RECHI - Annual Report 2020 | FinancialReports.eu

	Table of Contents
[I.	LETTER TO SHAREHOLDERS] .................................................................................................................. 1
[II.	COMPANY HISTORY] ................................................................................................................................... 4
I.	DATE OF ESTABLISHMENT: ................................................................................................................................ 4
II.	ORGANIZATION AND OPERATIONS..................................................................................................................... 4
[III.	CORPORATE GOVERNANCE REPORT] .................................................................................................. 5
I.	ORGANIZATION................................................................................................................................................. 5
II.	PROFILES OFDIRECTORS, PRESIDENT, EXECUTIVEVICEPRESIDENTS, ASST. VP,AND SUPERVISORS OF THE
	VARIOUS DEPARTMENTS AND BRANCHES........................................................................................................... 7
III.	REMUNERATION PAID TO DIRECTORS,THEPRESIDENT,AND THEVICEPRESIDENTS IN THE MOST RECENT YEAR14
IV.	STATUS OFCORPORATEGOVERNANCE........................................................................................................... 18
V.	DISCLOSURE OF THE ACCOUNTANT’S FEE: ...................................................................................................... 50
VI.	CHANGE OFCPA ............................................................................................................................................ 51
VII. THECHAIRMAN,PRESIDENT,OR MANAGER RESPONSIBLE FOR FINANCE OR ACCOUNTING HOLDING A POSITION
	AT A FIRM BELONGING TO A CERTIFYINGCPAFIRM OR ANY AFFILIATED ENTERPRISE WITHIN THE PRECEDING
	YEAR: NONE. .................................................................................................................................................. 51
VIII. THE TRANSFER OF SHARES AND CHANGES IN PLEDGES OF THEDIRECTORS, MANAGERS AND SHAREHOLDERS
	HOLDING MORE THAN10%OF THE SHARES IN THE MOST RECENT YEAR AND AS OF THE PRINTING DATE OF THIS
	ANNUAL REPORT. ............................................................................................................................................ 52
IX.	THE TOP TEN SHAREHOLDERS WHO ARE SPOUSES OR RELATIVES WITHIN THE SECOND DEGREE OF KINSHIP OF
	ONE ANOTHER: ................................................................................................................................................ 54
X.	THE NUMBER OF SHARES HELD IN AS INVESTEE BY AN ENTITY CONTROLLED DIRECTLY OR INDIRECTLY BY THE
	COMPANY,THECOMPANY’SDIRECTOR,MANAGERS. THE AGGREGATE SHAREHOLDING RATIO SHALL BE
	PROVIDED: (UNIT:THOUSAND SHARES) .......................................................................................................... 55
[IV.	CAPITAL OVERVIEW] ................................................................................................................................ 56
I.	SHARES ANDDIVIDENDS................................................................................................................................ 56
II.	CORPORATE BOND: NONE. .............................................................................................................................. 61
III.	PREFERRED SHARES: NONE. ........................................................................................................................... 61
IV.	GLOBAL DEPOSITORY SHARES: NONE. ............................................................................................................ 61
V.	THE STATUS OF EMPLOYEE SHARE OPTION: NONE. .......................................................................................... 61
VI.	NEW RESTRICTED EMPLOYEE SHARES: NONE................................................................................................. 61
VII. M&A (INCLUDE MERGER AND ACQUISITION,CONSOLIDATION,AND DIVISION): NONE. ................................... 61
VIII. IMPLEMENTATION OF THE FUNDS ALLOCATION PLAN: NONE. .......................................................................... 61
[V.	OPERATING HIGHLIGHTS] ...................................................................................................................... 62
I.	BUSINESSACTIVITIES..................................................................................................................................... 62

II.	ANALYSIS OF THE MARKET AS WELL AS PRODUCTION AND MARKETING SITUATION........................................ 65
III.	EMPLOYEE INFORMATION IN THE LAST TWO YEARS UP TO THE PUBLICATION DATE OF THIS ANNUAL REPORT
	(CONSOLIDATED) ............................................................................................................................................ 69
IV.	INFORMATION ON SPENDING ON ENVIRONMENTAL PROTECTION..................................................................... 69
V.	WORK ENVIRONMENT AND EMPLOYEE SAFETY PROTECTION MEASURES: ....................................................... 70
VI.	LABOR–MANAGEMENTRELATIONS................................................................................................................ 71
VII. IMPORTANTCONTRACTS................................................................................................................................. 73
VIII. MANAGEMENT OFINTELLECTUALPROPERTY................................................................................................. 73
[VI.	FINANCIAL INFORMATION] .................................................................................................................... 75
I.	CONDENSEDBALANCESHEET ANDINCOMESTATEMENT OF THE LAST FIVE YEARS........................................ 75
II.	FINANCIALANALYSIS OF THEPASTFIVEYEARS............................................................................................. 80
III.	AUDITCOMMITTEE’SREVIEWREPORT ON THEMOSTRECENTFISCALYEAR’SFINANCIALSTATEMENT........ 83
IV.	MOSTRECENTFINANCIALREPORTS............................................................................................................... 84
V.	THECOMPANY’S INDIVIDUAL FINANCIAL STATEMENTS AUDITED AND CERTIFIED BY A CERTIFIED PUBLIC
	ACCOUNTANT IN THE MOST RECENT FISCAL YEAR. ........................................................................................ 180
VI.	FINANCIAL INSOLVENCY INCIDENTS ENCOUNTERED BY THECOMPANY AND AFFILIATES FOR THE MOST RECENT
	YEARS,UP TILL THE PUBLICATION DATE OF THIS ANNUAL REPORT. THE IMPACT ON THE COMPANY’S FINANCIAL
	SITUATION SHALL BE SPECIFIED: ................................................................................................................... 266
[VII.	REVIEW OF FINANCIAL POSITION, BUSINESS PERFORMANCE AND RISK ISSUES] ............ 267
I.	FINANCIAL POSITION.................................................................................................................................... 267
II.	FINANCIAL PERFORMANCE........................................................................................................................... 268
III.	CASH FLOW.................................................................................................................................................. 269
IV.	IMPACTS OFMAJORCAPITALEXPENDITURES IN THEMOSTRECENTYEAR TOFINANCIALPERFORMANCE.. 270
V.	THE MAJOR CAUSES FOR PROFITS OR LOSSES INCURRED BY INVESTMENTS DURING THE MOST RECENT YEAR;
	RECTIFICATIONS AND INVESTMENT PLANS FOR THE NEXT YEAR: ................................................................... 270
VI.	RISK DISCLOSURE......................................................................................................................................... 271
VII. OTHER IMPORTANT NOTES: ........................................................................................................................... 273
[VIII.	SPECIFIC NOTES]...................................................................................................................................... 274
I.	INFORMATION ON THE AFFILIATES(AS OFDEC. 31, 2020) ............................................................................. 274
II.	THE STATUS OF PRIVATE PLACEMENT OF SECURITIES IN THE MOST RECENT YEAR TO THE DATE THIS REPORT
	WAS PRINTED: NONE. .................................................................................................................................... 283
III.	HOLDING OR DISPOSAL OF SHARES IN THE COMPANY BY THE COMPANY’S SUBSIDIARIES DURING THE MOST
	RECENT FISCAL YEAR OR DURING THE CURRENT FISCAL YEAR UP TO THE DATE OF PUBLICATION OF THE
	ANNUAL REPORT: NONE. ............................................................................................................................... 283
IV.	OTHER MATTERS THAT REQUIRE ADDITIONAL DESCRIPTION: NONE.............................................................. 283
[IX.	IF THE RESULT OF INCIDENTS SET FORTH IN SUBPARAGRAPH 2 PARAGRAPH 3,

ARTICLE 36 OF THE SECURITIES AND EXCHANGE ACT THAT COULD HAVE A MATERIAL EFFECT ON SHAREHOLDER EQUITY OR SECURITIES PRICES DURING THE MOST RECENT FISCAL YEAR OR DURING THE CURRENT FISCAL YEAR UP TO THE PUBLICATION DATE OF THE ANNUAL REPORT]: ........................................................................... 283

[I. Letter to Shareholders]

Dear Shareholders,

Japan’s JARN magazine predicted that the global household air-conditioning sales would fall by 27% in the first half of 2020 due to the impact of the COVID-19 pandemic. The global air-conditioning market as a whole fell by 8.9% in 2020 over the year of 2019. The air-conditioning industry in China had delayed in resuming production and sales after the Chinese New Year of 2020. Fortunately, the supply and demand of the air-conditioning industry restarted after March, and the market has gradually recovered since May. However, the domestic market of China had declined by 12.89% throughout the year due to the pandemic. In terms of exports, the annual export market grew by 4.65%. (Source: Industry Online, JARN Magazine)

Air conditioner and compressor production and sales report of China

Unit: 1,000 pcs

					Unit: 1,000pcs
	Item		2020 (January – December)	Year-on-year growth	2019 (January – December)
Air conditioner	Total production		144,905	-5.17%	152,801
	Sale	Total	141,464	-6.08%	150,627
		Domestic sales	80,281	-12.89%	92,163
		Export	61,184	4.65%	58,465
Compressor	Total production		210,411	-1.55%	213,716
	Sale	Total	211,551	-1.69%	215,181
		Domestic sales	177,752	-2.03%	181,442
		Export	33,799	0.18%	33,739

The Company’s overall compressor sales volume in 2020 was 19.31 million units, a year-on-year increase of 5.95%, and consolidated income was NT$19,319,962 thousand, a year-on-year decline of 4.04%. Market uncertainty increases, price competition worsens, and the domestic air conditioner market in China is sluggish due to the impact of COVID-19 pandemic on global economy. Under the implementation of the new national standard, the pressure of heavy inventory of constant frequency air conditioners has led to a price war; at the same time, the significant increase in cost of raw materials and the oversupply of compressors have intensified the competition in the compressor industry.

I. Review of business operation results in 2020: 1. Profitability:

Consolidated Financial Statements

Unit: NT$1 thousand

Item	2020	2019	Increase (decrease) in amount	Growth rate %
Operatingrevenue – net	19,319,962	20,132,944	(812,982)	-4.04%
Operatingcost	17,019,887	17,393,058	(373,171)	-2.15%
Grossprofit	2,300,075	2,739,886	(439,811)	-16.05%
Net OperatingIncome	819,805	865,948	(46,143)	-5.33%
Consolidatedpre-tax netprofit	988,015	801,266	186,749	23.31%
Consolidated net income	722,644	646,849	75,795	11.72%
Net income attributable to the Company	709,491	655,960	53,531	8.16%

Main reasons for profit growth: The global economy in 2019 was deeply affected by the China-US trade conflict, the rapid growth of air-conditioning industry for two consecutive years, the high inventories of the industry, and the change of constant frequency and inverter frequency structure faced by the industry; therefore, the market competition became severe. The oversupply of compressors has led to a price war and a decline in gross profit. Rechi under the influence of China-US trade conflict and tariffs in 2020 had quickly adjusted the production base to produce compressors in Taiwan and directly sell them into the US market; at the same time, it comprehensively improved the internal cost structure and optimized production efficiency with the good effect resulting gradually in 2020.

Compressor business:
- A. Research & Development:
  - The Company based on the 2020 development plan has successively completed the development of North American unit-type new energy-efficient compressors, China 1.5HP and 3.0HP miniaturized compressors, Japan new energy-saving high-efficiency inverter compressors, car-roof high-efficiency horizontal compressor, European R290 mobile air-conditioning miniaturized compressors, and multi-functional smart micro air-conditioning.
- B. Sales:
  - The number of compressors sold in Southeast Asia, Europe, and the Chinese market increased year-on-year; also, the application of products in inverter mini-split air conditioners, unitary air conditioners, heat pump dryers, and Roof top air conditioners increased year-on-year; however, the sale in North America, South Asia, and Central and South America decreased year-on-year.
- C. Production:
  - The production/assembly line of the Company’s Guanyin plant in Taiwan for a capacity of 2 million units of compressor is completed and in production; also, the capacity expansion plan of Qingdao Plant is ongoing for a planned production capacity of 12 million units. The production capacity of Huizhou plant is planned for 6 million units and the production capacity of Jiujiang plant is planned for 6 million units for a grand total of 26 million units.
II. Summary of 2021 Business Plan:

In prospect of 2021, the environment affecting the Company’s operations is illustrated as follows:

Global economic environment: According to the World Economic Outlook report released by the International Monetary Fund (IMF), the global economic growth rate last year was predicted to be 3.5%. In prospect of this year, the momentum of global recovery is stronger than expected. The IMF predicts that the global economy is to expand by 5.5% because the market expects the launch of vaccines to stimulate economic growth and the policy stimuli from the United States, Japan, and other countries.
Air conditioner and compressor industry:
A. Air-conditioning industry:
- The air-conditioning industry of China accounts for approx. 85% of the global production capacity; also, the manufacturers have begun and accelerated overseas plant construction due to the ongoing China-US trade conflict; also, they are actively expanding the European market.
- In terms of industrial competition, the two major air-conditioner manufacturers in China with self-made compressors for the reason of cleaning out constant frequency inventory and cornering inverter frequency market share after China’s implementing new energy efficiency standards in 2020 had adopted price reduction strategies to lead the air-conditioner market, which caused market prices to crash. Also, due to the gradual

recovery in demand and the global central bank monetary quantitative easing policy adopted in the second half of 2020, hot money flowed to bulk commodities that caused the cost of raw materials to rise sharply and put great pressure on the industry taking as a whole.

The global air-conditioning market declined due to the impact of the pandemic in 2020. It is expected that the launch of vaccines and the stimulation of fiscal and economic policies of various countries will help the overall air-conditioning market demand return to the level before the outbreak of the pandemic.
B. Air-conditioning energy-efficiency regulations:
China has the constant frequency and inverter frequency integrated new energy efficiency standards formally implemented in July 2020. Australia and New Zealand also has new energy efficiency standards announced in 2020, while India will implement new energy efficiency standards in 2022. The overall air-conditioning trend is moving quickly towards inverter frequency conversion and high efficiency.
C. Compressor industry:
The production capacity of major compressor manufacturers continues to expand, and the overall global compressor production capacity has reached 260 million units, which is an oversupply that causes severe competition in the compressor industry. Especially as the inverter compressor is the future of the industry, the market competition is therefore expected to be even more severe while fighting for market share.
The consumer market for heat pump dryers in Europe has grown due to the home-bound regulations during the crisis of the COVID-19 pandemic that indirectly triggered the demand for home appliances. The demand for compressors that are used in the heat pump dryers has been growing dramatically since Q4, 2020.

The operating challenges arising from the changes in the overall environment in 2021 will be more daunting than in previous years. The operating strategies of the Group are summarized as follows:

The annual compressor sales target is 19.5 million units and more.
The Company will continue to promote inverter compressors to account for 25% or more in response to the competition in the inverter frequency products.
Expand the economic scale and comprehensively develop new customers, new models, and new applications.
Improve product competitiveness and promote cost reasonableness continuously.
Enhance product technology reserves, and enhance basic research and mid-term/long-term product development.
Improve the quality consistency in 2021 based on the 2020 CPK.
Promote reasonableness and automation of production continuously to improve production efficiency.
Improve the efficiency of indirect personnel and continuously improve the operation process.
Increase the capital turnover rate and strictly control the total inventory of finished products.
Optimize human resources and substantiate talent pool management.

Looking ahead to the future, the Company will continue to uphold the concept of sustainable development and corporate ethical management, and based on the strategy of value innovation, to continuously improve the Company’s competitiveness, to develop together with global strategic customers, and to realize the mission of maximizing corporate value.

Chairman:

President: Accounting Supervisor:

[II. Company History]

I. Date of establishment:

December 19, 1989

II. Organization and operations

December 1989	RECHI PRECISION CO., LTD. was incorporated
December 1996	Passed ISO 9001 certification by the Bureau of Standards, Metrology and Inspection, Ministry of Economic Affairs (MOEA)
November 1999	The extraordinary shareholders’ meeting approved the matters regardinginvestment in compressor assembly plants in China
February2000	Established Rechi Holdings Co., Ltd.
July	Established Rechi Refrigeration Dongguan Co., Ltd.
January 2001	Established TCL Rechi (Huizhou) Refrigeration Equipment CompanyLimited
	Established Dongguan Rechi Compressor Co., Ltd.
December	Established Rewan (HongKong) Co., Ltd.
February 2002	Had stocks listed on Taipei Exchange for trading
May	Established Rechi Investments Co., Ltd.
August 2003	Had stocks listed on Taiwan Stock Exchange for trading
October	Mass produced compressors for dehumidifiers
January 2004	Acquired Rewan Hardware (Dongguan) Co., Ltd.
July	Established Rechi Precision (Huizhou) Mechanism Company
April 2005	Established Rechi Precision (Qingdao) Electric Machinery Limited
April 2008	Passed ISO14001 certification by the Bureau of Standards, Metrologyand Inspection,MOEA
April 2009	Successfully introduced inverter compressors to the Japanese market
September	Established Qingdao Rechi Electric Machinery Sales Company
June 2012	Established Qingdao China Steel Precision Metal Co., Ltd. as a joint venture with ChinaSteel Group
June 2013	Established Dyna Rechi Co., Ltd.
November	Established Dyna Rechi Jiujiang Co., Ltd.
December 2014	Established Rechi Precision (Jiujiang) Electric Machinery Limited
July2015	Set upan India office
May 2017	Established an U.S. liaison office
March 2018	Set up a Thailand office
August	Established a Japan liaison office
December	Established Jiangxi Baida Precision Manufacturing Corp. as a joint venture with ZhejiangBaida Precision ManufacturingCorp.
August 2019	Acquired Ablek Technology Ltd.
September	Put into operation the compressor automation assembly line in Guanyinplant in Taoyuan

[III.Corporate Governance Report]

I. Organization

(I) Organizational Structure of the Company

==> picture [489 x 412] intentionally omitted <==

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

Board of
Directors
Remuneration Committee Auditing
Audit Committee Office
Operational
Headquarters
Corporate Governance
Committee
Product Business Marketing Business R&D Logistics and
Group Division administrative support
R&D Operation Strategy
Compressor Motor Domestic Center Development Center
sales
Research Biotechnology Center
Jiujiang Jiujiang
institute
Export
Financial Center
Qingdao Humen
Production Control
Huizhou Dongkeng Center
Information Center
Guanyin Pingtung
Quality Center
Human Resources
Center
----- End of picture text -----

(II) Business of Major Departments

Department Name	Business
Corporate Governance Committee	Responsible for the operating procedures of the Corporate Governance Best-Practice Principles, the Corporate Social Responsibility Best-Practice Principles, and the Ethical Corporate Management Best-Practice Principles.
Auditing Office	Audit of group-wide business activities and systems.
Operational Headquarters	Responsible for the planning and implementation of the Group’s operational goals, policies, and strategies.
Logistics and administrative support	Including Operation Strategy Development Center, Biotechnology Center, Financial Center, Production Control Center, information center, Quality Center, and Human Resources Center. Responsible for the overall planning of the Group’s marketing, short-, mid-, and long-term operational plans and strategic development, investment planning and evaluation, corporate image, and relevant legal affairs; mass production of new products, introduction of production lines and equipment, production technology standardization; fund planning, fundraising, and coordination control, business analysis, budget and cost target implementation; production planning and control, original price analysis and management, production and sales coordination, inventory control and coordination, warehousing and transportation; information system and computer equipment planning, application software, Internet website planning; quality assurance system, quality audit, after-sales services, quality management and quality education implementation; organization planning and implementation, human resource policy, corporate social responsibility and administrative affairs, and planning and implementation of other matters.
R&D	Including the R&D Center and the Research Institute, responsible for coordinating the Group’s product R&D processes and plans, product technical documentation integration and release, as well as safety regulations and patents.
Marketing Business Division	Responsible for the integration of the Group’s product marketing strategy, market expansion, and customer management.
Product Business Group	It is divided into compressor business group and motor business group, with production sites located in Jiujiang, Qingdao, Huizhou, Humen, Dongkeng, Guanyin, and Pingtung.

II. Profiles of Directors, President, Executive Vice Presidents, Asst. VP, and supervisors of the various departments and branches 1. Information on the directors April 30, 2021 ril 30, 2021

April 30, 2021

Title	Nationality or place of registration	Name	Gender	Date of (elected to) office	Tenure	Initial date of elected to office	Quantity of shareholding at the time of elected to office	Quantity of shareholding at the time of elected to office	Current shareholding	Current shareholding	Shareholding of spouse and dependents at present	Shareholding of spouse and dependents at present	Shareholding by nominee arrangement	Shareholding by nominee arrangement	Major (academic degree) experience	Holding other positions of the Company and other companies at present	Other executive, di supervisor who is a kindred within the under the Civil	Other executive, di supervisor who is a kindred within the under the Civil	rector or spouse or 2nd tier Code
							Shares	Shareholding ratio %	Shares	Shareholding ratio %	Shares	Shareholding ratio %	Shares	Shareholding ratio %			Title	Name	Relation
Institutional Director	R.O.C.	SAMPO CORPORATION	－	2020/06/16	3 years	1989/12/08	135,240,160	26.78%	135,610,160	26.86%	-	-	-	-	－	－	－	－	－
Chairman & Corporate Director representative	R.O.C.	Representative: CHEN, SHENG TIEN	Male	2020/06/16	3 years	1989/12/8– 2005/6/7 2011/6/22– 2011/9/30 2014/6/11–	0	0%	0	0%	733	0%	0	0%	(Experience) Chairman of RECHI PRECISION CO., LTD. (Education) Civil Engineering, Utah State University	The Company’s Chairman Chairman of SAMPO CORPORATION Chairman of Rechi Investments Co., Ltd. Chairman of Rechi Holdings Co., Ltd Chairman of AMIGO LOGISTICS CORPORATION Chairman of Sampo Japan Co., Ltd. Chairman of SAMPO International Food Service Co.,Ltd.	Director	CHEN, SHENG CHUAN	Brothers
Vice Chairman & Corporate Director representative	R.O.C.	Representative: YANG, CHENG MING	Male	2020/06/16	3 years	2020/06/16	0	0%	0	0%	0	0%	0	0%	(Experience) Vice President of SAMPO CORPORATION (Education) Department of Engineering Science, National ChengKungUniversity	The Company’s Vice Chairman Advisor to SAMPO CORPORATION	None	None	None
Corporate Director representative	R.O.C.	Representative: CHEN, CHIAO MING	Male	2020/06/16	3 years	2020/06/16	1,154,743	0.23%	1,154,743	0.23%	0	0%	0	0%	(Experience) President of RECHI PRECISION CO., LTD. (Education) Master’s in Management Science, National Chiao Tung University	Special Assistant to the Company’s Chairman	None	None	None
Institutional Director	Japan	Sharp Corporation	－	2020/06/16	3 years	2011/06/22	22,771,289	4.51%	22,771,289	4.51%	-	-	-		－	－	－	－	－
Corporate Director representative	Japan	Representative: NAKASHIMA, MITSUO	Male	2020/06/16	3 years	2016/05/06	0	0%	0	0%	0	0%	0	0%	(Experience) Deputy Manager of the Healthy Environment System Department of Sharp Corporation of Japan (Education) Taisei Gakuin University	Manager and Assistant Manager of SAS Department of Sharp Corporation of Japan/Manager of Domestic and International air-conditioning PCI Department	None	None	None
Institutional Director	R.O.C.	China Steel Corporation	－	2020/06/16	3 years	2011/06/22	23,002,022	4.56%	23,002,022	4.56%	-	-	-	-	－	－	－	－	－
Corporate Director representative	R.O.C.	Representative: CHENG, CHI CHAO	Male	2020/10/31	3 years	2020/10/31	0	0%	0	0%	0	0%	0	0%	(Experience) Director of Steel Research and Development Division, China Steel Corporation (Education) Doctoral Degree, Beneficiation Engineering, Technische Universität Clausthal	Acting Vice President of Technical Department of China Steel Corporation Director of Dyna Rechi Co., Ltd. Chairman of INFOCHAMP SYSTEMS CORPORATION	None	None	None
Institutional Director	R.O.C.	Chumpower Machinery Corp.	－	2020/06/16	3 years	2014/06/11	4,135,762	0.82%	4,135,762	0.82%	-	-	-	-	－	－	－	－	－

Corporate Director representative	R.O.C.	Representative: CHEN, SHENG CHUAN	Male	2020/06/16	3 years	2020/06/16	0.02%	0%	0%	0%	(Experience) Chairman of SAMPO CORPORATION (Education) Master’s, Electrical Engineering, University of Cincinnati	Chairman of NUCOM INTERNATIONAL CORPORATION Vice Chairman of SAMPO CORPORATION Director of Sunpo International Investment Co., Ltd. Director of AMIGO LOGISTICS CORPORATION Director of Xinbao Electric (Dongguan) Co., Ltd. Director of DongGuan Sheng Bo Electronics Co.,Ltd.	Chairman	CHEN, SHENG TIEN	Brothers
Independent director	R.O.C.	SU, CHING YANG	Male	2020/06/16	3 years	2014/06/11	0%	0%	0%	0%	(Experience) Director/President of China Motor Corporation (Education) Department of Mechanical Engineering, National Cheng Kung University	Independent Director/Audit Committee/Remuneration Committee of Aerowin Technology Corporation Independent Director/Audit Committee/Remuneration Committee of KENDA RUBBER INDUSTRIAL CO., LTD. Director of NATUREWISE BIOTECH & MEDICALS CORPORATION	None	None	None
Independent director	R.O.C.	CHEN, SHENG WANG	Male	2020/06/16	3 years	2017/06/22	0%	0%	0%	0%	(Experience) President of SHARP Taiwan (Education) Master’s, In-service Master Program in Economics, National Taiwan University	None	None	None	None
Independent director	R.O.C.	LEE, JEN FANG	Male	2020/06/16	3 years	2017/06/22	0%	0%	0%	0%	(Experience) Head of Graduate Institute of Technology, Innovation, and Intellectual Property Management, National Chengchi University (Education) Doctor of Business Administration, National Chengchi University	Independent Director/Audit Committee/Remuneration Committee of BenQ Medical Tech Co., Ltd.	None	None	None

Note: Where the Chairman of the Company and the President or the person with equivalent position (the top-level manager) are the same person, each other’s spouse, or relatives, the reason, reasonableness, necessity, and countermeasures shall be specified: N/A.

Dominant shareholders of institutional shareholders

Dominant shareholders	of institutional shareholders	of institutional shareholders
	Apr. 30,2021
Names of Institutional		Shareholding
	Dominant shareholders of institutional shareholders
Shareholders		ratio

SAMPO CORPORATION	McLetti Investment Co.,Ltd.	8.41%
	Nucom Investment Co.,Ltd.	4.65%
	Steffili Investment Co.,Ltd.	4.60%
	Chumpower MachineryCorp.	2.60%
	xCHEN,SHENG WEI	2.10%
	CHEN,SHENG WEI	1.81%
	Monteliso Development Co.,Ltd.	1.61%
	Investment Account of the Central Bank of Norway under custodyof Citibank(Taiwan)	1.49%
	Joint Employee Welfare Committee, SAMPO CORPORATION	1.18%
	American JPMorgan Chase Bank Taipei Branch was entrusted with the custody of PGIA’s Advanced Integrated International Stock Index Fund series Investment account	1.18%
Sharp Corporation	HON HAI PRECISION IND.CO.,LTD.	24.47%
	FOXCONN FAR EASTLIMITED	17.23%
	FOXCONN TECHNOLOGY PTE.LTD.	12.17%
	SIO International Holdings Limited	6.61%
	The Master Trust Bank of Japan,Ltd.	1.64%
	CustodyBank of Japan,Ltd.	0.91%
	Nippon Life Insurance Company	0.89%
	Meiji Yasuda Life Insurance Company	0.86%
	CustodyBank of Japan,Ltd.	0.83%
	Makita Corporation	0.67%
China Steel Corporation	Ministryof Economic Affairs	20.00%
	Employee Stock Ownership Trust of China Steel Corporation under custody of Mega International Commercial Bank	4.22%
	TransgloryInvestment Corporation	1.63%
	Advanced Starlight Advanced Integrated International Stock Index under custodyof Chase Bank	1.33%
	Vanguard Stock Index Account under custody of Taipei Branch,JPMorgan Chase Bank	1.06%
	Citibank (Taiwan) in the custody for Investment Account of the Central Bank of Norway	1.04%
	WinningInvestment Corporation	1.02%
	Labor Pension Fund(the New Fund)	0.96%
	Public Service Education Pension Fund SupervisoryBoard	0.91%
	Labor Insurance Fund	0.81%
Chumpower Machinery Corp.	SAMPO CORPORATION	100.00%

Where the major shareholders of institutional shareholders are institutional shareholders, the information on the major shareholder(s)

	Apr. 30,2021	Apr. 30,2021
		Shareholding
Names of Institutional Shareholders	Dominant shareholders of institutional shareholders
		ratio

McLetti Investment Co.,Ltd.	McLetti Investment Co.,Ltd.(BVI)	100.00%
Nucom Investment Co.,Ltd.	Nucom International Corporation	100.00%
Steffili Investment Co.,Ltd.	McLetti Investment Co.,Ltd.(BVI)	100.00%
Monteliso Development Co., Ltd.	CHEN,YI-HSIU	37.5%
	As it is a non-public company, the information on its major shareholders is not accessible
Investment Account of the Central Bank of Norwayunder custodyof Citibank(Taiwan)	As it is a non-public company, the information on its major shareholders is not accessible
Joint Employee Welfare Committee, SAMPO CORPORATION	As it is a juridical person, there is no information on its major shareholders
American JPMorgan Chase Bank Taipei Branch was entrusted with the custody of PGIA’s Advanced Integrated International Stock Index Fund series Investment account	As it is a non-public company, the information on its major shareholders is not accessible
HON HAI PRECISION IND.CO.,LTD.	TerryGou	9.69%
	Terry Gou special trust property account under custodyof CTBC Bank	2.89%
	Singapore Government investment account under custodyof Citibank Taiwan	1.85%
	Labor Pension Fund(the New Fund)	1.62%
	Advanced Starlight Advanced Integrated International Stock Index under custodyof Chase Bank	1.50%
	Vanguard Stock Index Account under custody of Taipei Branch,JPMorgan Chase Bank	1.23%
	Citibank (Taiwan) in the custody for Investment Account of the Central Bank of Norway	1.21%
	Depository receipt of Yuan Hai Precision Industry Co.,Ltd. under custodyof Citibank Taiwan	1.05%
	Fidelity Puritan Funds: Fidelity Low Credit Risk Equity Fund under custody of Standard Chartered Bank	1.03%
Makita Corporation	The Master Trust Bank of Japan,Ltd.(Trust account)	8.83%
	CustodyBank of Japan,Ltd.(Trust account)	4.43%
	MARUWA CO.,LTD.	3.18%
	MUFG Bank,Ltd.	3.10%
	Makita Cooperation Companies' Investment Association	2.40%
	The Bank of New York Mellon as Depositary Bank for DR Holders	2.23%
	Sumitomo Mitsui BankingCorporation	2.13%
	CustodyBank of Japan,Ltd.(Trust account 5)	2.00%
	Nippon Life Insurance Company	1.97%
	CustodyBank of Japan,Ltd.(Trust account 9)	1.95%
Transglory Investment Corporation	China Steel Express	49.89%
	CHUNG HUNG STEEL CORPORATION	40.91%
	CHINA STEEL CHEMICAL CORPORATION	9.20%
Winning Investment Corporation	Gains Investment Corporation	49.00%
	Maruichi Steel Tube Ltd.	42.00%
	TransgloryInvestment Corporation	9.00%

Profiles of Directors

Apr. 30, 2021

Condition Name	More than 5 years of work experience and the following professionalqualification	More than 5 years of work experience and the following professionalqualification	More than 5 years of work experience and the following professionalqualification	Status of independence (note)	Status of independence (note)	Status of independence (note)	Status of independence (note)	Status of independence (note)	Status of independence (note)	Status of independence (note)	Status of independence (note)	Status of independence (note)	Status of independence (note)	Status of independence (note)	Status of independence (note)	Number of public companies that Independent Directors also hold positions
	In the capacity of a tutor or above in a public or private school of higher education in the disciplines of commerce, law, finance, accounting, or any other areas of specialization required for the business operation of the Company	A professional or technician who has passed the national examination for professionals like court judge, prosecutor, lawyer, certified public accountant, or any other expertise required for the business operation of the Company with the issuance of a certificate of completion	Work experience in commerce, law, finance, accounting or necessary for company operation	1	2	3	4	5	6	7	8	9	10	11	12
CHEN, SHENG TIEN	－	－														0
YANG, CHENG MING	－	－														0
CHEN, CHIAO MING	－	－														0
CHEN, SHENG CHUAN	－	－														0
CHENG, CHI CHAO	－	－														0
NAKASHIMA, MITSUO	－	－														0
SU,CHING YANG	－	－														2
CHEN, SHENG WANG	－	－														0
LEE, JEN FANG		－														1

Note: Respective director and supervisor who meet the following qualifications 2 years before assumption of office and at the time of assumption office shall place a “  ” in the appropriate space.

(1) Not an employee of the Company or its affiliates;
(2) Not a director or supervisor of the Company or its affiliated companies (but if the independent director is appointed in accordance with the “Securities and Exchange Act” or the law and regulations of the local country, and concurrently serves as such at a public company and its parent or subsidiary or a subsidiary of the same parent, it is not subject to this requirement).
(3) Not a director, spouse, minor children thereof, or other natural person shareholders who hold more than 1% of the total issued shares of the Company by nominee arrangement or with top ten ownership.
(4) Not a spouse, relative within the second degree of kinship, or lineal relative within the third degree of kinship of a managerial officer under Subparagraph (1) or any of the persons in Paragraph (2) and (3).
(5) Not a director, supervisor, or employee of a corporate shareholder that directly holds 5% or more of the total number of issued shares of the Company or that ranks among the top five in shareholdings or that designates its representative to serve as a director or supervisor of the Company under Article 27, Paragraph 1 or 2 of the Company Act (but if the independent director is appointed in accordance with the “Securities and Exchange Act” or the law and regulations of the local country, and concurrently serves as such at a public company and its parent or subsidiary or a subsidiary of the same parent, it is not subject to this requirement).
(6) A majority of the Company’s director seats or voting shares and those of any other company are not controlled by the same person who is a director, supervisor, or employee of that other company (but if the independent director is appointed in accordance with the “Securities and Exchange Act” or the law and regulations of the local country, and concurrently serves as such at a public company and its parent or subsidiary or a subsidiary of the same parent, it is not subject to this requirement).
(7) The chairperson, general manager, or person holding an equivalent position of the Company and a person in any of those positions at another company or institution are not the same person or are not spouses who is a director (or governor), supervisor, or employee of that other company or institution (but if the independent director is appointed in accordance with the “Securities and Exchange Act” or the law and regulations of the local country, and concurrently serves as such at a public company and its parent or subsidiary or a subsidiary of the same parent, it is not subject to this requirement).
(8) Not a director (or governor), supervisor, managerial officer, or a shareholder who holds 5% or more of the issued shares of another company or institution that conducts finance or business transactions with the Company (however, if a specific company or institution holds 20% or more and no more than 50% of the total number of issued shares of the Company and the independent directors appointed in accordance with the Act or the law and regulations of the local country concurrently serve as such at the Company and its parent or subsidiary or a subsidiary of the same parent company, it is not subject to this requirement).
(9) Not a professional individual, or an owner, partner, director (or governor), supervisor or officer of a sole proprietorship, partnerships, company, or institution that provides auditing services to the Company or any affiliate of the Company, or that provides commercial, legal, financial, accounting or related services to the Company or any affiliate of the Company for which the provider in the last 2 years had received cumulative compensation exceeding NT$500,000, or a spouse thereof. However, this restriction does not apply to a member of the remuneration committee, public tender offer review committee or special committee for merger and acquisition, who exercises powers pursuant to the “Securities and Exchange Act” or to the “Business Mergers and Acquisition Act” or relevant laws and regulations.
(10) Not the spouse or kindred within the 2nd tier under the Civil Code to another Director;
(11) None of the particulars inscribed in Article 30 of the “Company Act” is applicable.
(12) Not elected to office as the representative of the government, institutions, or their representative as specified in Article 27 of the “Company Act”

2. Profiles of President, Executive Vice Presidents, Asst. VP, and supervisors of the various departments and branches Apr. 30, 2021

Title	Nationality	Name	Gender	Date of (elected to) office	Shareholding	Shareholding	Shareholding by spouse or dependents	Shareholding by spouse or dependents	Shareholding by nominee arrangement	Shareholding by nominee arrangement	Major (academic degree) experience	Holding positions in other companies at present	Spouse or kin w second pillar u Civil Code and manage	Spouse or kin w second pillar u Civil Code and manage	ithin the nder the who is a r
					Shares	Shareholding ratio	Shares	Shareholding ratio	Shares	Shareholding ratio			Title	Name	Relation
President	R.O.C.	FENG, MING FA	Male	2017/06/22	259,879	0.05%	0	0%	0	0%	(Experience) RECHI PRECISION CO., LTD. Vice President (Education) Doctoral Degree, Virginia Polytechnic Institute and State University	Director/President of Rechi Investments Co., Ltd. Director of Rechi International Holdings Co., Ltd Director of Rechi Investments Holdings Co., Ltd. Chairman of GR Holdings (Hong Kong) Limited Director of Rechi Refrigeration Dongguan Co., Ltd. Director of Dongguan Rechi Compressor Co., Ltd. Director of TCL Rechi (Huizhou) Refrigeration Equipment Company Limited Director of Rechi Precision (Huizhou) Mechanism Company Chairman of Qingdao Rechi Electric Machinery Sales Company Director of Dyna Rechi Co.,Ltd.	None	None	None
Vice President	R.O.C.	WU, YI WEN	Male	2009/12/01	418,957	0.08%	0	0%	0	0%	(Experience) RECHI PRECISION CO., LTD. Assistant Vice President (Education) Mechanical Engineering, National Taipei University of Technology	Chairman of Rechi Refrigeration Dongguan Co., Ltd. Chairman of Dongguan Rechi Compressor Co., Ltd. Vice Chairman of TCL Rechi (Huizhou) Refrigeration Equipment Company Limited Vice Chairman of Rechi Precision (Huizhou) Mechanism Company Director of Rechi Precision (Qingdao) Electric Machinery Limited Director of Qingdao Rechi Electric Machinery Sales Company Director of Dyna Rechi Co., Ltd. Chairman of Dyna Rechi Jiujiang Co., Ltd. Chairman of Rechi Precision (Jiujiang) Electric MachineryLimited	None	None	None
Vice President	R.O.C.	KO, CHIH CHENG	Male	2017/01/01	187,783	0.04%	0	0%	0	0%	(Experience) RECHI PRECISION CO., LTD. Assistant Vice President (Education) Department of Accounting, Chinese Culture University	Supervisor of Rechi Investments Co., Ltd. Director of GR Holdings (Hong Kong) Limited Director of Rechi Refrigeration Dongguan Co., Ltd. Director of Dongguan Rechi Compressor Co., Ltd. Supervisor of TCL Rechi (Huizhou) Refrigeration Equipment Company Limited Supervisor of Rechi Precision (Huizhou) Mechanism Company Chairman of Rechi Precision (Qingdao) Electric Machinery Limited Director of Qingdao Rechi Electric Machinery Sales Company Director of Dyna Rechi Co., Ltd. Director of Dyna Rechi Jiujiang Co., Ltd. Supervisor of Rechi Precision (Jiujiang) Electric Machinery Limited Director of Qingdao China Steel Precision Metal Co., Ltd. Supervisor of Ablek Technology Co., Ltd. Supervisor of Ablek TechnologyLtd.	None	None	None

Vice President	China	NIU, YONG GUANG	Male	2019/01/01	67,000	0.01%	0	0%	0%	(Experience) President of Rechi Precision (Qingdao) Electric Machinery Limited (Education) Qingdao University of Science and Technology	Director of Rechi Precision (Qingdao) Electric Machinery Limited Director/President of Qingdao Rechi Electric Machinery Sales Company Supervisor of Qingdao China Steel Precision Metal Co., Ltd.	None	None	None
Assistant VP	R.O.C.	LIAO, HSUEH YEN	Male	2012/02/01	51,025	0.01%	0	0%	0%	(Experience) President of Rechi Precision (Qingdao) Electric Machinery Limited (Education) Mechanical Engineering, National Taiwan University of Science and Technology	Director of Jiangxi Baida Precision Manufacturing Corp.	None	None	None
Assistant VP	R.O.C.	LIU, SHIH CHIEH	Male	2018/11/05	51,193	0.01%	0	0%	0%	(Experience) President of TCL Rechi (Huizhou) Refrigeration Equipment Company Limited (Education) Mechanical Engineering, Oriental Institute of Technology	Director/President of Rechi Precision (Jiujiang) Electric Machinery Limited Director of Jiangxi Baida Precision Manufacturing Corp.	None	None	None
Assistant VP	R.O.C.	CHIEN, CHENG CHUNG	Male	2019/01/01	25,823	0.01%	3,000	0%	0%	(Experience) Manager of Quality Assurance Department and Director of Quality Control Center, RECHI PRECISION CO., LTD. (Education) Master’s in Mechanical Engineering, National Sun Yat-sen University	Director of Ablek Technology Co., Ltd. Director of Ablek Technology Ltd.	None	None	None
Assistant VP	R.O.C.	CHEN, SHUN FANG	Male	2020/03/01	0	0%	0	0%	0%	(Experience) RECHI PRECISION CO., LTD. Manager, Business Dept. (Education) Mechanical Engineering, Taichung Municipal Sha-Lu Industrial High School	None	None	None	None
Assistant VP	R.O.C.	LO, PEI CHOU Note 2	Male	2021/01/01	30,000	0.01%	0	0%	0%	(Experience) RECHI PRECISION CO., LTD. Director of Operation Strategy Development Center (Education) Mechanical Engineering, Ta Hwa University of Science and Technology	None	None	None	None
Chief Financial Officer/Chief Accounting Officer	R.O.C.	WU, CHIN MEI	Female	2009/01/07	32,767	0.01%	266	0%	0%	(Experience) Section Chief in Accounting, RECHI PRECISION CO., LTD. (Education) Business Administration, Minghsin University of Science and Technology	Chief Accounting Officer of Rechi Holdings Co., Ltd. Supervisor of Rechi Refrigeration Dongguan Co., Ltd. Supervisor of Dongguan Rechi Compressor Co., Ltd. Supervisor of Rechi Precision (Qingdao) Electric Machinery Limited Supervisor of Qingdao Rechi Electric Machinery Sales Company	None	None	None

Note 1: Where the President or the person with equivalent position (the top-level manager) and the Chairman of the Company are the same person, each other’s spouse, or relatives, the reason, reasonableness, necessity, and countermeasures shall be disclosed: N/A.

Note 2: LO, PEI CHOU, the senior executive of the Group, was promoted to Assistant VP with the approval of the board of directors on March 22, 2021.

III. Remuneration paid to directors, the President, and the Vice Presidents in the most recent year

1. Remuneration of the President and independent directors Unit NTD thousand

Title	Name			Remuneratio	Remuneratio	n to directors	n to directors			Sum of A, D As a percen profit afte	B, C, and tage of net r tax (%)	Rem	Rem	uneration for performance of works as employees	uneration for performance of works as employees	uneration for performance of works as employees	uneration for performance of works as employees	uneration for performance of works as employees	uneration for performance of works as employees	The sum of F, and G in after-tax n	A, B, C, D, E, proportion to et income (%)	Remuneration received from the invested companies other than the subsidiaries and the parent company
		Director fees (A)		Severance payment and pension (B)		Remuneration to directors (C)		Fees for performance of works (D)				Salaries, bonus, and special allowance (E)		Severance payment and pension (F)		Remuneration		to employees (G)
		The Company	All companies included in the financial statements	The Company	All companies included in the financial statements	The Company	All companies included in the financial statements	The Company	All companies included in the financial statements	The Company	All companies included in the financial statements	The Company	All companies included in the financial statements	The Company	All companies included in the financial statements	The Company		All companies included in the financial statements		The Company	All companies included in the financial statements
																Amount in cash	Amount in stock	Amount in cash	Amount in stock
Institutional Director	SAMPO CORPORATION	100	1,100	0	0	7,670	7,670	0	0	1.2361	1.2361	-	-	-	-	-	-	-	-	1.2361	1.2361	0
Chairman	Representative of SAMPO CORPORATION CHEN,SHENG TIEN	0	0	0	0	0	0	42	42	0.0059	0.0059	3,900	3,900	0	0	0	0	0	0	0.5556	0.5556	0
Director	Representative of SAMPO CORPORATION LIU,JIN HSI(till 2020/06/15)	0	0	0	0	0	0	18	18	0.0025	0.0025	1,680	1,680	54	54	0	0	0	0	0.2469	0.2469	0
	Representative of SAMPO CORPORATION YANG,CHENG MING(till 2020/06/16)	0	0	0	0	0	0	24	24	0.0034	0.0034	0	0	0	0	0	0	0	0	0.0034	0.0034	0
Director	Representative of SAMPO CORPORATION CHEN,SHENG CHUAN(till 2020/06/15)	195	195	0	0	0	0	18	18	0.0300	0.0300	0	0	0	0	0	0	0	0	0.0300	0.0300	0
	Representative of SAMPO CORPORATION CHEN,CHIAO MING(till 2020/06/16)	0	0	0	0	0	0	24	24	0.0034	0.0034	1,780	1,780	63	63	3,458	0	3,458	0	0.7505	0.7505	0
Institutional Director	Sharp Corporation	360	360	0	0	1,278	1,278	0	0	0.2309	0.2309	-	-	-	-	-	-	-	-	0.2309	0.2309	0
Director	Representative of Sharp Corporation NAKASHIMA, MITSUO	0	0	0	0	0	0	0	0	0.0000	0.0000	0	0	0	0	0	0	0	0	0.0000	0.0000	0
Institutional Director	China Steel Corporation	360	360	0	0	1,278	1,278	24	24	0.2343	0.2343	-	-	-	-	-	-	-	-	0.2343	0.2343	0
Director	Representative of China Steel Corporation HUANG, YI HSING (till 2020/10/30) CHENG,CHI CHAO(till 2020/10/31)	0	0	0	0	0	0		0	0.0000	0.0000	0	0	0	0	0	0	0	0	0.0000	0.0000	0
Institutional Director	Chumpower Machinery Corp.	0	0	0	0	1,278	1,278	0	0	0.1802	0.1802	-	-	-	-	-	-	-	-	0.1802	0.1802	0
Director	Representative of Chumpower Machinery Corp. CHEN,SHIH CHANG(till 2020/6/15)	195	195	0	0	0	0	18	18	0.0300	0.0300	0	0	0	0	0	0	0	0	0.0300	0.0300	0
	Representative of Chumpower Machinery Corp. CHEN, SHENG CHUAN (from 2020/06/16)	165	165	0	0	0	0	18	18	0.0258	0.0258	0	0	0	0	0	0	0	0	0.0258	0.0258	0
Independent director	SU, CHING YANG	720	720	0	0	918	918	42	42	0.2368	0.2368	0	0	0	0	0	0	0	0	0.2368	0.2368	0
Independent director	CHEN, SHENG WANG	720	720	0	0	918	918	42	42	0.2368	0.2368	0	0	0	0	0	0	0	0	0.2368	0.2368	0
Independent director	LEE, JEN FANG	720	720	0	0	918	918	42	42	0.2368	0.2368	0	0	0	0	0	0	0	0	0.2368	0.2368	0

Please specify the policy, system, standards, and structure of the remuneration payment for independent directors, and state the relevance to the amount of remuneration based on their responsibilities, risks, time contributed, and other factors: According to the Company’s Articles of Incorporation, the board of directors is authorized to determine their basic monthly remuneration according to the usual level of the industry. According to the directors’ remuneration payment regulations, if there is a profit, the directors’ remuneration may be provided in the case of earnings distribution, and the relevant amount calculation will be implemented in accordance with the directors’ remuneration distribution regulations. The requirements for attendance, participation, and continuing education of independent directors are implemented in accordance with the rules of the scope of duties of independent directors. The annual performance is also included in the board’s assessment of compliance with relevant laws and regulations and the degree of participation in the Company’s operations. 2. Except as disclosed in the table above, the remuneration received by the directors of the Company for providing services to all companies in the financial statements (such as serving as a consultant in a non-employee capacity) in the most recent year: 0

Pa ment scale y

		Payment scale	Payment scale	Payment scale
Payment scale of remuneration to the Directors of the Company		Name of director
	Sum of the said four types of	remunerations (A+B+C+D)	Sum of the said seven types of remunerations (A+B+C+D+E+F+G)
	The Company	All companies included in the financial statements	The Company	All companies included in the financial statements
Less than NT$1,000,000	CHEN, SHENG TIEN; LIU, JIN HSI; YANG, CHENG MING SAMPO- CHEN, SHENG CHUAN; CHEN, CHIAO MING NAKASHIMA, MITSUO; HUANG, YI HSING; CHENG, CHI CHAO, CHEN, SHIH CHANG Chumpower – CHEN, SHENG CHUAN	CHEN, SHENG TIEN; LIU, JIN HSI; YANG, CHENG MING SAMPO- CHEN, SHENG CHUAN; CHEN, CHIAO MING NAKASHIMA, MITSUO; HUANG, YI HSING; CHENG, CHI CHAO, CHEN, SHIH CHANG; Chumpower – CHEN, SHENG CHUAN	YANG, CHENG MING; SAMPO- CHEN, SHENG CHUAN; NAKASHIMA, MITSUO; HUANG, YI HSING; CHENG, CHI CHAO, CHEN, SHIH CHANG; Chumpower – CHEN, SHENG CHUAN	YANG, CHENG MING; SAMPO- CHEN, SHENG CHUAN; NAKASHIMA, MITSUO; HUANG, YI HSING; CHENG, CHI CHAO, CHEN, SHIH CHANG; Chumpower – CHEN, SHENG CHUAN
1,000,000 (inclusive)–2,000,000 (exclusive)	Sharp Corporation; China Steel Corporation; Chumpower Machinery Corp.; SU, CHING YANG; CHEN, SHENG WANG; LEE, JEN FANG	Sharp Corporation; China Steel Corporation; Chumpower Machinery Corp.; SU, CHING YANG; CHEN, SHENG WANG; LEE, JEN FANG	LIU, JIN HSI; Sharp Corporation; China Steel Corporation; Chumpower Machinery Corp.; SU, CHING YANG; CHEN, SHENG WANG; LEE, JEN FANG	LIU, JIN HSI; Sharp Corporation; China Steel Corporation; Chumpower Machinery Corp.; SU, CHING YANG; CHEN, SHENG WANG; LEE, JEN FANG
2,000,000 (inclusive)–3,500,000 (exclusive)
3,500,000(inclusive)–5,000,000(exclusive)			CHEN,SHENG TIEN	CHEN,SHENG TIEN
5,000,000 (inclusive)–10,000,000 (exclusive)	SAMPO CORPORATION	SAMPO CORPORATION	SAMPO CORPORATION; CHEN,CHIAO MING	SAMPO CORPORATION; CHEN,CHIAO MING
10,000,000(inclusive)–15,000,000(exclusive)
15,000,000(inclusive)–30,000,000(exclusive)
30,000,000(inclusive)–50,000,000(exclusive)
50,000,000(inclusive)–100,000,000(exclusive)
More than NT$100 million
Total	17	17	17	17

2. Remuneration to the President and Vice President

Unit: NT$1 thousand

Title	Name	Salaries (A)	Salaries (A)	Severance payment and pension (B)	Severance payment and pension (B)	Salaries, bonus, and special subsidy (C)	Salaries, bonus, and special subsidy (C)	Remuneration	Remuneration	to employees (D)	to employees (D)	The sum of A, B, C, and D in proportion to after-tax net income(%)	The sum of A, B, C, and D in proportion to after-tax net income(%)	Remuneration received from the invested companies other than the subsidiaries and the parent company
		The Company	All companies included in the financial statements	The Company	All companies included in the financial statements	The Company	All companies included in the financial statements	The Company		All companies included in the financial statements		The Company	All companies included in the financial statements
								Amount in cash	Amount in stock	Amount in cash	Amount in stock
President F	ENG, MING F	A 2,640	2,640	105	105	440	440	2,427	0	2,427	0	0.7910	0.7910	0
Vice President	WU, YI WEN	2,215	2,215	88	88	366	366	1,618	0	1,618	0	0.6042	0.6042	0
Vice President & Corporate Governance Officer	KO, CHIH CHENG	1,726	1,726	106	106	287	287	1,618	0	1,618	0	0.5267	0.5267	0
Vice President	NIU, YONG GUANG	0	1,717	0	65	0	244	1,618	0	1,618	0	0.2281	0.5136	0

Payment scale

	Payment scale	Payment scale
Payment scale of remunerations paid to the President and Vice Presidents of the Company	Names of the President and Vice Presidents
	The Company	All companies included in the financial statements
Less than NT$1,000,000
1,000,000(inclusive)–2,000,000(exclusive)	NIU,YONG GUANG
2,000,000(inclusive)–3,500,000(exclusive)
3,500,000 (inclusive)–5,000,000 (exclusive)	WU, YI WEN; KO, CHIH CHENG	WU, YI WEN; KO, CHIH CHENG; NIU,YONG GUANG
5,000,000(inclusive)–10,000,000(exclusive)	FENG,MING FA	FENG,MING FA
10,000,000(inclusive)–15,000,000(exclusive)
15,000,000(inclusive)–30,000,000(exclusive)
30,000,000(inclusive)–50,000,000(exclusive)
50,000,000(inclusive)–100,000,000(exclusive)
More than NT$100 million
Total	4	4

3. Names of managers with remuneration as employees and the status of payment

Unit: NT$1 thousand

						Unit: NT$1 thousa
Item	Title	Name	Amount in stock	Amount in cash	Total	As a percentage of net profit after tax(%)
managers	President	FENG,MING FA	0	11,447	11,447	1.6134
	Vice President	WU,YI WEN
	Vice President & Corporate Governance Officer	KO, CHIH CHENG
	Vice President	NIU,YONG GUANG
	Assistant VP	LIAO,HSUEH YEN
	Assistant VP	LIU,SHIH CHIEH
	Assistant VP	CHIEN, CHENG CHUNG
	Assistant VP	CHEN,SHUN FANG
	Assistant VP	LO,PEI CHOU(Note 1)
	Chief financial officer Chief Accounting Officer	WU, CHIN MEI

Note 1: Approved by the board of directors on March 22, 2021 to be promoted to Assistant VP.

Analysis of the total remuneration paid to the directors, supervisors, the President, and Vice Presidents of the Company in the most recent two years by the Company and all companies in the consolidated financial statements as a percentage of the net profit after tax of the standalone or individual financial reports and description of the remuneration policy, standards, and combinations, procedures for setting remuneration, and their correlation with the operating performance and future risks.

Year	Total remuneration paid to directors, supervisors, the President, and Vice Presidents (in NTD thousands)	Total remuneration paid to directors, supervisors, the President, and Vice Presidents (in NTD thousands)	As a percentage of net profit after tax (%)	As a percentage of net profit after tax (%)
	The Company	All companies in the consolidated financial statements	The Company	All companies in the consolidated financial statements
2019	35,551	43,298	5.42	6.60
2020	45,301	47,329	6.38	6.67

(1) 2020 operating performance indicators of the board of directors and managers:
A. Pursue the maximization of corporate value; the consolidated revenue and total net profit after tax achieves the budgeted targets.
B. Fulfill the corporate responsibility for caring for the Earth; the sales of energy-saving inverter compressors account for 25%.
C. Sales volume of BLDC motors reaches more than 6.77 million units.
D. The number of new customers developed achieves the budgeted target.
E. Revenue not from compressor business unit accounts for more than 5.5% of the budgeted consolidated revenue.
(2) In 2020, the achievement rate of the operating indicators was 97.5%.
(3) The remuneration of directors and supervisors and the change of managers’ remuneration are adjusted based on the achievement rate of the operating indicators with consideration for the net profit before tax for the year.

IV. Status of Corporate Governance

(I) Information on the operations of the board of directors:

The board of directors held 8[A] times in the most recent year (2020), and the attendance of directors is as follows:

Title	Name	Actual attendance (times)[B]	Attendance by proxy	Actual attendance (%) [B/A]	Note
Chairman	SAMPO – CHEN, SHENG TIEN	8	0	100%	Reelected (reelection on 2020/6/16) Required attendance: 8
Vice chairman	SAMPO – YANG, CHENG MING	5	0	100%	Newly elected (reelection on 2020/6/16) Required attendance: 5
Director	SAMPO – CHEN, CHIAO MING	5	0	100%	Newly elected (reelection on 2020/6/16) Required attendance: 5
Director	Chumpower Machinery – CHEN, SHENG CHUAN	3	0	60%	Newly elected (reelection on 2020/6/16) Required attendance: 5
Director	China Steel Corporation – CHENG, CHI CHAO	2	0	100%	Newly elected (reassignment on 2020/10/31) Required attendance: 2
Director	Sharp Corporation – NAKASHIMA, MITSUO	0	5	0%	Reelected (reelection on 2020/6/16) Required attendance: 8
Independent director	SU, CHING YANG	8	0	100%	Reelected (reelection on 2020/6/16) Required attendance: 8
Independent director	CHEN, SHENG WANG	8	0	100%	Reelected (reelection on 2020/6/16) Required attendance: 8
Independent director	LEE, JEN FANG	8	0	100%	Reelected (reelection on 2020/6/16) Required attendance: 8
Vice chairman	SAMPO – LIU, JIN HSI	3	0	100%	Formerly elected (reelection on 2020/6/16) Required attendance: 3
Director	SAMPO – CHEN, SHENG CHUAN	3	0	100%	Formerly elected (reelection on 2020/6/16) Required attendance: 3
Director	China Steel Corporation – HUANG, YI HSING	2	2	33%	Dismissed (reassignment on 2020/10/31) Required attendance: 6
Director	Chumpower Machinery – CHEN, SHIH CHANG	3	0	100%	Formerly elected (reelection on 2020/6/16) Required attendance: 3
Additional disclosure: 1. (1) Matters listed in Article 14-3 of the Securities and Exchange Act: Please refer to pages 46-49 (12) Important resolutions of the board of directors. (2) In addition to said matters, other board meeting decisions with dissenting or reserved opinions from independent directors, for which there is a record or declaration in writing: none. 2. For the implementation of the director’s recusal from proposals with conflicts of interest, the name of the director, the content of the proposal, the reason for the recusal, and the situation of participation in the voting shall be specified: The directors recused themselves from of participating in the discussion and voting on their remuneration 1. Board of directors meetingon 2020/03/20:

A. Subject: To discuss the list of candidates for the 13th term of directors (independent directors) of the Company. Resolution result:
a. Chairman CHEN, SHENG TIEN nominated: CHEN, SHENG TIEN, representative of SAMPO CORPORATION, CHEN, CHIAO MING, representative of SAMPO CORPORATION, YANG, CHENG MING, representative of SAMPO CORPORATION, Chumpower Machinery Corp., HUANG, YI HSING, representative of China Steel Corporation, NAKASHIMA, MITSUO, representative of Sharp Corporation of Japan, SU, CHING YANG (independent director), CHEN, SHENG WANG (independent director), and LEE, JEN FANG (independent director).
b. The nominee CHEN, SHENG TIEN, representative of SAMPO CORPORATION, recused himself for a conflict of interest and appointed CHEN, SHENG CHUAN as the acting chair. After the acting chair consulted all the directors present, they agreed without objection.
c. When the other nominees one by one were reviewed, except for the recusal of the parties involved due to their own conflicts of interest, after the chair consulted all other directors present, they all agreed without objection.
d. The nominated directors had specified their names and education (experience). The independent director candidates had submitted relevant supporting documents in accordance with Article 5 of the Regulations Governing Appointment of Independent Directors and Compliance Matters for Public Companies.
e. The list of nominated candidates after deliberation is as follows: CHEN, SHENG TIEN, representative of SAMPO CORPORATION, CHEN, CHIAO MING, representative of SAMPO CORPORATION, YANG, CHENG MING, representative of SAMPO CORPORATION, Chumpower Machinery Corp., HUANG, YI HSING, representative of China Steel Corporation, NAKASHIMA, MITSUO, representative of Sharp Corporation of Japan, SU, CHING YANG (independent director), CHEN, SHENG WANG (independent director), and LEE, JEN FANG (independent director), which would be sent to the general shareholders’ meeting for election.
Board of directors meeting on 2020/06/16:
A. Subject: The proposal for deliberation of the remuneration of the Chairman of the Company. (Chairman CHEN, SHENG TIEN, who had a conflict of interest in this case was requested to recuse himself from the deliberation of this proposal)
Resolution: The Chairman appointed Mr. YANG, CHENG MING, the Vice Chairman, to act as the acting chair; except for the director who recused himself because of conflicts of interest, all the other directors present passed the proposal without objection.
B. Subject: The proposal for deliberation of the remuneration of the Vice Chairman of the Company. (Vice Chairman YANG, CHENG MING, who had a conflict of interest in this case was requested to recuse himself from the deliberation of this proposal)
Resolution: Except for the director who recused himself because of conflicts of interest, all the other directors present passed the proposal without objection.
The publicly listed company shall disclose the evaluation cycle and period, evaluation scope, method, and evaluation content of the board of directors’ self (or peer) evaluation, and fill out the attached table 2–(2) implementation status of evaluation of board of directors.

The Company passed the Rules of the Performance Evaluation of the Board of Directors on March 18, 2016 with approval of all the members of the board of directors present without objection. Since 2017, the performance evaluation of the board of directors has been carried out every year. The execution of the evaluation of the board of directors is as in (2) implementation status of evaluation of board of directors, and the evaluation results are presented simultaneously in the corporate social responsibility section of the Company’s website (http://www.rechi.com/managecompany.do).

The objective of fortifying the functions of the Board in current year and the most recent year (e.g. the establishment of the Auditing Committee, and enhancement of the transparency of information) and the assessment of the result of execution:
The Company’s board of directors has established two functional committees, the Audit Committee (established in 2017) and the Remuneration Committee (established in 2011) to assist the board of directors in fulfilling their supervisory duties. The resolutions of the board of directors and functional committees, and the communication status between independent directors, internal audit officer, and CPAs are announced on the Company’s website.
In order to establish a good corporate governance system, protect shareholders’ rights and interests, and strengthen the functions of the board of directors, the Company has established a Corporate Governance Committee under the board of directors. On March 20, 2020, the board of directors approved the appointment of KO, CHIH CHENG, Vice President of the Company, as the Corporate Governance Officer with approval of all the board members present.

(II) The board of directors’ evaluation and implementation status

Evaluation cycle	Evaluation period	Evaluation scope	Evaluation method (Note 4)	Evaluation content (Note 5)
Evaluation performed once a year	For the Year Ended December 31, 2020	Board of directors	Internal self-evaluation by the board of directors	1. Compliance with relevant laws and regulations 2. Level of participation in companyoperations

2020 performance evaluation of board of directors

	Item			Average
Aspect		Specific indicators	Weight
	No.			score

Compliance with relevant laws and regulations (60%)	1	Compliance with the matters discussed by the board of directors accordingto law	10%	10.0
	2	Whether the board of directors convenes at least six meetings ayear	10%	10.0
	3	Compliance with the recusal system	10%	10.0
	4	Achieving the number of hours of continuing education required for directors eachyear	10%	0.0
	5	Board attendance rate	10%	10.0
	6	Shareholders’ meeting attendance rate	10%	10.0
2. Level of participation in company operations (40%)	7	Review of the Company’s accounting system, financial position, financial reports, audit reports, and follow-upstatus	10%	9.8
	8	Communication with the Company’s CPAs	10%	9.9
	9	Assessment and supervision of the Company’s existingorpotential risks	10%	9.8
	10	Communication and interaction with the Company’s management	10%	9.9
	Total score		100%	89.3
Results of the performance evaluation of board of directors (smooth operations, aspects/items that still need to be improved, and next year’s improvement plans or actions for the aforementioned items, etc.): 1. The board of directors’ compliance with relevant laws and regulations was 10 points in the evaluation result. For the indicator of “achieving the number of hours of continuing education required for directors each year,” due to the pandemic this year, the relevant courses were cancelled, so this condition failed to be met; the scores of the remaining indicators were full marks or close to full marks, which has indicated that the overall operation of the Company’s board of directors is still considered to be adequate in line with corporate governance principles. 2. In 2021, the same model will be adopted by the board of directors’ operation in various items as the one adopted in the previous year. The Company will regularly notify directors of the information on continuing education courses, and will also evaluate the possibility of offering courses bycommissioningexternal entities for directors.

(III) The operation of the Auditing Committee

The Audit Committee held 5[A] times in the most recent year (2020), and the attendance of committee members is as follows:

Title	Title	Name	Name	Actual attendance (times)[B]	Attendance by proxy	Actual attendance (%)[B/A] (Note)	Actual attendance (%)[B/A] (Note)	Note
Convener and chair		SU, CHING YANG		5	0	100%		Reelected (reelection on 2020/6/16) Required attendance: 5
Committee member		CHEN, SHENG WANG		5	0	100%		Reelected (reelection on 2020/6/16) Required attendance: 5
Committee member		LEE, JEN FANG		5	0	100%		Reelected (reelection on 2020/6/16) Required attendance: 5
Additional disclosure: 1. (1)Implementation of the currentyear: Meeting date (Session) Agenda 2020/3/20  The 2019 individual financial reports of the Company  The 2019 consolidated financial report of the Company and its subsidiaries.  The Company’s internal audit report for Sep - Dec 2019 and Jan 2020.  Proposal for the issuance of the Company’s Statement of Declaration of Internal Control System.  The Company’s chief financial officer change proposal  Replacement of CPAs due to the need for internal job rotation of Deloitte Touche Tohmatsu Limited.  The independence evaluation of the 2020 CPAs.  The proposal for the partial amendment of the “Procedures for Endorsements/Guarantees”  The proposal for the credit limits provided by the Company’s financial institutions and the limits on the endorsement and guarantee provided by the Company to its subsidiaries 2020/5/4  The Company’s internal audit report for Feb - Mar 2020.  Proposal for the issuance of 2019 Audit Committee’s Review Report.  Proposal for the credit lines provided by the Company’s financial institutions and the credit lines of the subsidiaries endorsed andguaranteed bytheCompany. 2020/06/16  Proposal for election of the convener of the Audit Committee of the Company  Proposal for the loan to Rechi Precision (Jiujiang) Electric MachineryLimited. 2020/8/4  The Company’s internal audit report for Apr - Jun 2020.  The Company’s revision of the 2020 audit plan.  Proposal for the loan to Rechi Precision (Qingdao)							All independent directors’ opinions and the Company’s response thereto. All independent directors passed the resolutions without objection

	Meeting date (Session)
			Agenda


	2020/3/20		 The 2019 individual financial reports of the Company  The 2019 consolidated financial report of the Company and its subsidiaries.  The Company’s internal audit report for Sep - Dec 2019 and Jan 2020.  Proposal for the issuance of the Company’s Statement of Declaration of Internal Control System.  The Company’s chief financial officer change proposal  Replacement of CPAs due to the need for internal job rotation of Deloitte Touche Tohmatsu Limited.  The independence evaluation of the 2020 CPAs.  The proposal for the partial amendment of the “Procedures for Endorsements/Guarantees”  The proposal for the credit limits provided by the Company’s financial institutions and the limits on the endorsement and guarantee provided by the Company to its subsidiaries
	2020/5/4		 The Company’s internal audit report for Feb - Mar 2020.  Proposal for the issuance of 2019 Audit Committee’s Review Report.  Proposal for the credit lines provided by the Company’s financial institutions and the credit lines of the subsidiaries endorsed andguaranteed bytheCompany.
	2020/06/16		 Proposal for election of the convener of the Audit Committee of the Company  Proposal for the loan to Rechi Precision (Jiujiang) Electric MachineryLimited.
	2020/8/4		 The Company’s internal audit report for Apr - Jun 2020.  The Company’s revision of the 2020 audit plan.  Proposal for the loan to Rechi Precision (Qingdao)

	Electric Machinery Limited.  Proposal for loan to Dyna Rechi Jiujiang Co., Ltd. by the Company.  Proposal for the credit lines provided by the Company’s financial institutions and the credit lines of the subsidiaries endorsed and guaranteed by the Company. 	Electric Machinery Limited.  Proposal for loan to Dyna Rechi Jiujiang Co., Ltd. by the Company.  Proposal for the credit lines provided by the Company’s financial institutions and the credit lines of the subsidiaries endorsed and guaranteed by the Company. 
2020/11/03	 The Company’s internal audit report for Jun - Sep 2020.  The Company’s 2021 audit plan  Proposal for the credit lines provided by the Company’s financial institutions and the credit lines of the subsidiaries endorsed andguaranteed bytheCompany.
Meeting date
		Matters communicated with the internal audit officer

2020/03/20		 The Company’s internal audit reports for the fourth quarter of 2019 and for January of 2020.  The Company’s 2019 internal control system effectiveness report.
2020/05/04		 The Company’s internal audit reports for February and March of 2020.
2020/06/16		 Proposal for reelection of the convener of the 2ndAudit Committee of the Company
2020/08/04		 The Company’s internal audit reports for the second quarter of 2020.  The Company’s revision of the 2020 auditplan
2020/11/03		 The Company’s internal audit reports for the third quarter of 2020.  The Company’s 2021 auditplan
4. The communication between independent directors andCPAs is as follows:
Meeting date
		Matters communicated with CPAs

	Electric Machinery Limited.  Proposal for loan to Dyna Rechi Jiujiang Co., Ltd. by the Company.  Proposal for the credit lines provided by the Company’s financial institutions and the credit lines of the subsidiaries endorsed and guaranteed by the Company. 	Electric Machinery Limited.  Proposal for loan to Dyna Rechi Jiujiang Co., Ltd. by the Company.  Proposal for the credit lines provided by the Company’s financial institutions and the credit lines of the subsidiaries endorsed and guaranteed by the Company. 
2020/11/03	 The Company’s internal audit report for Jun - Sep 2020.  The Company’s 2021 audit plan  Proposal for the credit lines provided by the Company’s financial institutions and the credit lines of the subsidiaries endorsed andguaranteed bytheCompany.
Meeting date
		Matters communicated with the internal audit officer

2020/03/20		 The Company’s internal audit reports for the fourth quarter of 2019 and for January of 2020.  The Company’s 2019 internal control system effectiveness report.
2020/05/04		 The Company’s internal audit reports for February and March of 2020.
2020/06/16		 Proposal for reelection of the convener of the 2ndAudit Committee of the Company
2020/08/04		 The Company’s internal audit reports for the second quarter of 2020.  The Company’s revision of the 2020 auditplan
2020/11/03		 The Company’s internal audit reports for the third quarter of 2020.  The Company’s 2021 auditplan
4. The communication between independent directors andCPAs is as follows:
Meeting date
		Matters communicated with CPAs

	2020/03/20	Discussed the 2019 standalone financial reports of the Company and its subsidiaries and the review of the Company’s and its subsidiaries’ 2019 consolidated financial statements, including any problems or difficulties encountered in the audit, and the management’s response.

(IV) The Company’s corporate governance operation and the deviation with the “Corporate Governance Best-Practice Principles for TWSE/TPEx Listed Companies,” and the reasons thereof:

Items for assessment	State of operation	State of operation	State of operation	The variation with the “Corporate Governance Best-Practice Principles for TWSE/TPEx Listed Companies,” and the reasons for the variation
	Yes	No	Summary
1. Will the Company, based on the “Corporate Governance Best-Practice Principles for TWSE/TPEx Listed Companies,” set up and disclose the Company’s corporate governance best-practice principles?			The Company has formulated the Corporate Governance Best-Practice Principles to strengthen the corporate governance system and structure, and the implementation status is disclosed on the Company’s website and the Market Observatory Post System (MOPS).	All the above is compliant with the Corporate Governance Best-Practice Principles for TWSE/TPEx Listed Companies.
2. The Equity Structure and Shareholders Equity of the Company (1) Will the Company have the internal procedures regulated to handle shareholders’ proposals, doubts, disputes, and litigation matters; also, have the procedures implemented accordingly? (2) Will the Company possess the list of the Company’s major shareholders and the list of the ultimate controllers of the major shareholders? (3) Will the Company establish and implement the risk control and firewall mechanisms with the related parties? (4) Will the Company set up internal norms to prohibit insiders from utilizing the undisclosed information to trade securities?	   		(I) In addition to the spokesperson and acting spokesperson engaged by the Company, the Company has set up a stock affairs agency to deal with shareholders’ suggestions or disputes. If legal issues are involved, the Company will appoint professional attorneys or request personnel from relevant units to handle them. (II) The Company possesses the list of the Company’s major shareholders and the list of the ultimate controllers of the major shareholders, and discloses them in accordance with the laws and regulations. (III) The Company has established the internal measures for supervision of subsidiaries, measures for endorsement/guarantees, measures for loan to others, and rules for acquiring or disposing of assets to establish and implement appropriate risk control mechanisms and firewalls in accordance with the law. (IV) The Company has formulated the Procedures for Handling Material Inside Information to expressly prohibit the Company’s insiders from using undisclosed information on the market to buy and sell securities.	All the above is compliant with the Corporate Governance Best-Practice Principles for TWSE/TPEx Listed Companies.
3. The Organization and Function of the Board of Directors (1) Will the Board of Directors have diversified policies regulated and implemented substantively according to the composition of the members?			(1) The Company has formulated the Corporate Governance Best-Practice Principles and has set out a diversity policy in the third chapter “Strengthening the Functions of the Board of Directors.” The nomination and election of members of the Company’s board of directors is in accordance with the Company’s Articles of Incorporation with a candidate nomination system adopted. In addition to the assessment of the academic qualifications of each candidate, the “Rules of Elections of the Board of Directors and the Corporate Governance Best-Practice Principles are followed to ensure the diversityand independence of the members of the board of directors.	All the above is compliant with the Corporate Governance Best-Practice Principles for TWSE/TPEx Listed Companies.

Items for assessment	State of operation	State of operation	State of operation	The variation with the “Corporate Governance Best-Practice Principles for TWSE/TPEx Listed Companies,” and the reasons for the variation
	Yes	No	Summary
(2) In addition to the Remuneration Committee and the Audit Committee established in accordance with the law, does the company voluntarily establish other types of functional committees? (3) Does the company establish a method to evaluate board performance and evaluate board performance every year? Are the performance evaluation results reported to the board and used as a reference for the remuneration and nomination for reelection of directors?	 		Management objectives: Directors who concurrently serve as the Company’s managers do not exceed one third of the number of directors; more than half of the directors do not have a spousal relationship or are not relatives within the second degree of kinship with each other; directors from different industries will be increased; independent directors have a term of no more than nine years. The Company’s 13th Board of Directors has 9 members (including 3 independent directors), and each has a term of 3 years and the term may be renewed once reelected. One of them is a Japanese director (accounting for 11.11%); another director serves as a manager concurrently (accounting for 11.11%); two are relatives within the second degree of kinship (22.22%); directors’ industry experience ranges from finance, technology, biotechnology, trade to logistics. The proportion of independent directors is 33.33% (two independent directors have a term of less than 3 years, and the other one has a term between 4 and 6 years). They are good at leadership, business management, operational judgment, and crisis management with international perspectives, and the diversity of the board of directors is fully implemented. The board of directors formulates a diversity policy based on the composition of the board and is disclosed on the Company’s website and MOPS. (2) In addition to the Remuneration Committee, the company has established a Corporate Governance Committee, a Risk Management Committee, and an Audit Committee in accordance with the law, which are all composed of all independent directors. In addition, other functional committees will be evaluated and established as needed in the future. (3) In accordance with the Rules of the Performance Evaluation of the Board of Directors as approved by all the members of the board of directors present on March 18, 2016, every year, the members of the board of directors and the board of directors meeting unit will conduct internal self-evaluation on the five major aspects (including participation in the Company’s operations, improvement of the quality of board decisions, composition and structure of the board, election and continuing education of directors, and internal control) for the annual performance evaluation of the board of directors. The Company’s board of directors conducted an individual director’s performance evaluation on December 29, 2020. The evaluation results are as follows: In compliance with relevant laws and regulations of the board of directors, communication with internal auditors and CPAs, supervision of the Company’s existing or potential risks, and the Company’s operations and levels, the score was 89.3 points, which indicated that the overall operations of the Company’s board of directors was still sound.

Items for assessment	State of operation	State of operation	State of operation	The variation with the “Corporate Governance Best-Practice Principles for TWSE/TPEx Listed Companies,” and the reasons for the variation
	Yes	No	Summary
(4) Will the Company have the independence of the public accountant evaluated regularly?			The Company uses the results as one of the references for future selection or nomination of directors and individual directors’ remuneration. (4) The Company regularly (once a year) evaluates the professionalism and independence of CPAs. Evaluation items included “CPA and his/her family members do not hold direct or indirect significant financial interests of the Company,” “During the audit, CPA’s family members did not serve as directors, supervisors, managers, or positions that have a direct and significant influence on the audit work,” and “CPA has implemented necessary independence/conflicts of interest procedures, and has not violated independence or did not have unresolved conflicts of interest.” This year, the proposal for independence assessment of the Company’s 2021 CPAs was passed on March 22, 2021, and it was passed without objection by all the directorspresent.
4. Have Exchange-listed and/or OTC-listed companies staffed eligible in appropriate number personnel for corporate governance to take charge of corporate governance related issues (including but not limited to providing directors and supervisors with the data required for the performance of their duties, assisting directors and supervisors in law compliance, handling of the relevant issues in the board of directors’ and shareholders’ meeting, production of the minutes of board of directors’ meeting and shareholders’ meeting and the like)			1. In order to establish a good corporate governance system, protect shareholders’ rights and interests, and strengthen the functions of the board of directors, the Company has established a Corporate Governance Committee under the board of directors. On March 20, 2020, the board of directors approved the appointment of KO, CHIH CHENG, Vice President, as the Corporate Governance Officer. Vice President KO, CHIH CHENG has more than three years of management experience in legal affairs, finance, stock affairs, and deliberation in public companies. 2. Matters related to corporate governance include the following: (1) Coordinate the goals and formulation of the Company’s corporate social responsibility and sustainable development direction. (2) Assisting communication with stakeholders. (3) Preparation of corporate social responsibility report. (4) Handling matters relating to board meetings and shareholders’ meetings according to law. (5) Preparation of the minutes of the board of directors’ meetings and the shareholders’ meetings. (6) Assisting directors in taking office and continuing education. (7) Provision of information necessary for directors to perform their duties. (8) Assisting directors in complying with the law. (9) Other matters stipulated in accordance with the Company’s articles of incorporation or contracts. (10) Maintenance of relations with investors. (11) Implementation of ethical corporate management. 3. The implementation status of the business in 2020 is as follows: (1) Prepared a corporate social responsibility report. (2) Notified the board of directors regularlyof the latest amendments to and	All the above is compliant with the Corporate Governance Best-Practice Principles for TWSE/TPEx Listed Companies.

Items for assessment	State of operation	State of operation	State of operation	The variation with the “Corporate Governance Best-Practice Principles for TWSE/TPEx Listed Companies,” and the reasons for the variation
	Yes	No	Summary
			development of regulations in the fields of the Company’s operations and corporate governance (3) If the independent directors in accordance with the “Corporate Governance Best-Practice Principles” need to meet with the internal audit officer or the certified public accountant individually to understand the Company’s financial business, assist in arranging relevant meetings. (4) Assisted directors in drawing up annual training plans and arranging courses. (5) Assisted and reminded directors to comply with laws and regulations when performing duties or passing formal board resolutions, and was responsible for reviewing the release of material information of important board resolutions after each meeting to ensure the legality and correctness of the material information to protect investors’ right to access correct trading information in real time. (6) Arranged exchanges between directors and shareholders as needed, so that investors could obtain sufficient information to evaluate and determine the Company’s reasonable capital market value, and to ensure that shareholders’ rights and interests were well protected. (7) Drafted the board of directors’ meeting agenda and notified the directors seven days in advance, convened board meetings, provided them with meeting materials, reminded directors in advance to recuse themselves from any issue with their personal interest involved, and completed the meeting minutes within 20 days after each meeting. (8) Handled the pre-registration of the date of a shareholders’ meeting in accordance with the law, prepared the meeting notice, the meeting handbook, and the meeting minutes within the specified time limit, and handled the change registration for the amendments to the Articles of Incorporation or the reelection of directors. 4. The corporate governance officer has taken at least 18 hours of continuing education as required within one year from the date of assuming the position. Please refer to page 44.
5. Has the Company established channels for communications with the stakeholders (including but not limiting to shareholders, employees, customers, and suppliers), and set up a section for stakeholders at the official website of the Company with proper response to the concerns of the stakeholders on issues related to corporate social responsibility?			Based on the five major principles of the AA1000 Stakeholder Engagement Standard, namely dependency, responsibility, influence, diverse perspectives, and tension, the Company has identified the main stakeholders as shareholders, banks, employees, customers (distributors), and suppliers (contractors), government authorities, other professional groups, etc. The Company has set up a dedicated section for stakeholders on its website to understand the issues of concern through appropriate communication channels and to respond appropriately.	All the above is compliant with the Corporate Governance Best-Practice Principles for TWSE/TPEx Listed Companies.
6. Has the Companycommissioned aprofessional			The Companyhas commissioned the Registrar & Transfer AgencyDepartment,Yuanta	All the above is

Items for assessment	State of operation	State of operation	State of operation	The variation with the “Corporate Governance Best-Practice Principles for TWSE/TPEx Listed Companies,” and the reasons for the variation
	Yes	No	Summary
share registration and investor service institution for providing services for shareholders?			Securities Co., Ltd. to handle such matters.	compliant with the Corporate Governance Best-Practice Principles for TWSE/TPEx Listed Companies.
7. Disclosure of Information (1) Does the Company have a website set up and the financial business and corporate governance information disclosed? (2) Has the Company adopted other information disclosure methods (such as, establishing an English website, designating a responsible person for collecting and disclosing information of the Company, substantiating the spokesman system, placing the juristic person seminar program on the Company’s website)? (3) Does the Company announce and report the annual financial report within two months after the end of each fiscal year, and announce and report the financial report for the first, second, and third quarters and the operating conditions of each month before theprescribed deadline?	  		(1) The Company has set up a website (www.rechi.com), and adopts the MOPS to regularly disclose the Company’s financials, material information, and corporate governance-related information. (2) The Company also has a spokesperson/acting spokesperson system, the stock affairs department, and other relevant departments responsible for disclosing relevant information in accordance with regulations. (3) The Company’s 2020 consolidated and standalone financial reports were announced and filed on March 22, 2021; the financial reports for the first, second, and third quarters of 2020 and the revenue of each month were also announced and filed to MOPS before the specified deadline.	All the above is compliant with the Corporate Governance Best-Practice Principles for TWSE/GTSM Listed Companies.
8. Is there any further information that may help to understand the status of corporate governance of the company better (including but not limited to employees’ rights, employee care, investor relation, supplier relation, stakeholders’ rights, the continuing education of the directors and supervisors, risk management policy and risk assessment in action, the pursuit of customer policy, and the protection of the directors and supervisors with professional liability insurance)?			The Company has set up a corporate social responsibility section on its website. 1. Employee rights and interests: The Company treats employees with integrity, protects their legal rights and interests in accordance with the Labor Standards Act, and holds labor–management meetings regularly to actively establish communication bridges with employees. 2. Employee care: The Company has set up an Employee Welfare Committee and allocates employee welfare funds in accordance with the law, while emphasizing employee welfare. Employees enjoy a number of benefit measures, while the Company contributes employee pensions in accordance with regulations. The labor-employment relationship is harmonious. 3. Investor relations: The Company has set up a spokesperson/acting spokesperson mechanism to respond to shareholders’ suggestions. 4. Supplier relationship: The Company has always maintained a good relationship with its suppliers. 5. Stakeholder’s rights: Stakeholders can communicate with the Companyand make	All the above is compliant with the Corporate Governance Best-Practice Principles for TWSE/TPEx Listed Companies.

Items for assessment	State of operation	State of operation	State of operation
	Yes	No	Summary
			suggestions to protect their legitimate rights and interests. 6. Directors’ continuing education: The status of the Company’s directors’ attendance at the board meetings, and the situation of their continuing education have been disclosed on MOPS. 7. Implementation of risk management policies and risk measurement standards: The implementation of the Company’s risk management and measurement standards is handled in accordance with the requirements of corporate governance operations. 8. Implementation of customer policy: The Company maintains a stable and good relationship with customers to create profits. 9. The Company’s purchase of liability insurance for directors: The Company purchased directors’ liability insurance from Mingtai Fire & Marine Insurance Co., Ltd. on May 1, 2021, with an insured amount of US$5,000,000. The insurance period was one year. Relevant matters have been reported to the board of directors’ in May 2021. For relevant information, please refer to the “Corporate Governance” section under “Investor Relations” on the Company’s website(www.rechi.com)
9. Please describe the improvement performed according to the corporate governance evaluation results published by the Corporate Governance Center of Taiwan Stock Exchange in recent years, and propose the matters with priority for improvement and the respective measures: 1. The Company’s final score of the 7thCorporate Governance Evaluation is 73.69 points, and its ranking in the evaluation by the Taiwan Stock Exchange falls within the range of 21-35%. Scoring higher than the 71.99 points in the 7thCorporate Governance Evaluation, this year, the Company has disclosed the implementation status, the plans implemented, and the implementation effectiveness based on the evaluation data. 2. The items that require continuous improvement are as follows: (1) The directors shall achieve the number of continuing education hours according to the regulations. (2) The Company shall upload the English versions of the meeting handbook, annual report, and annual financial report before the shareholders’ meeting. (3) The Company shall amend the Corporate Governance Best-Practice Principles to disclose the system of appointment and dismissal, evaluation, a s well as salary and remuneration of internal auditors. (4)The Companyshall disclose the operations of risk management and report to the board of directors.

(V) The foundation, responsibilities, and functionality of the Remuneration Committee

1. Information on the members of the Remuneration Committee

Identity	Condition Name	More than 5 years of work experience and the following professional qualification	More than 5 years of work experience and the following professional qualification	More than 5 years of work experience and the following professional qualification	Status of independence (note)	Status of independence (note)	Status of independence (note)	Status of independence (note)	Status of independence (note)	Status of independence (note)	Status of independence (note)	Status of independence (note)	Status of independence (note)	Status of independence (note)	Number of other public companies where the member is also a member of their remuneration committees	Note
		In the capacity of a tutor or above in a public or private school of higher education in the disciplines of commerce, law, finance, accounting, or any other areas of specialization required for the business operation of the Company	A professional or technician who has passed the national examination for professionals like court judge, prosecutor, lawyer, certified public accountant, or any other expertise required for the business operation of the Company with the issuance of a certificate of completion	Commercial, legal, financial, accounting or other work experiences required to perform the assigned duties	1	2	3	4	5	6	7	8	9	10
Independent director	SU, CHING YANG	－	－												2	None
Independent director	CHEN, SHENG WANG	－	－												0	None
Independent director	LEE, JEN FANG		－												1	None

Note: If the members met the following conditions in the period of 2 years prior to the assumption of office and within the term of office, place a “  ” in the appropriate box representing the specific condition.

(1) Not an employee of the Company or its affiliates;
(2) Not a director or supervisor of the Company or its affiliated companies (but if the independent director is appointed in accordance with the “Securities and Exchange Act” or the law and regulations of the local country, and concurrently serves as such at a public company and its parent or subsidiary or a subsidiary of the same parent, it is not subject to this requirement).

(3) Not a director, spouse, minor children thereof, or other natural person shareholders who hold more than 1% of the total issued shares of the Company by nominee arrangement or with top ten ownership.

(4) Not a spouse, relative within the second degree of kinship, or lineal relative within the third degree of kinship of a managerial officer under Subparagraph (1) or any of the persons in Paragraph (2) and (3).

(5) Not a director, supervisor, or employee of a corporate shareholder that directly holds 5% or more of the total number of issued shares of the Company or that ranks among the top five in shareholdings or that designates its representative to serve as a director or supervisor of the Company under Article 27, Paragraph 1 or 2 of the Company Act (but if the independent director is appointed in accordance with the “Securities and Exchange Act” or the law and regulations of the local country, and concurrently serves as such at a public company and its parent or subsidiary or a subsidiary of the same parent, it is not subject to this requirement).
(6) A majority of the Company’s director seats or voting shares and those of any other company are not controlled by the same person who is a director, supervisor, or employee of that other company (but if the independent director is appointed in accordance with the “Securities and Exchange Act” or the law and regulations of the local country, and concurrently serves as such at a public company and its parent or subsidiary or a subsidiary of the same parent, it is not subject to this requirement).
(7) The chairperson, general manager, or person holding an equivalent position of the Company and a person in any of those positions at another company or institution are not the same person or are not spouses who is a director (or governor), supervisor, or employee of that other company or institution (but if the independent director is appointed in accordance with the “Securities and Exchange Act” or the law and regulations of the local country, and concurrently serves as such at a public company and its parent or subsidiary or a subsidiary of the same parent, it is not subject to this requirement).
(8) Not a director (or governor), supervisor, managerial officer, or a shareholder who holds 5% or more of the issued shares of another company or institution that conducts finance or business transactions with the Company (however, if a specific company or institution holds 20% or more and no more than 50% of the total number of issued shares of the Company and the independent directors appointed in accordance with the Act or the law and regulations of the local country concurrently serve as such at the Company and its parent or subsidiary or a subsidiary of the same parent company, it is not subject to this requirement).
(9) Not a professional individual, or an owner, partner, director (or governor), supervisor or officer of a sole proprietorship, partnerships, company, or institution that provides auditing services to the Company or any affiliate of the Company, or that provides commercial, legal, financial, accounting or related services to the Company or any affiliate of the Company for which the provider in the last 2 years had received cumulative compensation exceeding NT$500,000, or a spouse thereof. However, this restriction does not apply to a member of the remuneration committee, public tender offer review committee or special committee for merger and acquisition, who exercises powers pursuant to the “Securities and Exchange Act” or to the “Business Mergers and Acquisition Act” or relevant laws and regulations.

(10) None of the particulars inscribed in Article 30 of the “Company Act” is applicable.

Information on the operation of the Remuneration Committee
(1) The Remuneration Committee of the Company consists of 3 members.
(2) The term of office of the current committee members: From June 16, 2020 to June 15, 2023, the Remuneration Committee met twice in the most recent year (2020) [A]. The qualifications and attendance of the members are as follows:

Title	Name	Attendance in person[B]	Attendance by proxy	Actual attendance (%) [B/A]	Note
Convener	SU, CHING YANG	2	0	100%	Reelected (reelection on 2020/6/16) Required attendance: 2
Committee member	CHEN, SHENG WANG	2	0	100%	Reelected (reelection on 2020/6/16) Required attendance: 2
	LEE, JEN FANG	2	0	100%	Reelected (reelection on 2020/6/16) Required attendance: 2
Additional disclosure: 1. If the board of directors did not adopt or amended the suggestions of the Remuneration Committee, the date of the board meeting, the session, the content of the proposal, the results of the resolutions by the board of directors, and the Company’s response to the opinions of the Remuneration Committee shall be specified (if the salary and remuneration approved by the board of directors are better than what is suggested by the Remuneration Committee, the difference and reasons shall be specified): N/A. 2. For the resolutions by the Remuneration Committee, if any member had dissenting or reserved opinions, for which there is a record or declaration in writing, the meeting date, session, content of the proposal, all members’ opinions,and the response to such opinions shall be specified: N/A.

(3) The reasons for discussion and the resolution results of the Remuneration Committee, and the Company’s response to the members’ opinions:

		Committee members’ opinions and resolution results	The company’s response to the opinions of the members:
Date	Agenda

2020/3/20	 The Company’s 2019 remuneration to employees and remunerationto directors	Adopted without objection from all the members present	Submitted to the board of directors and approved by all directors present
2020/06/16	 The remuneration to the Company’s Chairman  The remuneration to the Company’s Vice Chairman  The remuneration to the Company’s President

(VI) Status of fulfilling social responsibilities and deviation from the “Corporate Social Responsibility Best-Practice Principles for TWSE/GTSM Listed Companies” and reasons thereof

Items for assessment	State of operation	State of operation	State of operation	Deviation from the “Corporate Social Responsibility Best-Practice Principles for TWSE/GTSM Listed Companies” and reasons thereof
	Yes	No	Summary
1. Does the company follow the principle of materiality to conduct risk assessments on environmental, social, and corporate governance issues related to the Company’s operations, and formulate relevant risk management policies or strategies?			The Company conducts relevant risk assessments on important issues in accordance with the materiality principle of corporate social responsibility (for the aspects of environmental/social/corporate governance), and has formulated relevant risk management policies or strategies based on the risks assessed. Refer to the “Risk Management” section under “Corporate Governance” of “Investor Relations” on the Company’s website. In addition, the Company’s board of directors approved the Risk Management Policies and Procedures on March 20, 2020, to clearly define the Company’s risk management organizational structure and powers and responsibilities, and the Auditing Office conducts audits on each business unit every year while issuing reports to effectivelycontrol any potentiallyharmful risks.	All the above is compliant with the Corporate Social Responsibility Best-Practice Principles for TWSE/GTSM Listed Companies
2. Does the Company have a dedicated (or concurrent) unit set up to promote corporate social responsibility and have the senior management authorized by the board of directors to handle matters and report the processing results to the board of directors?			1. In order to improve the management efficiency of corporate social responsibility, integrate horizontal resources to meet stakeholders’ expectations for corporate governance, environmental protection, and social care, and to integrate environmental, social, corporate governance business, the Company established the Corporate Social Responsibility Promotion Committee under the Corporate Governance Committee in December 2014 to be responsible for the implementation of corporate sustainability-related matters. The committee is chaired by the Plant Manager chairman of the committee, under which five teams were established based on the Company’s important and substantive needs, namely Stock Affairs Unit, Financial Management Center, Operation Strategy Development Center, Administration and Human Resources Center, and Guanyin Plant Business Group, with a general affairs team (Administration and Human Resources Center) set up as the responsible unit for company-wide corporate social responsibility in charge of coordinating all units within the Company related to the implementation of corporate social responsibility for joint implementation. 2. The Corporate Social Responsibility Promotion Committee meets regularly to discuss relevant tasks and report on the CSR implementation of each unit at the meeting. The committee prepares and publishes a sustainability report every year in accordance with regulations, discloses the operation status, and reviews the effectiveness of implementation, while reporting to the board of directors quarterly.	All the above is compliant with the Corporate Social Responsibility Best-Practice Principles for TWSE/GTSM Listed Companies
3. Environmental issues (1) Does the Company have an appropriate environmental management system established in accordance with its industrial			(1) The Company has passed ISO14001 certification, declares relevant data regularlyin accordance with the Occupational Safetyand Health Act,and has	All the above is compliant with the Corporate Social

Items for assessment	State of operation	State of operation	State of operation	Deviation from the “Corporate Social Responsibility Best-Practice Principles for TWSE/GTSM Listed Companies” and reasons thereof
	Yes	No	Summary
character? (2) Is the Company committed to enhance the utilization efficiency of resources and use renewable materials that are with low impact on the environmental? (3) Does the Company assess the potential risks and opportunities of climate change to the Company now and in the future, and take measures to respond to climate-related issues? (4) Does the company prepare statistics on greenhouse gas emissions, water consumption, and total waste weight in the past two years, and formulate policies for energy conservation and carbon reduction, greenhouse gas reduction, water reduction, or other waste management?	  		formulated four major policies for environmental management: 1. Comply with environmental regulations and protect the Earth’s environment. 2. Research and develop green products to prevent pollution effectively. 3. Strengthen environmental protection awareness and encourage all employees to participate in environmental protection. 4. Promote continuous improvement and create a high-quality environment. (2) In terms of shipping, the Company mainly uses recyclable pallets for containers. If there is carton packaging, the Company actively collects all the suppliers’ cartons and requires them to recycle and reuse them. At the feeding end, the Company works together with suppliers to minimize the impact on the environment. The Company also continues to miniaturize its products to save resources, energy, and reduce carbon emissions, and engages in recycling (such as recycling of tailings of silicon steel sheets), while trying to simplify packaging design and recycling and reusing shipping containers. The Company adopts the concept of “resource recycling” at the design stage for the products. The products are designed for easy disassembly and recycling. The Company selects materials that are recyclable and reusable as much as possible. Plastics are also marked with recycling signs to facilitate recycling. The average recyclable ratio of the Company’s product materials is more than 80%, which greatly reduces the impact on the environment. (3) The Company’s mission is to fulfill the corporate responsibility of caring for the Earth. While pursuing business growing, it actively takes into account environmental protection. Since 1999, it has developed and completed the second generation of environmentally friendly refrigerant compressors (the ozone depletion potential, or ODP, is 0). To further reduce the impact on the greenhouse effect, since 2013, it has developed the third-generation environmentally friendly refrigerant compressor with a lower impact on the global warming potential (GWP) and improved product energy efficiency index, which can guide customers to introduce it quickly, and the proportion of the sales of the third-generation environmentally friendly refrigerant compressors has increased by nearly 50%. (4) Based on ISO 14001, the Company implements an environmental management system to integrate business operations and environmental protection, establish a specific environmental management system, set environmental goals and target policies, and perform reviews accordingly. The Company’s energy saving and carbon reduction goals: Thee Company will reduce paper consumption by 0.2% per year, water consumption by 2% per year, electricity consumption by2%peryear,and increase the waste recyclingrate by5%per	Responsibility Best-Practice Principles for TWSE/GTSM Listed Companies

Items for assessment	State of operation	State of operation	State of operation	Deviation from the “Corporate Social Responsibility Best-Practice Principles for TWSE/GTSM Listed Companies” and reasons thereof
	Yes	No	Summary
			year to achieve the goal of energy conservation and carbon reduction. The relevant achievements are as follows: 1. The Company is located in the Guanyin Industrial Park in Taoyuan. The industrial water source in this area is tap water. Since underground water is strictly prohibited in this area, tap water is the only choice for water supply. When setting up the Company’s factories, it considered saving energy and resources to create better profits, save energy, and reduce carbon emissions with protecting the environment and resources as the production goal. Therefore, the Company adopted the facilities and equipment on the production lines that would consume the least water. The use of tap water in 2020 was 5.2137 million liters, an increase of 0.1996 million liters compared to 5.0141 million liters in 2019; the small increase in water consumption was due to process changes and new compressor lines set up. The Company’s control of water resources is strict despite the low cost of water so as to do its part as an enterprise to save energy and reduce carbon emissions, care for the Earth, and leave more energy resources for future generations. As of now, there has been no violation of environmental laws and regulations. 2. As a top provider of forward-looking energy-saving products, the Company has implemented the Group’s development strategy and objectives, and has continued to develop inverters and disruptive innovative energy-saving products. Based on the sales performance of the Company’s products in 2020, the cumulative contribution to global energy conservation and carbon reduction was 6.66 billion kilowatt-hours of electricity, which was equivalent to a reduction of approximately 3.39 million metric tons of CO2(calculated based on the 2019 emission factor for electricity consumption of the Bureau of Energy of the Ministry of Economic Affairs), an increase of more than 2.76 million metric tons of CO2 reduced compared with 5.43 billion kilowatt-hours of electricity saved for 2019. Its implementation of carbon reduction policies has been aligned with the targets to some extent (please refer to the “Social Responsibility Report” in the “Corporate Social Responsibility” section of the Company’s website). 3. The Company mainly produces compressors. According to the characteristics of the industry, the waste output includes general waste, inorganic sludge, and waste cutting fluid, all of which are processed and handled by legal service providers, and are mostly incinerated. According to the characteristics of resources recycled, most of them are mainly scrap metal andpaper,and theyare ultimatelyrecycled and reused bythe

Items for assessment	State of operation	State of operation	State of operation	Deviation from the “Corporate Social Responsibility Best-Practice Principles for TWSE/GTSM Listed Companies” and reasons thereof
	Yes	No	Summary
			resource recycling service providers. The total weight of waste in 2020 was 576.8 tons, an increase of 108.58 tons compared to 468.22 tons in 2019. The companydoes not import or export foreign waste.
4. Social issues (1) Does the Company have the relevant management policies and procedures stipulated in accordance with the relevant laws and regulations and international conventions on human rights? (2) Does the Company formulate and implement reasonable employee benefit measures (including salary, leave, and other benefits), and appropriately reflect operating performance and results in employee compensation?	 		(1) In order to fulfill corporate social responsibility and implement human rights protection, the Company has referred to internationally recognized human rights standards, such as the Universal Declaration of Human Rights, the United Nations Global Compact, and the International Labor Organization’s Declaration on Fundamental Principles and Rights at Work, and complied with local labor and environmental laws and regulations, formulated human rights policies, and promoted and implemented internal management laws and internal control procedures to prevent infringement and violations of human rights, and enable in-service employees in the Group to be treated in a reasonable and dignified manner. The implementation guidelines are as follows: Respect diversity in the workplace and ensure equal employment. Provide reasonable and fair working conditions. Develop a safe and healthy work environment. Maintain an unobstructed communication and grievance channel. Respect privacy and the right to freedom of association. Insist on ethical management and fair transactions. Prohibit forced labor and child labor. Regularly review and evaluate policy implementation. (2) The Company has set up an Employee Welfare Committee in accordance with the Employee Welfare Fund Act, and holds regular meetings to discuss issues, such as the amendment to the committee’s charter and the distribution of employee benefits. Budgets are drawn up according to the activities and events each year. In accordance with the annual activity/event plan, it regularly organizes employee travel, autumn family day activities, and ball games, and provides allowances for weddings and funerals, child scholarship, foreign employees activity fees, gifts for three major festivals (Lunar New Year, Labor Day, Mid-Autumn Festival), and sports equipment for employees to use. In addition to labor and health insurance, comprehensive group insurance and travel safety insurance are purchased to provide employees with better protection. Please refer to page 71 for employee benefit measures. The Company’s overall salary includes base pay, bonuses, and employee remuneration. Each year, the salary adjustment plan is formulated in accordance with operating performance and the market benchmark standards, andproduction bonuses,operatingbonuses, performance bonuses are	All the above is compliant with the Corporate Social Responsibility Best-Practice Principles for TWSE/GTSM Listed Companies

Items for assessment	State of operation	State of operation	State of operation	Deviation from the “Corporate Social Responsibility Best-Practice Principles for TWSE/GTSM Listed Companies” and reasons thereof
	Yes	No	Summary
(3) Does the Company provide employees with a safe and healthy work environment, and provide safety and health education to employees regularly? (4) Has the company established an effective career development and training program for employees? (5) With regard to customer health and safety, customer privacy, marketing,and labelingofproducts and services,does the	  		determined based on the operating performance. It also stipulates that part of the Company’s net profit shall be distributed as employee remuneration in the Company’s Articles of Incorporation. (3) In order to improve the Company’s safety and health system and management performance, the Company has been implementing the Taiwan Occupational Safety and Health Management System (TOSHMS) since 2012. In order to effectively operate the requirements of the management system, a Labor Safety and Health Management Committee is established in accordance with the law, of which labor representatives account for one-third of the total as required by law. The top-level manager of the labor safety and health management committee is the Plant Manager, and the labor representatives can directly communicate to the top-level manager. The Safety and Health Management Committee convenes quarterly and prepares statistics on occupational injuries. In order to effectively monitor the health status of employees, in addition to pre-employment physical examinations, the Company arranges annual health examinations for in-service employees, and informs them of the examination results, while organizing general and special health examinations in accordance with the law and health promotion activities, and sending health information summary to all employees from time to time. (4) The Company divides training into core value as well as basic and professional and management training. The core value includes understanding of Rechi’s environment and various systems to recognize its spirit and culture; the basic training cover on-the-job training (OJT) and qualifications; professional and management training are to enhance employees’ professional and management capabilities. In terms of systems, in addition to the ISO quality system for training standards, there are “employee education and training measures” and “internal lecturers measures” for each job level to organize relevant training every year, and to continue the training to cultivate internal lecturers. Furthermore, the Company has formulated the rewards measures to motivate employees to obtain certificates and to learn independently, and rewards will be given when employees obtain specific job certificates. In addition, in order to ensure the quality and performance of training, the Company passed the review of Talent Quality-management System (TTQS) in 2014, and established R&D learning maps for R&D personnel, and revised them at any time according to the Company’s development status, to provide career development training for R&D personnel systemically, which is include as a reference for employee promotion. (5) In order to protect consumers’ rights and interests, the information on product specifications, power supply,refrigerant,and certification agencies is correctly

Items for assessment	State of operation	State of operation	State of operation	Deviation from the “Corporate Social Responsibility Best-Practice Principles for TWSE/GTSM Listed Companies” and reasons thereof
	Yes	No	Summary
Company follow relevant laws and international standards, and formulate relevant consumer protection policies and complaint procedures? (6) Does the Company formulate supplier management policies that require suppliers to comply with relevant regulations on issues such as environmental protection, occupational safety and health, or labor human rights, and the implementation?			labeled, to provide customers with correct information and safety for purchase and use. In addition, the self-made heat pump water heater is a terminal product that directly accessible to consumers. At present, the Company is actively working to develop and improve products to meet the standard requirements of energy efficient marks to obtain the 10KW energy efficient mark and to control the quality of materials and products in accordance with ISO9001, ISO14001, ISO17025, IATF16949, and RoHS. The Company has also formulated the 0800 customer service hotline management measures, to not only provide 24-hour free customer service hotline but regulate the management of information (customer calls or messages received) and the response to unusual events. (6) The Company’s management of suppliers has shifted from focusing on quality, products, and delivery in the early stage gradually towards a joint establishment of social responsibility. In the survey and evaluation items for introduction of new suppliers, it is necessary for suppliers to provide the basic information through the Basic Information Form of Suppliers, and the suppliers are requested to fill out the CSR Environmental Management Questionnaire according to the facts. This questionnaire covers the two aspects of “health and safety” and “environment,” among which “health and safety” includes issues related to occupational safety and health and labor human rights; “environment” includes issues related to environmental protection. With that, the Company can understand the current status of suppliers’ implementation of CSR while they are encouraged to establish an ISO environmental management system (ISO14001), and all suppliers are invited to work together to fulfill their corporate responsibilities for society, workers, and theplanet.
5. Does the Company refer to internationally accepted reporting standards or guidelines to prepare corporate social responsibility reports and other reports that disclose its non-financial information? Have the aforesaid reports been assured or certified by a third-party verification agency?			The Company has already released the 2020 corporate social responsibility report with reference to the internationally accepted GRI Standards in 2021, and obtained the assurance report from the independent third-party British Standards Institution. The corporate social responsibility report is available in the “Corporate Social Responsibility” section of the Company’s website.	All the above is compliant with the Corporate Social Responsibility Best-Practice Principles for TWSE/GTSM Listed Companies
6. If the Company has established its own Corporate Social Responsibility Best-Practice Principles in accordance with the Corporate Social Responsibility Best-Practice Principles for TWSE/GTSM Listed Companies, please specify its current implementation and any deviation from the Best-Practice Principles: The Company has formulated its Corporate Social Responsibility Best-Practice Principles in accordance with the Corporate Social Responsibility Best-Practice Principles for TWSE/GTSM Listed Companies established by the competent authority (please refer to the “Corporate Governance” section of the MOPS and the “Corporate Social Responsibility” section of the Company’s website(http://www.rechi.com). There is no difference between the actual operation and the regulations of theprinciples.
7. Other information critical to the understandingof our bank’s corporate social responsibilityand how it isput intopractice:

Items for assessment	State of operation	State of operation	State of operation	Deviation from the “Corporate Social Responsibility Best-Practice Principles for TWSE/GTSM Listed Companies” and reasons thereof
	Yes	No	Summary
(1) Social participation: Based on the spirit of “giving back what it has taken to society,” Rechi has been actively involved in social participation for a long time. The efforts can be specifically divided into education and counseling, social welfare system, and friendly community. A. In order to support outstanding students and accompany children’s growth with love and care, the Company promotes learning guidance and counseling services: 1. In order to support outstanding students from underprivileged backgrounds at the Department of Mechanical Engineering, National Cheng Kung University (NCKU), the Company has donated a total of NT$9 million for 10 consecutive years as of 2021, and set up the Learning and Guidance Scholarship of Rechi/College of Engineering of NCKU. Each award-winning student will NT$40,000 per semester, and needs to participate in the tutoring of senior high school students in their spare time, which is well-received by society, with the aim of guiding senior high school students in learning and giving back to society in the spirit of serving while learning. 2. As of 2021, a total of NT$636,000 in scholarships have been provided to international students at National Chin-Yi University of Technology. 3. In addition, the Company joined hands with the National Central University, NCKU, National Pingtung University of Science and Technology, and National Chin-Yi University of Technology to establish a platform for industry–academia collaboration to provide students with summer internship opportunities through internship projects. 4. The Company works with schools through various company activities and events to promote professional exchanges and cultivate talents. Launch of the Jiujiang Factory: The Company organized an internship project for college students to visit the overseas factory. 30th Anniversary of the Group: The Company organized the 1st Rechi Cup Sound Analysis Creativity Competition and the Rechi Campus Maker Competition B. Through the collaboration with reputable social welfare organizations and schools, the Company sent personnel to the institutions that lacked hot water supply facilities to study the situation and provided installation service of heat pump water heaters for free: In 2018, the Company donated one set of heat pump water heaters to SOS Children’s Village of Taiwan and two sets of heat pump hosts to the National United University. In 2019, the Company donated a set of heat pump water heaters to Taoyuan City Guanyin Kindergarten, Taoyuan City Kangfu Intelligent Development Center, Taoyuan City Shuren Foundation Affiliated Care Home, Taoyuan City Ankang Care Home, and Taoyuan City Tin Fun Care Home, respectively. C. The Company has provided small amounts of funding to local volunteer fire brigades, temples, or patrol teams near the factory to support and care for the local residents, and give back to the residents so as to promote more positive actions in the society: a small amount of NT$5,000 to the patrol team in Fulin Village, Guanyin District, and another small amount of NT$5,000 to sponsor the volunteer fire brigade’s year-end review meeting in Caota, Guanyin District. D. In 2021, Taiwan’s poor performance in the export of pineapples caused losses to pineapple farmers. In order to fulfill its corporate social responsibility, the Company purchased 600 boxes of pineapples from the Tainan Agricultural Products Marketing Co. Ltd. and distributed them to employees to support the pineapple farmers with actions. The total purchase amount was NT$210,000. (2) Corporate governance: Refer to the “Corporate Social Responsibility” section of the Company’s website(www.rechi.com).

(VII) Implementation of ethical management and deviation from the “Ethical Corporate Management Best-Practice Principles for TWSE/GTSM Listed Companies” and the reasons thereof:

Items for assessment	Status of operation	Status of operation	Status of operation	Deviation From the “Ethical Corporate Management Best-Practice Principles for TWSE or TPEx Listed Company” and the Reasons
	Yes	No	Summary
1. Establishment of ethical corporate management policy and proposal (1) Has the company established policies for ethical corporate management approved by the board of directors and stated such policies and practices in its regulations and external documents and in the commitment made by the board of directors and senior management to actively implement such policies? (2) Has the company established an assessment mechanism of risk from unethical behavior to regularly analyze and assess business activities with higher risk of involvement in unethical behavior and preventive programs for unethical behaviors containing at least the preventive measures stated in paragraph 2, Article 7 of the “Ethical Corporate Management Best-Practice Principles for TWSE/TPEx-Listed Companies”?	 		(1) The Company engages in business activities based on the principles of fairness, honesty, integrity, and transparency. In order to implement the ethical management policy and actively prevent dishonest behaviors, the board of directors approved the formulation of the Ethical Corporate Management Best-Practice Principles in accordance with the Ethical Corporate Management Best-Practice Principles for TWSE/TPEx-Listed Companies on March 21, 2014, and passed the amendments thereto on March 17, 2017 and November 6, 2019, respectively. The principles have clearly defined the Company’s ethical management policies, approaches, and stipulate that the board of directors and the management shall actively implement the commitments of this management policy, and that they shall follow the principles of ethical management when performing business. (2) At the same time, the board of directors approved the formulation of the Procedures for Ethical Management and Guidelines for Conduct on November 6, 2019, and passed the amendments thereto on March 20, 2020. In accordance with the Ethical Corporate Management Best-Practice Principles and the Procedures for Ethical Management and Guidelines for Conduct, the Company’s board of directors approved the formulation of the Risk Management Policies and Procedures without objection on March 20, 2020, to clearly define the Company’s risk management organizational structure and powers and responsibilities, and the Auditing Office conducts audits on each business unit every year while issuing reports to effectively control any potentially harmful risks. It also expressly prohibits bribery and receipt of bribes, provision of illegal political contributions, provision of improper charitable donations or sponsorships, unreasonable gifts, hospitality, or other improper benefits, infringement of intellectual property rights, engaging in unfair competition, or products or services that are detrimental to interested parties in the Ethical Corporate Management Best-Practice Principles. The Procedures for Ethical Management and Guidelines for Conduct specify the matters that shall be paid attention to in the execution of the business, and the Company organizes education sessions and awareness-raisingevents to implement the ethical managementpolicy.	All the above are compliant with Ethical Corporate Management Best-Practice Principles for TWSE/TPEx Listed Companies.

Items for assessment	Status of operation	Status of operation	Status of operation	Deviation From the “Ethical Corporate Management Best-Practice Principles for TWSE or TPEx Listed Company” and the Reasons
	Yes	No	Summary
(3) Does the Company clearly define operating procedures, behavior guidelines, disciplinary actions, and grievance systems for violations in the unethical behavior prevention plan and implement them as required, and regularly review said plan?			(3) The Procedures for Ethical Management and Guidelines for Conduct not only regulate the specific matters that shall be paid attention to when performing the business but include the formulation of reporting regulations, internal awareness-raising events, establishment of rewards and disciplinary actions, and grievance systems. In order to promote ethical behavior, the Company not only publishes the Ethical Corporate Management Best-Practice Principles and the Procedures for Ethical Management and Guidelines for Conduct on the Company’s internal website for employees to consult at any time, but it also requests new employees to read them on the first day of work and sign the statement on compliance with the Ethical Corporate Management Best-Practice Principles. In addition, it raises new employees’ awareness of the Company’s core values and compliance system, and provides them with relevant education and trainingcourses on a regular basis.
2. Implementation of Ethical Corporate Management (1) Does the company have the integrity of the trade counterparty assessed and with the code of integrity expressed in the contract signed? (2) Does the Company set up a dedicated unit under the board of directors to promote ethical corporate management, which reports to the board of directors regularly (at least once a year) on its ethical management policies, plans for preventing dishonest behavior, supervision, and implementation? (3) Does the Company have developed policies to prevent conflicts of interest, provided adequate channel for communication, and substantiated the policies?	  		(1) Before the Company establishes a business relationship with others, it first evaluates the legality of its counterparties, their ethical management policy, and whether there has been a record of unethical conduct, to ensure that their business operations are fair and transparent and that they will not request, offer, or accept bribes. The contract signed between the Company and others covers the requirement that the counterparty of a transaction shall abide by the terms of ethical operations, and the Company will fully understand the counterparty’s status of ethical operations. If there is damage involved in the case of unethical conduct, it may request compensation for losses in accordance with the contract. (2) The Company has set up the Corporate Governance Committee, a dedicated (concurrent) unit, under the board of directors to implement ethical corporate management to ensure the implementation of the Ethical Corporate Management Best-Practice Principles based on the duties and scope of business of each unit, and to report on the implementation to the board of directors on a quarterly basis. (3) In order to prevent conflicts of interest and provide appropriate channels, the Company’s board of directors approved the formulation of the Ethical Corporate Management Best-Practice Principles on March 21, 2014, and the amendments thereto on March 17, 2017 and November 6, 2019, respectively. For conflicts of interest in business,employees shall inform	All the above are compliant with Ethical Corporate Management Best-Practice Principles for TWSE/TPEx Listed Companies.

Items for assessment	Status of operation	Status of operation	Status of operation	Deviation From the “Ethical Corporate Management Best-Practice Principles for TWSE or TPEx Listed Company” and the Reasons
	Yes	No	Summary
(4) Does the Company have established an effective accounting system and internal control system for the implementation of ethical corporate management, and the internal audit unit based on the assessed risk of unethical conduct to formulate relevant audit plans, and check the compliance with the unethical conduct preventive action or commission an accountant to perform the check? (5) Has the Company organized corporate management internal and external education and training programs on a regular basis?	 		their supervisors in advance according to the employment contract to prevent conflicts of interest. When there is a conflict of interest in various proposals of the board of directors, they will follow the principle of recusal to avoid the discussion, and leave the meeting without participating in the vote. (4) In accordance with the Ethical Corporate Management Best-Practice Principles and the Procedures for Ethical Management and Guidelines for Conduct, the Company’s board of directors approved the formulation of the Risk Management Policies and Procedures without objection on March 20, 2020, to clearly define the Company’s risk management organizational structure and powers and responsibilities. The Company always pays attention to ensuring the correctness and completeness of its financial reporting process and its control. It designs relevant internal control systems for operating procedures with high potential risks of unethical conduct, and implements the annual audit plan drawn up by the internal audit based on the results of the risk assessment, and an audit report will be prepared submitted to the board of directors after the audit. (5) Ethical corporate management has been incorporated into the Company’s internal regular training in 2019. In 2020, 32 participants attended educational training, with a total of 64 training hours. As for external trainings, in 2020, three members of the Company’s Board of Directors participated in external courses related to ethical corporate management andprevention of insider trading,with a total of 9 traininghours.
3. The Function of the Reporting System of the Company (1) Does the Company have a specific report and reward system stipulated, a convenient report channel established and responsible staff designated to handle the individual being reported?			(1) The Company has formulated the “Rules for the Prosecution of Illegal and Unethical or Dishonest Conducts” upon unanimous approval from all attending directors at the board meeting on December 23, 2019. In the Rules state clear and effective award and penal system, and if any personnel of the Company seriously violates ethical conduct, the Company shall dismiss the personnel from his or her position or terminate his or her employment in accordance with applicable laws and regulations or relevant procedures of the Company. The Company encourages the insiders’ and outsiders’ informing of unethical or unseemly conducts, and rewarded accordingly. Insiders having made a false report or malicious accusation shall be subject to disciplinary action and be removed from office if the circumstance concerned is material.	All the above are compliant with Ethical Corporate Management Best-Practice Principles for TWSE/TPEx Listed Companies.

Items for assessment	Status of operation	Status of operation	Status of operation	Deviation From the “Ethical Corporate Management Best-Practice Principles for TWSE or TPEx Listed Company” and the Reasons
	Yes	No	Summary
(2) Has the Company established standard operating procedures for investigating reported events, follow-up measures to be taken after the investigation was completed, and related confidentiality mechanisms? (3) Has the Company taken proper measures to protect the whistle-blowers from suffering any consequence of reporting an incident?	 		The Company shall establish a mailbox and hotline for insiders and outsiders of the Company to submit reports. (2) The “Rules for the Prosecution of Illegal and Unethical or Dishonest Conducts” was passed unanimous by all attending directors at the board meeting on December 23, 2019. In the Rules, Article 5 – Handling Procedures clearly regulates the operating procedures, document retention periods, etc., internal control system review and operating procedures of the responsible units which are identified after investigation, and proposal of improvement measures to prevent the recurrence of the same conduct. Article 7 -- Protection of Whistleblowers and Investigators regulates that the handling of whistle-blowing matters shall be represented in writing that they will keep the whistleblowers’ identity, investigators and contents of information confidential. (3) The Company has formulated the “Rules for the Prosecution of Illegal and Unethical or Dishonest Conducts” upon unanimous approval from all attending directors at the board meeting on December 23, 2019. In the Rules it is clearly stated that the Company is committed to protecting the whistleblower from improper treatment as a result of the whistleblowing.
4. Intensification of Disclosure Does the Company have the contents of corporate management and its implementation disclosed on the website and MOPS?			The Company has set up the “ethical corporate management” sector under “investor relations” > “corporate governance,” and has disclosed information and promotion related to ethical corporate management on the MOPS for inquiry at any time. It has also disclosed information related to ethical corporate management on the external website.	All the above are compliant with Ethical Corporate Management Best-Practice Principles for TWSE/TPEx Listed Companies.
5. If the Company has established its own corporate management principles in accordance with “Ethical Corporate Management Best-Practice Principles for TWSE/TPEx-Listed Companies,” please describe its current practices and any discrepancies from the Best-Practice Principles: The Company has established its “Ethical Corporate Management Best-Practice Principles.” All employees, managerial officers, and board members shall abide by these Principles. There are no discrepancies between the currentpractices and the Best-Practice Principles.
6. Other information relevant to understanding the Company’s business integrity (e.g. reviews of business integrity principles): The Company pays close attention to the development of the domestic and overseas regulations related to ethical corporate management, and encourages its directors, managerial officers, employees to give suggestions. Based on the suggestions, the Company may review, improve and promote the ethical corporate management policies it has formulated, in order to improve the effectiveness of the company’s ethical corporate management.

(VIII) If the Company has formulated its corporate governance principles and relevant regulations, the inquiry methods should be disclosed:
Please refer to “Corporate Governance” sector in the MOPS, or the Company’s website.
(IX) Other information that facilitates the understanding in the Company’s corporate governance should also be disclosed together:
Important information of the Company is disclosed on the MOPS and the Company’s website in accordance with the laws and regulations of the competent authorities. Company website: http://www.rechi.com/

MOPS: http://mops.twse.com.tw/mops/web/index. Stock No: 4532

2. Education training of the Board in 2020.

								Whether
			Training date					the
		Date of						training
							Trainin
Title	Name	(elected to)			Organizer	Course name	g hours	had
		office						complied
			Start	End
								with

								policies
Corporate Director representative	CHEN, SHENG TIEN	2020/06/16	2020/11/10	2020/11/10	Taiwan Corporate Governance Association	5G Key Technology and Applications	3.0	Yes
			2020/12/08	2020/12/08	Taiwan Corporate Governance Association	Red Flags of Fraud for Financial Misrepresentation	3.0	Yes
Corporate Director representative	YANG, CHENG MING	2020/06/16	2020/11/10	2020/11/10	Taiwan Corporate Governance Association	5G Key Technology and Applications	3.0	Yes
Corporate Director representative	CHEN, SHENG CHUAN	2020/06/16	2020/11/10	2020/11/10	Taiwan Corporate Governance Association	5G Key Technology and Applications	3.0	Yes
Corporate Director representative	CHEN, CHIAO MING	2020/06/16	2020/10/16	2020/10/16	Taiwan Securities Exchange Corporation Taipei Exchange (TPEx)	2020 Corporate Governance and Corporate Integrity Seminar for Directors and Supervisors	3.0	Yes
Independent director	SU, CHING YANG	2020/06/16	2020/05/28	2020/05/28	Securities and Futures Development Foundation	Analysis and Case Study of Non-arm’s Length Transactions of Directors and Supervisors	3.0	Yes
			2020/10/16	2020/10/16	Taiwan Securities Exchange Corporation Taipei Exchange (TPEx)	2020 Corporate Governance and Corporate Integrity Seminar for Directors and Supervisors	3.0	Yes
Independent director	LEE, JEN FANG	2020/06/16	2020/08/18	2020/08/18	Taiwan Institute of Directors	Business Transformation in an Era of Change	3.0	Yes
			2020/11/19	2020/11/19	Taiwan Institute of Directors	Opportunities and Challenges for Businesses in the U.S.–China Trade War	3.0	Yes
Independent director	CHEN, SHENG WANG	2020/06/16	2020/09/21	2020/09/21	Taiwan Securities Exchange Corporation	Summit – “Corporate Governance 3.0 – A Blueprint for Sustainable Development”	3.0	Yes

2020 Continuing training regarding Corporate Governance participated by managerial officers:

		Trainingdate	Trainingdate			Training hours
Title	Name			Organizer	Course name		N
		Start	End				ote

Vice President/CFO/Chief Corporate Governance Officer	KO, CHIH CHENG	2020/06/12	2020/06/12	Taiwan Corporate Governance Association	10 Must-Learn Lessons of Corporate Governance	3
		2020/07/14	2020/07/14	Taiwan Corporate Governance Association	Smart Financial Management from the Board of Directors’ Perspective	3
		2020/09/22	2020/09/22	Taiwan Corporate Governance Association	Capital Market and Corporate Governance	3
		2020/11/24	2020/11/24	Taiwan Corporate Governance Association	Corporate Governance 3.0 – A Blueprint for Sustainable Development	3
		2020/12/11	2020/12/11	Taiwan Corporate Governance Association	Mergers and Acquisitions Reviews and Directors’ Responsibilities	3
Chief Financial Officer/Chief Accounting Officer	WU, CHIN MEI	2020/08/27	2020/08/28	Accounting Research and Development Foundation	Continuing Training for Chief Accounting Officers of Issuers, Securities Firms, and Securities Exchanges	12

(X) Execution status of internal control system:

Statement of Declaration of Internal Control System

RECHI PRECISION CO., LTD.

Statement of Declaration of Internal Control System

Date: Mar. 22, 2021

The Company hereby states the results of the self-evaluation of the internal control system for

2020 as follows:

The Company is aware that the establishment, execution, and maintenance of its internal control policies are the responsibilities The Company’s board of directors and managers. These policies were implemented throughout The Company. The purpose is to provide reasonable assurance on the achievement of operating effectiveness and efficiency (including profits, performance, and assets safeguarding), reporting matters with reliability, timeliness, and transparency, and compliance with the relevant law and regulations.
Internal control policies are prone to limitations. No matter how robustly designed, effective internal control policies merely provide reasonable assurance to the achievements of the three goals above. Furthermore, environmental and situational changes may affect the effectiveness of internal control policies. However, self-supervision measures were implemented within The Company’s internal control policies to facilitate immediate rectification once procedural flaws have been identified.
The Company has based on the criteria of the internal control system effectiveness in the “Regulations Governing the Establishment of Internal Control System by Public Companies” (referred to as the Regulations” hereinafter) to determine the effectiveness of the internal control system design and implementation. The criteria introduced by “The Governing Principles” consisted of five major elements, each representing a different stage of internal control: 1. Control environment, 2. Risk evaluation and response, 3. Procedural control, 4. Information and communication, 5. Supervision. Each element further contains several items. Please refer to “The Governing Principles” for details.
The Company adopted the aforementioned criteria to evaluate the effectiveness of its policy design and execution.
Based on the results of the determination in the preceding paragraph, the Company is of the opinion that, as of December 31, 2020, the internal control system (including the supervision and management of subsidiaries), including the design and implementation of the internal control system relating to the effectiveness and efficiency of the operations, reliability, timeliness, and transparency of reporting, and compliance with applicable laws and regulations, is effective and can reasonably assure the achievement of the foregoing goals.
This declaration forms part of the main contents of the company’s annual report and prospectus, and shall be disclosed to the public. Any misrepresentation or concealment of the aforementioned disclosures shall be liable to violation of Articles 20, 32, 171 and 174 of the Securities and Exchanges Act and the legal consequences thereof.
This statement of declaration has been unanimously approved by all nine attending board members at the board meeting on Mar. 22, 2021.

RECHI PRECISION CO., LTD.

Chairman: CHEN, SHENG TIEN Signature

President: FENG, MING FA Signature

For the CPAs specifically commissioned to review the internal control system, the Independent Auditor’s Report should be disclosed: None

(XI) Punishment of the Company and its internal personnel by law, punishment of the internal personnel of the Company for violation of the internal control system in the most recent year to the date this report was printed, and the major defects and state of corrective action taken: None.
(XII) Important resolutions of the Shareholders’ Meeting and Board Meeting during the most recent fiscal year and as of the printing date of this annual report.

1. Important resolutions and implementation of 2020 Shareholders’ Meeting

		Date of	Date of
Session				Important resolutions and implementation of the shareholders’ meeting
		meeting

2020 Shareholders’ Meeting		2020/06/16		1. Recognition of the 2019 Business Report and Financial Statements Implementation: Approved as proposed. 2. Recognition of the Company’s 2019 profit distribution. Implementation: Ex-Dividend Date: July 12, 2020. Distribution Date: July 24, 2020. (Cash dividend: NT$ 0.5 per share.) 3. Approval of the proposal for the partial amendment of the Company’s “Shareholder Meeting Conference Rules.” Implementation: Disclosed on the Company’s website after approval. 4. Approval of the proposal for the partial amendment of the “Articles of Incorporation.” Implementation: Approved by the Ministry of Economic Affairs on July 29, 2020 and disclosed on the Company’s website. 5. Approval of the proposal for the partial amendment of the “Procedures for Endorsements/Guarantees.” Implementation: Disclosed on the Company’s website after approval. 6. Election of the 13th Board of Directors (incl. Independent Directors) Elected list SAMPO CORPORATION Representative: CHEN, SHENG TIEN SAMPO CORPORATION Representative: YANG, CHENG MING SAMPO CORPORATION Representative: CHEN, CHIAO MING China Steel Corporation Representative: HUANG, YI HSING Sharp Corporation Representative: NAKASHIMA, MITSUO Chumpower Machinery Corp. Independent director SU, CHING YANG Independent director CHEN, SHENG WANG Independent director LEE, JEN FANG Implementation: Approved by the Ministry of Economic Affairs on July 29, 2020 and disclosed on the Company’s website. 7. Approval of the proposal for canceling the non-compete restriction for new directors and their representatives. * Implementation: Effective upon approval.
2. Details of the important resolutions of Board of directors meeting in 2020/01/01 - 2021 and as of thepublication date of the annual report.
					Issues
					listed in
						Independent
					the
						Directors’ opinions
					Securities
Session	Time		Important resolutions			and the
					Exchange
						Company’s
					Act,
						response thereto.
					Article

					14-3
19thmeeting of the 12th Board of Directors	2020/03/20		1. Approved the 2019 individual financial reports of the Company			Approved by all attending Independent Directors
			2. Approved the 2019 consolidated financial report of the Companyand its subsidiaries.
			3. Approved the Company’s 2019 business report.

		4. Approved the 2019 earnings distribution
19thmeeting of the 12th Board of Directors	2020/03/20	5. Approved the Company’s 2019 remuneration to employees and remuneration to directors.		Approved by all attending Independent Directors
		6. Approved the issuance of the Company’s Statement of Declaration of Internal Control System.
		7. Approved the proposal for director election at the 2020 shareholders’ meeting.	
		8. Approved the candidates for 13th director election (incl. Independent Directors) nominated by the Company’s board of directors.	
		9. Approved the proposal for canceling the non-compete restriction for new directors and their representatives.	
		10. Approved the established of the Company’s “Chief Corporate Governance Officer”
		11. Approved the personnel adjustment to the senior-level managerial employees	
		12. Approved the proposal for canceling the non-compete restriction for the managerial officers.
		13. Approved the replacement of CPAs due to the need for internal job rotation of Deloitte Touche Tohmatsu Limited
		14. Approved the independence evaluation of the 2020 CPAs.
		15. Approved the partial amendment to the Company’s “Rules of Procedure for Board of Directors Meetings.”
		16. Approved the partial amendment to the Company’s “Rules of Procedures GoverningShareholders’ Meeting.”
		17. Approved the partial amendment to the Company’s “Charter of Audit Committee.”
		18. Approved the partial amendment to the Company’s “Charter of Remuneration Committee.”
		19. Approved the formulation of the Company’s “Risk Management Policyand Procedures.”	
		20. Approved the partial amendment to the Company’s “Code of Corporate Governance Practice”
		21. Approved the partial amendment to the Company’s “Corporate Social ResponsibilityBest-Practice Principles.”
		22. Approved the partial amendment to the Company’s “Procedures for Ethical Management and Guidelines for Conduct.”
		23. Approved the partial amendment to the Company’s “Procedures for Endorsements/Guarantees.”	
		24. Approve the convening of the 2020 Regular Shareholders’ meeting
		25. Approved the credit lines provided by the Company’s financial institutions and the credit lines of the subsidiaries endorsed and guaranteed bythe Company.	
20thmeeting of the 12th Board of Directors	2020/04/13	1. Approved the proposal of transferring shares to employees through repurchase		Approved by all attending Independent Directors
21stmeeting of the 12th Board of Directors	2020/05/04	1. Approved the 2020 Q1 consolidated financial report of the Companyand its subsidiaries.		Approved by all attending Independent Directors
		2. Partially amended the “Procedure for Transferring of Buyback Shares to Employees” as required bythe competent authority.
		3. Approved the credit lines provided by the Company’s financial institutions and the credit lines of the subsidiaries endorsed and guaranteed bythe Company.	
1stmeeting of the 13th Board of Directors	2020/06/16	1. Approved the election of the 13th chairman and vice chairman of the Board.		Approved by all attending Independent Directors
		2. Approved the appointment of the Company’s managerial officers.
		3. Approved the appointment of the Company’s 2ndaudit committee members.
		4. Approved the appointment of the Company’s 4th salary

		remuneration committee member.
		5. Approved the Company’s 2020 ex-dividend date.
2ndmeeting of the 13th Board of Directors	2020/06/16	1. Approved the remuneration to the Company’s Chairman.		Approved by all attending Independent Directors
		2. Approved the remuneration to the Company’s Vice Chairman.	
		3. Approved the remuneration to the Company’s President.
		4. Approved the loan to Rechi Precision (Jiujiang) Electric MachineryLimited	
3rdmeeting of the 13th Board of Directors	2020/08/04	1. Approved the 2020 Q2 consolidated financial report of the Companyand its subsidiaries.		Approved by all attending Independent Directors
		2. Approved the Company’s 2020 businessplan.
		3. Approved the loan to Rechi Precision (Qingdao) Electric MachineryLimited	
		4. Approved the loan to Dyna Rechi JiujiangCo.,Ltd.	
		5. Approved the change of the Company’s safe keeper for important seals.
		6. Approved the partial amendment to the subsidiary Company’s “Regulations Governingthe Supervisingof Subsidiaries”	
		7. Approved the “Procedures for RepurchasingShares.”
		8. Approved the credit lines provided by the Company’s financial institutions and the credit lines of the subsidiaries endorsed and guaranteed bythe Company.	
4thmeeting of the 13th Board of Directors	2020/11/03	1. Approved the 2020 Q3 consolidated financial report of the Companyand its subsidiaries.		Approved by all attending Independent Directors
		2. Approved the Company’s 2021 auditplan.
		3. Approved the credit lines provided by the Company’s financial institutions and the credit lines of the subsidiaries endorsed and guaranteed bythe Company.	
5thmeeting of the 13th Board of Directors	2020/12/29	1. Approved the Company’s 2021 business plan.		Approved by all attending Independent Directors
6thmeeting of the 13th Board of Directors	2021/03/22	1. Approved the 2020 individual financial reports of the Company		Approved by all attending Independent Directors
		2. Approved the 2020 consolidated financial report of the Companyand its subsidiaries.
		3. Approved the Company’s 2020 business report.
		4. Approved the 2020 earnings distribution
		5. Approved the Company’s 2020 remuneration to employees and remuneration to directors.
		6. Approved the issuance of the Company’s Statement of Declaration of Internal Control System.
		7. Approved the replacement of CPAs due to the internal job rotation of Deloitte Touche Tohmatsu Limited
		8. Approved the independence evaluation of the 2020 CPAs.
		9. Approved the proposal for canceling the non-compete restriction for new directors and their representatives.
		10. Approved the proposal for canceling the non-compete restriction for current independent directors.
		11. Approved the proposal for canceling the non-compete restriction for the managerial officers.
		12. Approved the personnel adjustment to the senior-level managerial employees
		13. Approved the partial amendment to the Company’s “Policy for Remuneration to Managerial Officers.”
		14. Approved the partial amendment to the Company’s “Rules of Procedures GoverningShareholders’ Meeting.”
		15. Approved the partial amendment to the Company’s “Rules of Procedure for Board of Directors Meetings.”
		16. Approved the credit lines provided by the Company’s financial institutions.	
		17. Approve the convening of the 2021 Regular Shareholders’ Meeting

7thmeeting of the 13th Board of Directors	2021/05/05	1. Approved the 2021 Q1 consolidated financial report of the Companyand its subsidiaries.		Approved by all attending Independent Directors
		2. Approved the credit lines of the subsidiaries endorsed andguaranteed bythe Company.

(XIII) Adverse opinions from the Directors or the Supervisors against major resolutions of the Board on record or in written declaration in the most recent year to the date this report was printed. The key content: None.

(XIV) In the most recent fiscal year and as of the publication of the annual report, the summary of the resignation or dismissal of the Chairman, President, Chief Accounting Officer, Chief Financial Officer, Chief Internal Auditor, Chief Corporate Governance and Chief R&D Officer.

Summary of the Resignation or Dismissal of the Company-Related Personnel

				April 20,2021
Title	Name	Date of (elected to) office	Date of dismissal	Reason for resignation or dismissal
Chief financial officer	KO, CHIH CHENG	2009/01/07	2020/03/19	Reassigned due to duty needs
Chief R&D Officer	HSU, HSI KUN	2017/01/01	2020/03/19	Reassigned due to duty needs

Note: The persons related to as referred to in this context are the Chairman, President, Chief Accounting Officer, Chief Financial Officer, Chief Internal Auditor, Chief Corporate Governance and Chief R&D Officer.

V. Disclosure of the accountant’s fee:

(I) Scale of accountant’s fee

Name of CPA firm	Name of CPA	Name of CPA	Inspection period	Remarks
Deloitte & Touche	TSAI, CHEN TSAI	CHANG, CHING FU	2020/01/01–2020/12/31

Unit: NT$ thousand

Item of audit fees Amount scale	Item of audit fees Amount scale	Auditing fee	Non-auditing fee	Total
1	Less than NT$2,000 thousand		√
2	NT$2,000 thousand (inclusive) – NT$4,000 thousand
3	NT$4,000 thousand (inclusive) – NT$4,000 thousand
4	NT$6,000 thousand (inclusive) – NT$8,000 thousand	√		√
5	NT$8,000 thousand – NT$10,000 thousand
6	More than NT$10,000 thousand (inclusive)

(II) When professional fees paid to a certified public accountant or the accounting firm of a certified public accountant or its affiliate enterprises for non-auditing services account for a proportion equal to one-quarter or more of the fees paid for auditing, the amount of fees paid for both auditing and non-auditing service as well as the nature of the non-auditing services performed shall be disclosed:

The Company’s 2020 non-auditing fee accounts for 0.42% of the auditing fee, less than a quarter. Matters related to the non-audit services and content of audit fees.

Unit: NT$ thousand

Name of CPA firm	Name of CPA	Auditing fee		Non-auditing fee	Non-auditing fee	Non-auditing fee		CPA inspection period	Remarks
			System design	Industrial and commercial registration	Human resource	Others	Subtotal
Deloitte & Touche	TSAI, CHEN TSAI CHANG, CHING FU	7,200		30			30	2020/01/01 to 2020/12/31

(III) When the Company changes its accounting firm and the amount of fees paid for auditing services during the year in which the change is made are lower than for the previous year, the amount by which the fees decreased, the proportional decrease, and the reasons therefor shall be disclosed: None.

(IV) In the event that the audit fees paid for the current fiscal year are lower than those for the previous fiscal year by 15% or more, the reduction in the amount of audit fees, reduction percentage, and reason(s) thereof shall be disclosed: The audit fee in 2020 has increase by 3.75% from 2019.

VI. Change of CPA

(I) On the predecessor CPAs 2020

hange of CPA On the predecessor CPAs 2020
Date of replacement	Mar. 20, 2020
Reason for replacement and note	Due to internal job rotation of Deloitte & Touche, the original CPAs of TSAI, CHEN TSAI and CHENG, CHIN TSUNG were replaced by TSAI, CHEN TSAI and CHANG,CHING FU,starting2020Q1.
The commissioner or CPA terminates or declines the commission	Counterparty Status		CPAs		Commissioner
	Decided to terminate the appointment		N/A
	Decided to not to (continue the) appointment
Opinions and reasons of audit reports issued during the most recent two years, excluding those issued with unqualified opinion.		N/A
Disagreement with the issuer (Yes/No)	Yes			Accounting principles or practices
				Disclosure of financial statements
				Audit scope or procedure
				Others
	None	N/A
	Explanation
Other disclosures (Matters covered in Item 1-4, Subparagraph 5, Article 10 of the Regulations should be disclosed)		N/A

2019: N/A

(II) On the successor CPAs: N/A
(III) Reply letter from the predecessor CPAs regarding Item 1 and 2-3, Subparagraph 5, Article 10 of the Regulations: N/A
VII. The Chairman, president, or manager responsible for finance or accounting holding a position at a firm belonging to a certifying CPA firm or any affiliated enterprise within the preceding year: None.

VIII.The transfer of shares and changes in pledges of the Directors, Managers and shareholders holding more than 10% of the shares in the most recent year and as of the printing date of this annual report.

(I) Changes in shareholding of Directors, Managers and major shareholders

Title	Name	2020	2020	As of Apr. 30 of currentyear	As of Apr. 30 of currentyear	Note
		Increase (decrease) in no. of shares held	Increase (decrease) in no. of pledged shares	Increase (decrease) in no. of shares held	Increase (decrease) in no. of pledged shares
Institutional Director	SAMPO CORPORATION	37,000	0	0	0	Major shareholder
Chairman & Corporate Director representative	CHEN, SHENG TIEN	0	0	0	0
Vice Chairman & Corporate Director representative	YANG, CHENG MING	0	0	0	0
Corporate Director representative	CHEN, CHIAO MING	0	0	0	0
Institutional Director	Sharp Corporation	0	0	0	0
Corporate Director representative	NAKASHIMA, MITSUO	0	0	0	0
Institutional Director	China Steel Corporation	0	0	0	0
Corporate Director representative	CHENG, CHI CHAO	0	0	0	0
Institutional Director	Chumpower MachineryCorp.	0	0	0	0
Corporate Director representative	CHEN, SHENG CHUAN	(112,550)	0	0	0
Independent director	SU, CHING YANG	0	0	0	0
Independent director	CHEN, SHENG WANG	0	0	0	0
Independent director	LEE, JEN FANG	0	0	0	0
President	FENG, MING FA	0	0	0	0
Vice President	WU, YI WEN	0	0	0	0
Vice President & Corporate Governance Officer	KO, CHIH CHENG	0	0	0	0
Vice President	NIU, YONG GUANG	0	0	0	0
Assistant VP	LIAO, HSUEH YEN	0	0	0	0
Assistant VP	LIU, SHIH CHIEH	0	0	0	0
Assistant VP	CHIEN, CHENG CHUNG	0	0	0	0
Assistant VP	CHEN, SHUN FANG	0	0	0	0
Assistant VP	LO, PEI CHOU	0	0	0	0

Chief financial officer, Chief AccountingOfficer	WU, CHIN MEI	0	0	0	0

(II) Information on transfer of shares: N/A

(III) Information on pledged shares: N/A

IX. The top ten shareholders who are spouses or relatives within the second degree of kinship of one another:

							Date: Apr. 30,2021	Date: Apr. 30,2021	Date: Apr. 30,2021
Name	Shareholding		Shareholding by spouse or dependents		Shareholding by nominee arrangement		The name and relationship of the top ten shareholders who are spouses or relatives within the second degree of kinship		Note
	Shares	Sharehold ingratio	Shares	Sharehold ingratio	Shares	Sharehol dingratio	Compan yname	Relation
SAMPO CORPORATION	135,610,160	26.86%	-	-	-	-	None	None
SAMPO CORPORATION Representative: CHEN, SHENG TIEN	0	0%	733	0%	-	-	None	None
SAMPO CORPORATION Representative: YANG, CHENG MING	0	0%	0	0%	-	-	None	None
SAMPO CORPORATION Representative: CHEN, CHIAO MING	1,154,743	0.23%	0	0%	-	-	None	None
Fubon Life Insurance Co., Ltd. Representative: Tsai, Ming-Hsing	27,546,703	5.46%	-	-	-	-	None	None
China Steel Corporation	23,002,022	4.56%	-	-	-	-	None	None
China Steel Corporation Representative: Cheng, Chi-Chao	0	0%	0	0%	-	-	None	None
Mega Bank in custodian for Sharp Corporation Investment Account	22,771,289	4.51%	-	-	-	-	None	None
Mega Bank in custodian for Sharp Corporation Investment Account Representative: NAKASHIMA,MITSUO	0	0%	0	0%	-	-	None	None
Taiwan Life Insurance Co., Ltd. Representative: Huang, Ssu-Kuo	16,052,762	3.18%	-	-	-	-	None	None
LIU, MAO SUNG	9,103,754	1.80%	4,227,700	0.84%	-	-	None	None
National Electronic Appliance Co., Ltd. Representative: Hung, Min-Hung	8,005,731	1.59%	-	-	-	-	None	None
DIVINE PILL INDUSTRIAL CO., LTD. Representative: Wu, Ching-Yao	7,048,289	1.40%					None	None
Investment Account of the Central Bank of Norway under custody of Citibank (Taiwan)	6,205,714	1.23%	-	-	-	-	None	None
Jianhong International Investment Co., Ltd. Representative: Hung, Min-Hung	5,662,353	1.12%	-	-	-	-	None	None

X. The number of shares held in as investee by an entity controlled directly or indirectly by the Company, the Company’s Director, managers. The aggregate shareholding ratio shall be provided: (Unit: thousand shares)

Investee	The Company	The Company	Investment by an entity controlled directly or indirectly by the Company, the Company’s Director, managers	Investment by an entity controlled directly or indirectly by the Company, the Company’s Director, managers	Total investment	Total investment
	Shares	Shareholding ratio	Shares	Shareholding ratio	Shares	Shareholding ratio
Dyna Rechi Co., Ltd.	72,000	42.20%	48,412	28.38%	120,412	70.58%

[IV.Capital Overview]

I. Shares and Dividends

(I) Sources of shares and dividends

Apr. 30, 2021

							Apr. 30,2021	Apr. 30,2021
Year and month	Issuing price	Authorized capital		Paid-upcapital			Remarks
		Shares (in thousand shares)	Amount (thousand)	Shares (in thousand shares)	Amount (thousand)	Sources of share capital (thousand shares)	Paid in properties other than cash	Others
2002/10	10	260,000	2,600,000	189,165	1,891,657	Capitalization from earnings 189,472	─	2002/07/25 pursuant to Zheng-Qi-Hui-Tai-Cai-Zheng (I) Letter No. 0910141754.
2003/07	10	287,000	2,870,000	198,396	1,983,965	Capitalization from earnings 92,308	─	2003/03/08 pursuant to Zheng-Qi-Hui-Tai-Cai-Zheng (I) Letter No. 0920133431.
2004/10	10	300,000	3,000,000	250,646	2,506,461	Capitalization from earnings 125,305	─	2004/07/09 Jin-Guan-Zheng-1-Zi Letter No. 0930130588.
2006/04	10	426,000	4,260,000	307,991	3,079,914	Capitalization from earnings 31,864	─	2006/03/07 Jin-Guan-Zheng-1-Zi Letter No. 0950107188.
2006/08	10	426,000	4,260,000	342,062	3,420,620	Capitalization from earnings 34,070	─	2006/08/28 Jin-Guan-Zheng-1-Zi Letter No. 09501189590.
2006/10	10	426,000	4,260,000	342,087	3,420,872	Capitalization from bonds 25	─	2006/10/16 Jing-Shou-Shang-Zi Letter No. 09501232940.
2006/12	10	426,000	4,260,000	344,350	3,443,502	Capitalization from employee share options 2,263	─	2006/12/28 Jing-Shou-Shang-Zi Letter No. 09501291520.
2007/01	10	426,000	4,260,000	345,274	3,452,745	Capitalization from bonds 924	-	2007/01/15 Jing-Shou-Shang-Zi Letter No. 09601009150.
2007/03	10	426,000	4,260,000	346,221	3,462,215	Capitalization from employee share options 947	─	2007/03/06 Jing-Shou-Shang-Zi Letter No. 09601042860.
2007/07	10	426,000	4,260,000	348,196	3,481,963	Capitalization from bonds 1,974	─	2007/07/13 Jing-Shou-Shang-Zi Letter No. 09601164410.
2007/08	10	426,000	4,260,000	352,690	3,526,905	Capitalization from bonds 2,504 Capitalization from employee share options 1,990	─	2007/08/31 Jing-Shou-Shang-Zi Letter No. 09601215330.
2007/09	10	426,000	4,260,000	364,595	3,645,959	Capitalization of earnings 11,905	─	2007/09/14 Jing-Shou-Shang-Zi Letter No. 09601227630.
2008/09	10	426,000	4,260,000	384,665	3,846,652	Capitalization of earnings 20,069	─	2008/09/01 Jing-Shou-Shang-Zi Letter No. 09701223360.
2008/09	10	426,000	4,260,000	383,038	3,830,382	Retirement of treasury stock 1,627	─	2008/09/17 Jing-Shou-Shang-Zi Letter No. 09701234110.
2010/10	10	426,000	4,260,000	403,475	4,034,752	Capitalization from private placement 20,437	─	2010/10/01 Jing-Shou-Shang-Zi Letter No. 09901218390.
2010/11	10	426,000	4,260,000	393,492	3,934,922	Retirement of treasury stock 9,983	─	2010/11/08 Jing-Shou-Shang-Zi Letter No. 09901248870.
2011/05	10	486,000	4,860,000	416,171	4,161,712	Capitalization from private placement 22,679	─	2011/05/06 Jing-Shou-Shang-Zi Letter No. 10001087290.
2011/09	10	486,000	4,860,000	428,656	4,286,564	Capitalization of earnings 12,485	─	2011/09/01 Jing-Shou-Shang-Zi Letter No. 10001201250.

2012/09	10	486,000	4,860,000	441,516	4,415,161	Capitalization of earnings 12,859	─	2012/09/04 Jing-Shou-Shang-Zi Letter No. 10101181900.
2013/08	10	486,000	4,860,000	454,761	4,547,616	Capitalization from earnings 13,245	─	2013/08/01 Jing-Shou-Shang-Zi Letter No. 10201154700.
2014/08	10	486,000	4,860,000	468,404	4,684,044	Capitalization from earnings 13,643	─	2014/07/30 Jing-Shou-Shang-Zi Letter No. 10301156780.
2016/12	10	600,000	6,000,000	483,882	4,838,821	Capitalization from bonds 15,478	─	2016/12/01 Jing-Shou-Shang-Zi Letter No. 10501274930.
2017/04	10	600,000	6,000,000	486,062	4,860,623	Capitalization from bonds 2,180	─	2017/04/17 Jing-Shou-Shang-Zi Letter No. 10601044760.
2017/05	10	600,000	6,000,000	487,937	4,879,372	Capitalization from bonds 1,875	─	2017/05/26 Jing-Shou-Shang-Zi Letter No. 10601067790.
2017/09	10	600,000	6,000,000	490,157	4,901,578	Capitalization from bonds 2,220	─	2017/12/08 Jing-Shou-Shang-Zi Letter No. 10601166020.
2017/12	10	600,000	6,000,000	492,178	4,921,784	Capitalization from bonds 2,020	─	2018/01/15 Jing-Shou-Shang-Zi Letter No. 10701004880.
2018/04	10	600,000	6,000,000	492,662	4,926,627	Capitalization from bonds 484	─	2018/04/12 Jing-Shou-Shang-Zi Letter No. 10701038570.
2018/06	10	600,000	6,000,000	495,686	4,956,863	Capitalization from bonds 3,023	─	2018/06/13 Jing-Shou-Shang-Zi Letter No. 10701059300.
2018/08	10	600,000	6,000,000	506,013	5,060,131	Capitalization from bonds 10,326	─	2018/08/30 Jing-Shou-Shang-Zi Letter No. 10701112420.
2020/02	10	600,000	6,000,000	504,915	5,049,151	Retirement of treasury stock 1,098	─	2020/02/06 Jing-Shou-Shang-Zi Letter No. 10901009400.

Shares Type		Authorized capital		Remarks
	Outstanding (listed) shares	Unissued Shares	Total
Common shares	504,915,105	95,084,895	600,000,000	Treasury stock 20,000 shares

Information regarding self-registration: N/A

(II) Shareholder structure

(II) Shareholder structure	(II) Shareholder structure	(II) Shareholder structure	(II) Shareholder structure	(II) Shareholder structure	(II) Shareholder structure	(II) Shareholder structure	(II) Shareholder structure
Apr. 19,2021
Shareholder structure Quantity	Government agencies	Financial institutions	Other corporations	Individuals	Foreign institutions and foreign persons	Institutions and persons from China	Total
No. of person(s)	0	5	65	20,953	142	3	21,168
Shareholding	0	45,301,465	190,961,594	201,422,601	66,999,445	230,000	504,915,105
Shareholding ratio	0%	8.97%	37.82%	39.89%	13.27%	0.05%	100.00%

(III) Diversification of Shareholdings

I) Diversification of Shareholdings	I) Diversification of Shareholdings
NT$10/share			Apr. 19,2021 Ratio of Shareholding (%) 0.19% 4.63% 3.98% 2.30% 2.26% 3.04% 3.44% 5.43% 4.64% 3.35% 2.01% 1.44% 0.93% 6.05% 11.75% 44.56% 100.00%
Range of Shareholding	No. of Shareholders	Shares	Ratio of Shareholding (%)
1 to 999	5,076	935,786	0.19%
1,000 to 5,000	10,309	23,400,455	4.63%
5,001 to 10,000	2,520	20,102,998	3.98%
10,001 to 15,000	927	11,635,424	2.30%
15,001 to 20,000	615	11,396,793	2.26%
20,001 to 30,000	597	15,325,781	3.04%
30,001 to 50,000	440	17,374,383	3.44%
50,001 to 100,000	387	27,415,181	5.43%
100,001 to 200,000	167	23,443,054	4.64%
200,001 to 400,000	61	16,926,818	3.35%
400,001 to 600,000	20	10,132,675	2.01%
600,001 to 800,000	10	7,273,162	1.44%
800,001 to 1,000,000	5	4,707,176	0.93%
1,000,001 to 3,000,000	18	30,531,741	6.05%
3,000,001 to 10,000,000	11	59,330,742	11.75%
Over 10,000,001	5	224,982,936	44.56%
Total	21,168	504,915,105	100.00%

(IV) Names of principle shareholder

V) Names of principle shareholder
		Apr. 19,2021
Shares Names ofprinciple shareholder SAMPO CORPORATION Fubon Life Insurance Co.,Ltd. China Steel Corporation Mega Bank in custodian for Sharp Corporation Investment Account Taiwan Life Insurance Co.,Ltd. Porite Taiwan Co.,Ltd. LIU,MAO SUNG National Electronic Appliance Co.,Ltd. Citibank (Taiwan) in the custody for Special Account for Investment of the Central Bank of Norway JianhongInternational Investment Co.,Ltd.	No. of Shares held	Shareholding ratio
	135,610,160	26.86%
	27,546,703	5.46%
	23,002,022	4.56%
	22,771,289	4.51%
	16,052,762	3.18%
	9,103,754	1.80%
	8,005,731	1.59%
	7,048,289	1.40%
	6,205,714	1.23%
	5,662,353	1.12%

(V) Information on market price, net value, earnings and dividends per share in the most recent 2 years

	recent 2years	recent 2years	recent 2years
Items	Year			2019	2020	As ofMar. 31, 2021
Market price per share (Note 1)	Highest			27.75	23.10	22.95
	Lowest			22.60	13.65	19.50
	Average			24.69	19.20	21.05
Net value per (Note 2)	Before dividend distribution			15.66	17.50	17.80
	After dividend distribution
				15.16	16.80	17.10

Earnings per share	Weighted average no. of shares			504,915,105	504,901,225	504,895,105
	Earnings per share (Note 3)		Before adjustment	1.3	1.41	0.27
			After adjustment	-	-	-
Dividends per share	Cash dividends			0.5	0.7 (Pending approval of the shareholders’ meeting)	-
	Stock dividends	Stock dividend from retained earnings		-	-	-
		Stock dividend from capital reserves		-	-	-
	Accumulated undistributed dividends(Note 4)			-	-	-
Analysis of ROI	Price/Earnings ratio(Note 5)			18.99	13.62	-
	Price/Dividend ratio(Note 6)			49.38	27.43	-
	Cash dividendyield(Note 7)			0.02	0.04	-

Where stock dividends were paid from earnings or capital reserves, the information on the market price and cash dividends adjusted retroactively according to the number of shares issued shall also be disclosed.
Note 1: The highest and lowest market prices of common stock each year are shown and the annual average market price is calculated according to the strike price and the trading volume in each year.
Note 2: Calculated based on the number of outstanding shares at year-end; amount of distribution resolved in next year’s shareholders’ meeting is presented in the table.
Note 3: If retroactive adjustments are required because of free share distribution, earnings per share before and after adjustments shall be shown.
Note 4 If equity securities are issued with terms that allow dividends to be accrued and accumulated until the year the Company makes profit, the amount of cumulative undistributed dividends up till the current year is disclosed separately.
Note 5: Price/Earnings ratio = Average closing price per share for the year/earnings per share.
Note 6: Price/Dividend ratio = Average closing price per share for the year/cash dividends per share.
Note 7: Cash dividend yield = cash dividends per share/average closing price per share for the year
Note 8: Net worth per share and earnings per share should be based on audited (auditor-reviewed) data as at the latest quarter before the publishing date of this annual report. For all other fields, data should be provided as at the end of their respective years.

(VI) The company’s dividend policies and execution

Dividend policies
- (1) Conditions and occasions of dividends distribution: If the Company has profit after final accounting, the Company shall use the earning to pay for taxes, set off accumulated deficits, and appropriate 10% of the legal reserve, and appropriate to or reverse from special reserve pursuant to relevant laws and regulations. 25% to 99% of the remaining earnings, if any, shall be appropriated as shareholders’ bonuses.
- (2) Appropriation to special reserve: The Appropriation shall be handled in accordance with the Company Act, and Paragraph 1 Article 41 of the Securities and Exchange Act. An amount (equal to the recognized deduction to the shareholders’ equity) is appropriated to the special reserve from the after tax in current year and undistributed earnings from previous year. In cases of subsequent reversal of shareholders’ equity, the reserved amount may be distributed.
- (3) Type and amount of dividends distributed: The Board of Directors shall prepare and submit a proposal for the distribution of dividends to the shareholders’ meeting in accordance with the law in a yearly basis. 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.
The earnings distribution proposed at the 2021 shareholders’ meeting: Cash dividends: NT$ 353,426,574.
(VII) Influence on the company business performance, and EPS by the proposal of stock grant in this shareholders’ meeting: N/A

(VIII) Remuneration of employees, directors and supervisors

The percentage or scope of remuneration to the employees, Directors, and Supervisors as stated in the Articles of Incorporation:
The Company’s Articles of Incorporation stipulate that, after annual earnings first offset any deficit, no more than 3% shall be allocated as remuneration of directors, and no less than 1% and no more than 8% shall be allocated to remuneration to employees. The remuneration to employees and directors shall be submitted to the shareholders’ meeting for review.
However, profits must first be taken to offset against cumulative losses if any, then used for appropriation of remuneration to employees and directors based on the preceding percentage.
Remuneration to employees can be paid in the form of cash or shares to employees of affiliated companies that satisfy certain criteria. The criteria shall be determined by the Board of Directors or other authorized personnel.
The estimation basis of remuneration to employees, directors and supervisors for the current period, and the accounting process when there is discrepancy between the calculation basis and actual distribution amount of employee remuneration distributed by shares and the estimated value:
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. The remuneration to employees for the year 2020 is estimated to be NT$ 49,441 thousand based on the preceding percentage of no less than 1% and no more than 8%. The remuneration to directors for the year 2020 is estimated to be NT$ 14,262 thousand based on the preceding percentage of no more than 3%.
Remuneration proposals approved by the board of directors:
(1) The amount of remuneration distributed in cash or stocks to employees and directors: The Company’s Board meeting resolved on Mar. 23, 2021 to distribute NT$ 49,441 thousand of remuneration to employees and NT$ 14,261 thousand of remuneration of Directors in the form of cash.
(2) The amount of remuneration to employees paid in the form of stock as a percentage to the sum of the net income as stated in the individual financial statements, and the total remunerations to employees: N/A.
Actual distribution of remuneration to employees and directors in the previous year

			Unit: NT$thousand	Unit: NT$thousand
Items	Distributed to	Amount recognized in 2019	Actual distribution amount	Difference
Remuneration to employees	Employees of the Company	45,368	45,368	0
Remuneration of Directors	Directors of the Company	13,087	13,087	0

(IX) Share repurchases of the Company

Share repurchases (Completed)

Share repurchases (Completed)
	April 20,2021
No. of repurchase	8threpurchase
Purpose	Transfer to employees
Period for the repurchase	2020/04/14 – 2020/06/13
Price range of the shares to be repurchased	NT$ 11.35 – NT$ 25.50
Type and no. of shares repurchased	Common shares/20 thousand shares
Monetary amount of shares repurchased	NT$ 306,000
No. of repurchased shares as a percentage ofproposed share repurchase(%)	0.4%
No. of shares retired or transferred	0
Accumulated no. of shares held	20 thousand shares
Accumulated no. of shares held as a percentage to the total issued share(%)	0.0040%

II. Corporate bond: None.

III. Preferred shares: None.

IV. Global depository shares: None.
V. The status of employee share option: None.
VI. New restricted employee shares: None

VII. M&A (include merger and acquisition, consolidation, and division): None.

VIII. Implementation of the funds allocation plan: None.

[V. Operating Highlights]

I. Business Activities

(I) Business scope

1. The principal businesses of the Company

CB01990	Other MachineryManufacturing
CC01010	Manufacture of Power Generation, Transmission and Distribution Machinery.
CC01030	Electrical Appliances and Audiovisual Electronic Products Manufacturing.
F601020	ElectricApplianceInstallation.
E603050	Automatic Control Equipment Engineering.
E801070	Kitchenware and SanitaryFixtures Installation Engineering
F113020	Wholesale of Electrical Appliances.
IG03010	EnergyTechnicalServices.
ZZ99999	All business items that are not prohibited or restricted by law, except those that are subject to special approval.

2. Proportion of business

	Unit: NT$thousand	Unit: NT$thousand	Unit: NT$thousand	Unit: NT$thousand	Unit: NT$thousand
Year Product	2019			2020
	Sales volume		Proportion to total business amount	Sales volume	Proportion to total business amount
Compressor	19,481,965		96.77%	18,338,985	94.90%
Others	650,979		3.23%	980,977	5.10%
Total	20,132,944		100.00%	19,319,962	100.00%
3. The Company’s current commodity (service)items
Mainproducts		Scope of application
Rotary compressor and pumps		Applicable on domestic and overseas 330 kcal/hr – 8860 kcal/hr window A/C, split type A/C, unitary A/C, dehumidifiers, and heat pump applications including heat pump dryer, and water heater.
Home and commercial heat pump water heater equipment		Applicable on domestic and overseas water heaters for both single-split and multi-split type, providing 200 to 150,000 L of hot water a day.

3. The Company’s current commodity (service) items

4. New products (services) planned to be developed

Products

Planned R&D

Rotary compressor

Development of new class-A energy efficient inverter compressor for
Europe heat pump water heater
Development of N. America light commercial three-phase fixed speed
compressor
Development of new motor for 35FR/44FR fixed speed compressor to
improve product in N. America market
Development of refrigerator-use 39FR fixed speed compressor
Development of inverter compressor for truckparkingair-conditioner

Home and commercial
heat pump water
heater equipment

Development or introduction of high-efficiency or multi-functional home
or commercial heat pump water heater

(II) Industry Overview:

1. Current industry situation and development:

Due to the continued impact of the COVID-19 pandemic since 2020, the resumption of work at home appliance companies in Europe and the U.S. is not as good as in China. The air conditioning industry is thus becoming more concentrated in China. In the fiscal year of 2020, the export of air conditioners from enterprises in China increased by 4.65% year on year. The Chinese companies’ domestic sales for home air-conditioners fell 12.89% year-on-year. At the beginning of the outbreak, the Company set up a global outbreak response team to formulated relevant plans and actively respond to the situation. Therefore, despite the pandemic, the Company’s sales volume grew in 2020, outperforming the industry. The following table shows the production and sales volume of the rotary compressor industry in China (unit: million units)

Year	2019	2020	year-on-year increase
Production	21,375	21,045	-1.55%
Sales	21,518	21,155	-1.69%
In Stock	808	713	-11.73%

From 2011 Q1, the air conditioner industry had entered its peak sales season and market demand recovered to that of 2019. However, with the rise in the price of raw materials, the cost pressure on the upstream and downstream companies has increased significantly. The China’s domestic demand increased due to the recovery of market. Due to global warming, experts predict that the global temperature will be higher compared to the same period in previous years. Thus, most air conditioner companies are optimistic about the growth of the domestic market. Although the export market is still expanding, uncertainties increase of export orders for air conditioning companies, due to increase in the price of raw materials and appreciation of RMB.

Association between upstream, midstream, and downstream industry participants:

Upstream Midstream Downstream Copper pipe supplier Rotary compressor Air-conditioner manufacturer manufacturer Silicon steel sheet Reciprocating compressor Dehumidifier supplier manufacturer manufacturer heat pump dryer Magnet supplier manufacturer Heat pump Sheet metal supplier dishwasher manufacturer Refrigeration oil Heat pump water heater manufacturer

Refrigeration oil suppliers

Development trend and competition of products:
(1) Development trend of products: Rotary compressors have mature application in home air-conditioners, commercial air-conditioners, dehumidifiers, heat pump dryers, heat pump water heaters, and heat pump heaters. The Company is also developing new applications in truck parking air-conditioners, Unitary air-conditioners, heat pump dryers, pool heat pumps, water chillers, and refrigerated trucks.
(2) Competition of products:
- In face of rapid price increase in raw materials, companies in the industry focus on design and enhance their competitiveness through miniaturization and cost optimization.

Through our differentiation advantage in miniaturized design, the Company has been

able to maintain its leading position in the industry and is competitive in China domestic sales of inverter applications.

(III) Technology and R&D

Research and development expenses:

echnology and R&D . Research and development expenses:	echnology and R&D . Research and development expenses:	echnology and R&D . Research and development expenses:
Unit: NT$thousand
Year Items	2019	2020
Research and development expenses	482,026	435,395
Net operating value	20,132,944	19,319,962
Percentage	2%	2%

2. Major R&D results in the most recent year

(1) Development of 2023 new energy-efficient compressor for N. America unitary air-conditioners (R410A series)
(2) Development of 1.5HP small 35RF inverter compressor for China home air-conditioners
(3) Development of 3.0HP small 40RF inverter compressor for China home air-conditioners
(4) Development of high efficiency inverter compressor (1.0, 1.5HP) with new energy-saving method for Japan home air-conditioners
(5) Development of 44FR horizontal compressor for rooftop air-conditioners
(6) Development of 15K small 44FR compressor for Europe R290 portable air-conditioners
(7) Development of multi-functional smart miniature air-conditionings

(IV) Short and long-term business development plan:

Long-term business development plan:
(1) Strengthening our core technologies, utilizing our product differentiation, expanding medium and large scale and ground-breaking applications, and accelerating penetration into high value-added product markets.
(2) Cultivating strategic customers, jointly formulating medium- and long-term plans, expanding the global market in phases, and stabilizing a certain operating ratio of strategic customers.
Short-term business development plan:
(1) Adjusting product distribution and continuously expanding the application of compressors in different fields.
- Developing new miniaturized and low-cost products in response to the rising prices of raw materials
- Fostering and enhancing product applications in energy-saving markets such as heat pump dryers, heat pump dishwashers and heat pump water heater, and expanding the use of commercial air-conditioners.
(2) Actively expanding the China domestic market
- Promoting the product strategy in the domestic market, through our product competitive advantages Establishing close relationship with strategic customers to increase the ratio of our products on the customer side.

II. Analysis of the market as well as production and marketing situation
(I) Market analysis:
1. The regions for the sale of main products

Unit: NT$ thousand

Year Regions	2020	2020
	Amount	Percentage
China	11,501,257	59.53%
Thailand	1,417,868	7.34%
USA	1,786,742	9.25%
Poland	1,954,957	10.12%
Brazil	439,130	2.27%
Egypt	503,545	2.61%
Others	1,716,463	8.88%
Total	19,319,962	100.00%

2. Market share percentage

In 2020, the global market share of our compressors was about 10%, N. America market was 18%, S.E. Asia Market was 25%, S. America market was 19%, Europe market was 33%, China market was 8%. Our products are selling to the major countries in the world, with over 200 customers.

Competitive niche, positive and negative factors for the prospects of our development, and our corresponding strategies:
- (1) Competitive niche and, positive factors for the prospects of our development:
  - Our sales products have reached the major countries of air-conditioner manufacturers, raking No. 4 in the global industry and gradually closing the gap with No. 3.
  - We have a wide range of customers in major air-conditioner manufacturers all over the world.
  - Our production and sales are located in the major air-conditioner manufacturing regions in China, and we also have offices in India, Thailand, the United States and Japan.
  - Our product technology and quality are at the top of the industry and are fully trusted by customers
- (2) Negative factors and our corresponding strategies:
  - Rising raw material prices, which reduces profit
  - Shorter ordering cycle, faster internal production delivery cycles required.
- (3) Corresponding strategies:
  - The pressure of rising costs is transferred through downstream manufacturers, to maintain profit margins
  - We enhance our communication with our customers to obtain timely order delivery information, and at the same time do advance planning to enhance our internal production mechanism and meet customer needs.
(II) Usage and manufacturing processes of the Company’s main products:

1. Usage of the Company’s main products

Refrigerant compressor: Key component for home window air-conditioner, split style air-conditioner, heat pump dryer, and heat pump water heater.
Pump: Key component for refrigerant compressor, for assembly of refrigerant compressor.

2. Production process:

==> picture [438 x 184] intentionally omitted <==

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

Precise abrasive Constant temperature
Roughing of 3
machining of 5 pump Cleaning room
pump parts
parts hierarchical storage
Pump Compressor Water leakage
Cleaning
assembly assembly detection
Electrodepositi Engine oil
Testing Packaging
on Coating filling
Stock in
----- End of picture text -----

(III) Supply of main raw materials:

Our main raw materials are supplied from stable sources, and we have good relations with various suppliers. Details of suppliers are as follows:

Main raw materials	Suppliers
Silicon steel sheet	ChinaSteel, CHINA BAOWU STEEL GROUP CORPORATION LIMITED,and Shougang
Enameled wire	Jingda Rea, DONGGUAN YULONG ELECTRIC MATERIAL CO.,LTD, and ZHUHAI GREE ELECTRIC ENTERPRISES LTD.
Roller	Shanghai Zhaofeng Weikang Trading Co.,Ltd, HUIZHOU DIANZHAN HARDWARE CO.,LTD, and Shanxi HuaxiangGroupCo.,Ltd
Powder metallurgy top & bottom flange	NBTM NEW MATERIALS GROUP Co., LTD, Zhejiang Baida Precision Manufacturing Corp., and Weida
Vane	Zhejiang Baida Precision Manufacturing Corp., China Chenglong Group Co., Ltd., AVIC Guizhou south west Tool(Group)Co.,LTD.,and Yongwei
Accumulator	GuangZhou Dajin Electric Appliances CO., LTD., Dadian Hardware Product(Jiujiang) Co., Ltd., Jiepin,and Rizhao Huifeng
Motor overload protector	Foshan Tongbao Huaxing Control Co.,Ltd., NINGBO UBUKATA ELECTRIC CO.,LTD, Sensata, and JIANGSU CHANGRONG ELECTRIC CO.,LTD.
Terminal	CHAOZHOU SANHUAN(GROUP) CO.,Ltd, Rizhao Huifeng,Fusite,and Airuide
Casting (Cylinder, Shaft, Top & Bottom flange)	Shanxi Huaxiang Group Co.,Ltd, HUIZHOU DIANZHAN HARDWARE CO.,LTD,Deshang
Magnet (inverter)	Jinlong (China Xiamen Tunsten Group), Shougang, and JL MAG RARE-EARTH CO.,LTD.
Engine oil	JXTG, Zhejiang Baida Precision Manufacturing Corp.,and IDEMITSU LUBE CO.,LTD.

(IV) A list of any suppliers and clients accounting for 10 percent or more of the company’s total procurement (sales) amount in either of the 2 most recent fiscal years, the amounts bought from (sold to) each, the percentage of total procurement (sales) accounted for by each:
Information of main suppliers in the most recent 2 years

Year		2019	2019	2019		2020	2020	2020	As of thepreviousquarter of 2021	As of thepreviousquarter of 2021	As of thepreviousquarter of 2021	As of thepreviousquarter of 2021
Item s	Company name	Amount	Percentag e in the net annual percentag e of purchase (%)	Relatio n with the issuer	Company name	Amount	Percentag e in the net annual percentag e of purchase (%)	Relatio n with the issuer	Company name	Relation with the issuer	Percentag e in the net percentag e of purchase as of the previous quarter of the year (%)	Relatio nwith the issuer
1	Supplier A	1,575,247	10.86	None	NA (Note 1)	-	-	-	Supplier A	509,703	11.13	None
	Others	12,932,55 9	89.14		Others	14,103,64 2	100.00		Others	4,068,11 9	88.87
	Net procuremen t	14,507,80 6	100.00		Net procuremen t	14,103,64 2	100.00		Net procuremen t	4,577,82 2	100.00

Note 1: The procurement amount does not reach 10% of the total procurement of the consolidated company.

Reasons of changes: Business demand

2. Information of main customers in the most recent 2 years:

Unit: NT$ thousand

										Unit: NT$thousand	Unit: NT$thousand	Unit: NT$thousand
Year		2019			2020				As of t	hepreviousquarter of 2021
Items	Company name	Amount	Percentage in the net annual percentage of sales (%)	Relation with the issuer	Company name	Amount	Percentage in the net annual percentage of sales (%)	Relation with the issuer	Company name	Amount	Percentage in the net percentage of sale as of the previous quarter of the year (%)	Relation withthe issuer
1	NA (Note 2)	-	-	-	Customer A	2,035,285	10.53	-	NA (Note 2)	-	-	-
	Others	20,132,944	100.00		Others	17,284,677	89.47		Others	5,830,124	100.00
	Net sales revenue	20,132,944	100.00		Net sales revenue	19,319,962	100.00		Net sales revenue	5,830,124	100.00

Note 2: The revenue amount does not reach 10% of the total revenue of the consolidated company. Reasons of changes: Business demand

(V) Production volume and value in the latest two years:

Unit: thousand units; NT$ thousand

Year Production volume & value Main products (or by department)	2019	2019	2019	2020	2020	2020
	Production capacity	Production volume	Production value	Production capacity	Production volume	Production value
Compressor	21,000	18,075	16,664,786	21,000	19,424	16,925,204
Others	-	-	631,618	-	-	869,704
Total	21,000	18,075	17,296,404	21,000	19,424	17,794,908

Note 1: Production capacity refers to the output that a company can produce under normal operating conditions, using its existing production facilities, taking into account the necessary downtime, holidays and other factors.

Note 2: If the production of any products is substitutable, the production capacities should be consolidated, with special notes provided.

(VI) Sales volume and value in the latest two years:

Unit: thousand units; NT$ thousand

					Unit: thousand units;NT$thousand	Unit: thousand units;NT$thousand	Unit: thousand units;NT$thousand	Unit: thousand units;NT$thousand
Year Sales volume and value Main products (or bydepartment)	2019				2020
	Domestic sales		Export		Domestic sales		Export
	Volume	Value	Volume	Value	Volume	Value	Volume	Value
Compressor	10,694	10,715,726	7,536	8,766,239	11,072	9,878,164	8,242	8,460,821
Others	-	351,780	-	299,199	-	420,407	-	560,570
Total	10,694	11,067,506	7,536	9,065,438	11,072	10,298,571	8,242	9,021,391

III. Employee information in the last two years up to the publication date of this annual report (consolidated)

			Apr. 30,2021	Apr. 30,2021
Year		2019	2020	As of Apr. 30 of the currentyear
No. of employees	Direct labor	4,038	3,776	3,990
	Indirect labor	1,524	1,397	1,378
	Total	5,562	5,173	5,368
Average age		33.10	33.95	33.70
Average seniority		3.32	3.62	3.50
Distribution of educational levels	Doctoral Degree	0.11%	0.10%	0.11%
	Master’s Degree	1.60%	1.37%	1.45%
	College	20.82%	20.36%	19.25%
	Senior high school	32.02%	20.71%	17.25%
	Below senior high school	45.45%	57.46%	61.94%

IV. Information on spending on environmental protection

(1) Loss incurred due to environmental pollution:

2019	2020	As of the publication date of this annual report in 2021
None	None	None
	None	None
	None	None
None	None	None

Disposition date: Dec. 20, 2019

Disposition reference numbers: Tao-Huan-Shi-Zi No. 1080111663

Laws or regulations violated: Paragraph 2, Article 28 of the Waste Disposal Act, and Item 4 of

the Enterprises Designated and Officially Announced to Employ Waste Professional Technical Personnel

Content of violation:

No agent was appointed to report to the competent authority for review within 15 days from the resignation of the waste professional technical personnel.

Content of dispositions: Fine, pursuant to relevant regulations Improvement measures: Comply with environmental regulations and employees are required to report to the competent authorities immediately after leaving their jobs.

Planned spending on environmental protection in the next three years

Year	2021	2022	2023
Proposed pollution prevention and control equipment or expenses	Maintenance of wastewater treatment equipment	Maintenance of wastewater treatment equipment	Maintenance of wastewater treatment equipment
Planned improvements	Minimize pollution	Minimize pollution	Minimize pollution
Amount of expense	NT$ 785 thousand	NT$ 790 thousand	NT$ 795 thousand

(II) Information on the Company’s response to the RoHS is as follows:
Our products are RoHS compliant.
Response to the impacts of RoHS on the Company’s financial operations.
- As the products of the Company are RoHS compliant and such matter is already known to the customers, there is no impact on the financial operations of the Company.

V. Work environment and employee safety protection measures:

(I) Organization of the Occupational Safety and Health Management Committee: The Company has established the Occupational Safety and Health Management Committee. The committee meetings were held every three months to decide on the company safety policy objectives and to establish a labor safety. The Company has also established an occupational safety and health management unit, responsible for the implementation of the plan objectives approved by the Company’s Occupational Safety and Health Management Committee. Each unit is required to implement automatic safety and health inspection. The President of the Company shall serve as the chairman of the Occupational Safety and Health Management Committee. The director of Guanyin plant shall serve as the committee vice chairman. The committee members shall consist of 10 labor representatives and 2 delegated officers.
(II) Important work related to environmental protection and safety and health management:
Formulating “Regulated Governing Safety and Health” and “Safety and Health Work Rules.”
Organizing the self-defense fire organization and emergency response team, and carrying out disaster prevention drills regularly. (2 fire drills held in 2020)
Establishing a medical room staffed by professional doctors and delegated factory-base nurses providing medical consultation and services.
Organizing pre-duty safety training for new recruits, relocated staff. The current employees are inspected for general and special operations, and records are kept to track their health conditions. (1 employee health check-up was held in 2020)
Implementing work environment inspection, monitoring and improvement according to the annual plan. (2 inspections were carried out in 2020)
Implementing automatic operation inspection, checkpoint measurement and make records and review reports according to the annual automatic inspection plan.
Established a breastfeeding room to provide a friendly workplace environment for employees with needs.
Organizing domestic travels, in order to relieve the work pressure of our colleagues and to enhance the emotional exchange among their families.
Promoting the paper consumption reduction in order to protect the environment.

VI. Labor–management Relations

(I) Benefits measures:

Salary: There are various bonus including performance bonuses, production bonuses, and operating bonuses, and also remuneration to employees. Leave: Marriage leave, maternity leave, paternity leave, family leave, etc. are granted in accordance with the Labor Standards Act and the Act of Gender Equality in Employment. Insurance: Labor insurance and national health insurance, group insurance, travel insurance, and other insurance systems that are more favorable than as required by the Labor Standards Act Transportation: Designated transportation vehicle and staff parking are available. Accommodations: Staff dormitories are available. Meals: Staff canteen and meal subsidies are provided. Activities: A staff social hall and regular family day activities for employees. Subsidies: Subsidies for maternity, hospitalization, and funeral. Cash gift or vouchers for birthdays, the three festivals, and New Year’s Party lottery.

Welfare Committee: Annual travel and overseas travel subsidies and school subsidies for employees’ children.
(II) Continuing training:
The Company’s annual education and training is planned based on the operation strategy and the training needs proposed by each department. The training plan is implemented accordingly. In 2020, 527 participants attended educational training, with a total of 1,414 training hours, and total training expense of NT$ 151,260.
Based on the functions, the training of the Company consists of three types, the general training, professional training and management training. The content and the training results are as follows:

Byfunctions	Content of training	No. ofparticipants	Traininghours
General training	Basic training, such as on-board training and labor safety. These are mainly internal trainings and delivered throughvideos.	120 participants	226 hours
Professional training	Advanced job skills and knowledge training. These are mainly conducted through external training.	378 participants	981 hours
Management training	Supervisory skills and knowledge	29 participants	207 hours

(III) Post-employment policy:

In order to provide employees with a stable retirement life, the Company has established the Retirement Reserve Funds Supervising Committee in accordance with the Regulations Governing Retirement. The Company makes monthly contributions of 4% of the total salaries and wages to the pension fund and deposits it in the Bank of Taiwan to protect the rights and interests of employees. Starting July 1, 2005, the new labor retirement system was adopted. 6% of the total salary income is allocated to the employee’s personal pension account. For employees who voluntarily submits pension, the voluntary submission amount shall be deducted from the employee’s monthly salary and deposited to the employee’s personal pension account with Bureau of Labor Insurance.

The Company’s retirement application requirements are as follows:

(1) Voluntary retirement: A worker may apply for voluntary retirement under any of the following conditions (the same shall apply for employees subject to the Labor Pension Act):
A. Workers who attain the age of 55 and have worked for more than 15 years.
B. Workers who have worked for more than 25 years.
C. Workers who attain the age of 60 and have worked for more than 10 years.

(2) Forced retirement: The Company shall not force a worker to retire unless any of the following situations has occurred:
- A. Workers who attain the age of sixty-five.
- B. A worker who is unable to perform his/ her duties due to disability. In circumstances where a worker has reached the age as stated in the preceding subparagraph 1, and is not in good health to perform his/her duties, the workers’ department chief may submit a request to the department’s management higher than the President (incl.) for a forced retirement.
(3) Retirement by agreement: If both the conditions below are fulfilled.
- A. A worker who has seniority in the old labor retirement system and at least 15 years of total seniority.
- B. If there are no suitable positions available due to the transformation of the Company or technology upgrade of the original job position.
Pension payments:
(1) Employees who joined the Company before July 1, 2005 and selected the Regulations for the Allocation and Management of the Workers’ Retirement Reserve Funds (old labor retirement system), the calculation of their pension under the old labor retirement system is governed by the relevant provisions of the Labor Standards Act. Upon retirement, the worker may apply for a payout under the Company’s retirement reserve account in accordance with the regulations.
(2) After the Labor Pension Act comes into effect, workers who select the new labor retirement system will have their pensions paid in accordance with the Labor Pension Act and no additional payment will not be given upon retirement.
(3) A worker who is disabled due to the performing duties, and meets the condition in subparagraph 1, the pension shall be increased by 20% in accordance with the regulations. A worker who meets the condition of seniority in the new labor pension system in subparagraph 2 is paid in accordance with the calculation of severance pay set forth in the Labor Pension Act.
Pension payments: The Company shall pay the employees’ retirement benefits within 30 days from the date of retirement in accordance with the regulations.
Important resolutions and implementation of 2020 Retirement Reserve Funds Supervising

Committee Meeting Date of Important resolutions meeting Report on the application and appropriation for the retirement of 2 persons in Jan – Mar 2020. 2020/03/18 Approved the contribution amount and verification of the old labor retirement system reserve as of as of 2020/03/18. Report on the application and appropriation for the retirement of 6 persons in Mar. – Jun. 2020. 2020/06/24 Approved the contribution amount and verification of the old labor retirement system reserve as of as of 2020/06/24. Report on the application and appropriation for the retirement of 4 persons in Aug. – Sep. 2019. 2020/09/29 Approved the contribution amount and verification of the old labor retirement system reserve as of as of 2020/06/29. Report on the application and appropriation for the retirement of 1 person in Dec. 2020. 2020/12/23 Approved the contribution amount and verification of the old labor retirement system reserve as of as of 2020/12/23.

(1) Old labor retirement system: According to the Statement of Retirement Reserve Funds as of March 31, 2021, the total amount deposited in the name of the Retirement Reserve Funds Supervising Committee in the Bank of Taiwan was NT$ 98,143,215.
(2) New labor retirement system: The Company contributes 6% of the employees’ monthly salary to the accounts with Bureau of Labor Insurance.

(IV) Labor–management agreements: The Company has established a Labor–management Committee and holds regular labor–management meetings to handle labor–management issues in accordance with the law.
(V) Measures for preserving employees’ rights and interests: The Company has established work rules and related regulations in accordance with the laws and regulations. The Company also holds labor–management meetings and set up the Employee Welfare Committee to protect the rights and interests of employees.
(VI) Any losses suffered by the company in the most recent 2 fiscal years and up to the annual report publication date due to labor disputes: None.

VII. Important Contracts

Mar. 31, 2021

Nature of		Commencement date and
	Interested party		Subject
contracts		deadline of a contract

Joint venture agreement (Note 1)	TCL Group	2001/01/03 – long term	Establishment of a compressor assembly plant through joint venture
Joint venture agreement	ChinaSteel Group	2012/11/06 – 2062/11/6	Establishment of a steel cutting logistics plant through joint venture
Joint venture agreement	Zhejiang Baida Precision Manufacturing Corp.	2018/09/03 – 2038/09/02	Establishment of a high energy-efficient pump parts factory through joint venture
Cooperation agreement	National Cheng Kung University SAMPO CORPORATION	2018/12/18 – 2023/12/17	Joint Research Center
Cooperation agreement	National Pingtung University of Science and Technology	2020/08/01 – 2022/07/31	Development and application of compressor vibration noise automation analysis program module

Note 1: TCL Rechi (Huizhou) Refrigeration Equipment Company Limited approved on June 23, 2020 through board resolution to amend the Article 61 of the Articles of Incorporation to make the term of the joint venture long-term (the original joint venture contract starts and ends on 2001/01/03 – 2021/01/02).

VIII.Management of Intellectual Property

(I) Intellectual property management

In order to promote product innovation, the Company has established a R&D center to integrate R&D resources for technology development research and innovation. Thereby, the Company is able to obtain more advanced technical results to stand in a more advantageous position in the market or to obtain more business benefits. In order to protect the Company’s smooth operation and to safeguard the Company’s R&D and innovation, Rechi has been actively researching and proposing intellectual property rights plans to continue to accumulate intellectual property energy.

1. Proprietary trademark management

In order to reinforce the management of the Company’s intellectual property, the Company has formulated operating procedures for the management of intellectual property and established internal management system for relevant intellectual property in accordance with Taiwan Intellectual Property Management System. The internal management system includes the patent management and incentive scheme, and the Regulations Governing Patent Infringement, in order to encourage employees’ contribution of their expertise, innovative research, and improving of patents from enhanced R&D competitiveness and other intangible intellectual assets.

2. Copyright management

Employees of the R&D Center are responsible for writing knowledge documents. Such knowledge documents that are determined to have professional, educational, or standardized value are ranked and stored in the Company’s reading room and internal network for the Company’s related personnel to read and study in order to improve their professional skills and facilitate them to apply the knowledge in practice.

(II) Implementation

The Company regularly reports matters related to intellectual property to the Board of Directors in Q3 of each year.

The Company adopted intellectual property management system in 2014. The implementation of the system is as follows: 2014

Formulated the “Procedures for Intellectual Property Right Management” concerning applications and management operations related to patent, trademark and copyright.

2015

Established the “Regulations Governing Patent Management and Awards” in order to encourage employees’ contribution of their expertise, innovative research, and improving of patents from enhanced R&D competitiveness to obtain patents and awards both domestically and internationally.
Established the “Regulations Governing Knowledge Document Management Implementation” to include knowledge document into in copyrights to enhance the Company’s intellectual property.

2018

The Company’s intellectual property management attended a 30-hour course, “Patent Litigation Practice” organized by TIPA, in order to continuously enhance the management’s knowledge in intellectual property rights and improve the understanding and management of the Company’s intellectual property rights.
Selected excellent knowledge documents and held a knowledge document presentation sessions. The Company’s personnel may attend the sessions and to enhance their practical professional skills.

2019

The Company’s intellectual property management attended a 24-hour course, “Introduction to Intellectual Property Rights” organized by TIPA, in order to continuously enhance the management’s knowledge in intellectual property rights and improve the understanding and management of the Company’s intellectual property rights.
Formulated the “Regulations Governing Patent Infringement” to serve as the guidelines for the Company’s personnel to handle patent infringement and dispute, in order to ensure the Company’s right and goodwill.

(III) List of intellectual property obtained and results

Patent: As of December 31, 2020, the Company has applied for 750 patents, and a little less than 650 cases were approved. In 2020, the Company obtained 58 cases of patents. Among the cases, 50 are in China, and 8 are in Taiwan. For the quality of our patents, we have an approval rate of 87%.
Trademark: As of December 31, 2020, the Company applied a total number of 9 trademark. 3. Copyright: As of December 31, 2020, the Company has completed a total of 142 knowledge document covering a wide range of professional knowledge regarding the Company’s products.
(IV) Certification: As of now, the Company has not applied for the certification of “Taiwan Intellectual Property Management System.”

[VI. Financial Information]

I. Condensed Balance Sheet and Income Statement of the last five years

(I) 1. Individual Condensed Balance Sheets – IFRS

Unit: NT$ thousand

Items	Year	Financial Analyses for the Past Five Fiscal Years	Financial Analyses for the Past Five Fiscal Years	Financial Analyses for the Past Five Fiscal Years	Financial Analyses for the Past Five Fiscal Years	Financial Analyses for the Past Five Fiscal Years
		2020	2019	2018	2017	2016
Current assets		5,171,596	4,064,572	4,081,181	3,375,735	2,894,495
Property, plant, and equipment		735,790	627,170	640,887	627,021	672,087
Intangible assets		25,749	23,260	25,160	1,947	3,336
Other assets		12,092,985	12,042,862	10,991,041	10,575,755	9,452,238
Total assets		18,026,120	16,757,864	15,738,269	14,580,458	13,022,156
Current liabilities	Before dividend distribution	4,210,561	3,147,819	4,016,664	4,523,774	3,629,132
	After dividend distribution	(Note 1)	3,400,277	4,622,562	5,409,063	4,740,713
Non-current liabilities		4,977,316	5,685,184	3,524,141	2,183,564	1,478,688
Total liabilities	Before dividend distribution	9,187,877	8,833,003	7,540,805	6,707,338	5,107,820
	After dividend distribution	(Note 1)	9,085,461	8,146,703	7,592,627	6,219,401
Equity attributable to shareholders of the parent company		8,838,243	7,924,861	8,197,464	7,873,120	7,914,336
Share capital		5,049,151	5,060,131	5,060,131	4,926,627	4,860,623
Capital reserve		1,343,868	1,351,403	1,338,059	1,133,360	1,034,044
Retained earnings	Before dividend distribution	3,188,752	2,746,961	2,697,075	2,429,842	2,546,239
	After dividend distribution	(Note 1)	2,494,503	2,091,177	1,544,553	1,434,658
Other equity		(743,222)	(1,199,368)	(863,535)	(570,493)	(440,764)
Treasury shares		(306)	(34,266)	(34,266)	(46,216)	(85,806)
Non-controlling interests		-	-	-	-	-
Total equity	Before dividend distribution	8,838,243	7,924,861	8,197,464	7,873,120	7,914,336
	After dividend distribution	(Note 1)	7,672,403	7,591,566	6,987,831	6,802,755

Note 1: The 2020 profit distribution has not been approved at the general shareholders’ meeting. Note 2: The above financial information for each year was audited by the CPAs.

2. Consolidated Condensed Balance Sheets – IFRS

Unit: NT$ thousand

Items	Year	Financial Analyses for the Past Five Fiscal Years	Financial Analyses for the Past Five Fiscal Years	Financial Analyses for the Past Five Fiscal Years	Financial Analyses for the Past Five Fiscal Years	Financial Analyses for the Past Five Fiscal Years	Financial information as of Mar. 31 of current year (Note 2)
		2020	2019	2018	2017	2016
Current assets		20,337,012	17,304,310	17,621,926	16,443,538	14,639,099	20,384,341
Property, plant, and equipment		7,304,877	7,207,022	7,011,114	6,061,276	5,827,209	7,326,504
Intangible assets		41,629	43,448	43,285	15,378	17,066	41,525
Other assets		1,737,190	2,130,883	1,921,115	1,541,238	1,142,075	1,592,894
Total assets		29,420,708	26,685,663	26,597,440	24,061,430	21,625,449	29,345,264
Current liabilities	Before dividend distribution	13,594,789	10,982,594	12,859,749	11,927,299	10,285,490	13,774,039
	After dividend distribution	(Note 1)	11,235,052	13,465,647	12,812,588	11,397,071	-
Non-current liabilities		5,546,112	6,253,485	4,010,516	2,730,531	1,853,903	5,038,635
Total liabilities	Before dividend distribution	19,140,901	17,236,079	16,870,265	14,657,830	12,139,393	18,812,674
	After dividend distribution	(Note 1)	17,488,537	17,476,163	15,543,119	13,250,974	-
Equity attributable to shareholders of the parent company		8,838,243	7,924,861	8,197,464	7,873,120	7,914,336	9,088,035
Share capital		5,049,151	5,060,131	5,060,131	4,926,627	4,860,623	5,049,151
Capital reserve		1,343,868	1,351,403	1,338,059	1,133,360	1,034,044	1,343,868
Retained earnings	Before dividend distribution	3,188,752	2,746,961	2,697,075	2,429,842	2,546,239	3,619,450
	After dividend distribution	(Note 1)	2,494,503	2,091,177	1,544,553	1,434,658	-
Other equity		(743,222)	(1,199,368)	(863,535)	(570,493)	(440,764)	(924,128)
Treasury shares		(306)	(34,266)	(34,266)	(46,216)	(85,806)	(306)
Non-controlling interests		1,441,564	1,524,723	1,529,711	1,530,480	1,571,720	1,441,555
Total equity	Before dividend distribution	10,279,807	9,449,584	9,727,175	9,403,600	9,486,056	10,532,590
	After dividend distribution	(Note 1)	9,197,126	9,121,277	8,518,311	8,374,475	-

Note 1: The 2020 profit distribution has not been approved at the general shareholders’ meeting. Note 2: Financial information as of Q1 2021 was audited CPAs.

(II) 1. Individual Condensed Statement of Comprehensive Income – IFRS

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

Year Items	Financial Analyses for the Past Five Fiscal Years(Note 1)	Financial Analyses for the Past Five Fiscal Years(Note 1)	Financial Analyses for the Past Five Fiscal Years(Note 1)	Financial Analyses for the Past Five Fiscal Years(Note 1)	Financial Analyses for the Past Five Fiscal Years(Note 1)
	2020	2019	2018	2017	2016
Operating income	8,729,536	8,483,558	8,846,105	7,738,840	8,462,781
Gross profit	736,274	1,082,808	1,505,000	997,387	1,323,620
Operating (loss) gain	193,233	266,676	736,530	443,631	596,681
Non-operating incomes and expenses	696,722	556,185	725,542	793,870	1,018,657
Net profit before tax	889,955	822,861	1,462,072	1,237,501	1,615,338
Net income of continuing operations in current period	709,491	655,960	1,101,426	1,021,192	1,324,251
Loss from discontinued operations	-	-	-	-	-
Net income (loss) in current period	709,491	655,960	1,101,426	1,021,192	1,324,251
Other comprehensive income for the current period (net, after-tax)	456,655	(336,009)	(248,516)	(135,878)	(714,834)
Total comprehensive income in current period	1,166,146	319,951	852,910	885,314	609,417
Net income attributable to the shareholders of parent company	709,491	655,960	1,101,426	1,021,192	1,324,251
Net income attributable to uncontrolled equity	-	-	-	-	-
Total comprehensive income attributable to the shareholders of parent company	1,166,146	319,951	852,910	885,314	609,417
Total comprehensive income attributable to uncontrolled equity	-	-	-	-	-
Earnings per share	1.41	1.30	2.20	2.10	2.80

Note 1: The above financial information for each year was audited by the CPAs.

2. Consolidated Condensed Statement of Comprehensive Income – IFRS

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

Year Items	Financial Analyses for the Past Five Fiscal Years(Note 1)	Financial Analyses for the Past Five Fiscal Years(Note 1)	Financial Analyses for the Past Five Fiscal Years(Note 1)	Financial Analyses for the Past Five Fiscal Years(Note 1)	Financial Analyses for the Past Five Fiscal Years(Note 1)	Financial information as of Mar. 31 of current year(Note 2)
	2020	2019	2018	2017	2016
Operating income	19,319,962	20,132,944	22,479,295	19,826,889	17,674,255	5,830,124
Gross profit	2,300,075	2,739,886	3,555,437	2,996,984	3,674,209	617,266
Operating (loss) gain	819,805	865,948	1,648,334	1,420,752	1,983,827	199,049
Non-operating incomes and expenses	168,210	(64,682)	(70,986)	10,023	(6,847)	16,692
Net profit before tax	988,015	801,266	1,577,348	1,430,775	1,976,980	215,741
Net income of continuing operations in current period	722,644	646,849	1,151,729	1,040,841	1,394,733	145,658
Loss from discontinued operations	-	-	-	-	-	-
Net income (loss) in current period	722,644	646,849	1,151,729	1,040,841	1,394,733	145,658
Other comprehensive income for the current period (net, after-tax)	471,130	(397,300)	(267,624)	(161,431)	(777,314)	107,125
Total comprehensive income in current period	1,193,774	249,549	884,105	879,410	617,419	252,783
Net income attributable to the shareholders of parent company	709,491	655,960	1,101,426	1,021,192	1,324,251	136,488
Net income attributable to uncontrolled equity	13,153	(9,111)	50,303	19,649	70,482	9,170
Total comprehensive income attributable to the shareholders of parent company	1,166,146	319,951	852,910	885,314	609,417	249,792
Total comprehensive income attributable to uncontrolled equity	27,628	(70,402)	31,195	(5,904)	8,002	2,991
Earnings per share	1.41	1.30	2.20	2.10	2.80	0.27

Note 1: The above financial information for each year was audited by the CPAs. Note 2: Financial information as of Q1 2021 was audited CPAs.

(III) Auditors’ Opinions for the Most Recent 5 Years

Year Items	Names of financial statement	Names of financial statement	auditors in the opinions	last 5 years, and their audit	last 5 years, and their audit
	2020	2019	2018	2017	2016
CPA	TSAI, CHEN TSAI CHANG, CHING FU	TSAI, CHEN TSAI CHENG, CHIN TSUNG	TSAI, CHEN TSAI CHENG, CHIN TSUNG	TSAI, CHEN TSAI CHENG, CHIN TSUNG	TSAI, CHEN TSAI CHENG, CHIN TSUNG
Audit opinion	Unqualified opinion	Unqualified opinion	Unqualified opinion	Unqualified opinion	Unqualified opinion

II. Financial Analysis of the Past Five Years

1. Individual Financial Analysis of the Past Five Years – IFRSs

Year Analysis item	Year Analysis item	Financial analysis for the latest 5 years (Note 1)	Financial analysis for the latest 5 years (Note 1)	Financial analysis for the latest 5 years (Note 1)	Financial analysis for the latest 5 years (Note 1)	Financial analysis for the latest 5 years (Note 1)
		2020	2019	2018	2017	2016
Financial Structure (%)	Liabilities to assets ratio	50.97	52.71	47.91	46.00	39.22
	Long-term capital to property, plant and equipment ratio	1,877.65	2,170.07	1,828.97	1,603.88	1,397.59
Solvency %	Current ratio	122.82	129.12	101.61	74.62	79.76
	Quick ratio	112.13	116.25	94.64	67.87	72.41
	Debt service coverage ratio	13.19	13.55	28.35	29.79	44.56
Operating capacity	Account receivable turnover (times)	3.49	3.36	3.84	3.63	3.97
	Average days of collection	104.58	108.63	95.05	100.55	91.94
	Inventory turnover (times)	19.84	22.91	28.14	26.51	29.56
	Account payable turnover (times)	3.42	3.44	4.33	4.43	4.74
	Average days in sales	18.40	15.93	12.97	13.77	12.35
	Rate of real estate, plant buildings and equipment turnover(times)	12.81	13.38	13.95	11.91	12.47
	Total asset turnover (times)	0.50	0.52	0.58	0.56	0.65
Profitability	Return on assets (%)	4.42	4.36	7.55	7.66	10.36
	Return on shareholders’ equity (%)	8.46	8.14	13.71	12.94	16.90
	Income before tax as a percentage of paid-in capital (%)	17.63	16.26	28.89	25.14	33.38
	Net profit margin (%)	8.13	7.73	12.45	13.20	15.65
	Earnings per share (NT$)	1.41	1.30	2.20	2.10	2.80
Cash flow (%)	Cash flow ratio (%)	5.00	11.68	20.37	0.00	9.83
	Cash flow adequacy ratio (%)	42.67	37.69	36.65	27.80	41.02
	Cash reinvestment ratio (%)	(0.29)	(1.62)	(0.50)	(9.48)	(3.55)
Leverage	Operating leverage	7.58	8.34	3.64	4.97	5.58
	Financial leverage	1.61	1.33	1.08	1.11	1.07
Please explain the reasons for changes in the financial ratios in the latest two years. (Analysis may be exempt if the change is less than 20%) 1. The decrease in cash flow ratio is mainly due to the decrease in cash flow and cash expenditure in operation activities in the current year. The Increase in current liabilities is due to the increase in short-term borrowing payables. 2. The decrease in cash reinvestment ratio is mainly due to the decrease in net cash inflow from operating activities in the current year, and the decrease in cash dividend paid, causing an increase in working capital. 3. The increase in financial leverage is mainly due to the increase in the interest expenses and decrease in operating profit in the currentyear.

Note 1: The above financial information for each year was audited by the CPAs.

2. Consolidated Financial Analysis of the Past Five Years – IFRSs

Year Analysis item	Year Analysis item	Financial analysis for the latest 5 years (Note 1)	Financial analysis for the latest 5 years (Note 1)	Financial analysis for the latest 5 years (Note 1)	Financial analysis for the latest 5 years (Note 1)	Financial analysis for the latest 5 years (Note 1)	As of Mar. 31 of current year(Note 2)
		2020	2019	2018	2017	2016
Financial Structure (%)	Liabilities to assets ratio	65.06	64.59	63.43	60.92	56.13	64.11
	Long-term capital to property, plant and equipment ratio	216.65	217.89	195.94	200.19	194.60	212.53
Solvency %	Current ratio	149.59	157.56	137.03	137.86	142.33	147.99
	Quick ratio	127.16	124.77	106.94	109.00	113.02	120.72
	Debt service coverage ratio	7.64	4.20	9.82	17.00	24.27	10.82
Operating capacity	Account receivable turnover (times)	2.33	2.42	2.52	2.51	3.05	2.71
	Average days of collection	156.65	150.83	144.84	145.42	119.67	134.69
	Inventoryturnover(times)	7.13	6.74	7.31	7.13	7.03	8.53
	Account payable turnover (times)	2.22	2.77	3.30	3.57	4.50	2.27
	Average days in sales	51.19	54.15	49.93	51.19	51.92	42.79
	Rate of real estate, plant buildings and equipment turnover(times)	2.66	2.83	3.44	3.34	3.00	3.19
	Total asset turnover(times)	0.69	0.76	0.89	0.87	0.82	0.79
Profitability	Return on assets(%)	3.00	3.18	5.11	4.88	6.81	2.22
	Return on shareholders’ equity (%)	7.33	6.75	12.04	11.02	14.35	5.60
	Income before tax as a percentage of paid-in capital (%)	19.57	15.83	31.17	29.07	40.86	17.09
	Netprofit margin(%)	3.74	3.21	5.12	5.25	7.89	2.50
	Earnings per share (NT$)	1.41	1.30	2.20	2.10	2.80	0.27
Cash flow (%)	Cash flow ratio (%)	31.70	19.86	18.29	4.09	12.04	2.56
	Cash flow adequacy ratio (%)	96.53	67.91	50.04	53.38	62.89	105.59
	Cash reinvestment ratio(%)	18.22	7.12	7.24	(3.37)	2.83	1.59
Leverage	Operatingleverage	5.04	7.21	4.35	4.39	3.91	5.91
	Financial leverage	1.22	1.41	1.12	1.07	1.04	1.12
Please explain the reasons for changes in the financial ratios in the latest two years. (Analysis may be exempt if the change is less than 20%) 1. The increase in debt service coverage ratio is mainly due to the increase in the interest expenses and decrease in operating profit in the current year. 2. The increase in debt service coverage ratio is mainly due to the increase in net profit before tax in the current year. 3. The decrease in cash flow adequacy ratio is mainly due to the increase in net cash flow in the past 5 years and the increase in capital expenditure in current year. 4. The increase in cash flow reinvestment ratio is mainly due to the increase in net cash flow from operating activities in current period and the decrease in cash dividends. 5. The decrease in operating leverage is mainly due to the increase in changes in operating cost. 6. The decrease in account payable turnover is mainly due to the increase in accounts payable in current year and the fact that there are no significant changes in the cost of sales.

Note 1: The above financial information for each year was audited by the CPAs.

Note 2: Financial information as of Q1 2021 was audited CPAs.

Formulas for financial ratios and financial ratio analysis

Financial structure
(1) Debt-to-asset ratio = total liabilities/total assets
(2) Ratio of long-term capital to property, plant and equipment = (Total equities ＋noncurrent liabilities) /property, plant and equipment.
Solvency ratio
(1) Current ratio = current assets/current liabilities
－－
(2) Quick ratio = (current assets inventories prepaid expense)/current liabilities
(3) Interest protection multiples = Pre-income tax and interest profits/interest expenditure of the term
Operating performance
(1) Receivables (including accounts receivable and bills receivable that are incurred as a result of business operation) = net sales/balance from average receivables of each term (including accounts receivable and bills receivable)
(2) Average collection days = 365/receivables turnover
(3) Inventory turnover = sales cost/average inventory value
(4) Payables (including accounts payable and bills payable that are incurred as a result of business operation) = sales cost/balance from average payables of each term (including accounts payable and bills payable)
(5) Average inventory turnover days = 365/inventory turnover
(6) Turnover of property, plant and equipment = net sales amount/ average net worth of property, plant and equipment
(7) Total assets turnover = net sales amount/average total assets
Profitability
(1) Return on assets = (after tax net profit + interest expenses x (1- tax rate))/average asset balance
(2) Return on equity = net income/average total equity
(3) EBIT margin = net income/net sales amount
－
(4) Earnings per share = (profits or loss attributable to owners of the parent company preferred stock dividend)/weighted average stock shares issued
Cash Flow
(1) Cash flow ratio = Net cash flow from business activities/current liabilities
(2) Net cash flow adequacy ratio = net cash flow from operating activities for the most recent five years/(capital expenditures + inventory increase + cash dividend for the most recent five years)
(3) Cash reinvestment ratio = (net cash flow from operating activities – cash dividend)/gross property, plant and equipment value + long-term investment + other non-current assets + working capital)
Leverage:
(1) Operating leverage = (Net operating income – Changes in operating cost and expense)/Operating profit
(2) Financial leverage = operating incom/ (operating income/interest expenses)

III. Audit Committee’s Review Report on the Most Recent Fiscal Year’s Financial Statement

RECHI PRECISION CO., LTD.

Audit Committee’s Review Report

We have reviewed 2020 financial statements, earnings distribution proposal, and business report prepared by the Board of Directors and audited by the CPAs of Deloitte & Touche, and, having found no non-compliance, hence present this review report in accordance with Article 14-4 of the Securities and Exchange Act and Article 219 of the Company Act.

We hereby present the review report

For 2021 General Shareholders’ Meeting

RECHI PRECISION CO., LTD.

Convener of the Auditing Committee: SU, CHING YANG

May 5, 2021

IV. Most Recent Financial Reports

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 2020 (from January 1, 2020 to December 31, 2020), 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 22, 2021

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, 2020 and 2019, 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, 2020 and 2019, 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 2020. 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 2020 consolidated financial statements of RECHI PRECISION CO., LTD (RECHI Group) and its subsidiaries are described as follows:

Estimating impairments on accounts receivable

The Group’s net accounts receivable from non-related parties as of December 31, 2020 were NT$4,008,821 thousand, of which accounts receivable for export accounted for 55%, which was material to the overall consolidated financial statements. The assessment of impairment of accounts receivable is based on the assumption of the expected loss rate of the Group.

The Group’s impairment assessment of accounts receivable is based on assumptions on default rate and expected loss rate, while by considering historical experience, current market conditions, and forward-looking information to make assumptions and select inputs for impairment assessment. If the actual future cash flows are less than expected, a material impairment loss may have resulted.

Because of the materiality of the balances of such accounts and the critical judgments that must be exercised by the management during the assessment, the assessment of impairment of accounts receivable is a key audit item.

For the estimation and relevant disclosures of the uncertainties of accounting policies, accounting estimates, and assumptions related to accounts receivable, please refer to Notes 4, 5, and 10 of the consolidated financial statements.

The main audit procedures that we have implemented for the impairment assessment of accounts receivable above are as follows:

Understand the allowance policy for the estimated impairment of accounts receivable put forth by the management, test the correctness of the aging of the balance of accounts receivable, and check the correctness of the amount of allowance for loss put forth by the management.
Evaluate the reasonableness of the expected credit loss rate based on the status of recovery of account receivables from customers and relevant forward-looking information, while considering the current year’s recovery of receivables and other available information to evaluate the reasonableness of the loss allowance.
Evaluate the status of recovery of the overdue accounts receivable in cash after the deadline to consider whether it is necessary to provide additional loss allowances.

Other information

The Company has also prepared the parent company only financial statements for the years ended December 31, 2020 and 2019, 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.

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, 2020. 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 TSAI, CHEN TSAI

CPA CHANG, CHING FU

Securities and Futures Bureau Approval Document No. Tai-Cai-Zheng (6) Zi No. 0920123784

Securities and Futures Bureau Approval Document No.

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

March 22, 2021

RECHI PRECISION CO., LTD. and its subsidiaries

Consolidated Balance Sheet

December 31, 2020 and 2019

Code 1100 1110 1120 1136 1150 1160 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 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, & 31) Notes receivable – non-related parties (Note 4, 10 & 31) Notes receivable – related parties (Note 4 & 30) Notes receivable – non-related parties (Note 4, 5 & 10) Accounts receivable – related parties (Note 4 & 30) Other receivables (Note 30) 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 & 31) Right-of-use assets (Note 4 & 15) Other intangible assets (Note 4) Goodwill (Note 4 & 26) 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 30) Accounts payable – non-related parties Accounts payable – related parties (Note 30) Other payables (Note 18 & 26) Income tax liability (Note 4 & 23) Liability reserve – Current Lease liabilities – current (Note 4 & 15) Refund liabilities – current (Note 21) Other current liabilities Total of current liabilities Non-current liabilities Long-term borrowings (Note 17 & 31) 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 & 27) 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 Uncontrolled equity Total equity Total Liabilities and Equity		December 31,2020	December 31,2020	% 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		Unit: NT$1 December 31,2019	Unit: NT$1 December 31,2019	thousand % 4 4 3 10 13 - 17 - 1 9 4 - 65 - 2 27 1 - - 2 3 35 100 9 - 16 - 9 - 3 2 - - 2 - 41 17 4 3 - - - 24 65 19 5 3 3 4 10 5) - 29 6 35 100
			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				Amount $ 1,158,126 1,161,644 692,830 2,510,524 3,574,646 782 4,460,765 161 107,274 2,486,785 1,115,064 35,709 17,304,310 27,240 519,427 7,207,022 163,609 43,448 55,725 553,256 811,626 9,381,353 $ 26,685,663 $ 2,500,210 99,937 4,168,451 30,331 2,321,114 57,593 816,390 404,056 51,304 3,258 478,246 51,704 10,982,594 4,510,660 998,879 641,390 13,075 54,727 34,754 6,253,485 17,236,079 5,060,131 1,351,403 857,735 863,535 1,025,691 2,746,961 1,199,368) 34,266) 7,924,861 1,524,723 9,449,584 $ 26,685,663
		( (		(		( (		(

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

January 1 to December 31, 2020 and 2019

Unit: NTD thousand, except Earnings Per Share (NTD)

Code 4100 Sales revenue (Note 4, 21 & 30) 5000 Operating cost (Note 11, 22 & 30) 5900 Gross profit Operating expenses (Note 22 & 30) 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 & 30) 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		2020

(Continued on next page)

(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		2020		% 5 1) 4 - 2 - 2 - - - 2 6		2019
		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						%
	( ( (		(				4 ( 1) 3 - - - - ( 3 ) 1 ( 2) ( 2) 1

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Code Profit attributable to: 8610 The company’s shareholders 8620 Uncontrolled equity 8600 Total comprehensive income attributable to: 8710 The company’s shareholders 8720 Uncontrolled equity 8700 Earnings per share (Note 24) Business units in continuing operation 9710 Basic 9810 Diluted		2020		% 4 - 4 6 - 6		2019
		Amount $ 709,491 13,153 $ 722,644 $ 1,166,146 27,628 $ 1,193,774 $ 1.41 $ 1.40				Amount $ 655,960 9,111) $ 646,849 $ 319,951 70,402) $ 249,549 $ 1.30 $ 1.29		%
					( (			3 - 3 1 - 1

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 Statements of Changes in Shareholders’ Equity

January 1 to December 31, 2020 and 2019

Unit: NT$1 thousand

			Equityof the company	Equityof the company	Equityof the company					Total equity
Capital stock Shares (in thousand shares) Amount 506,013 $ 5,060,131 - - - - - - - - - - - - - - - - - - - - 506,013 5,060,131 - - - - - - - - ( 1,098 ) ( 10,980 ) - - - - - - - - 504,915 $ 5,049,151	Capital reserves $ 1,338,059 - - - - 11,693 1,651 - - - - 1,351,403 - - - - ( 7,535 ) - - - - $ 1,343,868		Retained earnings		Undistributed earnings $ 1,378,990 ( 110,143 ) ( 293,042 ) ( 605,898 ) - - - 655,960 ( 176) 655,784 - 1,025,691 ( 65,596 ) ( 335,833 ) ( 252,458 ) - ( 15,751 ) - 709,491 509 710,000 $ 1,066,053	Other equity 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 ( $ 719,013 ) ( $ 144,522 ) - - - - - - - - - - - - - - ( 356,548) 20,715 ( 356,548) 20,715 - - ( 1,075,561 ) ( 123,807 ) - - - - - - - - - - - - - - 114,027 342,119 114,027 342,119 ($ 961,534) $ 218,312	Treasuryshares ( $ 34,266 ) - - - - - - - - - - ( 34,266 ) - - - ( 306 ) 34,266 - - - - ($ 306)
						Exchange differences from the translation of financial statements of foreign operations ( $ 719,013 ) - - - - - - - ( 356,548) ( 356,548) - ( 1,075,561 ) - - - - - - - 114,027 114,027 ($ 961,534)
Shares (in thousand shares) 506,013 - - - - - - - - - - 506,013 - - - - ( 1,098 ) - - - - 504,915		Statutory surplus reserves $ 747,592 110,143 - - - - - - - - - 857,735 65,596 - - - - - - - - $ 923,331		Special surplus reserves $ 570,493 - 293,042 - - - - - - - - 863,535 - 335,833 - - - - - - - $ 1,199,368
(							( ( ( (	( ( ( (	( ( ( ( (	$ 9,727,175 - - ( 605,898 ) ( 40,586 ) 11,693 1,651 646,849 ( 397,300) 249,549 106,000 9,449,584 - - ( 252,458 ) ( 306 ) - ( 110,787 ) 722,644 471,130 1,193,774 $ 10,279,807

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 Statements of Cash Flow

January 1 to December 31, 2020 and 2019

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 gains on disposal of property,
plant and equipment and prepaid
rents
A23700
Impairment loss of property, plant
and equipment
A23700
Inventory valuation and
obsolescence losses
A24100
Unrealized foreign currency
exchange loss (gain)
A29900
Gains on lease modification
A30000
Net change in operating assets and
liabilities
A31115
Decrease (increase) in financial
assets mandatorily measured at
fair value through profit or loss
A31130
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
Increase in other receivable

A31200
Decrease in inventories
A31230
Decrease in prepayments
A31240
Decrease in other current assets
A32125
Increase in return liability – current
A32130
Increase in notes payable

Unit: NT$1 thousand
2020
2019
$ 988,015
$ 801,266
876,830
824,731
9,629
9,864
(
6,977 )
5,864
(
44,877 )
(
40,552 )
148,846
250,285
(
74,693 )
(
79,085 )
(
31,658 )
(
32,390 )
(
1,368 )
(
7,939 )
(
2,252 )
(
46 )
-
2,317
9,738
7,440
(
59,473 )
7,583
-
(
10 )
92,270
(
265,863 )
(
915,438 )
(
115,711 )
782
957
584,450
423,314
(
2,377 )
141
(
74,303 )
(
43,950 )
217,485
110,764
353,219
88,413
9,399
9,086

133,463
186,998
1,541,765
557,814

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Code
A32140
Increase (decrease) in notes payable
– related parties
A32150
Increase in accounts payable
A32160
Increase (decrease) in accounts
payable – related parties
A32180
Increase (decrease) in other
accounts payable
A32200
Increase (decrease) 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
B00040
Financial assets acquired on the basis of
cost after amortization
B00050
Financial assets on the basis of cost after
amortization
B01800
Acquisition of investment in associates.
B02200
Net cash outflow from acquisition of
subsidiary
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 outflow from 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

C01800
Increase 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

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Code C04900 Purchase of treasury stock C05800 Increase (Decrease) in reduced non-controlling interest CCCC Net cash outflow from financing activities DDDD Impact of changes in exchange rate on cash and cash equivalents 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	2020 ( $ 306 ) ( 110,787) (1,266,165) 12,308 2,418,817 1,158,126 $ 3,576,943		2019
		$ - 65,414 ( 522,122) ( 150,549) ( 533,737 ) 1,691,863 $ 1,158,126

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 Notes to financial statements

January 1 to December 31, 2020 and 2019

(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 22, 2021.

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)

Except for the following, 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:

1. Amendments to IAS 1 and IAS 8 “Definition of Materiality”

The Group adopted the amendments on January 1, 2020. The threshold for materiality was amended to be “can be reasonably expected to influence users,” and the disclosures in the consolidated financial statements were adjusted by removing immaterial information which may obscure material information.

2. Amendment to IFRS 16 “COVID-19-Related Rent Concessions”

The Group has chosen to apply the practical expedient of the amendment to deal with rent negotiations directly related to COVID-19 between it and the lessor. Please refer to Note 4 for the relevant accounting policies. Before applying the amendment, the Group shall judge whether the provisions of the lease modification shall apply to the aforementioned rent negotiation.

The Group began to apply the amendment on January 1, 2020. Since the aforementioned rent negotiation only affected the year of 2020, the

retrospective application of the amendment did not affect the retained earnings as of January 1, 2020.

(2) IFRSs endorsed by FSC that are applicable from 2021 onwards

The new/amended/revised standards or interpretation Effective Date per IASB Amendments to IFRS 4 “Deferral of Effective Date of Effective immediately IFRS 9” upon promulgation Amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4, and Effective for the annual IFRS 16 – “Interest Rate Benchmark Reform – Phase reporting periods 2” beginning on or after January 1, 2021

Amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4, and IFRS 16 – “Interest Rate Benchmark Reform – Phase 2”

“Interest Rate Benchmark Reform – Phase 2” is mainly about amendments to IFRS 9, IFRS 7, and IFRS 16, which provide practical expedients for the impact of changes in interest rate indicators.

Changes in the basis for determining contractual cash flows caused by changes in interest rate indicators

Changes in the basis for determining the contractual cash flow of financial assets, financial liabilities, and lease liabilities shall be regarded as changes in effective interest rates when changes in the basis are determined, and if such changes are the direct result of changes in interest rate indicators, and the new basis is economically equivalent to the basis before the changes.

When the amendments are applied for the first time, the Group expects to recognize the cumulative effects, to which amendments are applied retrospectively, as retained earnings of January 1, 2021.

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

the Financial Supervisory Commission

The new/amended/revised standards or interpretation

IASB publication
effective date(Note 1)

“2018-2020 IFRSs improvements”

Amendment to IFRS 3 – “Reference to the Conceptual
Framework”

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.”

IFRS 17 “Insurance Contracts”

Amendments to IFRS 17

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

Amendments to IAS 1 “Disclosure of Accounting Policies”
Amendments to IAS 8 “Definition of Accounting Estimates”
Amendments to IAS 16 “Property, Plant and Equipment –
Proceeds before Intended Use”

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

January 1, 2022 (Note 2)
January 1, 2022 (Note 3)
Undefined
January 1, 2023
January 1, 2023
January 1, 2023
January 1, 2023 (Note 6)
January 1, 2023 (Note 7)
January 1, 2022 (Note 4)
January 1, 2022 (Note 5)

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 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, 2022; the amendment of “Initial application of IFRSs” in IFRS 1 applies the annual reported periods since January 1, 2022 retrospectively.
Note 3: The amendment applies to the merges whose acquisition dates after the annual reported periods since January 1, 2022.
Note 4: The amendment applies to the property, plant and equipment achieving the expected operations by the management after January 1, 2021.
Note 5: The amendment applies to the contracts yet performing all obligations as of January 1, 2022.
Note 6: The amendments apply to the annual reporting periods beginning on or after January 1, 2023 prospectively.
Note 7: 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.
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.

2. 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.

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

The amendments stipulate that the selling price of the item produced in order to make the property, plant and equipment reach the location and condition necessary for them to be capable of operating in the manner expected by the management shall not be debited to the cost of the asset. The aforementioned items produced shall be measured in accordance with IAS 2 “Inventories,” and the selling price and cost shall be recognized in profit or loss in accordance with the applicable standards.

The amendments are applicable to property, plant and equipment that have reached the location and conditions necessary for them to be capable of operating in the manner expected by the management after January 1, 2021. When the amendment is applied to the Group for the first time, the information in the comparative period shall be restated.

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:

100

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.

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.

101

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.

For those that are not current assets or liabilities above are classified as non-current assets or liabilities.

102

(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 7.

(5) Corporate Merger

Corporate mergers are handled in the acquisition method. Acquisition-related costs are included as expenses in the period, in which the costs are incurred and the services are obtained.

Goodwill is measured on the basis that the fair value of the consideration transferred exceeds the net amount of identifiable assets acquired and liabilities assumed on the acquisition date.

(6) 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.

103

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 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.

(7) 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.

(8) 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.

104

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.

(9) Real 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.

(10) 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.

105

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

(11) 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.

(12) 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.

(13) 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.

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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.

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 29 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.

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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.

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

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credit from the financial instruments within the perpetuity of these financial instruments.

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.

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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.

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.

(14) 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.

(15) 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.

(16) 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, 2021, 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.

(17) 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.

(18) 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.

(19) 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.

(20) 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.

The estimated impairment of accounts receivable

The estimated impairment of accounts receivable is based on the default rates and expected loss rates assumed by the Group. Taking into account the Group’s past experience, current market situation and future prediction, the Group shall prepare a pro forma report and select appropriate inputs for impairment. If the actual future cash flows are less than expected, a material impairment loss may have resulted.

6. Cash and cash equivalents

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 31,2020 $ 1,341 1,928,983 1,646,619 $ 3,576,943	December 31,2019
			$ 1,855 571,744 584,527 $ 1,158,126

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

7.

sheet date:
December 31,2020 Bank deposits 0.01%～2.93% Financial instruments measured at fair value through profit or loss December 31,2020 Financial assets–current Measured at fair value through income under compulsion Wealth management products $ 1,105,608 Non-derivative financial assets - Listed stocks – overseas 8,643 Beneficial certificates - $ 1,114,251	December 31,2019
	0.01%～2.75% December 31,2019
Financial assets–current Measured at fair value through income under compulsion Wealth management products Non-derivative financial assets - Listed stocks – overseas Beneficial certificates
		$ 1,098,007 9,301 54,336 $ 1,161,644

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8. Financial assets at fair value through other comprehensive income

Equity investment

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. Non-current Domestic investment Unlisted/OTC Common stock of Magnpower Corporation Common stock of Bigbest Solutions, Inc.	December 31,2020 $ 54,906 1,067,276 $ 1,122,182 $ 25,500 - $ 25,500	December 31,2019
			$ 53,020 639,810 $ 692,830 $ 27,240 - $ 27,240

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.

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 31,2020 $ 2,706,359 - $ 2,706,359	December 31,2019	December 31,2019
			$ 2,478,387 32,137 $ 2,510,524

(1) For details of financial assets at amortized cost, refer to Note 31.
(2) As of December 31, 2019, the interest rate range of the time deposits with original maturity date of more than 3 months were 2.45%–2.55%.

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December 31, 2020

December 31, 2019

10. 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	$ 4,563,676 7,255) ( $ 4,556,421 $ 3,714,982 27,253) ( 3,687,729 321,092 $ 4,008,821	$ 3,575,029 383) $ 3,574,646 $ 4,521,875 61,110) 4,460,765 - $ 4,460,765

(1) Accounts receivable based on cost after amortization

The Group’s average credit period for sales open account with net 0 days to 210 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, 2020

Not overdue Expected credit loss rate 0%~0.37% Total book value $ 3,559,609 Allowance for loss (expected credit loss of the given duration) ( 6,564) Cost after amortization $ 3,553,045 December 31, 2019 Not overdue Expected credit loss rate 0%~0.05% Total book value $ 4,179,606 Allowance for loss (expected credit loss of the given duration) ( 1,325) Cost after amortization $ 4,178,281	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
		0.68%~11.44% $ 124,235 ( 1,875) $ 122,360 Overdue for 1 to 30 days	1 O	8.36%~32.90% $ 18,285 ( 7,614) $ 10,671 verdue for 31 to 60 days	2 O	0.91%~64.94% $ 2,444 ( 1,578) $ 866 verdue for 61 to 90 days	3 O	3.11%~76.39% $ 1,969 ( 1,194) $ 775 verdue for 91 to 120 days	O	35.60%~100% $ 8,440 ( 8,428) $ 12 verdue for over 121 days	$ 3,714,982 ( 27,253) $ 3,687,729 Total
Expected credit loss rate Total book value Allowance for loss (expected credit loss of the given duration) Cost after amortization
	0%~0.05% $ 4,179,606 ( 1,325) $ 4,178,281	1.83%~2.47% $ 278,463 ( 6,778) $ 271,685		8.31%~17.47% $ 6,048 ( 983) $ 5,065	4	3.68%~58.01% $ 132 ( 36) $ 96	5	1.20%~60.39% $ 11,016 ( 5,640) $ 5,376		77.78%~100% $ 46,610 ( 46,348) $ 262	$ 4,521,875 ( 61,110) $ 4,460,765

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

Regarding the accounts receivable of specific customers, the Group decides whether to sell it to the bank without the right of recourse or not to sell it depending on the status of the 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, 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 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
		0.03% $ 321,189 ( 97) $ 321,092		0.68% $ - - $ -		32.90% $ - - $ -		64.94% $ - - $ -		76.39% $ - - $ -		90.22%~100% $ - - $ -		$ 321,189 ( 97) $ 321,092

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

Balance, beginning of year Add (less): Impairment loss (reversal) for the current year Less: Actual write-off amount in the current period Foreign currency translation differences Balance, end of year		2020
	Notes receivable $ 383 6,737 - 135 $ 7,255	Accounts receivable $ 61,110 ( 13,714 ) ( 20,071 ) 25 $ 27,350	Total
			$ 61,493 ( 6,977 ) ( 20,071 ) 160 $ 34,605

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Balance, beginning of year Add (less): Impairment loss (reversal) for the current year Foreign currency translation differences Balance, end of year			2019
	Notes receivable $ 7,316 ( 6,928 ) ( 5) $ 383		Accounts receivable $ 50,221 12,792 1,903) $ 61,110		Total
		(		(	$ 57,537 5,864 1,908) $ 61,493

As of December 31, 2020 and 2019, the amounts of notes receivable that have expired and have not been cashed were NT$RMB 21,185 thousand and NT$4,733 thousand, respectively.

11. Inventory

thousand, respectively. Inventory
Finished products Work in process Raw materials Inventory in-transit	December 31,2020 $ 625,590 348,041 508,806 805,343 $ 2,287,780	December 31,2019
			$ 513,991 455,136 643,654 874,004 $ 2,486,785

In 2020 and 2019, the cost of goods sold related to inventory was NT$17,019,887 thousand and NT$17,393,058 thousand, respectively. Cost of goods sold includes inventory valuation losses of NT$9,738 thousand and NT$7,440 thousand.

12. Subsidiaries

(1) Subsidiaries included in the consolidated financial statements

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

Investor	Subsidiaryname	Nature of the operation	Percentage of shareholdings	Percentage of shareholdings	Remark
			December 31,2020	December 31,2019 100.00% 100.00% 42.20% 100.00% 100.00% 100.00% 77.78% 25.00% 100.00% 100.00%
The parent company The parent company The 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.	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	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	100.00% 100.00% 42.20% 100.00% 100.00% 100.00% 77.78% 25.00% 100.00% 100.00%		(1)、(2) (2)

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(Continued from previous page)

Investor 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.	Subsidiaryname	Nature of the operation 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	Percentage of	shareholdings	Remark
			December 31,2020	December 31,2019
	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.		100.00% 67.86% 100.00% 50.00% 50.00% 35.50% 100.00% 64.50% 100.00% 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%	(3) (3) (3)

(1) Dyna Rechi Co., Ltd. increased the capital by NT$106,000 thousand through external shareholders in August 2019, which caused the Company’s shareholding ratio to drop from 45.00% to 42.20%. However, the Company holds more than half of the seats on the board of directors of Dyna Rechi Co., Ltd. with substantive ability to lead its vital activities, so it is classified as a subsidiary. Please refer to Note 27 for equity transactions associated with non-controlling interests.
(2) Information on the significant subsidiaries with non-controlling interests.
(3) In the third quarter of 2019, the Group’s subsidiary Dyna Rechi Co., Ltd. acquired 100% equity of Ablek Technology Co., Ltd.
(2) Information of the significant but non-controlling equity in subsidiaries

Subsidiaryname Principal places business TCL Rechi (Huizhou) Refrigeration Equipment Company Limited China Dyna Rechi Co., Ltd. Taiwan Profit and loss distributed to the non-controllingequity Subsidiaryname 2020 2019 TCL Rechi (Huizhou) Refrigeration Equipment Company Limited (excluding non-controlling interests of its subsidiaries) $ 47,653 $ 20,658 Dyna Rechi Co., Ltd. (excluding non-controlling interests of its subsidiaries) ( 35,102 ) ( 30,091 ) Others 602 322 Total $ 13,153 ($ 9,111)	Subsidiaryname Principal places business TCL Rechi (Huizhou) Refrigeration Equipment Company Limited China Dyna Rechi Co., Ltd. Taiwan Profit and loss distributed to the non-controllingequity Subsidiaryname 2020 2019 TCL Rechi (Huizhou) Refrigeration Equipment Company Limited (excluding non-controlling interests of its subsidiaries) $ 47,653 $ 20,658 Dyna Rechi Co., Ltd. (excluding non-controlling interests of its subsidiaries) ( 35,102 ) ( 30,091 ) Others 602 322 Total $ 13,153 ($ 9,111)	Subsidiaryname Principal places business TCL Rechi (Huizhou) Refrigeration Equipment Company Limited China Dyna Rechi Co., Ltd. Taiwan Profit and loss distributed to the non-controllingequity Subsidiaryname 2020 2019 TCL Rechi (Huizhou) Refrigeration Equipment Company Limited (excluding non-controlling interests of its subsidiaries) $ 47,653 $ 20,658 Dyna Rechi Co., Ltd. (excluding non-controlling interests of its subsidiaries) ( 35,102 ) ( 30,091 ) Others 602 322 Total $ 13,153 ($ 9,111)	Subsidiaryname Principal places business TCL Rechi (Huizhou) Refrigeration Equipment Company Limited China Dyna Rechi Co., Ltd. Taiwan Profit and loss distributed to the non-controllingequity Subsidiaryname 2020 2019 TCL Rechi (Huizhou) Refrigeration Equipment Company Limited (excluding non-controlling interests of its subsidiaries) $ 47,653 $ 20,658 Dyna Rechi Co., Ltd. (excluding non-controlling interests of its subsidiaries) ( 35,102 ) ( 30,091 ) Others 602 322 Total $ 13,153 ($ 9,111)	of	Non-controlling equity shareholding and voting right ratio	Non-controlling equity shareholding and voting right ratio
					December 31,2020 22.22% 57.80% Uncontrolled	December 31,2019
						22.22% 57.80% equity
		2020 $ 47,653 35,102 ) 602 $ 13,153		December 31, 2020 $ 661,780 672,110 107,674 $ 1,441,564		December 31, 2019
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	(		( (			$ 718,354 700,962 105,407 $ 1,524,723

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The aggregate 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

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 Total comprehensive income 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	December 31,2020 $ 5,267,977 1,114,902 ( 2,907,362 ) ( 12,785) $ 3,462,732 $ 2,693,260 661,780 107,692 $ 3,462,732 2020 $ 5,489,177 $ 217,148 - $ 217,148 $ 168,893 47,653 602 $ 217,148	December 31,2019
		$ 5,142,784 1,234,821 ( 2,652,655 ) ( 17,834) $ 3,707,116 $ 2,883,336 718,354 105,426 $ 3,707,116 2019
			$ 6,060,800 $ 94,409 - $ 94,409 $ 73,429 20,658 322 $ 94,409

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Cash flow Operating activities Investing Financing Effect of foreign exchange rates changes on cash Net cash inflow Dividends paid to non-controlling interests TCL Rechi (Huizhou) Refrigeration Equipment Company Limited Subsidiaries of TCL Rechi (Huizhou) Refrigeration Equipment Company Limited	2020 $ 899,114 250,256 ( 519,065 ) 15,552 $ 645,857 $ 110,787 $ -	2019
		$ 678,266 ( 468,577 ) ( 173,907 ) ( 9,221) $ 26,561 $ 40,586 $ -

Dyna Rechi Co., Ltd. and Its Subsidiaries

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. Non-controlling interests of the subsidiaries of Dyna Rechi Co., Ltd. Operating income Net income (loss) Other comprehensive income Total comprehensive income	December 31,2020 $ 1,138,340 1,914,293 ( 1,419,652 ) ( 43,729) $ 1,589,252 $ 490,790 672,110 426,352 $ 1,589,252 2020 $ 2,507,530 ( $ 33,335 ) 17,484 ($ 15,851)	December 31,2019
		$ 1,127,195 1,848,217 ( 1,360,002 ) ( 10,307) $ 1,605,103 $ 511,858 700,962 392,283 $ 1,605,103 2019
		$ 2,417,048 ( $ 41,607 ) ( 42,743) ($ 84,350)

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Net income (loss) attributable to: The company’s shareholders Non-controlling interests of Dyna Rechi Co., Ltd. Non-controlling interests of the subsidiaries of Dyna Rechi Co., Ltd. Total comprehensive income attributable to: The company’s shareholders Non-controlling interests of Dyna Rechi Co., Ltd. Non-controlling interests of the subsidiaries of Dyna Rechi Co., Ltd. Cash flow Operating activities Investing Financing Effect of foreign exchange rates changes on cash Net cash inflow (outflow) Dividends paid to non-controlling interests Dyna Rechi Co., Ltd. Subsidiaries of Dyna Rechi Co., Ltd. Investment under the equity method Investments in the affiliated company Individual non-dominant associates Qingdao China Steel Precision Metal Co., Ltd. Jiangxi Baida Precision Manufacturing Corp.	2020 ( $ 25,631 ) ( 35,102 ) 27,398 ($ 33,335) ( $ 21,068 ) ( 28,852 ) 34,069 ($ 15,851) $ 325,543 ( 202,444 ) ( 82,435 ) 5,020 $ 45,684 $ - $ - December 31,2020 $ 184,100 334,132 $ 518,232	2019	2019
		( $ 23,920 ) ( 30,091 ) 12,404 ($ 41,607) ( $ 35,100 ) ( 45,401 ) ( 3,849) ($ 84,350) ( $ 4,891 ) ( 188,247 ) 267,135 ( 10,428) $ 63,569 $ - $ - December 31,2019
			$ 185,347 334,080 $ 519,427

Investment under the equity method Investments in the affiliated company

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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		2020 $ 1,368 $ -		2019
				$ 7,939 $ -

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, 2019 Additions Disposition Acquired through business combination Net exchange differences Other reclassification Balance as of December 31, 2019 Accumulated depreciation and impairment Balance as of January 1, 2019 Recognized as impairment loss Depreciation expenses Disposition Acquired through business combination Net exchange differences Balance as of December 31, 2019 Net amount as of December 31, 2019 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	Proprietaryland	Proprietaryland	Building	Machinery and equipment	Other equipment	Construction in progress	Total
		$ 207,567 - - - - - $ 207,567 $ - - - - - - $ - $ 207,567 $ 207,567 - - - - $ 207,567 $ - - - - - $ - $ 207,567	$ 3,477,970 135,134 ( 25,009 ) 7,321 ( 111,179 ) 162,169 $ 3,646,406 $ 1,192,555 2,317 118,474 ( 24,932 ) 2,219 ( 38,746) $ 1,251,887 $ 2,394,519 $ 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	$ 8,645,062 198,488 ( 681,889 ) 42,566 ( 328,979 ) 613,548 $ 8,488,796 $ 5,130,712 - 566,169 ( 613,128 ) 23,284 ( 183,264) $ 4,923,773 $ 3,565,023 $ 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	$ 1,641,901 78,073 ( 92,111 ) 10,163 ( 39,472 ) 60,823 $ 1,659,377 $ 1,059,862 - 131,757 ( 88,243 ) 6,033 ( 22,367) $ 1,087,042 $ 572,335 $ 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	$ 421,743 303,503 - - ( 19,449 ) ( 238,219) $ 467,578 $ - - - - - - $ - $ 467,578 $ 467,578 50,963 - 6,146 ( 112,451) $ 412,236 $ - - - - - $ - $ 412,236	$ 14,394,243 715,198 ( 799,009 ) 60,050 ( 499,079 ) 598,321 $ 14,469,724 $ 7,383,129 2,317 816,400 ( 726,303 ) 31,536 ( 244,377) $ 7,262,702 $ 7,207,022 $ 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

The Group expected that the future economic benefits of some of the plants would be reduced, resulting in the recoverable amount being less than its book value. Therefore, the impairment loss of NT$2,317 thousand for 2019 was recognized, and the impairment loss has been included in other profits and losses.

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The Group determines the recoverable amount of the relevant plants based on the fair value less the disposal cost. The relevant fair value is determined by cost. The cost method used is Level 3 fair value measurement with the total cost of repurchasing or constructing a new asset under the current conditions, less the physical depreciation, functional depreciation, and economic depreciation that have occurred.

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

iation expenses is appropriated in accordance s of useful life illustrated below:	with the straight-lin
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

Please refer to Note 31 for the amount of property, plant and equipment pledged as guarantees for borrowings.

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 31,2020 $ 156,015 44,681 574 $ 201,270 2020 $ 45,878 $ 4,346 6,285 617 $ 11,248	December 31,2019
			$ 157,437 5,546 626 $ 163,609 2019
			$ 399 $ 4,524 3,420 387 $ 8,331

(2) Lease liabilities

Lease liabilities
Carrying amount of lease liabilities Current Non-current	December 31,2020 $ 10,720 $ 45,557	December 31,2019
			$ 3,258 $ 13,075

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The range of lease liability discount is as follows:

Land Buildings Transportation equipment	December 31,2020 2.70% 1.35%～2.20% 1.35%～2.70%	December 31,2019
		2.70% 1.35%～2.00% 2.00%～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.

(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		2020 $ 10,681 $ 15,855 $ 34,034)		2019
	(		(	$ 10,192 $ 18,779 $ 33,240)

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.

For the years ended December 31, 2019, short-term lease expenses also included leases for which the lease terms ended on or before December 31, 2019, and for which the recognition exemption applied. As of December 31, 2019, the short-term lease commitment amount, for which the recognition exemption applied, was NT$1,894 thousand.

All lease commitments during the lease terms beginning after the balance sheet date are as follows:

date are as follows:
Lease commitment	December 31,2020 $ -	December 31,2019
			$ -

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16. Other assets

Other assets
Current Prepayment for purchase Others (Note) Non-current Prepayments for equipment Refundable deposits	December 31,2020 $ 353,603 434,552 $ 788,155 $ 364,403 40,080 $ 404,483	December 31,2019
			$ 334,666 816,107 $ 1,150,773 $ 777,550 34,076 $ 811,626

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

17. Loans

(1) Short-term borrowings

s Short-term borrowings
Unsecured loans - Credit borrowings Interest rate collars - Unsecured borrowings	December 31,2020 $ 1,862,583 0.80%～3.65%	December 31,2019
		$ 2,500,210 0.98%～4.39%

(2) Short-term notes payable

Short-term notes payable
Commercial papers payable Less: Discount of short-term notes and bills payable	December 31,2020 $ 650,000 ( 307) $ 649,693	December 31,2019
			$ 100,000 ( 63) $ 99,937

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

December 31, 2020

Guarantee/underwriting institutions	Face amount	Face amount		Discounted amount		Book value	Interest rate collars Note Note Note Note Note Note	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		－－－－－－		$ - - - - - - $ -

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Note: Interest rate range is 0.90–1.17%.

December 31, 2019

Guarantee/underwriting institutions	Face amount	Face amount		Discounted amount		Book value	Interest rate collars	Collateral	Collateral Book amount	Collateral Book amount
Commercial papers payable International Bills Finance Corporation China Bills Finance Corporation		$ 30,000 70,000 $ 100,000		$ 48 15 $ 63		$ 29,952 69,985 $ 99,937	Note Note	－－		$ - - $ -

Note: Interest rate is 1.19%.

(3) Long-term borrowings

Secured loans (Note 31) 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	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 March 22, 2019 to March 22, 2021, US$9,000 thousand was drawn down, which was repaid early in April 2020; from June 24, 2020 to June 24, 2020, US$9,000 thousand was drawn down, and will be repaid in a lump sum upon maturity. From March 28, 2019 to March 26, 2022, US$8,000 thousand was drawn down, which was repaid early in April 2020; from April 15, 2020 to April 15, 2022, US$8,000 thousand was drawn down, and will be repaid in a lump sum upon maturity. From March 29, 2019 to March 29, 2022, a loan was repaid early in June 2020; from June 19, 2020 to June 19, 2022, US$400,000 thousand was drawn down, and will be repaid in a lump sum upon maturity. From August 8, 2019 to April 26, 2022, US$500,000 thousand was drawn down, and NT$185,000 thousand and NT$115,000 thousand were repaid early in December 2019 and December 2020, respectively, and the remaining amount will be repaid in a lump sum upon maturity. Since December 21, 2018 and January 21, 2019, NT$300,000 thousand and NT$200,000 thousand were drawn down separately, which were both repaid early in December 2020. From March 13, 2019 to March 13, 2021, NT$600,000 thousand was drawn down and repaid early in February and April of 2020; from July 21, 2020 to July 21, 2022, NT$100,000 thousand was drawn down and will be repaid in a lump sum upon maturity.	December 31, 2020 $ 1,600,000 256,320 227,840 400,000 200,000 - 100,000	December 31, 2019
	2024.07.26 2022.06.24 2022.04.15 2022.06.19 2022.04.26 2021.12.21 2022.07.21			$ 1,600,000 269,820 239,840 400,000 315,000 500,000 600,000

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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 2022.12.23 2022.12.25 2029.10.15 2027.02.15	Material terms From August 12, 2019 to August 9, 2021, NT$300,000 thousand was drawn down and repaid early in August 2020; from December 25, 2020 to December 23, 2022, NT$300,000 thousand was drawn down and will be repaid in a lump sum upon maturity. From December 25, 2019 to December 25, 2022, NT$200,000 thousand was drawn down, and will be amortized and repaid in a total of four instalments from March 25, 2022. 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, 2020 $ 300,000 200,000 120,780 278,300 3,683,240 - $ 3,683,240	December 31, 2019	December 31, 2019
					$ 300,000 200,000 86,000 - 4,510,660 - $ 4,510,660

The effective interest rate as of December 31, 2020 and 2019 was 0.74%–1.50% and 0.85%– 2.73%, 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 31,2020 $ 1,000,000 ( 454) $ 999,546	December 31,2019
	(	(	$ 1,000,000 1,121) $ 998,879

The Company and the International Bills Finance Corporation signed a bank-guaranteed commercial paper revolving credit line and underwriting

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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, and the contract expiration date was November 11, 2024.

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, 2020 and 2019 was 1.34%–1.40% and 1.47%–1.52%, respectively.

18. Other payables

Other payables
Salary and bonus payables Remuneration to employees and directors and supervisors payable Payable tax Vacation benefit payable Equipment payables Others (Note)	December 31,2020 $ 334,410 121,756 13,565 15,205 82,971 308,913 $ 876,820	December 31,2019
			$ 296,673 102,488 33,742 15,640 92,076 275,771 $ 816,390

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

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

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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 31,2020 $ 146,565 ( 94,312) $ 52,253	December 31,2019
	(	(	$ 162,599 107,872) $ 54,727

Change in net defined benefit liability is shown below

Balance as of January 1, 2019 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, 2019 Balance as of January 1, 2020 Service costs Current service cost Interest expenses (revenues) Recognized in the profit or loss	Present value of the defined benefit obligations $ 188,380 2,700 1,885 4,585 - 958 3,994 ( 462) 4,490 - ( 34,856) $ 162,599 $ 162,599 1,953 1,219 3,172	The fair value ofplan assets ($ 120,806) - ( 1,213) ( 1,213) ( 4,270 ) - - - ( 4,270) ( 16,439 ) 34,856 ($ 107,872) ($ 107,872) - ( 812) ( 812)	Net defined benefit liability
	( (		$ 67,574 2,700 672 3,372 ( 4,270 ) 958 3,994 ( 462) 220 ( 16,439 ) - $ 54,727 $ 54,727 1,953 407 2,360

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from previous page)
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	Present value of the defined benefit obligations $ - 98 3,619 ( 247) 3,470 - ( 22,676) $ 146,565	The fair value ofplan assets ( $ 4,106 ) - - - ( 4,106) ( 4,198 ) 22,676 ($ 94,312)	Net defined benefit liability
	( (		( $ 4,106 ) 98 3,619 ( 247) ( 636) ( 4,198 ) - $ 52,253

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

below:
Operating cost Marketing expenses Administrative expenses Research and development expenses		2020 $ 159 27 2,105 69 $ 2,360		2019
				$ 205 17 3,042 108 $ 3,372

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.

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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 31,2020 0.500% 2.000%	December 31,2019
		0.750% 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 31,2020 ($ 3,619) $ 3,756 $ 3,634 ($ 3,521)	December 31,2019	December 31,2019
	( (	( (	$ 4,002) $ 4,154 $ 4,029 $ 3,903)

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	December 31,2020 $ 600 9.9 years	December 31,2019	December 31,2019
			$ 720 9.9 years

20. Equity

(1)	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 31,2020 600,000 $ 6,000,000 504,915 $ 5,049,151	December 31,2019	December 31,2019
				600,000 $ 6,000,000 506,013 $ 5,060,131

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

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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 reserves

NT$5,049,151 thousand. Capital reserves
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 Treasury stock trade Endowments For covering loss carried forward only. Gains on disposal of assets Recognition of changes in ownership interests of subsidiaries (2) Others	December 31,2020 $ 279,956 1,050,383 - 1,651 21 11,693 164 $ 1,343,868	December 31,2019
			$ 280,564 1,052,668 4,642 1,651 21 11,693 164 $ 1,351,403

(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.

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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 June 16, 2020 and June 14, 2019, which resolved to pass the 2019 and 2018 earnings distribution proposals, respectively, as follows:

Statutory surplus reserves Special surplus reserves Cash dividend	Distribution of retained earnings 2019 2018 $ 65,596 $ 110,143 335,833 293,042 252,458 605,898	Dividend Per Share(NTD)	Dividend Per Share(NTD)
	2019 $ 65,596 335,833 252,458	2019 $ 0.5	2018
			$ 1.2

On March 22, 2021, the board of directors proposed the 2020 earnings distribution proposal as follows:

distribution proposal as follows:
Legal reserve appropriated Reversal of special reserve Cash dividend	Distribution of retained earnings $ 69,425 456,146 353,427	Dividend Per Share ( N T D )
		$ 0.7

The 2020 earnings distribution proposal is pending a resolution by the shareholders’ meeting scheduled to be held on June 17, 2021.

(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.

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As of December 31, 2020 and 2019, the special surplus reserve provided by the Company in accordance with Letter Jin Guan-Zheng-Fa No. 1010012865 was NT$1,199,368 thousand and NT$863,535 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	2020 ( $ 1,075,561 ) 142,534 ( 28,507) ($ 961,534)	2019
		( $ 719,013 ) ( 445,685 ) 89,137 ($ 1,075,561)

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 Balance, end of year	2020 ( $ 123,807 ) 342,119 $ 218,312	2019
		( $ 144,522 ) 20,715 ($ 123,807)

(6) Uncontrolled equity

Uncontrolled equity
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 Increase in non-controlling interests by subsidiary’s capital increase (Note 27) Balance, end of year	2020 $ 1,524,723 13,153 16,037 ( 1,562 ) ( 110,787 ) - $ 1,441,564	2019
		$ 1,529,711 ( 9,111 ) ( 65,361 ) 4,070 ( 40,586 ) 106,000 $ 1,524,723

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(7) Treasury shares

Transfer of shares to employees (Thousand shares)

Treasury shares	Transfer of shares to employees	Transfer of shares to employees
Cause Number of shares on January 1 and December 31, 2019 Number of shares on January 1, 2020 Increase Decrease Number of shares on December 31, 2020	(Thousand shares)
	(	1,098 1,098 20 1,098) 20

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		2020 $ 18,471,937 500,871 347,154 $ 19,319,962		2019
				$ 19,540,547 432,672 159,725 $ 20,132,944

(2) Refund liability

Based on historical experience and contract conditions, the Group’s estimated refund liability for sales returns and discounts in 2020 and 2019 was NT$776,240 thousand and NT$695,991 thousand, respectively. As of December 31, 2020 and 2019, the balance of the refund liability was NT$610,010 thousand and NT$478,246 thousand, respectively.

22. Business units in continuing operation income

(1) Interest revenue

Interest revenue
Bank deposits		2020 $ 74,693		2019
				$ 79,085

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(2) Other income Rent revenue Other operating leases (Note 15) Dividend income Financial assets at fair value through profit and loss Investment of equity instruments at fair value through other comprehensive income Others (Note 25) (3) Other profits and losses Financial assets mandatorily measured at fair value through profit or loss Net foreign exchange gain (loss) Gains or losses on disposal of property, plant and equipment and prepaid rents Impairment loss of property, plant and equipment Others ( The components of financial assets at Interest income from wealth management products Net gains and losses on changes in the fair value of stocks and fund beneficiary certificates (4) Financial costs Interest from bank borrowings Interest on lease liabilities Less: The amount included in the cost of qualifying assets Other financial costs		2020 2019 $ 16,705 $ 11,629 90 104 31,568 32,286 103,027 71,852 $ 151,390 $ 115,871 2020 2019 $ 44,877 $ 40,552 52,804 ( 46,061 ) 2,252 46 - ( 2,317 ) 2,493) ( 1,848) $ 97,440 ($ 9,628) FVTPL are as follows: 2020 2019 $ 42,809 $ 33,697 2,068 6,855 $ 44,877 $ 40,552 2020 2019 $ 148,089 $ 261,992 757 439 - ( 12,146) 148,846 250,285 7,835 7,664 $ 156,681 $ 257,949		2019
				$ 11,629 104 32,286 71,852 $ 115,871 2019
				$ 33,697 6,855 $ 40,552 2019
			(	$ 261,992 439 12,146) 250,285 7,664 $ 257,949

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Information of interest capitalization is as follows:

Interest capitalization amount Capitalized interest rate (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		2020 $ - - 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		2019
				$ 12,146 2.00-2.13% 2019
				$ 683,140 141,591 $ 824,731 $ 223 9,641 $ 9,864 2019
				$ 13,484 3,372 16,856 2,204,453 $ 2,221,309 $ 1,538,901 682,408 $ 2,221,309

(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 2020 and 2019, the remuneration to employees and directors was estimated based on the aforementioned pre-tax profit and the possible distributable amount according to the past experience.

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The remuneration to employees and directors for 2020 and 2019 was resolved by the board of directors on March 22, 2021 and March 20, 2020, respectively, as follows:

Amount

follows: Amount
Remuneration to employees Remuneration to directors	2020 Cash Stock $ 49,441 $ - 14,262 -	2019
	Cash $ 49,441 14,262	Cash $ 45,368 13,087	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 2019 and 2018 and the amount recognized in the consolidated financial statements for 2019 and 2018.

For information on the remuneration to employees and directors as resolved by the Company’s board of directors for 2020 and 2019, 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)		2020 $ 445,425 392,621) $ 52,804		2019
	(		( (	$ 425,512 471,573) $ 46,061)

23. Continuing department income tax

(1) Income tax recognized in profit or loss

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

			2020			2019
Income tax expenses in the
current period
Accrued in current year		$	436,240		$	259,825
Additional levy on
undistributed earnings			95			4,672
Prior year adjustment	(		175,535)	(		140,430)
			260,800			124,067
Deferred tax
Accrued in current year	(		20,054 )			58,189
Prior year adjustment			24,625	(		27,839)
			4,571			30,350
Income tax expense recognized
in the profit or loss		$	265,371		$	154,417

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

(2) (3)	2020 2019 Income before tax from continuing operations $ 988,015 $ 801,266 Income tax expense of net income before tax at the statutory tax rate $ 431,661 $ 271,212 Non-deductible expenses and losses for tax purposes 12,752 31,112 Non-taxable income ( 25,784 ) ( 492 ) Additional levy on undistributed earnings 95 4,672 Unrecognized (recognizable) deductible temporary differences 22,182 ( 11,657 ) Income tax expense of prior years adjusted in the current year ( 175,535) ( 140,430) Income tax expense recognized in the profit or loss $ 265,371 $ 154,417 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%. Income tax recognized in the other comprehensive profit or loss 2020 2019 Deferred tax Accrued in current year - Translation of foreign operations $ 30,069 ( $ 93,207 ) - Unrealized gain or loss on financial assets at fair value through other comprehensive profit or loss 85,493 5,935 - Remeasurement of defined benefit plan 127 ( 44) $ 115,689 ($ 87,316) Current Tax Liability December 31,2020 December 31,2019 Current Tax Liability Payable income tax $ 514,837 $ 404,056		2019
		( $ 93,207 ) 5,935 ( 44) ($ 87,316) December 31,2019
			$ 404,056

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%.

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(4) Deferred income tax assets and liabilities

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

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 2019 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	Balance, beginningofyear $ 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 Balance, beginningofyear $ 20,413 15,046 18,514 - 17,994 56,415 13,667 4,695 4,172 6,682 84,605 64,261 112,548 11,429 $ 430,441	Recognized in the profit or loss $ - ( 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 Recognized in theprofit or loss $ - ( 4,500 ) 1,244 4,971 ( 7,128 ) 47,871 ( 2,614 ) 6,591 ( 778 ) ( 1,018 ) ( 1,462 ) - ( 1,539 ) 3,533 $ 45,171	Recognized in the other comprehensive profit of loss ( $ 14,478 ) - - - - - ( 127 ) - - - - ( 30,069 ) - - ($ 44,674) $ 71,015 - - - - - $ 71,015 Recognized in the other comprehensive profit of loss ( $ 5,935 ) - - - - - 44 - - - - 93,207 - - $ 87,316		Exchange difference $ - - 303 - 331 2,191 - 70 17 101 1,493 - 7 ) 266 $ 4,765 $ - - 143 - - 15 $ 158 Exchange difference $ - - 515 ) - 421 ) 4,070 ) - 458 ) 44 ) 224 ) 3,302 ) - 49 ) 589) $ 9,672)		Balance, end 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 Balance, end 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

(Continued on next page)

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(Continued from previous page)

Deferred tax liabilities Temporary difference Investment gains of foreign investment companies Real property, plant and equipment Reserve for land revaluation increment tax (“LRIT”) Unrealized exchange gain Others	Balance, beginningofyear $ 538,748 12,513 10,104 2,065 2,892 $ 566,322	Recognized in the profit or loss $ 79,248 982 - ( 1,817 ) ( 2,892) $ 75,521	Recognized in the other comprehensive profit of loss $ - - - - - $ -		Exchange difference $ - 453 ) - - - $ 453)		Balance, end of year
		( (		( (			$ 617,996 13,042 10,104 248 - $ 641,390

(5) 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 2018 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		2020 $ 1.41 $ 1.40		2019
				$ 1.30 $ 1.29

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		2020 2019 $ 709,491 $ 655,960 Unit: shares in thousands 2020 2019 504,901 504,915 3,103 2,731 508,004 507,646

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

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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 2020 and 2019 was NT$62,870 thousand and NT$114,745 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		2020 $ 55,857		2019
				$ 20,432

In addition, for the subsidized items that are transferred to profit or loss within the useful lives of the assets, as of December 31, 2020 and 2019, the amount of NT$573,428 thousand and NT$580,715 thousand had been obtained, respectively. The amount of reduction of depreciation expenses is as follows:

Reduction of depreciation expenses		2020 $ 23,090		2019
				$ 20,687

26. Corporate Merger

(1) Acquisition of subsidiaries

Ablek Technology Co., Ltd. and Its Subsidiaries	Major operating activities	Date of acquisition	Owners’ equity with voting rights/percenta ge of acquisition(%)	Consideration t r a n s f e r r e d	Consideration t r a n s f e r r e d
	Manufacturing and sales of motors for household appliances	August 9, 2019	100%		$ 146,471

Based on the strategic advantages of complementarity of products, the Group acquired 100% of the equity of Ablek Technology Co., Ltd. and its subsidiary Ablek Technology Ltd.

(2) Consideration transferred

Cash

Ablek Technology Co., Ltd. and Its Subsidiaries $ 146,471

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(3) Assets acquired and liabilities assumed at the date of acquisition

Current assets Cash and cash equivalents Accounts receivable and other receivable Inventory Prepaid and other assets current Non-Current assets Plant and equipment Other non-current assets Current liabilities Accounts payable and other accounts payable Other current liabilities	Ablek Technology Co., Ltd. and Its Subsidiaries
	$ 41,450 35,827 21,771 3,453 28,514 3,268 ( 43,526 ) ( 11) $ 90,746

(4) Goodwill arising from acquisitions

Goodwill arising from acquisitions
Consideration transferred Less: The fair value of the net identifiable assets acquired Goodwill arising from acquisitions	Ablek Technology Co., Ltd. and Its Subsidiaries
	(	$ 146,471 90,746) $ 55,725

The goodwill generated from acquisition of Ablek Technology Co., Ltd. and its subsidiaries is mainly derived from the control premium. In addition, the consideration paid for business combination includes the expected combination synergies, revenue growth, future market development and the employee value of Ablek Technology Co., Ltd. and its subsidiaries. However, such benefits did not meet the requirements for the recognition of identifiable intangible assets and were therefore not recognized separately.

(5) Net cash outflow from acquisition of subsidiary

therefore not recognized separately. Net cash outflow from acquisition of subsidiary
Consideration of cash payments Less: Balance of cash and cash equivalents of acquisition Investment payable (listed under other payables – others)	Ablek Technology Co., Ltd. and Its Subsidiaries
	$ 146,471 ( 41,450 ) ( 15,626) $ 89,395

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(6) Effects of business combination on the operating results

The operating results of the acquired company are from the date of the acquisition as follows:

acquisition as follows:
Operating income Net profits of the current year	Ablek Technology Co., Ltd. and Its Subsidiaries
		$ 138,873 $ 68

27. Equity transactions with the non-controlling equity

The Group failed to subscribe for the shares issue by means of cash capital increase by subsidiary Dyna Rechi Co., Ltd. in proportion to its shareholding ratio in August 2019, resulting in the shareholding ratio falling from 45% to 42.20%.

Since the transaction above did not change the Group’s control over the subsidiary, the Group treated it as an equity transaction.

the Group treated it as an equity transaction.
Consideration of cash received The carrying amount of the net assets of the subsidiary is calculated for the amount to be transferred to non-controlling interests based on the relative changes in equity. Equity transaction balance Adjustment of equity transaction balance Capital reserves- recognition of changes in ownership interests of subsidiaries	Dyna Rechi Co., Ltd.
	(	$ 106,000 94,307) $ 11,693 $ 11,693

28. 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.

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29. 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, 2020

Fair value hierarchy 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 December 31, 2019 Financial assets at fair value through profit and loss Listed stocks – overseas Beneficiary certificates of fund 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 $ 8,643 - $ 8,643 $ 1,067,276 54,906 - $ 1,122,182 Level 1 $ 9,301 54,336 - $ 63,637 $ 639,810 53,020 - $ 692,830	Level 2 $ - - $ - $ - - - $ - Level 2 $ - - - $ - $ - - - $ -	Level 3 $ - 1,105,608 $ 1,105,608 $ - - 25,500 $ 25,500 Level 3 $ - - 1,098,007 $ 1,098,007 $ - - 27,240 $ 27,240	Total
				$ 8,643 1,105,608 $ 1,114,251 $ 1,067,276 54,906 25,500 $ 1,147,682 Total
				$ 9,301 54,336 1,098,007 $ 1,161,644 $ 639,810 53,020 27,240 $ 720,070

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There were no transfers between Level 1 and Level 2 fair value in 2020 and 2019.

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 Other gains and losses unrealized in the current period		Financial instruments measured at fair value throughprofit or loss 2020 2019 $ 1,098,007 $ 781,303 42,809 33,697 - - 35,208 ) 283,007 $ 1,105,608 $ 1,098,007 $ - $ -	Financial instruments measured at fair value throughprofit or loss 2020 2019 $ 1,098,007 $ 781,303 42,809 33,697 - - 35,208 ) 283,007 $ 1,105,608 $ 1,098,007 $ - $ -	Financial instruments at fair value through other comprehensive income	Financial instruments at fair value through other comprehensive income
		2020 $ 1,098,007 42,809 - 35,208 ) $ 1,105,608 $ -		2020 $ 27,240 - ( 1,740 ) - $ 25,500 $ -	2019
	(				$ 29,490 - ( 2,250 ) - $ 27,240 $ -

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 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.

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(3) Categories of financial instruments

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 31,2020 $ 1,114,251 15,064,724 1,147,682 16,361,222	December 31,2019
		$ 1,161,644 11,846,354 720,070 15,118,220

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.

1. Market Risk

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.

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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 46.49% 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 7.34% 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 34.

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) 2019 ( $ 624 )	Effect on	RMB(ii)
	2020 $ 6,065		2020 ( $ 18,006 )	2019
				( $ 28,230 )

(i) It is mainly derived from the Group’s outstanding USD-denominated bank deposits, receivables, payables, and short-term borrowings 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 31,2020 $ 4,352,978 2,512,276 1,928,953 4,682,786	December 31,2019
		$ 3,095,051 2,600,147 571,714 5,509,539

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 2020 and 2019 net profit before tax would have decreased by NT$27,538 thousand and NT$49,378 thousand, respectively, mainly due to the Group’s exposure to the risk of changes in the interest rate.

(3)

Other price risks.

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

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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 2020 and 2019 would have increased/decreased by NT$86 thousand and NT$636 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 2020 and 2019 would have increased/decreased by NT$11,222 thousand and NT$6,928 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 seven 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 2020 and 2019, the Group’s concentration of credit risk on the top seven customers did not exceed 22% 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 seven customers. As of December 31, 2020 and 2019, the percentage of the total accounts receivable from the aforementioned customers was both 66%.

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, 2020 and 2019, please refer to the description of (2) regarding the financing amount below.

152

(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, 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		1 to 3 months		3 months to 1 year		1 to 5years		Over 5years
			$ 2,121,118 1,081 3,755 1,337,107 $ 3,463,061		$ 3,163,643 2,038 7,511 870,942 $ 4,044,134		$ 3,856,813 8,813 33,799 310,498 $ 4,209,923		$ 24,586 36,305 4,618,557 - $ 4,679,448		$ - 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		1 to 5years	5 to 10years			10 to 15 years		15 to 20 years $ 2,052	Over 20 years
		$ 11,932		$ 36,305		$ 2,052		$ 2,052			$ 10,089

December 31, 2019

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		1 to 3 months		3 months to 1 year		1 to 5years		Over 5years
			$ 1,943,958 301 5,919 917,717 $ 2,867,895		$ 3,185,027 609 11,839 312,386 $ 3,509,861		$ 1,850,092 2,697 53,274 1,402,394 $ 3,308,457		$ 29,456 4,693 5,569,151 - $ 5,603,300		$ - 15,584 60,228 - $ 75,812
N L In In

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

follows:
Lease liabilities		Less than 1 year		1 to 5years	5 to 10years			10 to 15 years		15 to 20 years $ 1,920	Over 20 years
		$ 3,607		$ 4,693		$ 1,920		$ 1,920			$ 9,824

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.

153

(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 31,2020 $ 1,600,000 170,880 1,770,880 5,595,062 24,543,793 30,138,855 $ 31,909,735	December 31,2019
			$ 1,600,000 179,880 1,779,880 6,509,686 21,811,792 28,321,478 $ 30,101,358

(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, 2020

	Amount	Reclassified to other	Amount	Amount	Amount	The annual
						interest rate
						of prepaid
Counterparties	factored	receivables	available	drawn down		amount(%)
DBS Bank	$ 82,215	$ -	$ -		$ 82,215	0.85%
Limited

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 2020 and 2019, 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$1,164,153 thousand and NT$3,413,127 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 2020 and 2019, the Group recognized financial costs of NT$8,473 thousand and NT$36,087 thousand upon factoring of the banker’s acceptance receivable.

30. 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:

154

(1) Name of related parties and the relations

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

(2) Operating income

Operating income
Account titles in book Sales revenue	Type and Name of relatedparty Investor with significant influence Affiliated enterprises		2020 $ 6,231 2,030 $ 8,261		2019
					$ 5,238 - $ 5,238

(3) Purchase

Purchase		$ 8,261		$ 5,238
Type and Name of relatedparty Affiliated enterprises Investor with significant influence		2020 $ 636,927 - $ 636,927		2019
				$ 674,984 170 $ 675,154

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 Notes receivable-related party Accounts receivable – related parties Other receivables	Type and Name of relatedparty Investor with significant influence Investor with significant influence Investor with significant influence Affiliated enterprises	December 31, 2020 $ - $ 2,538 $ 34 1 $ 35	December 31, 2019
				$ 782 $ 161 $ - - $ -

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 2020 and 2019.

155

(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 relatedparty Affiliated enterprises Affiliated enterprises Investor with significant influence	December 31, 2020 $ 64,459 $ 134,719 - $ 134,719	December 31, 2019	December 31, 2019
				$ 30,331 $ 57,409 184 $ 57,593

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

(6) Lease agreement

provided. Lease agreement
Type and Name of relatedparty Interest expenses Investor with significant influence Rent expense Investor with significant influence		2020 $ - $ 532		2019
				$ 28 $ 88

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 (7) Remuneration to the management Short-term employee benefits Retirement benefits	December 31,2020 $ 442 2020 $ 51,092 646 $ 51,738	December 31,2020 $ 442 2020 $ 51,092 646 $ 51,738	December 31,2019	December 31,2019
				$ 442 2019

				$ 74,761 645 $ 75,406

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.

156

31. Pledged assets

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

Proprietary land Building Notes receivable Financial assets based on cost after amortization	December 31,2020 $ 207,567 224,689 1,083,476 2,706,359 $ 4,222,091	December 31,2019	December 31,2019
			$ 207,567 236,009 653,874 2,083,018 $ 3,180,468

32. 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:

USD JPY	December 31,2020 $ 260 -	December 31,2019
		$ 9 50,300

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

Purchase of property, plant, and equipment JPY RMB NTD USD	December 31,2020 $ 74,980 39,512 2,784 84	December 31,2019
		$ 520,675 118,226 20,332 793

(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, 2020, the amount of the letters of guarantee issued by the bank was NT$10 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, 2020, the amount of the letters of guarantee issued by the bank was NT$500 thousand.

33. Other information

157

policies are gradually loosened, the Group expects that its operations will gradually return to normal. However, as the 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.

34. 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, 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

158

December 31, 2019

December 31, 2019
Foreign currency assets Monetary items USD USD 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 $ 59,628 16,513 100,146 50,289 26,738 19,048 120,867 14,836 62,530 487,815 193,399 10,275	Exchange rate 29.98 (USD : NTD) 6.9762 (USD : RMB) 4.2975 (RMB : NTD) 0.0092 (JPY : USD) 33.59 (EUR : NTD) 33.59 (EUR : NTD) 0.1433 (RMB : USD) 29.98 (USD : NTD) 6.9762 (USD : RMB) 4.2975 (RMB : NTD) 0.0642 (JPY : RMB) 33.59 (EUR : NTD)	Book value
			$ 1,787,641 495,045 430,380 13,880 898,145 639,810 519,427 444,770 1,874,648 2,096,376 53,378 345,128

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:

follows:
Functional currency USD NTD RMB	2020	Net exchange losses(gains) $ 570 ( 31,500 ) 83,734 $ 52,804	2019
	Functional currency exchanges for presentation currency 29.549 (USD : NTD) 1 (NTD : NTD) 4.283 (RMB : NTD)		Functional currency exchanges for presentation currency 30.912 (USD : NTD) 1 (NTD : NTD) 4.482 (RMB : NTD)	Net exchange losses(gains)
		(		( (	$ 5,760 35,568 87,389) $ 46,061)

159

35. 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: None.
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 4.
Accounts receivable-related party reaching NTD 100 million or more than 20% of the Paid-in shares capital: Table 5.
Trading in derivative instruments: N/A.
Other: business relationships and significant intercompany transactions between parent and subsidiary units: Table 6.
(2) Information on investees: Table 7.
(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 8 attached.
Significant direct transactions with the investee in Mainland China or indirectly through third regions, its prices, terms of payment, and unrealized gain or loss: Table 9.
- (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.

160

(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 10.

36. 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:

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 $ 18,471,937 22,358,382 $ 40,830,319 $ 1,116,591		BLDC motor unit $ 500,871 482,006 $ 982,877 $ 113,685)		Others $ 347,154 311,394 $ 658,548 $ 22,416		Total
			(				$ 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

(Continued on next page)

161

(Continued from previous page)

2019 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 $ 432,672 439,521 $ 872,193 $ 162,554)		Others $ 159,725 146,254 $ 305,979 $ 2,100		Total
		$ 19,540,547 24,555,463 $ 44,096,010 $ 1,239,974					$ 20,132,944 25,141,238 45,274,182 ( 25,141,238) 20,132,944 1,079,520 79,085 115,871 ( 213,572 ) ( 9,628 ) ( 257,949 ) 7,939 $ 801,266

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 U.S. Thailand Egypt Brazil Others		Income from external customers	Income from external customers	Income from external customers
		2020 $ 11,501,257 1,954,957 1,786,742 1,417,868 503,545 439,130 1,716,463 $ 19,319,962		2019
				$ 12,042,612 1,659,958 2,051,926 974,939 461,007 588,554 2,353,948 $ 20,132,944

162

China Taiwan	Non-Current assets	Non-Current assets	Non-Current assets
	December 31,2020 $ 6,781,568 1,219,830 $ 8,001,398	December 31,2019
			$ 7,042,874 1,227,194 $ 8,270,068

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	2020 $ 2,034,936	2019
		NA (Note)

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

163

Unit: NTD thousand or in thousands in foreign currencies

RECHI PRECISION CO., LTD. and its subsidiaries

The Loaning of Funds

For the Year Ended December 31, 2020

Table 1

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 3	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. Dongguan Rechi Compressor Co., Ltd.	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. Rechi Precision (Jiujiang) Electric Machinery Limited Dyna Rechi Jiujiang Co., Ltd.	Other receivables Other receivables Other receivables Other receivables Other receivables Other receivables Other receivables	Yes Yes Yes Yes Yes Yes Yes	NTD 349,185 ( RMB 80,000 ) NTD 349,185 ( RMB 80,000 ) NTD 218,241 ( RMB 50,000 ) NTD 1,281,600 ( USD 45,000 ) NTD 523,778 ( RMB 120,000 ) NTD 130,944 ( RMB 30,000 ) NTD 130,944 ( RMB 30,000 )	NTD 349,185 ( RMB 80,000 ) NTD 349,185 ( RMB 80,000 ) NTD 218,241 ( RMB 50,000 ) NTD 1,281,600 ( USD 45,000 ) NTD 130,944 ( RMB 30,000 ) NTD - ( RMB - ) NTD 130,944 ( RMB 30,000 )	NTD 349,185 ( RMB 80,000 ) NTD 349,185 ( RMB 80,000 ) NTD 218,241 ( RMB 50,000 ) NTD 1,281,600 ( USD 45,000 ) NTD 130,944 ( RMB 30,000 ) NTD - ( RMB - ) NTD 130,944 ( RMB 30,000 )	1.40% 1.40% 1.40% 0.00%~ 2.00% 2.60%~ 4.46% 2.80% 3.15%	2 2 2 2 2 2 2	$ - - - - - - -	Working capital Working capital Working capital Working capital Working capital Working capital Working capital	$ - - - - - - -	－－－－－－－	－－－－－－－	NTD 883,824 NTD 883,824 NTD 883,824 NTD 11,199,751 NTD 806,924 NTD 142,407 NTD 142,407	NTD 1,767,649 NTD 1,767,649 NTD 1,767,649 NTD 11,199,751 NTD 806,924 NTD 142,407 NTD 142,407

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.

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

Note 4: Already eliminated in the consolidated statements

164

Unit: NTD thousand or in thousands in foreign currencies

RECHI PRECISION CO., LTD. and its subsidiaries

Endorsements and guarantees made for others

For the Year Ended December 31, 2020

Table 2

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	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.	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 TechnologyCo.,Ltd.	Note 1 Note 2 Note 2 Note 3(2) Note 2 Note 1	$ 8,838,243 8,838,243 8,838,243 NTD 4,480,152 ( RMB 1,026,424 ) 581,450 581,450	NTD 2,779,641 ( USD 90,500 ) NTD 739,448 ( USD 24,000 ) NTD 1,872,809 ( USD 51,000 ) ( RMB 70,000 ) NTD 1,770,651 ( RMB 410,000 ) NTD 188,070 ( USD 6,000 ) NTD 30,000	NTD 2,164,480 ( USD 76,000 ) NTD 227,840 ( USD 8,000 ) NTD 1,387,777 ( USD 38,000 ) ( RMB 70,000 ) NTD 1,265,797 ( RMB 290,000 ) NTD 85,440 ( USD 3,000 ) NTD 30,000	NTD 1,167,680 ( USD 41,000 ) NTD 113,920 ( USD 4,000 ) NTD 526,937 ( USD 8,500 ) ( RMB 65,262 ) NTD 1,213,419 ( RMB 278,000 ) NTD - ( USD - ) NTD -	$ - - - - - -	24% 3% 16% 28% 7% 3%	$ 13,257,365 13,257,365 13,257,365 NTD 6,720,228 ( RMB 1,539,636 ) 581,450 581,450	Y Y Y N N N	N N N N N N	N Y Y Y Y N

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) A company with which it does business.

(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$8,838,243 (net worth) × 100% = NT$8,838,243.
(2) The upper limit of the Company’s endorsements/guarantees provided is NT$8,838,243 (net worth) × 150% = NT$13,257,365.
(3) The upper limit of the Rechi Precision (Qingdao) Electric Machinery Limited’s endorsement/guarantee provided to each entity is RMB 1,026,424 (net worth) × 100% = RMB 1,026,424.
(4) The upper limit of the Rechi Precision (Qingdao) Electric Machinery Limited’s endorsements/guarantees provided is RMB 1,026,424 (net worth) × 150% = RMB 1,539,636.
(5) The upper limit of the Dyna Rechi Co., Ltd.’s endorsement/guarantee provided to each entity is NT$1,162,900 (net worth) × 50% = NT$581,450.
(6) The upper limit of the Dyna Rechi Co., Ltd.’s endorsements/guarantees provided is NT$1,162,900 (net worth) × 50% = NT$581,450.
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.

Note 7: The Company provides letters of guarantee issued by banks of NT$10,000 thousand to the Customs Administration as an endorsement/guarantee for tariff.

Note 8: Subsidiary Dyna Rechi Co., Ltd. provides letters of guarantee issued by banks of NT$500 thousand to the Customs Administration as an endorsement/guarantee for tariff.

165

RECHI PRECISION CO., LTD. and its subsidiaries

Marketable securities held – end of year

December 31, 2020

Table 3

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

Holding company	Types and names of securities	Relationship with the securities issuer	Account titles in book		At ending	At ending	At ending	Note
				Number of shares	Book value	Shareholding ratio	Fair value
RECHI PRECISION CO., LTD. Rechi Investments Co., Ltd. Rechi Refrigeration Dongguan Co., Ltd. Dongguan Rechi Compressor Co., Ltd.	D-Shares of Qingdao Haier Co., Ltd. China Steel Corporation Sharp Corporation Bigbest Solutions, Inc. Magnpower Corporation Accumulation wealth management product Zhao-Jin wealth management product of China Merchants Bank Co., Ltd. Fu-Guo-Ying-Jia No. 2 wealth management product Accumulation wealth management product Fu-Guo-Ju-Bao-Pen No. 6 wealth management product Fu-Guo-Ying-Jia No. 1 wealth management product	None None None None None None None None None None None	The financial assets measured for the fair values through other comprehensive income- current The financial assets measured for the fair values through other comprehensive income- current 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	19,048 2,218 20 600 3,000 - - - - - -	$ 1,067,276 54,906 8,643 - 25,500 21,824 19,642 43,648 7,857 87,296 96,026	- - - 0.9% 7.5% - - - - - -	$ 1,067,276 54,906 8,643 - 25,500 21,824 19,642 43,648 7,857 87,296 96,026	Note 1 Note 1 Note 1 - - Note 2 Note 2 Note 2 Note 2 Note 2 Note 2

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166

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Holding company	Types and names of securities	Relationship with the securities issuer	Account titles in book		At ending	At ending	At ending	Note
				Number of shares	Book value	Shareholding ratio	Fair value
Qingdao Rechi Electric Machinery Sales Company Rechi Precision (Qingdao) Electric Machinery Limited TCL Rechi (Huizhou) Refrigeration Equipment CompanyLimited	Min-Sheng-Cui-Zhu – Thursday Public Sharing wealth management product Min-Sheng-Cui-Zhu – Friday Public Sharing wealth management product Fu-Guo-Ju-Bao-Pen No. 3 wealth management product Fu-Guo-Ju-Bao-Pen No. 12 wealth management product e-Ling-Tong wealth management product of Industrial and Commercial Bank of China Limited Bu-Bu-Zeng-Ying wealth management product of Hua Xia Bank e-Ling-Tong wealth management product of Industrial and Commercial Bank of China Limited Min-Sheng-Cui-Zhu – Wednesday Public Sharing wealth management product Accumulation wealth management product Fu-Guo-Ju-Bao-Pen No. 5 wealth management product Fu-Guo-Ju-Bao-Pen No. 13 wealth management product Fu-Guo-Ju-Bao-Pen No. 10 wealth management product	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	- - - - - - - - - - - -	$ 244,430 39,283 43,648 43,648 30,554 78,567 52,378 43,648 34,919 130,944 43,648 43,648	- - - - - - - - - - - -	$ 244,430 39,283 43,648 43,648 30,554 78,567 52,378 43,648 34,919 130,944 43,648 43,648	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, funds, and investees at the end of December 2020.

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.

167

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, 2020

Table 4

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	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	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 (Jiujiang) Electric Machinery Limited RECHI PRECISION CO., LTD. Rechi Precision (Huizhou) Mechanism Company RECHI PRECISION CO., LTD. Rechi Refrigeration Dongguan Co., Ltd.	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. Subsidiary of Rechi Holdings Co., Ltd. Ultimate parent company Subsidiaries Ultimate parent company Subsidiary of GR Holdings (Hong Kong) Limited	Purchase Purchase Purchase Purchase Sale Purchase Sale Sale Sale Purchase Sale Sale Purchase	$ 1,625,113 4,662,092 1,013,994 346,722 1,459,465 149,116 215,446 173,202 346,722 1,231,259 1,625,113 149,116 1,459,465	20 58 13 4 64 7 10 8 15 24 30 3 29	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 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 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 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 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	Accounts payable Accounts payable Accounts payable Accounts payable Accounts receivable Accounts payable Accounts receivable Accounts receivable Accounts receivable Accounts payable Payable notes Accounts receivable Accounts receivable Accounts payable	$ 346,989 1,522,264 254,770 143,836 443,025 11,163 61,568 117,700 143,836 478,238 811,856 346,989 11,163 443,025	15 66 11 6 55 3 8 15 18 35 33 21 1 33	Note Note Note Note Note Note Note Note Note Note Note Note Note Note

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168

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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	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 (Huizhou) Mechanism Company Rechi Precision (Qingdao) Electric Machinery Limited Qingdao Rechi Electric Machinery Sales Company Rechi Precision (Jiujiang) Electric Machinery Limited	Qingdao Rechi Electric Machinery Sales Company TCL Rechi (Huizhou) Refrigeration Equipment Company 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.	Subsidiaries The parent company Ultimate parent company Subsidiaries Subsidiary of GR Holdings (Hong Kong) Limited Affiliated enterprises Subsidiary of Rechi Holdings Co., Ltd. The parent company The 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	Sale Sale Sale Sale Purchase Purchase Purchase Purchase Purchase Purchase Purchase Sale Sale	$ 3,645,737 1,231,259 4,662,092 2,529,031 215,446 430,365 107,824 3,645,737 2,529,031 3,338,211 294,160 3,338,211 1,013,994	67 99 65 35 3 7 2 37 26 34 3 73 22	O/A with net 60 days via 180-day bank acceptance bill O/A with net 90 days via T/T 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	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 30–150 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 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 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	Accounts receivable Notes receivable Accounts receivable Notes receivable 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 Payable notes Accounts receivable Notes receivable Accounts receivable	$ 1,224,352 159,274 478,238 811,856 1,522,264 556,026 255,282 61,568 44,867 7,376 41,791 1,224,352 159,274 556,026 255,282 1,197,283 1,072,817 66,101 47,402 1,197,283 1,072,817 254,770	75 9 100 100 73 27 40 5 4 - 4 40 5 18 8 39 34 2 2 78 95 17	Note Note Note Note Note Note Note Note Note Note Note Note Note Note Note Note Note Note Note Note

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169

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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	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 Refrigeration Dongguan Co., Ltd. Dyna Rechi Jiujiang Co., Ltd. Rechi Precision (Qingdao) Electric Machinery Limited Jiangxi Baida Precision Manufacturing Corp. 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 GR Holdings (Hong Kong) Limited Subsidiary of Dyna Rechi Holdings Co., Ltd. Subsidiary of Rechi Investments Holdings Co., Ltd. Affiliated enterprises Subsidiary of Rechi Holdings Co., Ltd. Subsidiary of TCL Rechi (Huizhou) Refrigeration Equipment Company Limited and Rechi Precision (Qingdao) Electric Machinery Limited The parent company Sub-subsidiary Sub-subsidiary The parent company	Purchase Purchase Sale Purchase Sale Sale Sale Purchase Purchase Sale	$ 173,202 1,713,205 107,824 206,562 1,713,205 294,160 185,449 185,449 199,089 199,089	4 39 2 5 77 13 8 85 100 69	O/A with net 60 days via T/T 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 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 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 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 payable Accounts payable Payable notes Accounts receivable Accounts payable Payable notes Accounts receivable Notes receivable Accounts receivable Notes receivable Accounts receivable Accounts payable Accounts payable Accounts receivable	$ 117,700 279,538 8,730 41,791 89,852 57,083 279,538 8,730 66,101 47,402 69,997 69,997 67,485 67,485	12 28 1 3 9 7 65 15 15 83 17 90 100 93	Note Note Note Note Note Note Note Note Note Note Note Note

Note: Already eliminated in the consolidated statements

170

RECHI PRECISION CO., LTD. and its subsidiaries

Unit: NT$1 thousand

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

December 31, 2020

Table 5

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	Accounts receivable from related party Amount recovered after the balance sheet date	Amount of allowance for bad debt
					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) Electric MachineryLimited	Rechi Precision (Qingdao) Electric Machinery Limited 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 (Jiujiang) Electric Machinery Limited 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 CO., LTD.	Subsidiary of Rechi Investments Holdings 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 Subsidiary of Rechi Holdings Co., Ltd. Ultimate parent company Subsidiaries The parent company Ultimate parent company Subsidiary Ultimate parent company	Other receivables (Note 2) $ 352,293 Other receivables (Note 2) 356,470 Other receivables (Note 2) 219,407 Other receivables (Note 3) 1,281,600 Accounts receivable 443,025 Accounts receivable 143,836 Accounts receivable 117,700 Accounts receivable 346,989 Accounts receivable 1,224,352 Notes receivable 159,274 Accounts receivable 478,238 Notes receivable 811,856 Accounts receivable 1,552,264 Accounts receivable 556,026 Notes receivable 255,282 Accounts receivable 254,770	- - - - 3.36 2.46 1.50 4.78 2.69 2.69 0.97 0.97 3.12 3.18 3.18 4.06	$ - - - - - - - - - - - - - - - -	- - - - - - - - - - - - - - - -	$ - - - - 382,504 80,978 117,631 311,043 787,141 141,868 251,786 161,498 1,262,592 530,857 254,713 246,852	$ - - - - - - - - - - - - - - - -

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171

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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
Dyna Rechi Jiujiang Co., Ltd. Dongguan Rechi Compressor Co., Ltd.	Qingdao Rechi Electric Machinery Sales Company Dyna Rechi Jiujiang Co., Ltd. Rechi Precision (Jiujiang) Electric Machinery Limited Qingdao Rechi Electric Machinery Sales Company Dyna Rechi Jiujiang Co., Ltd.	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. Subsidiary of TCL Rechi (Huizhou) Refrigeration Equipment Company Limited and Rechi Precision (Qingdao) Electric Machinery Limited Subsidiary of Dyna Rechi Holdings Co., Ltd.	Accounts receivable $ 1,197,283 Notes receivable 1,072,817 Other receivables (Note 3) 133,049 Accounts receivable 279,538 Notes receivable 8,730 Accounts receivable 66,101 Notes receivable 47,402 Other receivables (Note 3) 131,024	1.50 1.50 - 6.06 6.06 2.64 2.64 -	$ - - - - - - - -	- - - - - - - -	$ 714,912 423,503 12 279,538 8,730 40,417 46,136 -	$ - - - - - - - -

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.

172

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, 2020

Table 6

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)
0 0 1 2 2 2 2 3 3 3 3 4 4 4 5 5 5 5 6 6 6 6 7 7 8	RECHI PRECISION CO., LTD. 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 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 Dyna Rechi Jiujiang Co., Ltd. Dyna Rechi Jiujiang Co., Ltd. Ablek TechnologyLtd.	Rechi Precision (Qingdao) Electric Machinery Limited Rechi Precision (Jiujiang) Electric Machinery Limited Rechi Precision (Jiujiang) Electric Machinery Limited The parent company TCL Rechi (Huizhou) Refrigeration Equipment Company Limited TCL Rechi (Huizhou) Refrigeration Equipment Company Limited Rechi Precision (Qingdao) Electric Machinery Limited The parent company The parent 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 The parent company The 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 The parent company Rechi Precision (Jiujiang) Electric Machinery Limited Qingdao Rechi Electric Machinery Sales Company Ablek TechnologyCo.,Ltd.	1 1 3 2 3 3 3 2 2 3 3 3 3 3 2 2 3 3 3 3 3 2 3 3 3	Other receivables Other receivables Other receivables Sale Sale Accounts receivable Sale Sale Accounts receivable Sale Accounts receivable Sale Accounts receivable Notes receivable Sale Accounts receivable Sale Accounts receivable Sale Accounts receivable Notes receivable Sale Sale Sale Sale	$ 352,293 356,470 1,281,600 346,722 1,459,465 443,025 215,446 1,625,113 346,989 3,645,737 1,224,352 1,231,259 478,238 811,856 4,662,092 1,522,264 2,529,031 556,026 3,338,211 1,197,283 1,072,817 1,013,994 1,713,205 294,160 199,089	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 No significant difference No significant difference	1% 1% 4% 2% 8% 2% 1% 8% 1% 19% 4% 6% 2% 3% 24% 5% 13% 2% 17% 4% 4% 5% 9% 2% 1%

173

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.

174

RECHI PRECISION CO., LTD. and its subsidiaries

Information on Investees

For the Year Ended December 31, 2020

Table 7

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	Endingshareholding	Endingshareholding	Endingshareholding	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	$ 8,194,085 195,000 720,000 USD 25,768 USD 90,000 USD 25,701 784,303 90,746 90,919	$ 8,194,085 195,000 720,000 USD 25,768 USD 90,000 USD 25,701 784,303 90,746 90,919	- 39,000 72,000 - - - - 7,004 -	100.00 100.00 42.20 100.00 100.00 100.00 100.00 100.00 100.00	$ 11,092,363 347,573 490,790 USD 34,947 USD 157,142 USD 34,778 775,232 144,771 89,682	$ 776,620 3,402 ( 60,733 ) USD 1,576 USD 14,396 USD 1,580 49,726 ( 32 ) 861	$ 766,807 3,402 ( 25,632 ) N/A N/A N/A N/A N/A N/A	Subsidiary Subsidiary Subsidiary 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 8.

175

Unit: NTD thousand or in thousands 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, 2020

Table 8

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 recovered in currentperiod	Amount of investment remitted or recovered in currentperiod	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 215,081 ( USD 7,552 ) NTD 257,402 ( USD 9,038 ) NTD 2,043,212 ( USD 71,742 ) NTD 1,348,500 ( USD 47,349 ) NTD 2,563,200 ( USD 90,000 ) NTD 30,554 ( RMB 7,000 ) NTD 569,600 ( USD 20,000 ) NTD 1,127,061 ( RMB 258,215 ) NTD 1,879,680 ( USD 66,000 ) NTD 1,091,382 ( USD 38,321 ) NTD 19,936 (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 720,288 ( USD 25,291 ) NTD 297,588 ( USD 10,449 ) NTD 944,511 ( USD 33,164 ) NTD 85,440 ( USD 3,000 ) NTD 797,440 ( USD 28,000 ) （註7） NTD - ( RMB - ) NTD - ( USD - ) NTD 708,741 ( RMB 162,376 ) （註10） NTD 1,879,680 ( USD 66,000 ) NTD 327,406 ( USD 11,496 ) NTD - (USD -)		$ - - - - - - - - - - -	$ - - - - - - - - - - -	NTD 720,288 ( USD 25,291 ) NTD 297,588 ( USD 10,449 ) NTD 944,511 ( USD 33,164 ) NTD 85,440 ( USD 3,000 ) NTD 797,440 ( USD 28,000 ) (Note 7) NTD - ( RMB - ) NTD - ( USD - ) NTD 708,741 ( RMB 162,376 ) (Note 10) NTD 1,879,680 ( USD 66,000 ) NTD 327,406 ( USD 11,496 ) NTD - (USD -)	$ 49,269 6,972 214,437 8,436 425,392 64,641 14,259 77,177 132,512 ( 9,699 ) 2,999	100.00 100.00 77.78 77.78 100.00 88.89 30.00 62.72 100.00 30.00 42.20	$ 49,269 6,972 166,784 6,561 425,392 57,460 4,278 48,407 132,512 ( 2,910 ) 1,266	NTD 953,006 ( USD 33,462 ) NTD 356,017 ( USD 12,501 ) NTD 2,316,248 ( USD 81,329 ) NTD 1,172,982 ( USD 41,186 ) NTD 4,480,150 ( USD 157,309 ) NTD 292,015 ( RMB 66,902 ) NTD 184,100 ( USD 6,464 ) NTD 753,281 ( RMB 172,580 ) NTD 2,017,310 ( USD 70,833 ) NTD 334,132 ( USD 11,732 ) NTD 11,300 (RMB 2,589 )	NTD 366,708 ( USD 12,876 ) NTD 43,574 ( USD 1,530 ) NTD 1,802,385 ( USD 63,286 ) NTD 165,924 ( USD 5,826 ) NTD 2,305,342 ( USD 80,946 ) - NTD 4,842 ( USD 170 ) - - - -

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 5,761,094			NTD 4,425,080 (US$155,375) (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.

176

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 5,849 25,800 66,000 11,581 700 USD 155,375

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.

177

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, 2020

Table 9

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	$ 1,625,113 4,662,092 1,013,994 346,722	20 58 13 4	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	( $ 346,989 ) ( 1,522,264 ) ( 254,770 ) ( 143,836 )	15 66 11 6	$ 2,139 9,018 788 982

Note 1: Already eliminated in the consolidated statements

178

RECHI PRECISION CO., LTD.

Information on Major Shareholders December 31, 2020

Table 10

Names of Dominant Shareholders	Shares	Shares
	Shares	Shareholdingratio
Sampo Corporation Fubon Life Insurance Co., Ltd.	135,610,160 27,546,703	26.85% 5.45%

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.

179

V. The Company’s individual financial statements audited and certified by a certified public accountant in the most recent fiscal year .

Auditor’s Report

Audit opinions

We have audited the accompanying individual balance sheet of RECHI PRECISION CO., LTD. (the “Company”) as of December 31, 2020 and 2019, and the related individual statement of income, individual statement of changes in shareholders equity, individual statement of cash flows, and notes to the individual financial statements (including major accounting policy) for the years then ended.

In our opinion, the accompanying individual financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2020 and 2019 and for the years then ended, and its individual financial performance and its individual cash flows for the years then ended in conformity with the Regulations Governing the Preparation of Financial Reports by Securities Issuers.

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 separate financial statements. We are independent of the Company in accordance with the Norm of Professional Ethics for Certified Public Accountant of the Republic of China, 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 individual financial statements of the Company in 2020. These matters were addressed in the content of our audit of the individual financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on those matters.

180

The key audit matters of the 2020 individual financial statements of the Company are described as follows:

Estimating impairments on accounts receivable

The Company’s net accounts receivable from non-related parties as of December 31, 2020 were NT$2,257,126 thousand, which was material to the financial statements. The impairment assessment of accounts receivable is based on assumptions on default rate and expected loss rate, while by considering historical experience, current market conditions, and forward-looking information to make assumptions and select inputs for impairment assessment. If the actual future cash flows are less than expected, a material impairment loss may have resulted.

For the major sources and relevant disclosures of the uncertainties of accounting policies and significant accounting judgement, estimates, and assumptions related to accounts receivable, please refer to Notes 4, 5, and 8 of the individual financial statements.

The main audit procedures that we have implemented for the impairment assessment of accounts receivable above are as follows:

Understand the allowance policy for the estimated impairment of accounts receivable put forth by the management, test the correctness of the aging of the balance of accounts receivable, and check the correctness of the amount of allowance for loss put forth by the management.
Evaluate the reasonableness of the expected credit loss rate based on the status of recovery of account receivables from customers and relevant forward-looking information, while considering the current year’s recovery of receivables and other available information to evaluate the reasonableness of the loss allowance.
Evaluate the status of recovery of the overdue accounts receivable in cash after the deadline to consider whether it is necessary to provide additional loss allowances.

Responsibilities of Management and Those in Charge of Governance of the Individual Financial Statements

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

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

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

181

Auditor’s Responsibilities for the Audit of the Individual Financial Statements

Our objectives are to obtain reasonable assurance about whether the individual 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 individual financial statements.

Identify and assess the risks of material misstatement of the individual 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 Company’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 the Company 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 individual 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 the Company to cease to continue as a going concern.
Evaluate the overall presentation, structure, and content of the individual statements, including related notes, whether the individual statements represent the underlying transactions and events in a matter that achieves fair presentation.

182

Obtain sufficient and appropriate audit evidence on the financial information of business entities within the Company in order to express an opinion on the individual financial statements. We are responsible for guiding, supervising, and performing the audit and forming an audit opinion on the Company.

From the matters communicated with the governing body, we determined the key audit matters for the audit of the Company’s individual financial statements for the year ended December 31, 2020. 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 TSAI, CHEN TSAI

CPA CHANG, CHING FU

Securities and Futures Bureau Approval Document No. Tai-Cai-Zheng (6) Zi No. 0920123784

March 22, 2021

183

RECHI PRECISION CO., LTD.

Individual Balance Sheet

December 31, 2020 and 2019

Unit: NT$1 thousand

Code 1100 1120 1150 1160 1170 1180 1200 1210 130X 1410 1470 11XX 1550 1600 1755 1780 1840 1990 15XX 1XXX Code 2100 2110 2170 2180 2200 2230 2280 2365 2399 21XX 2541 2542 2570 2580 2640 2670 25XX 2XXX 3110 3200 3310 3320 3350 3300 3400 3500 3XXX	Assets Current assets Cash and cash equivalents (Note 4 & 6) The financial assets measured for the fair values through other comprehensive income – current (Notes 4 & 7) Notes receivable – non-related parties (Notes 4 & 8) Notes receivable – related parties (Notes 4 & 24) Notes receivable – non-related parties (Notes 4, 5 & 8) Accounts receivable – related parties (Notes 4 & 24) Other receivables Other receivables – related parties (Note 24) Inventory (Note 4 and 9) Prepayments Other current assets Total current assets Non-Current assets Investment accounted for using equity method (Notes 4 & 10) Property, plant and equipment (Notes 4, 11 & 25) Right-of-use assets (Notes 4 & 12) Other intangible assets (Note 4) Deferred income tax assets (Note 4 & 19) Other non-current assets Total non-current assets Total assets Liabilities and equity Current liabilities Short-term borrowings (Note 13) Short-term notes payable (Note 13) Accounts payable – non-related parties Accounts payable – related parties (Note 24) Other payables (Notes 14 & 24) Income tax liability (Notes 4 & 19) Lease liabilities – current (Note 4 & 12) Refund liabilities – current (Note 17) Other current liabilities Total of current liabilities Non-current liabilities Short-term borrowings (Notes 13 & 25) Long-term notes payable (Note 13) Deferred tax liabilities (Note 4 & 19) Lease liabilities – non-current (Note 4 & 12) Net defined benefit liabilities (Note 4 & 15) Other non-current liabilities Total non-current liability Total liabilities Equity (Notes 16 & 21) Common stock Capital reserves Retained earnings Statutory surplus reserves Special surplus reserves Undistributed earnings Total retained earnings Other equity Treasury shares Total equity Total Liabilities and Equity		December31,2020	December31,2020	% 1 6 1 - 13 - - 5 3 - - 29 66 4 - - 1 - 71 100 4 3 - 12 2 1 - - 1 23 18 6 4 - - - 28 51 28 7 5 7 6 18 4) - 49 100		December31,2019	December31,2019
			Amount $ 230,166 1,067,276 193,861 - 2,257,126 28,439 5,874 936,965 425,313 25,062 1,514 5,171,596 11,930,726 735,790 1,811 25,749 133,600 26,848 12,854,524 $ 18,026,120 $ 706,849 499,854 28,739 2,267,932 328,618 148,927 838 73,681 155,123 4,210,561 3,199,080 999,546 724,995 950 52,253 492 4,977,316 9,187,877 5,049,151 1,343,868 923,331 1,199,368 1,066,053 3,188,752 743,222) 306) 8,838,243 $ 18,026,120				Amount $ 71,974 639,810 182,376 9 2,315,355 25,917 27 419,761 380,617 24,485 4,241 4,064,572 11,728,422 627,170 1,294 23,260 184,673 128,473 12,693,292 $ 16,757,864 $ 335,900 - 18,183 2,353,587 253,173 75,887 1,254 92,264 17,571 3,147,819 4,001,000 998,879 630,215 71 54,727 292 5,685,184 8,833,003 5,060,131 1,351,403 857,735 863,535 1,025,691 2,746,961 1,199,368) 34,266) 7,924,861 $ 16,757,864		%
		( (		(		( (		(	- 4 1 - 14 - - 3 2 - - 24 70 4 - - 1 1 76 100 2 - - 14 2 - - 1 - 19 24 6 4 - - - 34 53 30 8 5 5 6 16 7) - 47 100

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

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

184

RECHI PRECISION CO., LTD.

Individual Income Statement

For the Years Ended December 31, 2020 and 2019

Unit: NTD thousand, except Earnings Per Share (NTD)

Code 4110 Operating income (Notes 4, 17 & 24) 5000 Operating cost (Notes 9, 18 & 24) 5900 Gross profit 5920 Realized loss on subsidiaries 5950 Realized gross profits Operating expenses (Notes 18 & 24) 6100 Marketing expenses 6200 Administrative expenses 6300 Research and development expenses 6450 Expected credit impairment loss (Note 8) 6000 Total operating expenses 6900 Net Operating Income Non-operating income and expense (Notes 18 & 24) 7100 Interest revenue 7010 Other income 7020 Other profits and losses 7050 Financial costs 7070 Share of profit or loss on subsidiaries accounted for using the equity method 7000 Total non-operating revenues and expenses		2020

(Continued on next page)

185

(Continued from previous page)

Code 7900 Net profit before tax 7950 Income tax expenses (Note 19) 8200 Net profits of the current year Other comprehensive income 8310 Titles not reclassified as profit and loss accounts: 8311 Remeasurement of defined benefit plan (Note 15) 8316 Unrealized gains (losses) on investments in equity instruments at fair value through other comprehensive profit or loss (Note 16) 8330 Share of other comprehensive income on subsidiaries accounted for using the equity method (Note 16) 8349 Income tax related to titles not subject to reclassification (Note 19) 8360 Accounts to be reclassified to profit or loss subsequently: 8361 Exchange differences from the translation of financial statements of foreign operations (Note 16) 8399 Income tax related to items that may be reclassified (Note 16 & 19) 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)		2020		% 10 2) 8 - 5 - 1) 4 1 - 1 5 13		2019
		Amount $ 889,955 180,464) 709,491 636 427,466 146 85,620) 342,628 141,393 27,366) 114,027 456,655 $ 1,166,146						%
	( ( (		( (				10 ( 2) 8 - - - - - ( 5 ) 1 ( 4) ( 4) 4

186

(Continued from previous page)

Code Earnings per share (Note 20) Business units in continuing operation 9710 Basic 9810 Diluted		2020	%		2019
		Amount $ 1.41 $ 1.40			Amount $ 1.30 $ 1.29	%

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

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

187

Unit: NT$1 thousand

RECHI PRECISION CO., LTD.

Individual Statements of Changes in Shareholders’ Equity

For the Years Ended December 31, 2020 and 2019

Capital stock Shares (in thousand shares) Amount 506,013 $ 5,060,131 - - - - - - - - - - - - - - - - 506,013 5,060,131 - - - - - - - - ( 1,098 ) ( 10,980 ) - - - - - - 504,915 $ 5,049,151	Capital stock Shares (in thousand shares) Amount 506,013 $ 5,060,131 - - - - - - - - - - - - - - - - 506,013 5,060,131 - - - - - - - - ( 1,098 ) ( 10,980 ) - - - - - - 504,915 $ 5,049,151	Capital reserves $ 1,338,059 - - - 11,693 1,651 - - - 1,351,403 - - - - ( 7,535 ) - - - $ 1,343,868		Retained earnings		Other equity Exchange differences from the translation of financial statements of foreign operations Unrealized gain on financial assets at fair value through other comprehensive profit or loss ( $ 719,013 ) ( $ 144,522 ) - - - - - - - - - - - - ( 356,548) 20,715 ( 356,548) 20,715 ( 1,075,561 ) ( 123,807 ) - - - - - - - - - - - - 114,027 342,119 114,027 342,119 ($ 961,534) $ 218,312	Other equity Exchange differences from the translation of financial statements of foreign operations Unrealized gain on financial assets at fair value through other comprehensive profit or loss ( $ 719,013 ) ( $ 144,522 ) - - - - - - - - - - - - ( 356,548) 20,715 ( 356,548) 20,715 ( 1,075,561 ) ( 123,807 ) - - - - - - - - - - - - 114,027 342,119 114,027 342,119 ($ 961,534) $ 218,312	Treasuryshares ( $ 34,266 ) - - - - - - - - ( 34,266 ) - - - ( 306 ) 34,266 - - - ($ 306)		Total equity
						Exchange differences from the translation of financial statements of foreign operations ( $ 719,013 ) - - - - - - ( 356,548) ( 356,548) ( 1,075,561 ) - - - - - - 114,027 114,027 ($ 961,534)
Shares (in thousand shares) 506,013 - - - - - - - - 506,013 - - - - ( 1,098 ) - - - 504,915			Statutory surplus reserves $ 747,592 110,143 - - - - - - - 857,735 65,596 - - - - - - - $ 923,331	Special surplus reserves $ 570,493 - 293,042 - - - - - - 863,535 - 335,833 - - - - - - $ 1,199,368
(	(	(			( ( ( ( ( ( ( (	( ( ( ( (	( (	( ( ( (	( ( ( (	$ 8,197,464 - - 605,898 ) 11,693 1,651 655,960 336,009) 319,951 7,924,861 - - 252,458 ) 306 ) - 709,491 456,655 1,166,146 $ 8,838,243

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

Chairman: CHEN, SHENG TIEN

Accounting Manager: WU, CHIN MEI

Manager: FENG, MING FA

188

RECHI PRECISION CO., LTD.

Individual Statements of Cash Flow

For the Years Ended December 31, 2020 and 2019

Unit: NT$1 thousand

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 A20900 Interest expenses A21200 Interest revenue A21300 Dividend income A22300 Share of profit or loss on subsidiaries accounted for using the equity method A22500 Net gains on disposal of property, plant and equipment A23700 Inventory valuation and obsolescence losses A24000 Realized net loss on subsidiaries A24100 Unrealized foreign currency exchange loss (gain) A29900 Gains on lease modification A30000 Net change in operating assets and liabilities A31130 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 Increase (decrease) in other accounts receivable A31190 Decrease (increase) in other receivables – related parties A31200 Increase in inventories A31230 Increased in Advance A31240 Increase (decrease) in other current assets A32125 Increase (decrease) in return liability – current A32150 Increase (decrease) in accounts payable A32160 Increase (decrease) in accounts payable – related parties A32180 Increase (decrease) in other accounts payable A32240 Increase decrease in net defined benefit liability A32230 Increase (decrease) in other current liabilities A33000 Cash inflow from operating activities (Continued on next page)	2020 $ 889,955 62,021 3,318 2,117 73,021 ( 11,192 ) ( 30,459 ) ( 744,577 ) ( 956 ) - - ( 66,206 ) - ( 8,762 ) 9 111,196 ( 3,480 ) ( 5,847 ) 59,350 ( 44,696 ) ( 577 ) 2,727 ( 16,884 ) 10,556 ( 123,003 ) 57,049 ( 1,838 ) 137,552 350,394	2019
		$ 822,861 57,793 3,242 398 65,579 ( 8,983 ) ( 30,067 ) ( 527,410 ) ( 308 ) 4,221 14,462 32,105 ( 10 ) ( 129,995 ) 1,730 52,927 17,819 712 ( 7,357 ) ( 119,437 ) ( 10,090 ) ( 651 ) 32,912 ( 26,811 ) 499,466 ( 98,176 ) ( 13,067 ) ( 17,593) 616,272

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(Continued from previous page)

Code A33100 Interest received A33300 Interest payment A33500 Income tax payment AAAA Net cash inflow from operating activities Cash flow from investing activities B02700 Purchase of property, plant, and equipment B02800 Proceeds from disposal of property, plant and equipment B04300 Increase in other receivables – related parties B04400 Decreased in other receivables – related parties B04500 Purchase of intangible assets B06700 Increase of other non-current assets B07600 Dividends received BBBB Net cash inflow in investing activities Cash flow from financing activities C00100 Increase of short-term loans C00200 Decrease in short-term loans C00500 Increase in short-term notes payable C00600 Decrease in short-term notes payable C01800 Increase in long-term notes payable C01600 Proceeds from long-term loan C01700 Repayments of long-term borrowings C03000 Collect the guarantee deposits received C04020 Repayments of principal portion of the lease C04500 Dividends paid C04900 Purchase of treasury stock C05400 Acquisition of equity of subsidiaries CCCC Net cash outflow from financing activities 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	2020 $ 8,422 ( 73,574 ) ( 74,557) 210,685 ( 35,216 ) 9,620 ( 880,040 ) 353,920 ( 5,807 ) ( 21,472 ) 714,271 135,276 368,314 - 499,854 - - 1,413,080 ( 2,215,000 ) 200 ( 1,453 ) ( 252,458 ) ( 306 ) - ( 187,769) 158,192 71,974 $ 230,166	2019
		$ 6,135 ( 67,722 ) ( 186,872) 367,813 ( 23,399 ) 1,465 - - ( 1,342 ) ( 143,689 ) 172,137 5,172 - ( 700,161 ) - ( 429,820 ) 998,879 4,486,000 ( 3,385,000 ) - ( 1,901 ) ( 605,898 ) - ( 906,140) ( 544,041) ( 171,056 ) 243,030 $ 71,974

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

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

190

RECHI PRECISION CO., LTD.

Individual Notes to financial statements

For the Years Ended December 31, 2020 and 2019

(Unless otherwise provided, Unit: NTD Thousand)

1. Organization and operations

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.

This parent company only financial statement is denominated in NT dollars, the functional currency of the Bank.

2. Financial reporting date and procedures

The individual financial statements were approved by the board of directors and authorized for issue on March 22, 2021.

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)

Except for the following, the application of the amendments to the IFRSs endorsed and issued into effect by the FSC does not have material impact on the Company’s accounting policies:

1. Amendments to IAS 1 and IAS 8 “Definition of Materiality”

The Company adopted the amendments on January 1, 2020. The threshold for materiality was amended to be “can be reasonably expected to influence users,” and the disclosures in the individual financial statements were adjusted by removing immaterial information which may obscure material information.

2. Amendment to IFRS 16 “COVID-19-Related Rent Concessions”

The Company has chosen to apply the practical expedient of the amendment to deal with rent negotiations directly related to COVID-19 between it and the lessor. Please refer to Note 4 for the relevant accounting policies. Before applying the amendment, the Company shall judge whether the provisions of the lease modification shall apply to the aforementioned rent negotiation.

The Company began to apply the amendment on January 1, 2020. Since the aforementioned rent negotiation only affected the year of 2020, the

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retrospective application of the amendment did not affect the retained earnings as of January 1, 2020.

(2) IFRSs endorsed by FSC that are applicable from 2021 onwards

The new/amended/revised standards or interpretation		Effective Dateper IASB
Amendments to IFRS 4 “Deferral Of Effective Date		Effective immediately
of IFRS 9”		upon promulgation
Amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4,		Effective for the annual
and IFRS 16 – “Interest Rate Benchmark Reform		reporting periods
– Phase 2”		beginning on or after
		January 1, 2021

Amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4, and IFRS 16 – “Interest Rate Benchmark Reform – Phase 2”

“Interest Rate Benchmark Reform – Phase 2” is mainly about amendments to IFRS 9, IFRS 7, and IFRS 16, which provide practical expedients for the impact of changes in interest rate indicators.

Changes in the basis for determining contractual cash flows caused by changes in interest rate indicators

When the amendments are applied for the first time, the Company expects to recognize the cumulative effects, to which amendments are applied retrospectively, as retained earnings of January 1, 2021.

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

as retained earnings of January 1, 2021. The IFRSs released by the IASB but not yet approved the Financial Supervisory Commission	as retained earnings of January 1, 2021. The IFRSs released by the IASB but not yet approved the Financial Supervisory Commission	and announced effective by
		IASB publication effective
The new/amended/revised standards or interpretation		date(Note 1)
“2018-2020 IFRSs improvements”		January 1, 2022 (Note 2)
Amendment to IFRS 3 – “Reference to the Conceptual
Framework”		January 1, 2022 (Note 3)
Amendment to IFRS 10 and IAS 28, “Sale or		To be determined
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 IAS 1 “Classification of Liabilities as		January 1, 2023
Current or Non-Current”
Amendments to IAS 1 “Disclosure of Accounting Policies” January 1, 2023 (Note 6) Amendments to IAS 8 “Definition of Accounting Estimates” January 1, 2023 (Note 7)
Amendments to IAS 16 “Property, Plant and Equipment –		January 1, 2022 (Note 4)
Proceeds before Intended Use”
Amendments to IAS 37 “Onerous Contracts – Cost of		January 1, 2022 (Note 5)
Fulfilling a Contract”

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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 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, 2022; the amendment of “Initial application of IFRSs” in IFRS 1 applies the annual reported periods since January 1, 2022 retrospectively.
Note 3: The amendment applies to the merges whose acquisition dates after the annual reported periods since January 1, 2022.
Note 4: The amendment applies to the property, plant and equipment achieving the expected operations by the management after January 1, 2021.
Note 5: The amendment applies to the contracts yet performing all obligations as of January 1, 2022.
Note 6: The amendments apply to the annual reporting periods beginning on or after January 1, 2023 prospectively.
Note 7: 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.
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 Company sells or invests assets in an affiliated company (or joint venture), or the Company 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 Company shall fully recognize the profits and losses arising from such transactions.

In addition, if the Company sells or contributes assets to affiliated companies (or joint ventures), or the Company 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 Company 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 Company should be offset.

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2. 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 Company 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 Company has the right at the end of the reporting period, regardless of whether the Company expects to exercise the right, the liabilities are classified as non-current. The amendments have clarified that if the Company must comply with certain conditions before it has the right to defer payment of its liabilities, the Company must have complied with said conditions at the end of the reporting period, even if the lender is testing whether the Company 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 Company to the counterparty. However, as for the terms of the liability, where the transfer of the equity instruments of the Company 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.

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

The amendments are applicable to property, plant and equipment that have reached the location and conditions necessary for them to be capable of operating in the manner expected by the management after January 1, 2021. When the amendment is applied to the Company for the first time, the information in the comparative period shall be restated.

Amendments to IAS 1 “Disclosure of Accounting Policies”

The amendments clearly stipulate that the Company 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 Company does not need to disclose such information.

The Company 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.

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Not all accounting policy information related to material transactions, other events, or circumstances are significant.

(1) The Company changed its accounting policies during the reporting period, and the change resulted in a significant change in financial statement information;
(2) The Company selects its applicable accounting policies from the options allowed by the standards;
(3) Due to the lack of specific standards, the Company has formulated accounting policies in accordance with IAS 8 “Accounting Policies, Changes and Errors in Accounting Estimates”;
(4) The Company 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 Company 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.

Further to the aforementioned influence, the Bank will continue to evaluate the effect of the amendment to other IFRSs on the financial positions and performance of the Bank 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 individual financial statements were prepared in accordance with the “Regulations Governing the Preparation of Financial Reports by Securities Issuers.”

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(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 individual 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.

In preparing individual financial statements, the Company adopts the equity method for investment in subsidiaries. In order to make the current year’s profit or loss, other comprehensive income, and equity of the individual financial statements the same as the current year’s profit or loss, other comprehensive income, and equity attributable to the owners of the Company in the Company’s consolidated financial statements, “investments using the equity method,” “share of profits or losses on subsidiaries using the equity method,” “share of other comprehensive income on subsidiaries using the equity method,” and relevant equity items were adjusted for certain accounting differences arising from between the individual basis and the consolidated basis.

(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.

For those that are not current assets or liabilities above are classified as non-current assets or liabilities.

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(4) Foreign currency

For the transactions conducted in a currency other than the Company’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 Company’s financial statements.

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 individual financial statements, the assets and liabilities of the Company’s foreign operations (including subsidiaries that operate in countries or adopt the functional currencies different from the Company) are translated into New Taiwan dollars. Income and expense items are translated in accordance with the current average exchange rates and the exchange differences are booked in the other comprehensive profit or loss.

(5) Inventory

Inventories are raw materials, materials, finished products, work in process and products. 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.

(6) Investment in subsidiaries

The Company has the investment in subsidiaries handled in accordance with the equity method.

Subsidiaries refer to entities (including structured entities) over which the Company has control.

Under the equity method, investments were originally recognized at cost; the book value after the acquisition date fluctuates along with the distribution of profit or loss from the subsidiaries and other comprehensive profit or loss. In addition, for the changes in the affiliated company’s equity, the Company is entitled to have it recognized proportionately to the shareholding.

When the Company’s change in the ownership of the subsidiary does not result in loss of control, it is treated as an equity transaction. The difference between the book amount of the investment and the fair value of the consideration paid or received shall be directly recognized as equity.

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In assessing impairment, the Company based on the cash drivers of the financial statements and compared the recoverable amount and book value. If the amount of recoverable assets increased in the future, the reversal of impairment shall be recognized as income. The book value of the reversal of impaired assets shall not exceed the book value before recognition for impairment net of amortization.

The unrealized concurrent trade between the company and the subsidiaries stated in the financial statement of individual entities shall be removed. The profit or loss resulting from the countercurrent, and side-stream transactions between the Company and the subsidiary are recognized in the individual financial statement within the range irrelevant with the Company’s interest in the subsidiary.

(7) Real property, plant and equipment

The depreciation of each material part of real estate, plants, and equipment should be appropriated independently in accordance with the useful year and a straight-line method. The Company shall review the estimation of life span, residual value and depreciation method at least once a year and extend the effect of changes in applicable accounting policy.

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.

(8) 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 straight-line method over the useful lives. The Company conducts at least one annual review at the end of each year to assess the estimated useful life, residual value, and amortization methods, and applies the effect of changes in accounting estimates prospectively.

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

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

The Company 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 Company 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.

(10) Financial instruments

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

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 Company are those measured at amortized cost and investments in equity instruments measured at fair value through other comprehensive income (FVTOCI).

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A. Financial assets at amortized cost

If the financial assets of the Company 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; and
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.

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

The Company 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 dividend of the investment of equity instruments at fair value through other comprehensive income shall be recognized as income when the right of the Company 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 Company shall, on each balance sheet day, evaluate the financial assets on the basis of cost after amortization on the basis of expected credit loss (including accounts receivable)

Accounts receivable shall be recognized for provisions for loss on the basis of expected credit loss within the perpetuity of the assets. Other financial assets shall be evaluated for any significant increase of risk

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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.

For internal credit risk management purpose, the Company, 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 Company’s financial assets are derecognized only when the contractual rights from the cash flows of a financial asset becomes 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 Company 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 Company 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.

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2. Equity instruments

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

An equity instrument issued by the Company is 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.

Financial liabilities
(1) Subsequent measurement

All financial assets shall be measured under the effective interest rate method on the cost after amortization except under the following circumstances:

Financial guarantee contract

The financial guarantee contract issued by the Company that is not measured at fair value through profit or loss (FVTPL) is measured at the allowance for the expected credit loss or the amortized amount after initial recognition, whichever is higher.

(2) Derecognition of financial liabilities

(11) Liability reserve

(12) Recognition of revenue

The Company, 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 Company recognizes the sales in revenue and accounts receivable.

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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.

(13) Lease

The Company assesses whether or not the arrangement is (or includes) a lease arrangement on the agreement date

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

The Company is the lessee.

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 Company 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 expressed on the individual balance sheet.

The Company and the lessor engaged in rent negotiations directly related to the COVID-19 pandemic, and adjusted the rents due before June 30, 2021, resulting in a

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decrease in the rents before the negotiation. These negotiations did not materially change other lease terms. The Company 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.

(14) Loan costs

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

(15) 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.

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(16) Income tax

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

tax.

1. Income tax expenses in the current period

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.

Deferred income tax liabilities are recognized for all taxable temporary differences related to the subsidiary, unless the Company can control the timing of reversal of temporary differences and the temporary differences are unlikely to be reversed 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.

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 effect resulting from the book amount of the assets and liabilities expected to be recovered or liquidated at the balance sheet date.

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Current and deferred income tax for the year

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

When adopting accounting policy, the management of the Company shall make related judgments, estimations, and assumptions for information that cannot be easily retrieved from other sources based on historical experiences and other relevant factors. Actual results may differ from the estimates.

The estimated impairment of accounts receivable

The estimated impairment of accounts receivable is based on the default rates and expected loss rates assumed by the Company. Taking into account the consolidated company’s past experience, current market situation and future prediction, the Company shall prepare a pro forma report and select appropriate inputs for impairment. If the actual future cash flows are less than expected, a material impairment loss may have resulted.

6. Cash and cash equivalents

Cash and cash equivalents
Cash on hand and working capital Bank checks and demand deposits	December 31,2020 $ 98 230,068 $ 230,166	December 31,2019
			$ 149 71,825 $ 71,974

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

December 31, 2020 December 31, 2019 Bank deposits 0.02%～0.20% 0.05%～0.38%

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7. Financial assets at fair value through other comprehensive profit or loss

Equity investment Current Overseas investment Listed stock D-shares Of Qingdao Haier Co., Ltd. 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 31,2020 $ 1,067,276 December 31,2020 $ 193,863 ( 2) $ 193,861 $ 1,947,596 ( 11,562) 1,936,034 321,092 $ 2,257,126	December 31,2019	December 31,2019
		$ 639,810 December 31,2019
	( (	( (	$ 182,380 4) $ 182,376 $ 2,324,895 9,540) 2,315,355 - $ 2,315,355

8. Note receivable and account receivable

(1) Accounts receivable based on cost after amortization

The Company’s average credit period for sales open account with net 0 days to 210 days, and no interest is accrued on accounts receivable.

In order to mitigate the credit risk, the Company 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 Company 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 Company’s credit risk is significantly reduced.

The Company 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. As the Company’s credit loss history shows that there is no significant difference in the loss patterns of different customer groups, the provision

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matrix does not further differentiate the customer groups, and only the expected credit loss rate is set based on the number of overdue days of the accounts receivable.

If there is evidence that the counterparty is facing serious financial difficulties and the Company cannot reasonably expect to recover the amount, e.g. the counterparty is in liquidation, the Company 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.

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

December 31, 2020

Not overdue Expected credit loss rate 0.03% Total book value $ 1,815,099 Allowance for loss (expected credit loss of the given duration) ( 554) Cost after amortization $ 1,814,545 December 31, 2019 Not overdue Expected credit loss rate 0.05% Total book value $ 2,049,112 Allowance for loss (expected credit loss of the given duration) ( 1,124) Cost after amortization $ 2,047,988		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
			(	0.68% $ 110,802 863) $ 109,939 Overdue for 1 to 30 days	( O	32.90% $ 18,018 7,613) $ 10,405 verdue for 31 to 60 days	( O	64.94% $ 2,424 1,574) $ 850 verdue for 61 to 90 days	( O	76.39% $ 1,253 958) $ 295 verdue for 91 to 120 days	9 O	0.22%~100.00% $ - - $ - verdue for over 121 days	(	$ 1,947,596 11,562) $ 1,936,034 Total
Expected credit loss rate Total book value Allowance for loss (expected credit loss of the given duration) Cost after amortization
	(	0.05% $ 2,049,112 1,124) $ 2,047,988	(	2.47% $ 269,384 6,654) $ 262,730	(	17.47% $ 5,619 982) $ 4,637		58.01% $ - - $ -	(	60.39% $ 1 1) $ -	(	77.78%~100% $ 779 779) $ -	(	$ 2,324,895 9,540) $ 2,315,355

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

Regarding the accounts receivable of specific customers, the Company decides whether to sell it to the bank without the right of recourse or not to sell it depending on the status of the working capital. The business model of the Company 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, 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 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
	(	0.03% $ 321,189 97) $ 321,092		0.68% $ - - $ -		32.90% $ - - $ -		64.94% $ - - $ -		76.39% $ - - $ -		90.22%~100% $ - - $ -	(	$ 321,189 97) $ 321,092

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

Balance, beginning of year Add (less): Impairment loss (reversal) for the current year Balance, end of year			2020
	Notes receivable $ 4 ( 2) $ 2		Accounts receivable $ 9,540 2,119 $ 11,659		Total
	(				$ 9,544 2,117 $ 11,661

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Balance, beginning of year Add (less): Impairment loss (reversal) for the current year Balance, end of year			2019
	Notes receivable $ 11 ( 7) $ 4		Accounts receivable $ 9,135 405 $ 9,540		Total
	(				$ 9,146 398 $ 9,544

Inventories

Inventories
Merchandise inventories Finished products Work-in-process Raw materials Inventory in-transit	December 31,2020 $ 8,270 130,585 6,425 94,106 185,927 $ 425,313	December 31,2019
			$ 8,661 90,956 20,180 99,780 161,040 $ 380,617

In 2020 and 2019, the cost of goods sold related to inventory was NT$7,993,262 thousand and NT$7,400,750 thousand, respectively. Cost of goods sold includes inventory valuation losses of NT$0 thousand and NT$4,221 thousand.

10. Investment under the equity method Investment in subsidiaries

Investment under the equity method Investment in subsidiaries
Non-public/non-OTC companies Rechi Holdings Co., Ltd. Rechi Investments Co., Ltd. Dyna Rechi Co., Ltd.	December 31,2020 $ 11,092,363 347,573 490,790 $ 11,930,726	December 31,2019
			$ 10,872,539 344,025 511,858 $ 11,728,422

The Company’s ownership and voting rights in the equity of the subsidiary at the balance sheet date is as follows:

balance sheet date is as follows:
Rechi Holdings Co., Ltd. Rechi Investments Co., Ltd. Dyna Rechi Co., Ltd. (Note 21)	December 31,2020 100.00% 100.00% 42.20%	December 31,2019
		100.00% 100.00% 42.20%

Dyna Rechi Co., Ltd. increased the capital by NT$106,000 thousand through external shareholders in August 2019, which caused the Company’s shareholding ratio to drop to 42.20%. However, the Company holds more than half of the seats on the board of directors of Dyna Rechi Co., Ltd. with substantive ability to lead its vital activities, so it is classified as a subsidiary.

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The share of profits and losses and other comprehensive income on subsidiaries under the equity method for 2020 and 2019 is recognized based on the subsidiaries’ financial statements that have been audited by auditors during the same period.

As mentioned in Table 2, the Company provided financial guarantees for bank borrowings of Rechi Holdings Co., Ltd., Rechi Precision (Qingdao) Electric Machinery Limited, and Rechi Precision (Jiujiang) Electric Machinery Limited. As of December 31, 2020 and 2019, the financial guarantees provided above were not included in the book balance of the investments in subsidiaries.

11. Real property, plant and equipment

Costs Balance as of January 1, 2019 Additions Disposal Other reclassification Balance as of December 31, 2019 Accumulated depreciation and impairment Balance as of January 1, 2019 Depreciation expenses Disposal Balance as of December 31, 2019 Net amount as of December 31, 2019 Costs Balance as of January 1, 2020 Additions Disposal Other reclassification Balance as of December 31, 2020 Accumulated depreciation and impairment Balance as of January 1, 2020 Depreciation expenses Disposal Balance as of December 31, 2020 Net amount as of December 31, 2020		Proprietary land	Building	Machinery and equipment	Other equipment	Construction in progress	Construction in progress	Total
		$ 207,567 - - - $ 207,567 $ - - - $ - $ 207,567 $ 207,567 - - - $ 207,567 $ - - - $ - $ 207,567	$ 463,274 9,539 ( 640 ) 2,779 $ 474,952 $ 228,228 11,355 ( 640) $ 238,943 $ 236,009 $ 474,952 606 - - $ 475,558 $ 238,943 11,927 - $ 250,870 $ 224,688	$ 1,018,136 1,053 ( 453,121 ) 6,098 $ 572,166 $ 980,006 9,271 ( 453,121) $ 536,156 $ 36,010 $ 572,166 47,904 ( 466,859 ) 123,097 $ 276,308 $ 536,156 16,528 ( 462,373) $ 90,311 $ 185,997	$ 722,446 15,475 ( 71,678 ) 8,347 $ 674,590 $ 562,302 35,225 ( 70,521) $ 527,006 $ 147,584 $ 674,590 6,299 ( 169,560 ) - $ 511,329 $ 527,006 32,167 ( 165,382) $ 393,791 $ 117,538		$ - - - - $ - $ - - - $ - $ - $ - - - - $ - $ - - - $ - $ -	$ 2,411,423 26,067 ( 525,439 ) 17,224 $ 1,929,275 $ 1,770,536 55,851 ( 524,282) $ 1,302,105 $ 627,170 $ 1,929,275 54,809 ( 636,419 ) 123,097 $ 1,470,762 $ 1,302,105 60,622 ( 627,755) $ 734,972 $ 735,790

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

iation expenses is appropriated in accordance s of useful life illustrated below:	with the straight-lin
Building
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	2 to 15 years
Other equipment	1 to 15 years

Please refer to Note 25 for the amount of property, plant and equipment provided as guarantees for borrowings.

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12. Lease arrangements

(1) Right-of-use assets.

arrangements Right-of-use assets.
Carrying amount of right-of-use assets Building Transportation equipment Addition of right-of-use assets Depreciation expense of right-of-use assets Building Transportation equipment	December 31,2020 $ 1,380 431 $ 1,811 2020 $ 1,916 $ 1,264 135 $ 1,399	December 31,2019
			$ 1,294 - $ 1,294 2019
			$ - $ 1,942 - $ 1,942

(2) Lease liabilities

Lease liabilities
Carrying amount of lease liabilities Current Non-current	December 31,2020 $ 838 $ 950	December 31,2019
			$ 1,254 $ 71

The range of lease liability discount is as follows:

Building Transportation equipment Other lease information Short-term lease expense Variable lease payments not included in lease liability measurement Total cash (outflow) of leases	December 31,2020 1.35% 1.35% 2020 $ 2,126 $ 675 ($ 4,266)	December 31,2019	December 31,2019
			1.35% - 2019
	(	(	$ 2,958 $ 2,714 $ 7,627)

(3) Other lease information

The Company 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.

For the years ended December 31, 2019, short-term lease expenses also included leases for which the lease terms ended on or before December 31, 2019, and

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for which the recognition exemption applied. As of December 31, 2019, the short-term lease commitment amount, for which the recognition exemption applied, was NT$393 thousand.

All lease commitments during the lease terms beginning after the balance sheet date are as follows:

date are as follows:
Lease commitment	December 31,2020 $ -	December 31,2019
			$ -

13. Borrowings

(1) Short-term borrowings

December 31, 2020 December 31, 2019 Unsecured loans - Credit borrowings $ 706,849 $ 335,900 Interest rate collars - Unsecured borrowings 0.80%～0.96% 0.98%

(2) Short-term notes payable

Short-term notes payable
Commercial papers payable Less: Discount of short-term notes and bills payable	December 31,2020 $ 500,000 ( 146) $ 499,854	December 31,2019
	(		$ - - $ -

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

December 31, 2020

Guarantee/underwritin ginstitutions	Face amount	Face amount	Discounted amount	Discounted amount	Bookvalue	Bookvalue	Interest rate collars	Collateral		Collateral Book amount
Commercial papers payable Taiwan Finance Corporation International Bills Finance Corporation China Bills Finance Corporation Dah Chung Bills Finance Corp.		$ 100,000 150,000 150,000 100,000 $ 500,000		$ 33 44 34 35 $ 146		$ 99,967 149,956 149,966 99,965 $ 499,854	Note Note Note Note	- - - -		$ - - - - $ -

Note: Interest rate is 0.90%.

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(3) Long-term borrowings

Secured loans (Note 25) Mega International Commercial Bank Unsecured loans 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 March 29, 2019 to March 29, 2022, a loan was repaid early in June 2020; from June 19, 2020 to June 19, 2022, US$400,000 thousand was drawn down, and will be repaid in a lump sum upon maturity. From August 8, 2019 to April 26, 2022, US$500,000 thousand was drawn down, and NT$185,000 thousand and NT$115,000 thousand were repaid early in December 2019 and December 2020, respectively, and the remaining amount will be repaid in a lump sum upon maturity. Since December 21, 2018 and January 21, 2019, NT$300,000 thousand and NT$200,000 thousand were drawn down separately, which were both repaid early in December 2020. From March 13, 2019 to March 13, 2021, NT$600,000 thousand was drawn down and repaid early in February and April of 2020; from July 21, 2020 to July 21, 2022, NT$100,000 thousand was drawn down and will be repaid in a lump sum upon maturity. From August 12, 2019 to August 9, 2021, NT$300,000 thousand was drawn down and repaid early in August 2020; from December 25, 2020 to December 23, 2022, NT$300,000 thousand was drawn down and will be repaid in a lump sum upon maturity. From December 25, 2019 to December 25, 2022, NT$200,000 thousand was drawn down, and will be amortized and repaid in a total of four instalments from March 25, 2022. 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, 2020 $ 1,600,000 400,000 200,000 - 100,000 300,000 200,000 120,780 278,300 3,199,080 - $ 3,199,080	December 31, 2019	December 31, 2019
	2024.07.26 2022.06.19 2022.04.26 2021.12.21 2022.07.21 2022.12.23 2022.12.25 2029.10.15 2027.02.15				$ 1,600,000 400,000 315,000 500,000 600,000 300,000 200,000 86,000 - 4,001,000 - $ 4,001,000

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The effective interest rate as of December 31, 2020 and 2019 was 0.85%–1.50% and 0.85%– 1.58%, respectively.

(4) Long-term notes payable

Long-term notes payable
Commercial papers payable Less: Discount of long-term notes payable	December 31,2020 $ 1,000,000 ( 454) $ 999,546	December 31,2019
	(	(	$ 1,000,000 1,121) $ 998,879

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, and the contract expiration date was November 11, 2024.
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, 2020 and 2019 was 1.34%–1.40% and 1.47%–1.52%, respectively.

14. Other payables

Other payables
Salary and bonus payables Remuneration to employees and directors and supervisors payable Payables for non-use of leave Others (Note)	December 31,2020 $ 107,047 121,756 9,640 90,175 $ 328,618	December 31,2019
			$ 73,501 102,488 10,279 66,905 $ 253,173

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

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15. Retirement benefits plan

(1) Defined contribution pension plan

The pension system of the “Labor Pension Act” that is applicable to the Company is a defined contribution pension plan subject to government management with an amount equivalent to 6% of the monthly salary appropriated and contributed to the personal account with the Bureau of Labor Insurance.

(2) Defined benefit plan

The company within the Company 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 individual 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 31,2020 $ 146,565 ( 94,312) $ 52,253	December 31,2019
		(	$ 162,599 107,872) $ 54,727

Change in net defined benefit liability is shown below

Balance as of January 1, 2019 Service costs Current service cost Interest expenses (revenues) Recognized in the profit or loss Reevaluation Planned ROE (except the amount of net interest)	Present value of the defined benefit obligations $ 188,380 2,700 1,885 4,585 -	The fair value ofplan assets ($ 120,806) - ( 1,213) ( 1,213) ( 4,270 )	Net defined benefit liability
			$ 67,574 2,700 672 3,372 ( 4,270 )

(Continued on next page)

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(Continued from previous page)

from previous page)
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, 2019 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	Present value of the defined benefit obligations $ 958 3,994 ( 462) 4,490 - ( 34,856) $ 162,599 $ 162,599 1,953 1,219 3,172 - 98 3,619 ( 247) 3,470 - ( 22,676) $ 146,565	The fair value ofplan assets $ - - - ( 4,270) ( 16,439 ) 34,856 ($ 107,872) ($ 107,872) - ( 812) ( 812) ( 4,106 ) - - - ( 4,106) ( 4,198 ) 22,676 ($ 94,312)	Net defined benefit liability
	( ( ( (		$ 958 3,994 ( 462) 220 ( 16,439 ) - $ 54,727 $ 54,727 1,953 407 2,360 ( 4,106 ) 98 3,619 ( 247) ( 636) ( 4,198 ) - $ 52,253

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

below:
Operating cost Marketing expenses Administrative expenses Research and development expenses		2020 $ 159 27 2,105 69 $ 2,360		2019
				$ 205 17 3,042 108 $ 3,372

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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.

Discount rate The expected rate of increase in salaries	December 31,2020 0.500% 2.000%	December 31,2019
		0.750% 2.000%

Discount 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 31,2020 ($ 3,619) $ 3,756 $ 3,634 ($ 3,521)	December 31,2019	December 31,2019
	( (	( (	$ 4,002) $ 4,154 $ 4,029 $ 3,903)

Amount projected for appropriation in 1 year Average maturity of determined benefit obligation	December 31,2020 $ 600 9.9 years	December 31,2019	December 31,2019
			$ 720 9.9 years

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16. Equity

(1) Share capital

Common stock

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 31,2020 600,000 $ 6,000,000 504,915 $ 5,049,151	December 31,2019
			600,000 $ 6,000,000 506,013 $ 5,060,131

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

(2) Capital reserves

NT$5,049,151 thousand. Capital reserves
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 Treasury stock trade Endowments For covering loss carried forward only. Gains on disposal of assets Recognition of changes in ownership interests of subsidiaries (2) Others	December 31,2020 $ 279,956 1,050,383 - 1,651 21 11,693 164 $ 1,343,868	December 31,2019
			$ 280,564 1,052,668 4,642 1,651 21 11,693 164 $ 1,351,403

(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.

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(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 18 (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.

The Company held annual shareholders’ meetings on June 16, 2020 and June 14, 2019, which resolved to pass the 2019 and 2018 earnings distribution proposals, respectively, as follows:

Statutory surplus reserves Special surplus reserves Cash dividend	Distribution of retained earnings 2019 2018 $ 65,596 $ 110,143 335,833 293,042 252,458 605,898	Dividend Per Share (NTD)	Dividend Per Share (NTD)
	2019 $ 65,596 335,833 252,458	2019 $ 0.5	2018
			$ 1.2

On March 22, 2021, the board of directors proposed the 2020 earnings distribution proposal as follows:

distribution proposal as follows:
Legal reserve appropriated Reversal of special reserve Cash dividend	Distribution of retained earnings $ 69,425 456,146 353,427	Dividend Per Share (NTD)
		$ 0.7

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The 2020 earnings distribution proposal is pending a resolution by the shareholders’ meeting scheduled to be held on June 17, 2021.

(4) Special surplus reserves

(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 Unrealized gain or loss on comprehensive income Balance, beginning of year Generated in current year Unrealized gains or losses – equity instruments Share of other comprehensive income on subsidiaries accounted for using the equity method Balance, end of year	2020 2019 ( $ 1,075,561 ) ( $ 719,013 ) 141,393 ( 443,132 ) ( 27,366) 86,584 ($ 961,534) ($ 1,075,561) financial assets at fair value through other 2020 2019 ( $ 123,807 ) ( $ 144,522 ) 341,973 23,742 146 ( 3,027) $ 218,312 ($ 123,807)	2019
		( $ 144,522 ) 23,742 ( 3,027) ($ 123,807)

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

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(6) Treasury shares

Treasury shares
Cause Number of shares on January 1 and December 31, 2019 Number of shares on January 1, 2020 Increase Decrease Number of shares on December 31, 2020	Transfer of shares to employees (Thousand shares)
	(	1,098 1,098 20 1,098) 20

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.

17. Income

(1) Revenue from contracts with customer

Product type Commodity sales revenue Compressors and compressor pumps Others		2020 $ 8,631,145 98,391 $ 8,729,536		2019
				$ 8,301,150 182,408 $ 8,483,558

(2) Refund liability

Based on historical experience and contract conditions, the Company’s estimated refund liability for sales returns and discounts in 2020 and 2019 was NT$193,014 thousand and NT$167,831 thousand, respectively. As of December 31, 2020 and 2019, the balance of the refund liability was NT$73,681 thousand and NT$92,264 thousand, respectively.

18. Business units in continuing operation income

(1) Interest revenue

Interest revenue
Bank deposits		2020 $ 11,192		2019
				$ 8,983

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(2) Other income

Other income
Dividend income – investment of equity instruments at fair value through other comprehensive income Others		2020 $ 30,459 12,768 $ 43,227		2019
				$ 30,067 19,357 $ 49,424

(3) Other profits and losses Net gains or losses on disposal of property, plant and equipment Net foreign exchange gain (loss) Others (4) Financial costs Interest from bank borrowings Interest on lease liabilities (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	2020 $ 956 ( 29,351 ) ( 858) ($ 29,253) 2020 ( $ 73,009 ) ( 12) ($ 73,021) 2020 $ 24,770 37,251 $ 62,021 $ 76 3,242 $ 3,318		2019
		(	$ 308 38,896 3,257) $ 35,947 2019
		( $ 65,525 ) ( 54) ($ 65,579) 2019
			$ 14,952 42,841 $ 57,793 $ 2 3,240 $ 3,242

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(6) Employee benefits expenses

Employee benefits expenses
Retirement benefits Defined contribution pension plan Defined benefit plan (Note 15) Other employee benefits Total employee benefits expenses Consolidation based on functions Operating cost Operating expenses		2020 $ 10,318 2,360 12,678 390,040 $ 402,718 $ 78,757 323,961 $ 402,718		2019
				$ 11,523 3,372 14,895 390,935 $ 405,830 $ 68,477 337,353 $ 405,830

(7) Remuneration to the employees and the directors

The remuneration to employees and directors for 2020 and 2019 was resolved by the board of directors on March 22, 2021 and March 20, 2020, respectively, as follows:

Amount

follows: Amount
Remuneration to employees Remuneration to directors	2020 Cash Stock $ 49,441 $ - 14,262 -	2019
	Cash $ 49,441 14,262	Cash	Stock $ - -
		$ 45,368 13,087

If there are still changes in the amount specified in the individual 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 2019 and 2018 and the amount recognized in the individual financial statements for 2019 and 2018.

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(8) Foreign exchange gain (loss)

Foreign exchange gain (loss)
Total foreign exchange gains Total foreign exchange gain (loss) Net profit (loss)		2020 $ 233,239 262,590) $ 29,351)		2019
	( (		(	$ 243,201 204,305) $ 38,896

19. Continuing department income tax

(1) Income tax recognized in profit or loss

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

2020 2019 Income tax expenses in the current period Accrued in current year $ 153,388 $ 110,730 Additional levy on undistributed earnings 95 4,672 Prior year adjustment ( 5,886) ( 21,624) 147,597 93,778 Deferred tax Accrued in current year 32,867 73,123 Income tax expense recognized in the profit or loss $ 180,464 $ 166,901 Adjustment of accounting income and income tax expense are as follows: 2020 2019 Income before tax from continuing operations $ 889,955 $ 822,861 Income tax derived by applying the statutory tax rate to pre-tax net profit $ 177,991 $ 164,572 Non-deductible expenses and losses for tax purposes 10,212 11,478 Additional levy on undistributed earnings 95 4,672 Unrecognized (recognizable) deductible temporary differences ( 1,948 ) 7,803 Income tax expense of prior years adjusted in the current year ( 5,886) ( 21,624) Income tax expense recognized in the profit or loss $ 180,464 $ 166,901		2019
	(	$ 822,861 $ 164,572 11,478 4,672 7,803 21,624) $ 166,901

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

		2020		2019
	Deferred tax
	Accrued in current year
	－Conversion of overseas
	operating institutions	$ 27,366	(	$ 86,584 )
	－Unrealized gain or loss on
	financial assets at fair value
	through other
	comprehensive income	85,493		5,935
	－Reevaluation of determined
	benefit plan	127	(		44)
	Income tax recognized in the other
	comprehensive profit or loss	$ 112,986	(	$ 80,693)
(3)	Current Tax Liability
		December 31,2020	December 31,2019
	Current Tax Liability
	Payable income tax	$ 148,927		$ 75,887

(4) Deferred income tax assets and liabilities

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

2020

2020
Deferred income tax assets Temporary difference Financial assets at fair value through other comprehensive profit or loss Allowance to reduce inventory to market Unrealized exchange loss Refund liability Defined benefit pension plans Vacation benefit payable Exchange differences of foreign operations Deferred tax liabilities Temporary difference Financial assets at fair value through other comprehensive profit or loss Investment gains of foreign investment companies Unrealized exchange gain Real property, plant and equipment Reserve for land revaluation increment tax (“LRIT”)		Balance, beginning of year	Recognized in theprofit or loss $ - ( 2,956 ) ( 4,972 ) ( 679 ) ( 367 ) ( 128 ) - ($ 9,102) $ - 16,861 7,799 ( 895 ) - $ 23,765	Recognized in the other comprehensive profit of loss ( $ 14,478 ) - - - ( 127 ) - ( 27,366) ($ 41,971) $ 71,015 - - - - $ 71,015	Balance, end of year
		$ 14,478 6,180 4,972 3,721 11,097 2,056 142,169 $ 184,673 $ - 617,982 - 2,129 10,104 $ 630,215		( ( ( (		$ - 3,224 - 3,042 10,603 1,928 114,803 $ 133,600 $ 71,015 634,843 7,799 1,234 10,104 $ 724,995

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2019

2019
Deferred income tax assets Temporary difference Financial assets at fair value through other comprehensive profit or loss Allowance to reduce inventory to market Unrealized exchange loss Refund liability Defined benefit pension plans Vacation benefit payable Exchange differences of foreign operations Deferred tax liabilities Temporary difference Investment gains of foreign investment companies Unrealized exchange gain Real property, plant and equipment Reserve for land revaluation increment tax (“LRIT”) Others		Balance, beginning of year	Recognized in theprofit or loss $ - 844 4,972 ( 2,289 ) ( 2,614 ) ( 96 ) - $ 817 $ 79,234 ( 1,923 ) ( 479 ) - ( 2,892) $ 73,940	Recognized in the other comprehensive profit of loss ( $ 5,935 ) - - - 44 - 86,584 $ 80,693 $ - - - - - $ -	Balance, end of year
		$ 20,413 5,336 - 6,010 13,667 2,152 55,585 $ 103,163 $ 538,748 1,923 2,608 10,104 2,892 $ 556,275		(		$ 14,478 6,180 4,972 3,721 11,097 2,056 142,169 $ 184,673 $ 617,982 - 2,129 10,104 - $ 630,215

(5) Income tax audit

The profit-seeking enterprise income tax returns filed by the Company up to 2018 have been approved by the tax collection authority.

20. Earnings per share

Unit: NTD per share

Basic earnings per share Diluted earnings per share		2020 $ 1.41 $ 1.40		2019
				$ 1.30 $ 1.29

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		2020 $ 709,491		2019
				$ 655,960

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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		Unit: shares in thousands 2020 2019 504,901 504,915 3,103 2,731 508,004 507,646	Unit: shares in thousands 2020 2019 504,901 504,915 3,103 2,731 508,004 507,646	Unit: shares in thousands 2020 2019 504,901 504,915 3,103 2,731 508,004 507,646
				504,915 2,731 507,646

Unit: shares in thousands

If the Company 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.

21. Changes in equity of subsidiary – no impact on control

The Company failed to subscribe for the shares issue by means of cash capital increase by subsidiary Dyna Rechi Co., Ltd. in proportion to its shareholding ratio in August 2019, resulting in the shareholding ratio falling from 45% to 42.20%.

Since the transaction above did not change the Company’s control over the subsidiary, the Company treated it as an equity transaction. Please refer to Note 27 of the Company’s 2020 consolidated financial statements for the details of the changes in equity of the subsidiary.

22. Capital risk management

Under the premise of capital management for assuring sustainable operation, the Company seeks to maximize return to shareholders through the optimization of debts and equity balance. There is no major change in the Company’s overall strategy.

The capital structure of the Company is composed of the net debt (i.e. borrowings less cash and cash equivalents) and equity (i.e. share capital, capital reserves, retained earnings, and other equity items).

The Company is not required to comply with other external capital requirements, except for the various commitments on long-term borrowings in Note 13.

The Company’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 Company 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.

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23. Financial instruments

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

The management of the Company believes that the carrying amount of financial assets and liabilities not measured by fair values approaches their fair values.

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(2) Information on fair value – financial instruments at fair value on repetition.
Fair value hierarchy
December 31, 2020
Level 1 Level 2 Level 3 Total
Financial assets at fair
value through other
comprehensive
profit or loss
Equity investment
- Listed stocks –
overseas $ 1,067,276 $ - $ - $ 1,067,276
December 31, 2019
Level 1 Level 2 Level 3 Total
Financial assets at fair
value through other
comprehensive
profit or loss
Equity investment
- Listed stocks –
overseas $ 639,810 $ - $ - $ 639,810
----- End of picture text -----

There were no transfers between Level 1 and Level 2 fair value in 2020 and 2019.

(2) Categories of financial instruments

2019. Categories of financial instruments
Financial assets Financial assets based on cost after amortization (Note 1) Financial assets at fair value through other comprehensive profit or loss Equity investment Financial liabilities Based on cost after amortization (Note 2)	December 31,2020 $ 3,654,510 1,067,276 7,792,667	December 31,2019
		$ 3,017,448 639,810 7,774,746

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.

228

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.

(3) Purpose and policy of financial risk management

The main financial instruments of the Company include investments in equity and debt instruments, accounts receivable, accounts payable, borrowings, and lease liabilities. The Company’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 Company’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 Company’s board of directors.

1. Market Risk

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

The exposure of market risk of the financial instruments of the Company and the management and measurement of this risk remained unchanged.

(1) Exchange rate risk

The Company engages in foreign currency-denominated sales and purchase transactions; therefore, the Company is exposed to exchange rate risks. Approximately 97.55% 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 97.57% of the cost is not denominated in the functional currency of any of the Group’s entity involved in the transaction. The Company 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 Company at the balance sheet date, please refer to Note 28.

Sensitivity analysis

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

The Branch’s sensitivity analysis for the exchange rate of NT dollar (the functional currency) to each relevant foreign currency increased or decreased by 1.7% is detailed as follows. The 1.7% sensitivity rate is used for the Branch’s reporting exchange rate risk to management; also, it is management’s reasonable estimation of the possible fluctuation in exchange rates. The sensitivity analysis includes only the outstanding monetary items in foreign currency; also, the translation at year-end is

229

adjusted in accordance with the changes in exchange rates 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 or loss	Effect on	USD(i) 2019 $ 21,929	Effect on	RMB(ii)
	2020 $ 21,577		2020 ( $ 17,468 )	2019
				( $ 28,769 )

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

(2) Interest rate risk

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

The carrying amount of financial assets and liabilities of the Company under interest rate exposure on balance sheet date is as follows:

With fair value interest rate risk - Financial assets - Financial liabilities Contain cash flow interest rate risk - Financial assets - Financial liabilities	December 31,2020 $ - 1,206,703 230,048 4,198,626	December 31,2019
		$ - 335,900 71,805 4,999,879

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 Company 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.

230

If the interest rate increased by 100 base points, with all other variables remaining unchanged, the Company’s 2020 and 2019 net profit before tax would have decreased by NT$39,686 thousand and NT$49,281 thousand, respectively, mainly due to the Company’s exposure to the risk of changes in the interest rate.

(3) Other price risks.

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

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%, other comprehensive income before tax for 2020 and 2019 would have increased/decreased by NT$10,673 thousand and NT$6,398 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 refers to the risk that the counter party delays the contractual obligation resulting in the financial loss of the Company. As of the balance sheet date, the maximum credit risk exposure that might cause the Company to suffer financial losses due to the counterparty’s failure to perform its obligations and the financial guarantees provided by the Company was derived from the carrying amount of financial assets recognized in the individual balance sheet and the amount of contingent liabilities arising from the financial guarantees provided by the Company.

Except for the Company’s top five customers, the Company 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 Company defines it as a counterparty with similar characteristics. In 2020 and 2019, the Company’s concentration of credit risk on the top five customers did not exceed 54% of the total monetary assets, and the concentration of credit risk on other counterparties did not exceed 3% of the total monetary assets.

231

The Company’s credit risk is mainly concentrated on the top five customers. As of December 31, 2020 and 2019, the percentage of the total accounts receivable from the aforementioned customers was 72% and 70%, respectively.

3. Liquidity Risk

The Company has supported the business operation and mitigated the impact of changes in cash flow by managing and maintaining sufficient cash and cash equivalent position. The Company’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 company. For the Company’s bank financing amount not drawn down as of December 31, 2020 and 2019, please refer to the description of (2) regarding the financing amount below.

(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 Company’s undiscounted cash flow (including principal and estimated interest) of financial liabilities on the earliest possible repayment date upon request. The following table shows the earliest times that the Company may be demanded to make immediate repayment of bank loans, without considering the likelihood of such demands. Maturity analysis of other non-derivative financial liabilities is prepared based on the agreed repayment date.

December 31, 2020

N	on-derivative financial liabilities o interest-bearing liabilities ease liabilities struments with floating interest rates struments with fixed interest rates nancial guarantee liabilities		Payment on demand or less than 1 month $ 49,809 127 3,433 542,179 3,780,097 $ 4,375,645		1 to 3 months $ 2,323,146 131 6,866 665,449 - $ 2,995,592		3 months to 1 year $ 13,891 589 30,899 - - $ 45,379		1 to 5years $ 492 988 4,132,745 - - $ 4,134,225		Over 5years
											$ - - 149,432 - - $ 149,432
N L In In Fi

December 31, 2019

N	on-derivative financial liabilities o interest-bearing liabilities ease liabilities struments with floating interest rates struments with fixed interest rates nancial guarantee liabilities		Payment on demand or less than 1 month $ 48,990 105 4,811 129,471 5,262,514 $ 5,445,891		1 to 3 months $ 2,367,534 216 9,622 213,330 - $ 2,590,702		3 months to 1 year $ 22,151 933 43,297 - - $ 66,381		1 to 5years $ 292 68 5,056,166 - - $ 5,056,526		Over 5years
											$ - - 60,228 - - $ 60,228
N L In In Fi

232

The amount of the financial guarantee contracts above is the maximum amount that the Company may have to pay to fulfill the guarantee obligation if the holders of the financial guarantee contracts ask the guarantor for the full guarantee amount. However, based on the expectations at the balance sheet date, the Company believes that it is unlikely that the payments for said contracts will be made.

(2) Financing amount

Financing 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 31,2020 $ 1,600,000 170,880 $ 1,770,880 $ 3,805,329 3,327,971 $ 7,133,300	December 31,2019
			$ 1,600,000 179,880 $ 1,779,880 $ 3,735,779 3,277,481 $ 7,013,260

(5) Information on transfer of financial assets

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

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 Company, and the losses arising from the credit risk shall be borne by the bank.

24. Related party transactions

Except as disclosed in other notes, transactions between the Company and related parties are also as follows:

(1) Name of related parties and the relations

Name Relationship with the Company Rechi Holdings Co., Ltd. Subsidiary Rechi Precision (Qingdao) Electric Machinery Limited Subsidiary TCL Rechi (Huizhou) Refrigeration Equipment Company Limited Subsidiary Rechi Precision (Huizhou) Mechanism Company Subsidiary Rechi Refrigeration Dongguan Co., Ltd. Subsidiary Rechi Precision (Jiujiang) Electric Machinery Limited Subsidiary

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233

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Relationshipwith the Company	Relationshipwith the Company	Relationshipwith the Company	Relationshipwith the Company
Subsidiary Subsidiary Subsidiary Investor with Subsidiary of Subsidiary of 2020	significant influence Sampo Corporation Sampo Corporation 2019 $ 85,392 3,314 $ 88,706 2019
			$ 85,392 3,314 $ 88,706 2019
		$ 4,115,909 2,099,037 861,000 197,290 $ 7,273,236

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

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

parties)
Account titles in book Notes receivable-related party Accounts receivable – related parties	Type and Name of related party Investor with significant influence Subsidiary Investor with significant influence	December 31, 2020 $ - $ 27,162 1,277 $ 28,439	December 31, 2019
				$ 9 $ 25,821 96 $ 25,917

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Account titles in book Other receivables – related parties	Type and Name of related party Subsidiary Rechi Precision (Jiujiang) Electric Machinery Limited Rechi Precision (Qingdao) Electric Machinery Limited TCL Rechi (Huizhou) Refrigeration Equipment Company Limited Rechi Precision (Huizhou) Mechanism Company Others Investor with significant influence	December 31, 2020 $ 4,665 1,249 3,046 4,637 1,108 34 $ 14,739	December 31, 2019	December 31, 2019
				$ 21,416 31,799 15,889 - 4,011 - $ 73,115

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 2020 and 2019.

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

Account titles in book Accounts payable – related parties Other payables	Type and Name of relatedparty Subsidiary Rechi Precision (Qingdao) Electric Machinery Limited TCL Rechi (Huizhou) Refrigeration Equipment Company Limited Rechi Precision (Jiujiang) Electric Machinery Limited Others Subsidiary	December 31, 2020 $ 1,522,264 346,989 254,770 143,909 $ 2,267,932 $ 109	December 31, 2019	December 31, 2019
				$ 1,207,282 812,628 252,389 81,288 $ 2,353,587 $ 396

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

235

(6) Loans to related parties (including interest receivable)

Type and Name of relatedparty Rechi Precision (Qingdao) Electric Machinery Limited Rechi Precision (Jiujiang) Electric Machinery Limited Dyna Rechi Jiujiang Co., Ltd.	December 31,2020 $ 351,044 351,805 219,377 $ 922,226	December 31,2019	December 31,2019
			$ 346,646 - - $ 346,646

The interest rate of the short-term loans provided by the Company to its subsidiaries is similar to the market interest rate. The interest income from loans to subsidiaries for 2020 and 2019 was NT$9,717 thousand and NT$7,610,000, respectively.

(7) Lease agreement

respectively. Lease agreement
Type and Name of relatedparty Interest expenses Investor with significant influence Rent expense Investor with significant influence		2020 $ - $ 532		2019
				$ 28 $ 88

The rent of the lease contract between the Company 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.

terms.
The total amount of lease payments to be paid in the future	December 31,2020 $ 442	December 31,2019
			$ 442

(8) Remuneration to the management

Remuneration to the management
Short-term employee benefits Retirement benefits		2020 $ 47,688 646 $ 48,334		2019
				$ 62,937 646 $ 63,583

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25. Pledged assets

The following assets have been provided as collateral for borrowings from banks:

Proprietary land Building	December 31,2020 $ 207,567 224,689 $ 432,256	December 31,2019	December 31,2019
			$ 207,567 236,009 $ 443,576

26. Significant contingent liabilities and unrecognized contractual commitments

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

(1) Unrecognized material contractual commitments

Purchase of property, plant, and equipment RMB NTD USD	December 31,2020 $ 5,700 2,160 84	December 31,2019
		$ 45,609 20,332 -

(2) 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, 2020, the amount of the letters of guarantee issued by the bank was NT$10 thousand.

27. Other information

Due to the global pandemic, governments of various countries have successively implemented various pandemic prevention and control measures, including extended holidays, temporary suspension of work, and work from home, resulting in a reduction in the number of operating and production days in some areas. However, as the period for which the Company suspended the work was extremely short, the impact on the Company’s production was not significant. As the domestic pandemic slows down and government policies are gradually loosened, the Company expects that its operations will gradually return to normal. However, as the international pandemic development is still uncertain, the Company will continue to pay attention to the development of the pandemic and take appropriate countermeasures to reduce the impact on its operations.

28. 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 Company; 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:

237

December 31, 2020

Foreign currency Foreign currency assets Monetary items USD $ 58,782 RMB 212,370 EUR 30,441 Non-monetary items Financial assets at fair value through other comprehensive profit or loss EUR 30,476 Subsidiaries accounted for under the equity method USD 389,479 Foreign currency liabilities Monetary items USD 14,216 RMB 447,785 EUR 1,381 December 31, 2019 Foreign currency Foreign currency assets Monetary items USD $ 57,190 RMB 81,917 EUR 26,738 Non-monetary items Financial assets at fair value through other comprehensive profit or loss EUR 19,048 Subsidiaries accounted for under the equity method USD 362,660	Exchange rate 28.48 (USD : NTD) 4.3648 (RMB : NTD) 35.02 (EUR : NTD) 35.02 (EUR : NTD) 28.48 (USD : NTD) 28.48 (USD : NTD) 4.3648 (RMB : NTD) 35.02 (EUR : NTD) Exchange rate 29.98 (USD : NTD) 4.2975 (RMB : NTD) 33.59 (EUR : NTD) 33.59 (EUR : NTD) 29.98 (USD : NTD)	Bookvalue
		$ 1,674,105 926,957 1,066,034 1,067,276 11,092,363 404,870 1,954,497 48,354 Book value
Foreign currency assets Monetary items USD RMB EUR Non-monetary items Financial assets at fair value through other comprehensive profit or loss EUR Subsidiaries accounted for under the equity method USD
		$ 1,714,568 352,035 898,145 639,810 10,872,539

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238

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Foreign currency liabilities Monetary items USD RMB EUR	Foreign currency $ 14,164 475,699 10,275	Exchange rate 29.98 (USD : NTD) 4.2975 (RMB : NTD) 33.59 (EUR : NTD)	Book value
			$ 424,628 2,044,308 345,128

The unrealized foreign currency exchange gains and losses with a material impact are as follows:

Foreign currency USD RMB EUR	2020	Net exchange losses(gains) $ 16,573 8,481 41,152 $ 66,206	2019
	Exchange rate 28.48 (USD : NTD) 4.3648 (RMB : NTD) 35.02 (EUR : NTD)		Exchange rate 29.98 (USD : NTD) 4.2975 (RMB : NTD) 33.59 (EUR : NTD)	Net exchange losses(gains)
				( ( (	$ 40,157 ) 21,315 13,263) $ 32,105)

29. 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: None.
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 4.
Accounts receivable-related party reaching NTD 100 million or more than 20% of the Paid-in shares capital: Table 5.
Trading in derivative instruments: N/A.
(2) Information on investees: Table 6.

239

(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, current profit or loss and investment gains or losses recognized, ending balance, amount received as earnings distributions from the investment, and the limitations on investment: Table 7.
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 8 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.
- (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 9.

240

RECHI PRECISION CO., LTD. and its subsidiaries

The Loaning of Funds

For the Year Ended December 31, 2020

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 3	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. Dongguan Rechi Compressor Co., Ltd.	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. Rechi Precision (Jiujiang) Electric Machinery Limited Dyna Rechi Jiujiang Co., Ltd.	Other receivables Other receivables Other receivables Other receivables Other receivables Other receivables Other receivables	Yes Yes Yes Yes Yes Yes Yes	NTD 349,185 ( RMB 80,000 ) NTD 349,185 ( RMB 80,000 ) NTD 218,241 ( RMB 50,000 ) NTD 1,281,600 ( USD 45,000 ) NTD 523,778 ( RMB 120,000 ) NTD 130,944 ( RMB 30,000 ) NTD 130,944 ( RMB 30,000 )	NTD 349,185 ( RMB 80,000 ) NTD 349,185 ( RMB 80,000 ) NTD 218,241 ( RMB 50,000 ) NTD 1,281,600 ( USD 45,000 ) NTD 130,944 ( RMB 30,000 ) NTD - ( RMB - ) NTD 130,944 ( RMB 30,000 )	NTD 349,185 ( RMB 80,000 ) NTD 349,185 ( RMB 80,000 ) NTD 218,241 ( RMB 50,000 ) NTD 1,281,600 ( USD 45,000 ) NTD 130,944 ( RMB 30,000 ) NTD - ( RMB - ) NTD 130,944 ( RMB 30,000 )	1.40% 1.40% 1.40% 0.00%~ 2.00% 2.60%~ 4.46% 2.80% 3.15%	2 2 2 2 2 2 2	$ - - - - - - -	Working capital Working capital Working capital Working capital Working capital Working capital Working capital	$ - - - - - - -	－－－－－－－	－－－－－－－	NTD 883,824 NTD 883,824 NTD 883,824 NTD 11,199,751 NTD 806,924 NTD 142,407 NTD 142,407	NTD 1,767,649 NTD 1,767,649 NTD 1,767,649 NTD 11,199,751 NTD 806,924 NTD 142,407 NTD 142,407

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

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

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

241

Unit: NTD thousand or in thousands in foreign currencies

RECHI PRECISION CO., LTD. and its subsidiaries

Endorsements and guarantees made for others

For the Year Ended December 31, 2020

Table 2

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	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.	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 TechnologyCo.,Ltd.	Note 1 Note 2 Note 2 Note 3(2) Note 2 Note 1	$ 8,838,243 8,838,243 8,838,243 NTD 4,480,152 ( RMB 1,026,424 ) 581,450 581,450	NTD 2,779,641 ( USD 90,500 ) NTD 739,448 ( USD 24,000 ) NTD 1,872,809 ( USD 51,000 ) ( RMB 70,000 ) NTD 1,770,651 ( RMB 410,000 ) NTD 188,070 ( USD 6,000 ) NTD 30,000	NTD 2,164,480 ( USD 76,000 ) NTD 227,840 ( USD 8,000 ) NTD 1,387,777 ( USD 38,000 ) ( RMB 70,000 ) NTD 1,265,797 ( RMB 290,000 ) NTD 85,440 ( USD 3,000 ) NTD 30,000	NTD 1,167,680 ( USD 41,000 ) NTD 113,920 ( USD 4,000 ) NTD 526,937 ( USD 8,500 ) ( RMB 65,262 ) NTD 1,213,419 ( RMB 278,000 ) NTD - ( USD - ) NTD -	$ - - - - - -	24% 3% 16% 28% 7% 3%	$ 13,257,365 13,257,365 13,257,365 NTD 6,720,228 ( RMB 1,539,636 ) 581,450 581,450	Y Y Y N N N	N N N N N N	N Y Y Y Y N

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) A company with which it does business.

(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$8,838,243 (net worth) × 100% = NT$8,838,243.
(2) The upper limit of the Company’s endorsements/guarantees provided is NT$8,838,243 (net worth) × 150% = NT$13,257,365.
(3) The upper limit of the Rechi Precision (Qingdao) Electric Machinery Limited’s endorsement/guarantee provided to each entity is RMB 1,026,424 (net worth) × 100% = RMB 1,026,424.
(4) The upper limit of the Rechi Precision (Qingdao) Electric Machinery Limited’s endorsements/guarantees provided is RMB 1,026,424 (net worth) × 150% = RMB 1,539,636.
(5) The upper limit of the Dyna Rechi Co., Ltd.’s endorsement/guarantee provided to each entity is NT$1,162,900 (net worth) × 50% = NT$581,450.
(6) The upper limit of the Dyna Rechi Co., Ltd.’s endorsements/guarantees provided is NT$1,162,900 (net worth) × 50% = NT$581,450.
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.

Note 7: The Company provides letters of guarantee issued by banks of NT$10,000 thousand to the Customs Administration as an endorsement/guarantee for tariff.

Note 8: Subsidiary Dyna Rechi Co., Ltd. provides letters of guarantee issued by banks of NT$500 thousand to the Customs Administration as an endorsement/guarantee for tariff.

242

RECHI PRECISION CO., LTD. and its subsidiaries

Marketable securities held – end of year

December 31, 2020

Table 3

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

Holding company	Types and names of securities	Relationship with the securities issuer	Account titles in book		At ending	At ending	At ending	Note
				Number of shares	Book value	Shareholding ratio	Fair value
RECHI PRECISION CO., LTD. Rechi Investments Co., Ltd. Rechi Refrigeration Dongguan Co., Ltd. Dongguan Rechi Compressor Co., Ltd.	D-Shares of Qingdao Haier Co., Ltd. China Steel Corporation Sharp Corporation Bigbest Solutions, Inc. Magnpower Corporation Accumulation wealth management product Zhao-Jin wealth management product of China Merchants Bank Co., Ltd. Fu-Guo-Ying-Jia No. 2 wealth management product Accumulation wealth management product Fu-Guo-Ju-Bao-Pen No. 6 wealth management product Fu-Guo-Ying-Jia No. 1 wealth management product	None None None None None None None None None None None	The financial assets measured for the fair values through other comprehensive income- current The financial assets measured for the fair values through other comprehensive income- current 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	19,048 2,218 20 600 3,000 - - - - - -	$ 1,067,276 54,906 8,643 - 25,500 21,824 19,642 43,648 7,857 87,296 96,026	- - - 0.9% 7.5% - - - - - -	$ 1,067,276 54,906 8,643 - 25,500 21,824 19,642 43,648 7,857 87,296 96,026	Note 1 Note 1 Note 1 - - Note 2 Note 2 Note 2 Note 2 Note 2 Note 2

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243

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Holding company	Types and names of securities	Relationship with the securities issuer	Account titles in book		At ending	At ending	At ending	Note
				Number of shares	Book value	Shareholding ratio	Fair value
Qingdao Rechi Electric Machinery Sales Company Rechi Precision (Qingdao) Electric Machinery Limited TCL Rechi (Huizhou) Refrigeration Equipment CompanyLimited	Min-Sheng-Cui-Zhu – Thursday Public Sharing wealth management product Min-Sheng-Cui-Zhu – Friday Public Sharing wealth management product Fu-Guo-Ju-Bao-Pen No. 3 wealth management product Fu-Guo-Ju-Bao-Pen No. 12 wealth management product e-Ling-Tong wealth management product of Industrial and Commercial Bank of China Limited Bu-Bu-Zeng-Ying wealth management product of Hua Xia Bank e-Ling-Tong wealth management product of Industrial and Commercial Bank of China Limited Min-Sheng-Cui-Zhu – Wednesday Public Sharing wealth management product Accumulation wealth management product Fu-Guo-Ju-Bao-Pen No. 5 wealth management product Fu-Guo-Ju-Bao-Pen No. 13 wealth management product Fu-Guo-Ju-Bao-Pen No. 10 wealth management product	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	- - - - - - - - - - - -	$ 244,430 39,283 43,648 43,648 30,554 78,567 52,378 43,648 34,919 130,944 43,648 43,648	- - - - - - - - - - - -	$ 244,430 39,283 43,648 43,648 30,554 78,567 52,378 43,648 34,919 130,944 43,648 43,648	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, funds, and investees at the end of December 2020.

244

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, 2020

Table 4

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	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	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 (Jiujiang) Electric Machinery Limited RECHI PRECISION CO., LTD. Rechi Precision (Huizhou) Mechanism Company RECHI PRECISION CO., LTD. Rechi Refrigeration Dongguan Co., Ltd.	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. Subsidiary of Rechi Holdings Co., Ltd. Ultimate parent company Subsidiary Ultimate parent company Subsidiary of GR Holdings (Hong Kong) Limited	Purchase Purchase Purchase Purchase Sale Purchase Sale Sale Sale Purchase Sale Sale Purchase	$ 1,625,113 4,662,092 1,013,994 346,722 1,459,465 149,116 215,446 173,202 346,722 1,231,259 1,625,113 149,116 1,459,465	20 58 13 4 64 7 10 8 15 24 30 3 29	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 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 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 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 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	Accounts payable Accounts payable Accounts payable Accounts payable Accounts receivable Accounts payable Accounts receivable Accounts receivable Accounts receivable Accounts payable Payable notes Accounts receivable Accounts receivable Accounts payable	$ 346,989 1,522,264 254,770 143,836 443,025 11,163 61,568 117,700 143,836 478,238 811,856 346,989 11,163 443,025	15 66 11 6 55 3 8 15 18 35 33 21 1 33

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245

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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	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 (Huizhou) Mechanism Company Rechi Precision (Qingdao) Electric Machinery Limited Qingdao Rechi Electric Machinery Sales Company Rechi Precision (Jiujiang) Electric Machinery Limited	Qingdao Rechi Electric Machinery Sales Company TCL Rechi (Huizhou) Refrigeration Equipment Company 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.	Subsidiary Parent company Ultimate parent company Subsidiary 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	Sale Sale Sale Sale Purchase Purchase Purchase Purchase Purchase Purchase Purchase Sale Sale	$ 3,645,737 1,231,259 4,662,092 2,529,031 215,446 430,365 107,824 3,645,737 2,529,031 3,338,211 294,160 3,338,211 1,013,994	67 99 65 35 3 7 2 37 26 34 3 73 22	O/A with net 60 days via 180-day bank acceptance bill O/A with net 90 days via T/T 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	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 30–150 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 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 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	Accounts receivable Notes receivable Accounts receivable Notes receivable 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 Payable notes Accounts receivable Notes receivable Accounts receivable	$ 1,224,352 159,274 478,238 811,856 1,522,264 556,026 255,282 61,568 44,867 7,376 41,791 1,224,352 159,274 556,026 255,282 1,197,283 1,072,817 66,101 47,402 1,197,283 1,072,817 254,770	75 9 100 100 73 27 40 5 4 - 4 40 5 18 8 39 34 2 2 78 95 17

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246

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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	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 Refrigeration Dongguan Co., Ltd. Dyna Rechi Jiujiang Co., Ltd. Rechi Precision (Qingdao) Electric Machinery Limited Jiangxi Baida Precision Manufacturing Corp. 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 GR Holdings (Hong Kong) Limited Subsidiary of Dyna Rechi Holdings Co., Ltd. Subsidiary of Rechi Investments Holdings Co., Ltd. Affiliated enterprises 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	Purchase Purchase Sale Purchase Sale Sale Sale Purchase Purchase Sale	$ 173,202 1,713,205 107,824 206,562 1,713,205 294,160 185,449 185,449 199,089 199,089	4 39 2 5 77 13 8 85 100 69	O/A with net 60 days via T/T 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 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 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 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 payable Accounts payable Payable notes Accounts receivable Accounts payable Payable notes Accounts receivable Notes receivable Accounts receivable Notes receivable Accounts receivable Accounts payable Accounts payable Accounts receivable	$ 117,700 279,538 8,730 41,791 89,852 57,083 279,538 8,730 66,101 47,402 69,997 69,997 67,485 67,485	12 28 1 3 9 7 65 15 15 83 17 90 100 93

247

RECHI PRECISION CO., LTD. and its subsidiaries

Unit: NT$1 thousand

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

December 31, 2020

Table 5

The company booked in the receivables	Name of counterparty	Relation	Receivables from related party	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) 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 TCL Rechi (Huizhou) Refrigeration Equipment Company Limited RECHI PRECISION CO., LTD. Rechi Precision (Jiujiang) Electric Machinery Limited 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 CO., LTD.	Subsidiary of Rechi Investments Holdings Co., Ltd. Subsidiary of Rechi Holdings Co., Ltd. Subsidiary of Dyna Rechi Holdings Co., Ltd. Subsidiary Subsidiary of Rechi Holdings Co., Ltd. Ultimate parent company Subsidiary of Rechi Holdings Co., Ltd. Ultimate parent company Subsidiary Parent company Ultimate parent company Subsidiary Ultimate parent company	Other receivables (Note 1) 352,293 Other receivables (Note 1) 356,470 Other receivables (Note 1) 219,407 Other receivables (Note 2) 1,281,600 Accounts receivable 443,025 Accounts receivable 143,836 Accounts receivable 117,700 Accounts receivable 346,989 Accounts receivable 1,224,352 Notes receivable 159,274 Accounts receivable 478,238 Notes receivable 811,856 Accounts receivable 1,552,264 Accounts receivable 556,026 Notes receivable 255,282 Accounts receivable 254,770	- - - - 3.36 2.46 1.50 4.78 2.69 2.69 0.97 0.97 3.12 3.18 3.18 4.06	$ - - - - - - - - - - - - - - - -	- - - - - - - - - - - - - - - -	$ - - - - 382,504 80,978 117,631 311,043 787,141 141,868 251,786 161,498 1,262,592 530,857 254,713 246,852	$ - - - - - - - - - - - - - - - -

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248

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The company booked in the receivables	Name of counterparty	Relation	Receivables from related party	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
Dyna Rechi Jiujiang Co., Ltd. Dongguan Rechi Compressor Co., Ltd.	Qingdao Rechi Electric Machinery Sales Company Dyna Rechi Jiujiang Co., Ltd. Rechi Precision (Jiujiang) Electric Machinery Limited Qingdao Rechi Electric Machinery Sales Company Dyna Rechi Jiujiang Co., Ltd.	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. Subsidiary of TCL Rechi (Huizhou) Refrigeration Equipment Company Limited and Rechi Precision (Qingdao) Electric Machinery Limited Subsidiary of Dyna Rechi Holdings Co., Ltd.	Accounts receivable 1,197,283 Notes receivable 1,072,817 Other receivables (Note 2) 133,049 Accounts receivable 279,538 Notes receivable 8,730 Accounts receivable 66,101 Notes receivable 47,402 Other receivables (Note 2) 131,024	1.50 1.50 - 6.06 6.06 2.64 2.64 -	$ - - - - - - - -	- - - - - - - -	$ 714,912 423,503 12 279,538 8,730 40,417 46,136 -	$ - - - - - - - -

Note 1: It includes loans provided to others and advance payments receivable.

Note 2: It refers to loans provided to others.

249

RECHI PRECISION CO., LTD. and its subsidiaries

Information on Investees

For the Year Ended December 31, 2020

Table 6

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	Endingshareholding	Endingshareholding	Endingshareholding	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	$ 8,194,085 195,000 720,000 USD 25,768 USD 90,000 USD 25,701 784,303 90,746 90,919	$ 8,194,085 195,000 720,000 USD 25,768 USD 90,000 USD 25,701 784,303 90,746 90,919	- 39,000 72,000 - - - - 7,004 -	100.00 100.00 42.20 100.00 100.00 100.00 100.00 100.00 100.00	$ 11,092,363 347,573 490,790 USD 34,947 USD 157,142 USD 34,778 775,232 144,771 89,682	$ 776,620 3,402 ( 60,733 ) USD 1,576 USD 14,396 USD 1,580 49,726 ( 32 ) 861	$ 766,807 3,402 ( 25,632 ) N/A N/A N/A N/A N/A N/A	Subsidiary Subsidiary Subsidiary Sub-subsidiary Sub-subsidiary Third-tier subsidiaries. Sub-subsidiary Sub-subsidiary Third-tier subsidiaries.

Note 1: For information on investments in Mainland China, please refer to Table 7.

250

Unit: NTD thousand or in thousands 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, 2020

Table 7

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 recovered in currentperiod	Amount of investment remitted or recovered in currentperiod	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 215,081 ( USD 7,552 ) NTD 257,402 ( USD 9,038 ) NTD 2,043,212 ( USD 71,742 ) NTD 1,348,500 ( USD 47,349 ) NTD 2,563,200 ( USD 90,000 ) NTD 30,554 ( RMB 7,000 ) NTD 569,600 ( USD 20,000 ) NTD 1,127,061 ( RMB 258,215 ) NTD 1,879,680 ( USD 66,000 ) NTD 1,091,382 ( USD 38,321 ) NTD 19,936 (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 720,288 ( USD 25,291 ) NTD 297,588 ( USD 10,449 ) NTD 944,511 ( USD 33,164 ) NTD 85,440 ( USD 3,000 ) NTD 797,440 ( USD 28,000 ) (Note 7) NTD - ( RMB - ) NTD - ( USD - ) NTD 708,741 ( RMB 162,376 ) (Note 10) NTD 1,879,680 ( USD 66,000 ) NTD 327,406 ( USD 11,496 ) NTD - (USD -)		$ - - - - - - - - - - -	$ - - - - - - - - - - -	NTD 720,288 ( USD 25,291 ) NTD 297,588 ( USD 10,449 ) NTD 944,511 ( USD 33,164 ) NTD 85,440 ( USD 3,000 ) NTD 797,440 ( USD 28,000 ) (Note 7) NTD - ( RMB - ) NTD - ( USD - ) NTD 708,741 ( RMB 162,376 ) (Note 10) NTD 1,879,680 ( USD 66,000 ) NTD 327,406 ( USD 11,496 ) NTD - (USD -)	$ 49,269 6,972 214,437 8,436 425,392 64,641 14,259 77,177 132,512 ( 9,699 ) 2,999	100.00 100.00 77.78 77.78 100.00 88.89 30.00 62.72 100.00 30.00 42.20	$ 49,269 6,972 166,784 6,561 425,392 57,460 4,278 48,407 132,512 ( 2,910 ) 1,266	NTD 953,006 ( USD 33,462 ) NTD 356,017 ( USD 12,501 ) NTD 2,316,248 ( USD 81,329 ) NTD 1,172,982 ( USD 41,186 ) NTD 4,480,150 ( USD 157,309 ) NTD 292,015 ( RMB 66,902 ) NTD 184,100 ( USD 6,464 ) NTD 753,281 ( RMB 172,580 ) NTD 2,017,310 ( USD 70,833 ) NTD 334,132 ( USD 11,732 ) NTD 11,300 (RMB 2,589 )	NTD 366,708 ( USD 12,876 ) NTD 43,574 ( USD 1,530 ) NTD 1,802,385 ( USD 63,286 ) NTD 165,924 ( USD 5,826 ) NTD 2,305,342 ( USD 80,946 ) - NTD 4,842 ( USD 170 ) - - - -

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 5,761,094			NTD 4,425,080 (US$155,375) (Note 5)			(Note 6)

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.

251

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 5,849 25,800 66,000 11,581 700 USD 155,375

252

RECHI PRECISION CO., LTD. and its subsidiaries

Table 8

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	$ 1,625,113 4,662,092 1,013,994 346,722	20 58 13 4	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	( $ 346,989 ) ( 1,522,264 ) ( 254,770 ) ( 143,836 )	15 66 11 6	$ 2,139 9,018 788 982

253

Information on Major Shareholders

RECHI PRECISION CO., LTD.

December 31, 2020

Table 9

Names of Dominant Shareholders	Shares	Shares
	Shares	Shareholdingratio
SAMPO CORPORATION Fubon Life Insurance Co., Ltd.	135,610,160 27,546,703	26.85% 5.45%

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 individual financial statements and the number of shares actually delivered by the Company with the dematerialized registration completed may differ due to different calculation bases.

254

§Table of Contents of Statements of Significant Accounting Titles§

Item	No./Index
Statement of assets, liabilities and equity
Cash and cash equivalent Statement	Statement 1
The financial assets measured for the fair values	Statement 2
through other comprehensive income- current
Statement of Notes Receivable	Note 8
Accounts receivable statement	Statement 3
Statement of Inventories	Statement 4
Statement of Changes in Investment under the equity	Statement 5
method
Property, plant, and equipment list	Note 11
Statement of Changes in the Accumulated	Note 11
Depreciation of Real Properties, Plants and
Equipment
Statement of Changes in the Accumulated Impairment	Note 11
of Real Properties, Plants and Equipment
Details of deferred income tax asset	Note 19
Statement of short-term borrowings	Statement 6
Statement of short-term notes payables	Note 13
Other payables statement	Note 14
Statement of long-term borrowings	Statement 7
Statement of long-term notes payables	Note 13
Statement of deferred income tax liabilities	Note 19
Statement of profits and loss
Statement of operating income	Statement 8
Statement of operating cost	Statement 9
Statement of operating expenses	Statement 10
Statement of employee benefits, depreciation,	Statement 11
depletion, and amortization expenses of the year by
function

255

RECHI PRECISION CO., LTD.

Cash and cash equivalent Statement

December 31, 2020

Statement 1

Unit: NTD thousand or in foreign currencies

Item Cash on hand Check deposits Current deposits Foreign currency deposits	Summary USD5,808,747x28.48 INR2,619,654x0.3855 EUR1,224,844x35.02 THB286,491x0.9556 RMB29,629×4.3648		Amount
			$ 98 20 20,308 209,740 $ 230,166

256

RECHI PRECISION CO., LTD.

Statement of the financial assets measured for the fair values through other comprehensive income – current December 31, 2020

Statement 2

Unit: Thousand shares/NTD thousand except for NTD for unit price

Name of financial instrument Listed stocks – overseas D-shares Of Qingdao Haier Co., Ltd.	Number of shares 19,048		Total amount $ 1,067,276		Cost of acquisition $ 712,200	Fair value Unit price (Note 1) Total amount 56.03 $ 1,067,276	Fair value Unit price (Note 1) Total amount 56.03 $ 1,067,276	Note
						Unit price (Note 1) 56.03
								Note 2

Note 1: The market price of overseas listed stocks was calculated based on the closing price on December 31, 2020. Note 2: No guarantee or collateral was provided.

257

RECHI PRECISION CO., LTD. Accounts receivable statement

December 31, 2020

Statement 3

Unit: NT$1 thousand

Name of customer Customer A Customer B Customer C Customer D Customer E Others (aggregate amount for customers accounting for within 5%) Less: Allowance for losses		Amount
	(	$ 643,691 421,085 321,189 129,796 116,200 636,824 2,268,785 11,659) $ 2,257,126

258

RECHI PRECISION CO., LTD.

Statement of Inventories

December 31, 2020

Statement 4

Unit: NT$1 thousand

Item Raw materials Work-in-process Finished products Merchandise inventories Inventory in-transit Spare parts for repair and maintenance Less: Allowance for inventory devaluation and obsolescence		Amount	Amount	Amount
		Costs $ 55,364 6,885 132,564 8,941 189,945 47,734 441,433 16,120) $ 425,313	Marketprice(Note)
	(			$ 53,293 7,070 175,147 9,973 202,942 42,757 $ 491,182

Note: Net realizable value.

259

Unit: Thousand shares/NTD thousand

RECHI PRECISION CO., LTD.

Statement of Changes in Investment under the equity method

For the Year Ended December 31, 2020

Statement 5

Balance,beginningofyear Number of shares Amount - $ 10,872,539 39,000 344,025 72,000 511,858 $ 11,728,422	Increase in currentperiod Number of shares Amount - $ 136,829 - 146 - 4,564 $ 141,539	Decrease in currentperiod Number of shares Amount - ( $ 683,812 ) - - - - ($ 683,812)	Equity method Investment income $ 766,807 3,402 ( 25,632) $ 744,577	Balance,end ofyear Sharehold ing ratio Number of shares (%) Amount - 100 $ 11,092,363 39,000 100 347,573 72,000 42.20 490,790 $ 11,930,726	Balance,end ofyear Sharehold ing ratio Number of shares (%) Amount - 100 $ 11,092,363 39,000 100 347,573 72,000 42.20 490,790 $ 11,930,726	Collateral or pledge
				Number of shares - 39,000 72,000	Sharehold ing ratio (%) 100 100 42.20
Number of shares - 39,000 72,000	Number of shares - - -	Number of shares - - -
			(			None None None

Note 1: The increase this year was due to an increase of NT$136,829 thousand in the exchange differences from the translation of financial statements of foreign operations; the decrease this year was due to the cash dividends distributed in the amount of NT$683,812 thousand by subsidiaries recognized using the equity method.

Note 2: The increase this year was due to the recognition of unrealized gains on the financial assets of the investees.

Note 3: The increase this year was due to the increase in the exchange differences from the translation of financial statements of foreign operations.

Note 4: The difference between the book value and the net equity value is the realized/unrealized gross profit on subsidiaries and the goodwill of the investment in subsidiaries.

260

RECHI PRECISION CO., LTD.

Statement of short-term borrowings December 31, 2020

Statement 6

Unit: NT$1 thousand

Type of Loans Credit loan Credit loan	Remark Working capital loan Working capital loan		Closing balance $ 41,849 665,000 $ 706,849	Agreement Terms 2020.12.29– 2021.01.26 2020.12.28– 2021.03.25	Interest rate range (%) Note Note		Financing amount $ 483,700 700,000 $ 1,183,700	Collateral and Mortgage
								None None

Note: Interest rate range is 0.80%–0.96%.

261

RECHI PRECISION CO., LTD.

Statement of long-term borrowings

December 31, 2020

Statement 7

Unit: NT$1 thousand

Creditor Jih Sun International Commercial Bank Far Eastern International Bank Co., Ltd. Yuanta Bank Mega International Commercial Bank Chang Hwa Commercial Bank, Ltd. Chang Hwa Commercial Bank, Ltd. Chang Hwa Commercial Bank, Ltd. Mizuho Bank	Agreement Terms 2020.06.19–2022.06.19 2019.08.08–2022.04.26 2020.07.21–2022.07.21 2019.07.26–2024.07.26 2019.12.25–2022.12.25 2019.10.15–2029.10.15 2020.02.26–2027.02.15 2020.12.25–2022.12.23	Repayment method Repayment in a lump sum upon maturity Repayment in a lump sum upon maturity Repayment in a lump sum upon maturity Repayment in a lump sum upon maturity Repayment in four installments from March 25, 2022 Monthly amortization and repayment of the principal and interest from November 15, 2022 Monthly amortization and repayment of the principal and interest from March 15, 2023 Repayment in a lump sum upon maturity	Annual rate (%) 0.85-1.50		Amount		Total $ 400,000 200,000 100,000 1,600,000 200,000 120,780 278,300 300,000 $ 3,199,080	Collateral or Mortgage －－－ Land and building －－－－	Note
				Due within 1 year or 1 operatingcycle $ - - - - - - - - $ -	Mature beyond oneyear $ 400,000 200,000 100,000 1,600,000 200,000 120,780 278,300 300,000 $ 3,199,080
									－－－－－－－－

262

RECHI PRECISION CO., LTD. Statement of operating income For the Year Ended December 31, 2020

Statement 8

Unit: NT$1 thousand

Item Revenue from sales of compressors and compressor pumps Others Total sales income Less: Sales discounts and allowances Sales return	Quantity 8,341 thousand units		Amount
		$ 8,793,402 98,391 8,891,793 ( 114,030 ) ( 48,227) $ 8,729,536

263

RECHI PRECISION CO., LTD.

Statement of operating cost

2020

Statement 9

Unit: NT$1 thousand

Item
Raw materials, beginning of period
Add: Raw materials purchased in current
period
Work-in-process/Finished products
transferred in
Less: Work-in-process/Finished products
transferred in
Materials allocated for outsourced
processing
Other deductions
Raw materials, end of period
Material consumption in current period
Direct labor
Manufacturing overhead
Total manufacturing cost
Work in process – beginning
Add: Semi-finished products purchased
Less: Raw materials transferred in
Other deductions
Work in process – ending
Cost for finished goods
Opening finished products
Add: Accessories purchased
Raw materials transferred in
Other credits
Less: Raw materials transferred in
Finished products, end of period
Cost of goods sold in the manufacturing
industry
Opening inventory
Add: Supplies purchased in current
period
Less: Ending inventory
Cost of goods sold in the trading industry
Customs tax refund income
Gains on recovery of inventories and spare
parts for repair and maintenance
Others
Cost of goods sold

Amount

$ 50,573
700,159
106,188
(
14,522 )
(
11,002 )
(
6,299 )
(
55,364)
769,733
41,389

97,635
908,757
20,180
15,394
(
94,365 )
(
1,471 )
(
6,885)
841,610
92,549
27,295
8,464
9,978
(
5,765 )
(
132,564)

841,567
9,634
7,162,965
(
8,941)
7,163,658
(
717 )
(
14,780 )

3,534
$ 7,993,262

264

RECHI PRECISION CO., LTD.

Statement of operating expenses

For the Year Ended December 31, 2020

Statement 10

Unit: NT$1 thousand

Item Salaries Utilities expense Depreciation Commission Transportation expenses Testing and inspection expenses Others (Note)		Marketing expenses $ 45,319 - 581 16,115 70,136 77 19,354 $ 151,582	Administrativ e expenses $ 144,224 2,216 7,180 - 58 940 50,899 $ 205,517	Research and development expenses $ 97,055 13,052 29,490 - 358 23,472 20,398 $ 183,825		Total
						$ 286,598 15,268 37,251 16,115 70,552 24,489 90,651 $ 540,924

Note: The balance of each of other accounts did not exceed 5% of the amount of this account.

265

RECHI PRECISION CO., LTD.

Statement of employee benefits, depreciation, depletion, and amortization expenses

For the Years Ended December 31, 2020 and 2019

Statement 11

Unit: NT$1 thousand

Characteristics Salaries and wages Labor insurance and national health insurance Pension expenses Remuneration to directors Other employee benefits expenses Depreciation expenses Amortization expenses		2020		Total $ 329,675 24,450 12,678 19,423 16,492 62,021 3,318 $ 468,057		2019
	Allocated as operating cost $ 62,500 7,182 2,964 - 6,111 24,770 76 $ 103,603	Allocated as operating expenses $ 267,175 17,268 9,714 19,423 10,381 37,251 3,242 $ 364,454			Allocated as operating cost $ 52,560 7,609 3,034 - 5,274 14,952 2 $ 83,431	Allocated as operating expenses $ 273,222 21,677 11,861 17,029 13,564 42,841 3,240 $ 383,434		Total
								$ 325,782 29,286 14,895 17,029 18,838 57,793 3,242 $ 466,865

Note 1: As of December 31, 2020 and 2019, the number of employees of the Company was 354 and 407, respectively, of which the number of directors who did not serve as employees concurrently was both 8.
Note 2: The average employee benefit expenses in 2020 and 2019 were NT$1,108 thousand and NT$974 thousand, respectively.
Note 3: The average employee salary expenses in 2020 and 2019 were NT$953 thousand and NT$816 thousand, respectively. The average employee salary expenses increased by 16.70%.
Note 4: Independent directors have been engaged in the current year and the previous year, so no supervisors were engaged.
Note 5: The salary and remuneration policy of the Company’s directors, managers, and employees is as follows:

Directors and managers: The performance evaluation and remuneration of directors and managers are determined and confirmed based on the usual level of payment in the industry and the consideration for the reasonableness of the connection between individual performance, the Company’s operating performance, and future risks before being reviewed by the remuneration committee and approved by the board of directors.

Employees: The employee remuneration is determined by the head of each unit according to the salary survey and analysis results, the Company’s operating performance, and individual performance and achievement, and approved by the manager in charge of the business.

VI. Financial insolvency incidents encountered by the Company and affiliates for the most recent years, up till the publication date of this annual report. The impact on the company’s financial situation shall be specified: None

266

[VII. Review of financial position, business performance and risk issues]

I. Financial position

issues] Financial position	issues] Financial position	issues] Financial position	issues] Financial position	issues] Financial position

Year Items	2020	2019	Difference
			Amount	%
Current assets	20,337,012	17,304,310	3,032,702	18%
Property, plant, and equipment	7,304,877	7,207,022	97,855	1%
Intangible assets	41,629	43,448	(1,819)	-4%
Other assets	1,737,190	2,130,883	(393,693)	-18%
Total assets	29,420,708	26,685,663	2,735,045	10%
Current liabilities	13,594,789	10,982,594	2,612,195	24%
Non-current liabilities	5,546,112	6,253,485	(707,373)	-11%
Total liabilities	19,140,901	17,236,079	1,904,822	11%
Share capital	5,049,151	5,060,131	(10,980)	0%
Capital reserve	1,343,868	1,351,403	(7,535)	-1%
Retained earnings	3,188,752	2,746,961	441,791	16%
Other equity	(743,222)	(1,199,368)	456,146	-38%
Treasuryshares	(306)	(34,266)	33,960	-99%
Non-controllinginterests	1,441,564	1,524,723	(83,159)	-5%
Total equity	10,279,807	9,449,584	830,223	9%
The annual report shall list the main reasons for any material change (any increase or decrease greater than 20%) in the Company’s assets, liabilities, or equity during the most recent 2 fiscal years, the effect thereof, and the measures to be taken in response: 1. The increase in current liabilities is mainly due to the improvement of the Company’s operation in the second half of the year, resulting in an increase in purchase and an increase in payables. 2. The increase in other equities is mainly due to the increase in unrealized investment gains on equity instrument measured at fair value through other comprehensive income, and increase in exchange differences from the translation of financial statements of foreign operations. 3. The decrease in treasury shares is mainly due to the cancellation of the remaining treasury shares during the period because the execution period for the transfer of treasuryshares to employees had expired.

267

II. Financial performance

(I) The main reasons for any material change in operating revenues, operating income, and income before tax during the past two fiscal years: Unit: NT$ thousand; %

Year Items	2020	2019	Difference	Difference
			Amount	Rate of change (%)
Operating revenue – net	19,319,962	20,132,944	(812,982)	-4%
Operatingcost	17,019,887	17,393,058	(373,171)	-2%
Grossprofit	2,300,075	2,739,886	(439,811)	-16%
Operatingexpenses	1,480,270	1,873,938	(393,668)	-21%
Net OperatingIncome	819,805	865,948	(46,143)	-5%
Non-operating incomes and expenses	168,210	(64,682)	232,892	-360%
Netprofit before tax	988,015	801,266	186,749	23%
Income tax expenses	265,371	154,417	110,954	72%
Net profits for the period	722,644	646,849	75,795	12%
Main reasons for items with changes of more than 20% between the two periods: 1. The decrease in operating expenses is mainly due to the move of the compressor production to the Taiwan plant, which resulted in a significant decrease in U.S. tariff fees. 2. The increase in non-operating revenues and expenses is mainly due to increase in gains on exchange and decrease in interest expenses. 3. The increase in net profit before tax is mainly due to the Company’s effort in reducing costs. 4. The increase in income tax expenses in mainly due to the increase in the net profit before tax.

(II) The main reasons and expected sales volume that may affect the company’s future financial business and plan for the response: The sales volume of compressor in the year 2020 was 19,310,000 units, which is a growth of 5.95%. The consolidated revenue was NT$ 19,319,962 thousand, which is a decrease of 4.04%. The Company’s sales goal for the coming year is 19,500,000 units of compressors. In face of the competitive market of inverter products, the Company continues to promote inverter compressors with the aim of increasing the market share to more than 25%. In terms of operations, the Company’s priority is to secure its market share. We will maximize our profits through more streamlined internal management and control, enhanced automated production technology, and optimized production planning. We anticipate a continuing growth in the future, and a good financial condition.

268

III. Cash flow

(I) Analysis of changes in cash flow in the most recent year (2020):

Unit: NT$ thousand

					Unit: NT$	thousand	thousand
Balance, beginning of year (1)	Cash flow from operating activities for the whole year(2)	Cash flow from investment activities for the whole year(3)	Cash flow from operating activities for the whole year(4)	Impact of changes in exchange rate on cash and cash equivalents (5)	Cash surplus (deficit)(1)+ (2)+ (3)+ (4)+ (5)	Measures taken for cash deficits
						Investment plans	Financing plans
1,158,126	4,309,578	(636,904)	(1,266,165)	12,308	3,576,943	-	-
Analysis of variance in increase/decrease: 1. Analysis of changes in cash flow in the most recent year Operating activities: Cash inflow is mainly generated from profit. Investing activities: Cash outflow is mainly generated from advance paid for purchase of property, plant, and equipment. Financing activities: Cash outflow is mainly generated from the repayment of bank loan. 2. Remedies for cash deficit and liquidity analysis Investment plans: N/A Financing plans: N/A

(II) Corrective measures to be taken in response to illiquidity: N/A

269

(III) Cash liquidity analysis for the coming year (2021):

Unit: NT$ thousand

					Unit: NT$	thousand	thousand
Balance, beginning of year (1)	Cash flow from operating activities for the whole year (2)	Cash flow from investment activities for the whole year(3)	Cash flow from operating activities for the whole year (4)	Impact of changes in exchange rate on cash and cash equivalents (5)	Cash surplus (deficit)(1) + (2) + (3) +(4) +(5)	Measures taken for cash deficits
						Investment plans	Financing plans
3,576,943	1,388,094	(504,565)	(584,467)	-	3,876,005	-	-
Analysis of variance in increase/decrease: 1. Analysis of changes in cash flow for the coming year Operating activities: Cash inflow is mainly generated from anticipated revenues and collection of receivables. Investing activities: Cash outflow is mainly generated from acquisition of equipment. Financing activities: Cash outflow is mainly generated from the distribution of cash dividends. 2. Remedies for cash deficit and liquidity analysis Investment plans: N/A Financing plans: N/A

IV. Impacts of Major Capital Expenditures in the Most Recent Year to Financial Performance

The Company is in good operating condition with stable cash inflows from operating activities. The significant capital expenditures in 2020 were covered mainly by the Company’s own operating capitals. Thus, such matter did not have a significant impact on the Company’s financial operations.

V. The major causes for profits or losses incurred by investments during the most recent year; rectifications and investment plans for the next year:
(I) The Company’s main investment policy is to expand the capacity of its primary businesses and increase revenues and profitability.
(II) The sales volume of compressor in the year 2020 was 19,310,000 units, which is a growth of 5.95%. The consolidated revenue was NT$ 19,319,962 thousand, which is a decrease of 4.04%.
(III) The Company prudently evaluates various opportunities, actively expands its business, continues to invest appropriate resources, and streamlines processes and related costs to create higher profits.
(IV) Major cash investment plans in the coming year: No such plan yet.

270

VI. Risk disclosure

(I) The effect upon the company’s profits/losses of interest and exchange rate fluctuations and changes in the inflation rate in the most recent year, and response measures to be taken in the future:
In recent years, the Company has been utilizing a combination of low-interest-rate short-term loan and medium- and long-term loans from stable sources to finance the operations in aim to reduce the volatility caused by changes in market interest rates. In addition, the Company’s cash management policy is based on the principle of safe and sound operation, and its capital allocation prioritizes safety management. By strengthening the Group’s capital allocation, increasing the efficiency of capital utilization, grasping information on interest rates on the monetary market and financial market, and taking appropriate countermeasures in order to reduce the impact of interest rate changes on the Company.
The Company’s exchange rate risk is mainly related to operating activities (when revenues and expenses are denoted in currency other than the Company’s functional currency) and net investment in a foreign operation. The Company offsets asset positions and liability positions denoted in foreign currencies to balance the positions in aim to achieve a natural hedging effect and decrease the exchange rate risk. The Company continuously monitors market movements in exchange rates in order to respond in a timely manner to the impact of significant exchange rate fluctuations.
The changes in inflation in the most recent year has no significant influence on the profits (loss) of the Company.
(II) The policy of engaging in high-risk, highly leveraged investments, loaning of funds, endorsements and guarantee, and derivatives trading, the main reason for profit or loss, and future response measures:
The Company did not engage in high-risk, high-leverage investments in the year 2020. Any derivative transactions of the Company are for the purpose of improving operating results and reducing the Company’s operational and financial risks. The Company’s lending to others and endorsement of guarantees that the Company provided for related parties are carried out in accordance with the Company’s “Procedures for Loans to Others,” and “Procedures for Endorsements & Guarantees.”
(III) R&D work to be carried out in the future, and further expenditures expected for R&D work:
The Company’s R&D of compressors is carried out according to its annual R&D plan and the needs of customers. The Company is able effectively master the key technology and manage R&D progress of its products to ensure the scheduling of mass production and meet the needs of customers. In the future, the Company will continue to expand the R&D capabilities and integrate with market trends to develop innovative key components for air-conditioners. The Company will also develop various energy-saving applications and expanded into new compressor applications in line with the trend of energy saving and carbon reduction. The estimated R&D expense for 2021 was NT$ 455,148 thousand.
(IV) The impact of the changes in domestic and foreign major policies and law on the Company’s finance and business in the most recent years, and the response measures: The changes in domestic and foreign major policies and law have no significant impact on the Company’s finance and business in the most recent year.
(V) The impact of the changes in domestic and foreign major technologies on the Company’s finance and business in the most recent years, and the response measures:

271

The changes in domestic and foreign major technologies have no significant impact on the Company’s finance and business in the most recent year.

(VI) The impact of changes in corporate image on the Company’s crisis management and the response measures:
There are no significant changes in corporate image, and thus these is no crisis.
(VII) Expected benefits and possible risks associated with any merger and acquisitions: The Company has no ongoing M&A operations.
(VIII) Expected benefits and possible risks associated with any plant expansion: High performance air-conditioners and compressors for new applications are the main focus of the Company. Also, the development of BLDC motors is also a great help to our business expansion. With the sales of compressors and comprehensive services to air-conditioner customers, the Company is able to rapidly increase the market share of inverter compressors. All of the Company’s expansion plans of new businesses are prudently evaluated before implementation. During the implementation, the Company also closely monitors changes in the industry to achieve the estimated profits and avoid possible risks.
(IX) Risks associated with any consolidation of sales or purchasing operations: The Company has no consolidation of sales. Thus, N/A.
(X) Effect upon and risk to the company in the event a major quantity of shares belonging to a director, supervisor, or shareholder holding greater than a 10 percent stake in the company has been transferred or has otherwise changed hands, and mitigation measures being or to be taken:

No such matter in the most recent year and as of the publication date of this annual report in the current year.

(XI) The effects, risks and responsive measures associated with changes in management: No such matter in the most recent year and as of the publication date of this annual report in the current year.
(XII) Litigation or non-litigation events: None.

(XIII) Other important risks:

Information Security Risk
(1) Organization of information security

The Company has established the Information Center to formulate and supervise information security policies, and the Information Center is responsible for supervising and promoting the information security policies.

==> picture [304 x 132] intentionally omitted <==

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

President of the Group
CFO of the Group
Information
Security Team
President of each department
Information Information
Security Security Handling
----- End of picture text -----

Information Security Team: Directs and promotes information security policies.
Information Security Management Unit: Consists of chiefs of various operating departments of the Group, and implements information

272

security policy and risk control.

Information Security Handling Unit: Consists of information units of the Group’s operating divisions, implements risk control and risk event management.
President of each department, responsible for implementation of information security policies.
(2) When an information security incident occurs, the source will be blocked according to the procedures and such matter will be reported to the Information Center immediately to minimize losses and control risks effectively. The incident will then be reported to the CFO of the Group and President after risk is under control, and the President will determine if to report to the Board of Directors base on the materiality of the incident.
(3) Information security policies:
Over the years, we have been improving our information security facilities to enhance information security management and collecting data of major information security issues on a daily basis, and the data serves as an important item for the daily information security facility check.
The Company’s information system adopts off-site data backup and storage. The Company conducts emergency response drills on a yearly basis to ensure smooth operations of the information system and data protection, reduce the risk of system interruption caused by unpredictable disasters or information security incidents, and ensure system recovery within the shortest possible time.
For prevention of cyber-attack and necessary protection, the Company has introduced information security protection mechanisms including fire wall, e-mail-filter and verification, and anti-virus software, and remove end-user from system administrator to prevent risks of hackers. The Company evaluates the information security risk items in Q4 every year and sets up budgets to improve and enhance information security control for the following year.
(4) As of the publication date of this annual report, the Company has not experienced major cyber-attack.

VII. Other important notes: None

273

[VIII. Specific Notes]

I. Information on the affiliates (as of Dec. 31, 2020)
(I) Consolidated Report on business operations: 1. Organization chart for affiliates:

==> picture [458 x 254] intentionally omitted <==

274

2. Profiles of the bank’s subsidiaries

Unit: NT$ thousand or thousand in foreign currencies

Names of affiliates	Date of establishment	Address	Authorized capital	Principal business
Rechi Investments Co., Ltd.	2002/05/10	10F.-1, No. 374, Sec. 2, Bade Rd., Songshan Dist.,Taipei City10556	390,000	Investment business
Rechi Holdings Co., Ltd.	2000/02/22	Palm Grove House, P.O. Box 438, Road Town Tortola, British Virgin Islands	USD 228,015	Investment business, and purchase and sales of compressors and components
Rechi International Holdings Co., Ltd.	2000/11/20	Palm Grove House, P.O. Box 438, Road Town Tortola, British Virgin Islands	USD 25,768	Investment business
Rechi Investments Holdings Co., Ltd.	2000/11/20	Palm Grove House, P.O. Box 438, Road Town Tortola, British Virgin Islands	USD 90,000	Investment business
GR Holdings (Hong Kong) Limited	2000/06/07	Room 1610-1611, No. 302-308 Hennessy Road, Wan Chai, Hong Kong	USD 14,050	Investment business, and purchase and sales of motors
Rechi Refrigeration Dongguan Co., Ltd.	2000/07/11	No. 38, Gaokesan Road, Xinliangao High-Tech Zone, Humenzhen, Dongguan City, Guangzhou, 523917 China	HKD 58,850	Manufacture of motors
Dongguan Rechi Compressor Co., Ltd.	2001/01/16	No. 38, Gaokesan Road, Xinliangao High-Tech Zone, Humenzhen, Dongguan City, Guangzhou, 523917 China	HKD 70,500	Manufacture of compressor motors
TCL Rechi (Huizhou) Refrigeration Equipment Company Limited	2001/01/17	Xiaoqu No. 7, Zhongkaigaoxin Technology Development Zone, Xiaoqu, Huizhou City, Guangdong Province, 516006,China	USD 71,742	Compressor assembly
Rechi Precision (Huizhou) Mechanism Company	2004/07/27	Xiaoqu No. 7, Zhongkaigaoxin Technology Development Zone, Xiaoqu, Huizhou City, Guangdong Province, 516006,China	USD 47,349	Compressors and components
Rechi Precision (Qingdao) Electric	2005/04/21	No. 500, Fenjin Road, Huangdao District,	USD 90,000	Compressor assembly

275

Machinery Limited		Qingdao City, Shangdong Province, 266555 China.
Qingdao Rechi Electric Machinery Sales Company	2009/09/30	(Assembly shop 3F) No. 500, Fenjin Road, Huangdao District, Qingdao City, Shangdong Province, 266555 China.	RMB 7,000	Sales of compressors and components
Dyna Rechi Co., Ltd.	2013/06/28	No. 25, Jingjian Rd., Pingtung City, Pingtung County90093	1,706,000	Design and manufacture of BLDC motors
Dyna Rechi Holdings Co., Ltd	2013/08/02	Novasage Chambers, PO Box 3018, Level 2. CCCS Building, Beach Road,Apia,Samoa	USD 25,800	Investment business
Dyna Rechi Jiujiang Co., Ltd.	2013/11/07	No. 15, Chunjiang Road, Chengxigang District, Economy and Technology Development Zone, Jiujiang City, Jiangxi Province,China	USD 40,000	Design and manufacture of BLDC motors
Rechi Precision (Jiujiang) Electric Machinery Limited	2014/12/02	No. 13, Chunjiang Road, Chengxigang District, Economy and Technology Development Zone, Jiujiang City, Jiangxi Province,China	USD 66,000	Sales of new model parts, compressors, and components
Ablek Technology Co., Ltd.	2019/05/16	No. 259, Sanyuan St., Yangmei Dist., Taoyuan City326	70,038	Purchase and sales of motors and components
(Samoa) Ablek Technology Ltd.	2017/06/22	Portcullis Chambers,P.O.Box 1225,Apia,Samoa	USD 1,000	Investment business
Ablek Technology Ltd.	2007/01/19	1F, Bld 1, Sanjiagaoxinjishu Industrial Park, No. 123, Junfasan Road, Dongkeng Town, Dongguan City, Guangdong Province, China	USD 700	Manufacture of motors

Considered to be a controlled and subordinate relation according to Article 369-3 of the Company Act: None.
Industries covered by all the affiliates: Air-conditioner compartment business, motor business, investment business.

276

Where connections exist among the businesses operated by individual affiliates, a description of the mutual dealings and division of work among such affiliates should be provided:

Company name	Product	Sales counterparties
RECHI PRECISION CO., LTD.	Compressors and related components	TCL Rechi (Huizhou) Refrigeration Equipment Company Limited Rechi Precision (Qingdao) Electric Machinery Limited Rechi Precision(Jiujiang)Electric MachineryLimited
Rechi Refrigeration Dongguan Co., Ltd.	Motor-related components	TCL Rechi (Huizhou) Refrigeration Equipment Company Limited Rechi Precision (Qingdao) Electric Machinery Limited Rechi Precision (Huizhou) Mechanism Company Rechi Holdings Co., Ltd Dyna Rechi Jiujiang Co., Ltd. Rechi Precision (Jiujiang) Electric Machinery Limited RECHI PRECISION CO.,LTD.
TCL Rechi (Huizhou) Refrigeration Equipment Company Limited	Compressors and related components	RECHI PRECISION CO., LTD. Rechi Holdings Co., Ltd Rechi Precision (Qingdao) Electric Machinery Limited Qingdao Rechi Electric Machinery Sales Company Rechi Precision (Huizhou) Mechanism Company Rechi Refrigeration Dongguan Co., Ltd. Dyna Rechi Jiujiang Co., Ltd. Rechi Precision(Jiujiang)Electric MachineryLimited
Rechi Precision (Huizhou) Mechanism Company	Pumps and motor-related components	TCL Rechi (Huizhou) Refrigeration Equipment Company Limited Rechi Precision (Qingdao) Electric Machinery Limited Rechi Refrigeration Dongguan Co.,Ltd.
Rechi Precision (Qingdao) Electric Machinery Limited	Compressors and related components	RECHI PRECISION CO., LTD. Rechi Holdings Co., Ltd TCL Rechi (Huizhou) Refrigeration Equipment Company Limited Qingdao Rechi Electric MachinerySales Company
Qingdao Rechi Electric Machinery Sales Company	Sales of compressors and components	Sales counterparties are non-affiliates in China
Dyna Rechi Co., Ltd.	BLDC motors, actuators, and related mechatronics systems	Dyna Rechi Jiujiang Co., Ltd.
Dyna Rechi Jiujiang Co., Ltd.	BLDC motors, actuators, and related mechatronics systems	RECHI PRECISION CO., LTD. Dyna Rechi Co., Ltd. Qingdao Rechi Electric Machinery Sales Company Rechi Precision (Jiujiang) Electric Machinery Limited Rechi Precision(Qingdao)Electric MachineryLimited
Rechi Precision (Jiujiang) Electric Machinery Limited	New model parts, compressors, and related components	RECHI PRECISION CO., LTD. Rechi Holdings Co., Ltd TCL Rechi (Huizhou) Refrigeration Equipment Company Limited Rechi Precision (Qingdao) Electric Machinery Limited Qingdao Rechi Electric MachinerySales Company
Ablek Technology Ltd.	Motors and related components	Ablek Technology Co., Ltd. (Samoa) Ablek Technology Ltd.

277

6. Information on directors, supervisors, and presidents of affiliates:

Unit: NT$ thousand or thousand in foreign currencies

Names of affiliates	Title	Names or representative	Shareholding	Shareholding
			No. of shares/Capital contribution	Percentage of shareholding
Rechi Investments Co., Ltd.	Chairman	CHEN, SHENG TIEN (legal representative of RECHI PRECISION CO.,LTD.)	39,000	100%
	Director	CHEN, CHIAO MING (legal representative of RECHI PRECISION CO.,LTD.)
	Director	FENG, MING FA (legal representative of RECHI PRECISIONCO.,LTD.)
	Supervisor	KO, CHIH CHENG (legal representative of RECHI PRECISION CO.,LTD.)
	President	FENG, MING FA	-	-
Rechi Holdings Co., Ltd.	Chairman	RECHI PRECISION CO., LTD. Rep.: CHEN, SHENG TIEN	USD 258,015	100%
Rechi International Holdings Co., Ltd.	Director	Rechi Holdings Co., Ltd. Rep.: FENG, MING FA	USD 25,768	100%
Rechi Investments Holdings Co.,Ltd.	Director	Rechi Holdings Co., Ltd. Rep.: FENG, MING FA	USD 90,000	100%
GR Holdings (Hong Kong) Limited	Chairman	FENG, MING FA (legal representative of Rechi International Holdings Co.,Ltd.)	USD 14,050	100%
	Director	KO, CHIH CHENG (legal representative of Rechi International Holdings Co.,Ltd.)
	Director	CHEN, CHIAO MING (legal representative of Rechi International Holdings Co.,Ltd.)
Rechi Refrigeration Dongguan Co., Ltd.	Chairman	WU, YI WEN (legal representative of GR Holdings (Hong Kong)Limited)	HKD 58,850	100%
	Director	KO, CHIH CHENG (legal representative of GR Holdings (Hong Kong)Limited)
	Director	FENG, MING FA (legal representative of GR Holdings (Hong Kong)Limited)
	Director	CHEN, CHIAO MING (legal representative of GR Holdings (Hong Kong)Limited)
	Supervisor	WU, CHIN MEI (legal representative of GR Holdings (Hong Kong)Limited)
	President	WANG, HSIAO WEN	-	-
Dongguan Rechi Compressor Co., Ltd.	Chairman	WU, YI WEN (legal representative of Rechi Holdings Co., Ltd.)	HKD 70,500	100%
	Director	FENG, MING FA (legal representative of Rechi Holdings Co., Ltd.)
	Director	CHEN, CHIAO MING (legal representative of Rechi Holdings Co.,

278

		Ltd.)
	Director	KO, CHIH CHENG (legal representative of Rechi Holdings Co., Ltd.)
	Supervisor	WU, CHIN MEI (legal representative of Rechi Holdings Co., Ltd.)
	President	WANG, HSIAO WEN	-	-
TCL Rechi (Huizhou) Refrigeration Equipment Company Limited	Chairman	CHEN, SHAO LIN (legal representative of TCL Air-Conditioner (Zhongshan) Co.,Ltd.)	USD 15,941	22.22%
	Vice Chairman Director	WU, YI WEN (legal representative of Rechi Holdings Co., Ltd.)	USD 55,801	77.78%
	Director	CHEN, CHIAO MING (legal representative of Rechi Holdings Co., Ltd.)
	Director	FENG, MING FA (legal representative of Rechi Holdings Co., Ltd.)
	Supervisor	KO, CHIH CHENG (legal representative of Rechi Holdings Co., Ltd.)
	President	WANG, HSIAO WEN	-	-
Rechi Precision (Huizhou) Mechanism Company	Chairman	CHEN, SHAO LIN (legal representative of TCL Air-Conditioner (Zhongshan)Co.,Ltd.)	USD 3,381	7.14%
	Director	CHEN, CHIAO MING (legal representative of TCL Rechi (Huizhou) Refrigeration Equipment CompanyLimited)	USD 32,131	67.86%
	Vice Chairman Director	WU, YI WEN (legal representative of Rechi Holdings Co., Ltd.)	USD 11,837	25.00%
	Director	FENG, MING FA (legal representative of Rechi Holdings Co., Ltd.)
	Supervisor	KO, CHIH CHENG (legal representative of Rechi Holdings Co., Ltd.)
	President	WANG, HSIAO WEN	-	-
Rechi Precision (Qingdao) Electric Machinery Limited	Chairman	KO, CHIH CHENG (legal representative of Rechi Investments Holdings Co.,Ltd.)	USD 90,000	100%
	Director	NIU, YONG GUANG (legal representative of Rechi Investments Holdings Co.,Ltd.)
	Director	WU, YI WEN (legal representative of Rechi Investments Holdings Co.,Ltd.)
	Supervisor	WU, CHIN MEI (legal representative of Rechi Investments HoldingsCo.,Ltd.)

279

	President	WANG, CHOU CHIANG	-	-
Qingdao Rechi Electric Machinery Sales Company	Chairman	FENG, MING FA (legal representative of TCL Rechi (Huizhou) Refrigeration Equipment CompanyLimited)	RMB 3,500	50%
	Director	WU, YI WEN (legal representative of TCL Rechi (Huizhou) Refrigeration Equipment CompanyLimited)
	Supervisor	WU, CHIN MEI (legal representative of TCL Rechi (Huizhou) Refrigeration Equipment CompanyLimited)
	Director	KO, CHIH CHENG (legal representative of Rechi Precision (Qingdao)Electric MachineryLimited)	RMB 3,500	50%
	Director	NIU, YONG GUANG (legal representative of Rechi Precision (Qingdao)Electric MachineryLimited)
	President	NIU, YONG GUANG	-	-
Dyna Rechi Co., Ltd.	Chairman	LIU, JIN HSI (legal representative of RECHI PRECISION CO.,LTD.)	720,000	42.20%
	Director	CHEN, CHIAO MING (legal representative of RECHI PRECISIONCO.,LTD.)
	Director	WU, YI WEN (legal representative of RECHI PRECISION CO.,LTD.)
	Director	FENG, MING FA (legal representative of RECHI PRECISIONCO.,LTD.)
	Director	KO, CHIH CHENG (legal representative of RECHI PRECISION CO.,LTD.)
	Director	CHENG, CHI CHAO (legal representative of China Steel Corporation)	400,000	23.45%
	Director	LIU, MIN HSIUNG (legal representative of China Steel Corporation)
	Director	HSU, YUNG FU (legal representative of Ablek Technology Ltd.)	80,000	4.69%
	Director	LIN, CHEN-YU(legal representative of Richtek TechnologyCorporation)	160,000	9.38%
	Supervisor	LI, WEN FENG (legal representative of Taiwan Sanyo Electric Co.,Ltd.)	160,000	9.38%
	Supervisor	ONISHI MASATAKA(legal representative of SharpCorporation)	80,000	4.69%
	President	HSU, YUNG FU	18,169	1.07%
Dyna Rechi Holdings Co., Ltd	Chairman	Dyna Rechi Co., Ltd. Rep.: LIU, JIN HSI	USD 25,800	100%
Dyna Rechi Jiujiang Co., Ltd.	Chairman	WU, YI WEN (legal representative of Dyna Rechi Holdings Co., Ltd.)	USD 25,800	64.5%

280

	Director	LIU, MIN HSIUNG (legal representative of Dyna Rechi Holdings Co.,Ltd.)
	Director	KO, CHIH CHENG (legal representative of Dyna Rechi Holdings Co.,Ltd.)
	Supervisor	LI, WEN LIN (legal representative of Dyna Rechi Holdings Co.,Ltd.)
	President	LIU, SHIH CHIEH	-	-
Rechi Precision (Jiujiang) Electric Machinery Limited	Chairman	WU, YI WEN (legal representative of Rechi Holdings Co., Ltd.)	USD 66,000	100%
	Director	CHEN, CHIAO MING (legal representative of Rechi Holdings Co., Ltd.)
	Director	LIU, SHIH CHIEH (legal representative of Rechi Holdings Co., Ltd.)
	Supervisor	KO, CHIH CHENG (legal representative of Rechi Holdings Co., Ltd.)
	President	LIU, SHIH CHIEH	-	-
Ablek Technology Co., Ltd.	Chairman	CHEN, CHIAO MING (legal representative of Dyna Rechi Co., Ltd.)	7,004	100%
	Director	HSU, YUNG FU (legal representative of Dyna Rechi Co., Ltd.)
	Director	CHIEN, CHENG CHUNG (legal representative of Dyna Rechi Co., Ltd.)
	Supervisor	KO, CHIH CHENG (legal representative of Dyna Rechi Co., Ltd.)
Ablek Technology Ltd.	Chairman	HSU, YUNG FU	USD 700	100%
	Director	CHIEN, CHENG CHUNG
	Director	HSIEH, MING-FENG
	Supervisors	KO, CHIH CHENG
(Samoa) Ablek Technology Ltd.	Director	Ablek Technology Co., Ltd. Rep.: CHEN, CHIAO MING	USD 1,000	100%

281

7. 2020 Operating summary of affiliates

Unit: EPS in NT$, otherwise NT$ thousand or thousand in foreign currencies


Company	Authorize	Total	Total		Operating	Operating	Income after	Earnings per
				Net worth
name	d capital	assets	liabilities		income	income	taxation	share


Rechi Investments Co.,Ltd.	NTD 390,000	NTD 352,173	NTD 100	NTD 352,073	NTD 0	NTD (170)	NTD 3,403	NTD 0
Rechi Holdings Co.,Ltd.	USD 258,015	USD 434,273	USD 41,023	USD 393,250	USD 0	USD (44)	USD 26,282	Note 1
Rechi Internationa l Holdings Co.,Ltd.	USD 25,768	USD 34,947	USD 0	USD 34,947	USD 0	USD (5)	USD 1,576	Note 1
Rechi Investments Holdings Co.,Ltd.	USD 90,000	USD 157,309	USD 0	USD 157,309	USD 0	USD (1)	USD 14,396	Note 1
GR Holdings (Hong Kong) Limited	USD 14,050	USD 34,783	USD 5	USD 34,778	USD 0	USD (125)	USD 1,580	Note 1
Rechi Refrigeratio n Dongguan Co.,Ltd.	RMB 62,253	RMB 319,006	RMB 100,667	RMB 218,339	RMB 528,374	RMB 9,140	RMB 11,504	Note 1
Dongguan Rechi Compressor Co.,Ltd.	RMB 74,586	RMB 82,640	RMB1,075	RMB 81,565	RMB 3,076	RMB (1,579)	RMB 1,628	Note 1
TCL Rechi (Huizhou) Refrigeratio n Equipment Company Limited	RMB 509,746	RMB 1,598,755	RMB 916,479	RMB 682,276	RMB 1,279,908	RMB 31,131	RMB 50,070	Note 1
Rechi Precision (Huizhou) Mechanism Company	RMB 324,550	RMB 393,698	RMB 48,181	RMB 345,517	RMB 289,397	RMB 1,121	RMB 1,970	Note 1
Rechi Precision (Qingdao) Electric Machinery Limited	RMB 614,443	RMB 1,883,015	RMB 856,592	RMB 1,026,423	RMB 1,683,332	RMB 86,363	RMB 99,328	Note 1
Qingdao Rechi Electric Machinery Sales Company	RMB 7,000	RMB 1,649,806	RMB 1,574,542	RMB 75,264	RMB 2,335,965	RMB 11,301	RMB 15,094	Note 1
Dyna Rechi Co., Ltd.	NTD 1,706,000	NTD 1,543,034	NTD 380,134	NTD 1,162,900	NTD 198,675	NTD (79,745)	NTD (60,733)	NTD 0

282

Dyna Rechi Holdings Co.,Ltd.	RMB 162,476	RMB 177,638	RMB 29	RMB 177,609	RMB 0	RMB (13)	RMB 11,611	Note 1
Dyna Rechi Jiujiang Co.,Ltd.	RMB 258,214	RMB 505,792	RMB 230,640	RMB 275,152	RMB 518,150	RMB 18,352	RMB 18,021	Note 1
Rechi Precision (Jiujiang) Electric Machinery Limited	RMB 429,771	RMB 1,328,288	RMB 866,113	RMB 462,175	RMB 1,061,420	RMB 8,688	RMB 30,941	Note 1
Ablek Technology Ltd.	RMB 5,394	RMB 53,560	RMB 47,426	RMB 6,134	RMB 67,363	RMB 2,055	RMB 700	Note 1
(Samoa) Ablek Technology Ltd.	RMB 6,786	RMB 20,547	RMB 0	RMB 20,547	RMB 18,940	RMB (557)	RMB 201	Note 1
Ablek Technology Co.,Ltd.	NTD 70,038	NTD 162,037	NTD 72,990	NTD 89,047	NTD 196,213	NTD (119)	NTD (204)	NTD 0

Note 1: Non-shareholding. Thus, N/A.

(II) Consolidated financial statements of affiliates: Please refer to page 84 (III) Affiliation reports: N/A

II. The status of private placement of securities in the most recent year to the date this report was printed: None.
III. Holding or disposal of shares in the company by the company’s subsidiaries during the most recent fiscal year or during the current fiscal year up to the date of publication of the annual report: None.
IV. Other matters that require additional description: None
[IX. If the result of incidents set forth in Subparagraph 2 Paragraph 3, Article 36 of the Securities and Exchange Act that could have a material effect on shareholder equity or securities prices during the most recent fiscal year or during the current fiscal year up to the publication date of the annual report]: None

283

AI assistant

RECHI — Annual Report 2020

52399_rns_2021-09-10_5cc1a525-5649-4825-bc36-ec0fa55eca87.pdf

Table of Contents

[I. Letter to Shareholders]

Dear Shareholders,

Consolidated Financial Statements

[II. Company History]

I. Date of establishment:

[III.Corporate Governance Report]

I. Organization

II. Profiles of Directors, President, Executive Vice Presidents, Asst. VP, and supervisors of the various departments and branches 1. Information on the directors April 30, 2021 ril 30, 2021

2. Profiles of President, Executive Vice Presidents, Asst. VP, and supervisors of the various departments and branches Apr. 30, 2021

III. Remuneration paid to directors, the President, and the Vice Presidents in the most recent year

1. Remuneration of the President and independent directors Unit NTD thousand

Pa ment scale y

2. Remuneration to the President and Vice President

Payment scale

3. Names of managers with remuneration as employees and the status of payment

IV. Status of Corporate Governance

(I) Information on the operations of the board of directors:

(II) The board of directors’ evaluation and implementation status

2020 performance evaluation of board of directors

(III) The operation of the Auditing Committee

(V) The foundation, responsibilities, and functionality of the Remuneration Committee

1. Information on the members of the Remuneration Committee

(3) The reasons for discussion and the resolution results of the Remuneration Committee, and the Company’s response to the members’ opinions:

2. Education training of the Board in 2020.

(X) Execution status of internal control system:

1. Important resolutions and implementation of 2020 Shareholders’ Meeting

Summary of the Resignation or Dismissal of the Company-Related Personnel

V. Disclosure of the accountant’s fee:

VI. Change of CPA

2019: N/A

IX. The top ten shareholders who are spouses or relatives within the second degree of kinship of one another:

[IV.Capital Overview]

I. Shares and Dividends

(I) Sources of shares and dividends

(II) Shareholder structure

(III) Diversification of Shareholdings

(IV) Names of principle shareholder

(VI) The company’s dividend policies and execution

(VIII) Remuneration of employees, directors and supervisors

(IX) Share repurchases of the Company

II. Corporate bond: None.

[V. Operating Highlights]

I. Business Activities

1. The principal businesses of the Company

2. Proportion of business

3. The Company’s current commodity (service) items

4. New products (services) planned to be developed

(II) Industry Overview:

1. Current industry situation and development:

(III) Technology and R&D

2. Major R&D results in the most recent year

(IV) Short and long-term business development plan:

2. Market share percentage

1. Usage of the Company’s main products

2. Production process:

(III) Supply of main raw materials:

2. Information of main customers in the most recent 2 years:

(V) Production volume and value in the latest two years:

(VI) Sales volume and value in the latest two years:

III. Employee information in the last two years up to the publication date of this annual report (consolidated)

IV. Information on spending on environmental protection

V. Work environment and employee safety protection measures:

VI. Labor–management Relations

(III) Post-employment policy:

VII. Important Contracts

VIII.Management of Intellectual Property

(I) Intellectual property management

1. Proprietary trademark management

2. Copyright management

(II) Implementation

2015

2018

2019

(III) List of intellectual property obtained and results

[VI. Financial Information]

I. Condensed Balance Sheet and Income Statement of the last five years

RECHI Annual Report 2020