RECHI - Audit Report / Information 2020

Stock No: 4532

RECHI PRECISION CO., LTD.

Individual Financial Statements and Independent Auditor’s Report 2020 and 2019

Address: No. 943, Sec. 2, Chenggong Rd., Guanyin Dist., Taoyuan City 328, Taiwan (R.O.C.) TEL: (03)483-7201

The independent auditors’ review report and the accompanying Individual Financial Statements are the English translation of the Chinese version prepared and used in the Republic of China. If there is any conflict between, or any difference in the interpretation of the English and Chinese language independent auditors’ review report and Individual Financial Statements, the Chinese version shall prevail.

§Table of Contents§

Item 1. Cover 2. Table of Contents 3. Auditor’s Report 4. Individual Balance Sheet 5. Individual comprehensive income statements 6. Individual statement of changes in equity 7. Individual Cash Flow Statement 8. Notes to the individual financial statements (1) Organization and operations (2) Financial reporting date and procedures (3) Application of new and revised standards and interpretation (4) Summary of significant accounting policies (5) Main source of significant accounting judgment, estimates and assumptions uncertainty (6) Summary of significant accounting titles (7) Related party transactions (8) Pledged assets (9) Significant contingent liabilities and unrecognized contractual commitments (10) Significant disaster loss (11) Significant subsequent events (12) Other information (13) Information of foreign currency assets and liabilities with significant effects (14) Notes of disclosure 1. Information about important transactions 2. Information regarding investees 3. Information regarding investment in the territory of Mainland China 4. Information on Major Shareholders (15) Segment information 9. Statements of significant accounting titles	Page 1 2 3–6 7 8–10 11 12–13 14 14 14–18 18–29 29 29–56 56–59 60 60 - - 60 60–62 62 63 63 63 - 78–89	Notes to financial the statements No.
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Auditor’s Report

To RECHI PRECISION CO., LTD.:

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.

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.

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 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.

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.

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 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.
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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.

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 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

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		December 31, 2020	December 31, 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		December 31, 2019	December 31, 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

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

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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		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

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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

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RECHI PRECISION CO., LTD.

Individual Statements of Changes in Shareholders’ Equity

For the Years Ended December 31, 2020 and 2019

Unit: NT$1 thousand

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	Treasury shares ( $ 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

Manager: FENG, MING FA

Accounting Manager: WU, CHIN MEI

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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

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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

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.

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:

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 Date per 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	reporting periods
Reform – 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

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 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

the Financial Supervisory Commission
	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	January 1, 2023 (Note 6)
Policies”
Amendments to IAS 8 “Definition of Accounting	January 1, 2023 (Note 7)
Estimates”
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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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 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 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.
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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.
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 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.

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

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

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

When preparing the 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

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.

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.

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.

(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.

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 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.

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.

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.

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 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 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.

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

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.

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.

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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

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.

(11) 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.

(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.

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 expressed on the individual 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 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.

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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 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

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.

(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.

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.

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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.

(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

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.

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, R&D, and personnel training expense.

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.

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 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

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

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 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 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:

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

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

8.	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

(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 30days	( O	32.90% $ 18,018 7,613) $ 10,405 verdue for 31 to 60days	( O	64.94% $ 2,424 1,574) $ 850 verdue for 61 to 90days	( O	76.39% $ 1,253 958) $ 295 verdue for 91 to 120days	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 rs 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	December 31, 2020 1.35% 1.35%	December 31, 2019
		1.35% -

(3) Other lease information

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

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 g institutions	Face amount	Face amount	Discounted amount	Discounted amount	Book value	Book value	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.

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 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 of plan 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 of plan 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.

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:

Discount 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:

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)

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

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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.

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.
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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.

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 (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

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

As of December 31, 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 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

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.

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

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.

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.

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.

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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
Deferredincome taxassets 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 the profit 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 the profit 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

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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.

(2) Information on fair value – financial instruments at fair value on repetition.

Fair value hierarchy

Fair value hierarchy
December 31, 2020 Financial assets at fair value through other comprehensive profit or loss Equity investment - Listed stocks – overseas December 31, 2019 Financial assets at fair value through other comprehensive profit or loss Equity investment - Listed stocks – overseas	Level 1	Level 2 $ - Level 2 $ -	Level 3 $ - Level 3 $ -	Total
	$ 1,067,276 Level 1			$ 1,067,276 Total
	$ 639,810			$ 639,810

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.

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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

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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.

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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.

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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		1to 3months $ 2,323,146 131 6,866 665,449 - $ 2,995,592		3 months to 1 year $ 13,891 589 30,899 - - $ 45,379		1to 5 years $ 492 988 4,132,745 - - $ 4,134,225		Over5 years
											$ - - 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		1to 3months $ 2,367,534 216 9,622 213,330 - $ 2,590,702		3 months to 1 year $ 22,151 933 43,297 - - $ 66,381		1to 5 years $ 292 68 5,056,166 - - $ 5,056,526		Over5 years
											$ - - 60,228 - - $ 60,228
N L In In Fi

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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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Relationship with the Company	Relationship with the Company	Relationship with the Company	Relationship with 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 related party 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.

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

Type and Name of related party 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 thousand, respectively.

(7) Lease agreement

respectively. Lease agreement
Type and Name of related party 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 Short-term employee benefits Retirement benefits		2020 $ 47,688 646 $ 48,334		2019
				$ 62,937 646 $ 63,583

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

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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$10,000 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:

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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)	Book value
		$ 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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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.
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(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.
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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 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.

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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. DynaRechiCo.,Ltd.	Rechi Holdings Co., Ltd. Rechi Precision (Qingdao) Electric Machinery Limited Rechi Precision (Jiujiang) Electric Machinery Limited Qingdao Rechi Electric Machinery Sales Company Dyna Rechi Jiujiang Co., Ltd. Ablek Technology Co.,Ltd.	Note 1 Note 2 Note 2 Note 3(2) Note 2 Note1	$ 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.

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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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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 Company Limited	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.

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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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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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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

70 -

Unit: NT$1 thousand

RECHI PRECISION CO., LTD. and its subsidiaries

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

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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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.

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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	Ending shareholding	Ending shareholding	Ending shareholding	Current period profit/loss of the investee	Recognized investment Income	Note
				Current period-end	Previous period-end	Number of shares	Percentage (%)	Book value
RECHI PRECISION CO., LTD. Rechi Holdings Co., Ltd. Rechi International Holdings Co., Ltd. Dyna Rechi Co., Ltd. Ablek Technology Co., Ltd.	Rechi Holdings Co., Ltd. Rechi Investments Co., Ltd. Dyna Rechi Co., Ltd. Rechi International Holdings Co., Ltd. Rechi Investments Holdings Co., Ltd. GR Holdings (Hong Kong) Limited Dyna Rechi Holdings Co., Ltd. Ablek Technology Co., Ltd. Ablek Technology Ltd.	British Virgin Islands Taiwan Taiwan British Virgin Islands British Virgin Islands Hong Kong Samoa Taiwan Samoa	Investment business Investment business BLDC Motor Investment business Investment business Investment business Investment business Sales business Investment business	$ 8,194,085 195,000 720,000 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.

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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 recoveredincurrent period	Amount of investment remitted or recoveredincurrent period	Accumulated amount of investment remitted from Taiwan at ending	Current period profit/loss of the investee	The Company’s directly or indirectly invested shareholding	Investment gains (losses) recognized for current period (Note 4)	Book value of investment at ending	The investment income received at the end of the current period
							Outward remittance	Recover
Rechi Refrigeration Dongguan Co., Ltd. Dongguan Rechi Compressor Co., Ltd. TCL Rechi (Huizhou) Refrigeration Equipment Company Limited Rechi Precision (Huizhou) Mechanism Company Rechi Precision (Qingdao) Electric Machinery Limited Qingdao Rechi Electric Machinery Sales Company Qingdao China Steel Precision Metal Co., Ltd. Dyna Rechi Jiujiang Co., Ltd. Rechi Precision (Jiujiang) Electric Machinery Limited Jiangxi Baida Precision Manufacturing Corp. Ablek Technology Ltd.	Refrigerant compressor motors and air conditioner accessories Rotary refrigerant compressors Rotary refrigerant compressors Rotary refrigerant compressor components Rotary refrigerant compressor components Sales business Processing production Refrigerant compressor motors and BLDC motors Rotary refrigerant compressors Processing production Home appliance motors	NTD 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 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.

74 -

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.

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RECHI PRECISION CO., LTD. and its subsidiaries

Significant direct transactions with the investee in Mainland China or indirectly through third regions, its prices, terms of payment, unrealized gain or loss, and other relevant information. For the Year Ended December 31, 2020

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

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RECHI PRECISION CO., LTD.

Information on Major Shareholders

December 31, 2020

Table 9

Names of Dominant Shareholders	Shares	Shares
	Shares	Shareholding ratio
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.
77 -

§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

78 -

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

79 -

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.

80 -

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

81 -

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	Market price (Note)
	(			$ 53,293 7,070 175,147 9,973 202,942 42,757 $ 491,182

Note: Net realizable value.

82 -

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, beginning of year Number of shares Amount - $ 10,872,539 39,000 344,025 72,000 511,858 $ 11,728,422	Increase in current period Number of shares Amount - $ 136,829 - 146 - 4,564 $ 141,539	Decrease in current period Number of shares Amount - ( $ 683,812 ) - - - - ($ 683,812)	Equity method Investment income $ 766,807 3,402 ( 25,632) $ 744,577	Balance, end of year 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 of year 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.

83 -

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%.

84 -

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 operating cycle $ - - - - - - - - $ -	Mature beyond one year $ 400,000 200,000 100,000 1,600,000 200,000 120,780 278,300 300,000 $ 3,199,080
									－－－－－－－－

85 -

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

86 -

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

87 -

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.

88 -

RECHI PRECISION CO., LTD.

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

For the Years Ended December 31, 2020 and 2019

Statement 11 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		Unit: NT$1 thousand 2019 Allocated as operating expenses Total $ 273,222 $ 325,782 21,677 29,286 11,861 14,895 17,029 17,029 13,564 18,838 42,841 57,793 3,240 3,242 $ 383,434 $ 466,865	Unit: NT$1 thousand 2019 Allocated as operating expenses Total $ 273,222 $ 325,782 21,677 29,286 11,861 14,895 17,029 17,029 13,564 18,838 42,841 57,793 3,240 3,242 $ 383,434 $ 466,865
	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

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.

89 -

AI assistant

RECHI — Audit Report / Information 2020

52399_rns_2020-11-06_9cf8555e-e41e-481a-87ef-0db2a418e4d3.pdf

RECHI PRECISION CO., LTD.

Individual Financial Statements and Independent Auditor’s Report 2020 and 2019

§Table of Contents§

Auditor’s Report

To RECHI PRECISION CO., LTD.:

Audit opinions

The basis for opinions

Key audit matters

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

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

RECHI PRECISION CO., LTD. Individual Balance Sheet

RECHI PRECISION CO., LTD.

Individual Income Statement

(Continued from previous page)

(Continued from previous page)

RECHI PRECISION CO., LTD.

Individual Statements of Changes in Shareholders’ Equity

RECHI PRECISION CO., LTD.

Individual Statements of Cash Flow

For the Years Ended December 31, 2020 and 2019

Unit: NT$1 thousand

(Continued from previous page)

RECHI PRECISION CO., LTD.

Individual Notes to financial statements

1. Organization and operations

2. Financial reporting date and procedures

3. Application of new and revised standards and interpretation

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

4. Summary of significant accounting policies

(4) Foreign currency

(5) Inventory

(6) Investment in subsidiaries

(10) Financial instruments

1. Financial assets

(1) Classification of measurement

(2) Impairment of financial assets

2. Equity instruments

Financial guarantee contract

Commodity sales revenue

The Company is the lessee.

(16) Income tax

1. Income tax expenses in the current period

2. Deferred tax

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

The estimated impairment of accounts receivable

6. Cash and cash equivalents

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

(1) Accounts receivable based on cost after amortization

December 31, 2020

10. Investment under the equity method Investment in subsidiaries

11. Real property, plant and equipment

12. Lease arrangements

(1) Right-of-use assets.

(3) Other lease information

13. Borrowings

(3) Long-term borrowings

14. Other payables

15. Retirement benefits plan

(1) Defined contribution pension plan

(2) Defined benefit plan

(Continued from previous page)

16. Equity

(3) Retained earnings and Dividend Policy

(6) Treasury shares

17. Income

(2) Refund liability

18. Business units in continuing operation income

(2) Other income

(6) Employee benefits expenses

(7) Remuneration to the employees and the directors

Amount

19. Continuing department income tax

2020

(5) Income tax audit

20. Earnings per share

Net profits of the current year

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

RECHI Audit Report / Information 2020