RECHI - Annual Report 2021 | FinancialReports.eu

Stock No: 4532

RECHI PRECISION CO., LTD. and its subsidiaries

Consolidated financial statements and Auditor’s Report 2021 and 2020

Address: No. 943, Sec. 2, Chenggong Rd., Guanyin Dist., Taoyuan City 328, Taiwan (R.O.C.)

TEL: (03) 483-7201

§Table of Contents§

Item 1. Cover 2. Table of Contents 3. Statement of Affiliate’s Consolidated Financial Report 4. Auditor’s Report 5. Consolidated Balance Sheet 6. Consolidated comprehensive income statements 7. Consolidated statement of changes in equity 8. Consolidated cash flow statement 9. Notes to consolidated financial statement (1) Organization and operations (2) Financial reporting date and procedures (3) Application of new and revised standards and interpretation (4) Summary of significant accounting policies (5) Main source of significant accounting judgment, estimates and assumptions uncertainty (6) Summary of significant accounting titles (7) Related party transactions (8) Pledged assets (9) Significant contingent liabilities and unrecognized contractual commitments (10) Significant disaster loss (11) Significant subsequent events (12) Other information (13) Information of foreign currency assets and liabilities with significant effects (14) Notes of disclosure 1. Information about important transactions 2. Information regarding investees 3. Information regarding investment in the territory of Mainland China 4. Information on Major Shareholders (15) Segment information	Page 1 2 3 4~7 8 9~11 12 13~15 16 16 16~20 20~32 32~33 33~69 70~71 72 72 - - 73 73~74 75 75 75~76 76 76~78	Notes to financial the statements No.
		- - - - - - - - 1 2 3 4 5 6~27 28 29 30 - - 31 32 33 33 33 33 34

Statement of Affiliate’s Consolidated Financial Report

Considering that the companies to be included into the consolidated financial statements of associates under the “Criteria Governing Preparation of Affiliation Reports, Consolidated Business Reports and Consolidated Financial Statements of Affiliated Enterprises” were the same as those to be included into the consolidated financial statements of the parent and subsidiaries under IFRS 10 for 2021 (from January 1, 2021 to December 31, 2021), and the relevant information to be disclosed in the consolidated financial statements of associates has already disclosed in said consolidated financial statements of the parent and subsidiaries, no consolidated financial statements of affiliated enterprises were prepared separately.

Hereby declare

Company name: RECHI PRECISION CO., LTD.

Chairman: CHEN, SHENG TIEN

March 16, 2022

Auditor’s Report

To RECHI PRECISION CO., LTD.:

Audit opinions

We have audited the accompanying consolidated balance sheet of RECHI PRECISION CO., LTD. (the “Company”) and subsidiary (collectively, the “Group”) as of December 31, 2021 and 2020, and the related consolidated statement of income, consolidated statement of changes in shareholders equity, consolidated statement of cash flows, and notes to the consolidated financial statements (including major accounting policy) for the years then ended.

In my opinion, the financial statements as referred to present fairly, in all material aspects the financial position of RECHI PRECISION CO., LTD. as of December 31, 2021 and 2020, and the results of its operations and cash flows for the years then ended in conformity with the Regulation Governing the Preparation of Financial Reports by Securities Issuers, and applicable IFRS, IAS, SIC, and IFRIC as recognized by the Financial Supervisory Commission.

The basis for opinions

We conducted our audit in accordance with the Regulations Governing Auditing and Attestation of Financial statements by Certified Public Accountants and generally accepted auditing standards. Our responsibilities under those standards are further described in the responsibilities of auditors for the audit of the consolidated financial statements. We are independent of RECHI Group in accordance with the Code of Ethics for certified public accountants in the part relevant to the audit of the consolidated financial statements of RECHI Group, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believed that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Key audit matters

Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the consolidated financial statements of RECHI Group in 2021. These matters were addressed in the content of our audit of the consolidated financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on those matters.

The key audit matters of the 2021 consolidated financial statements of RECHI PRECISION CO., LTD (RECHI Group) and its subsidiaries are described as follows:

The basis for recognition of the revenue on export sales

RECHI Group is mainly engaged in the business focused on the manufacturing and selling of refrigerant compressors, by exporting and importing the product, our market covers a wide range of areas globally, therefore, the terms and conditions apply to different clients might also vary.

The sales revenue from exported goods sold was recognized by the Group when transaction conditions were fulfilled in accordance with that applied to different clients as predetermined and the control over the goods sold was transferred to the buyers. The relatively longer transportation period needed for part of export transactions and the terms and conditions apply to specific clients required human judgment in the process of revenue recognition, which might result in an incorrect time record of sales revenue, thus we have made the timing of recognizing sales revenue from exported goods with specific transaction conditions as one of the most important audit matters of the year.

The main audit procedures that we have implemented for the above timing of sales revenue recognition are as follows:

Understand and evaluate the procedures for the timing of sales revenue recognition plus the policy for internal control, and test the effectiveness of such controls.
Terminate the above test on the sales transactions with specific clients within a certain period before and after the balance sheet date, which includes verification of transaction conditions of the specific transaction, papers like import/export declarations, and inquiry of shipping schedule, in order to be sure if revenue recognition was recorded with a proper period.
Obtain the shipment details of the manual operation summary for a specific period for inspection, and check the relevant vouchers randomly to confirm whether the adjustment of the time point of revenue recognition is correct.

Other information

The Company has also prepared the parent company only financial statements for the years ended December 31, 2021 and 2020, for which we have issued an unqualified opinion.

Responsibilities of Management and Those in Charge of Governance of the Sale or Contribution of Assets between an Investor and its Associate or Joint Venture

The responsibility of management is to prepare fairly presented consolidated financial statements in conformity with the Regulations Governing the Preparation of Financial Reports by Securities Issuers and International Financial Reports Standards, International Accounting Standards interpretations, and announcements of interpretations recognized and published by the Financial Supervisory Commission and maintain necessary internal control related to the preparation of consolidation of financial statements in order to ensure the material misstatement caused by fraud or error does not exist in the consolidated financial statements.

In preparing the consolidated financial statements, the management is responsible for assessing the ability of the Group in continuing as a going concern, disclosing relevant matters, and adopting the going concern basis of accounting unless the management intends to liquidate the Group or cease the operations without other viable alternatives.

The governing body of the Group (including the Audit Committee) are responsible for supervising the financial reporting process.

Auditor’s Responsibilities for the Audit of the Sale or Contribution of Assets between an Investor and its Associate or Joint Venture

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

As part of an audit in accordance with the accounting principles generally accepted in the Republic of China, we exercise professional judgment and maintain professional skepticism throughout the audit. We also perform the following works:

Identify and assess the risks of material misstatement of the consolidated financial statements, whether due to fraud or error, design, and perform audit procedures responsive risks, and obtain evidence that is sufficient and appropriate to provide a basis of 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.
Understand the internal control related to the audit in order to design appropriate audit procedures under the circumstances, while not for the purpose of expressing an opinion on the effectiveness of the Group’s internal control.
Evaluate the appropriateness of accounting policies used and the reasonability of accounting estimates and related disclosures made by the management.
Conclude the appropriateness of the use of the going concern basis of accounting by the management, and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on RECHI Group and its ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the consolidated financial statements or, if such disclosures are inappropriate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of the auditor’s report. However, future events or conditions may cause RECHI Group to cease to continue as a going concern.
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Evaluate the overall presentation, structure, and content of the consolidated statements, including related notes, whether the consolidated statements represent the underlying transactions and events in a matter that achieves fair presentation.
Obtain sufficient and appropriate audit evidence on the financial information of business entities within the Group in order to express an opinion on the consolidated financial statements. We are responsible for guiding, supervising, and performing the audit and forming an audit opinion on the Group.

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

From the matters communicated with the governing body, we determined the key audit matters for the audit of the Group’s consolidated financial statements for the year ended December 31, 2021. We describe these matters in our auditor’s 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 communications.

Deloitte & Touche CPA CHANG, CHING HSIA

CPA TSAI, CHEN TSAI

Financial Supervisory Commission Approval Document No.

Chin-Kuan-Cheng-Shen-Zi No. 1090347472

Securities and Futures Bureau Approval Document No.

Tai-Cai-Zheng (6) Zi No. 0920123784

March 16, 2022

RECHI PRECISION CO., LTD. and its subsidiaries

Consolidated Balance Sheet

December 31, 2021 and 2020

Unit: NT$1 thousand

Code 1100 1110 1120 1136 1150 1170 1180 1200 130X 1410 1470 11XX 1517 1550 1600 1755 1821 1805 1840 1990 15XX 1XXX Code 2100 2110 2150 2160 2170 2180 2200 2230 2250 2280 2365 2320 2399 21XX 2540 2542 2570 2580 2640 2670 25XX 2XXX 3110 3200 3310 3320 3350 3300 3400 3500 31XX 36XX 3XXX	Assets Current assets Cash and cash equivalents (Note 4 & 6) Financial assets through profit and/or loss with measuring for the faire values – current (Note 4 & 7) The financial assets measured for the fair values through other comprehensive income – current (Notes 4 & 8) Financial assets at amortized cost – current (Notes 4, 9, & 29) Notes receivable – non-related parties (Note 4, 10 & 29) Notes receivable – non-related parties (Note 4 & 10) Accounts receivable – related parties (Notes 4 & 28) Other receivables (Note 28) Inventory (Note 4 & 11) Prepayments (Note 16) Other current assets (Note 16) Total current assets Non-Current assets The financial assets measured for the fair values through other comprehensive income – non-current (Note 4 & 8) Investment under Equity method (Note 4 & 13) Real property, plant and equipment (Note 4, 14 & 29) Right-of-use assets (Note 4 & 15) Other intangible assets (Note 4) Goodwill (Note 4) Deferred income tax assets (Note 4 & 23) Other non-current assets (Note 16) Total non-current assets Total assets Liabilities and equity Current liabilities Short-term borrowings (Note 17) Short-term notes payable (Note 17) Notes payable – non-related party Payable notes – related parties (Note 28) Accounts payable – non-related parties Accounts payable – related parties (Note 28) Other payables (Note 18) Income tax liability (Note 4 & 23) Liability reserve – Current Lease liabilities – current (Note 4 & 15) Refund liabilities – current (Note 21) Long-term borrowings due within one year (Note 17) Other current liabilities Total of current liabilities Non-current liabilities Long-term borrowings (Note 17 & 29) Long-term notes payable (Note 17) Deferred tax liabilities (Note 4 & 23) Lease liabilities – non-current (Note 4 & 15) Net defined benefit liabilities (Note 4 & 19) Other non-current liabilities Total non-current liability Total liabilities Equity of the company (Note 12 & 20) Common stock Capital reserves Retained earnings Statutory surplus reserves Special surplus reserves Undistributed earnings Total retained earnings Other equity Treasury shares Total equity of the company Non-controlling interests Total equity Total Liabilities and Equity		December 31, 2021	December 31, 2021	% 11 5 - 12 11 13 - 1 11 4 - 68 - 2 26 1 - - 2 1 32 100 2 1 22 - 11 1 3 2 - - 2 1 1 46 9 3 3 - - - 15 61 19 5 4 3 7 14 4) - 34 5 39 100		December 31, 2020	December 31, 2020
			Amount $ 3,045,098 1,239,339 - 3,281,365 2,998,597 3,489,300 766 146,864 2,897,985 1,042,814 25,056 18,167,184 18,120 506,214 6,866,585 188,799 37,655 55,725 500,585 241,640 8,415,323 $ 26,582,507 $ 612,380 349,698 5,760,034 36,320 2,987,695 142,605 876,227 453,327 99,147 12,438 481,107 225,754 150,163 12,186,895 2,453,886 649,463 752,046 37,131 53,625 36,521 3,982,672 16,169,567 5,049,151 1,343,868 992,756 743,222 2,044,866 3,780,844 1,075,955) 95,476) 9,002,432 1,410,508 10,412,940 $ 26,582,507				Amount $ 3,576,943 1,114,251 1,122,182 2,706,359 4,556,421 4,008,821 2,538 173,562 2,287,780 761,845 26,310 20,337,012 25,500 518,232 7,304,877 201,270 41,629 55,725 531,980 404,483 9,083,696 $ 29,420,708 $ 1,862,583 649,693 5,805,047 64,459 2,731,900 134,719 876,820 514,837 90,467 10,720 610,010 - 243,534 13,594,789 3,683,240 999,546 735,767 45,557 52,253 29,749 5,546,112 19,140,901 5,049,151 1,343,868 923,331 1,199,368 1,066,053 3,188,752 743,222) 306) 8,838,243 1,441,564 10,279,807 $ 29,420,708		%
		( (		(		( (		(	12 4 4 9 15 14 - 1 8 2 - 69 - 2 25 1 - - 2 1 31 100 6 2 20 - 9 1 3 2 - - 2 - 1 46 13 3 3 - - - 19 65 17 5 3 4 4 11 3) - 30 5 35 100

The notes attached shall constitute an integral part of this Consolidated financial statement.

Chairman: CHEN, SHENG TIEN

Manager: FENG, MING FA

Accounting Manager: WU, CHIN MEI

RECHI PRECISION CO., LTD. and its subsidiaries

Consolidated Income Statement

For the Years Ended December 31, 2021 and 2020

Unit: NT$ thousand, except Earnings Per Share (NT$)

Code 4100 Sales revenue (Note 4, 21 & 28) 5000 Operating cost (Note 11, 22 & 28) 5900 Gross profit Operating expenses (Note 22 & 28) 6100 Marketing expenses 6200 Administrative expenses 6300 Research and development expenses 6450 Expected credit impairment loss (reversal gain) (Note 10) 6000 Total operating expenses 6900 Net Operating Income Non-operating income and expense (Note 22) 7100 Interest revenue 7010 Other income 7020 Other profits and losses 7050 Financial costs 7060 The share of profit/loss on associates accounted for using the equity method (Note 13) 7000 Total non-operating revenues and expenses		2021

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(Continued from previous page)

Code 7900 Net profit before tax 7950 Income tax expenses (Note 4 & 23) 8200 Net profits of the current year Other comprehensive income 8310 Titles not reclassified as profit and loss accounts: 8311 Determined Benefit Plan Reevaluation (Note 4 & 19) 8316 Unrealized gains (losses) on investments in equity instruments at fair value through other comprehensive income (Note 20) 8349 Income tax related to titles not subject to reclassification (Note 20 & 23) 8360 Accounts to be reclassified to profit or loss subsequently: 8361 Exchange differences from the translation of financial statements of foreign operations (Note 4 & 20) 8399 Income tax related to titles that could be reclassified (Note 20 & 23) 8300 Other comprehensive income of the current year (net amount after taxation) 8500 Total amount of comprehensive income of the current year (Continued on next page)		2021		% 3 - 3 - - - - - - - - 3		2020
						Amount $ 988,015 265,371) 722,644 636 427,612 85,620) 342,628 158,571 30,069) 128,502 471,130 $ 1,193,774		%
					( ( (		(	5 1) 4 - 2 - 2 - - - 2 6

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Code Profit attributable to: 8610 The company’s shareholders 8620 Non-controlling interests 8600 Total comprehensive income attributable to: 8710 The company’s shareholders 8720 Non-controlling interests 8700 Earnings per share (Note 24) Business units in continuing operation 9710 Basic 9810 Diluted		2021		% 2 - 2 3 - 3		2020
		Amount $ 542,921 24,807) $ 518,114 $ 612,786 31,056) $ 581,730 $ 1.08 $ 1.07				Amount $ 709,491 13,153 $ 722,644 $ 1,166,146 27,628 $ 1,193,774 $ 1.41 $ 1.40		%
	( (							4 - 4 6 - 6

The notes attached shall constitute an integral part of this Consolidated financial statement.

Chairman: CHEN, SHENG TIEN Manager: FENG, MING FA Accounting Manager: WU, CHIN MEI

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Unit: NT$1 thousand

RECHI PRECISION CO., LTD. and its subsidiaries

Consolidated Statements of Changes in Shareholders’ Equity

For the Years Ended December 31, 2021 and 2020

			Equity of the company	Equity of the company					Total equity
Capital stock Shares (in thousand shares) Amount 506,013 $ 5,060,131 - - - - - - - - ( 1,098 ) ( 10,980 ) - - - - - - - - 504,915 5,049,151 - - - - - - - - - - - - - - - - 504,915 $ 5,049,151	Capital reserves $ 1,351,403 - - - - ( 7,535 ) - - - - 1,343,868 - - - - - - - - $ 1,343,868		Retained earnings	Undistributed earnings $ 1,025,691 ( 65,596 ) ( 335,833 ) ( 252,458 ) - ( 15,751 ) - 709,491 509 710,000 1,066,053 ( 69,425 ) 456,146 ( 353,427 ) - 542,921 ( 3,980) 538,941 406,578 $ 2,044,866	Otherequity Exchange differences from the translation of financial statements of foreign operations Unrealized gain or loss on financial assets at fair value through other comprehensive income ( $ 1,075,561 ) ( $ 123,807 ) - - - - - - - - - - - - - - 114,027 342,119 114,027 342,119 ( 961,534 ) 218,312 - - - - - - - - - - ( 52,541) 126,386 ( 52,541) 126,386 - ( 406,578) ($ 1,014,075) ($ 61,880)	Treasury shares ( $ 34,266 ) - - - ( 306 ) 34,266 - - - - ( 306 ) - - - ( 95,170 ) - - - - ($ 95,476)
					Exchange differences from the translation of financial statements of foreign operations ( $ 1,075,561 ) - - - - - - - 114,027 114,027 ( 961,534 ) - - - - - ( 52,541) ( 52,541) - ($ 1,014,075)
Shares (in thousand shares) 506,013 - - - - ( 1,098 ) - - - - 504,915 - - - - - - - - 504,915		Statutory surplus reserves $ 857,735 65,596 - - - - - - - - 923,331 69,425 - - - - - - - $ 992,756
(						( ( ( ( (	( ( ( (	( ( ( (	$ 9,449,584 - - ( 252,458 ) ( 306 ) - ( 110,787 ) 722,644 471,130 1,193,774 10,279,807 - - ( 353,427 ) ( 95,170 ) 518,114 63,616 581,730 - $ 10,412,940

The notes attached shall constitute an integral part of this Consolidated financial statement.

Chairman: CHEN, SHENG TIEN

Manager: FENG, MING FA

Accounting Manager: WU, CHIN MEI

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RECHI PRECISION CO., LTD. and its subsidiaries

Consolidated Statements of Cash Flow

For the Years Ended December 31, 2021 and 2020

Code
Cash flow from operating activities
A10000
Current year net profit before taxation

A20010
Profits and loss
A20100
Depreciation expenses
A20200
Amortization expenses
A20300
Expected credit impairment loss
(reversal gain)
A20400
Net gains on financial assets at fair
value through profit or loss
A20900
Interest expenses
A21200
Interest revenue

A21300
Dividend income

A22300
The shares of profit and/or loss at
equity method over the associates
A22500
Net loss (income) from the disposal
and obsolescence of property,
plant, equipment and right-of-use
assets
A23700
Inventory valuation and
obsolescence losses
A24100
Unrealized foreign currency
exchange gain
A30000
Net change in operating assets and
liabilities
A31115
Decrease (increase) in financial
assets mandatorily measured at
fair value through profit or loss
A31130
Decrease (increase) in notes
receivable
A31140
Decrease in notes receivable –
related party
A31150
Decrease in accounts receivable
A31160
Decrease (increase) in accounts
receivable-related parties
A31180
Decrease (increase) in other
accounts receivable
A31200
Decrease (increase) in inventories

A31230
Increase (decrease) in prepayments
A31240
Decrease in other current assets
A32125
Increase (decrease) in return
liability – current
A32130
Increase (decrease) in notes payable
A32140
Increase (decrease) in notes
payable – related parties
A32150
Increase in accounts payable

Unit: NT$1 thousand
2021
2020
$ 695,989
$ 988,015
914,039
876,830
10,481
9,629
(
14,223 )
(
6,977 )
(
55,961 )
(
44,877 )
77,406
148,846
(
102,148 )
(
74,693 )
(
8,205 )
(
31,658 )
(
3,776 )
(
1,368 )
6,037
(
2,252 )
14,170
9,738
(
39,547 )
(
59,473 )
(
69,127 )
92,270
1,539,685
(
915,438 )
-
782
502,257
584,450
1,772
(
2,377 )
50,216
(
74,303 )
(
634,472 )
217,485
(
256,144 )
353,219
1,254
9,399
(
127,631 )
133,463
(
14,010 )
1,541,765
(
28,139 )
34,128
270,598
368,389

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Code A32160 Increase in accounts payable – related parties A32180 Increase in other payables A32200 Increase in provisions A32230 Increase (decrease) in other current liabilities A32240 Increase decrease in net defined benefit liability A33000 Cash inflow from operating activities A33100 Interest received A33300 Interest payment A33500 Income tax payment AAAA Net cash inflow from operating activities Cash flow from investing activities B00020 Disposal of financial assets at fair value through other comprehensive income B00040 Financial assets acquired on the basis of cost after amortization B00050 Financial assets on the basis of cost after amortization B02700 Purchase of property, plant, and equipment B02800 Proceeds from disposal of property, plant and equipment B04500 Purchase of intangible assets B06700 Increase of other non-current assets B07600 Dividends received B09900 Acquisition of government subsidies BBBB Net cash inflow (outflow) in investing activities Cash flow from financing activities C00200 Decrease in short-term loans C00500 Increase in short-term notes payable C00600 Decrease in short-term notes payable C01600 Proceeds from long-term loan C01700 Repayments of long-term borrowings C01900 Decrease in long-term notes payable C03000 Collect the guarantee deposits received C03100 Return of guarantee deposits received C04020 Repayments of principal portion of the lease C04500 Pay owners’ dividends C04900 Purchase of treasury stock C05800 Decrease in non-controlling interests CCCC Net cash outflow from financing activities DDDD Impact of changes in exchange rate on cash and cash equivalents	2021 $ 7,886 2,500 9,162 ( 93,371 ) ( 3,604) 2,653,094 78,620 ( 79,831 ) ( 202,634) 2,449,249 1,282,152 ( 618,423 ) 43,417 ( 244,536 ) 3,805 ( 6,590 ) ( 141,212 ) 21,066 25,095 364,774 ( 1,198,906 ) - ( 299,995 ) 462,081 ( 1,452,081 ) ( 350,000 ) 6,916 - ( 11,635 ) ( 353,427 ) ( 95,170 ) - ( 3,292,217) ( 53,651)		2020
		$ 77,126 77,588 39,163 191,830 ( 1,838) 4,538,861 67,269 ( 156,217 ) ( 140,335) 4,309,578 - ( 1,565,538 ) 1,369,703 ( 411,854 ) 81,599 ( 7,584 ) ( 141,901 ) 31,658 7,013 ( 636,904) ( 638,839 ) 549,756 - 1,915,413 ( 2,717,333 ) - - ( 4,870 ) ( 6,741 ) ( 252,458 ) ( 306 ) ( 110,787) ( 1,266,165) 12,308

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Code EEEE Net increase (decrease) in cash and cash equivalents E00100 Cash and cash equivalents balance – beginning of year E00200 Cash and cash equivalents balance – end of year	2021 ( $ 531,845 ) 3,576,943 $ 3,045,098		2020
			$ 2,418,817 1,158,126 $ 3,576,943

The notes attached shall constitute an integral part of this Consolidated financial statement.

Chairman: CHEN, SHENG TIEN Manager: FENG, MING FA Accounting Manager: WU, CHIN MEI

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RECHI PRECISION CO., LTD. and its subsidiaries

Consolidated Notes to financial statements

For the Years Ended December 31, 2021 and 2020

(Unless otherwise provided, Unit: NTD thousand)

1. Organization and operations

RECHI PRECISION CO., LTD. (formerly known as RECHI INDUSTRIAL CO., LTD., hereinafter referred to as the Company) was established in December 1989 in accordance with the Company Act of the Republic of China, mainly engaged in the assembly and processing, manufacturing and repairing, and trading of refrigerant compressors, and design services of relevant products, as well as import and export business.

The Company’s shares had been listed for trading on the Taipei Exchange since October 2001, and have changed to be listed on the Taiwan Stock Exchange since August 2003.

The consolidated financial statements are presented in the Company’s functional currency – New Taiwan dollars.

2. Financial reporting date and procedures

The consolidated financial statements were approved by the board of directors and authorized for issue on March 16, 2022.

3. Application of new and revised standards and interpretation

(1) Initial application of the International Financial Reporting Standards (IFRS), International Accounting Standards (IAS), IFRIC Interpretations (IFRIC), and SIC Interpretations (SIC) (collectively, the “IFRSs”) endorsed and issued into effect by the Financial Supervisory Commission (FSC)

The application of the amendments to the IFRSs endorsed and issued into effect by the FSC does not have material impact on the Group’s accounting policies:

(2) The IFRSs endorsed by the FSC for application starting from 2022

The new/amended/revised standards or interpretation Effective Date per IASB “Annual Improvements to IFRSs 2018-2020 Cycle” January 1, 2022 (Note 1) Amendments to IFRS 3 “Reference to the Conceptual Framework” January 1, 2022 (Note 2) Amendments to IAS 16 “Property, Plant and January 1, 2022 (Note 3) Equipment – Proceeds before Intended Use” Amendments to IAS 37 “Onerous Contracts – Cost January 1, 2022 (Note 4) of Fulfilling a Contract”

Note 1: The amendment of IFRS 9 applies to the exchange of financial liabilities or modified terms incurring in the annual reported periods since January 1, 2022; the amendment of “Agriculture” in IAS 41 applies to the measurement at fair value in the annual reported periods since January 1,
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2022; the amendment of “Initial application of IFRSs” in IFRS 1 applies the annual reported periods since January 1, 2022 retrospectively.

Note 2: The amendment applies to the merges whose acquisition dates after the annual reported periods since January 1, 2022.
Note 3: The amendment applies to the property, plant and equipment achieving the expected operations by the management after January 1, 2021.
Note 4: The amendment applies to the contracts yet performing all obligations as of January 1, 2022.

The evaluation of the amendment to other IFRSs by the Group to the date this parent company's financial statement was approved and released, would not have a great effect on the financial positions and performance of the companies in the consolidated financial statements.

(3) The IFRSs released by the IASB but not yet approved and announced effective by the Financial Supervisory Commission

IASB publication effective The new/amended/revised standards or interpretation date (Note 1) Amendment to IFRS 10 and IAS 28, “Sale or Undefined Contribution of Assets between an Investor and its Associate or Joint Venture and Investment in Associates.” IFRS 17 “Insurance Contracts” January 1, 2023 Amendments to IFRS 17 January 1, 2023 Amendments to IFRS 17 “Initial Application of IFRS January 1, 2023 17 and IFRS 9 – Comparative Information” Amendments to IAS 1 “Classification of Liabilities January 1, 2023 as Current or Non-Current” Amendments to IAS 1 “Disclosure of Accounting January 1, 2023 (Note 2) Policies” Amendments to IAS 8 “Definition of Accounting January 1, 2023 (Note 3) Estimates” Amendments to IAS 12 “Deferred Tax Related to January 1, 2023 (Note 4) Assets and Liabilities Arising from a Single Transaction”

Note 1: Unless stated otherwise, the above New IFRSs are effective for annual periods beginning on or after their respective effective dates.
Note 2: The amendments apply to the annual reporting periods beginning on or after January 1, 2023 prospectively.
Note 3: The amendments apply to changes in accounting estimates and changes in accounting policies that occur during the annual reporting periods beginning on or after January 1, 2023.
Note 4: The amendments apply to transactions taking place after January 1, 2022, except for the temporary differences in lease and decommissioning obligations recognized in deferred tax as of January 1, 2022.
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1.

Amendment to IFRS 10 and IAS 28, “Sale or Contribution of Assets between an Investor and its Associate or Joint Venture and Investment in Associates.”

The amendment stipulates that if the Group sells or invests assets in an affiliated company (or joint venture), or the Group loses control of a subsidiary, but retains significant influence (or joint control) on the subsidiary, if the aforementioned assets or the former subsidiary meets the definition of “Business” as in IFRS 3 “Business Combination,” the Group shall fully recognize the profits and losses arising from such transactions.

In addition, if the Group sells or contributes assets to affiliated companies (or joint ventures), or the Group loses the control over a subsidiary but retains significant influence on the subsidiaries (or joint control), and if the aforementioned assets or subsidiary not in compliance with the definition of IFRS 3 “Business,” the Group is to recognize the profit and loss of the transactions only within the equity scope of the affiliated companies (or joint ventures) irrelevant to the investors, in other words, the profit and loss attributable to the Group should be offset.

Amendments to IAS 1 “Classification of Liabilities as Current or Non-Current”

The amendments are to clarify that when determining whether a liability is classified as non-current, the Group shall assess whether it has the right to defer the settlement period to at least 12 months after the reporting period at the end of the reporting period. If the Group has the right at the end of the reporting period, regardless of whether the Group expects to exercise the right, the liabilities are classified as non-current. The amendments have clarified that if the Group must comply with certain conditions before it has the right to defer payment of its liabilities, the Group must have complied with said conditions at the end of the reporting period, even if the lender is testing whether the Group complies with said conditions at a later date.

The amendments stipulate that, for the purpose of classification of liabilities, the aforementioned settlement refers to the elimination of liabilities due to the transfer of cash, other economic resources, or equity instruments of the Group to the counterparty. However, as for the terms of the liability, where the transfer of the equity instruments of the Group may result in its settlement of the liability based on the counterparty’s choice, if the choice is separately recognized in equity according to IAS 32 “Financial Instruments: Expression,” the foregoing terms do not affect the liability classification.

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Amendments to IAS 1 “Disclosure of Accounting Policies”

The amendments clearly stipulate that the Group shall determine the significant accounting policy information that shall be disclosed based on the definition of materiality. If accounting policy information can be reasonably expected to affect the decisions made by the main users of general-purpose financial statements based on these financial statements, the accounting policy information is significant. The amendments also clarify:

Accounting policy information related to non-material transactions, other matters, or circumstances is non-significant, and the Group does not need to disclose such information.
The Group may determine that the relevant accounting policy information is significant based on the nature of transactions, other matters, or circumstances, even if the amount is not significant.
Not all accounting policy information related to material transactions, other events, or circumstances are significant.

In addition, the amendments also illustrate that if the accounting policy information is related to material transactions, other matters, or circumstances while in line with the following circumstances, the information may be significant:

(1) The Group changed its accounting policies during the reporting period, and the change resulted in a significant change in financial statement information;
(2) The Group selects its applicable accounting policies from the options allowed by the standards;
(3) Due to the lack of specific standards, the Group has formulated accounting policies in accordance with IAS 8 “Accounting Policies, Changes and Errors in Accounting Estimates”;
(4) The Group discloses relevant accounting policies that it must adopt significant judgments or assumptions to determine; or
(5) Complicated accounting treatment requirements are involved and users of financial statements rely on such information to understand such material transactions, other matters, or circumstances.
Amendments to IAS 8 “Definition of Accounting Estimates”

The amendments stipulate that the accounting estimates refer to the monetary amounts affected by measurement uncertainty in the financial statements. When the Group applies accounting policies, it may need to measure financial statement items with monetary amounts that cannot be directly observed and must be estimated. Therefore, measurement techniques and inputs must be used to establish accounting estimates to achieve this purpose. If the impact of changes in measurement techniques or inputs on accounting estimates is not a correction of previous errors, these changes are changes in accounting estimates.

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Further to the aforementioned influence, the companies in the consolidated financial statements will continue to evaluate the effect of the amendment to other IFRSs on the financial positions and performance of the companies in the consolidated financial statements to the date this parent company only financial statement approved and released, and will make appropriate disclosure after the evaluation.

4. Summary of significant accounting policies

(1) Compliance Statement

The consolidated financial statements are prepared in accordance with the Regulations Governing the Preparation of Financial Reports by Securities Issuers and the IFRSs approved and published by the FSC.

(2) Basis of preparation

Except for the financial instruments on the basis of fair value and the recognition of net defined benefit liabilities on the basis of the present value of net defined benefit obligation net of the fair value of planned assets, this consolidated financial statement was compiled on the basis of historical cost.

The evaluation of fair value could be classified into Level 1 to Level 3 by the observable intensity and importance of related input value:

Level 1 input value: refers to the quotation of the same asset or liability in an active market as of the evaluation (before adjustment).
Level 2 input value: refers to the direct (the price) or indirect (inference of price) observable input value of asset or liability further to the quotation of Level 1.
Level 3 input value: the unobservable input value of asset or liability.
(3) Standards in differentiating current and non-current assets and liabilities.
- Current assets including:
Assets held mainly for trading purpose:
Assets expected to be realized within 12 months after the balance sheet date; and
Cash and cash equivalents (not including those that are limited to exchange or repay liabilities exceeding 12 months after the balance sheet date).
- Current liabilities include:
Liabilities held for trading purposes;
Liabilities to be repaid within 12 months after the balance sheet date, and
Liabilities with the repayment deadline that cannot be unconditionally deferred to at least 12 months after the balance sheet date.
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For those that are not current assets or liabilities above are classified as non-current assets or liabilities.

(4) Basis of consolidation

This consolidated financial statement contains the information of the financial statements of the Bank and its controlled entities (subsidiaries). The Consolidated Statement of Comprehensive Income already covered the operating profit and/or loss of the subsidiaries, which have been acquired or disposed of the current term, from the date of acquisition until the date of disposal. The subsidiaries’ financial statements have been properly adjusted to keep the accounting policies consistent with the accounting policies of the Group. In preparing these consolidated financial statements, the transactions, account balances, incomes and loss and expenses among the individual entities are written off in full amount. The total comprehensive incomes of the subsidiaries were non-controlling interest attributed to the Company’s owners and the non-controlling interest, to become the balance of loss even as the non-controlling interest.

When the changes of interest of the subsidiaries’ ownership by the Group do not lead to the loss of control, it is disposed of as interest transactions. The book value of the Group and non-controlling interest has been adjusted to reflect the changes of the relative interest of subsidiaries. The differential between the adjustment amount of non-controlling interest and the fair value of consideration received is directly recognized as interest and belongs to the owner of the Company.

For details of subsidiaries, shareholding ratios, and business items, please refer to Note 12 and Table 8.

(5) Foreign currency

For the transactions conducted in a currency other than the business entity’s functional currency (foreign currency), it is to be translated to the functional currency in accordance with the exchange rate on the transaction date when preparing the individual financial statements.

Foreign currency monetary items are translated at the closing rate on each balance sheet date. The exchange differences arising from the settlement of monetary items or translating monetary items are recognized in the current profit or loss.

The foreign non-currency items measured at fair value are translated in accordance with the exchange rate on the fair value determination date and the exchange difference is booked as current profit or loss. However, for the changes in fair value recognized in the other comprehensive income, the exchange difference is recognized in the other comprehensive income.

The foreign non-currency items measured at historical cost are translated in accordance with the exchange rate on the transaction date without the need for a translation again.

When preparing the consolidated financial statements, the assets and liabilities of the Group’s foreign operations (including subsidiaries and associates that operate in countries or adopt the functional currencies different from the Group) are translated into New Taiwan dollars. The profits and losses are translated in accordance with the current average exchange rates, and the exchange differences

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resulted is booked in other comprehensive income (and attributable to the Company’s shareholders and non-controlling equity respectively).

If the Group disposes of the ownership interest of a foreign operation, or disposes of part of the equity of a foreign operation’s subsidiary and loses control, or disposes of a foreign operation’s associate, and the retained equity is a financial asset and is treated based on the accounting policies adopted for financial instruments, then all accumulated exchange differences attributable to the owners of the Company and related to the foreign operation will be reclassified to profit or loss.

If the partial disposal of the subsidiaries of the foreign operation institution did not result in a loss of control, the cumulative exchange differences are reattributed proportionally as non-controlling equity of the subsidiaries without any profit and loss recognized. In any other event of partial disposal of an overseas operating institution, the accumulated difference in foreign exchange was reclassified to profit and/or loss pro rata to the percentage of disposal.

(6)

Inventory

Inventories are raw materials, materials, finished goods, and work-in-process. Inventory is valued in accordance with the lower of cost or net cash value. When comparing cost and net cash value, except for the homogeneous inventories, it is based on the itemized lower of cost or net cash value. Net realizable value refers to the estimated sale price under normal circumstances net of the estimated cost needed to complete the project and the estimated expenses needed to complete the sale. The cost of inventory is calculated using the weighted average method.

(7) Investments in the affiliated company

The term “associate” as set forth herein denotes an enterprise, which has significant effect upon the Group, but is not a subsidiary or a joint venture.

The Group adopts equity method for investment in associates.

Under the equity method, investments in the affiliated companies were originally recognized at cost; the book value after the acquisition date fluctuates along with the distribution of profit or loss from the affiliated company and other comprehensive income by the Group. In addition, the changes in the equity of affiliates shall be recognized in proportion to the proportion of shareholding.

When assessing impairment, the Group regards the overall book value of the investment as a single asset to compare the recoverable amount with the book value, and conducts an impairment test. The impairment loss recognized is also part of the book value of the investment. Any reversal of the impairment loss can be recognized within the range of the recoverable amount of the subsequently increased investment.

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The profit or loss resulting from the countercurrent, downstream and side-stream transactions between the Group and the affiliated company is recognized in the consolidated financial statement within the range that is irrelevant to the Group’s interest in the affiliated company.

(8) Property, plant, and equipment

Real property, plant and equipment are recognized as costs, and they will be measured by the amount after the costs less the amount of accumulated depreciation and accumulated impairment losses afterwards.

Those real estate, plant buildings, equipment & facilities under construction were recognized at the amount of the costs after deducting the loss in the accumulated impairment. Costs include professional service expanses and loan costs that meet the capitalization conditions. When such assets are completed and reach expected use status, such assets will be classified to proper items under real property, plant and equipment and the provision of depreciation shall begin.

Each material part of property, plants, and equipment shall be depreciated separately in accordance with the useful year and a straight-line method. The Group shall at least inspect the estimated service life, residual value and depreciation method by the day of the end of each fiscal year and postpone the effect of applying estimated accounting changes.

In the case of delisting real estate, plants, and equipment, the difference between the net disposal price and the book value of the asset is recognized in profit or loss.

(9) Goodwill

Goodwill from business combination is recorded at acquisition cost and subsequently measured at cost less accumulated impairment.

For impairment test purposes, goodwill is allocated to each cash-generating unit (CGU) that benefits from the synergy of a business combination.

In testing assets for impairment, the Company compares the carrying amounts of operating segments (CGUs with allocated goodwill) to their recoverable amounts on a yearly basis (or when impairment indicators exist). CGUs with allocated goodwill arisen from company combination in the current year should be tested for impairment before the end of the year. When the recoverable amount of CGUs is below the carrying amount, an impairment loss should be recognized to reduce first the carrying amount of goodwill of the CGU, and then the carrying amounts of other assets of the CGU proportionately. Any impairment loss should be directly recognized as loss in the current period. Subsequent reversal of impairment loss is not allowed.

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On disposal of the relevant CGU, the amount attributable to goodwill is included in the determination of the gain or loss on disposal.

(10) Intangible assets

The intangible asset with limited useful life acquired separately was originally measured at cost and subsequently measured at cost, net of accumulated amortization and accumulated impairment losses. Intangible assets are amortized using the straight-line method over the useful lives. The Group conducts at least one annual review at the end of each year to assess the estimated useful life, residual value, and amortization methods. And the impact of changes in accounting estimates should be delayed.

In removing intangible assets, the difference between the net proceeds of disposition and the book value shall be recognized as income.

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

The Group assesses if there are any signs of possible impairment in property, plant, and equipment as well as right-of-use and intangible assets (excluding goodwill) at each balance sheet date. If there is any indication of impairment occurring, the recoverable amount of the asset should be estimated. If the recoverable amount of an individual asset cannot be estimated, the Group is to estimate the recoverable amount of the respective cash-generating unit. The common asset is amortized to each cash-generating unit in accordance with a consistent and reasonable sharing basis.

The recoverable amount is the fair value net of cost or the value in use whichever is higher. When the recoverable amount of an individual asset or cash-generating unit is less than its book amount, the book amount of the asset or cash-generating unit should be reduced to its recoverable amount. The impairment loss is recognized in the profit or loss.

When the impairment loss was reversed subsequently, the book amount of the asset or cash-generating unit is increased to the adjusted recoverable amount, but the increased book amount may not exceed the book amount of the asset or cash-generating unit without recognizing the impairment loss in prior periods (net of amortization or depreciation). The reversed impairment loss is recognized in the profit or loss.

(12) Financial instruments

When the Group has become a party to the instrument contract, the financial assets and financial liabilities are to be recognized in the consolidated balance sheet.

For the initial recognition of the financial assets and financial liabilities, if the financial assets or financial liabilities are not measured at fair value through profit or loss, it is measured at fair value plus transaction cost that is directly attributable to the acquisition or issuance of financial assets or financial liabilities. The transaction cost directly attributable to the acquisition or issuance of financial assets or financial liabilities that are measured at fair value through profit or loss is immediately recognized in the profit or loss.

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1. Financial assets

The regular way of purchase or sale of financial assets are recognized and derecognized based on the accounting on the transaction date.

(1) Classification of measurement

Financial assets held by the Group are those measured at fair value through profit or loss (FVTPL) and at amortized cost, as well as investments in equity instruments measured at fair value through other comprehensive income (FVTOCI).

A. Financial assets at FVTPL

Financial assets measured at FVTPL are those mandatorily measured at FVTPL Financial instruments designated at fair value through income statements included the investment of equity instruments not designated at fair value through other comprehensive income and those not conforming to the standard of debt instruments on the basis of cost after amortization or at fair value through other comprehensive income.

Financial assets measured at FVTPL are measured at fair value, and the dividends and interest generated are recognized in other income and interest revenue, respectively, and gains or losses generated from remeasurement are recognized in other profits and losses. Please refer to Note 27 for the determination of fair value.

B. Financial assets based on cost after amortization

If the financial assets of the Group met both of the following conditions, classify as financial assets on the basis of cost after amortization:

a. Financial assets held under particular mode of operation and the purpose of holding is for the collection of cash flow from contracts
b. Cash flow generated on particular dates deriving from the contacts and the cash flow is wholly for the payment of principal and interest accrued from the outstanding amount of the principal.

Financial assets on the basis of cost after amortization (including cash and cash equivalents and accounts receivable on the basis of cost after amortization) shall be determined for the total book value under the effective interest rate method after the initial recognition net of the cost of any impairment after amortization for measurement. Any exchange gains or loss will be recognized as income.

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Interest revenue is calculated by multiplying the effective interest rate by the total carrying amount of financial assets.

Cash equivalents are time deposits within 3 months from the date of acquisition, with high liquidity, can be converted into cash with marginal risk on the change in value, and are used for the fulfillment of short-term commitment in cash settlement.

C. Investment of equity instruments at fair value through other comprehensive income

The Group may make an irrevocable choice at the time of initial recognition for designating the investment of equity instruments not available-for-sale and not recognized by the acquirer under corporate merger and acquisition or with consideration at fair value through other comprehensive income for measurement.

The investment of equity instruments at fair value through other comprehensive income is measured at fair value. Subsequent changes in fair value will be recognized as other comprehensive income and accumulated into other equity. In the disposition of assets, accumulated gains or loss shall be directly transferred to retained earnings without classification as income.

The dividend of the investment of equity instruments at fair value through other comprehensive income shall be recognized as income when the right of the Group in the collection of dividends is ascertained, unless the dividend is obviously representing the recovery of the cost of investment in part.

(2) Impairment of financial assets

The Group at each balance sheet date assesses the impairment loss of financial assets (including accounts receivable) at amortized cost according to the expected credit loss.

Accounts receivable are recognized in allowance for loss based on the lifetime expected credit losses (ECLs). Other financial assets shall be evaluated for any significant increase of risk from the day of initial recognition. If none is found, recognize for provision for anticipated credit loss along a period of 12 months. If it is, recognize for provision of anticipated credit risk within the perpetuity of the assets.

Anticipated credit loss is the weighted average loss of credit on the basis of the weight of the risk of default. Anticipated credit loss in a period of 12 months means the expected loss of credit from the financial instruments within 12 months due to default. Anticipated credit loss with the perpetuity of the financial instruments means the expected loss of credit from the financial instruments within the perpetuity of these financial instruments.

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For internal credit risk management purpose, the Group, without considering the collateral, determines the following circumstances indicating that a default has occurred on the financial instrument:

A. There is internal or external information indicating that the debtor is no longer able to pay off a debt.
B. Payments are overdue for more than 180 days, unless there are reasonable and supporting information showing that the delayed default benchmark is more appropriate.

All impairment of financial assets is recognized through the reduction of the book value of the provisioned account.

(3) The derecognition of financial assets

The Group has financial assets derecognized only when the contractual rights from the cash flows of a financial asset become invalid or when the financial assets are transferred and almost all the risks and rewards of the asset ownership have been transferred to other enterprises.

If the Group neither transfers nor retains almost all the risks and rewards of the ownership of a financial asset, and retains control of the asset, it will continue to recognize the asset within the scope of continuous participation in the asset and recognize relevant liabilities for the amount that may have to be paid. If the Group retains almost all the risks and rewards of the ownership of a financial asset, it will continue to recognize the asset and recognize the payments received as secured borrowings.

When a financial asset measured at amortized cost is derecognized as a whole, the difference between its book value and the consideration received is recognized in profit or loss. When equity instrument investments measured at FVTOCI are derecognized as a whole, accumulated gains and losses are directly transferred to retained earnings and are not reclassified to profit or loss.

2. Equity instruments

The debt and equity instruments issued by the Group are classified as financial liabilities or equity pursuant to the contractual agreements and the definition of financial liabilities and equity instruments.

Equity instruments issued by the Group are recognized for an amount after deducting the direct issuing cost from the proceeds collected.

The Company’s equity retrieved is debited or credited to the equity. The Company’s equity purchased, sold, issued, or cancelled is not recognized in the profit or loss.

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Financial liabilities
(1) Subsequent measurement

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

(2) Derecognition of financial liabilities

When derecognizing financial liabilities, the difference between the book amount and the consideration paid (including any transferred non-cash assets or assumed liabilities) is recognized as profit or loss.

(13) Liability reserve

The recognized liability reserve amount is with the risk and uncertainty of the obligation considered, and it is the optimum estimate of the expenditure required to settle the obligations on the balance sheet date. Provision for liabilities shall be measured based on the discount value of the estimated cash flow for the settlement of obligation.

Warranty

The warranty obligation under a sales contract is the best estimated expense by management in clearing the Group’s obligations and it is recognized when the related instrument income is recognized.

(14) Recognition of revenue

The Group, after identifying the performance obligations, had the transaction price amortized to each performance obligation and recognized as income when the performance obligations were fulfilled.

Commodity sales revenue

When the sales arrive at a customer’s designated location or when the goods are shipped, and the customer has the right to set the price and use of the goods and bears the main responsibility for resale and the risk of obsolescence, the Group recognizes the sales in revenue and accounts receivable.

When the material is supplied for processing, the ownership of the processed product is not transferred; therefore, the income is not recognized when the material is supplied.

(15) Lease

The Group assesses whether the contract is (or includes) a lease arrangement on the agreement date.

For contracts that include lease and non-lease components, the Group allocates the consideration in the contracts based on the relative stand-alone prices and treats them separately.

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1. The Group is the lessor

When the lease term is to have all risks and returns attached to the ownership of assets transferred to the lessee, it is classified as a financing lease. All other leases are classified as operating leases.

Lease payments for operating leases upon deduction of lease incentives are recognized as income on a straight-line basis in relevant lease periods. Initial direct costs generated in the acquisition of operating leases are added to the underlying asset carrying amount and recognized as expenses on a straight-line basis in lease periods.

2. The Group as the lessee

Except for recognizing low-value asset leases applying to exemption and lease payments for short-term leases being recognized as an expense on a straight-line basis over the lease term, other leases will be recognized as right-of-use assets and lease liabilities at the lease commencement date.

The right-of-use asset is measured at cost (including the amount equal to the lease liability at its initial recognition, lease payments made before the commencement of the lease less any received, any incurred by the lessee, and an estimate of costs to be incurred by restoring the underlying asset to the condition required) less any depreciation and any accumulated impairment losses. Additionally, the cost is subsequently adjusted for any . Right-of-use assets are separately presented on the Consolidated Balance Sheet.

Right-of-use assets are depreciated on a straight-line basis over the period from the commencement date of the lease to expiration of its useful life or expiration of the lease term, whichever date is earlier. If the ownership of the underlying asset will be acquired at the end of the lease period, or if the cost of the right-of-use asset reflects exercising an option, the asset will be depreciated over the period from the commencement date of the lease to expiration of the useful life of the underlying asset.

Lease liabilities are initially measured at the present value of lease payments (including fixed payments, less lease incentives received). If the implied interest rate of the lease is easily determined, the lease payments will be discounted to their present value using that interest rate. If such interest rate is not easily determined, the incremental borrowing rate will be used.

Subsequently, the lease liabilities are measured at amortized cost using the effective interest method, and the interest expenses are amortized over the lease term. If changes in the lease term lead to changes in future lease payments, the Group will remeasure the lease liabilities and adjust the right-of-use asset accordingly. However, if the book value of the right-of-use asset has been reduced to zero, the remaining remeasured amount is recognized in profit or loss. For lease modifications that are not treated as a separate lease, remeasurement of lease liabilities due to the reduction in the scope of the lease is to reduce the right-of-use assets, and to recognize the profit or loss of partial or full termination of the lease. Remeasurement of lease liabilities due to other modifications is an adjustment to the right-of-use asset. Lease liabilities are separately presented on the Consolidated Balance Sheet.

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The Group and the lessor engaged in rent negotiations directly related to the COVID-19 pandemic, and adjusted the rents due before June 30, 2022, resulting in a decrease in the rents before the negotiation. These negotiations did not materially change other lease terms. The Group has elected to adopt practical expedients to treat rent negotiations that meet the aforementioned conditions without evaluating whether the negotiation is about a lease modification, and recognizes the reduction in lease payments in profit or loss when the concession or such situation occurs, and makes a corresponding downward adjustment to the lease liabilities.

Changes in rent as stipulated in lease agreements not determined by indices or rates are recognized as expenses in the current period.

(16) Loan costs

Borrowing costs directly belonging to acquiring, building or producing assets that meet the requirements are part of the costs of such assets until the completion of all necessary activities that the assets reaching the status of expected use or sale.

The income of a temporary investment with a specific loan that has not yet met the essential requirement of capital expenditure is deducted from the loan cost that meets the essential requirement of capitalization.

In addition to the transaction stated in the preceding paragraph, all other loan costs are recognized as profit and loss upon occurring.

(17) Government grant

A government subsidy can only be recognized when it is firmly believed that the Group will comply with the terms added to the government subsidy and will receive such subsidy.

Government grants related to income are recognized in other income on a systematic basis over the periods, in which the Group recognizes as expenses the relevant costs for which the grants are intended to compensate. Government grants whose primary condition is that the Group should purchase, construct, or otherwise acquire non-current assets are debited to the carrying amount of said assets and recognized in profit or loss over the useful lives of said assets by reducing the depreciation or amortization expenses of said assets.

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If the government subsidy is used for compensating expenses or losses that have already occurred or for the purpose of immediate financial support to the Group without any related cost in the future, it will be recognized as income during the receivable period.

(18) Employee benefits
Short-term employee benefits

Liabilities relating to short-term employee benefits are measured by the non-discounted amount of the expected payment in exchange for employee services.

2. Retirement benefits

Under the defined contribution pension plan, the pension amount appropriated during the service years of the employees is recognized as an expense.

The determined cost of benefit for determined benefit retirement plan (including the cost of service, net interest, and reevaluation) is based on the actuary of projected unit method. The net interests of the service cost (including the service cost for the current period) and net defined benefit liability (asset) are recognized as employee benefit expenses when they occur. The value of second measurement (including the profits and loss under actuary and the return on assets of the plan net or interest) shall be recognized as other comprehensive incomes and as retained earnings, if realized. No reclassification as profits and loss in subsequent periods.

Net defined benefit liability (asset) is the appropriation deficit (surplus) of the defined benefit pension plan. Net defined benefit asset shall not exceed the refund of the appropriated fund or decrease the present value of appropriation of fund in the future.

(19) Income tax

Income tax expense is the sum of the current income tax and deferred income

tax.

Income tax expenses in the current period

The Group determines the income (loss) of the current year in accordance with the laws and regulations in each jurisdiction area for income tax filings, and calculates the income tax payable (recoverable) accordingly.

Additional income tax on unappropriated earnings is calculated in accordance with the provisions of the Income Tax Act of the Republic of China, to be recognized in the year of the shareholder resolution meeting.

The adjustment to prior period income tax payable is booked as current income tax.

2. Deferred tax

Deferred tax is computed in accordance with the temporary differences between the book value of assets and liabilities and the tax bases of taxable income.

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Deferred income tax liabilities are generally recognized in accordance with all taxable temporary differences. Deferred income tax assets are recognized when there is the likelihood of having taxable income to be used for the income tax credit resulting from the temporary difference, accumulated deficit or machinery equipment purchase, R&D, and personnel training expense.

All taxable provisional differences relevant to the investment in subsidiaries and associates were recognized as deferred income tax liabilities, except an event while the Group could control the time point of recovery of the control over the provisional difference or while the said provisional difference would be very likely not recoverable in the foreseeable future. The deductible temporary differences related to such investments are recognized as deferred income tax assets when there is likely a sufficient taxable income available for realizing a temporary difference and within the expected reverse in the foreseeable future.

The book amount of deferred income tax asset must be reviewed at each balance sheet date. The book amount of those that no longer have any sufficient taxable income to recover all or part of the asset should be adjusted down. Those that are not originally recognized as deferred income tax assets should also be reexamined at each balance sheet date. The book amount of those that are likely to generate taxable income in the future for the recovery of all or part of its assets should be adjusted up.

Deferred income tax assets and liabilities are measured in accordance with the expected liability liquidation or the tax rate in the period when the asset is realized. The tax rate is based on the tax rate and tax laws that are legislated or substantively legislated at the balance sheet date. The measurement of deferred income tax liabilities and assets reflects the tax consequence resulted from the book value of the assets or liabilities expected to be recovered or liquidated on the balance sheet date.

Current and deferred income tax for the year

Current and deferred income taxes are recognized in the profit or loss, except for the current and deferred income taxes related to the items recognized in other comprehensive income or directly included in the equity are recognized in the other comprehensive income or directly included in the equity.

5. Main source of significant accounting judgment, estimates and assumptions uncertainty

The Group at the time of adopting accounting policies, for the information hard to obtain from other sources, should have the relevant judgments, estimates, and assumptions made by the management in accordance with the historical experience and other essential factors. Actual results may differ from the estimates.

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The management will continue to review the estimates and basic assumptions. If the amendment affects only the current estimates, it is recognized in the current period. If the amendment of accounting estimates affects both current and future periods, it is recognized in the respective current and future periods.

6. Cash and cash equivalents

in the respective current and future periods. Cash and cash equivalents
Cash on hand and working capital Bank checks and demand deposits Cash equivalents (Investment with the original maturity date within three months) Bank time deposit	December 31, 2021 $ 1,334 1,523,784 1,519,980 $ 3,045,098	December 31, 2020
			$ 1,341 1,928,983 1,646,619 $ 3,576,943

The deposits in banks showed the following interest rate ranges as of the balance sheet date:

	sheet date:
7.	December 31, 2021 Bank deposits 0.01%~2.50% Financial instruments measured at fair value through profit or loss December 31, 2021 Financial assets–current Measured at fair value through income under compulsion Wealth management products $ 1,232,985 Non-derivative financial assets – Listed stocks – overseas 6,354 $ 1,239,339	December 31, 2020
		0.01%~2.93% December 31, 2020
	Financial assets–current Measured at fair value through income under compulsion Wealth management products Non-derivative financial assets – Listed stocks – overseas
			$ 1,105,608 8,643 $ 1,114,251

8.	Financial assets at fair value through other comprehensive income Equity investment December 31, 2021 Current Domestic investment TSEC/GTSM listed shares Common stock of China Steel Corporation $ - Overseas investment Listed stock D-shares Of Qingdao Haier Co., Ltd. - $ -	Financial assets at fair value through other comprehensive income Equity investment December 31, 2021 Current Domestic investment TSEC/GTSM listed shares Common stock of China Steel Corporation $ - Overseas investment Listed stock D-shares Of Qingdao Haier Co., Ltd. - $ -	December 31, 2020	December 31, 2020
	Equity investment Current Domestic investment TSEC/GTSM listed shares Common stock of China Steel Corporation Overseas investment Listed stock D-shares Of Qingdao Haier Co., Ltd.
				$ 54,906 1,067,276 $ 1,122,182

(Continued on next page)

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(Continued from previous page)

Non-current Domestic investment Unlisted/OTC Common stock of Magnpower Corporation Common stock of Bigbest Solutions, Inc.	December 31, 2021 $ 18,120 - $ 18,120	December 31, 2020	December 31, 2020
			$ 25,500 - $ 25,500

The Group has invested in the common stocks of the above-mentioned companies in accordance with medium and long-term strategic purposes, and expects to make profits through long-term investments. The management of the Group holds that the short-term fluctuation in the fair value of these investments shall be recognized as income or loss and is not congruent with the aforementioned long-term investment plan; therefore, they chose to designate these investments as financial assets at fair value through other comprehensive income.

In the year 2021, the Group has made adjustments in investment positions for diversification of risks, sold D-shares Of Qingdao Haier Co., Ltd. and common stock of China Steel Corporation with fair values of NT$ 1,193,308 thousand and NT$ 88,843 thousand respectively, whereas related other equity - the amount of NT$ 406,578 thousand after deduction of income tax by the unrealized gain on financial assets at fair value through other comprehensive profit or loss was reset to retained earnings.

9. Financial assets based on cost after amortization

Current Restricted cash in banks Time deposits with original maturity date of more than 3 months (2)	December 31, 2021 $ 3,188,575 92,790 $ 3,281,365	December 31, 2020	December 31, 2020
			$ 2,706,359 - $ 2,706,359

(1) For details of financial assets at amortized cost, refer to Note 29.
(2) As of December 31, 2021, the interest rate range of the time deposits with original maturity date of more than 3 months were 0.03%–1.40%.
34 -

10. Note receivable and account receivable

Note receivable and account receivable
Notes receivable Measured on the basis of cost after amortization Total book value Less: Allowance for losses Accounts receivable Measured on the basis of cost after amortization Total book value Less: Allowance for losses Measured at fair values through other comprehensive income	December 31, 2021 $ 3,001,255 ( 2,658) $ 2,998,597 $ 3,176,112 ( 17,067) 3,159,045 330,255 $ 3,489,300	December 31, 2020
	( (	( (	$ 4,563,676 7,255) $ 4,556,421 $ 3,714,982 27,253) 3,687,729 321,092 $ 4,008,821

(1) Accounts receivable based on cost after amortization

The Group’s average credit period for sales open account with net 0 days to 225 days, and no interest is accrued on accounts receivable.

In order to mitigate the credit risk, the Group has formulated credit management measures to regulate the determination of credit limits, credit approval, and other monitoring procedures to ensure that appropriate actions have been taken in the recovery of overdue receivables. In addition, the Group will review the recoverable amount of receivables on each balance sheet date to ensure that appropriate impairment loss has been appropriated for the uncollectible receivables. Under the circumstance, the Company’s management believes that the consolidated company’s credit risk is significantly reduced.

The Group will recognize the lifetime expected credit losses as loss allowance for accounts receivable. The full lifetime expected credit losses are calculated using Provision Matrix, which considers the historical default records and current financial status, industry economic conditions, as well as GDP forecast and industry outlook. Because of the different loss patterns of customer groups in different regions of the Group, the Group uses different provisions matrices for different customer groups by location, and determines the expected credit loss rate by taking into account the number of past due days of accounts receivable and the regional economic situation.

If there is evidence that the counterparty is facing serious financial difficulties and the Group cannot reasonably expect to recover the amount, e.g. the counterparty is in liquidation, then the Group directly writes off the relevant accounts receivable, but will continue to try to collect the receivable. The recovered amount is recognized in profit or loss.

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The Group’s allowance for loss of receivables is determined according to the preparation matrix as follows:

December 31, 2021

Expected credit loss rate Total book value Allowance for loss (expected credit loss of the given duration) Cost after amortization		Not overdue		Overdue for 1 to 30 days	O	verdue for 31 to 60 days	O	verdue for 61 to 90 days	O	verdue for 91 to 120 days	O	verdue for over 121 days		Total
		0%~0.29% $ 2,974,772 ( 4,730) $ 2,970,042		0.49%~13.12% $ 186,584 ( 1,208) $ 185,376	2	2.31%~51.60% $ 3,148 ( 702) $ 2,446	5	2.68%~64.25% $ 52 ( 28) $ 24	7	5.22%~82.01% $ 5,066 ( 4,151) $ 915		77.07%~100% $ 6,490 ( 6,248) $ 242		$ 3,176,112 ( 17,067) $ 3,159,045

December 31, 2020

Expected credit loss rate Total book value Allowance for loss (expected credit loss of the given duration) Cost after amortization		Not overdue		Overdue for 1 to 30days	O	verdue for 31 to 60days	O	verdue for 61 to 90days	O	verdue for 91 to 120days	O	verdue for over 121 days		Total
		0%~0.37% $ 3,559,609 ( 6,564) $ 3,553,045		0.68%~11.44% $ 124,235 ( 1,875) $ 122,360	1	8.36%~32.90% $ 18,285 ( 7,614) $ 10,671	2	0.91%~64.94% $ 2,444 ( 1,578) $ 866	3	3.11%~76.39% $ 1,969 ( 1,194) $ 775		35.60%~100% $ 8,440 ( 8,428) $ 12		$ 3,714,982 ( 27,253) $ 3,687,729

(2) Accounts receivable at fair value through other comprehensive income.

For accounts receivable from specific clients, the Group signed the factoring agreement with financial institutions that determine whether to use non-recourse factoring to sell its receivables to the bank or not to sell regarding working capital. The business model of the Group managing this kind of accounts receivable is to complete its goal through receiving contractual cash flows and selling financial assets. Thus, these kinds of accounts receivable are measured through other comprehensive income in fair value.

December 31, 2021

Not overdue Expected credit loss rate 0.02% Total book value $ 326,462 Allowance for loss (expected credit loss of the given duration) ( 57) Cost after amortization $ 326,405 December 31, 2020 Not overdue Expected credit loss rate 0.03% Total book value $ 321,189 Allowance for loss (expected credit loss of the given duration) ( 97) Cost after amortization $ 321,092	Not overdue	Overdue for 1 to 30 days	O	verdue for 31 to 60 days	O	verdue for 61 to 90 days	O	verdue for 91 to 120 days	O	verdue for over 121 days	Total
		0.49% $ 2,279 ( 11) $ 2,268 Overdue for 1 to 30days	O	22.31% $ 2,036 ( 454) $ 1,582 verdue for 31 to 60days	O	52.68% $ - - $ - verdue for 61 to 90days	O	82.01% $ - - $ - verdue for 91 to 120days	O	82.01%~100% $ - - $ - verdue for over 121 days	$ 330,777 ( 522) $ 330,255 Total
Expected credit loss rate Total book value Allowance for loss (expected credit loss of the given duration) Cost after amortization
	0.03% $ 321,189 ( 97) $ 321,092	0.68% $ - - $ -		32.90% $ - - $ -		64.94% $ - - $ -		76.39% $ - - $ -		90.22%~100% $ - - $ -	$ 321,189 ( 97) $ 321,092

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The information on changes in the allowance for loss on notes receivable and accounts receivable is as follows:

	2021
Notes receivable $ 7,255 ( 4,557 ) - ( 40) $ 2,658	Accounts receivable $ 27,350 ( 9,666 ) ( 12 ) ( 83) $ 17,589 2020	Total
		$ 34,605 ( 14,223 ) ( 12 ) ( 123) $ 20,247
Notes receivable $ 383 6,737 - 135 $ 7,255			Total
		$ 61,493 ( 6,977 ) ( 20,071 ) 160 $ 34,605

As of December 31, 2021 and 2020, the amounts of notes receivable that have expired and have not been cashed were NT$3,989 thousand and NT$21,185 thousand, respectively.

11. Inventory

respectively. Inventory
Finished products Work in process Raw materials Inventory in-transit	December 31, 2021 $ 1,460,336 445,584 579,436 412,629 $ 2,897,985	December 31, 2020
			$ 1,200,795 348,041 508,806 230,138 $ 2,287,780

In 2021 and 2020, the cost of goods sold related to inventory was NT$20,249,123 thousand and NT$17,019,887 thousand, respectively. Cost of goods sold includes inventory valuation losses of NT$14,170 thousand and NT$9,738 thousand.

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12. Subsidiaries

(1) Subsidiaries included in the consolidated financial statements

The business entities of the consolidated financial statements are as follows:

Investor	Subsidiaryname	Nature ofthe operation	Percentage of shareholdings	Percentage of shareholdings	Explanation
			December 31,2021	December 31,2020
Parent company Parent company Parent company Rechi Holdings Co., Ltd. Rechi Holdings Co., Ltd. Rechi Holdings Co., Ltd. Rechi Holdings Co., Ltd. Rechi Holdings Co., Ltd. Rechi Holdings Co., Ltd. Rechi International Holdings Co., Ltd. GR Holdings (Hong Kong) Limited TCL Rechi (Huizhou) Refrigeration Equipment Company Limited Rechi Investments Holdings Co., Ltd. TCL Rechi (Huizhou) Refrigeration Equipment Company Limited Rechi Precision (Qingdao) Electric Machinery Limited Rechi Precision (Jiujiang) Electric Machinery Limited Dyna Rechi Co., Ltd. Dyna Rechi Holdings Co., Ltd. Dyna Rechi Co., Ltd. Ablek Technology Co., Ltd. Ablek Technology Ltd.	Rechi Holdings Co., Ltd. Rechi Investments Co., Ltd. Dyna Rechi Co., Ltd. Rechi International Holdings Co., Ltd. Rechi Investments Holdings Co., Ltd. Dongguan Rechi Compressor Co., Ltd. TCL Rechi (Huizhou) Refrigeration Equipment Company Limited Rechi Precision (Huizhou) Mechanism Company Rechi Precision (Jiujiang) Electric Machinery Limited GR Holdings (Hong Kong) Limited Rechi Refrigeration Dongguan Co., Ltd. Rechi Precision (Huizhou) Mechanism Company Rechi Precision (Qingdao) Electric Machinery Limited Qingdao Rechi Electric Machinery Sales Company Qingdao Rechi Electric Machinery Sales Company Dyna Rechi (Jiujiang) Co., Ltd. Dyna Rechi Holdings Co., Ltd. Dyna Rechi (Jiujiang) Co., Ltd. Ablek Technology Co., Ltd. Ablek Technology Ltd. Ablek Technology Ltd.	Investment business Investment business BLDC Motor Investment business Investment business Production and sales of refrigerant compressors and refrigerant compressor accessories Manufacturing and sales of air-conditioning compressors and electric motors, and providing after-sales service and technical consulting service Production and sales of refrigerant compressors and refrigerant compressor accessories Production and sales of refrigerant compressors and refrigerant compressor accessories Investment business Production and sales of refrigerant compressor motors and air conditioner accessories Production and sales of refrigerant compressors and refrigerant compressor accessories Production and sales of new electromechanical components, fine blanking dies, precision bearings, and relevant accessories Sales business Sales business Production and sales of refrigerant compressor motors and BLDC motors Investment business Production and sales of refrigerant compressor motors and BLDC motors Sales business Investment business Manufacturing and sales of motors for household appliances	100.00% 100.00% 42.20% 100.00% 100.00% 100.00% 77.78% 25.00% 100.00% 100.00% 100.00% 67.86% 100.00% 50.00% 50.00% 35.50% 100.00% 64.50% 100.00% 100.00% 100.00%	100.00% 100.00% 42.20% 100.00% 100.00% 100.00% 77.78% 25.00% 100.00% 100.00% 100.00% 67.86% 100.00% 50.00% 50.00% 35.50% 100.00% 64.50% 100.00% 100.00% 100.00%	(1)`、`(2) (1)

(1) Information on the significant subsidiaries with non-controlling interests.
(2) Though the Company holds 42.20% of shares from Dyna Rechi Co., Ltd., but has obtained more than half of the board seats, which provide the Company the ability to direct the relevant activities of Dyna Rechi Co., Ltd., therefore, has listed it as the subsidiary of the Company.
(2) Information of the significant but non-controlling equity in subsidiaries

Subsidiary name TCL Rechi (Huizhou) Refrigeration Equipment Company Limited Dyna Rechi Co., Ltd.	Principal places of business	Non-controlling equity shareholding and voting right ratio	Non-controlling equity shareholding and voting right ratio
		December 31, 2021 22.22% 57.80%	December 31, 2020
	China Taiwan		22.22% 57.80%

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Subsidiary name TCL Rechi (Huizhou) Refrigeration Equipment Company Limited (excluding non-controlling interests of its subsidiaries) Dyna Rechi Co., Ltd. (excluding non-controlling interests of its subsidiaries) Others Total		Profit and loss distributed to the non-controlling equity 2021 2020 $ 34,466 $ 47,653 59,431 ) ( 35,102 ) 158 602 $ 24,807) $ 13,153	Profit and loss distributed to the non-controlling equity 2021 2020 $ 34,466 $ 47,653 59,431 ) ( 35,102 ) 158 602 $ 24,807) $ 13,153	Uncontrolled equity	Uncontrolled equity	Uncontrolled equity
		2021 $ 34,466 59,431 ) 158 $ 24,807)		December 31, 2021 $ 692,709 610,542 107,257 $ 1,410,508	December 31, 2020
	( (		(			$ 661,780 672,110 107,674 $ 1,441,564

non-controlling interests of its subsidiaries) ( 59,431 ) ( 35,102 ) 610,542 672,110 Others 158 602 107,257 107,674 Total ($ 24,807) $ 13,153 $ 1,410,508 $ 1,441,564	non-controlling interests of its subsidiaries) ( 59,431 ) ( 35,102 ) 610,542 672,110 Others 158 602 107,257 107,674 Total ($ 24,807) $ 13,153 $ 1,410,508 $ 1,441,564	non-controlling interests of its subsidiaries) ( 59,431 ) ( 35,102 ) 610,542 672,110 Others 158 602 107,257 107,674 Total ($ 24,807) $ 13,153 $ 1,410,508 $ 1,441,564
The summarized financial information of subsidiaries is based on the amount before writing off the intercompany transactions: TCL Rechi (Huizhou) Refrigeration Equipment Company Limited and Its Subsidiaries December 31, 2021 December 31, 2020 Current assets $ 5,165,913 $ 5,267,977 Non-Current assets 1,121,314 1,114,902 Current liabilities ( 2,669,240 ) ( 2,907,362 ) Non-current liabilities ( 17,954) ( 12,785) Equity $ 3,600,033 $ 3,462,732 Equity attributable to: The company’s shareholders $ 2,800,050 $ 2,693,260 Non-controlling interests of TCL Rechi (Huizhou) Refrigeration Equipment Company Limited 692,709 661,780 Non-controlling interests of the subsidiaries of TCL Rechi (Huizhou) Refrigeration Equipment Company Limited 107,274 107,692 $ 3,600,033 $ 3,462,732 2021 2020 Operating income $ 5,696,090 $ 5,489,177 Net profits of the current year $ 155,808 $ 217,148 Other comprehensive income - - Total comprehensive income $ 155,808 $ 217,148
Subsidiaries Current assets Non-Current assets Current liabilities Non-current liabilities Equity Equity attributable to: The company’s shareholders Non-controlling interests of TCL Rechi (Huizhou) Refrigeration Equipment Company Limited Non-controlling interests of the subsidiaries of TCL Rechi (Huizhou) Refrigeration Equipment Company Limited Operating income Net profits of the current year Other comprehensive income Total comprehensive income	December 31, 2021 $ 5,165,913 1,121,314 ( 2,669,240 ) ( 17,954) $ 3,600,033 $ 2,800,050 692,709 107,274 $ 3,600,033 2021 $ 5,696,090 $ 155,808 - $ 155,808

(Continued on next page)

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(Continued from previous page)

2021 Total comprehensive income attributable to: The company’s shareholders $ 121,184 Non-controlling interests of TCL Rechi (Huizhou) Refrigeration Equipment Company Limited 34,466 Non-controlling interests of the subsidiaries of TCL Rechi (Huizhou) Refrigeration Equipment Company Limited 158 $ 155,808 Cash flow Operating activities $ 66,138 Investing ( 95,808 ) Financing 6,022 Effect of foreign exchange rates changes on cash ( 4,634) Net cash inflow (outflow) ($ 28,282) Dividends paid to non-controlling interests TCL Rechi (Huizhou) Refrigeration Equipment Company Limited $ - Subsidiaries of TCL Rechi (Huizhou) Refrigeration Equipment Company Limited $ - Dyna Rechi Co., Ltd. and Its Subsidiaries December 31, 2021 Current assets $ 1,350,818 Non-Current assets 1,812,706 Current liabilities ( 1,642,038 ) Non-current liabilities ( 35,415) Equity $ 1,486,071 Equity attributable to: The company’s shareholders $ 875,529 Non-controlling interests of Dyna Rechi Co., Ltd. 610,542 $ 1,486,071		2020
	$ 168,893 47,653 602 $ 217,148 $ 899,114 250,256 ( 519,065 ) 15,552 $ 645,857 $ 110,787 $ - December 31, 2020
Current assets Non-Current assets Current liabilities Non-current liabilities Equity Equity attributable to: The company’s shareholders Non-controlling interests of Dyna Rechi Co., Ltd.
	$ 1,138,340 1,914,293 ( 1,419,652 ) ( 43,729) $ 1,589,252 $ 917,142 672,110 $ 1,589,252

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			2021		2020
	Operating income	$ 3,028,792		$ 2,507,530
	Net loss of the current year	( $	97,206 )	( $	33,335 )
	Other comprehensive income	(	5,975)		17,484
	Total comprehensive income	($	103,181)	($	15,851)
	Net income (loss) attributable
	to:
	The company’s shareholders	( $	37,775 )	$	1,767
	Non-controlling interests of
	Dyna Rechi Co., Ltd.	(	59,431)	(	35,102)
		($	97,206)	($	33,335)
	Total comprehensive income
	attributable to:
	The company’s shareholders	$	41,613	$	13,001
	Non-controlling interests of
	Dyna Rechi Co., Ltd.	(	61,568)	(	28,852)
		($	103,181)	($	15,851)
	Cash flow
	Operating activities	$	136,665	$	325,543
	Investing	(	126,977 )	(	202,444 )
	Financing		14,804	(	82,435 )
	Effect of foreign exchange
	rates changes on cash	(	1,665)		5,020
	Net cash inflow	$	22,827	$	45,684
	Dividends paid to
	non-controlling interests
	Dyna Rechi Co., Ltd.	$	-	$	-
	Subsidiaries of Dyna Rechi
	Co., Ltd.	$	-	$	-
13.	Investment under the equity method
	Investments in the affiliated company
		December 31, 2021		December 31, 2020
	Individual non-dominant associates
	Qingdao China Steel Precision
	Metal Co., Ltd.	$	179,748	$	184,100
	Jiangxi Baida Precision
	Manufacturing Corp.		326,466		334,132
		$	506,214	$	518,232

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Summarized information of individually immaterial associates.

Share of the Group Net profits of the current year Other comprehensive income of the current year		2021 $ 3,776 $ -		2020
				$ 1,368 $ -

The share of profits and losses and other comprehensive income on affiliated companies under the equity method is recognized based on the affiliated companies’ financial statements that have been audited by auditors during the same period.

14. Real property, plant and equipment

Cost Balance as of January 1, 2020 Additions Disposition Net exchange differences Other reclassification Balance as of December 31, 2020 Accumulated depreciation and impairment Balance as of January 1, 2020 Depreciation expenses Disposition Net exchange differences Other reclassification Balance as of December 31, 2020 Net amount as of December 31, 2020 Cost Balance as of January 1, 2021 Additions Disposition Net exchange differences Other reclassification Balance as of December 31, 2021 Accumulated depreciation and impairment Balance as of January 1, 2021 Depreciation expenses Disposition Net exchange differences Other reclassification Balance as of December 31, 2021 Net amount as of December 31, 2021	Proprietaryland	Proprietaryland	Building	Machinery and equipment	Otherequipment		Construction in progress	Total
		$ 207,567 - - - - $ 207,567 $ - - - - - $ - $ 207,567 $ 207,567 - - - - $ 207,567 $ - - - - - $ - $ 207,567	$ 3,646,406 57,005 ( 47,317 ) 41,372 111,346 $ 3,808,812 $ 1,251,887 134,929 ( 47,317 ) 13,406 - $ 1,352,905 $ 2,455,907 $ 3,808,812 47,545 ( 29 ) ( 16,352 ) 368,647 $ 4,208,623 $ 1,352,905 132,379 ( 29 ) ( 6,398 ) 301 $ 1,479,158 $ 2,729,465	$ 8,488,796 249,033 ( 777,302 ) 130,006 533,811 $ 8,624,344 $ 4,923,773 602,205 ( 703,441 ) 75,709 134 $ 4,898,380 $ 3,725,964 $ 8,624,344 162,957 ( 106,329 ) ( 44,677 ) 262,280 $ 8,898,575 $ 4,898,380 634,405 ( 97,169 ) ( 25,832 ) - $ 5,409,784 $ 3,488,791	$ 1,659,377 45,748 ( 184,155 ) 15,551 13,452 $ 1,549,973 $ 1,087,042 128,448 ( 178,529 ) 9,943 ( 134) $ 1,046,770 $ 503,203 $ 1,549,973 39,868 ( 24,348 ) ( 5,345 ) 30,276 $ 1,590,424 $ 1,046,770 130,632 ( 23,533 ) ( 3,355 ) ( 301) $ 1,150,213 $ 440,211	$ 467,578 50,963 - 6,146 ( 112,451) $ 412,236 $ - - - - - $ - $ 412,236 $ 412,236 169 - ( 2,186 ) ( 409,668) $ 551 $ - - - - - $ - $ 551		$ 14,469,724 402,749 ( 1,008,774 ) 193,075 546,158 $ 14,602,932 $ 7,262,702 865,582 ( 929,287 ) 99,058 - $ 7,298,055 $ 7,304,877 $ 14,602,932 250,539 ( 130,706 ) ( 68,560 ) 251,535 $ 14,905,740 $ 7,298,055 897,416 ( 120,731 ) ( 35,585 ) - $ 8,039,155 $ 6,866,585

Depreciation expenses is appropriated in accordance with the straight-line method and the years of useful life illustrated below:

rs of useful life illustrated below:
Buildings
Plant building	10 to 55 years
Electromechanical power
equipment	5 to 35 years
Engineering systems	2 to 55 years
Others	3 to 35 years
Machinery and equipment	1 to 20 years
Other equipment	1 to 20 years

42 -

Please refer to Note 29 for the amount of property, plant and equipment pledged as guarantees for borrowings.

15. Lease arrangements

(1) Right-of-use assets.

arantees for borrowings. arrangements Right-of-use assets.
Carrying amount of right-of-use assets Land Buildings Transportation equipment Addition of right-of-use assets Depreciation expense of right-of-use assets Land Buildings Transportation equipment	December 31, 2021 $ 150,833 35,863 2,103 $ 188,799 2021 $ 5,161 $ 4,404 11,467 752 $ 16,623	December 31, 2020
			$ 156,015 44,681 574 $ 201,270 2020
			$ 45,878 $ 4,346 6,285 617 $ 11,248

(2) Lease liabilities

Lease liabilities
Carrying amount of lease liabilities Current Non-current	December 31, 2021 $ 12,438 $ 37,131	December 31, 2020
			$ 10,720 $ 45,557

The range of lease liability discount is as follows:

Land Buildings Transportation equipment	December 31, 2021 2.70% 1.35%~2.20% 1.35%~2.70%	December 31, 2020
		2.70% 1.35%~2.20% 1.35%~2.70%

(3) Important rental activities and terms

The Group leases land located in Mainland China for a lease term of 50 years. All rents have been paid at the time of the lease, and when the lease term is terminated, the Group has no preferential right to acquire the land leased.

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(4) Other lease information

The Group has leased out part of the plant buildings, dormitories, machinery, and equipment, etc., under operating leases, with lease terms of 1 to 5 years.

Short-term lease expense Variable lease payments not included in lease liability measurement Total cash (outflow) of leases		2021 $ 5,962 $ 11,739 $ 30,515)		2020
	(			$ 10,681 $ 15,855 $ 34,034)

The Group has elected to apply the recognition exemption for leases of dormitories and other equipment that meet short-term leases, and, thus, did not recognize said leases in right-of-use assets and lease liabilities.

16. Other assets

her assets
Current Prepayment for purchase Other prepayments (Note) Others Non-current Prepayments for equipment Refundable deposits	December 31, 2021 $ 456,492 586,322 25,056 $ 1,067,870 $ 206,365 35,275 $ 241,640	December 31, 2020
			$ 353,603 408,242 26,310 $ 788,155 $ 364,403 40,080 $ 404,483

Note: Others refer to input tax, retained tax credit, and other prepayments.

17. Loans

(1) Short-term borrowings

Short-term borrowings
Unsecured loans – Credit borrowings Interest rate collars – Unsecured borrowings	December 31, 2021 $ 612,380 0.77%~1.13%	December 31, 2020
		$ 1,862,583 0.80%~3.65%

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(2) Short-term notes payable

December 31, 2021 December 31, 2020 Commercial papers payable $ 350,000 $ 650,000 Less: Discount of short-term notes and bills payable ( 302 ) ( 307 ) $ 349,698 $ 649,693

The short-term notes payable not due yet are enumerated below:

December 31, 2021

Guarantee/underwriting institutions	Face amount	Face amount		Discounted amount		Book value	Interest rate collars	Collateral	Collateral Book amount	Collateral Book amount
Commercial papers payable China Bills Finance Corporation International Bills Finance Corporation Ta Ching Bills Finance Corporation Mega Bills Finance Co., Ltd.		$ 70,000 200,000 30,000 50,000 $ 350,000		$ 8 217 62 15 $ 302		$ 69,992 199,783 29,938 49,985 $ 349,698	Note Note Note Note	－－－－		- - - - $ -

Note: Interest rate range is 1.14%–1.20%.

December 31, 2020

Guarantee/underwriting institutions	Face amount	Face amount		Discounted amount		Book value	Interest rate collars	Collateral	Collateral Book amount	Collateral Book amount
Commercial papers payable Taiwan Finance Corporation China Bills Finance Corporation Dah Chung Bills Finance Corp. International Bills Finance Corporation Ta Ching Bills Finance Corporation Mega Bills Finance Co., Ltd.		$ 100,000 190,000 100,000 190,000 20,000 50,000 $ 650,000		$ 33 41 35 102 3 93 $ 307		$ 99,967 189,959 99,965 189,898 19,997 49,907 $ 649,693	Note Note Note Note Note Note	－－－－－－		$ - - - - - - $ -

Note: Interest rate range is 0.90–1.17%.

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(3) Long-term borrowings

Secured loans (Note 29) Mega International Commercial Bank Unsecured loans USD loans from Taichung Commercial Bank Co., Ltd. USD loans from Land Bank of Taiwan Jih Sun International Commercial Bank Far Eastern International Bank Co., Ltd. Bank of Taiwan Yuanta Bank Mizuho Bank Chang Hwa Commercial Bank, Ltd. Chang Hwa Commercial Bank, Ltd. Chang Hwa Commercial Bank, Ltd. Less: Current portion Long-term borrowings	Date of maturity	Material terms From July 26, 2019 to July 26, 2024, NT$1,600,000 thousand was drawn down, and will be repaid in a lump sum upon maturity. From June 24, 2020 to June 24, 2022, US$9,000 thousand was drawn down, which was repaid early in November 2021; from November 16, 2021 to November 16, 2023, US$9,000 thousand was drawn down, and will be repaid in a lump sum upon maturity. From April 15, 2020 to April 15, 2022, NT$ 8,000 thousand was drawn down, and will be repaid in a lump sum upon maturity. From June 19,2020 to June 19, 2022, NT$400,000 thousand was drawn down, which was repaid early in February and November in the year 2021, respectively; from November 26, 2021 to November 24, 2023, US$10,000 thousand was drawn down, and will be repaid in a lump sum upon maturity. From August 8, 2019 to April 26, 2022 and repaid early in June 2021. From November 26, 2021 to May 5, 2024, NT$200,000 thousand was drawn down, and will be repaid in a lump sum upon maturity. From July 21, 2020 to July 21, 2022, NT$100,000 thousand was drawn down, which was repaid early in January 2021. From December 25, 2020 to December 23, 2022, NT$300,000 thousand was drawn down, which was repaid early in September 2021. From December 25, 2019, to December 25, 2022, NT$200,000 thousand was drawn down, which was amortized in four terms starting from March 25, 2022, and was repaid early in February 2021. The amounts of NT$86,000 thousand, NT$10,000 thousand, and NT$24,780 thousand were drawn down on October 15, 2019, February 5, 2020, and April 6, 2020, respectively, and the principal and interest will be amortized and repaid monthly from November 15, 2022. The amounts of NT$64,300 thousand, NT$69,000 thousand, NT$74,000 thousand, and NT$71,000 thousand were drawn down on February 26, 2020, April 13, 2020, June 22, 2020, and August 24, 2020, respectively, and the principal and interest will be amortized and repaid monthly from March 15, 2023.	December 31, 2021 $ 1,600,000 249,120 221,440 10,000 - 200,000 - - - 120,780 278,300 2,679,640 ( 225,754) $ 2,453,886	December 31, 2020	December 31, 2020
	2024.07.26 2023.11.16 2022.04.15 2023.11.24 2022.04.26 2024.05.05 2022.07.21 2022.12.23 2022.12.25 2029.10.15 2027.02.15		(		$ 1,600,000 256,320 227,840 400,000 200,000 - 100,000 300,000 200,000 120,780 278,300 3,683,240 - $ 3,683,240

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The effective interest rate as of December 31, 2021 and 2020 was 0.63%–1.50% and 0.74%– 1.50%, respectively.

The Company has taken out loans from Jih Sun International Commercial Bank, Chang Hwa Commercial Bank, Ltd., and Mega International Commercial Bank. The contracts also stated four commitments based on the Company’s consolidated financial statements: 1. The current ratio shall be maintained at 100% or more. 2. The debt ratio shall be maintained below 200—250% (inclusive) or lower. 3. The interest coverage ratio shall be maintained above 2–2.5 times (inclusive). 4. The net value of tangible assets shall be maintained at NT$5,000,000 thousand or more. The company’s consolidated financial statements have satisfied said commitments.

(4) Long-term notes payable

Long-term notes payable
Commercial papers payable Less: Discount of long-term notes payable	December 31, 2021 $ 650,000 ( 537) $ 649,463	December 31, 2020
	(	(	$ 1,000,000 454) $ 999,546

The Company and the International Bills Finance Corporation signed a bank-guaranteed commercial paper revolving credit line and underwriting contract, allowing the Company to issue a 90-day bank-guaranteed commercial paper with a revolving credit line within a 5-year period. The Company drew down the underwriting facility of NT$700,000 thousand as of November 18, 2019, with contract expiration dated November 11, 2024, of which NT$350,000 thousand was repaid early by December 24, 2021.
The Company and the Ta Ching Bills Finance Corporation signed a bank-guaranteed commercial paper revolving credit line and underwriting contract, allowing the Company to issue a 90-day bank-guaranteed commercial paper with a revolving credit line within a 5-year period. The Company drew down the underwriting facility of NT$300,000 thousand as of December 25, 2019, and the contract expiration date was November 29, 2024.
The effective interest rate for long-term notes payable as of December 31, 2021 and 2020 was 1.34%–1.39% and 1.34%–1.40%, respectively.

18. Other payables

Other payables
Salary and bonus payables Remuneration to employees and directors payable Payable tax Vacation benefit payable Equipment payables Others (Note)	December 31, 2021 $ 268,917 100,870 18,282 24,248 88,974 374,936 $ 876,227	December 31, 2020
			$ 334,410 121,756 13,565 15,205 82,971 308,913 $ 876,820

Note: Others are freight, commission, interest, and utilities expenses payable.

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19. Retirement benefits plan

(1) Defined contribution pension plan

The Company and Dyna Rechi Co., Ltd. in the Group have adopted a pension plan under the Labor Pension Act (LPA), which is a state-managed defined contribution plan. Under the LPA, the Company makes monthly contributions to employees’ individual pension accounts at 6% of monthly salaries and wages.

The employees of the Group’s subsidiaries in Mainland China are members of the retirement benefit plan managed by the Mainland China government. The subsidiaries must contribute a specific proportion of the salary cost to the retirement benefit plan to provide funding for the plan. The Group’s obligation for this government-managed retirement benefit plan is only to contribute a specific amount.

(2) Defined benefit plan

The company within the Group has a pension plan arranged in accordance with the “Labor Standard Law” of the Republic of China that was a defined benefit pension plan. Pension payment is calculated in accordance with the years of service and the average salary six months prior to the authorized retirement date. The company has a pension appropriated for an amount equivalent to 4% of the monthly salary and the proceeds are deposited in the designated account with Taiwan Bank in the name of the Labor Pension Reserve Commission. If the account balance before yearend is expected to be insufficient for paying the retiring employees of the year, the amount of difference should be appropriated in a lump sum before the end of March in the following year. The special account has been commissioned to the Bureau of Labor Fund of the Ministry of Labor Affairs for management. The Company contained in the financial statements exercises no influence on the right of the bureau in its investment management strategy.

The amount of determined benefit plan recognized in the consolidated balance sheet is shown below:

sheet is shown below:
Present value of the defined benefit obligations The fair value of plan assets Net defined benefit liability	December 31, 2021 $ 147,803 ( 94,178) $ 53,625	December 31, 2020
	(	(	$ 146,565 94,312) $ 52,253

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Change in net defined benefit liability is shown below

Balance as of January 1, 2020 Service costs Current service cost Interest expenses (revenues) Recognized in the profit or loss Reevaluation Planned ROE (except the amount of net interest) Actuarial losses (gains) – Changes in demographic assumptions – Changes in financial assumptions – Experience adjustments Recognized in the other comprehensive profit of loss Employer appropriation Benefits paid Balance as of December 31, 2020 Balance as of January 1, 2021 Service costs Current service cost Interest expenses (revenues) Recognized in the profit or loss Reevaluation Planned ROE (except the amount of net interest) Actuarial losses (gains) – Changes in demographic assumptions – Changes in financial assumptions – Experience adjustments Recognized in the other comprehensive profit of loss Employer appropriation Benefits paid Balance as of December 31, 2021	Present value of the defined benefit obligations $ 162,599 1,953 1,219 3,172 - 98 3,619 ( 247) 3,470 - ( 22,676) $ 146,565 $ 146,565 1,533 732 2,265 - 4,005 ( 1,739 ) 4,071 6,337 - ( 7,364) $ 147,803	The fair value of plan assets ($ 107,872) - ( 812) ( 812) ( 4,106 ) - - - ( 4,106) ( 4,198 ) 22,676 ($ 94,312) ($ 94,312) - ( 473) ( 473) ( 1,361 ) - - - ( 1,361) ( 5,396 ) 7,364 ($ 94,178)	Net defined benefit liability
			$ 54,727 1,953 407 2,360 ( 4,106 ) 98 3,619 ( 247) ( 636) ( 4,198 ) - $ 52,253 $ 52,253 1,533 259 1,792 ( 1,361 ) 4,005 ( 1,739 ) 4,071 4,976 ( 5,396 ) - $ 53,625

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The recognized loss of determined benefit plans by function is summarized below:

below:
Operating cost Marketing expenses Administrative expenses Research and development expenses		2021 $ 149 32 1,571 40 $ 1,792		2020
				$ 159 27 2,105 69 $ 2,360

The pension fund system of the company contained in the financial statements is exposed to the following risks due to the “Labor Standards Act”:

Investment risk: The Bureau of Labor Fund of the Ministry of Labor Affairs uses the labor pension fund for investment in domestic and foreign equity securities and debt securities, and as bank deposits through proprietary trade or commissioned third parties. However, the amount attributable to the planned asset of the Company contained in the financial statements shall not fall below the interest rate offered by the banks in the regions or countries of investment for 2-year time deposit as return.
Interest rate risk: The decline in interest rates of government bonds will cause the present value of the defined benefit obligations to go up; however, the return on debt investment of the plan assets will go up too; therefore, they both have a partial write-off effect on the net defined benefit liability.
Salary risk: the calculation of the present value of determined benefit obligation is based on the salaries of the members in the plan of the future. As such, an increase of the salaries of the members of the plan is bound to increase the present value of determined benefit obligation.

The determined benefit obligation of the company contained in the financial statements is based on the actuarial calculation of the actuary and the major assumption as of the evaluation day is shown below:

Discounted rate The expected rate of increase in salaries	December 31, 2021 0.625% 2.000%	December 31, 2020
		0.500% 2.000%

In case of reasonable and possible change in the major actuarial assumptions, and other assumptions remained unchanged, the amount of increase (decrease) in the present value of determined benefit obligation will be:

Discounted rate Increase by 0.25% Decrease by 0.25% The expected rate of increase in salaries Increase by 0.25% Decrease by 0.25%	December 31, 2021 ($ 3,470) $ 3,597 $ 3,486 ($ 3,381)	December 31, 2020	December 31, 2020
	( (	( (	$ 3,619) $ 3,756 $ 3,634 $ 3,521)

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Actuarial assumptions may be inter-related. The possibility of change in specific assumption is not high. The aforementioned sensitivity analysis may not be able to reflect the actual change in the present value of determined benefit obligation.

Amount projected for appropriation in 1 year Average maturity of determined benefit obligation y Share capital Common stock Authorized number of shares (thousand shares) Authorized capital Number of shares issued with fully paid-in capital (thousand shares) Outstanding capital	December 31, 2021 $ 2,000 9.5 years December 31, 2021 600,000 $ 6,000,000 504,915 $ 5,049,151	December 31, 2020	December 31, 2020
		$ 600 9.9 years December 31, 2020
			600,000 $ 6,000,000 504,915 $ 5,049,151

20. Equity

(1) Share capital

Common stock shares issued at NTD 10 Par and each share is entitled to one voting right and dividends.

The Company’s board of directors resolved on December 23, 2019 to take January 3, 2020 as the record date for capital reduction and to cancel 1,098 thousand treasury shares. After the capital reduction, the actual paid-in capital was NT$5,049,151 thousand.

(2) Capital reserve

NT$5,049,151 thousand. Capital reserve
May be used to offset a deficit, distributed as cash dividends, or transferred to share capital (1) Other capital surplus of shares Corporate bond conversion premium Endowments For covering loss carried forward only. Gains on disposal of assets Recognition of changes in ownership interests of subsidiaries (2) Others	December 31, 2021 $ 279,956 1,050,383 1,651 21 11,693 164 $ 1,343,868	December 31, 2020
			$ 279,956 1,050,383 1,651 21 11,693 164 $ 1,343,868

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(1) Such additional paid-in capital can be used to make up for losses; also, when the company is without any loss, it can be applied for cash distribution or capitalization. However, it is limited to a certain percentage of the annual paid-in capital for the purpose of capitalization.
(2) Such capital reserves are the effects of equity transactions recognized due to the changes in a subsidiary’s equity when the Company has not actually acquired or disposed of the equity of the subsidiary.
(3) Retained earnings and Dividend Policy

According to the earnings distribution policy of the Company’s Articles of Association, if there are earnings in the Company’s annual final accounts, the Company shall pay taxes, compensate the accumulated losses over the years, set aside 10% as a statutory surplus reserve, and then appropriate or reverse a special surplus reserve according to laws or regulations of the competent authority. Special surplus reserve; if there are still earnings available, together with the accumulated undistributed earnings, the board of directors shall put forward an earnings distribution proposal and submit it to the shareholders’ meeting for a resolution to distribute dividends to shareholders. Please refer to Note 22 (7) regarding the policy for remuneration to the employees and the directors as stipulated in the Company’s Articles of Association.

For the Company’s need for sustainable operation and business growth and to take into account the maintenance of profitability, the Company’s capital budget plan is adopted to measure the capital needs of the following years. The board of directors drafts a shareholders’ dividend distribution plan according to the law every year and submits it to the shareholders’ meeting. Shareholders’ dividends are distributed in two ways: cash dividends and stock dividends. The cash dividends must not be less than 10% of the total dividends distributed, and the rest are stock dividends.

Legal reserve shall be allocated up to the amount equivalent to the paid-in capital of the company. Legal reserve could be allocated for covering loss carried forward. If there is no loss, the amount of legal reserve in excess of the paid-in capital by 25% could be allocated as capital stock and paid out as cash dividend.

The Company has a special reserve appropriated and reversed in accordance with FSC.Certificate.Issue.Tzi No. 1010012865 Letter, FSC.Certificate.Issue.Tzi No. 1010047490 Letter, and “Special reserve appropriation Q&A after the adoption of International Financial Reporting Standards (IFRSs).”

The Company held annual shareholders’ meetings on August 26, 2021 and June 16, 2020, which resolved to pass the 2020 and 2019 earnings distribution proposals, respectively, as follows:

Legal reserve appropriated Special reserve appropriated (reversed) Cash dividends	Distribution of retained earnings 2020 2019 $ 69,425 $ 65,596 ( 456,146 ) 335,833 353,427 252,458	Dividend Per Share (NTD)	Dividend Per Share (NTD)
	2020 $ 69,425 ( 456,146 ) 353,427	2020 $ 0.7	2019
			$ 0.5

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On March 16, 2022, the board of directors proposed the 2021 earnings distribution proposal as follows:

distribution proposal as follows:
Legal reserve appropriated Special reserve appropriated Cash dividends	Distribution of retained earnings $ 94,552 332,733 349,927	Dividend Per Share (NTD)
		$ 0.7

The 2021 earnings distribution proposal is pending a resolution by the shareholders’ meeting scheduled to be held on June 15, 2022.

(4) Special surplus reserves

A special surplus reserve appropriated because of the first-time adoption of IFRSs for the exchange differences on translation of the financial statements of foreign operations (including subsidiaries) is reversed based on the percentage of the Company’s disposal. When the Company loses significant influence, said reserve will be fully reversed. When distributing the earnings, a special surplus reserve shall be appropriated for the difference between the net deduction of other shareholders’ equity and the special surplus reserve for the first-time application of IFRSs at the end of the reporting period. If the amount debited to the other shareholders’ equity is reversed subsequently, the reversed amount can be distributed.

As of December 31, 2021 and 2020, the special surplus reserve provided by the Company in accordance with Letter Jin Guan-Zheng-Fa No. 1010012865 was NT$743,222 thousand and NT$1,199,368 thousand, respectively.

(5) Other equity
Exchange differences from the translation of financial statements of foreign operations

operations
Balance, beginning of year Generated in current year Exchange differences on translation of foreign operations Relating income tax Balance, end of year	2021 ( $ 961,534 ) ( 65,677 ) 13,136 ($ 1,014,075)	2020
		( $ 1,075,561 ) 142,534 ( 28,507) ($ 961,534)

Unrealized gain on financial assets at fair value through other comprehensive profit or loss

profit or loss
Balance, beginning of year Generated in current year Unrealized gains or losses on equity instruments Cumulative unrealized gain (loss) of equity instruments transferred to retained earnings due to disposal Balance, end of year		2021 $ 218,312 126,386 406,578) $ 61,880)	2020
	( (		( $ 123,807 ) 342,119 - $ 218,312

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(6) Non-controlling interests

Non-controlling interests
Balance, beginning of year Net income (loss) Other comprehensive income of the current year Exchange differences from the translation of financial statements of foreign operations Relating income tax Cash dividend to the subsidiary’s shareholders Balance, end of year Treasury shares Cause Number of shares on January 1, 2020 Increase in current period Decrease in current period Number of shares on December 31, 2020 Number of shares on January 1, 2021 Increase in current period Number of shares on December 31, 2021	2021 $ 1,441,564 ( 24,807 ) ( 6,783 ) 534 - $ 1,410,508	2020
		$ 1,524,723 13,153 16,037 ( 1,562 ) ( 110,787) $ 1,441,564 Transfer of shares to employees (Thousand shares)
			1,098 20 ( 1,098) 20 20 5,000 5,020

(7) Treasury shares

The company’s Treasury stock may not be pledged in accordance with the Security and Exchange Law; moreover, it is without the privilege of dividend and voting right.

21. Income

(1) Revenue from contracts with customer

Product type Commodity sales revenue Compressors BLDC motors Others		2021 $ 21,645,753 500,408 455,440 $ 22,601,601		2020
				$ 18,471,937 500,871 347,154 $ 19,319,962

(2) Refund liability

Based on historical experience and contract conditions, the Group’s estimated refund liability for sales returns and discounts in 2021 and 2020 was NT$486,120 thousand and NT$776,240 thousand, respectively. As of December 31, 2021 and

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2020, the balance of the refund liability was NT$481,107 thousand and NT$610,010 thousand, respectively.

22. Business units in continuing operation income

thousand, respectively. Business units in continuing operation income
(1) Interest revenue 2021 Bank deposits $ 102,148 (2) Other income 2021 Rent revenue Other operating leases (Note 15) $ 19,569 Dividend income Financial assets at fair value through profit and loss 136 Investment of equity instruments at fair value through other comprehensive income 8,069 Others (Note 25) 46,955 $ 74,729 (3) Other profits and losses 2021 Financial assets mandatorily measured at fair value through profit or loss $ 55,961 Net foreign exchange gain (loss) ( 27,290 ) Gains (losses) on disposal of property, plant and equipment and prepaid rents ( 6,037 ) Others ( 9,694) ( $ 12,940 The components of financial assets at FVTPL are as follows: 2021 Interest income from wealth management products $ 58,250 The net profit (losses) on the changes in fair value of shares ( 2,289) $ 55,961		2020
		$ 74,693 2020
		$ 16,705 90 31,568 103,027 $ 151,390 2020
		$ 44,877 52,804 2,252 2,493) $ 97,440 2020
		$ 42,809 2,068 $ 44,877

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(4) Financial costs Interest from bank borrowings Interest on lease liabilities Other financial costs (5) Depreciation and amortization Consolidation of depreciation expenses based on functions Operating cost Operating expenses Consolidation of amortization expenses based on functions Operating cost Operating expenses (6) Employee benefits expenses Retirement benefits Defined contribution pension plan Defined benefit plan (Note 19) Other employee benefits Total employee benefits expenses Consolidation based on functions Operating cost Operating expenses		2021 $ 76,227 1,179 6,988 $ 84,394 2021 $ 774,134 139,905 $ 914,039 $ 699 9,782 $ 10,481 2021 $ 12,536 1,792 14,328 2,089,203 $ 2,103,531 $ 1,478,931 624,600 $ 2,103,531		2020
				$ 148,089 757 7,835 $ 156,681 2020
				$ 730,891 145,939 $ 876,830 $ 527 9,102 $ 9,629 2020
				$ 12,150 2,360 14,510 1,936,189 $ 1,950,699 $ 1,308,821 641,878 $ 1,950,699

(7) Remuneration to the employees and the directors

According to the Company’s Articles of Association, based on the current year’s pre-tax income before deduction of the remuneration to employees and directors, no less than 1% and no greater than 8% of the balance is allocated as remuneration to employees, and no more than 3% for remuneration to directors. For 2021 and 2020, the remuneration to employees and directors was estimated based on

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the aforementioned pre-tax profit and the possible distributable amount according to the past experience.

The remuneration to employees and directors for 2021 and 2020 was resolved by the board of directors on March 16, 2022 and March 22, 2021, respectively, as follows:

Amount

follows: Amount
Remuneration to employees Remuneration to directors	2021 Cash Stock $ 35,334 $ - 11,277 -	2020
	Cash $ 35,334 11,277	Cash $ 49,441 14,262	Stock
			$ - -

If there are still changes in the amount specified in the consolidated financial statement after announcement, proceed to the accounting of change and adjusted for booking in the next fiscal year.

There is no difference between the remuneration to employees and directors actually distributed for 2020 and 2019 and the amount recognized in the consolidated financial statements for 2020 and 2019.

For information on the remuneration to employees and directors as resolved by the Company’s board of directors for 2021 and 2020, please visit the Market Observatory Post System of the Taiwan Stock Exchange.

(8) Foreign exchange gain (loss)

Foreign exchange gain (loss)
Total foreign exchange gains Total foreign exchange gain (loss) Net profit (loss)		2021 $ 283,948 311,238) $ 27,290)		2020
	( (		(	$ 445,425 392,621) $ 52,804

Continuing department income tax
(1) Income tax recognized in profit or loss

The major components of income tax expense (income) are as follows:

Income tax expenses in the current period Accrued in current year Additional levy on undistributed earnings Prior year adjustment Deferred tax Accrued in current year Prior year adjustment Income tax expense recognized in the profit or loss		2021 $ 223,724 37,165 214,845) 46,044 37,933 93,898 131,831 $ 177,875		2020
	(		$ 436,240 95 (175,535) 260,800 ( 20,054 ) 24,625 4,571 $ 265,371

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Adjustment of accounting income and income tax expense are as follows:

		2021		2020
Income before tax from
continuing operations		$ 695,989		$ 988,015
Income tax expense of net
income before tax at the
statutory tax rate		$ 265,710		$ 431,661
Non-deductible expenses and
losses for tax purposes		26,516		12,752
Non-taxable income	(	23,007 )	(	25,784 )
Additional levy on
undistributed earnings		37,165		95
Unrecognized deductible
temporary differences		86,336		22,182
Income tax expense of prior
years adjusted in the current
year	(	214,845)	(	175,535)
Income tax expense recognized
in the profit or loss		$ 177,875		$ 265,371

Except for TCL Rechi (Huizhou) Refrigeration Equipment Company Limited, Rechi Precision (Qingdao) Electric Machinery Limited, Rechi Refrigeration Dongguan Co., Ltd., Rechi Precision (Jiujiang) Electric Machinery Limited, and Dyna Rechi (Jiujiang) Co., Ltd., which enjoy a preferential tax rate of 15% as in high-tech industries, the tax rate applicable to the subsidiaries in China is 25%.

(2) Income tax recognized directly in equity

Income tax expenses in the current period Disposal of equity instrument investments measured at fair value through other comprehensive income Deferred tax Disposal of equity instrument investments measured at fair value through other comprehensive income Income tax recognized directly in equity		2021 $ 999 96,221 $ 97,220		2020
				$ - - $ -

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(3) Income tax recognized in the other comprehensive profit or loss

(4)	Deferred tax Accrued in current year – Translation of foreign operations – Unrealized gain or loss on financial assets at fair value through other comprehensive profit or loss – Remeasurement of defined benefit plan Current Tax Liability Current Tax Liability Payable income tax	2021 ( $ 13,670 ) 25,206 ( 996) $ 10,540 December 31, 2021 $ 453,327		2020
			$ 30,069 85,493 127 $ 115,689 December 31, 2020
				$ 514,837

(5) Deferred income tax assets and liabilities

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

2021

2021
Deferredincome taxassets Temporary difference Investment losses of foreign investment companies Allowance to reduce inventory to market Unrealized exchange loss Liability reserve Refund liability Defined benefit pension plans Allowance for bad debt Vacation benefit payable Other payables Deferred government grants Exchange differences of foreign operations Loss deduction Others Deferred tax liabilities Temporary difference Financial assets at fair value through other comprehensive income Investment gains of foreign investment companies Real property, plant and equipment Reserve for land revaluation increment tax (“LRIT”) Unrealized exchange gain Others	Balance, beginning of year $ 601 22,193 179 19,489 137,148 10,603 5,670 3,266 6,372 93,965 127,399 88,317 16,778 $ 531,980 $ 71,015 635,063 10,863 10,104 7,916 806 $ 735,767	Recognized in the profit or loss $ 3,808 2,930 ( 93 ) 2,572 ( 28,360 ) ( 721 ) ( 1,112 ) 2,236 105 685 - ( 19,600 ) ( 6,931) ($ 44,481) $ - 93,387 ( 1,291 ) - ( 5,555 ) 809 $ 87,350	Recognized in the other comprehensive profit of loss $ - - - - - 996 - - - - 13,670 - - $ 14,666 $ 25,206 - - - - - $ 25,206	Directly recognized in equity	Exchange difference $ - ( 98 ) - ( 104 ) ( 715 ) - ( 30 ) ( 6 ) ( 35 ) ( 502 ) - - ( 90) ($ 1,580) $ - - ( 52 ) - - ( 4) ($ 56)	Balance, end ofyear
				$ - - - - - - - - - - - - - $ - ( $ 96,221 ) - - - - - ($ 96,221)			$ 4,409 25,025 86 21,957 108,073 10,878 4,528 5,496 6,442 94,148 141,069 68,717 9,757 $ 500,585 $ - 728,450 9,520 10,104 2,361 1,611 $ 752,046

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2020

2020
Deferred income tax assets Temporary difference Financial assets at fair value through other comprehensive income Investment losses of foreign investment companies Allowance to reduce inventory to market Unrealized exchange loss Liability reserve Refund liability Defined benefit pension plans Allowance for bad debt Vacation benefit payable Other payables Deferred government grants Exchange differences of foreign operations Loss deduction Others Deferred tax liabilities Temporary difference Financial assets at fair value through other comprehensive income Investment gains of foreign investment companies Real property, plant and equipment Reserve for land revaluation increment tax (“LRIT”) Unrealized exchange gain Others	Balance, beginning of year $ 14,478 10,546 19,243 4,971 10,445 100,216 11,097 10,828 3,350 5,440 79,841 157,468 110,960 14,373 $ 553,256 $ - 617,996 13,042 10,104 248 - $ 641,390	Recognized in the profit or loss	Recognized in the other comprehensive profit of loss	Exchange difference $ - - 303 - 331 2,191 - 70 17 101 1,493 - ( 7 ) 266 $ 4,765 $ - - 143 - - 15 $ 158	Balance, end ofyear
		$ - ( 9,945 ) 2,647 ( 4,792 ) 8,713 34,741 ( 367 ) ( 5,228 ) ( 101 ) 831 12,631 - ( 22,636 ) 2,139 $ 18,633 $ - 17,067 ( 2,322 ) - 7,668 791 $ 23,204	( $ 14,478 ) - - - - - ( 127 ) - - - - ( 30,069 ) - - ($ 44,674) $ 71,015 - - - - - $ 71,015			$ - 601 22,193 179 19,489 137,148 10,603 5,670 3,266 6,372 93,965 127,399 88,317 16,778 $ 531,980 $ 71,015 635,063 10,863 10,104 7,916 806 $ 735,767

(6) Income tax audit

The profit-seeking enterprise income tax returns filed by the Company and its domestic subsidiaries Rechi Investments Co., Ltd. and Dyna Rechi Co., Ltd. up to 2019 have been approved by the tax collection authority, and each subsidiary files local income tax return in accordance with local regulations.

24. Earnings per share

Unit: NTD per share

Basic earnings per share Diluted earnings per share		2021 $ 1.08 $ 1.07		2020
				$ 1.41 $ 1.40

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The earnings and weighted average common stock shares used in calculating the earnings per share are as follows:

Net profits of the current year

earnings per share are as follows: Net profits of the current year
The net income applied to calculate basic earnings per share Shares Weighted average common stock shares used to calculate basic earnings per share Effect of dilutive potential common stock: Remuneration to employees Weighted average common stock shares used to calculate diluted earnings per share		2021 2020 $ 542,921 $ 709,491 Unit: shares in thousands 2021 2020 504,344 504,901 2,352 3,103 506,696 508,004

If the Group may choose to have the employee compensation distributed via a stock or cash dividend, calculate the diluted earnings per share, assuming that the bonus to employees is with a stock dividend distributed, with the weighted average number of shares outstanding included when the potential common stock has a diluted effect. When diluted EPS is calculated in the next year resolves the number of share distribution for employee compensation, the dilution effect is also considered for such potential common shares.

25. Government grant

The amount of government grants received by the Group in 2021 and 2020 was NT$26,791 thousand and NT$62,870 thousand, respectively, which were recognized as current profit or loss or debited to assets for deferred recognition based on the nature of the subsidies.

The amounts recognized in other income are as follows:

Other income		2021 $ 1,696		2020
				$ 55,857

In addition, for the subsidized items that are transferred to profit or loss within the useful lives of the assets, as of December 31, 2021 and 2020, the amount of NT$566,299 thousand and NT$573,428 thousand had been obtained, respectively. The amount of reduction of depreciation expenses is as follows:

Reduction of depreciation expenses		2021 $ 29,161		2020
				$ 23,090

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26. Capital risk management

The Group manages capital to ensure the Group’s enterprises to maximize shareholder’s returns by optimizing the balance of debt and equity under the precondition of continuing operation. There is no major change in the Group’s overall strategy.

The capital structure of the Group is composed of the Group’s net debt (i.e. borrowings less cash and cash equivalents) and equity (i.e. share capital, capital reserves, retained earnings, other equity items, and non-controlling interests).

The Group is not required to comply with other external capital requirements, except for the various commitments on long-term borrowings in Note 17.

The Group’s management reviews the capital structure yearly, and the reviews include taking into consideration the cost of capital and the risks associated with each class of capital. The Group will balance its overall capital structure by paying dividends, issuing new shares, buying back shares, borrowing new debts, or repaying old debts based on the suggestions of the key management.

27. Financial instruments

(1) Fair value information – Financial instruments that are not measured at fair value

The Group’s management believes that the book value of the financial assets and financial liabilities that are not measured at fair value is close to its fair value.

(2) Information on fair value – financial instruments at fair value on repetition.
Fair value hierarchy December 31, 2021

Fair value hierarchy December 31, 2021
Financial assets at fair value through profit and loss Listed stocks – overseas Wealth management products Financial assets at fair value through other comprehensive income Equity investment – Domestic non-listed (OTC) stocks		Level 1 $ 6,354 - $ 6,354 $ -		Level 2 $ - - $ - $ -		Level 3 $ - 1,232,985 $ 1,232,985 $ 18,120		Total
								$ 6,354 1,232,985 $ 1,239,339 $ 18,120

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December 31, 2020

December 31, 2020
Financial assets at fair value through profit and loss Listed stocks – overseas Wealth management products Financial assets at fair value through other comprehensive income Equity investment – Listed stocks – overseas – TSEC/GTSM listed shares – Domestic non-listed (OTC) stocks		Level 1		Level 2 $ - - $ - $ - - - $ -		Level 3		Total
		$ 8,643 - $ 8,643 $ 1,067,276 54,906 - $ 1,122,182				$ - 1,105,608 $ 1,105,608 $ - - 25,500 $ 25,500		$ 8,643 1,105,608 $ 1,114,251 $ 1,067,276 54,906 25,500 $ 1,147,682

There were no transfers between Level 1 and Level 2 fair value in 2021 and 2020.

Financial instruments are adjusted according to Level 3 fair value.

Financial assets Balance, beginning Recognized in profit and loss (Other profit or loss) – Realized Recognized in the other comprehensive income (Unrealized gain or loss on financial assets at fair value through other comprehensive profit or loss) Disposal/Purchase Balance, ending	Financial instruments measured at fair value through profit or loss 2021 2020 $ 1,105,608 $ 1,098,007 58,250 42,809 - - 69,127 ( 35,208 ) $ 1,232,985 $ 1,105,608	Financial instruments measured at fair value through profit or loss 2021 2020 $ 1,105,608 $ 1,098,007 58,250 42,809 - - 69,127 ( 35,208 ) $ 1,232,985 $ 1,105,608	Financial instruments measured at fair value through profit or loss 2021 2020 $ 1,105,608 $ 1,098,007 58,250 42,809 - - 69,127 ( 35,208 ) $ 1,232,985 $ 1,105,608	Financial instruments at fair value through other comprehensive income	Financial instruments at fair value through other comprehensive income
		2021 $ 1,105,608 58,250 - 69,127 $ 1,232,985		2021 $ 25,500 - ( 7,380 ) - $ 18,120	2020
			(		$ 27,240 - ( 1,740 ) - $ 25,500

3. Evaluation techniques and an input value of Level 3 fair value measurement

The domestic unlisted equity investment is based on the market approach, which is according to the transaction price of a comparable target. The difference between the target evaluated and the comparable target is considered, and the value of the target evaluated is estimated with an appropriate multiple. In the market approach, evaluation is conducted by referring to the prices of stocks traded in the active market from companies engaged in the same or

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similar operations so as to determines the value multiple as the basis for evaluation.

For the RMB wealth management products purchased by subsidiaries, the quoted prices offered counterparties are adopted as the valuation techniques and significant unobservable inputs to calculate the expected return on such investment.

(3) Categories of financial instruments

investment. Categories of financial instruments
Financial assets Measured at fair values through profit and/or loss Measured at fair value through income under compulsion Financial assets based on cost after amortization (Note 1) Financial assets at fair value through other comprehensive income Equity investment Financial liabilities Based on cost after amortization (Note 2)	December 31, 2021 $ 1,239,339 12,997,265 18,120 13,731,529	December 31, 2020
		$ 1,114,251 15,064,724 1,147,682 16,361,222

Note 1: The balances include cash and cash equivalents, notes receivable, accounts receivable, other receivables, deposits, refundable deposits, and other financial assets measured at amortized cost.
Note 2: The balances include short-term borrowings, short-term notes payable, notes payable, accounts payable, other payables, guarantee deposits received, long-term borrowings, long-term notes payable, and other financial liabilities measured at amortized cost.
(4) Purpose and policy of financial risk management

The main financial instruments of the Group include investments in equity and debt instruments, accounts receivable, accounts payable, borrowings, and lease liabilities. The Group’s financial management department shall provide services to each business unit, to plan and coordinate operations in the domestic and international financial markets, and to monitor and manage the Group’s operation-related financial risks with the internal risk report, with the risk exposure analyzed in accordance with the degree and breadth of risks. These risks include market risk (including exchange rate risk, interest rate risk and other price risk), credit risk and liquidity risk.

The financial management department reports quarterly to the Group’s board of directors.

Market Risk
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Due to the operating activities, the major financial risk faced by the Group is the foreign currency exchange rate risk (see (1) below) and interest rate risk (see (2) below). The Group manages the foreign currency exchange rate and interest rate risks using the natural hedging method.

The Group’s exposure to financial instruments market risk and the management and measurement of the risk exposure have not been changed.

(1) Exchange rate risk

The Group engages in foreign currency-denominated sales and purchase transactions; therefore, the Group is exposed to exchange rate risks. Approximately 52.10% of the Group’s sales are not denominated in the functional currency of any of the Group’s entity involved in the transaction, and approximately 6.26% of the cost is not denominated in the functional currency of any of the Group’s entity involved in the transaction. The Group manages the exposure to the exchange rate risk using the natural hedging method.

For the carrying amount of monetary assets and monetary liabilities denominated in non-functional currencies of the Group at the balance sheet date (including the monetary items denominated in non-functional currencies that have been written off in the consolidated financial statements), please refer to Note 32.

Sensitivity analysis

The Group is mainly affected by fluctuations in the exchange rates of the USD and RMB.

The Group’s sensitivity analysis for New Taiwan Dollar (functional currency) to each relevant foreign currency exchange rates that increased or decreased by 1.7% is illustrated in the following table. The 1.7% sensitivity is used internally for reporting the exchange rate risk to management and is the assessment by management regarding the reasonable and possible changes in foreign exchange rates. The sensitivity analysis includes only the outstanding foreign currency monetary items; also, the translation at yearend is adjusted with the change in exchange rate by 1.7%. Each positive number in the following table represents the amount of increase in net profit before tax when NTD depreciates by 1.7% in relation to each relevant foreign currency; when NTD appreciates by 1.7% in relation to each relevant foreign currency, its effect on net profit before tax will be the negative number of the same amount.

Profit and loss	Effect on	USD (i) 2020 $ 6,065	Effect on	RMB (ii)
	2021 $ 15,762		2021 ( $ 40,886 )	2020
				( $ 18,006 )

(i) It is mainly derived from the Group’s outstanding USD-denominated bank deposits, receivables, and payables at the balance sheet date without cash flow hedging.
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(ii) It is mainly derived from the Group’s outstanding RMB-denominated bank deposits, receivables, and payables at the balance sheet date without cash flow hedging.
(2) Interest rate risk

Because the entities in the Group hold assets and borrowings with fixed and floating interest rates at the same time, the interest rate risk has arisen. The Group manage interest rate risk by maintaining an appropriate combination of fixed and floating rate.

The book value of the Group’s financial assets and financial liabilities with interest rate exposure on the balance sheet date is as follows:

follows:
With fair value interest rate risk – Financial assets – Financial liabilities Contain cash flow interest rate risk – Financial assets – Financial liabilities	December 31, 2021 $ 4,801,345 1,011,647 1,523,754 3,329,103	December 31, 2020
		$ 4,352,978 2,568,553 1,928,953 4,682,786

Sensitivity analysis

The following sensitivity analyses are based on the interest rate risk exposure of the non-derivative instruments on the balance sheet date. For assets and liabilities with floating interest rates, the analysis method is based on the assumption that the amount of assets and liabilities outstanding at the balance sheet date is outstanding throughout the reporting period. The rate of change used when the interest rates are reported to key management in the Group is 100 base points for increase or decrease in interest rates, which also represents the reasonably possible range of changes in interest rates determined by the management.

If the interest rate increased by 100 base points, with all other variables remaining unchanged, the Group’s 2021 and 2020 net profit before tax would have decreased by NT$18,053 thousand and NT$27,538 thousand, respectively, mainly due to the Group’s exposure to the risk of changes in the interest rate.

Other price risks.

The Group is exposed to equity price risk due to investment in domestic and foreign listed stocks.

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Sensitivity analysis

The sensitivity analysis below is based on the exposure to the equity price risk at the balance sheet date.

If the equity price increased/decreased by 1%, the pre-tax profit or loss for 2021 and 2020 would have increased/decreased by NT$64 thousand and NT$86 thousand respectively due to the increase/decrease in the fair value of the financial assets at fair value through profit or loss. Other comprehensive income before tax for 2021 and 2020 would have increased/decreased by NT$181 thousand and NT$11,477 thousand, respectively due to the increase/decrease in the fair value of financial assets at fair value through other comprehensive income.

2. Credit Risk

Credit risk meant for the Group’s risk of financial loss due to the counterparty’s failure in fulfilling contractual obligations. As of the balance sheet date, the top credit risk the Group might incur in financial losses due to failure by the counterparts in failure in performance of the obligations primarily come from the book value of financial assets recognized in the consolidated balance sheet.

Except for the Group’s top six customers, the Group does not have any major exposure to the credit risk of any single counterparty or any group of counterparties with similar characteristics. When the counterparty is an affiliated company, the Group has it defined as a counterparty with similar characteristics. In 2021 and 2020, the Group’s concentration of credit risk on the top seven customers did not exceed 14% of the total monetary assets, and the concentration of credit risk on other counterparties did not exceed 2% of the total monetary assets.

The Group’s credit risk is mainly concentrated on the top six customers. As of December 31, 2021 and 2020, the percentage of the total accounts receivable from the aforementioned customers was 57% and 60%.

3. Liquidity Risk

The Group has supported the Group’s business operation and mitigated the impact of changes in cash flow by managing and maintaining sufficient cash and cash equivalent position. The Group’s management monitors the use of banking facilities and ensures the compliance of loan agreement.

Bank loan is a main source of liquidity to the Group. For the Group’s bank financing amount not drawn down as of December 31, 2021 and 2020, please refer to the description of (2) regarding the financing amount below.

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(1) Liquidity and interest rate risk table of non-derivative financial liabilities

Non-derivative financial liabilities remaining contract maturity analysis is prepared in accordance with the Group’s undiscounted cash flow (including principal and estimated interest) of financial liabilities on the earliest possible repayment date upon request. Therefore, the Group may be required to immediately repay the bank loan is illustrated in the following table without considering the probability that the bank may immediately exercise such right. The other non-derivative financial liabilities maturity analysis is prepared in accordance with the agreed repayment date.

December 31, 2021

N	on-derivative financial liabilities o interest-bearing liabilities ease liabilities struments with floating interest rates struments with fixed interest rates		Payment on demand or less than 1 month		1to 3months		3 months to 1 year $ 3,241,270 9,966 250,094 69,682 $ 3,571,012		1to 5 years		Over5 years
			$ 3,040,373 1,131 2,769 663,327 $ 3,707,600		$ 3,127,199 2,261 5,539 230,216 $ 3,365,215				$ 31,502 28,882 3,103,156 - $ 3,163,540		$ - 15,835 59,924 - $ 75,759
N L In In

Further information about maturity analysis of lease liabilities is as follows:

follows:
Lease liabilities	Less than 1 year		1 to 5 years			5 to 10 years		10 to 15 years		15 to 20 years $ 2,052	Over 20 years
		$ 13,358		$ 28,882		$ 2,052		$ 2,052			$ 9,679

December 31, 2020

N	on-derivative financial liabilities o interest-bearing liabilities ease liabilities struments with floating interest rates struments with fixed interest rates		Payment on demand or less than 1 month		1to 3months		3 months to 1 year $ 3,856,813 8,813 33,799 310,498 $ 4,209,923		1to 5 years		Over5 years
			$ 2,121,118 1,081 3,755 1,337,264 $ 3,463,218		$ 3,163,643 2,038 7,511 871,092 $ 4,044,284				$ 24,586 36,305 4,619,011 - $ 4,679,902		$ - 16,245 149,432 - $ 165,677
N L In In

Further information about maturity analysis of lease liabilities is as follows:

follows:
Lease liabilities	Less than 1 year		1to 5 years			5 to 10 years		10 to 15 years		15 to 20 years $ 2,052	Over 20 years
		$ 11,932		$ 36,305		$ 2,052		$ 2,052			$ 10,089

Floating interest rate for the above-mentioned non-derivative financial assets and liabilities will vary due to the differences of the floating interest rate and the interest rate estimated on the balance sheet.

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(2) Financing amount

inancing amount
Secured bank loan – The loan quota used – The loan quota not yet used Unsecured bank loan amount – The loan quota used – The loan quota not yet used	December 31, 2021 $ 1,600,000 166,080 1,766,080 2,691,181 24,334,718 27,025,899 $ 28,791,979	December 31, 2020
			$ 1,600,000 170,880 1,770,880 5,595,062 24,543,793 30,138,855 $ 31,909,735

(5) Information on transfer of financial assets

The relevant information on the factoring of the Group’s accounts receivable not due at the end of the year is as follows:

December 31, 2021

Counterparties DBS Bank Limited		Amount factored $ 976,584	Reclassified to other receivables $ -		Amount available $ -	Amount drawn down $ 976,584	Amount drawn down Annual rate (%)
							0.85%

December 31, 2020

Counterparties DBS Bank Limited		Amount factored $ 82,215	Reclassified to other receivables $ -		Amount available $ -	Amount drawn down $ 82,215	Amount drawn down Annual rate (%)
							0.85%

According to the agreement of the factoring contract, the losses arising from business disputes (such as sales returns or discounts) shall be borne by the Group, and the losses arising from the credit risk shall be borne by the bank.

In 2021 and 2020, the Group discounted some of the banker’s acceptance receivable in Mainland China to the bank or endorsed and factored it as payments to suppliers. The amount was NT$1,004,251 thousand and NT$1,164,153 thousand, respectively. For the banker’s acceptance receivable factored, the losses arising from business disputes (such as sales returns or discounts) shall be borne by the Group, and the losses arising from the credit risk shall be borne by said bank.

In 2021 and 2020, the Group recognized financial costs of NT$1,820 thousand and NT$8,473 thousand upon factoring of the banker’s acceptance receivable.

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28. Related party transactions

The transactions, account balances, income, expenses and losses between the company and subsidiaries (related party of the company) are offset at the time of consolidation; therefore, it is not disclosed in this note. Except as disclosed in other notes, transactions between the Group and other related parties, are also as follows:

(1) Name of related parties and the relations

Name Relationship with the Group Sampo Corporation Investor with significant influence Sampo Japan Subsidiary of Sampo Corporation Qingdao China Steel Precision Metal Affiliated enterprises Co., Ltd. Jiangxi Baida Precision Affiliated enterprises Manufacturing Corp.

(2) Operating income

Operating income
Account titles in book Sales revenue	Type and Name of related party Investor with significant influence Affiliated enterprises		2021 $ 14,505 513 $ 15,018		2020
					$ 6,231 2,030 $ 8,261

(3) Purchase

Purchase
Type and Name of related party Affiliated enterprises		2021 $ 1,018,310		2020
				$ 636,927

Compared with other customers, there is no significant difference in the price and payment terms of transactions between the Group and its related parties.

(4) Receivables from concerned parties (excluding loans borrowed from concerned parties)

parties)
Account titles in book Accounts receivable – related parties Other receivables	Type and Name of related party Investor with significant influence Investor with significant influence Affiliated enterprises	December 31, 2021 $ 766 $ - - $ -	December 31, 2020
				$ 2,538 $ 34 1 $ 35

The outstanding receivables from the related party are without any guarantees collected. No allowance for losses was provided for accounts receivable from related parties in 2021 and 2020.

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(5) Payables to concerned parties (excluding loans borrowed from concerned parties)

Account titles in book Notes payable – related party Accounts payable – related parties	Type and Name of related party Affiliated enterprises Affiliated enterprises	December 31, 2021 $ 36,320 $ 142,605	December 31, 2020	December 31, 2020
				$ 64,459 $ 134,719

For balance of payables to concerned parties outstanding, no guarantee has been provided.

(6) Lease agreement

provided. Lease agreement
Type and Name of related party Rent expense Investor with significant influence		2021 $ 451		2020
				$ 532

The rent of the lease contract between the Group and the above-mentioned related parties is determined through negotiation with reference to the market conditions and is paid on a quarterly basis in accordance with the general payment terms.

Lease expenses include short-term leases. The total amount of lease payments to be paid in the future for short-term leases is as follows:

The total amount of lease payments to be paid in the future	December 31, 2021 $ 385	December 31, 2020	December 31, 2020
			$ 442

(7) Remuneration to the management

Remuneration to the management
Short-term employee benefits Retirement benefits		2021 $ 81,785 711 $ 82,496		2020
				$ 51,092 646 $ 51,738

The remuneration of directors and other key management personnel is determined by the Remuneration Committee after considering the factors, including industry standards and market conditions and taking into account their education and experience, seniority, work performance, and company profitability.

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29. Pledged assets

The following assets have been provided as collateral for borrowings from banks, notes issued, and customs guarantees for imported goods:

Proprietary land Buildings Notes receivable Financial assets based on cost after amortization	December 31, 2021 $ 207,567 213,152 290,246 3,188,575 $ 3,899,540	December 31, 2020	December 31, 2020
			$ 207,567 224,688 1,083,476 2,706,359 $ 4,222,090

30. Significant contingent liabilities and unrecognized contractual commitments

In addition to those disclosed in other notes, the significant commitments and contingencies of the Group as of the balance sheet date are as follows:

(1) The amount of the unused letter of credit issued by the Group for the purchase of raw materials and machinery and equipment is as follows:

JPY USD	December 31, 2021 $ 67,950 -	December 31, 2020
		$ - 260

(2) The Group’s unrecognized contractual commitment are as follows:

Purchase of property, plant, and equipment RMB NTD JPY USD	December 31, 2021 $ 39,964 2,534 2 -	December 31, 2020
		$ 39,512 2,784 74,980 84

(3) The Company has commissioned the bank to issue letters of guarantee to the Customs Administration for the post-release duty payments for imported goods. As of December 31, 2021 and 2020, the amount of the letters of guarantee issued by the bank was NT$10,000 thousand.
(4) Subsidiary Dyna Rechi Co., Ltd. has commissioned the bank to issue letters of guarantee to the Customs Administration for the post-release duty payments for imported goods. As of December 31, 2021 and 2020, the amount of the letters of guarantee issued by the bank was NT$500 thousand.
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31. Other information

The Group has been impacted by the global pandemic of coronavirus disease and its domestic effect recently, at places for departmental operations where methods of work from home and distributed work have been appropriated, whereas the impact on the production of the Group is not that significant. As the domestic pandemic slows down and government policies are gradually loosened, the Group expects that its operations will gradually return to normal. However, as the ROC and international pandemic development is still uncertain, the Group will continue to pay attention to the development of the pandemic and take appropriate countermeasures to reduce the impact on its operations.

32. Information of foreign currency assets and liabilities with significant effects

The following information is expressed in foreign currencies other than the functional currencies of each entity within the Group; also, the exchange rate disclosed refers to the exchange rate used for having such foreign currency converted into the functional currency. Foreign currency assets and liabilities with significant influence as follows:

December 31, 2021

December 31, 2021
Foreign currency assets Monetary items USD USD RMB RMB JPY EUR Non-monetary items Affiliated company under the equity method RMB Foreign currency liabilities Monetary items USD USD RMB JPY EUR	Foreign currency $ 67,628 23,237 150,287 1,325 22,735 14,053 116,599 19,314 38,054 705,578 364,208 442	Exchange rate 27.68 (USD : NTD) 6.3757 (USD : RMB) 4.3415 (RMB : NTD) 0.1568 (RMB : USD) 0.2405 (JPY : NTD) 31.32 (EUR : NTD) 0.1568 (RMB : USD) 27.68 (USD : NTD) 6.3757 (USD : RMB) 4.3415 (RMB : NTD) 0.0554 (JPY : RMB) 31.32 (EUR : NTD)	Book value
			$ 1,871,940 643,192 652,472 5,753 5,468 440,141 506,214 534,619 1,053,331 3,063,263 87,592 13,836

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December 31, 2020

December 31, 2020
Foreign currency assets Monetary items USD USD RMB RMB JPY EUR Non-monetary items Financial assets at fair value through other comprehensive income EUR Affiliated company under the equity method RMB Foreign currency liabilities Monetary items USD USD RMB JPY EUR	Foreign currency $ 63,511 20,394 212,626 1,297 22,195 30,441 30,476 118,729 17,901 53,478 456,590 402,958 1,381	Exchange rate 28.48 (USD : NTD) 6.5249 (USD : RMB) 4.3648 (RMB : NTD) 0.1533 (RMB : USD) 0.2763 (JPY : NTD) 35.02 (EUR : NTD) 35.02 (EUR : NTD) 0.1533 (RMB : USD) 28.48 (USD : NTD) 6.5249 (USD : RMB) 4.3648 (RMB : NTD) 0.0633 (JPY : RMB) 35.02 (EUR : NTD)	Book value
			$ 1,808,787 580,828 928,073 5,661 6,132 1,066,034 1,067,276 518,232 509,816 1,523,052 1,992,930 111,337 48,354

The Group mainly bears the foreign currency exchange rate risk in USD and RMB. The following information is presented in the functional currency of each entity possessing foreign currency. The disclosed exchange rate refers to the exchange rate of such functional currency converting into the presentation currency. The realized and unrealized foreign currency exchange gains and losses with a material impact are as follows:

Functional currency USD NTD RMB	2021	Net exchange losses (gains) $ 452 ( 66,027 ) 38,285 ($ 27,290)	2020
	Functional currency exchanges for presentation currency 28.009 (USD : NTD) 1 (NTD : NTD) 4.342 (RMB : NTD)		Functional currency exchanges for presentation currency 29.549 (USD : NTD) 1 (NTD : NTD) 4.283 (RMB : NTD)	Net exchange losses (gains)
		( (		(	$ 570 31,500 ) 83,734 $ 52,804

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33. Notes of disclosure

(1) Information about important transactions:
The Loaning of funds: Table 1.
Endorsement and Guarantee: Table 2.
Marketable securities held at the end of the period (excluding investment in subsidiaries, associates, and joint ventures): Table 3.
The cumulative purchase or sale of the same security for an amount exceeding NT$300 million or 20% of paid-in capital: Table 4.
The acquisition of real estate for an amount exceeding NT$300 million or 20% of paid-in capital: None.
The disposal of real estate for an amount exceeding NT$300 million or 20% of paid-in capital: None.
The purchase or sale with the related party for an amount exceeding NT$100 million or 20% of paid-in capital: Table 5.
Accounts receivable-related party reaching NTD 100 million or more than 20% of the Paid-in shares capital: Table 6.
Trading in derivative instruments: N/A.
Other: business relationships and significant intercompany transactions between parent and subsidiary units: Table 7.
(2) Information on investees: Table 8.
(3) Information regarding investment in the territory of Mainland China:
The name of the investee in Mainland China, the main businesses and products, its issued capital, method of investment, information on inflow or outflow of capital, percentage of ownership, investment gains or losses, ending balance, amount received as earnings distributions from the investment, and the limitations on investment: Please see Table 9 attached.
Significant direct or indirect transactions with the investee in Mainland China through third regions, its prices, terms of payment, and unrealized gain or loss: Please see Table 10 attached.
- (1) Input amounts, percentages, balance, and percentages of relevant payable at end of the term.
- (2) Sales amounts, percentages, balance, and percentages of relevant receivables at end of the term.
- (3) Amount of property transaction and amount of the profit and/or loss so incurred.
- (4) Balance and purposes of endorsements/guarantees or collateral provided at end of the term.
- (5) The highest balance of fund financing balance at end of the term, range of interest rates and total amount of interest in the current term.
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(6) Other transactions having significant effect upon profit and/or loss or financial standing of the current term, e.g. provision or acceptance of services.
(4) Information on major shareholders: Names of shareholders with a shareholding ratio of more than 5%, number of shares held, and percentage: Table 11.

34. Segment information

The information provided to the chief operating decision-maker for allocating resources and assessing segment performance is focusing on the type of product or service delivered or provided. The segments of the Group which should be reported are enumerated below:

Compressor business unit
BLDC motor unit

The chief operating decision maker regards the direct sales units of the business units in the Group as individual operating segments, but when preparing the financial statements, the Group considers the following factors and combined these operating segments into a single operating segment:

The operating segments have similar long-term gross profit;
The operating segments’ nature of products and the manufacturing processes are similar.
(1) Revenues and operating results of segments

Revenues and operating results of the Group’s continuing units are analyzed in accordance with segments to be reported, which are summarized as follows:

2021 Revenues from external customers Inter-segment income Department income Elimination of intersegment Consolidated revenue Segment profit/loss Interest revenue Other income Headquarters’ administration costs & directors’ remuneration Other profits and losses Financial costs The shares of profit at equity method over the associates Income before tax from continuing operations		Compressor business unit $ 21,645,753 25,557,354 $ 47,203,107 $ 923,199		BLDC motor unit $ 500,408 403,582 $ 903,990 $ 164,608)		Others $ 455,440 413,027 $ 868,467 $ 223		Total
			(				$ 22,601,601 26,373,963 48,975,564 ( 26,373,963) 22,601,601 758,814 102,148 74,729 ( 172,024 ) 12,940 ( 84,394 ) 3,776 $ 695,989

(Continued on next page)

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(Continued from previous page)

2020 Revenues from external customers Inter-segment income Department income Elimination of intersegment Consolidated revenue Segment profit/loss Interest revenue Other income Headquarters’ administration costs & directors’ remuneration Other profits and losses Financial costs The shares of profit at equity method over the associates Income before tax from continuing operations		Compressor business unit	(	BLDC motor unit $ 500,871 482,006 $ 982,877 $ 113,685)		Others $ 347,154 311,394 $ 658,548 $ 22,416		Total
		$ 18,471,937 22,358,382 $ 40,830,319 $ 1,116,591					$ 19,319,962 23,151,782 42,471,744 ( 23,151,782) 19,319,962 1,025,322 74,693 151,390 ( 205,517 ) 97,440 ( 156,681 ) 1,368 $ 988,015

Sales between segments are carried out at arm’s length.

Segment profits refer to the profits earned by each segment, excluding the headquarters’ administrative costs and directors’ remuneration to be amortized, share of profits and losses on associates under the equity method, rental income, interest income, gains or losses on disposal of property, plant and equipment, gains on disposal of investment, net foreign currency exchange gains or losses, financial instrument valuation gains or losses, interest expenses, other financial costs, and income tax expenses. The measured figures are provided for main decision makers to allocate resources to segments and evaluate the performance of each segment.

(2) Information by areas

Key two operations areas for the Group – Taiwan and China.

The Group’s continuing operating revenues from external customers are divided into the following operating geographical locations, and its non-current assets are divided based on the physical locations of the assets shown as follows:

China Poland USA	Income from external customers	Income from external customers
	2021 $ 12,280,842 2,858,692 2,595,695	2020
		$ 11,501,257 1,954,957 1,786,742

(Continued on next page)

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(Continued from previous page)

Income from external customers

		2020

December 31, 2021 $ 6,230,608 1,159,796 $ 7,390,404	December 31, 2020
		$ 6,781,568 1,219,830 $ 8,001,398

Non-current assets do not include assets classified as financial instruments, deferred income tax assets, and net defined benefit assets.

(3) Information on key customers

Income generated from a single customer for more than 10% of the Group’s total income is as follows:

total income is as follows:
Customer A	2021 NA (Note)	2020
		$ 2,034,936

Note: The revenue amount does not reach 10% of the total revenue of the merger company.

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RECHI PRECISION CO., LTD. and its subsidiaries

The Loaning of Funds

For the Year Ended December 31, 2021

Table 1

Unit: NTD thousand or in thousands in foreign currencies

No.	The lender of fund	The borrower of fund	Transaction title	Are they related parties	Maximum balance – current period (Note 3)	Balance, ending (Note 3)	The actual amounts disbursed (Note 3)	Interest rate collars	Nature of financing (Note 1)	Amount of business transactions	Reasons for the necessity of short-term financing	Amount of provision for bad debts	Collateral	Collateral	Limit of financing particular beneficiary (Note 2)	Total limit of financing (Note 2)	Note
													Name	Value
0 0 0 1 2 3 4	RECHI PRECISION CO., LTD. RECHI PRECISION CO., LTD. RECHI PRECISION CO., LTD. Rechi Holdings Co., Ltd. Rechi Precision (Jiujiang) Electric Machinery Limited Dongguan Rechi Compressor Co., Ltd. Rechi Precision (Qingdao) Electric Machinery Limited	Rechi Precision (Qingdao) Electric Machinery Limited Rechi Precision (Jiujiang) Electric Machinery Limited Dyna Rechi (Jiujiang) Co., Ltd. Rechi Precision (Jiujiang) Electric Machinery Limited Dyna Rechi (Jiujiang) Co., Ltd. Dyna Rechi (Jiujiang) Co., Ltd. Rechi Precision (Jiujiang) Electric Machinery Limited	Other receivables Other receivables Other receivables Other receivables Other receivables Other receivables Other receivables	Yes Yes Yes Yes Yes Yes Yes	NTD 347,320 ( RMB 80,000 ) NTD 347,320 ( RMB 80,000 ) NTD 217,075 ( RMB 50,000 ) NTD 1,245,600 ( USD 45,000 ) NTD 173,660 ( RMB 40,000 ) NTD 130,245 ( RMB 30,000 ) NTD 217,075 ( RMB 50,000 )	NTD - ( RMB - ) NTD 347,320 ( RMB 80,000 ) NTD 217,075 ( RMB 50,000 ) NTD 1,024,160 ( USD 37,000 ) NTD 173,660 ( RMB 40,000 ) NTD - ( RMB - ) NTD 217,075 ( RMB 50,000 )	NTD - ( RMB - ) NTD 347,320 ( RMB 80,000 ) NTD 217,075 ( RMB 50,000 ) NTD 1,024,160 ( USD 37,000 ) NTD 173,660 ( RMB 40,000 ) NTD - ( RMB - ) NTD 217,075 ( RMB 50,000 )	- 1.36%~ 1.40% 1.43% - 3.20% - 3.00%	2 2 2 2 2 2 2	$ - - - - - - -	Working capital Working capital Working capital Working capital Working capital Working capital Working capital	$ - - - - - - -	－－－－－－－	－－－－－－－	NTD 900,243 NTD 900,243 NTD 900,243 NTD 11,586,247 NTD 831,060 NTD 145,395 NTD 1,870,369	NTD 1,800,486 NTD 1,800,486 NTD 1,800,486 NTD 11,586,247 NTD 831,060 NTD 145,395 NTD 1,870,369

Note 1: (1) There are business transactions going on.

(2) There is a need for short-term financing.

Note 2: (1) The Company’s limit of financing for individual recipients and the total limit of financing shall not exceed 10% and 20% of the net worth of the Company as in the latest financial statements, respectively.

(2) Rechi Holdings Co., Ltd.’s limit of financing for individual recipients and the total limit of financing shall not exceed 40% of the net worth of the Company as in the latest financial statements; however, for those located overseas who directly and indirectly hold 100% of the voting shares of the company and have a need for purchase of materials or working capital, the limit of financing shall not exceed the net worth of the Company as in the latest financial statements.

(3) Rechi Precision (Jiujiang) Electric Machinery Limited’s limit of financing for individual recipients and the total limit of financing shall not exceed 40% of the net worth of the Company as in the latest financial statements; however, for those located overseas who directly and indirectly hold 100% of the voting shares of the company and have a need for purchase of materials or working capital, the limit of financing shall not exceed the net worth of the Company as in the latest financial statements.
(4) Dongguan Rechi Compressor Co., Ltd.’s limit of financing for individual recipients and the total limit of financing shall not exceed 40% of the net worth of the Company as in the latest financial statements; however, for those located overseas who directly and indirectly hold 100% of the voting shares of the company and have a need for purchase of materials or working capital, the limit of financing shall not exceed the net worth of the Company as in the latest financial statements.

(5) Rechi Precision (Qingdao) Electric Machinery Limited’s limit of financing for individual recipients and the total limit of financing shall not exceed 40% of the net worth of the Company as in the latest financial statements; however, for those located overseas who directly and indirectly hold 100% of the voting shares of the company and have a need for purchase of materials or working capital, the limit of financing shall not exceed the net worth of the Company as in the latest financial statements.

Note 3: Measured based on the exchange rate at the end of the period.

Note 4: Already eliminated in the consolidated statements

79 -

RECHI PRECISION CO., LTD. and its subsidiaries

Endorsements and guarantees made for others

For the Year Ended December 31, 2021

Table 2

Unit: NTD thousand or in thousands in foreign currencies

No.	The company providing the endorsement and/or guarantee	The party receiving the endorsement and/or guarantee	The party receiving the endorsement and/or guarantee	The limit of endorsements and/or guarantees to a single business entity (Notes 4 and 6)	The highest balance of endorsements and/or guarantees in the current period	The balance of endorsements and/or guarantees at the end of the period (Note 6)	The actual amounts disbursed (Note 6)	The endorsements and/or guarantees secured with property	Ratio of cumulative endorsement and guarantee to net worth in the most recent financial statement (%)	The upper limit of an endorsement and/or guarantee (Notes 4 and 6)	Guarantee and endorsem ent of parent company to subsidiary	Guarantee and endorsem ent by subsidiary to parent company	Guarantee and endorsem ent in Mainland China	Note
		Company name	Relation
0 0 0 1 2 2 3	RECHI PRECISION CO., LTD. RECHI PRECISION CO., LTD. RECHI PRECISION CO., LTD. Rechi Precision (Qingdao) Electric Machinery Limited (Note 5) Dyna Rechi Co., Ltd. Dyna Rechi Co., Ltd. Dongguan Rechi Compressor Co., Ltd.	Rechi Holdings Co., Ltd. Rechi Precision (Qingdao) Electric Machinery Limited Rechi Precision (Jiujiang) Electric Machinery Limited Qingdao Rechi Electric Machinery Sales Company Dyna Rechi (Jiujiang) Co., Ltd. Ablek Technology Co., Ltd. Rechi Refrigeration Dongguan Co., Ltd.	Note 1 Note 2 Note 2 Note 3(2) Note 2 Note 1 Note 3 (1)	$ 9,002,432 9,002,432 9,002,432 NTD 4,675,923 ( RMB 1,077,030 ) 528,187 528,187 NTD 363,489 ( RMB 83,724 )	NTD 2,256,298 ( USD 76,000 ) NTD 227,840 ( USD 8,000 ) NTD 1,448,079 ( USD 40,000 ) ( RMB 70,000 ) NTD 1,473,557 ( RMB 340,000 ) NTD 90,060 ( USD 3,000 ) NTD 30,000 NTD 216,400 ( RMB 50,000 )	NTD 1,577,760 ( USD 57,000 ) NTD - ( USD - ) NTD 1,411,105 ( USD 40,000 ) ( RMB 70,000 ) NTD 1,172,204 ( RMB 270,000 ) NTD 83,040 ( USD 3,000 ) NTD 30,000 NTD 108,537 ( RMB 25,000 )	NTD 913,440 ( USD 33,000 ) NTD - ( USD - ) NTD 167,416 ( USD 2,166 ) ( RMB 24,752 ) NTD 868,299 ( RMB 200,000 ) NTD - ( USD - ) NTD - NTD 108,529 ( RMB 24,998 )	$ - - - - - - -	18% - 16% 25% 8% 3% 30%	$ 13,503,648 13,503,648 13,503,648 NTD 7,013,884 ( RMB 1,615,545 ) 528,187 528,187 NTD 545,231 ( RMB 125,586 )	Y Y Y N N N N	N N N N N N N	N Y Y Y Y N Y

Note 1: Subsidiaries in which at least 50% of the ordinary shares are held directly by the Company.
Note 2: Investees in which at least 50% of the ordinary shares are held by the Company and its subsidiaries in total.
Note 3: (1) For companies that the Company directly and indirectly holds 90% of the voting shares.
(2) Companies that are endorsed and guaranteed by each shareholder based on their shareholding ratio because of a joint investment relationship.
Note 4: (1) The upper limit of the Company’s endorsement/guarantee provided to each entity is NT$9,002,432(net worth) × 100% = NT$9,002,432.
(2) The upper limit of the Company’s endorsements/guarantees provided is NT$9,002,432 (net worth) × 150% = NT$13,503,648.
(3) The upper limit of the Rechi Precision (Qingdao) Electric Machinery Limited’s endorsement/guarantee provided to each entity is RMB 1,077,030 (net worth) × 100% = RMB 1,077,030.
(4) The upper limit of the Rechi Precision (Qingdao) Electric Machinery Limited’s endorsements/guarantees provided is RMB 1,077,030 (net worth) × 150% = RMB 1,615,545.
(5) The upper limit of the Dyna Rechi Co., Ltd.’s endorsement/guarantee provided to each entity is NT$1,056,374 (net worth) × 50% = NT$528,187.
(6) The upper limit of the Dyna Rechi Co., Ltd.’s endorsements/guarantees provided is NT$1,056,374 (net worth) × 50% = NT$528,187.
(7) The upper limit of the Dongguan Rechi Compressor Co., Ltd.’s endorsement/guarantee provided to each entity is RMB 83,724 (net worth) × 100% = RMB 83,724.
(8) The upper limit of the Dongguan Rechi Compressor Co., Ltd.’s endorsement/guarantee provided is RMB 83,724 (net worth) × 150% = RMB 125,586.

Note 5: The amount endorsement/guarantee provided by the Rechi Precision (Qingdao) Electric Machinery Limited to the Qingdao Rechi Electric Machinery Sales Company is jointly endorsed by the Rechi Precision (Qingdao) Electric Machinery Limited and the TCL Rechi (Huizhou) Refrigeration Equipment Company Limited.

Note 6: Measured based on the exchange rate at the end of the period.
80 -

RECHI PRECISION CO., LTD. and its subsidiaries

Marketable securities held – end of year

March 31, 2021

Table 3

Unit: Thousand shares/NTD thousand

Holding company	Types and names of securities	Relationship with the securities issuer	Account titles in book		At ending	At ending		Note
				Number of shares	Book value	Shareholding ratio	Fair value
Rechi Investments Co., Ltd. Rechi Refrigeration Dongguan Co., Ltd. Dongguan Rechi Compressor Co., Ltd. Qingdao Rechi Electric Machinery Sales Company	Sharp Corporation Bigbest Solutions, Inc. Magnpower Corporation BOC Wealth Management – Enjoy Everyday BOC Wealth Management – Enjoy Everyday Fu-Guo-An-Xin No. 3 Fuxiang term of wealth management product Fu-Guo-An-Xin No. 3 Fuyu term of wealth management product Fu-Guo-An-Xin No. 3 Fushi term of wealth management product Fu-Guo-Ju-Bao-Pen No. 12 of 13th term wealth management product Fu-Guo-Ju-Bao-Pen No. 12 of 14th term wealth management product Fu-Guo-Ju-Bao-Pen No. 12 of 15th term wealth management product Fu-Guo-Ju-Bao-Pen No. 12 of 16th term wealth management product Fu-Guo-Ju-Bao-Pen No. 12 of 17th term wealth management product	None None None None None None None None None None None None None	Financial assets at fair value through profit or loss – current The financial assets measured for the fair values through other comprehensive income – non-current The financial assets measured for the fair values through other comprehensive income – non-current Financial assets at fair value through profit or loss – current Financial assets at fair value through profit or loss – current Financial assets at fair value through profit or loss – current Financial assets at fair value through profit or loss – current Financial assets at fair value through profit or loss – current Financial assets at fair value through profit or loss – current Financial assets at fair value through profit or loss – current Financial assets at fair value through profit or loss – current Financial assets at fair value through profit or loss – current Financial assets at fair value through profit or loss – current	20 600 3,000 - - - - - - - - - -	$ 6,354 - 18,120 78,147 8,683 43,415 43,415 95,513 30,390 43,415 65,123 78,147 30,390	- 0.9% 7.5% - - - - - - - - - -	$ 6,354 - 18,120 78,147 8,683 43,415 43,415 95,513 30,390 43,415 65,123 78,147 30,390	Note 1 - - Note 2 Note 2 Note 2 Note 2 Note 2 Note 2 Note 2 Note 2 Note 2 Note 2

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81 -

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Holding company	Types and names of securities	Relationship with the securities issuer	Account titles in book		At ending			Note
				Number of shares	Book value	Shareholding ratio	Fair value
Qingdao Rechi Electric Machinery Sales Company Rechi Precision (Qingdao) Electric Machinery Limited	Fu-Guo-Ju-Bao-Pen No. 12 of 18th term wealth management product Fu-Guo-Ju-Bao-Pen No. 12 of 19th term wealth management product Fu-Guo-Ju-Bao-Pen No. 12 of 20th term wealth management product Fu-Guo-Ju-Bao-Pen No. 12 of 21th term wealth management product ICBC Investment Product-Tian Li Bao XLT1801 Fu-Guo-Ju-Bao-Pen No. 13 of 11th term wealth management product Fu-Guo-Ju-Bao-Pen No. 13 of 12th term wealth management product Fu-Guo-Ju-Bao-Pen No. 13 of 13th term wealth management product Fu-Guo-Ju-Bao-Pen No. 13 of 14th term wealth management product Fu-Guo-Ju-Bao-Pen No. 13 of 15th term wealth management product Fu-Guo-Ju-Bao-Pen No. 13 of 16th term wealth management product Fu-Guo-Ju-Bao-Pen No. 13 of 17th term wealth management product Fu-Guo-Ju-Bao-Pen No. 13 of 18th term wealth management product Fu-Guo-Ju-Bao-Pen No. 13 of 19th term wealth management product Fu-Guo-Ju-Bao-Pen No. 13 of 20th term wealth management product ICBC Investment Product-Tian Li Bao XLT1801	None None None None None None None None None None None None None None None None	Financial assets at fair value through profit or loss – current Financial assets at fair value through profit or loss – current Financial assets at fair value through profit or loss – current Financial assets at fair value through profit or loss – current Financial assets at fair value through profit or loss – current Financial assets at fair value through profit or loss – current Financial assets at fair value through profit or loss – current Financial assets at fair value through profit or loss – current Financial assets at fair value through profit or loss – current Financial assets at fair value through profit or loss – current Financial assets at fair value through profit or loss – current Financial assets at fair value through profit or loss – current Financial assets at fair value through profit or loss – current Financial assets at fair value through profit or loss – current Financial assets at fair value through profit or loss – current Financial assets at fair value throughprofit or loss–current	- - - - - - - - - - - - - - - -	$ 43,415 43,415 34,732 43,415 121,562 30,390 39,073 26,049 43,415 21,708 21,708 43,415 43,415 30,390 43,415 86,830	- - - - - - - - - - - - - - - -	$ 43,415 43,415 34,732 43,415 121,562 30,390 39,073 26,049 43,415 21,708 21,708 43,415 43,415 30,390 43,415 86,830	Note 2 Note 2 Note 2 Note 2 Note 2 Note 2 Note 2 Note 2 Note 2 Note 2 Note 2 Note 2 Note 2 Note 2 Note 2 Note 2

Note 1: The fair values were calculated based on the closing prices of the stocks at the end of December 2021.

Note 2: The fair value measurement is based on the quoted prices offered the counterparties as the valuation techniques and significant unobservable inputs to calculate the expected return on such investments.

82 -

RECHI PRECISION CO., LTD. and its subsidiaries

The cumulative purchase or sale of the same security for an amount exceeding NT$300 million or 20% of paid-in capital

For the Year Ended December 31, 2021

Table 4

Unit: Thousand shares/NTD thousand

Company Buy & Sell	Types and names of securities	Account titles in book	Counterparti es	Relation	Beginning	Beginning	Buy	Buy		Sell	Sell		At ending	At ending
					Shares	Amount	Number of shares	Amount	Shares	Sale price	Book cost	Loss (gain) on disposal	Shares	Amount (Cost)
RECHI PRECISION CO., LTD.	Stock D-Shares of Qingdao Haier Co., Ltd.	The financial assets measured for the fair values through other comprehensive income – current	－	－	19,048	$ 712,200	-	$ -	19,048	$ 1,193,308	$ 712,200	$ 481,108	-	$ -

83 -

Unit: NT$1 thousand

RECHI PRECISION CO., LTD. and its subsidiaries

Total Purchases from or Sales to Related Parties Amounting to at least NT$100 Million or 20% of the Paid-in Capital

For the Year Ended December 31, 2021

Table 5

Purchase (sale) company	Counterparties	Relation		Transactions	Transactions		Trading terms different from general trade and reasons	Trading terms different from general trade and reasons	Notes and accounts receivable (payable)	Notes and accounts receivable (payable)	Notes and accounts receivable (payable)	Note
			Purchase (sale)	Amount	Proportion to total purchase (sale) (%)	The credit period	Unit price	The credit period	Title	Balance	Proportion to notes and accounts receivable (payable) (%)
RECHI PRECISION CO., LTD. Rechi Refrigeration Dongguan Co., Ltd. TCL Rechi (Huizhou) Refrigeration Equipment Company Limited Rechi Precision (Huizhou) Mechanism Company	TCL Rechi (Huizhou) Refrigeration Equipment Company Limited Rechi Precision (Qingdao) Electric Machinery Limited Rechi Precision (Jiujiang) Electric Machinery Limited Rechi Refrigeration Dongguan Co., Ltd. TCL Rechi (Huizhou) Refrigeration Equipment Company Limited Rechi Precision (Qingdao) Electric Machinery Limited RECHI PRECISION CO., LTD. Rechi Precision (Huizhou) Mechanism Company RECHI PRECISION CO., LTD. Rechi Refrigeration Dongguan Co., Ltd. Qingdao Rechi Electric Machinery Sales Company TCL Rechi (Huizhou) Refrigeration Equipment Company Limited	Subsidiary of Rechi Holdings Co., Ltd. Subsidiary of Rechi Investments Holdings Co., Ltd. Subsidiary of Rechi Holdings Co., Ltd. Subsidiary of GR Holdings (Hong Kong) Limited Subsidiary of Rechi Holdings Co., Ltd. Subsidiary of Rechi Investments Holdings Co., Ltd. Ultimate parent company Subsidiaries Ultimate parent company Subsidiary of GR Holdings (Hong Kong) Limited Subsidiaries Parent company	Purchase Purchase Purchase Purchase Sale Sale Sale Purchase Sale Purchase Sale Sale	$ 1,693,781 6,449,243 1,285,145 744,365 1,698,407 292,486 744,365 1,116,812 1,693,781 1,698,407 3,927,552 1,116,812	16 62 12 7 59 10 26 21 30 32 69 100	60–90 days from reimbursement 60–90 days from reimbursement 60–90 days from reimbursement 60–90 days from reimbursement O/A with net 60 days via T/T O/A with net 60 days via T/T 60–90 days from reimbursement O/A with net 90 days via T/T 60–90 days from reimbursement O/A with net 60 days via T/T O/A with net 60 days via 180-day bank acceptance bill O/A with net 90 days via T/T	No significant difference No significant difference No significant difference No significant difference No significant difference No significant difference No significant difference No significant difference No significant difference No significant difference No significant difference No significant difference	O/A with net 30–120 days O/A with net 30–120 days O/A with net 30–120 days O/A with net 30–120 days O/A with net 60–90 days via T/T O/A with net 60–90 days via T/T O/A with net 60–90 days via T/T O/A with net 30–150 days/O/A with net 60 days via 180-day bank acceptance bill O/A with net 30–150 days/O/A with net 60 days via 180-day bank acceptance bill O/A with net 30–150 days/O/A with net 60 days via 180-day bank acceptance bill O/A with net 30–150 days/O/A with net 60 days via 180-day bank acceptance bill O/A with net 30–120 days/O/A with net 60 days via 180-day bankacceptance bill	Accounts payable Accounts payable Accounts payable Accounts payable Accounts receivable Notes receivable Accounts receivable Accounts receivable Accounts payable Payable notes Accounts receivable Accounts payable Payable notes Accounts receivable Notes receivable Accounts receivable Notes receivable	$ 786,991 1,932,738 345,175 261,448 289,793 7,471 76,650 261,448 428,142 960,122 786,991 289,793 7,471 1,150,457 512,053 428,142 960,122	23 58 10 8 40 100 11 36 36 38 40 24 - 59 39 100 100	Note Note Note Note Note Note Note Note Note Note Note Note Note Note Note Note Note

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Purchase (sale) company	Counterparties	Relation		Transactions	Transactions		Trading terms different from general trade and reasons	Trading terms different from general trade and reasons	Notes and accounts receivable (payable)	Notes and accounts receivable (payable)	Notes and accounts receivable (payable)	Note
			Purchase (sale)	Amount	Proportion to total purchase (sale) (%)	The credit period	Unit price	The credit period	Title	Balance	Proportion to notes and accounts receivable (payable) (%)
Rechi Precision (Qingdao) Electric Machinery Limited Qingdao Rechi Electric Machinery Sales Company Rechi Precision (Jiujiang) Electric Machinery Limited	RECHI PRECISION CO., LTD. Qingdao Rechi Electric Machinery Sales Company Rechi Refrigeration Dongguan Co., Ltd. Qingdao China Steel Precision Metal Co., Ltd. Rechi Precision (Jiujiang) Electric Machinery Limited TCL Rechi (Huizhou) Refrigeration Equipment Company Limited Rechi Precision (Qingdao) Electric Machinery Limited Rechi Precision (Jiujiang) Electric Machinery Limited Dyna Rechi (Jiujiang) Co., Ltd. Qingdao Rechi Electric Machinery Sales Company RECHI PRECISION CO., LTD. Dyna Rechi (Jiujiang) Co., Ltd. Rechi Precision (Qingdao) Electric Machinery Limited Jiangxi Baida Precision Manufacturing Corp.	Ultimate parent company Subsidiaries Subsidiary of GR Holdings (Hong Kong) Limited Affiliated enterprises Subsidiary of Rechi Holdings Co., Ltd. Parent company Parent company Subsidiary of Rechi Holdings Co., Ltd. Subsidiary of Dyna Rechi Holdings Co., Ltd. Subsidiary of TCL Rechi (Huizhou) Refrigeration Equipment Company Limited and Rechi Precision (Qingdao) Electric Machinery Limited Ultimate parent company Subsidiary of Dyna Rechi Holdings Co., Ltd. Subsidiary of Rechi Investments Holdings Co., Ltd. Affiliated enterprises	Sale Sale Purchase Purchase Purchase Purchase Purchase Purchase Purchase Sale Sale Purchase Sale Purchase	$ 6,449,243 2,496,745 292,486 763,249 118,837 3,927,552 2,496,745 3,283,535 173,327 3,283,535 1,285,145 2,111,140 118,837 255,061	71 28 3 9 1 40 25 33 2 65 25 44 2 5	60–90 days from reimbursement O/A with net 60 days via 180-day bank acceptance bill O/A with net 60 days via T/T 7 days from arrival of goods/O/A via 180-day bank acceptance bill O/A with net 90 days via T/T O/A with net 60 days via 180-day bank acceptance bill O/A with net 60 days via 180-day bank acceptance bill O/A with net 60 days via 180-day bank acceptance bill O/A with net 60 days via 180-day bank acceptance bill O/A with net 60 days via 180-day bank acceptance bill 60–90 days from reimbursement O/A with net 90 days via T/T O/A with net 90 days via T/T O/A with net 30 days via 180-day bank acceptance bill	No significant difference No significant difference No significant difference No significant difference No significant difference No significant difference No significant difference No significant difference No significant difference No significant difference No significant difference No significant difference No significant difference No significant difference	O/A with net 30–120 days/O/A with net 60 days via 180-day bank acceptance bill O/A with net 30–120 days/O/A with net 60 days via 180-day bank acceptance bill O/A with net 30–120 days/O/A with net 60 days via 180-day bank acceptance bill O/A with net 30–120 days/O/A with net 60 days via 180-day bank acceptance bill O/A with net 30–120 days/O/A with net 60 days via 180-day bank acceptance bill O/A with net 60 days via 180-day bank acceptance bill O/A with net 60 days via 180-day bank acceptance bill O/A with net 60 days via 180-day bank acceptance bill O/A with net 60 days via 180-day bank acceptance bill O/A with net 30–120 days/O/A with net 60 days via 180-day bank acceptance bill O/A with net 30–120 days/O/A with net 60 days via 180-day bank acceptance bill O/A with net 30–120 days/O/A with net 60 days via 180-day bank acceptance bill O/A with net 30–120 days/O/A with net 60 days via 180-day bank acceptance bill O/A with net 30–120 days/O/A with net 60 days via 180-day bank acceptance bill	Accounts receivable Accounts receivable Notes receivable Accounts payable Accounts payable Payable notes Accounts payable Accounts payable Payable notes Accounts payable Payable notes Accounts payable Payable notes Accounts payable Accounts receivable Notes receivable Accounts receivable Accounts payable Payable notes Accounts receivable Accounts payable Payable notes	$ 1,932,738 766,695 61,575 76,650 72,036 556 16,822 1,150,457 512,053 766,695 61,575 943,869 947,453 10,588 943,869 947,453 345,175 256,936 86,830 16,822 70,569 35,763	71 28 12 6 6 - 1 40 26 27 3 33 49 - 69 91 25 33 10 1 9 4	Note Note Note Note Note Note Note Note Note Note Note Note Note Note Note Note Note Note

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Purchase (sale) company	Counterparties	Relation		Transactions	Transactions		Trading terms different from general trade and reasons	Trading terms different from general trade and reasons	Notes and accounts receivable (payable)	Notes and accounts receivable (payable)	Notes and accounts receivable (payable)	Note
			Purchase (sale)	Amount	Proportion to total purchase (sale) (%)	The credit period	Unit price	The credit period	Title	Balance	Proportion to notes and accounts receivable (payable) (%)
Dyna Rechi (Jiujiang) Co., Ltd. Dyna Rechi Co., Ltd. Ablek Technology Co., Ltd. Ablek Technology Ltd.	Rechi Precision (Jiujiang) Electric Machinery Limited Qingdao Rechi Electric Machinery Sales Company Dyna Rechi Co., Ltd. Dyna Rechi (Jiujiang) Co., Ltd. Ablek Technology Ltd. Ablek Technology Co., Ltd.	Subsidiary of Rechi Holdings Co., Ltd. Subsidiary of TCL Rechi (Huizhou) Refrigeration Equipment Company Limited and Rechi Precision (Qingdao) Electric Machinery Limited Parent company Sub-subsidiary Sub-subsidiary Parent company	Sale Sale Sale Purchase Purchase Sale	$ 2,111,140 173,327 229,475 229,475 392,088 392,088	81 7 9 87 100 96	O/A with net 90 days via T/T O/A with net 60 days via 180-day bank acceptance bill 60–90 days from reimbursement 60–90 days from reimbursement 60–90 days from reimbursement 60–90 days from reimbursement	No significant difference No significant difference No significant difference No significant difference No significant difference No significant difference	O/A with net 30–120 days/O/A with net 60 days via 180-day bank acceptance bill O/A with net 30–120 days/O/A with net 60 days via 180-day bank acceptance bill O/A with net 30–120 days/O/A with net 60 days via 180-day bank acceptance bill O/A with net 30–120 days O/A with net 30–120 days O/A with net 30–120 days	Accounts receivable Notes receivable Accounts receivable Accounts receivable Accounts payable Accounts payable Accounts receivable	$ 256,936 86,830 10,588 79,738 79,738 72,080 72,080	70 42 3 22 96 100 98	Note Note Note Note Note Note Note

Note: Already eliminated in the consolidated statements

86 -

RECHI PRECISION CO., LTD. and its subsidiaries

Accounts receivable from related parties for an amount exceeding NT$100 million or 20% of paid-in capital

March 31, 2021

Table 6

Unit: NT$1 thousand

The company booked in the receivables	Name of counterparty	Relation	Balance of accounts receivable from related parties (Note 1)	Turnover rate	Overdue Receivables from relatedparties	Overdue Receivables from relatedparties	Receivables amount collected from related parties subsequently	Amount of provision for bad debts
					Amount	Process
RECHI PRECISION CO., LTD. Rechi Holdings Co., Ltd. Rechi Refrigeration Dongguan Co., Ltd. TCL Rechi (Huizhou) Refrigeration Equipment Company Limited Rechi Precision (Huizhou) Mechanism Company Rechi Precision (Qingdao) Electric Machinery Limited Rechi Precision (Jiujiang) ElectricMachineryLimited	Rechi Precision (Jiujiang) Electric Machinery Limited Dyna Rechi (Jiujiang) Co., Ltd. Rechi Precision (Jiujiang) Electric Machinery Limited TCL Rechi (Huizhou) Refrigeration Equipment Company Limited RECHI PRECISION CO., LTD. RECHI PRECISION CO., LTD. Qingdao Rechi Electric Machinery Sales Company TCL Rechi (Huizhou) Refrigeration Equipment Company Limited RECHI PRECISION CO., LTD. Qingdao Rechi Electric Machinery Sales Company Rechi Precision (Jiujiang) Electric Machinery Limited RECHI PRECISION CO., LTD.	Subsidiary of Rechi Holdings Co., Ltd. Subsidiary of Dyna Rechi Holdings Co., Ltd. Subsidiaries Subsidiary of Rechi Holdings Co., Ltd. Ultimate parent company Ultimate parent company Subsidiaries Parent company Ultimate parent company Subsidiaries Subsidiary of Rechi Holdings Co., Ltd. Ultimate parent company	Other receivables (Note 2) $ 349,130 Other receivables (Note 2) 217,221 Other receivables (Note 3) 1,024,160 Accounts receivable 289,793 Notes receivable 7,471 Accounts receivable 261,448 Accounts receivable 786,991 Accounts receivable 1,150,457 Notes receivable 512,053 Accounts receivable 428,142 Notes receivable 960,122 Accounts receivable 1,932,738 Accounts receivable 766,695 Notes receivable 61,575 Other receivables (Note 3) 217,346 Accounts receivable 345,175	- - - 5.71 5.71 2.85 2.15 2.36 2.36 0.80 0.80 3.34 3.01 3.01 - 3.72	$ - - - - - - - - - - - - - - -	- - - - - - - - - - - - - - -	$ - - - 289,793 7,471 131,339 758,189 656,470 119,203 196,220 125,903 967,311 367,700 61,575 - 285,379	$ - - - - - - - - - - - - - - -

(Continued on next page)

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(Continued from previous page)

The company booked in the receivables	Name of counterparty	Relation	Balance of accounts receivable from related parties (Note 1)	Turnover rate	Overdue Receivables from related parties	Overdue Receivables from related parties	Receivables amount collected from related parties subsequently	Amount of provision for bad debts
					Amount	Process
Dyna Rechi (Jiujiang) Co., Ltd.	Qingdao Rechi Electric Machinery Sales Company Dyna Rechi (Jiujiang) Co., Ltd. Rechi Precision (Jiujiang) Electric Machinery Limited	Subsidiary of TCL Rechi (Huizhou) Refrigeration Equipment Company Limited and Rechi Precision (Qingdao) Electric Machinery Limited Subsidiary of Dyna Rechi Holdings Co., Ltd. Subsidiary of Rechi Holdings Co., Ltd.	Accounts receivable $ 943,869 Notes receivable 947,453 Other receivables (Note 3) 177,544 Accounts receivable 256,936 Notes receivable 86,830	1.74 1.74 - 6.14 6.14	$ - - - - -	- - - - -	$ 622,503 216,036 511 256,936 -	$ - - - - -

Note 1: Already eliminated in the consolidated statements

Note 2: It includes loans provided to others and advance payments receivable. Note 3: It refers to loans provided to others.

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Unit: NT$1 thousand

RECHI PRECISION CO., LTD. and its subsidiaries

Business relationship and significant transactions between Parent Company and Subsidiaries

For the Year Ended December 31, 2021

Table 7

No. (Note 1)	Trader’s name	Counterparty	Affiliation to trader (Note 2)	Transactions	Transactions	Transactions	Transactions
				Title	Amount	Terms and conditions	Percentage in consolidated total revenue or total assets (Note 3)
0 1 2 2 2 2 3 3 3 3 3 4 4 4 5 5 5 5 6 6 6 6 6	RECHI PRECISION CO., LTD. Rechi Holdings Co., Ltd. Rechi Refrigeration Dongguan Co., Ltd. Rechi Refrigeration Dongguan Co., Ltd. Rechi Refrigeration Dongguan Co., Ltd. Rechi Refrigeration Dongguan Co., Ltd. TCL Rechi (Huizhou) Refrigeration Equipment Company Limited TCL Rechi (Huizhou) Refrigeration Equipment Company Limited TCL Rechi (Huizhou) Refrigeration Equipment Company Limited TCL Rechi (Huizhou) Refrigeration Equipment Company Limited TCL Rechi (Huizhou) Refrigeration Equipment Company Limited Rechi Precision (Huizhou) Mechanism Company Rechi Precision (Huizhou) Mechanism Company Rechi Precision (Huizhou) Mechanism Company Rechi Precision (Qingdao) Electric Machinery Limited Rechi Precision (Qingdao) Electric Machinery Limited Rechi Precision (Qingdao) Electric Machinery Limited Rechi Precision (Qingdao) Electric Machinery Limited Rechi Precision (Jiujiang) Electric Machinery Limited Rechi Precision (Jiujiang) Electric Machinery Limited Rechi Precision (Jiujiang) Electric Machinery Limited Rechi Precision (Jiujiang) Electric Machinery Limited Rechi Precision (Jiujiang) Electric Machinery Limited	Rechi Precision (Jiujiang) Electric Machinery Limited Rechi Precision (Jiujiang) Electric Machinery Limited Parent company TCL Rechi (Huizhou) Refrigeration Equipment Company Limited TCL Rechi (Huizhou) Refrigeration Equipment Company Limited Rechi Precision (Qingdao) Electric Machinery Limited Parent company Parent company Qingdao Rechi Electric Machinery Sales Company Qingdao Rechi Electric Machinery Sales Company Qingdao Rechi Electric Machinery Sales Company TCL Rechi (Huizhou) Refrigeration Equipment Company Limited TCL Rechi (Huizhou) Refrigeration Equipment Company Limited TCL Rechi (Huizhou) Refrigeration Equipment Company Limited Parent company Parent company Qingdao Rechi Electric Machinery Sales Company Qingdao Rechi Electric Machinery Sales Company Qingdao Rechi Electric Machinery Sales Company Qingdao Rechi Electric Machinery Sales Company Qingdao Rechi Electric Machinery Sales Company Parent company Parent company	1 3 2 3 3 3 2 2 3 3 3 3 3 3 2 2 3 3 3 3 3 2 2	Other receivables Other receivables Sale Sale Accounts receivable Sale Sale Accounts receivable Sale Accounts receivable Notes receivable Sale Accounts receivable Notes receivable Sale Accounts receivable Sale Accounts receivable Sale Accounts receivable Notes receivable Sale Accounts receivable	$ 349,130 1,024,160 744,365 1,698,407 289,793 292,486 1,693,781 786,991 3,927,552 1,150,457 512,053 1,116,812 428,142 960,122 6,449,243 1,932,738 2,496,745 766,695 3,283,535 943,869 947,453 1,285,145 345,175	No significant difference No significant difference No significant difference No significant difference No significant difference No significant difference No significant difference No significant difference No significant difference No significant difference No significant difference No significant difference No significant difference No significant difference No significant difference No significant difference No significant difference No significant difference No significant difference No significant difference No significant difference No significant difference No significant difference	1% 4% 3% 8% 1% 1% 7% 3% 17% 4% 2% 5% 2% 4% 29% 7% 11% 3% 15% 4% 4% 6% 1%

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No. (Note 1)	Trader’s name	Counterparty	Affiliation to trader (Note 2)		Transactions	Transactions
				Title	Amount	Terms and conditions	Percentage in consolidated total revenue or total assets (Note 3)
7 7 8	Dyna Rechi (Jiujiang) Co., Ltd. Dyna Rechi (Jiujiang) Co., Ltd. Ablek Technology Ltd.	Rechi Precision (Jiujiang) Electric Machinery Limited Dyna Rechi Co., Ltd. Ablek Technology Co., Ltd.	3 3 3	Sale Sale Sale	2,111,140 229,475 392,088	No significant difference No significant difference No significant difference	9% 1% 2%

Note 1: The information of business operation between the parent company and its subsidiaries should be documented in the respectively numbered column as follows:

(1) Fill in “0” for parent company.
(2) The subsidiaries are sequentially numbered from 1 and so forth.
Note 2: The relationship with the traders is classified into three categories as follows:
(1) The parent company to subsidiary.
(2) The subsidiary to parent company.
(3) Between subsidiaries.
Note 3: Calculate the ratio of the transaction amount to consolidate the total income or total assets. For the assets and liabilities account, calculate the ratio of the ending balance to the consolidated total assets. For the profits and losses account, calculate the ratio of the interim cumulated amount to the consolidated total income.

Note 4: All the transactions listed in the table above have been eliminated during preparation of the consolidated financial statements.

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RECHI PRECISION CO., LTD. and its subsidiaries

Information on Investees

For the Year Ended December 31, 2021

Table 8

Unit: Thousand shares/NTD thousand or in thousands in foreign currencies

Investor	Name of investee	Location	Principal business	Sum of initial investment	Sum of initial investment	Ending shareholding	Ending shareholding	Ending shareholding	Current period profit/loss of the investee	Recognized investment Income	Note
				Current period-end	Previous period-end	Number of shares	Percentage (%)	Book value
RECHI PRECISION CO., LTD. Rechi Holdings Co., Ltd. Rechi International Holdings Co., Ltd. Dyna Rechi Co., Ltd. Ablek Technology Co., Ltd.	Rechi Holdings Co., Ltd. Rechi Investments Co., Ltd. Dyna Rechi Co., Ltd. Rechi International Holdings Co., Ltd. Rechi Investments Holdings Co., Ltd. GR Holdings (Hong Kong) Limited Dyna Rechi Holdings Co., Ltd. Ablek Technology Co., Ltd. Ablek Technology Ltd.	British Virgin Islands Taiwan Taiwan British Virgin Islands British Virgin Islands Hong Kong Samoa Taiwan Samoa	Investment business Investment business BLDC Motor Investment business Investment business Investment business Investment business Sales business Investment business	$ 8,194,085 150,000 720,000 USD 25,768 USD 90,000 USD 25,701 784,303 90,746 90,919	$ 8,194,085 390,000 720,000 USD 25,768 USD 90,000 USD 25,701 784,303 90,746 90,919	- 15,000 72,000 - - - - 7,004 -	100.00 100.00 42.20 100.00 100.00 100.00 100.00 100.00 100.00	$ 11,498,750 131,090 445,833 USD 37,262 USD 168,765 USD 37,097 781,279 126,405 66,055	$ 459,001 ( 2,043 ) ( 102,829 ) USD 1,513 USD 7,844 USD 1,517 10,188 ( 17,984 ) ( 23,148 )	$ 478,578 ( 2,043 ) ( 43,398 ) N/A N/A N/A N/A N/A N/A	Subsidiaries Subsidiaries (Note 3) Subsidiaries Sub-subsidiary Sub-subsidiary Third-tier subsidiaries. Sub-subsidiary Sub-subsidiary Third-tier subsidiaries.

Note 1: Already eliminated in the consolidated statements

Note 2: For information on investments in Mainland China, please refer to Table 9.

Note 3: The sum of initial investment by the Rechi Investments Co., Ltd. includes NT$195,000 thousand of cash investment and NT$195,000 thousand from capitalization of earnings, and has received payment of NT$240,000 thousand returned after a reduction of capital in the year 2021.

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Unit: NT$ thousand or thousand in foreign currencies

RECHI PRECISION CO., LTD. and its subsidiaries

Information regarding investment in the territory of Mainland China

For the Year Ended December 31, 2021

Table 9

Names of investees in China	Principal business	Paid-up capital	Paid-up capital	Mode of investments	Accumulated amount of investment remitted from Taiwan at beginning	Accumulated amount of investment remitted from Taiwan at beginning	Amount of investment remitted or recoveredincurrent period	Amount of investment remitted or recoveredincurrent period	Accumulated amount of investment remitted from Taiwan at ending	Current period profit/loss of the investee	The Company’s directly or indirectly invested shareholding	Investment gains (losses) recognized for current period (Note 4)	Book value of investment at ending	The investment income received at the end of the current period
							Outward remittance	Recover
Rechi Refrigeration Dongguan Co., Ltd. Dongguan Rechi Compressor Co., Ltd. TCL Rechi (Huizhou) Refrigeration Equipment Company Limited Rechi Precision (Huizhou) Mechanism Company Rechi Precision (Qingdao) Electric Machinery Limited Qingdao Rechi Electric Machinery Sales Company Qingdao China Steel Precision Metal Co., Ltd. Dyna Rechi (Jiujiang) Co., Ltd. Rechi Precision (Jiujiang) Electric Machinery Limited Jiangxi Baida Precision Manufacturing Corp. Ablek Technology Ltd.	Refrigerant compressor motors and air conditioner accessories Rotary refrigerant compressors Rotary refrigerant compressors Rotary refrigerant compressor components Rotary refrigerant compressor components Sales business Processing production Refrigerant compressor motors and BLDC motors Rotary refrigerant compressors Processing production Home appliance motors	NTD 209,039 ( USD 7,552 ) NTD 250,172 ( USD 9,038 ) NTD 1,985,819 ( USD 71,742 ) NTD 1,310,620 ( USD 47,349 ) NTD 2,491,200 ( USD 90,000 ) NTD 30,390 ( RMB 7,000 ) NTD 553,600 ( USD 20,000 ) NTD 1,121,036 ( RMB 258,215 ) NTD 1,826,880 ( USD 66,000 ) NTD 1,060,725 ( USD 38,321 ) NTD 19,376 ( USD 700 )		Note 2 Note 1 Note 1 Note 1 Note 2 Note 9 Note 1 Note 3 Note 1 Note 1 Note 11	NTD 700,055 ( USD 25,291 ) NTD 289,228 ( USD 10,449 ) NTD 917,980 ( USD 33,164 ) NTD 83,040 ( USD 3,000 ) NTD 775,040 ( USD 28,000 ) (Note 7) NTD - ( RMB - ) NTD - ( USD - ) NTD 704,953 ( RMB 162,376 ) (Note 10) NTD 1,826,880 ( USD 66,000 ) NTD 318,209 ( USD 11,496 ) NTD - ( USD -)		$ - - - - - - - - - - -	$ - - - - - - - - - - -	NTD 700,055 ( USD 25,291 ) NTD 289,228 ( USD 10,449 ) NTD 917,980 ( USD 33,164 ) NTD 83,040 ( USD 3,000 ) NTD 775,040 ( USD 28,000 ) (Note 7) NTD - ( RMB - ) NTD - ( USD - ) NTD 704,953 ( RMB 162,376 ) (Note 10) NTD 1,826,880 ( USD 66,000 ) NTD 318,209 ( USD 11,496 ) NTD - ( USD -)	$ 44,400 9,374 155,098 2,206 219,717 88,564 32,190 15,840 71,120 ( 19,605 ) ( 23,082 )	100.00 100.00 77.78 77.78 100.00 88.89 30.00 62.72 100.00 30.00 42.20	$ 44,400 9,374 120,632 1,716 219,717 78,725 9,657 9,935 71,120 ( 5,881 ) ( 9,742 )	NTD 992,313 ( USD 35,849 ) NTD 363,489 ( USD 13,132 ) NTD 2,424,500 ( USD 87,590 ) NTD 1,168,432 ( USD 42,212 ) NTD 4,675,923 ( USD 168,928 ) NTD 369,177 ( RMB 85,034 ) NTD 179,748 ( USD 6,494 ) NTD 759,191 ( RMB 174,869 ) NTD 2,077,650 ( USD 75,060 ) NTD 326,466 ( USD 11,794 ) NTD 1,498 ( RMB 345 )	NTD 356,408 ( USD 12,876 ) NTD 42,350 ( USD 1,530 ) NTD 1,751,756 ( USD 63,286 ) NTD 161,264 ( USD 5,826 ) NTD 2,240,585 ( USD 80,946 ) NTD 26,047 ( USD 941 )

Accumulated investment from Taiwan to Mainland China at ending			Amount of investment approved by Investment Commission of MOEA			Investment amount approved by the Investment Commission MOEAIC
NTD 5,615,385			NTD 4,293,140 (USD 155,099)(Note 5)			(Note 6)

Note 1: The Company has established a holding company (Rechi Holdings Co., Ltd.) in the British Virgin Islands and invested in the establishment of Rechi International Holdings Co., Ltd., Rechi Investments Holdings Co., Ltd., TCL Rechi (Huizhou) Refrigeration Equipment Company Limited, Dongguan Rechi Compressor Co., Ltd., Rechi Precision (Huizhou) Mechanism Company, Qingdao China Steel Precision Metal Co., Ltd., Rechi Precision (Jiujiang) Electric Machinery Limited, and Jiangxi Baida Precision Manufacturing Corp. through Rechi Holdings Co., Ltd.

Note 2: Through GR Holdings (Hong Kong) Limited and Rechi Investments Holdings Co., Ltd., the Company has invested in the establishment of Rechi Refrigeration Dongguan Co., Ltd. and Rechi Precision (Qingdao) Electric Machinery Limited in Mainland China.

Note 3: The Company’s subsidiary Dyna Rechi Co., Ltd. has invested in the establishment of Dyna Rechi (Jiujiang) Co., Ltd. in Mainland China through Dyna Rechi Holdings Co., Ltd.

Note 4: Recognized based on the financial statements audited by independent accountants.

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Note 5: Investment amounts authorized by Investment Commission, Ministry of Economic Affairs

Name of investee in China Rechi Refrigeration Dongguan Co., Ltd. Dongguan Rechi Compressor Co., Ltd. TCL Rechi (Huizhou) Refrigeration Equipment Company Limited Rechi Precision (Huizhou) Mechanism Company Rechi Precision (Qingdao) Electric Machinery Limited Qingdao China Steel Precision Metal Co., Ltd. Dyna Rechi (Jiujiang) Co., Ltd. Rechi Precision (Jiujiang) Electric Machinery Limited Jiangxi Baida Precision Manufacturing Corp. Ablek Technology Ltd.		Amount
		USD 12,999 8,920 - 6,566 16,960 5,573 25,800 66,000 11,581 700 USD 155,099

Note 6: It has been approved to not be subject to the upper limit of the investment amount or percentage as it meets the proviso of Point 3 of the “Principles for the Review of Investment or Technical Collaboration in Mainland China” per the Jin-Shou-Gong Letter No. 10320409110 issued by the Industrial Development Bureau, Ministry of Economic Affairs (MOEA).

Note 7: The difference between the amount of paid-in capital and the accumulated investment amount remitted from Taiwan at the end of the period is due to direct investment by Rechi Holdings Co., Ltd. with its own funds.

Note 8: The difference between the accumulated investment amount remitted from Taiwan at the end of the period and the amount approved by the Investment Commission, MOEA, is due to the capitalization of earnings and the repatriation of earnings. Note 9: It is the joint investment by TCL Rechi (Huizhou) Refrigeration Equipment Company Limited and Rechi Precision (Qingdao) Electric Machinery Limited, each with a 50% shareholding percentage. Note 10: The difference between the amount of paid-in capital and the accumulated investment amount remitted from Taiwan at the end of the period is due to the direct investment by Rechi Precision (Jiujiang) Electric Machinery Limited with its own funds. Note 11: Ablek Technology Co., Ltd., the sub-subsidiary of the Company, invests in Ablek Technology Ltd. in China through Ablek Technology Ltd. Note 12: Already eliminated in the consolidated financial statements except for Qingdao China Steel Precision Metal Co., Ltd. and Jiangxi Baida Precision Manufacturing Corp.

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RECHI PRECISION CO., LTD. and its subsidiaries

Significant direct transactions with the investee in Mainland China or indirectly through third regions, its prices, terms of payment, unrealized gain or loss, and other relevant information. For the Year Ended December 31, 2021

Table 10

Unit: NT$1 thousand

Names of investees in China	Transaction type	Purchase/Sale	Purchase/Sale	Price	Terms and conditions	Terms and conditions	Notes and accounts receivable (payable)	Notes and accounts receivable (payable)	Unrealized gains or losses	Note
		Amount	Percentage		Payment terms	Comparison with general transactions	Amount	Percentage
TCL Rechi (Huizhou) Refrigeration Equipment Company Limited Rechi Precision (Qingdao) Electric Machinery Limited Rechi Precision (Jiujiang) Electric Machinery Limited Rechi Refrigeration Dongguan Co., Ltd.	Purchase Purchase Purchase Purchase	$ 1,693,781 6,449,243 1,285,145 744,365	16 62 12 7	Normal Normal Normal Normal	60–90 days from reimbursement 60–90 days from reimbursement 60–90 days from reimbursement 60–90 days from reimbursement	Normal Normal Normal Normal	( $ 786,991 ) ( 1,932,738 ) ( 345,175 ) ( 261,448 )	23 58 10 8	$ 2,729 1,575 4,021 2,063

Note 1: Already eliminated in the consolidated statements

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RECHI PRECISION CO., LTD.

Information on Major Shareholders

December 31, 2021

Table 11

Names of Dominant Shareholders	Shares	Shares
	Shares	Shareholding ratio
SAMPO CORPORATION	135,610,160	26.85%

Note 1: The major shareholders in this table are shareholders holding more than 5% of the ordinary and preference shares with dematerialized registration and delivery completed (including treasury stocks) on the last business day of each quarter calculated by the Taiwan Depository & Clearing Corporation. The share capital recorded in the Company’s consolidated financial statements and the number of shares actually delivered by the Company with the dematerialized registration completed may differ due to different calculation bases.
95 -

AI assistant

RECHI — Annual Report 2021

52399_rns_2021-11-04_4477d001-1287-4ac9-a0d1-96ebf6e249ca.pdf

RECHI PRECISION CO., LTD. and its subsidiaries

Consolidated financial statements and Auditor’s Report 2021 and 2020

§Table of Contents§

Statement of Affiliate’s Consolidated Financial Report

Auditor’s Report

To RECHI PRECISION CO., LTD.:

Audit opinions

The basis for opinions

Key audit matters

The basis for recognition of the revenue on export sales

Other information

Responsibilities of Management and Those in Charge of Governance of the Sale or Contribution of Assets between an Investor and its Associate or Joint Venture

Auditor’s Responsibilities for the Audit of the Sale or Contribution of Assets between an Investor and its Associate or Joint Venture

RECHI PRECISION CO., LTD. and its subsidiaries

Consolidated Balance Sheet

December 31, 2021 and 2020

RECHI PRECISION CO., LTD. and its subsidiaries

Consolidated Income Statement

For the Years Ended December 31, 2021 and 2020

(Continued from previous page)

(Continued from previous page)

RECHI PRECISION CO., LTD. and its subsidiaries

Consolidated Statements of Changes in Shareholders’ Equity

RECHI PRECISION CO., LTD. and its subsidiaries

Consolidated Statements of Cash Flow

For the Years Ended December 31, 2021 and 2020

(Continued from previous page)

1. Organization and operations

2. Financial reporting date and procedures

3. Application of new and revised standards and interpretation

1.

4. Summary of significant accounting policies

(4) Basis of consolidation

(5) Foreign currency

(6)

Inventory

(7) Investments in the affiliated company

(8) Property, plant, and equipment

1. Financial assets

(1) Classification of measurement

(2) Impairment of financial assets

2.

Equity instruments

Warranty

Commodity sales revenue

1. The Group is the lessor

2. The Group as the lessee

2. Retirement benefits

(19) Income tax

2. Deferred tax

5. Main source of significant accounting judgment, estimates and assumptions uncertainty

6. Cash and cash equivalents

9. Financial assets based on cost after amortization

10. Note receivable and account receivable

(1) Accounts receivable based on cost after amortization

December 31, 2021

December 31, 2020

(2) Accounts receivable at fair value through other comprehensive income.

December 31, 2021

11. Inventory

12. Subsidiaries

(Continued from previous page)

Summarized information of individually immaterial associates.

14. Real property, plant and equipment

15. Lease arrangements

(3) Important rental activities and terms

(4) Other lease information

16. Other assets

17. Loans

(1) Short-term borrowings

(2) Short-term notes payable

December 31, 2021

December 31, 2020

(3) Long-term borrowings

18. Other payables

19. Retirement benefits plan

(1) Defined contribution pension plan

RECHI Annual Report 2021