REXON — Annual Report 2022

May 31, 2023

Stock Code: 1515 Annual Report inquiry website: http://mops.twse.com.tw Company: http ： //www.rexon.net

Rexon Industrial Corp., Ltd. 2022 Annual Report

Integrity Stability Growth

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Printed on April 14, 2023

I. Spokesperson and Deputy Spokesperson of the Company:

Spokesperson: Tank Chuang Title: Vice President Tel.: (04)2491-4141 Ext. 6711 Email: tank.chuang@rexon.com.tw Deputy Spokesperson: Hsu Sen-Yuan Title: Director Tel.: (04)2491-4141 Ext. 6777 Email: samuel.hsu@rexon.com.tw

II. Address and Telephone Number of the Head Office, Branch and Factory

Address of head office: No. 261, Renhua Rd., Dali Dist., Taichung City Tel.: (04)24914141

Branch: None Address of factory: No. 261, Renhua Rd., Dali Dist., Taichung City Tel.: (04)24914141

III. Stock Transfer Agency:

Name: Chinatrust Commercial Bank - Stock Agency Department Address: 5F., No. 83, Sec. 1, Chongqing S. Rd., Taipei City Website: http://www.ctbcbank.com Tel.: (02) 6636-5566

IV. CPAs for the Financial Reports in the Most Recent Year

Name of CPA: Kuo Shih-Hua, Wu Chun-Yuan Name of CPA firm: KPMG Taiwan Address: 68F., No. 7, Sec. 5, Xinyi Rd., Taipei City 11049 (Taipei 101) Website: http://www.kpmg.com.tw/ Tel.: (02) 8101-6666

V. Names of the Exchanges Where Our Securities Are Traded Offshore, and the Methods with Which the Information of the Offshore Securities Is Accessed: None

VI. Company Website:

Company: http://www.rexon.net

Table of Contents

One. Letter to Shareholders ........................................................................................................ 1	One. Letter to Shareholders ........................................................................................................ 1
Two. Company Profile ................................................................................................................ 3
I.	Company Profile ........................................................................................................ 3
Three. Corporate Governance Report .......................................................................................... 6
I.	Organizational system ................................................................................................ 6
II.	Information on directors, supervisors, President, Vice President, Director, and
	department and branch heads...................................................................................... 7
III.	Remuneration to directors, supervisors, President and Vice President in the most recent
	year .......................................................................................................................... 16
IV.	Status of corporate governance ................................................................................. 20
V.	Information on CPA professional fees....................................................................... 45
VI.	Information on change of CPAs ................................................................................ 45
VII.	CPA firm or its affiliates at which the Company’s President, General Manager, or
	managerial officers responsible for financial or accounting matters ever served as an
	employee in the most recent year.............................................................................. 46
VIII.	Details of equity transferred or pledged by directors, supervisors, managerial officers,
	or shareholders with more than 10% ownership interest in the most recent year up to
	the publication date of the annual report. Where the counterpart involved in the transfer
	or pledge of equity is a related party, the name of such counterpart, his/her relations
	with the Company, directors, supervisors, managerial officers, or shareholders with
	more than 10% ownership interest, and the number of shares acquired or pledged must
	be disclosed. ............................................................................................................. 47
IX.	Relationship information, if any one of the 10 largest shareholders is a related party, or
	is the spouse or a relative within the second degree of kinship with another shareholder:
	................................................................................................................................ 48
X.	The total number of shares and total equity stake held in the same investee by the
	Company, its directors and supervisors, managerial officers, and any companies
	controlled either directly or indirectly by the Company ............................................ 49
Four. Offering of Securities ...................................................................................................... 50
I.	Capital and share ...................................................................................................... 50
II.	Issuance of corporate bonds ..................................................................................... 54
III.	Issuance of preferred shares ..................................................................................... 55
IV.	Issuance of overseas depositary receipts ................................................................... 55
V.	Employee share subscription warrants ...................................................................... 55
VI.	Issuance of new shares in connection with mergers or acquisitions or with acquisitions
	of shares of other companies .................................................................................... 55
VII.	Implementation of the Company’s capital utilization plans ....................................... 56
Five. Operational Overview ...................................................................................................... 58
I.	Business contents ..................................................................................................... 58
II.	Overview of market and production/sales ................................................................. 66
III.	Employees ............................................................................................................... 74
IV.	Information on environmental protection expenses ................................................... 75
V.	Labor-management relationship ............................................................................... 76
VI.	Cyber security management ..................................................................................... 82
VII.	Important contracts: ................................................................................................. 83
Six. Overview of Finance ......................................................................................................... 84

I.	Condensed balance sheet and income statement for the most recent five years ......... 84
II.	Financial analysis for the most recent five years ....................................................... 87
III.	If the Company or the affiliates have experienced financial difficulties in the most recent
	year up to the publication date of the annual report, the impact on the finance status of
	the Company shall be specified. The term "affiliates" as used in Subparagraph (6) above
	refers to entities meeting the requirements set forth under Article 369-1 of the Company
	Act. .......................................................................................................................... 89
IV.	The Audit Committee’s audit report on the financial reports in the most recent year . 90
Seven.	Review and Analysis of Financial Status and Operational Results, and Risk
	Assessment .............................................................................................................. 91
I.	Financial status ........................................................................................................ 91
II.	Financial performance .............................................................................................. 92
III.	Cash flow ................................................................................................................. 92
IV.	The Impact of major capital expenditures in the most recent year on finance and
	business ................................................................................................................... 93
V.	The reinvestment policy for the most recent year, the main reasons for the profit/loss
	generated thereby, the improvement plan, and the investment plan for the coming year
	................................................................................................................................ 93
VI.	Risk management and assessment ............................................................................ 93
VII.	Other important matters............................................................................................ 95
Eight. Special Items .................................................................................................................. 96
I.	Information on affiliated companies ......................................................................... 96
II.	Private placement of securities in the most recent year up to the publication date of the
	annual report ............................................................................................................ 98
III.	Holding or disposal of the Company’s shares by subsidiaries in the most recent year up
	to the publication date of the annual report ............................................................... 98
IV.	Additional information required to be disclosed ....................................................... 99
V.	Any of the matters stated in Article 36, Paragraph 3, Subparagraph 2 of the Securities
	and Exchange Act which may have significant impact on the shareholders’ equity or the
	price of the securities in the most recent year up to the publication date of the annual
	report ....................................................................................................................... 99
Nine. Financial Reports .......................................................................................................... 100
I.	Financial Reports in the Most Recent Year ............................................................. 100
II.	The consolidated financial reports audited and certified by CPAs for the most recent
	year. ....................................................................................................................... 160

One. Letter to Shareholders

One. Letter to Shareholders

Dear shareholders,

We encountered fierce challenges in our business operation in 2022. The supply and demand of the market were affected by the COVID-19 pandemic that had a great impact on the global economy and ran into unprecedent uncertainty. The changes to the life and consumption habits led to the declination of the increased demand for the home gym fitness and sports devices. The war, geopolitics, stagflation, unceasing increase of the interest rate and loosening of the lockdown restrictions in 2022 resulted in weak demand, high stock quantity and significantly decreased customer demand. Consequently, both revenue and profitability of the Company were affected to a great extent in 2022. Despite the adverse business environment, we operated prudently and steadily and persisted in the core value of our fundamental business by manifesting our competitive advantages and operating our business firmly in this wave of economic changes.

I. Business results in 2022

(I). Implementation status of the business plan

The consolidated operating revenue in 2022 was NT$4,549,308 thousand with a decrease of NT$13,817,515 thousand (75.2%) in comparison with the amount of NT$18,366,823 thousand in 2021. The consolidated net loss after tax in 2022 was NT$299,120 thousand with a new loss per share of about NT$1.65.

(II). Implementation status of budgets

Since we did not made financial forecasts public, no budget implementation status needs to be disclosed.

(III). Analysis of financial expenditure and profitability

	Item	2021	2022
Financial structure(%)	Debt to assets ratio %	66.05	54.74
Solvency (%)	Current ratio %	111.54	96.00
	Quick ratio %	84.77	78.64
Profitability (%)	Return on assets(%)	9.63	-2.77
	Return on equity (%)	26.36	-7.71
	Earnings per share (NTD) (currentperiod)	5.80	-1.65

(IV) R&D status

As for machine tools, we continued to innovate and made use of patents to provide products that exceeded our customers’ expectations. The diversification of the product mix was achieved through the model of brand and retailer strategy alliance and the interactions among places of origin. As for fitness devices, we accelerated the development of new products and increased the items to meet the quick-changing and

• 1 -

One. Letter to Shareholders

multiple demands of the customers. We grew together with them and pursued high quality to meet their satisfaction. As for new businesses, we used our core technologies in line with the market trend and grasped the opportunity to develop product areas for our new business.

• II. Summary of the 2023 Business plan

• (I) Operating guidelines and important policies

  1. Create the best benefit for related parties with sustainable operations as the goal.

  2. Provide premium products and services for brand customers with our leading electromechanical technique.

  3. Uphold the philosophy of getting to the bottom of matters and continual improvement to achieve lean manufacturing and management.

(II) Business expectations and critical production/marketing policies

The global economy and market supply and demand will remain uncertain in 2023. The management team of the Company will uphold our corporate culture of “Integrity, Stability and Growth” and create competitive differentiation with total lean management and technical innovation to meet the requirements of the customer, create a win-win relationship with our partners, and achieve the optimal growth and sustainable development of the Company.

(III) Our development strategies will be affected by the external competitive environment, regulatory environment and overall business environment.

With the inherited attitude of “More Than Better”, the leading electromechanical integration technique, and the vision to provide brand customers with total services, we will be dedicated to the core competitive advantages of “leading technique”, “excellent manufacturing”, “quality first” and “customer trust” to provide services that meet the requirements of the customers and achieve the goals of growth in both revenue and profit. With the spirit of “More than Better” and “Continuous Improvement”, the management team and outstanding employees will create and consolidate our leading position and enhance the differentiation against our competitors to achieve the optimal growth and sustainable development of the Company, overcome the challenges in the external competitive environment, regulatory environment and overall business environment, and understand and control all the operational risks.

Finally, we sincerely extend our appreciation to all of our shareholders for your support. Please don’t hesitate to give encouragement and comments to our management team in the future.

May we wish you all

Good Health and Good Luck

President:Wang Kuan-Hsiang General Manager:Lo Cheng-Chou Accounting Manager: He Hsiu-Yuan

• 2 -

Two. Company Profile

Two. Company Profile

I. Company Profile

• (I). Establishment date: April 30, 1973

• (II). Company history:

• Corporate merger and acquisition in the most recent year and up to the publication date of the annual report: None.

• Large transfers or changes of shares held by the Company’s directors, supervisors, and large shareholders holding more than 10% of the shares, changes in management rights and other matters that may affect the shareholders’ equity, and their impacts on the Company: None

• Other information:

  • (1). Rexon was established by Mark Chen, Casey Wang and Shu-Lin, Lin with a capital of $450,000 on April 20, 1972.

  • (2). The company name, Guoxing Mechanical Factory, was officially registered on April 30, 1973. It had four employees and a factory building of 99.174 square meters leased at Yonghe Street, Taichung City. The capital was $1.60 million.

  • (3). The factory was moved to Daqing Street, Taichung City in 1974. The factory building had an area of 661.16 square meters and the name was changed to Guojun Mechanical & Industrial Ltd. as a result of restructuring.

  • (4). The capital was increased to $3 million in February 1,976. The factory was moved to Tucheng Rd., Dali City in October and the capital was increased to $10.1 million. The name was changed to Rexon Industrial Corp., Ltd. as a result of restructuring. The factory building had an area of about 4,628.15 square meters

  • (5). The capital was increases to $23 million in February 1982.

  • (6). Rexon acquired the Class-A manufactory certificate in 1983. In addition to one of the Top 500 Companies, the Company was ranked the first in Taiwan in the export of machine tools in 1982. President Mark Chen was elected as one of the Model of Taiwan and Overseas Entrepreneurs. In December, the Company invested $160 million in the construction of the second factory at Renhua Road and increased the capital to $70 million. The revenue was increased to more than $730 million in the same year.

  • (7). The construction of the Renhua Factory was completed in January 1985 and the capital was increased to more than 130 million. The Company was registered by the Industrial Development Bureau as a central factory in the center-satellite system and won the Business Rationalization Award from the Chinese National Federation of Industries.

  • (8). In 1986, the Company invested in Power Tools Specialists Inc. (P.T.S) and Porfi Heimwerker Maschinen GmbH(P.H.M).

  • (9). The revenue in 1986 was increased to $1.697 billion.

  • (10). The capital was increased to $150 million in September 1987 and the revenue was $1.824 billion in the same year. IBM S/38 computer was purchased.

  • (11). The Company founded Motomax Electric Co., Ltd. in Taiwan in November 1987.

  • (12). Total Quality Control (TQC) was introduced to the Company in January 1989 to promote rationalization of operations. In June, more than $110 million was invested to expand the Renhua Factory. The capital was increased to $199.5

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Two. Company Profile

million in August.

• (13). The IBM AS/400 computer equipment system was set up in September 1990.

• (14). The 1st Invention Award of the R.O.C was won in February 1992; the capital was increased to $400 million in July; the Company passed the ISO-9002 certification for European Common Market in August.

• (15). In 1992, investment was made to establish Rexon Japan.

• (16). In 1993, investment was made to establish the European branch in Germany.

• (17). In 1994, investment was made to establish the French branch in France.

• (18). In November 1994, the Company won the Outstanding Award of the Excellent Industrial Technology Development Awards from the Ministry of Economic Affairs.

• (19). The shares were public offered in February 1995 and the Company passed the ISO-9001 certification in September.

• (20). 1995, investment was made to establish the British branch in U.K.

• (21). In 1996, investment was made in Gold Item Group Ltd. (B.V.I) and Hangzhou Liwu Machinery & Electric Co., Ltd. in Mainland China.

• (22). The construction of the Global Support Center was completed in December 1998 and a ceremony was held to launch the Center in January 1999; this made the Company an electronized manufacturing service center in the world.

• (23). The Company passed the ISO-14001 certification successfully in 1999.

• (24). In 2000, the “Occupational Safety and Health Management System” was promoted with the support of the Industrial Safety and Health Technology Development Center.

• (25). The Company won the Industrial Excellence Award from the Ministry of Economic Affairs with great honor in 2000.

• (26). The Company merged Liyou Industrial, Lier Industry and Taiwan Suli in 2000.

• (27). In April 2001, the Company won the P.I.P.(Partner In Progress) award from U.S. Sesrs.

• (28). In April 2002, the Company won the P.I.P.(Partner In Progress) award from U.S. Sesrs again. The SAP system was introduced and launched in the same month.

• (29). In May 2003, the Company introduced the C.P.F.R. (Collaborative Planning, Forecasting, and Replenishment) project in cooperation with US Sears. It was launched in November of the same year.

• (30). The Company introduced the TPM officially in March 2004.

• (31). In 2007, investment was made in Gold Item Group Ltd. (B.V.I) and Rexon Health Business (Suzhou) Ltd. in Mainland China.

• (32). The Company won the 4th Taiwan Superior Brand Award in March 2007.

• (33). Rexon Health Business (Suzhou) Ltd. in Mainland China was divested in 2008.

• (34). In 2008, Rexon commercial oval-shaped / light commercial treadmill was recommended by a consumer magazine in the USA as the best choice.

• (35). In 2009, the Company was honored by Precor as the Supplier of the Year and divested Rexon Japan, Rexon Europe and Mejix.

• (36). In 2010, investment was made in Dongyang Liji in Mainland China; the product was recommended by a consumer magazine in the USA as the best choice; the Company was honored by Precor as the Supplier of the Year and won the awards in the QCC competition in Taiwan.

• (37). The Company was presented with the QCC award in Taiwan in 2011.

• (38). In 2012, the Company was honored by Stanley Black & Decker with the

• 4 -

Two. Company Profile

• outstanding performance award and won the QCC award in Taiwan.

• (39). In 2013, investment was made in Tongxiang Rexon Industrial Co., Ltd. and Kanji (Hangzhou) in Mainland China; the Company won the QCC award in Taiwan.

• (40). In 2014, new products were honored by Precor with a development award; the Company won the QCC award in Taiwan.

• (41). In 2015, the investment in Rexon Limited (U.K.) and Dongyang Liji was withdrawn; the Company won the QCC award in Taiwan.

• (42). The Company was presented with the QCC award in Taiwan in 2016.

• (43). In 2017, the Company was honored by Stanley Black & Decker with the outstanding innovation award and best partner award, and introduced and officially launched the EC Collaborative Commerce Supply Chain Management System.

• (44). In 2018, the Company was honored by Stanley Black & Decker with the outstanding innovation award and best partner award, and introduced and officially launched the intelligent material management system in factory.

• (45). Motomax Electric (Hong Kong) Ltd., Hangzhou Liwu and Kanji (Hangzhou) were divested in 2019; the industry-academia collaboration and Lean System Knowledge Application Alliance were introduced from Tunghai University; the Company was listed in CommonWealth Magazine’s 2019 Fast 100 - Taiwan’s Fastest Growing Companies and was approved by the Ministry of Economic Affairs to participate in the Action Plan for Welcoming Overseas Taiwanese Businesses to Return to Invest in Taiwan under InvesTaiwan.

• (46). In 2020, the Company participated in the Industry High Value Program of the Industrial Development Bureau, Ministry of Economic Affairs, was ranked by CommonWealth Magazine as No. 1 among Top 50 in terms of operational performance, and won the award for outstanding contribution to trade under the category of Award for International Trade from the Bureau of Foreign Trade, Ministry of Economic Affairs.

• (47). In 2021, the Company won the Germany’s iF Design Award, the first place among the V-shaped reversal Top 100 within the Resilient Enterprise Top 200, and the gold medal of Talent Quality-management System (TTQS) from the Workforce Development Agency of the Ministry of Labor; the intelligent site works project system was introduced and officially launched in factory.

• (48). The ESG Committee was founded in 2022 to start the ESG and carbon management projects; the ISO 14064-1 and ISO 14067 certificates were acquired; the Company won the paradigm of practice award under the “ANQ Recognition for Excellence in Quality Practice, ARE-QP”, the Three-Start Award under the 2022 Business Excellence Quality Award, and the U.S. International Design Excellence Awards (IDEA).

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Three. Corporate Governance Report

Three. Corporate Governance Report

I. Organizational system

• (I). Organizational structure

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(II).	Business of themaindepartments	Business of themaindepartments
	Main departments	Duties and functions
	General Administration Division	Responsible for planning the Company’s operational strategies, accounting matters related to finance and tax, and promotion and maintenance of IT systems
	HR Division	Responsible for planning and implementing the Company’s personnel policies, structure of the organization, corporate image, general affairs, and environment and safety
	Marketing & Product Department	Responsible for planning new products; marketing of products; protection of intellectual property rights, analysis and avoidance of infringement uponpatents,andhandling ofpatent litigationcases
	Sales Department	Responsible for development and marking of OEM/ODM/OBM business, and development, planning and implementation of new business
	Global Procurement Department 1.2	Responsible for supplier management material cost control, conformity with schedule and quality of new products, optimal control of parts inventory, and purchase of parts against production work order as predefined qualityand schedule
	Technical Division 1.2.3	Responsible for product strategies and improvements of machine tools and fitness equipment as well as development of new products Planning of production areas, and planning and making of production equipment and jigs Responsible for supplier quality control, inspection of parts and finished products, and establishment, maintenance and review of the QA system Responsible for improvement of manufacturing productivity, increase of production line balance rate, improvement of process quality and reduction of workforce, and repair and warranty of production equipment and electrical devices
	Logistic Division	Responsible for service and processing of customer’s orders, export operations, and establishment of accounts
	Manufacturing Division 1.2	Responsible for improvement of manufacturing capacities for fitness equipment and machine tools to product products of the best quality at the lowest cost

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Three. Corporate Governance Report

II. Information on directors, supervisors, President, Vice President, Director, and department and branch heads

(I). Information on directors and supervisors

1. Information on directors and supervisors (I)

April 1, 2023

Title	Nation																Other m	anagers, d	irectors or
	ality or place	Name	Gender	Date elected	Term of	Date first	Shares hel	d when elected	Current sh	areholding	Current s spouse or	hares held by minor children	Shares held o	in the names of thers	Education and experience	Concurrent posts in the Company	super relationshi	visors in a p or withi	spousal n the second	Rem arks
	of registr ation		Age	(appointed)	office	elected	Number of shares	Shareholding ratio	Number of shares	Shareholding ratio	Number of shares	Shareholding ratio	Number of shares	Shareholding ratio		and other companies	de Title	gree of kin Name	ship Relationship
President	R.O.C.	Wang Kuan- Hsiang	Male 41-50	2020.06.18	3 years	2002.06.26	2,228,700	1.23%	3,750,178	2.07%	0	0.00%	5,791,345	3.19%	Master, National Chung Hsing University Rexon Industrial Corp., Ltd., General Manager	Power Tool Specialists Inc.(PTS), President Gold Tech Group Ltd. , Director Tongxiang Rexon Industrial Co., Ltd. , Director TAISIC Materials Corp. , Independent Director	Director	Wang Chen, Li- Mei	Mother and child	Note 1
Director	R.O.C.	Kun Forever Co., Ltd.	N/A	2021.08.26	2 years	2021.08.26	18,735,302	10.32%	20,196,000	11.13%	0	0.00%	0	0.00%
		Representative: Wang Chen, Li- Mei	Female 61-70	2021.08.26	2 years	2021.08.26			1,000,000	0.55%			12,437,785	6.85%	Elementary school Tongxiang Rexon Industrial Co., Ltd., President Hangzhou Hangzhou Liwu Machinery & Electric Co., Ltd., President Motomax Electric Co.,Ltd., President TCGS Cultural and Educational Foundation, Director Soroptimist International of Americas ,Taiwan Region, Chairman Lotus Enterprise Exchange Association, Founding Chairman	Kun Forever Co., Ltd., President Fine Clear Co., Ltd., Director Rexon Technology Corp., Ltd., Supervisor Gold Tech Group Ltd., Director	President	Kuan- Hsiang Wang	Mother and child	None
Director	R.O.C.	Lin Shyi-Ying	Male 71-80	2020.06.18	3 years	1993.03.27	1,289,824	0.71%	892,824	0.49%	66,421	0.04%	0	0.00%	Feng Chia University Rexon Industrial Corp., Ltd., Vice President	Fine Clear Co., Ltd., President	None	None	None	None
Director	R.O.C.	Huang Chin- Hsiang	Male 51-60	2020.06.18	3 years	2017.06.13	58,094	0.03%	852,094	0.47%	0	0.00%	0	0.00%	Shu De Institute of Technology Rexon Industrial Corp., Ltd., Vice President	Rexon Industrial Corp., Ltd., Vice President Gold Tech Group Ltd., Director Fine Clear Co., Ltd., Directo	None	None	None	None
Director	R.O.C.	Kuo Pu-Chao	Male 41-50	2020.06.18	3 years	2017.06.13	0	0.00%	10,000	0.01%	6,000	0.00%	0	0.00%	Master of Business Administration, Durham University, UK Rexon Industrial Corp., Ltd., Director	Rexon Industrial Corp., Ltd., Director Rexon Technology Corp., Ltd., Director Hongqiao Investment Co., Ltd.. Director	None	None	None	None
Independent director	R.O.C.	Hung Chao- Nan	Male 71-80	2020.06.18	3 years	2017.06.13	0	0.00%	0	0.00%	0	0.00%	0	0.00%	Master of Politics, Arkansas State University, USA Member of the Legislative Yuan, member of the Control Yuan, convener of the Finance Committee	Taiwan Hon Chuan Enterprise Co., Ltd.,Independent Director,	None	None	None	None
Independent director	R.O.C.	Liu Pei-Yao	Male 71-80	2020.06.18	3 years	2017.06.13	0	0.00%	0	0.00%	606	0.00%	0	0.00%	Institute of Education, Cheyney University of Pennsylvania, USA General, National Taxation Bureau of the Central Area, Ministry of Finance, Director	None	None	None	None	None
Independent director	R.O.C.	Lee Cherng	Male 61-70	2020.06.18	3 years	2020.06.18	0	0.00%	0	0.00%	0	0.00%	0	0.00%	Associate Professor, Department of Law, Tunghai University Lawyer, Federal and State of New York, USA Adjunct EMBA Associate Professor, Tunghai University	Topkey Corporation, Independent Director NOVA TECHNOLOGY CORP., Independent Director	None	None	None	None
Independent director	R.O.C.	Wu Chwan- Chyuan	Male 61-70	2020.06.18	3 years	2020.06.18	0	0.00%	0	0.00%	0	0.00%	0	0.00%	Department and Graduate Institute of Accounting, University of Oklahoma, USA KPMG Taiwan, CPA	Taiwan Steel Union Co., Ltd., Independent Director	None	None	None	None

Note 1: If the President and General manager, or any other equivalents (senior management), are the same person, or spouse or relative within first degree of kinship with each other, the information about the reason, reasonableness, necessity and corresponding measures (e.g. increasing the number

of independent directors, and having a majority of directors that do not work as employees or managers of the Company, etc.) shall be provided: None.

• 7 -

Three. Corporate Governance Report

Table 1: Major shareholders of corporate shareholders: April 1, 2023

Name of corporate shareholder (Note 1)

Major shareholders of corporate shareholders (Note 2)

Kun Forever Co., Ltd.

Wang Chen, Li-Mei (45.50%), Wang Kuan-Hsiang (18.36%), Wang Kuan-Chuan (17.77%), Wang Yu-Chen (2.87%), Wang Yu-Hsi (2.87%), Lin Lu-Cheng (3.17%), Lin Lu-Yen (3.17%); the management institution in the Republic of China is National Property Administration of the Ministry of Finance, and the agent is Chao Tsu-Hsien, the Director-General of the Central Region Branch, National PropertyAdministration(6.29%)

Note 1: If directors and supervisors serve as representatives of corporate shareholders, the names of the corporate shareholders must be provided.

• Note 2: Name the major shareholders (the top 10 owners) of corporate shareholders and their shareholding percentage. Table 2 below is applicable if any of the major shareholders is an institution.

Table 2: Major shareholders in Table 1 if they are institutions April 1, 2023

Name of institution (Note 1)	Major shareholders of institution (Note 2)
N/A	N/A
N/A	N/A

Note 1: If any of the major shareholders listed in Table 1 is an institution, the name of the institution must be provided. Note 2: Name the major shareholders (the top 10 owners) of the institution and their shareholding percentage.

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Three. Corporate Governance Report

2. Information on directors and supervisors (II):

• (1). Disclosure of information on the professional qualification of directors and supervisors and the independence of independent directors

April 1, 2023

Criteria Name	Professional qualifications and experience (Note 1)	Independence (Note 2)	Number of public companies where the person concurrently acts as an independent director
Wang Kuan-Hsiang	Business and other experienced that the Companyneeds	N/A	None
Representative of Kun Forever Co., Ltd.: Wang Chen,Li-Mei	Business and other experienced that the Company needs	N/A	None
Lin Shyi-Ying	Business and other experienced that the Companyneeds	N/A	None
Huang Chin-Hsiang	Business and other experienced that the Companyneeds	N/A	None
Kuo Pu-Chao	Business and other experienced that the Companyneeds	N/A	None
Hung Chao-Nan	Work experience in business, law, or other areas required for the business of the Company without the circumstances under Article 30 of the Company Act.	1. The person and his/her spouse or relatives within the second degree of kinship are not the directors, supervisors or employees of the Company or any of its affiliates. 2. The independent director or his spouse or relative within the second degree of kinship does not hold any stocks of the Company on his/her own or in the name of others. 3. The independent director is not a director, supervisor or employee of any company that has a specific relationship with the Company (with reference to Article 3, Paragraph 1, Subparagraph 5~8 of the Regulations Governing Appointment of Independent Directors and Compliance Matters for Public Companies). 4. The independent director did not receive compensation for providing the Company or affiliates with commercial, legal, financial, accounting or related services in the most recent two years.	1
Liu Pei-Yao	Commercial, financial, accounting, or other professional or technical specialist who has passed a national examination and has been awarded a certificate in a professional capacity that is necessary for the business of the Company, without the circumstances under Article 30 of the CompanyAct.	1. The person and his/her spouse or relatives within the second degree of kinship are not the directors, supervisors or employees of the Company or any of its affiliates. 2. The independent director or his spouse or relative within the second degree of kinship does not hold any stocks of the Company on his/her own or in the name of others. 3. The independent director is not a director, supervisor or employee of any company that has a specific relationship with the Company (with reference to Article 3, Paragraph 1, Subparagraph 5~8 of the Regulations Governing Appointment of Independent Directors and Compliance Matters for Public Companies). 4. The independent director did not receive compensation for providing the Company or affiliates with commercial, legal, financial, accounting or related services in the most recent two years.	None
Lee Cherng	An instructor or higher up in a department of business, law, or other academic department required for the business of the Company in a public or private junior college, college, or university, without the circumstances under Article 30 of the CompanyAct.	1. The person and his/her spouse or relatives within the second degree of kinship are not the directors, supervisors or employees of the Company or any of its affiliates. 2. The independent director or his spouse or relative within the second degree of kinship does not hold any stocks of the Company on his/her own or in the name of others. 3. The independent director is not a director, supervisor or employee of any company that has a specific relationship with the Company (with reference to Article 3, Paragraph 1, Subparagraph 5~8 of the Regulations Governing Appointment of Independent Directors and Compliance Matters for Public Companies). 4. The independent director did not receive compensation for providing the Company or affiliates with commercial, legal, financial, accounting or related services in the most recent two years.	2
Wu Chwan-Chyuan	CPA or other professional or technical specialist who has passed a national examination and has been awarded a certificate in a professional capacity that is necessary for the business of the Company, without the circumstances under Article 30 of the CompanyAct.	1. The person and his/her spouse or relatives within the second degree of kinship are not the directors, supervisors or employees of the Company or any of its affiliates. 2. The independent director or his spouse or relative within the second degree of kinship does not hold any stocks of the Company on his/her own or in the name of others. 3. The independent director is not a director, supervisor or employee of any company that has a specific relationship with the Company (with reference to Article 3, Paragraph 1, Subparagraph 5~8 of the Regulations Governing Appointment of Independent Directors and Compliance Matters for Public Companies). 4. The independent director did not receive compensation for providing the Company or affiliates with commercial, legal, financial, accounting or related services in the most recent two years.	1

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Three. Corporate Governance Report

Note 1: Describe the professional qualifications and experience of respective directors and supervisors. In case of Audit Committee members specialized in accounting or finance, describe their accounting or finance background and work experience. Whether there are any circumstances under Article 30 of the Company Act shall be described additionally.

Note 2: In case of independent directors, the compliance with independence requirements shall be described, including but not limited to whether the independent director and his/her spouse or relatives within the second degree of kinship are the directors, supervisors or employees of the Company or any of its affiliates; whether the independent director or his spouse or relative within the second degree of kinship holds any stocks of the Company on his/her own or in the name of others; whether the independent director is a director, supervisor or employee of any company that has a specific relationship with the Company (with reference to Article 3, Paragraph 1, Subparagraph 5~8 of the Regulations Governing Appointment of Independent Directors and Compliance Matters for Public Companies); and whether the independent director received compensation for providing the Company or affiliates with commercial, legal, financial, accounting or related services in the most recent two years.

Note 3: As for the disclosure method, refer to the best practice references on the website of the Corporate Governance Center of TWSE.

Criteria	More than 5 years of work experience	More than 5 years of work experience	More than 5 years of work experience													Number
																of
	and following professional			Compliance with independence requirements												public
																compan
																ies
	qualifications
																where
																the
	An instructor	A judge, public	Work	1	2	3	4	5	6	7	8	9	10	11	12	person
	or higher up in	prosecutor,	experience													concurr
	a department	attorney, certified	in business,													ently
	of business,	public accountant,	law, finance													acts as
	law, finance,	or other	or													an
	accounting, or th	professional or thil ilit	accounting, th													indepen
	oer academic	ecnca specas who has passed a	or oer areas													dent director
	department	national	required for
	required for	examination and	the business
	the business of	has been awarded a	of the
	the Company	certificate in a	Company
	in a public or	professional
Name	private junior	capacity that is
	college,	necessary for the
	college, or	business of the
	university	Company.
Wang Kuan- Hsiang																0
Wang Chen, Li-Mei																0
Lin Shyi- Ying																0
Huang Chin-Hsiang																0
Kuo Pu- Chao																0
Hung Chao- Nan																1
Liu Pei-Yao																0
Lee Cherng																2
Wu Chwan- Chyuan																1

Note 2: Place a “  ” in the box if the director or supervisor met the following conditions at any time during active duty and two years prior to the date elected.

(1) Not a director or supervisor of the Company or our affiliates.

(2) Not a director or supervisor of the Company or our affiliates (The same does not apply, however, in cases where the person is an independent director of the Company, the parent of the Company, or any subsidiary, or any subsidiary of the same parent, as appointed and concurrently serving as such in accordance with the Act or the regulations of the local country.)

(3) Not a natural-person shareholder who holds shares, together with those held by his/her spouse, minor children, or held by the person under others' names, in an aggregate of 1% or more of the total number of issued shares of the Company, or ranking among the top 10 natural-person shareholders in holdings.

(4) Not a spouse, or relative within the second degree of kinship, or lineal relative within the third degree of kinship, of an executive officer falling

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Three. Corporate Governance Report

under Point (1) above, or of any of the persons in Point (2) or (3) above.

• (5) Not a director, supervisor, or employee of a corporate shareholder that directly holds 5% or more of the total number of issued shares of the Company, or ranks as one of its top five shareholders, or designates its representative to serve as a director or supervisor of the Company under Article 27, paragraph 1 or 2 of the Company Act. (The same does not apply, however, in cases where the person is an independent director of the Company, the parent of the Company, or any subsidiary, or any subsidiary of the same parent, as appointed and concurrently serving as such in accordance with the Act or the regulations of the local country.)

• (6) In case a majority of the Company's director seats or voting shares and those of any other company are controlled by the same person, not a director, supervisor, or employee of that other company. (The same does not apply, however, in cases where the person is an independent director of the Company, the parent of the Company, or any subsidiary, or any subsidiary of the same parent, as appointed and concurrently serving as such in accordance with the Act or the regulations of the local country.)

• (7) In case the President, General manager, or person holding an equivalent position of the Company and a person in any of those positions at another company or institution are the same person or are spouses, not a director, supervisor or employee of that other company or institution. (The same does not apply, however, in cases where the person is an independent director of the Company, the parent of the Company, or any subsidiary, or any subsidiary of the same parent, as appointed and concurrently serving as such in accordance with the Act or the regulations of the local country.)

• (8) Not a director, supervisor, or managerial officer, or a shareholder directly holding 5% or more of the shares, of any specific company or institution that has a business or financial relationship with the Company. (The same does not apply, however, in cases where the specific company or institution holds 20% or more and not more than 50% of the total number of the Company's issued shares and is an independent director of the Company, the parent of the Company, or any subsidiary, or any subsidiary of the same parent, as appointed and concurrently serving as such in accordance with the Act or the regulations of the local country.)

• (9) Not a professional individual who, or an owner, partner, director, supervisor, or managerial officer of a sole proprietorship, partnership, company, or institution that, provides auditing services to the company or any affiliate of the company, or that provides commercial, legal, financial, accounting or related services to the Company or any affiliate of the Company in the most recent two years with an accumulated service compensation of NT$500,000 or less, or a spouse thereof; provided that this restriction does not apply to a member of the Compensation Committee, public tender offer review committee, or special committee for merger/consolidation and acquisition, who exercises powers pursuant to the Securities and Exchange Act or to the Business Mergers and Acquisitions Act or related laws or regulations.

• (10) Not a spouse nor a relative within the second degree of kinship of another director.

• (11) None of the circumstances under Article 30 of the Company.

• (12) Not elected in the capacity of a government agency, a juristic person, or a representative thereof, as provided in Article 27 of the Company Act; Not a director or supervisor of the Company or our affiliates.

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Three. Corporate Governance Report

• (2). Diversity and independence of the Board of Directors

• A. Diversity of the Board of Directors: Describe the Board’s diversity policy, objectives and achievement status. The diversity policy includes but is not limited the director election criteria, the professional qualifications and experience that the Board of Directors must have, and the formation and proportion in respect of gender, age, nationality, and culture. The specific objectives and their achievement status with respect to these policies shall also be described.

a. To enhance the governance of the Company and promote the sound development of the Board’s formation and structure, Article 20 “Diversity Policy of Board Members” in “Corporate Governance Best Practice Principles” that the Company established in 2017 states that diversity shall be taken into account for the formation of the Board of Directors and an appropriate policy of diversity shall be devised based on the operations, type of business and development requirements, such as basic requirements and values (e.g. gender, age, nationality, and culture), professional background (e.g., law, accounting, industry, finance, marketing, technology), professional skills, and industry experience.

b. The current Board of Directors is composed of 9 directors, including 5 directors and 4 independent directors. The Board members have extensive experience and professionalism in the fields of law, business, and management. All the directors are the citizens of the Republic of China. As for their ages, 2 directors fall within the range from 41 to 50, 2 directors within the range of 51 to 60, 2 within the range of 61 to 70, and 3 of them have an age between 71 and 80. The equity of gender in the formation of the Board of Directors is another concern of the Company. The goal of the female director ratio is set to more than 10%. Currently, one of the nine directors is female at a ratio of 11%. The Company has 4 independent directors. Two of them have a term of office for less than 3 years and another two have a term of office for 5 years. None of the independent directors have served for more than three consecutive terms of service.

c. The diversity of the Board members depends on the continuous implementation of the Company’s “Corporate Governance Best Practice Principles”. We will stay abreast of the latest development to adopt more policies for the diversity of the Board members depending on the operations of the Board of Directors and the development requirements of the Company to ensure that the Board members have the necessary knowledge, skill, and experience to perform their duties.

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Three. Corporate Governance Report

Table 1: The im lementation status of the diversit olic on the com osition of the Board members p y p y p

Name	Nationality	Gender	Employee status	Age	Age	Age	Age	Term of office for independent directors	Term of office for independent directors	The ability to make judgments about operations	Accounting and financial analysis ability	Business management ability	Crisis management ability	Knowledge of the industry	International market perspective	Leadership ability	Decision- making ability
				41- 50	51- 60	61- 70	71- 80	Less than 3 years	3 to 9 years
Wang Kuan- Hsiang	R.O.C.	Male	V	V						V	V	V	V	V	V	V	V
Wang Chen, Li-Mei	R.O.C.	Female				V				V	V	V	V	V	V	V	V
Lin Shyi- Ying	R.O.C.	Male					V			V	V	V	V	V	V	V	V
Huang Chin- Hsiang	R.O.C.	Male	V		V					V	V	V	V	V	V	V	V
Kuo Pu- Chao	R.O.C.	Male	V	V						V	V	V	V	V	V	V	V
Hung Chao- Nan	R.O.C.	Male					V		V	V	V	V	V		V	V	V
Liu Pei- Yao	R.O.C.	Male					V		V	V	V	V	V		V	V	V
Lee Cherng	R.O.C.	Male			V			V		V	V	V	V		V	V	V
Wu Chwan- Chyuan	R.O.C.	Male				V		V		V	V	V	V		V	V	V

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Three. Corporate Governance Report

• B. Independence of the Board of Directors: Describe the number and proportion of the independent directors and their independence; describe whether the circumstances set forth in Paragraphs 3 and 4, Article 26-3 of the Securities and Exchange Act do not apply and give reasons, including description of the spousal relationship or the relationship within the second degree of kinship among directors, supervisors or between any director and supervisor.

• a. The current Board of Directors is comprised of 9 directors including 4 independent directors (44%). They have the independence needed for execution of their duties. The circumstances set forth in Paragraphs 3 and 4, Article 26-3 of the Securities and Exchange Act do not apply to the 4 independent directors, including description of the spousal relationship or the relationship within the second degree of kinship among directors, supervisors or between any director and supervisor.

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Three. Corporate Governance Report

(II). Information on President, Vice President, Director, and department and branch heads

April 1, 2023

Title	Nationality	Name	Gender	Date elected	Shareholding	Shareholding					Education and experience	Concurrent posts in other companies	Managerial officer in a spousal relationship or within the second degree of kinship	Managerial officer in a spousal relationship or within the second degree of kinship	Managerial officer in a spousal relationship or within the second degree of kinship	Rem
							Shares held by spouse or minor children		Shares held in the names of others
				(appointed)	Number of shares	Shareholding ratio	Number of shares	Shareholding ratio	Number of shares	Shareholding ratio			Title	Name	Relations hip	arks
General Manager (former)	R.O.C.	Wang Kuan- Hsiang	Male	2005.07.01 2022.04.01	3,750,178	2.07%	0	0.00%	5,791,345	3.19%	Master, National Chung Hsing University / Rexon Industrial Corp., Ltd., General Manager	Power Tool Specialists Inc., President Gold Tech Group Ltd., Director Tongxian Rexon Industrial Limited, director TAISIC Materials Corp.,Independent Director	None	None	None	None
General Manager (new)	R.O.C.	Lo Cheng- Chou	Male	2022.04.01	82,145	0.05%	0	0.00%	0	0.00%	Department and Graduate Institute of Business Administration, Chaoyang University of Technology / Rexon Industrial Corp.,Ltd.,Executive VP	Gold Tech Group Ltd., Director	None	None	None	None
Vice President CFO (former)	R.O.C.	Cheng Huai- Chih	Male	2000.06.23 2022.05.06	0	0.00%	0	0.00%	0	0.00%	Feng Chia University/Rexon Industrial Corp., Ltd., Executive VP	None	None	None	None	None
Vice President	R.O.C.	Cheng Mei- Ling	Female	2021.01.01	16,000	0.01%	0	0.00%	0	0.00%	Chienkuo Technology University / Rexon Industrial		None	None	None	None
												Tongxiang Rexon Industrial Co., Ltd., Director
											Corp.,Ltd.,Technical Division VP
Vice President	R.O.C.	George Ku	Male	2021.06.01	0	0.00%	0	0.00%	0	0.00%	EMBA, National Chung Hsing University / Rexon		None	None	None	None
												None
											Industrial Corp.,Ltd.,Technical Division VP
Vice President Accounting Manager	R.O.C.	He Hsiu- Yuan	Female	2021.06.01 2018.11.08	21,448	0.01%	0	0.00%	0	0.00%	EMBA, National Chung Hsing University / /Rexon	Gold Tech Group Ltd., Director	None	None	None	None
											Industrial Corp., Ltd., General Administration Division	Tongxiang Rexon Industrial Co., Ltd., Supervisor
											VP	Rexon TechnologyCorp.,Ltd.,Director
Vice President	R.O.C.	Huang Chin- Hsiang	Male	2021.06.01	852,094	0.47%	0	0.00%	0	0.00%	ShuDe Institute of Technology / Rexon Industrial	Gold Tech Group Ltd., Director	None	None	None	None
											Corp.,Ltd.,General Manager’s Office VP	Fine Clear Co.,Ltd.,Director
Vice President	Malaysia	Peng Meng- Wei	Male	2021.06.01	66,000	0.04%	0	0.00%	0	0.00%	National Chung Hsing University / Rexon Industrial	None	None	None	None	None
											Corp.,Ltd.,Sales Dept. VP
Vice President	R.O.C.	Chang Yu- Ming	Male	2021.06.01	5,000	0.00%	0	0.00%	0	0.00%	Oriental Institute of Technology / Rexon Industrial	Tongxiang Rexon Industrial Co., Ltd., Director	None	None	None	None
											Corp.,Ltd.,ManufacturingDivision VP	Rexon TechnologyCorp.,Ltd.,Director
Vice President	R.O.C.	Tank Chuang	Male	2021.06.01	5,000	0.00%	0	0.00%	0	0.00%	Master, National Yunlin University of Science and		None	None	None	None
											Technology / Rexon Industrial Corp., Ltd., President’s	None
											Office VP
Vice President	R.O.C.	Huang Liang-Wei	Male	2021.12.01	5,000	0.00%	0	0.00%	0	0.00%	Department and Graduate Institute of Chemical		None	None	None	None
											Engineering, National Chung Hsing University / Rexon	None
											Industrial Corp.,Ltd.,ManufacturingDivision VP
Vice President	R.O.C.	Chiang Yao- Tsung	Male	2021.12.01	806	0.00%	0	0.00%	0	0.00%	Department and Graduate Institute of Business		None	None	None	None
											Administration, Tunghai University / Rexon Industrial	None
											Corp.,Ltd.,Global Procurement Dept. VP
Director	R.O.C.	Kuo Pu- Chao	Male	2021.01.01	10,000	0.01%	6,000	0.00%	0	0.00%	Master of Business Administration, Durham University,UK / Rexon Industrial Corp.,Ltd.,Director	Rexon Technology Corp., Ltd., Director Hongqiao Investment Co.,Ltd. / Director	None	None	None	None
Director	R.O.C.	Li Wen-Tu	Male	2021.01.01	0	0.00%	0	0.00%	0	0.00%	United Institute of Technology / Rexon Industrial Corp.,Ltd.,Technical Division Director	None	None	None	None	None
Director	R.O.C.	Chen Kuo- Jung	Male	2021.01.01	52,000	0.03%	7,000	0.00%	0	0.00%	Chaoyang University of Technology / Rexon Industrial		None	None	None	None
												None
											Corp.,Ltd.,ManufacturingDivision Director
Director	R.O.C.	Feng Hsu- Hui	Male	2021.06.01	5,000	0.00%	0	0.00%	0	0.00%	EMBA, National Chung Hsing University / Rexon		None	None	None	None
											Industrial Corp., Ltd., Global Procurement Dept.	None
											Director
Director	R.O.C.	Chang Chih- Hao	Male	2021.06.01	7,000	0.00%	0	0.00%	0	0.00%	Chiao Tai High School / Rexon Industrial Corp., Ltd.,		None	None	None	None
												None
											ManufacturingDivision Director
Director	R.O.C.	Kuo Han-Yu	Male	2021.06.01	11,161	0.01%	0	0.00%	0	0.00%	Lunghwa Institute of Technology / Rexon Industrial	None	None	None	None	None
											Corp.,Ltd.,Global Procurement Dept. Director
Director CFO	R.O.C.	Hsu Sen- Yuan	Male	2021.06.01 2022.05.06	5,000	0.00%	0	0.00%	0	0.00%	Department and Graduate Institute of Finance,		None	None	None	None
											Chaoyang University of Technology / Rexon Industrial	Tongxiang Rexon Industrial Co., Ltd., Director
											Corp.,Ltd.,General Administration Division Director

Note 1: Mr. Wang Kuan-Hsiang resigned from President on April 1, 2022. Mr. Eric Lo assumed office as new President on April 1, 2022. Note 2: Mr. Cheng Huai-Chih resigned from CFO on May 6, 2022. Mr. Hsu Sen-Yuan assumed office as new CFO on May 6, 2022.

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Three. Corporate Governance Report

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

(I). Remuneration to directors including independent directors

																Unit: UTD thousand,December 31,2022	Unit: UTD thousand,December 31,2022	Unit: UTD thousand,December 31,2022	Unit: UTD thousand,December 31,2022	Unit: UTD thousand,December 31,2022	Unit: UTD thousand,December 31,2022	Unit: UTD thousand,December 31,2022
Title	Name	Remuneration to directors Remuneration (A) Pension (B) Director remuneration (C) Business expenses (D) Rexon All companies Rexon All companies Rexon All companies Rexon All companies								Ratio of sum of A, B, C and D to net income after tax Rexon All companies		Remuneration received in the capac Salary, bonus and special disbursement(E) Pension (F) Rexon All companies Rexon All companies				ity as concurrent employee Employee remuneration (G) Rexon Industrial Corp., Ltd. All companies included in the financial reports						Remunerati on received from investees
																				Ratio of sum of A, B, C, D, E, F and G to net income after tax Rexon All companies
President	Wang Kuan-Hsiang	Industrial Corp., Ltd.	included in the financial reports	Industrial Corp., Ltd.	included in the financial reports	Industrial Corp., Ltd.	included in the financial reports	Industrial Corp., Ltd.	included in the financial reports	Industrial Corp., Ltd. 0 0.00%	included in the financial reports 0 0.00%	Industrial Corp., Ltd. 4,810	included in the financial reports 4,810	Industrial Corp., Ltd. 121	included in the financial reports 121	Cash amount -	Stock amount	Cash amount -	Stock amount	Industrial Corp., Ltd. 4,931 -1.65%	included in the financial reports 4,931 -1.65%	other than subsidiaries None
Director	Kun Forever Co., Ltd.									0.00%	0.00%									0 0.00%	0 0.00%	None
	Representative: WangChen,Li-Mei							850	850	850 -0.28%	850 -0.28%	-	-	-	-	-		-		850 -0.28%	850 -0.28%	None
Director	Lin Shyi-Ying									0 0.00%	0 0.00%	-	-	-	-	-		-		0 0.00%	0 0.00%	None
Director	Huang Chin-Hsiang									0 0.00%	0 0.00%	2,229	2,229	68	68	-		-		2,297 -0.77%	2,297 -0.77%	None
Director	Kuo Pu-Chao									0 0.00%	0 0.00%	1,666	1,666	72	72	-		-		1,738 -0.58%	1,738 -0.58%	None
Independent director	Hung Chao-Nan							1,200	1,200	1,200 -0.40%	1,200 -0.40%		-	-	-	-		-		1,200 -0.40%	1,200 -0.40%	None
Independent director	Liu Pei-Yao							1,200	1,200	1,200 -0.40%	1,200 -0.40%		-	-	-	-		-		1,200 -0.40%	1,200 -0.40%	None
Independent director	Lee Cherng							1,200	1,200	1,200 -0.40%	1,200 -0.40%		-	-	-	-		-		1,200 -0.40%	1,200 -0.40%	None
Independent director	Wu Chwan-Chyuan							1,200	1,200	1,200 -0.40%	1,200 -0.40%		-	-	-	-		-		1,200 -0.40%	1,200 -0.40%	None
D	irector	0	0	0	0	0	0	5,650	5,650	5,650 -1.89%	5,650 -1.89%	8,705	8,705	261	261	-	-	-	-	14,616 -4.89%	14,616 -4.89%
1. Please describe the payment policy, system, standard and structure of the remuneration to independent directors, and the association of their responsibility, risk, and investment of time with the amount of the remuneration paid: The Board of Directors is authorized to determine the remuneration to the directors and independent directors of the Company based on individual participation in and contribution to the Company’s operations and with reference to the general level in the industry. 2. Further to the aforementioned disclosure, the remunerations received by the directors of the Company for rendering service to all companies included in the financial reports (e.g. serving as a consultant but not the employee of the Company)in the most recentyear: None.

1. Please describe the payment policy, system, standard and structure of the remuneration to independent directors, and the association of their responsibility, risk, and investment of time with the amount of the remuneration paid: The Board of Directors is authorized to determine the remuneration to the directors and independent directors of the Company based on individual participation in and contribution to the Company’s operations and with reference to the general level in the industry.

2. Further to the aforementioned disclosure, the remunerations received by the directors of the Company for rendering service to all companies included in the financial reports (e.g. serving as a consultant but not the employee of the Company) in the most recent year: None.

Note 1: The amount of the pension actually paid in 2021 is zero. The pension is a provision under expenditure. The remunerations to directors (C) and employees (G) are estimates.

• 16 -

Three. Corporate Governance Report

(II). Remuneration to General Manager and Vice President

Unit: UTD thousand, December 31, 2022

Title	Name	Salary (A)	Salary (A)	Pensi	on (B)	Bonus disbur	and special sement(C)	Amou		ration to employees (D)	ration to employees (D)	Ratio of sum net incom	of A, B, C and D to e after tax(%)	Remuneration received from investees other than subsidiaries
									nt of remune
		Rexon Industrial Corp., Ltd.	All companies included in the financial reports		All companies	Rexon	All companies	Rexon Indust	rial Corp.,	All companies included in
				Rexon	included in the	Industrial	included in the	Ltd.		the financ	ial reports	Rexon	All companies
				Industrial	financial	Corp.,	financial	Cash	Stock	Cash	Stock	Industrial	included in the
				Corp., Ltd.	reports	Ltd.	reports	amount	amount	amount	amount	Corp., Ltd.	financial reports
General Manager (former)	Wang Kuan- Hsiang	2,010	2,010	121	121	2,800	2,800	-		-	-	4,931 -1.65%	4,931 -1.65%	None
General Manager (new)	Lo Cheng-Chou	2,040	2,040	122	122	1,789	1,789	-		-	-	3,951 -1.32%	3,951 -1.32%	None
Vice President	Cheng Mei- Ling	1,476	1,476	89	89	1,274	1,274	-		-	-	2,839 -0.95%	2,839 -0.95%	None
Vice President	George Ku	1,176	1,176	71	71	814	814	-		-	-	2,061 -0.69%	2,061 -0.69%	None
Vice President	He Hsiu-Yuan	1,476	1,476	89	89	900	900	-		-	-	2,465 -0.82%	2,465 -0.82%	None
Vice President	Huang Chin- Hsiang	1,140	1,140	68	68	1,089	1,089	-		-	-	2,297 -0.77%	2,297 -0.77%	None
Vice President	Peng Meng-Wei	1,476	1,476	89	89	1,266	1,266	-		-	-	2,830 -0.95%	2,830 -0.95%	None
Vice President	Chang Yu-Ming	1,176	1,176	71	71	520	520	-		-	-	1,767 -0.59%	1,767 -0.59%	None
Vice President	Tank Chuang	1,806	1,806	108	108	1,271	1,271	-		-	-	3,186 -1.07%	3,186 -1.07%	None
Vice President	Huang Liang- Wei	1,740	1,740	104	104	660	660	-		-	-	2,504 -0.84%	2,504 -0.84%	None
Vice President	Chiang Yao- Tsung	1,140	1,140	68	68	1,066	1,066	-		-	-	2,274 -0.76%	2,274 -0.76%	None
Vice President		16,656	16,656	999	999	13,449	13,449	-	-	-	-	31,104 -10.41%	31,104 -10.41%

Note 1: Mr. Wang Kuan-Hsiang resigned from General Manager on April 1, 2022. Mr. Lo Cheng-Chou assumed office as new General Manager on April 1, 2022. Note 2: The pension is a provision under expenditure. The amount of the remuneration to employees (D) is an estimate.

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Three. Corporate Governance Report

(III). Remuneration to five highest remunerated management personnel of the TWSE/TPEx listed company

										Unit: UTD thousand,December 31,2022	Unit: UTD thousand,December 31,2022	Unit: UTD thousand,December 31,2022	Unit: UTD thousand,December 31,2022	Unit: UTD thousand,December 31,2022
Title	Name	Salary (A)		Pensio	n (B)	Bonus disbur	and special sement(C)	Amo		tion to employees (D)		Ratio of sum net incom	of A, B, C and D to e after tax(%)	Remuneration received from investees other than subsidiaries
									unt of remunera
		Rexon Industrial Corp., Ltd.								All companies included in
			All companies included in		All companies	Rexon	All companies
				Rexon	included in	Industrial	included in the	Rexon Industr	ial Corp., Ltd.	the financ	ial reports	Rexon	All companies
			the financial reports	Industrial	the financial	Corp.,	financial	Cash	Stock	Cash	Stock	Industrial	included in the
				Corp., Ltd.	reports	Ltd.	reports	amount	amount	amount	amount	Corp., Ltd.	financial reports
General Manager (former)	Wang Kuan- Hsiang	2,010	2,010	121	121	2,800	2,800	-		-	-	4,931 -1.65%	4,931 -1.65%	None
General Manager (new)	Lo Cheng-Chou	2,040	2,040	122	122	1,789	1,789	-		-	-	3,951 -1.32%	3,951 -1.32%	None
Vice President	Tank Chuang	1,806	1,806	108	108	1,271	1,271	-		-	-	3,186 -1.07%	3,186 -1.07%	None
Vice President	Cheng Mei-Ling	1,476	1,476	89	89	1,274	1,274	-		-	-	2,839 -0.95%	2,839 -0.95%	None
Vice President	Peng Meng-Wei	1,476	1,476	89	89	1,266	1,266	-		-	-	2,830 -0.95%	2,830 -0.95%	None

*Note: The pension is a provision under expenditure. The amount of the remuneration to employees (D) is an estimate.

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Three. Corporate Governance Report

• (IV). Names of managerial officers entitled to employee remuneration and status of the distribution

distribution	distribution
			Unit: UTD thousand,December 31,2022
Managerial			Stock	Cash amount	Total	Total amount as a percentage of net
	Title	Name
officer			amount			income after tax %
	General Manager (former)	Wang Kuan-Hsiang	0	0	0	0
	General Manager (new) Vice President(former)	Lo Cheng-Chou
	Vice President	ChengMei-Ling
	Vice President	George Ku
	Vice President (Account manager)	He Hsiu-Yuan
	Vice President	HuangChin-Hsiang
	Vice President	PengMeng-Wei
	Vice President	ChangYu-Ming
	Vice President	Tank Chuang
	Vice President	HuangLiang-Wei
	Vice President	ChiangYao-Tsung
	Director	Kuo Pu-Chao
	Director	Li Wen-Tu
	Director	Chen Kuo-Jung
	Director	FengHsu-Hui
	Director	ChangChih-Hao
	Director	Kuo Han-Yu
	Director(CFO)	Hsu Sen-Yuan

Note: The aforementioned amounts are estimates. The amount of employee remuneration (in shares and in cash) distributed to the managerial officers based on the resolution of the Board of Directors in the most recent year shall be specified. If it is impossible to forecast the same, the amount to be distributed for the year shall be calculated based on the actual distribution ratio in the previous year. The net income after tax refers to the net income after tax in the most recent year; for the data to which the International Financial Reporting Standards are applied, the net income after tax refers to the net income after tax in the separate or individual financial reports in the most recent year. Mr. Wang Kuan-Hsiang resigned from General Manager on April 1, 2022. Mr. Lo Cheng-Chou assumed office as new General Manager on April 1, 2022.

• (V). Analysis of the total remuneration paid to directors, supervisors, President and Vice President of the Company as a percentage of the net income after tax stated in the separate or individual financial reported in the most recent two years, and description of the policies, standards, and portfolios for payment of the remuneration, the procedures for determining the remuneration, and the association with the operation performance and future risk exposure.

• Analysis of the total remuneration paid to directors, supervisors, President and Vice President of the Company as a percentage of the net income after tax stated in the financial reported in the most recent two years:

Title		2022		2021
	Rexon Industrial Corp., Ltd.	All companies included in the financial reports	Rexon Industrial Corp., Ltd.	All companies included in the financial reports
Director	-4.89%	-4.89%	2.03%	2.03%
Supervisor	0.00%	0.00%	0.00%	0.00%
General Manager and VicePresident	-10.41%	-10.41%	5.26%	5.26%

1. Policies, standards, and portfolios for payment of the remuneration, the procedures for determining the remuneration, and the association with the operation performance and future risk exposure:

2. (1). The remuneration to directors includes travel allowance and distribution of earnings to directors and supervisors. The travel allowance is paid with reference to the level of other companies in the industry and the attendance of the directors in Board meetings.

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Three. Corporate Governance Report

The Company may pay remuneration to directors for their implementation of the Company's duties regardless of the operating profit and loss. The Board of Directors is authorized to determine the remuneration for the directors based on their individual involvement in and contribution to the Company’s operations without exceeding the highest grade of the pay scale specified in the remuneration standard.

(2). The remuneration to President and Vice President includes salary, bonus,employee bonus, and employee share subscription warrant. It is determined based on their positions and duties with reference to the peer lever of the remuneration to the same position.

IV. Status of corporate governance

(I). Information on operation of the Board of Directors

The Board of Directors held 5 meetings in the most recent year (2022). The presence and attendance of the directors are as follows

		Actual number of	Number of
				Actual presence (attendance)
Title	Name	presence	presence by		Remarks
				rate (%) [B/A]
		(attendance) B	proxy
President	WangKuan-Hsiang	5	0	100%
Director	WangChen,Li-Mei	5	0	100%
Director	Lin Shyi-Ying	3	0	60%
Director	HuangChin-Hsiang	4	0	80%
Director	Kuo Pu-Chao	5	0	100%
Independent director	HungChao-Nan	5	0	100%
Independent director	Liu Pei-Yao	5	0	100%
Independent director	Lee Cherng	5	0	100%
Independent director	Wu Chwan-Chyuan	5	0	100%
Other matters to be specified: I. Where any of the following circumstances occurs to any meeting of the Board of Directors, the date, term and proposal of the meeting as well as the opinions of all the independent directors and actions taken by the Company on such opinions shall be specified: (I) Matters referred to in Article 14-3 of the Securities and Exchange Act: Date Proposal Opinions of the independent directors Actions of the Company on such opinions Resolution 2022.03.15 1st meeting in 2022 Proposal for the establishment of the Company’s “Internal Control System Amendment Procedure” Consent N/A All the present directors approved the proposal unanimously when the chairperson asked for their opinions. 2022.05.05 2nd meeting in 2022 Proposal for the Change of the Company’s CFO Consent N/A All the present directors approved the proposal unanimously when the chairperson asked for their opinions. 2022.08.04 4th meeting in 2022 Proposal for the “GHG Inventory Schedule Planning” Consent N/A All the present directors approved the proposal unanimously when the chairperson asked for their opinions. 2022.08.04 4th meeting in 2022 Proposal for the amendment of the “Internal Control System” Consent N/A All the present directors approved the proposal unanimously when the chairperson asked for their opinions. 2022.11.03 5th meeting in 2022 Proposal for the amendment of the “Internal Control System” Consent N/A All the present directors approved the proposal unanimously when the chairperson asked for their opinions. (II) In addition to the matters mentioned above, any resolution of the Board of Directors for which dissent or reservation is expressed by any independent director, and recorded in the minutes or a written statement: None. II. Regarding the situation of a director’s recusal of conflict of interest, the name of the director, proposal, reasons for the recusal, and participation in the votingshall be described:

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Three. Corporate Governance Report

						Reasons for the	Reasons for the
	Date		Director Proposal				recusal Participation in the voting
	2022.05.31		Wang Kuan-Hsiang, Proposal for			Related party Except for the directors who did not participate in the
	3rd meeting in Wang Chen, Li-Mei, distribution of						discussion and voting due to conflict of interest, the rest of
	2022		Kuo Pu-Chao remunerations to				the present members approved the proposal unanimously
			directors				when the chairperson asked for their opinions.
	2022.05.31		Wang Kuan-Hsiang, Proposal for			Related party Except for the directors who did not participate in the
	3rd meeting in Kuo Pu-Chao, He distribution of						discussion and voting due to conflict of interest, the rest of
	2022		Hsiu-Yuan remuneration to				the present members approved the proposal unanimously
			managerial officers				when the chairperson asked for their opinions.
			and employees
	2022.11.03		Hung Chao-Nan, Liu Proposal for			Related party Except for the directors who did not participate in the
	5th meeting in Pei-Yao, Lee Cherng, adjustment of						discussion and voting due to conflict of interest, the rest of
	2022		Wu Chwan-Chyuan remuneration to				the present members approved the proposal unanimously
			independent				when the chairperson asked for their opinions.
			directors
III. Please disclose the interval, period, scope, method and item of						the self-evaluation (or peer evaluation) of the Board of Directors, and specify the
	implementation status of this evaluation:
	Evaluation			Evaluation
	interval		Evaluation period Evaluation scope	method			Evaluation item Evaluation result
	Once a	year	January 1, 2022 to 1. Entire Board of	Self-			Evaluation Items of Board of Directors Overall score of the Board of
			December 31, 2022 Directors	evaluation			(functional committees) Directors: 5 points; evaluation
			2. Individual	of the			A. Participation in the operations of the result: 4.96 points.
			members	Board of			Overall score of the functional
			3. Functional committees	Directors			company B. Improvement of the Bard of committees: 5 points; evaluation result: 4.92 points.
							Directors' decision-making quality Overall score of the Board
							C. Composition and structure of the members: 5 points; evaluation
							Board of Directors result: 4.72 points. This indicates
							D. Election and continuing education of the directors that the directors give positive evaluation to the efficiency and outcome of the indicators in
							E. Internal control terms of their implementation.
							Evaluation items of Board members
							(self-evaluation or peer evaluation):
							A. Understanding of the goals and
							missions of the Company
							B. Awareness of the duties of a director
							C. Participation in the operations of the
							company
							D. Management of internal relationship
							and communication
							E. Professionalism and continuing
							education of directors
							F. Internal control
IV. Evaluation			of the goals (e.g. establishment of the Audit Committee, improvement of information transparency, etc.) and implementation with
	respect to enhancement of the function of the Board of Directors in the current and most recent year:
	(I)	The Company has established the “Ethical Corporate Management Best Practice Principles” and the “Code of Ethical Conduct”, and has
		uploaded them to the MOPS and the official website of the Company.
	(II)	The directors are elected under the candidate nomination				system as stated in the Company's Articles of Incorporation. We carefully assess the
		qualifcations of the candidates and their willingness to be elected.
	(III) The Company arranges continuing education courses for					directors and supervisors every year to enhance their legal knowledge with respect
		to the themes of corporate governance.
	(IV) The directors of the Company were reelected at the annual meeting of shareholders on June 18, 2020. Addition two independent directors
		were	elected to enhance the corporate governance. The four independent directors were commissioned to serve as the members of the
		Company’s 1st Audit Committee. It shall hold at least one meeting every quarter. The Audit Committee held 4 meetings in 2022 with the
		CPAs and the chief auditor attending as nonvoting participants. The Audit Committee performed well in operation and communication.
	(V)	The Company has established the Regulations Governing the Performance Evaluation of the Board of Directors and discussed corresponding
		actionplans after makingassessment every year to		enhance the operation efficiencyof the Board of Directors on an ongoingbasis.

• (II). Operation of the Audit Committee or participation of the supervisors in the operation of the Board of Directors:

• Operation of the Audit Committee.

  • (1). The Audit Committee is composed of all the independent directors and holds at least one meeting every quarter. The cores of the annual tasks are described below:

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Three. Corporate Governance Report

• A. Fair presentation of the Company’s financial statements.

• B. Effective implementation of the Company’s internal control.

• C. The hiring, dismissal or remuneration of a certified public accountant.

• D. Transaction involving material asset or derivatives.

• E. The Company’s compliance with relevant regulations and rules.

• F. Existing or potential regulations and rules applicable to the Company.

• (2). Operation of the Audit Committee:

The Audit Committee held 4 meetings (A) in the most recent year (2022). The presence and attendance of the independent directors are as follows

	Title	Name	Actual number of presence (B)	Number of presence by proxy	Actual presence rate (%) (B/A)(Note)	Remarks
	Independent director	Hung Chao-Nan	4	0	100
	Independent director	Liu Pei-Yao	4	0	100
	Independent director	Lee Cherng	4	0	100
	Independent director	Wu Chwan- Chyuan	4	0	100
	Other matters to be specified: I. Where any of the following circumstances occurs to the operation of the Audit Committee, the date, term and proposal of the Audit Committee meeting as well as the dissent, reservation or major suggestion of any independent director, the Audit Committee resolution, and actions taken by the Company on the Audit Committee’s opinions shall be specified. (I)Matters referred to in Article 14-5 of the Securities and Exchange Act. Date Proposal Dissent and reservation of independent director Major suggestions of independent directors Audit Committee resolution Actions of the Company on the Audit Committee’s opinions Resolution of Board of Directors 03.15.2022 1st meeting in 2022 Internal audit activity report. Proposal for 2021 financial reports. Proposal for the “Statement of Internal Control System". Proposal for the establishment of the Company’s “Internal Control System Amendment Procedure”. Proposal for the report on the assessment of CPA independence. None None Approved and adopted by all the Audit Committee members. N/A Approved without changes. 2022.05.05 2nd meeting in 2022 2022 Q1 financial reports Internal audit activity report. Proposal for the change of the Company’s CFO. None None Approved and adopted by all the Audit Committee members. N/A Approved without changes. 2022.08.04 3rd meeting in 2022 2022 Q2 financial reports. Internal audit activity report. Proposal for amendment of the “Internal Control System”, “Internal Audit Implementation Rules”, and “Internal Control Self-Evaluation Regulations”. None None Approved and adopted by all the Audit Committee members. N/A Approved without changes. 2022.11.03 4th meeting in 2022 2022 Q3 financial reports Internal audit activity report. Proposal for 2023 audit plan Proposal for amendment of the “Internal Control System” and “Internal Audit Implementation Rules” under the preparation management of financial reports. None None Approved and adopted by all the Audit Committee members. N/A Approved without changes. (II) In addition to the matters mentioned above, any resolution unapproved by the Audit Committee but passed by more than two-thirds of the directors: None. II. Regardingthe situation of an independent director’s recusal of conflict of interest,the name of the independent director,

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Three. Corporate Governance Report

	Three. Corporate Governance Report	Three. Corporate Governance Report	Three. Corporate Governance Report
	proposal, reasons for the recusal, and participation in the voting shall be described: None. III. Communication between independent directors and internal chief auditor/CPAs (including material matters, methods and results of communication on the Company’s financial and business conditions, etc.) (I) Communication between independent directors and internal chief auditor/CPAs and the communication methods: 1. The internal chief auditor of the Company regularly reports the audit activities to the independent directors at the Audit Committee meeting, and communicates the results in the audit report and the follow-up of the implementation status to them. 2. The CPAs of the Company report the review and audit of the financial reports and internal control of the Company to the independent directors at the quarterly Audit Committee meeting, and perform adequate explanation and communication on the review and audit of the financial reports and the results thereof, the results of the internal control audit, and relevant laws and regulations. (II) The major matters for communication between the independent directors and the internal chief auditor in 2022 are summarized as follows: There was good communication with the independent directors regarding the implementation of the audit activities and its effectiveness. Date Matters for communication Communication result 2022.03.15 1st meeting in 2022 Internal audit activity report. Proposal for the “Statement of Internal Control System". Proposal for the establishment of the Company’s “Internal Control System Amendment Procedure”. Proposal for the report on the assessment of CPA independence. The independent directors has full understanding and the result was incorporated in the Audit Committee meeting minutes. 2022.05.05 2nd meeting in 2022 Internal audit activity report. The independent directors has full understanding and the result was incorporated in the Audit Committee meeting minutes. 2022.08.04 3rd meeting in 2022 Internal audit activity report. Proposal for amendment of the “Internal Control System”, “Internal Audit Implementation Rules”, and “Internal Control Self-Evaluation Regulations”. The independent directors has full understanding and the result was incorporated in the Audit Committee meeting minutes. 2022.11.03 4th meeting in 2022 Internal audit activity report. Proposal for 2023 audit plan Proposal for amendment of the “Internal Control System” and “Internal Audit Implementation Rules” under the preparation management of financial reports. The independent directors has full understanding and the result was incorporated in the Audit Committee meeting minutes. (III) The major matters for communication between the independent directors and the CPAs in 2022 are summarized as follows: There wasgood communication between the independent directors and CPAs. Date Matters for communication Communication result 2022.03.15 1st meeting in 2022 The CPAs’ review result report of 2021 financial statements. The independent directors has full understanding and the result was incorporated in the Audit Committee meeting minutes. 05.05.2022. 2nd meeting in 2022 The CPAs’ review result report of 2022 Q1 financial statements. The independent directors has full understanding and the result was incorporated in the Audit Committee meeting minutes. 2022.08.04 3rd meeting in 2022 The CPAs’ review result report of 2022 Q2 financial statements. The independent directors has full understanding and the result was incorporated in the Audit Committee meeting minutes. 2022.11.03 4th meeting in 2022 The CPAs’ review result report of 2022 Q3 financial statements. The independent directors has full understanding and the result was incorporated in the Audit Committee meeting minutes.
	Date	Matters for communication	Communication result
	2022.03.15 1st meeting in 2022	The CPAs’ review result report of 2021 financial statements.	The independent directors has full understanding and the result was incorporated in the Audit Committee meeting minutes.
	05.05.2022. 2nd meeting in 2022	The CPAs’ review result report of 2022 Q1 financial statements.	The independent directors has full understanding and the result was incorporated in the Audit Committee meeting minutes.
	2022.08.04 3rd meeting in 2022	The CPAs’ review result report of 2022 Q2 financial statements.	The independent directors has full understanding and the result was incorporated in the Audit Committee meeting minutes.
	2022.11.03 4th meeting in 2022	The CPAs’ review result report of 2022 Q3 financial statements.	The independent directors has full understanding and the result was incorporated in the Audit Committee meeting minutes.

1. Participation of the supervisors in the operation of the Board of Directors: None.

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Three. Corporate Governance Report

(III). Status of corporate governance, deviations from the Corporate Governance Best Practice Principles for TWSE/TPEx Listed Companies, and reasons for such deviations:

	Operation	Operation	Operation	Reasons for the
	Yes	No		deviations from
				the Corporate
Evaluation item				Governance Best
			Summary
				Practice Principles
				for TWSE/TPEx
				Listed Companies
I. Has the Company established and disclosed its corporate governance principles based on the “Corporate Governance Best Practice Principles for TWSE/TPEx Listed Companies”?	V		The Company has established the “Corporate Governance Best Practice Principles.”	No significant deviation
II. Shareholding structure and shareholder’s equity (I) Does the Company have an internal procedure and handle shareholders’ suggestions, doubts, disputes, and litigations accordingly? (II) Does the Company have the name list of the major shareholders who actually control the Company and the persons who have the ultimate control of the major shareholders? (III) Has the Company established and implemented risk control and firewall mechanisms between the Company and its affiliates? (IV) Has the Company established internal regulations to prohibit insiders from using the information not available to the market to trade securities?	V V V V		(I) The Company has established the “Material Internal Information Handling Procedure” and appointed a spokesman and a deputy spokesman to deal with shareholder affairs. (II) We have designated shareholder service personnel to deal with relevant matters and commissioned Chinatrust Commercial Bank - Stock Agency Department as our stock service agent to give assistance to ensure the services for major shareholders. (III) The Company has established the “Affiliates Management Regulations” and other relevant internal rules to build appropriate risk control mechanisms and firewalls. (IV) The Company has established the “Ethical Corporate Management Best Practice Principles”, “Code of Ethical Conduct" and “Material Internal Information Handling Procedure”, and prohibited insiders from using the information not available to the market to trade securities.	(I) No significant deviation (II) No significant deviation (III) No significant deviation (IV) No significant deviation
III. Composition and responsibilities of Board of Directors (I) Has the Board of Directors established and implemented diversity policies and specific management objectives?	V		(I) Board of Directors’ member diversity policy and implementation thereof 1. The Board of Directors of the Company adopted the “Corporate Governance Best Practice Principles” on August 9, 2017 and defined the diversity policy in Chapter 3 “Enhancement of the Functionality of the Board of Directors”. In addition, the candidate nomination system is fully applied to the election of the directors as stated in the Article of Incorporation. The education, experience, and quantifications of the candidates are subject to assessment. The “Corporate Governance Best Practice Principles” is observed to ensure the diversity of the Board members. 2. The implementation status of the diversity policy on the composition of the Board members (Table 1) The current Board of Directors is composed of 9 directors, including5 directors and 4 independent	(I) No significant deviation

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Three. Corporate Governance Report

	Operation	Operation	Operation	Reasons for the
	Yes	No		deviations from
				the Corporate
Evaluation item				Governance Best
			Summary
				Practice Principles
				for TWSE/TPEx
				Listed Companies
(II) Has the Company voluntarily formed other functional committees in addition to the Compensation Committee and Audit Committee set up pursuant to relevant laws and regulations? (III) Does the Company have regulations and methods for the performance evaluation of the Board of Directors and conduct regular performance evaluation every year? Does the Company submit the results of the performance evaluation to the Board of Directors? Are the results used as the basis for the remuneration to and nomination for re-election of individual directors? (IV) Does the Company review the independence of the CPAs on a regular basis?	V V V		directors (44%). The Board members have extensive experience and professionalism in the fields of law, business, and management. The equity of gender in the formation of the Board of Directors is another concern of the Company. The ratio of the female directors is 11%. The Company has achieved the specific management objective with respect to the diversity of the Board of Directors. (II) The Company has set up the Compensation Committee and Audit Committee. We will set up other functional committees in accordance with the law and the operations of the Company. (III) The Company has established the Regulations Governing the Performance Evaluation of the Board of Directors and performed the evaluation once a year. The results of the performance evaluation are submitted to the Board of Directors and used as the basis for the remuneration to and nomination for re-election of individual directors. The self-evaluation of the Board performance showed a good result in 2022. It was submitted to the Board of Directors on February 23, 2023. We will use it as reference for the remuneration to and nomination for re-election of individual directors. (IV) The financial management department performed self-evaluation of Kuo Shih-Hua and Wu Chun- Yuan, the CPAs of KPMG Taiwan in accordance with the assessment criteria of independence, and all of them conformed to the independence (Table 2). The result was submitted to and approved by the Board of Directors on February 23, 2023. KPMG Taiwan issued the “Statement of Independence”.	(II) Actions to be taken in accordance with actual needs (III) No significant deviation (IV) No significant deviation

• 25 -

Three. Corporate Governance Report

	Operation	Operation	Operation	Reasons for the
	Yes	No		deviations from
				the Corporate
Evaluation item				Governance Best
			Summary
				Practice Principles
				for TWSE/TPEx
				Listed Companies
IV. Does the Company, as a TWSE/TPEx listed company, have an adequate number of corporate governance personnel with appropriate qualifications as well as a chief corporate governance officer to be in charge of corporate governance affairs including, but not limited to, providing directors and supervisors with required information for fulfillment of their duties, assisting directors and supervisors in observance of laws and regulations, handling relevant matters for Board meetings and shareholders’ meetings according to the laws, and preparing minutes of Board meetings and shareholders’ meetings?	V		The Board of Directors adopted the “Director Requests Handling SOP” on March 28, 2019. The General Administration Division is responsible for handling directors’ requests and help them fulfill their duties in a timely and effective manner. The personnel of the General Administration Division serve concurrently as the corporate governance personnel. All of them have the work experience in financial and other management activities of public entities for more than three years. No chief corporate governance officer has been appointed. Duties: Providing directors with required information for fulfillment of their duties, maintaining Articles of Incorporation and implementing significant internal regulations, assisting directors in observance of laws and regulations, arranging continuing education courses for directors and implementing company registration , handling relevant matters for Board meetings and shareholders’ meetings according to the laws, maintaininginformation,and disclosingit adequately.	No significant deviation
V. Has the Company established a communication channel for the stakeholders (including but not limited to shareholders, employees, customers and suppliers), set a stakeholder section on the Company’s website, and responded to the concerns of the stakeholders on the material issues related to corporate social responsibilities?	V		The Company provides communication channels and practices for stakeholders with respect to the issues that they are concerned about. We have set up a stakeholder section and provided the contact information of the corresponding units on our website in order to respond properly to the issues that the stakeholders are concerned about.	No significant deviation
VI. Does the Company commission a professional stock service agent to deal with the matters of shareholders’ meetings?	V		The Company has commissioned Chinatrust Commercial Bank - Stock Agency Department as our stock service agent for dealing with the matters of shareholders’ meetings.	No significant deviation
VII. Disclosure of information (I) Has the Company established a website to disclose the financial, operational and corporate governance information? (II) Has the Company adopted other means to disclose information (e.g. English website, designation of specific personnel to collect and disclose corporate information, implementation of a spokesperson system, disclosure of investor conferences on the Company’s website)?	V V		(I) The Company has set up a website (www.rexon.net) and disclosed the information on our financial, operational and corporate governance information. (II) We have set up our website and provided relevant English and Chinese information as a reference for our shareholders and stakeholders. Mr. Tank Chuang, a vice president of the Company, is designated to serve as the spokesman and Mr. Hsu Sen-Yuan as the deputy spokesman. The public relation department is responsible for maintaining the channels of communication with the media. Any material information that may affect the shareholders and stakeholders are disclosed timely and adequately. The Company has established the “Material Internal Information Handling Procedure” to govern the handling of material internal information. This management procedure has been communicated to all the employees, managerial officers and directors.	(I) No significant deviation (II) No significant deviation

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Three. Corporate Governance Report

	Operation	Operation	Operation	Reasons for the
	Yes	No		deviations from
				the Corporate
Evaluation item				Governance Best
			Summary
				Practice Principles
				for TWSE/TPEx
				Listed Companies
(III) Has the Company announced and reported annual financial statements within two months after the end of a fiscal year, and announced and reported Q1, Q2, Q3 financial statements and the operating status of each month in advance of the prescribed deadline?	V		(III) The Company has conducted announcement and reporting within the time frame.The 2022 financial statement has announced on February,2023.	(III) No significant deviation
VIII. Does the Company have other information that enables a better understanding of the Company’s corporate governance practices (including but not limited to employee rights, employee care, investor relations, supplier relations, stakeholders’ rights, continuing education of directors and supervisors, implementation of risk management policies and risk assessment standards, implementation of customer policies, and insuring against liabilities of Company’s directors and supervisors)?	V		(I) Employee rights: In addition to protecting the legal rights of the employees according to the Labor Standards Act, the Company has set up the Employee Welfare Committee to provide various benefits for employees. (II) Employee care: The Company has established a good relationship of mutual trust and independence with our employees through the employee welfare system and education and training system. We also arrange health checkup on a regular basis. (III) Investor relations: A spokesman and deputy spokesman system has been set up for outward relationship and communication, and a person has been designated to disclose the information of the Company on the MOPS according to laws and regulations. (IV) Supplier relations: The Company will continue to maintain a good relationship with the suppliers based on the principles of mutual trust and benefit. (V) Stakeholders’ rights: The Company maintains smooth communication and recommendation channels with the stakeholders to protect the legal rights that they deserve. A spokesman and deputy spokesman system has been set up for answering the questions and dealing with the recommendations that shareholders raise. (VI) Continuing education of directors: The Company encourages the directors to take continuing education courses. The continuing education courses that the directors of the Company took in 2022 included the Legal Issues Concerning the Insider Shareholding Management and Share Trading Matters, Announcement of the Reference Guidelines for the Independent Director and Audit Committee to Fulfill Their Duties and Director and Supervisor Dissemination Conference, Corporate Sustainability Transformation from the Viewpoint of ESG Management, and The Trends and Challenges of the Information Security Governance. (VII) Implementation of risk management policies and risk assessment standards: The Company has established the SOP and an internal management system in line with relevant laws and the actual	No significant deviation

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Three. Corporate Governance Report

	Operation	Operation	Operation	Reasons for the
	Yes	No		deviations from
				the Corporate
Evaluation item				Governance Best
			Summary
				Practice Principles
				for TWSE/TPEx
				Listed Companies
			operational requirements. In addition to organizing education and training to ensure the correct concept of the employees, we promote and implement different risk management regulations to reduce the risk that may occur to our finance and business. In addition, the internal auditors checks the implementation of the Company’s risk management regulations. The Company makes improvement for the deficiencies, performs proper assessment, and effectively supervises the operation of the risk management mechanism. (VIII) Implementation of customer policies: The Company protects the confidentiality of the customers strictly. For the customers who have a competitive relationship with each other, designs are conducted in different specific sections and firewalls are built for this purpose. (IX) The Company takes out liability insurance for our directors and supervisors. These have been reported on the MOPS. (X) Internal and external education and training on ethical management have been organized (including the courses on ethical management, corporate governance, professional ethics and security management, and accounting system and internal control.)
IX. Improvements made based on the corporate governance evaluation result announced by the Corporate Governance Center of TWSE in the most recent year, and the prioritized improvements and measures for the areas to be improved. There is no needed to be described for the companies that are not included in the evaluation): 1. Improvements that the Company has made: A. Board member diversity policy. B. English disclosure of interim financial reports. C. Director and management succession plan. 2. Prioritized improvements and measures for the areas to be improved: A. Establishment of risk management policies and procedures. B. CSR. C. Setupof an information securityrisk management framework.

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Three. Corporate Governance Report

Table 1: The implementation status of the diversity policy on the composition of the Board members

Name	Name	Nationality	Gender	Employee status		Age	Age		Term of office for independent directors	Term of office for independent directors	The ability to make judgments about operations	Accounting and financial analysis ability	Accounting and financial analysis ability	Business management ability	Business management ability	Crisis management ability	Knowledge of the industry	International market perspective	Leadership ability	Decision- making ability
					41- 50	51- 60	61- 70	71- 80	Less than 3 years	3 to 9 years
Wang Kuan- Hsiang		R.O.C.	Male	V	V						V		V	V		V	V	V	V	V
Wang Chen, Li-Mei		R.O.C.	Female				V				V		V	V		V	V	V	V	V
Lin Shyi-Ying		R.O.C.	Male					V			V		V	V		V	V	V	V	V
Huang Chin- Hsiang		R.O.C.	Male	V		V					V		V	V		V	V	V	V	V
Kuo Pu-Chao		R.O.C.	Male	V	V						V		V	V		V	V	V	V	V
Hung Chao- Nan		R.O.C.	Male					V		V	V		V	V		V		V	V	V
Liu Pei-Yao		R.O.C.	Male					V		V	V		V	V		V		V	V	V
Lee Cherng		R.O.C.	Male			V			V		V		V	V		V		V	V	V
Wu Chwan- Chyuan		R.O.C.	Male				V		V		V		V	V		V		V	V	V
Table 2: Assessment criteria of CPA independence																Wu Chun- Yuan Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes
Serial no.	Assessment item												CPA Kuo Shih- Hua		CPA	Wu Chun- Yuan
1	Not a director or supervisor of the Companyor our affiliates.												Yes			Yes
2	Not a director or supervisor of the Company or our affiliates (except for an independent director of the Company, or the parent of the Company, or a subsidiary in which the Company directly or indirectly holds more than 50% voting shares.)												Yes			Yes
3	Not a natural-person shareholder who holds shares, together with those held by the person’s spouse, minor children, or held by the person under others’ names, in an aggregate amount of 1% or more of the total number of issued shares of the Companyor ranks as one of the Top10 shareholders.												Yes			Yes
4	Not a spouse, or relative within the second degree of kinship, or lineal relative within the third degree of kinship, of any persons under theprecedingthreeparagraphs.												Yes			Yes
5	Not a director, supervisor or employee of an corporate shareholder holding more than 5% of the issued shares of the Company,or of anyTop5 corporate shareholders.												Yes			Yes
6	Not a director, supervisor, managerial officer, or shareholder holding more than 5% of the issued shares of a specific companyor institution that has a financial or business relationshipwith the Company.												Yes			Yes
7	Not a spouse nor a relative within the second degree of kinshipof another director.												Yes			Yes
8	None of the circumstances under Article 30 of the Company.												Yes			Yes
9	Not elected in the capacity of a government agency, a juristic person, or a representative thereof, as provided in Article 27 of the CompanyAct;												Yes			Yes
10	Other valid reference information: CPA’s Statement of Independence												Yes			Yes

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Three. Corporate Governance Report

• (IV). If the Company has a compensation committee, its formation and operation shall be disclosed:

• Information on Compensation Committee members:

Status	Criteria	Professional qualifications	Independence	Number of other public companies where the person also serves in a compensation committee
	Name	and experience
Independent director (convener)	Hung Chao-Nan	Work experience in business, law, or other areas required for the business of the Company without the circumstances under Article 30 of the Company Act.	1. The person and his/her spouse or relatives within the second degree of kinship are not the directors, supervisors or employees of the Company or any of its affiliates. 2. The independent director or his spouse or relative within the second degree of kinship does not hold any stocks of the Company on his/her own or in the name of others. 3. The independent director is not a director, supervisor or employee of any company that has a specific relationship with the Company (with reference to Article 3, Paragraph 1, Subparagraph 5~8 of the Regulations Governing Appointment of Independent Directors and Compliance Matters for Public Companies). 4. The independent director did not receive compensation for providing the Company or affiliates with commercial, legal, financial, accounting or related services in the most recent twoyears.	1
Independent director	Liu Pei-Yao	Commercial, financial, accounting, or other professional or technical specialists who have passed a national examination and have been awarded a certificate in a professional capacity that is necessary for the business of the Company, without the circumstances under Article 30 of the Company Act.	1. The person and his/her spouse or relatives within the second degree of kinship are not the directors, supervisors or employees of the Company or any of its affiliates. 2. The independent director or his spouse or relative within the second degree of kinship does not hold any stocks of the Company on his/her own or in the name of others. 3. The independent director is not a director, supervisor or employee of any company that has a specific relationship with the Company (with reference to Article 3, Paragraph 1, Subparagraph 5~8 of the Regulations Governing Appointment of Independent Directors and Compliance Matters for Public Companies). 4. The independent director did not receive compensation for providing the Company or affiliates with commercial, legal, financial, accounting or related services in the most recent twoyears.	None
Independent director	Lee Cherng	An instructor or higher up in a department of business, law, or other academic department required for the business of the Company in a public or private junior college, college, or university, without the circumstances under Article 30 of the Company Act.	1. The person and his/her spouse or relatives within the second degree of kinship are not the directors, supervisors or employees of the Company or any of its affiliates. 2. The independent director or his spouse or relative within the second degree of kinship does not hold any stocks of the Company on his/her own or in the name of others. 3. The independent director is not a director, supervisor or employee of any company that has a specific relationship with the Company (with reference to Article 3, Paragraph 1, Subparagraph 5~8 of the Regulations Governing Appointment of Independent Directors and Compliance Matters for Public Companies). 4. The independent director did not receive compensation for providing the Company or affiliates with commercial, legal, financial, accounting or related services in the most recent twoyears.	2
Independent director	Wu Chwan- Chyuan	CPA or other professional or technical specialists who have passed a national examination and have been awarded a certificate in a professional capacity that is necessary for the business of the Company, without the circumstances under Article 30 of the Company Act.	1. The person and his/her spouse or relatives within the second degree of kinship are not the directors, supervisors or employees of the Company or any of its affiliates. 2. The independent director or his spouse or relative within the second degree of kinship does not hold any stocks of the Company on his/her own or in the name of others. 3. The independent director is not a director, supervisor or employee of any company that has a specific relationship with the Company (with reference to Article 3, Paragraph 1, Subparagraph 5~8 of the Regulations Governing Appointment of Independent Directors and Compliance Matters for Public Companies). 4. The independent director did not receive compensation for providing the Company or affiliates with commercial, legal, financial, accounting or related services in the most recent twoyears.	1

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Three. Corporate Governance Report

	Criteria	More than 5 years of work experience and following professional	More than 5 years of work experience and following professional	More than 5 years of work experience and following professional	Compliance with independence requirements (Note 2)	Compliance with independence requirements (Note 2)	Compliance with independence requirements (Note 2)	Compliance with independence requirements (Note 2)	Compliance with independence requirements (Note 2)	Compliance with independence requirements (Note 2)	Compliance with independence requirements (Note 2)	Compliance with independence requirements (Note 2)	Compliance with independence requirements (Note 2)	Compliance with independence requirements (Note 2)
		qualifications
		An instructor or	A judge, public	Work experience	1	2	3	4	5	6	7	8	9	10
		higher up in a	prosecutor, attorney,	in business, law,
		department of	certified public	finance,											Number of
Status		commerce, law,	accountant, or other	accounting, or											other public
		finance, accounting, or	professional or	other areas											companies
		other academic	technical specialist	required for the											where the	Remarks
(Note 1)		department related to	who has passed a	business of the											person also
		company business in a	national examination	Company											serves in a
		public or private	and has been awarded a												compensatio
		junior college, college,	certificate in a												n committee
		or university	professional capacity
			that is necessary for the
	Name		business of the
			Company.
Independent director	Hung Chao- Nan		V	V	V	V	V	V	V	V	V	V	V	V	1	No
Independent director	Liu Pei-Yao		V	V	V	V	V	V	V	V	V	V	V	V	0	No
Independent director	Lee Cherng	V		V	V	V	V	V	V	V	V	V	V	V	2	No
Independent director	Wu Chwan- Chyuan		V	V	V	V	V	V	V	V	V	V	V	V	1	No

Note 1: Please fill in the column under “Status” with “director,” “independent director” or “others”.

Note 2: Place a “V” in the box if the member met the following conditions at any time during active duty and two years prior to the date elected.

(1) Not a director or supervisor of the Company or our affiliates.

(2) Not a director or supervisor of the Company or our affiliates (The same does not apply, however, in cases where the person is an independent director of the Company, the parent of the Company, or any subsidiary, or any subsidiary of the same parent, as appointed and concurrently serving as such in accordance with the Act or the regulations of the local country.)

(3) Not a natural-person shareholder who holds shares, together with those held by his/her spouse, minor children, or held by the person under others' names, in an aggregate of 1% or more of the total number of issued shares of the Company, or ranking among the top 10 natural-person shareholders in holdings.

(4) Not a spouse, or relative within the second degree of kinship, or lineal relative within the third degree of kinship, of an executive officer falling under Point (1) above, or of any of the persons in Point (2) or (3) above.

(5) Not a director, supervisor, or employee of a corporate shareholder that directly holds 5% or more of the total number of issued shares of the Company, or ranks as one of its top five shareholders, or designates its representative to serve as a director or supervisor of the Company under Article 27, paragraph 1 or 2 of the Company Act. (The same does not apply, however, in cases where the person is an independent director of the Company, the parent of the Company, or any subsidiary, or any subsidiary of the same parent, as appointed and concurrently serving as such in accordance with the Act or the regulations of the local country.)

(6) In case a majority of the Company's director seats or voting shares and those of any other company are controlled by the same person, not a director, supervisor, or employee of that other company. (The same does not apply, however, in cases where the person is an independent director of the Company, the parent of the Company, or any subsidiary, or any subsidiary of the same parent, as appointed and concurrently serving as such in accordance with the Act or the regulations of the local country.)

(7) In case the President, General Manager, or person holding an equivalent position of the Company and a person in any of those positions at another company or institution are the same person or are spouses, not a director, supervisor or employee of that other company or institution. (The same does not apply, however, in cases where the person is an independent director of the Company, the parent of the Company, or any subsidiary, or any subsidiary of the same parent, as appointed and concurrently serving as such in accordance with the Act or the regulations of the local country.) .

(8) Not a director, supervisor, or managerial officer, or a shareholder directly holding 5% or more of the shares, of any specific company or institution that has a business or financial relationship with the Company. (The same does not apply, however, in cases where the specific company or institution holds 20% or more and not more than 50% of the total number of the Company's issued shares and is an independent director of the Company, the parent of the Company, or any subsidiary, or any subsidiary of the same parent, as appointed and concurrently serving as such in accordance with the Act or the regulations of the local country.)

(9) Not a professional individual who, or an owner, partner, director, supervisor, or managerial officer of a sole proprietorship, partnership, company, or institution that, provides auditing services to the company or any affiliate of the company, or that provides commercial, legal, financial, accounting or related services to the Company or any affiliate of the Company in the most recent two years with an accumulated service compensation of NT$500,000 or less, or a spouse thereof; provided that this restriction does not apply to a member of the Compensation Committee, public tender offer review committee, or special committee for merger/consolidation and acquisition, who exercises powers pursuant to the Securities and Exchange Act or to the Business Mergers and Acquisitions Act or related laws or regulations. .

(10) None of the circumstances under Article 30 of the Company. Not a director or supervisor of the Company or our affiliates.

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Three. Corporate Governance Report

1. Information on the operation of the Compensation Committee

2. (1). The Compensation Committee of the Company is comprises of 4 members.

3. (2). Term of office of the current Committee members: June 18, 2020 to June 17, 2023; the Compensation Committee held 4 meetings (A) in the most recent year (2022). The qualifications of the members and their presence status are as follows:

Title
		Actual number of	Number of	Actual presence rate
	Name				Remarks
		presence (B)	presence by	**(%) [Ｂ/Ａ] **
			proxy
Convener	Hung Chao- Nan	4	0	100%
Member	LiuPei-Yao	4	0	100%
Member	Lee Cherng	4	0	100%
Member	Wu Chwan- Chyuan	4	0	100%
Other matters to be specified: I. If the Board of Directors does not adopt or revise the suggestions of the Compensation Committee, the date, term and proposal of the Board of Directors meeting, the Board of Directors resolution and actions taken by the Company on the Compensation Committee’s opinions shall be specified (if the amount of remuneration adopted by the Board of Directors is higher than that suggested by the Compensation Committee, the differences and reasons must be indicated): None. II. For any resolution of the Compensation Committee for which dissent or reservation is expressed by any of the members and recorded in the minutes or a written statement, the date, term and proposal of the Compensation Committee meeting, opinions of all members and actions taken on such opinions shall be specified: None.

(3). Discussion matters and resolutions of the Compensation Committee in 2022, and the actions of the Company on the opinions of the Committee members:

Date	Proposal	Resolution	Actions of the Company on the Compensation Committee’s opinions
2022.03.15 1st meeting in 2022	Proposal for the distribution of the remuneration to the employees and directors in 2021. Proposal for the contribution rate of the year-end bonus in 2022.	All the present members approved the proposal unanimously when the chairperson asked for their opinions.	N/A
2022.05.05 2nd meeting in 2022	Proposal for the Change of the Company’s CFO	All the present members approved the proposal unanimously when the chairperson asked for their opinions.	N/A
2022.05.31 3rd meeting in 2022	Proposal for the distribution of the remuneration to the directors and managerial officers in 2021. Proposal for the adjustment of the remuneration to the managerial officers.	All the present members approved the proposal unanimously when the chairperson asked for their opinions.	N/A
2022.11.03 4th meeting in 2022	Proposal for the adjustment of the remuneration to the managerial officers.	All the present members approved the proposal unanimously when the chairperson asked for their opinions.	N/A

1. Information about the members of the nomination committee and its operation: N/A

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Three. Corporate Governance Report

• (V). Promotion and implementation status of sustainable development, deviations from the Sustainable Development Best Practice Principles for TWSE/TPEx Listed Companies, and reasons for such deviations:

	Implementation status (Note 1)	Implementation status (Note 1)	Implementation status (Note 1)	Deviations
	Yes	No		from the
				Sustainable
				Development
				Best Practice
Implementation item				Principles for
			Summary
				TWSE/TPEx
				Listed
				Companies and
				reasons for
				such deviations
I. Does the Company have a governance structure that promotes sustainable development and have a dedicated unit or designate an existing unit for the task of sustainable development promotion? Does the Board of Directors of the Company authorize the top management to handle relevant matters? How does the Board of Directors conduct supervision?	V		1. The Company’s governance structure for promotion of sustainable development: Rexon Sustainable Operations Committee (or ESG Committee in short). 2. The implementation status of the Company’s organizations is described below: (1) The name and establishment date of the dedicated sustainable development promotion units and the authorization from the Board of Directors: The Rexon Sustainable Operations Committee (or ESG Committee in short) was established in November 2021 to ensure the implementation of the corporate sustainable operations. The chairperson of the ESG Committee is designated by the President. He/she is responsible for the implementation of the CSR policy and development of the planned goals for the sustainable operations. (2) The composition and operation of the promotion unit and its implementation status in the current year (e.g. work plans and functions). The managerial officers at the highest level of respective functions provide customers with competitive innovative products and services. They show forth their influence on the green environmental protection among the suppliers; provide safe and healthy environment; enable employees to fully develop themselves and grow with the Company; ensure good corporate governance; protect the rights and interests of the stakeholders; and prepare work plans for participation in social welfare activities: To create sustainable growth, green operations, attract people with talent, facilitate co-prosperity and common good, and ensure the value of charity and sharing. (3) The frequency at which the promoting unit reports to the Board of Directors (at lease once a year), or the date on which it reports to the Board of Directors in the current year: At least once a year; it reported on November 3, 2022. 3. The chairperson of the ESG Committee is designated by the President. The members are comprised of the senior managerial officers of the Company. The chairperson regularly reports the strategies, objectives and management guidelines with respect to the sustainable development to the Board of Directors, and reviews the implementation status of the actions.	No significant deviation
II. Does the Company conduct risk assessment for environmental, social and corporate governance issues related to the Company’s operations in	V		The Company communicates with stakeholders through multiple channels, collects and summarizes their concerns, and initially identifies material issues based on theprinciples of sustainability,	No significant deviation

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Three. Corporate Governance Report

	Implementation status (Note 1)	Implementation status (Note 1)	Implementation status (Note 1)	Deviations
	Yes	No		from the
				Sustainable
				Development
				Best Practice
Implementation item				Principles for
			Summary
				TWSE/TPEx
				Listed
				Companies and
				reasons for
				such deviations
accordance with the materiality principle, and formulate relevant risk management policies or strategies?			materiality, completeness, and inclusiveness. The assessment team of the ESG Committee performs assessment in accordance with the criteria and, with this as a basis, makes analysis for the prioritization of the materiality, draws a matrix of material issues, and establishes relevant risk managementpolicies and strategies.
III. Environmental issues (I) Does the Company have an appropriate environmental management system established in accordance with its industrial characteristics? (II) Is the Company dedicated to enhancing energy efficiency and using recycled materials with low impact on the environment? (III) Does the Company assess the current and future risks and opportunities which climate change potentially brings to the Company? Does the Company take measures in response to climate- related issues? (IV) Does the Company make statistics of the greenhouse gas emissions, water consumption and total waste weight in the past two years? Does the Company have policies for energy saving and carbon reduction, reduction of greenhouse gas emissions, reduction of water consumption, or other waste managementpolicies?	V V V V		(I) The Company implemented the ESH management system and acquired the ISO-14000 certificate in 1999. The recycle, disposal and use of waste are performed in accordance with the laws and regulations governing the environmental management system and environmental protection. We review the implementation effectiveness whenever necessary and make improvement continually. A environment and safety department has been set up as the dedicated management unit. (II) The Company is dedicated to enhancing energy efficiency and using recycled materials with low impact on the environment: A. We are devoted to the improvement of designs and increase of the resource utilization rate to achieve the goal of reduction in raw material consumption and waste and thus reduce the load to the environment. B. The air conditioning equipment is only turned on when the indoor temperature reaches 28°C or more. The temperature is compulsorily set to 26°C (included) or higher. C. The packaging materials and the number of transports are reduced through the quality control cycle (PDCA). D. SOPs are formulated to reduce the consumption of paper. (III) In response to the climate change, the Company has introduced new processes, performed automation, eliminated old equipment and replaced it with new energy-saving equipment, enhanced management and recycle of waste, and developed green products. (IV) In 2022, the Company commissioned SGS (SGS Taiwan Ltd.) to perform GHG inventory and carbon footprint verification. In addition to acquiring the ISO 14064 certificate, we statistically calculate the GHG emissions and the weight of the waste every year, and establish the annual reduction goal to optimize the environmental performance year by year.	No significant deviation No significant deviation No significant deviation No significant deviation
IV. Social issues (I) Does the Company have management policies andprocedures in accordance with relevant	V		(I) The Company has established work rules pursuant to relevant laws and regulations andprovided them for the employees and	No significant deviation

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Three. Corporate Governance Report

	Implementation status (Note 1)	Implementation status (Note 1)	Implementation status (Note 1)	Deviations
	Yes	No		from the
				Sustainable
				Development
				Best Practice
Implementation item				Principles for
			Summary
				TWSE/TPEx
				Listed
				Companies and
				reasons for
				such deviations
regulations and international human rights conventions? (II) Does the Company establish and implement reasonable employee benefit measures (including remuneration, leave and other benefits)? Is the operating performance or results properly reflected in the remuneration for employees? (III) Does the Company provide employees with a safe and healthy work environment, and regularly provide them with safety and health education? (IV) Does the Company have effective programs for development and training regarding employees’ career skills? (V) With respect to the issues related to products and services, such as customer health and safety, customer privacy, marketing and labeling, does the Company conform to the relevant regulations and international standards and establish the relevant rightsprotectionpolicies and complaint	V V V V		management to follow. Everyone is equal regardless of the gender and nationality. (II) The Company has established and implemented reasonable employee benefit measures (including remuneration, leave and other benefits). The employee remuneration policy is determined in consideration of the personal capability, contribution to the Company, performance, competitiveness, and the future operation According to Article 25 of the Articles of Incorporation, if there is a profit in a fiscal year, the Company shall allocate at least 5% of the profit as the remuneration to the employees. It may be distributed in shares or cash as resolved by the Board of Directors. The employees of the subsidiaries who meet certain criteria are entitled to receiving the remuneration. (III) The Company has followed “Occupational Safety and Health Act” and set up qualified first-aid personnel and adequate first- aid kits, and arranged education and training for new employees, the personnel involved in changes of jobs, and newly appointed managerial officers in charge of safety and health education and training. Also, we have set up breastfeeding rooms pursuant to the “Act of Gender Equality in Employment”. The Company has established an emergency response team, defined the emergency response process, and formulated the Industrial Safety and Health Work Rules to cope with emergencies including power failure, water supply failure, fire, flood, typhoon, earthquake, personal injury (that may lead to temporary or permanent disability, food poisoning, statutory infectious disease (SARS), water pollution, and other emergencies that may lead to loss of personal life or property and environmental pollution. Refer to Page 81 for the information on the measures for protection of the work environment and personal safety. (IV) The Company has set up the HR Division, established effective employee career development and training plans, and implemented internal and external education and training. (V) The Company observes relevant laws and international standards. The product-related consumer rights and services are dealt with directly by brand customers.	No significant deviation No significant deviation No significant deviation No significant deviation

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Three. Corporate Governance Report	Three. Corporate Governance Report	Three. Corporate Governance Report	Three. Corporate Governance Report	Three. Corporate Governance Report
	Implementation status (Note 1)			Deviations
	Yes	No		from the
				Sustainable
				Development
				Best Practice
Implementation item				Principles for
			Summary
				TWSE/TPEx
				Listed
				Companies and
				reasons for
				such deviations
procedures for the consumers or customers? (VI) Does the Company have a supplier management policy that requires suppliers to comply with the regulations concerning environmental protection, occupational safety and health or labor rights? What’s the status of its implementation?	V		(VI) The supplier assessment process has been implemented before trading with them. The investigation items include environmental and social issues. The Company enters into purchase agreements with suppliers, and request that they and their products must meet the requirements of relevant laws and regulations as required bythepurchase agreement.	No significant deviation
V. Does the Company use internationally accepted standards or guidelines for preparation of reports as reference in preparing the corporate sustainability report and other reports disclosing non-financial information of the Company? Are assurance or guarantee opinions from any third- party verifying agent acquired for the aforementioned reports?		V	The Company is currently preparing the corporate sustainability report. It is expectedly completed in 2023.	No significant deviation
VI. In the event that the Company has established sustainable development best practice principles based on the “Sustainable Development Best Practice Principles for TWSE/TPEx Listed Companies,” please describe the differences between the implementation and the established principles: The Company implement the corporate social responsibility in accordance with the “Sustainable Development Best Practice Principles for TWSE/TPEx Listed Companies.”
VII. Other information that enables a better understanding of the Company’s promotion of sustainable development: A. Environmental protection: Mechanisms have been set up for removal, treatment and recycling of waste water, waste and waste containers. B. Community participation and social service: The Company provides fire-fighting devices for volunteer firefighters. C. Social contribution and welfare: The Company supports the plans of the government and actively participates in community activities as well as charitable and public welfare organizations D. Consumer rights: The Company takes out product liability insurance and sets up a consumer service hotline. E. Human rights: The Company protects the legal rights of the employees according to the Labor Standards Act. F. Safety and health: Labor safety education and training are arranged on a regular basis. The Company has acquired the ISO- 9001 certificate.
Note 1: When “yes” is selected for the implementation status, please specify the important policies, strategies and measures taken and the implementation status thereof; on the other hand, if “no” is selected, please describe the deviations, reasons and plans regarding the future policies, strategies and measures in the column of “deviations from the Sustainable Development Best Practice Principles for TWSE/TPEx Listed Companies, and reasons thereof.”

Note 2: The materiality principle means that the issues related to the aspects of environment, society and corporate governance have material impact on the Company’s investors and other stakeholders. Note 3: As for the disclosure method, refer to the best practice references on the website of the Corporate Governance Center of TWSE.

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Three. Corporate Governance Report

(VI). Climate-related information of TWSE/TPEx listed companies

1. Climate-related information and implementation status

1. Climate-related information and implementation status
Item	Implementation status
1. Description of the monitoring and governance that the Board of Directors and management perform with respect to the climate-related risks and opportunities. 2. Description of the short-term, medium-term and long-term impact of the identified climate risks and opportunities on the business, strategy and finance of the Company. 3. Description of the impact of extreme climate events and transformation actions on the finance. 4. Description of how the climate risk identification, assessment and management processes are integrated in the overall risk management system. 5. If scenario analysis is used to assess the resilience against climate change risks, the scenario, parameter, assumption, and analysis factor used as well as the major impact on finance shall be specified. 6. If there is a transformation plan in response to the management of the climate-related risks, describe the contents of the plan, the indicators used for identification and management of physical and transformation risks, and the goals. 7. If internal carbon pricing is used as a planning tool, the pricing basis shall be specified. 8. If any climate-related goals have been set, the information on the activities covered, the scope of greenhouse gas emissions, the planned schedule, and the progress which shall be achieved every year shall be specified; if carbon offset or renewable energy certificate (REC) is used to achieve related goals, the source and amount of the offset carbon credit or the number of the renewable energy certificate (REC) shall be specified. 9. The GHG inventoryand assurance areprovided in 1-1)separately.	Under development

• 1-1. GHG inventory and assurance

How to fill out the form

1. The information on Scope 1 and Scope 2 in the form shall be handled in accordance with the schedule under Article 10, Paragraph 2 of the Regulations. The disclosure of the Scope 3 information is up to the company.

2. Companies may perform greenhouse gas inventory pursuant to the following standards:

3. (1) Greenhouse Gas Protocol (GHG Protocol).

4. (2) ISO 14064 1 issued by the International Organization for Standardization (ISO).

5. Assurance institutions shall meet the assurance requirements specified by the TWSE and TPEx for the sustainability report.

6. Subsidiaries can be described individually, aggregately (e.g. by country or region), or in a consolidation manner.

7. The intensity of the greenhouse gas emissions can be calculated based on unit product/service or revenue. However, the revenue (at NTD million) shall be disclosed, at minimum.

8. The operational bases or subsidiaries that are not incorporated in the calculation of the inventories shall not occupy a percentage of more than 5% in total emissions. These total emissions are calculated based on the compulsory inventory scopes required under the above description item 1.

9. For the assurance, the contents of the assurance report issued by the assurance institution shall be extracted and the complete report shall be attached to the annual report.

Basic information of the company	This must be disclosed, at the minimum, in accordance with the “Sustainable Development Roadmapfor TWSE/TPEx Listed Company”.
□The company in the iron and steel and cement industries with a capital of more than NT$10 billion	□Parent company stand-alone inventory□Subsidiary inventory in consolidated financial reports
□The company with a capital of more than NT$5 billion and less than 10 billion	□Parent company stand-alone assurance□Subsidiary assurance in consolidated financial reports
■The Companywith a capital of less than NT$5 billion

Scope 1	Total emissions (tCO2e)	Intensity (tCO2e/NTD million) (Note 2)	Assurance institution	Assurance status (Note 3)
Parent company	Statistics in progress
Subsidiary
Total
Scope 2	Total emissions (tCO2e)	Intensity (tCO2e/NTD million) (Note 2)	Assurance institution	Assurance status (Note 3)
Parent company	Statistics in progress
Subsidiary
Total
Scope 3	Statistics in progress

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Three. Corporate Governance Report

(VII). Implementation of corporate ethical management and measures taken: Implementation status of corporate ethical management, deviations from the Ethical Corporate Management Best Practice Principles for TWSE/TPEx Listed Companies, and reasons for such deviations

	Operation(Note 1)	Operation(Note 1)	Operation(Note 1)	Reasons for the
				deviations from
				the Ethical
				Corporate
				Management
Evaluation item
	Yes	No	Summary	Best Practice
				Principles for
				TWSE/TPEx
				Listed
				Companies
I. Development of ethical management policies and programs (I) Are the Company’s guidelines on corporate conduct and ethics provided in internal policies and disclosed publicly? Have the Board of Directors and the senior management team demonstrated their commitments to implement the policies? (II) Has the Company established an assessment mechanism for the risk of dishonesty behaviors? Does the Company regularly analyze and assess business activities with a higher risk of dishonesty in the business scope, and formulate a plan to prevent dishonesty behaviors, which at least covers Paragraph 2 of Article 7 in the “Ethical Corporate Management Best Practice Principles for TWSE/TPEx Listed Companies”? (III) Does the Company establish procedures, behavioral guidelines, disciplinary actions and complaint systems in action plans against unethical conduct? Are the plans implemented thoroughly and reviewed and modified regularly?	V V V		(I) The Company has established the “Ethical Corporate Management Best Practice Principles” and the “Code of Ethical Conduct”, and has disclosed them on the website of the Company and the MOPS. The ethics are our core value and the root for operation of a company. These Principles are applicable to the directors, managerial officers, employees and other related personnel of the Company. (II) The Code of Ethical Conduct explicitly specifies the prohibited behaviors, including the principles and criteria for recusal of conflict of interest, gifts, entertainment, and political and charity donations, and the principles for review of the violation of ethical conduct. (III) The “Procedures for Ethical Management and Guidelines for Conduct” of the Company explicitly specifies the plans for prevention of unethical conduct, including procedures,behavioralguidelines,	No significant deviation No significant deviation No significant deviation

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Three. Corporate Governance Report

	Operation(Note 1)	Operation(Note 1)	Operation(Note 1)	Reasons for the
				deviations from
				the Ethical
				Corporate
				Management
Evaluation item
	Yes	No	Summary	Best Practice
				Principles for
				TWSE/TPEx
				Listed
				Companies
			disciplinary actions and complaint systems. The Company has established the “Whistleblowing Case Management Regulations”. The Audit Office is responsible for setting up internal and external whistleblowing channels and handling procedures for the Company.
II. Implementation of ethical management (I) Does the Company assess the ethics of all counterparties it has business relationships with? Are there any clauses of ethics in the agreements the Company enters into with business partners? (II) Has the Company set up a dedicated unit in charge of the implementation of the ethical corporate management under the Board of Directors? Does the unit report to the Board of Directors regularly (at least once a year) on the ethical management policy, the plan for prevention of unethical conduct, and the supervision of the implementation? (III) Does the Company have policies to prevent conflict of interest, provide adequate communication channels, and implement the policies?	V V V		(I) As the “Rexon Group Employee Code of Conduct” of the Company specifies, the Company shall fully understand the ethical management of the counterparty with whom an agreement is entered into, and it is advisable to incorporate ethical management in the provisions of the agreement or explicitly specify ethical requirements. (II) The HR Division is designated as the responsible unit for establishment of ethical management policies and related measures, and shall take the responsibility for supervision of their implementation. Substantial violations, if any, shall be reported to the Board of Directors. No substantial violations are identified up to now. (III) The Company has expressed the concern about conflict of interest in the ethical management policy. The conditions / criteria of the conflict of interest is specially described in our Code of Ethical Conduct and relevant personnel are requested to avoid it. The employees who become aware of anyconflict	No significant deviation No significant deviation No significant deviation

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Three. Corporate Governance Report

	Operation(Note 1)	Operation(Note 1)	Operation(Note 1)	Reasons for the
				deviations from
				the Ethical
				Corporate
				Management
Evaluation item
	Yes	No	Summary	Best Practice
				Principles for
				TWSE/TPEx
				Listed
				Companies
(IV) Has the Company established effective accounting and internal control systems for the implementation of ethical management? Does the internal audit unit of the Company prepare audit plans according to the assessment result of unethical conduct risks, and audit the implementation of the unethical conduct prevention plans and the compliance thereto accordingly, or hire external auditors to audit such execution and compliance? (V) Does the Company organize internal or external education and training on a regular basis to maintain ethical management?	V V		of interest or face similar situations are requested to report to his/her immediate supervisor, the highest head of the human resource unit, or the Board of Directors. (IV) Assessment and self-inspection of the internal control system, including the accounting system, are performed based on the ethical management principles with respect to the design and implementation effectiveness of the systems. Amendment is performed, if necessary. The audit unit is responsible for review. (V) All the new employees must take pre- service training on the date when they take office. The Company organizes education and trainingon ethical management regularly.	No significant deviation No significant deviation
III. Operation status of the whistleblowing system (I) Has the Company set up a specific whistleblower reporting and reward system and a convenient reporting channel, and designated appropriate personnel to deal with reported matters? (II) Has the Company developed any standard investigation procedures for reported misconduct, defined follow-up actions to be taken following the completion of the investigation, or had confidentiality systems in place? (III) Has the Company adopted any measures to protect whistleblowers from beingimproperly	V V V		(I) The Company has established the “Ethical Corporate Management Best Practice Principles” and the whistleblowing system. Misconduct can be reported to the audit department in writing and by email. (II) The Company has established the “Ethical Corporate Management Best Practice Principles” and the whistleblowing system. The confidentiality of the whistleblower’s identity and the contents that he/she reports, the actions to be taken after the investigation, and relevant nondisclosure mechanisms are all specified explicitly. (III) The Company has established the “Ethical Corporate Management Best	No significant deviation No significant deviation No significant deviation

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Three. Corporate Governance Report

	Operation(Note 1)	Operation(Note 1)	Operation(Note 1)	Reasons for the
				deviations from
				the Ethical
				Corporate
				Management
Evaluation item
	Yes	No	Summary	Best Practice
				Principles for
				TWSE/TPEx
				Listed
				Companies
treated due to whistleblowing?			Practice Principles” and the whistleblowing system, and has adopted measures to protect whistleblowers from being improperly treated due to whistleblowing?
IV. Enhancement of information disclosure (I) Has the Company disclosed its ethical management principles and implementation results on the website and MOPS?	V		The Company has made the disclosure on our website.	No significant deviation
V. In the event that the Company has established ethical management principles based on the “Ethical Corporate Management Best Practice Principles for TWSE/TPEx Listed Companies,” please describe its current practices and any deviations from the established principles: None
VI. Other important information that is helpful to understand the implementation of the ethical corporate management: (e.g. review and amendment of the Ethical Corporate Management Best Practice Principles established by the Company) A. Supplier: The Company and the suppliers are engaged in business activities in a fair and transparent manner. B. Employee: Dissemination is performed on a regular basis to help them fully understand the determination, policy, and prevention plan of the Company and the consequence of violation. C. Investor: The Company has set up a website to disclosure the general situation, basic information, and financial information of the Company. The information of the Company is disclosed on the MOPS in a timely, open, and transparent manner. D. Consumer: The Company has set up a hotline and a customer service mailbox to provide a transparent and effective consumer complaint channel. E. Management regulations: Each department prepares an SOP, authority of approval, internal audit system, and other relevant regulations.

(VIII). If the Company has established corporate governance best practice principles and relevant regulations, the way in which they can be searched for shall be disclosed: Please go to “CORPORATE GOVERNANCE” under the “INVESTOR RELATIONS” on our website (http://www.rexon.net/) or visit MOPS to search for the principles.

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Three. Corporate Governance Report

• (IX). Other information that enables a better understanding of the Company’s corporate governance:

• (1). The Company has established the “Material Internal Information Handling Procedure” to govern the handling and disclosure mechanism for material internal information. It is established as a standard for the directors, managerial officers and employees to follow.

• (2). Continuing education of directors and managerial officers

Title	Name	Date of course	Organizer	Title of course	Hours of course
Independent director	Lee Cherng	2022/08/11	Taiwan Corporate Governance Association	Merger from the Viewpoint of the Director and Supervisor	3
Independent director	Lee Cherng	2022/09/14	Taiwan Corporate Governance Association	Corporate Sustainability Transformation from the Viewpoint of ESG Management	3
Independent director	Lee Cherng	2022/10/06	Taiwan Stock Exchange Corporation and Taipei Exchange	Announcement of the Reference Guidelines for the Independent Director and Audit Committee to Fulfill Their Duties and Director and Supervisor Dissemination Conference	3
Independent director	Lee Cherng	2022/11/11	Taiwan Corporate Governance Association	Climate Change and ESG	3
Independent director	Wu Chwan- Chyuan	2022/02/24	Taiwan Corporate Governance Association	The Legal Issues Concerning the Insider Shareholding Management and Share Trading Matters	3
Independent director	Wu Chwan- Chyuan	2022/07/25	Taiwan Corporate Governance Association	The Trends and Challenges of the Information Security Governance.	3
Independent director	Hung Chao-Nan	2022/05/04	Taiwan Stock Exchange Corporation(TWSE)	Twin-Summit Forum	2
Independent director	Hung Chao-Nan	2022/07/13	Taiwan Stock Exchange Corporation and Taipei Exchange	Thematic Industrial Dissemination Conference on Sustainable Development Roadmap	2
Independent director	Hung Chao-Nan	2022/10/06	Taiwan Stock Exchange Corporation and Taipei Exchange	Announcement of the Reference Guidelines for the Independent Director and Audit Committee to Fulfill Their Duties and Director and Supervisor Dissemination Conference	3
Independent director	Liu Pei- Yao	2022/10/06	Taiwan Stock Exchange Corporation and Taipei Exchange	Announcement of the Reference Guidelines for the Independent Director and Audit Committee to Fulfill Their Duties and Director and Supervisor Dissemination Conference	3
Independent director	Liu Pei- Yao	2022/12/23	Accounting Research and Development Foundation	Legal Liabilities Involving “Competition for Management Rights” and Analysis of Relevant Cases	3
Director	Wang Kuan- Hsiang	2022/10/26	Securities and Futures Institute	2022 Legal Compliance Dissemination Conference on Insider Stock Trading	3
Director	Huang Chin- Hsiang	2022/05/20	Securities and Futures Institute	2022 Dissemination Conference on Prevention of Insider Trading	3
Accounting Manager	He Hsiu- Yuan	2022/8/18~2022/8/19	Accounting Research and Development Foundation	Continuing Education Programs for Principal Accounting Officers of Issuers, Securities Firms, and Securities Exchanges	12
Audit officer	Chung Kun-Chang	2022/7/27	The Institute of Internal Auditors, Taiwan	Analysis of Regulations and Practices on Loaning of Funds, Endorsements/Guarantees and Acquisition and Disposal of Assets	6
Audit officer	Chung Kun-Chang	2022/11/7	The Institute of Internal Auditors, Taiwan	Operating System Audit Focuses and Integration of TTC and its Operation	6

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Three. Corporate Governance Report

• (X). The following matters related to the implementation of the internal control system shall be disclosed

• Statement of Internal Control

Rexon Industrial Corp., Ltd.

Statement of Internal Control System

(All the applicable design implementations are effective and all the laws are observed.)

Date: February 23, 2023

Based on the result of the self-assessment with respect to the internal control system of Rexon Industrial Corp., Ltd. in 2022, we hereby declare the following:

• I. The Company acknowledges that the Board of Directors and managerial officers are responsible for the establishment, implementation and maintenance of the internal control system, and we have established a system as such. The purpose of the system is to reasonably ensure that the effectiveness and efficiency of operations (including profits, performance, and security of assets), and the reliability, timeliness, transparency, and regulatory compliance of reporting, as well as the compliance with applicable laws, regulations, and bylaws are achieved.

• II. Any internal control system has its inherent limitations. No matter how well an internal control system is designed, it can only provide reasonable assurance regarding the achievement of the above three objectives. Moreover, the effectiveness of an internal control system may be altered as a result of changes in the environment and circumstances. However, our internal control system has a self-monitoring mechanism, and we take corrective actions immediately once a nonconformity is identified.

• III. The Company judges the effectiveness of the design and implementation effectiveness of the internal control system with reference to the judgment items for such effectiveness as specified in the “Regulations Governing Establishment of Internal Control Systems by Public Companies” (hereinafter referred to as the “Regulations”). The internal control systems are divided into the following five constituent elements according to the management and control process in terms of the judgment items for the internal control system provided for in the “Regulations”: 1. control environment; 2. risk assessment; 3. control activities; 4. information and communications; and 5. monitoring activities. Each constituent element contains a number of items. For the items mentioned above, please refer to the “Regulations”.

• IV. The Company has adopted the aforementioned items to examine the effectiveness of the design and implementation of our internal control system.

• V. Based on the result of the aforementioned assessment, the Company finds that, as of December 31, 2022, the design and implementation of our internal control (including supervision and management of subsidiaries) have worked well regarding the effectiveness and efficiency of the operation,the reliability, timeliness and transparency of reporting,and compliance with relevant rules and applicable laws and regulations, providing reasonable assurance that the above objectives have been achieved.

• VI. The Statement will be the main part of the annual report and prospectus of the Company and publicly disclosed. If there is any misrepresentation, nondisclosure or other illegalities in the aforementioned disclosures, legal responsibilities specified in Articles 20, 32, 171 and 174 of the Securities and Exchange Act shall apply.

• VII. The Statement was approved at the Board of Directors meeting on February 23, 2023. There were 9 directors present. All of them approved the contents of the Statement and none of them expressed dissent. This information is declared as an addition.

Rexon Industrial Corp., Ltd.

President: Wang Kuan-Hsiang General Manager: Lo Cheng-Chou

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Three. Corporate Governance Report

1. If review of the internal control system has been conducted by CPAs, the CPAs’ review report must be disclosed: None.

2. Participation of internal auditors and CAO in training of an professional training institution or their acquisition of specified licenses:

Title	Name	Date of course	Organizer	Title of course	Hours of course
Accounting Manager	He Hsiu-Yuan	2022/8/18~2022/8/19	Accounting Research and Development Foundation	Continuing Education Programs for Principal Accounting Officers of Issuers, Securities Firms, and Securities Exchanges	12
Audit officer	Chung Kun-Chang	2022/7/27	The Institute of Internal Auditors, Taiwan	Analysis of Regulations and Practices on Loaning of Funds, Endorsements/Guarantees and Acquisition and Disposal of Assets	6
Audit officer	Chung Kun-Chang	2022/11/7	The Institute of Internal Auditors, Taiwan	Operating System Audit Focuses and Integration of TTC and its Operation	6
Auditor	Li Chien-Ying	2022/3/29	The Institute of Internal Auditors, Taiwan	Production Cycle Practices and Audit Focuses	6
Auditor	Li Chien-Ying	2022/12/5	The Institute of Internal Auditors, Taiwan	Self-Evaluation Practices	6

• (XI). Where the punishments received by the Company and the internal personnel thereof in accordance with laws or imposed by the Company on the internal personnel thereof violating the requirements of the internal control system in the most recent year up to the publication date of this annual report may lead to a material effect on shareholders’ equity or stock price, such punishments, material deficiencies and improvements shall be specified:

• (XII). Major resolutions of the shareholders’ meeting and Board of Directors in the most recent year up to the publication date of the annual report:

• Major resolutions of the shareholders’ meeting and their implementation status in 2022:

Time	Time	Major resolutions of the shareholder’s meeting	Implementation status	Implementation status
2022/05/31		Matters to be Ratified
		(I)Approval of the ratification of 2021 final accountingreports.	Implemented as resolved.
		(II)Approval of the ratification of earnings distribution for 2021.	Implemented as resolved.
	2. Major resolutions of theBoard of Directorsandtheir implementationstatus:
	Date	Major resolutions of the Board of Directors		Implementation status
	2022/3/15	01. Last meeting minutes and implementation status. 02. Report on the liability insurance for the directors of the Company 03. Report on the performance evaluation of the Board of Directors in 2021 04. Report on the assessment of CPA independence 05. Internal audit activity report. 06. Report on the disgorgement of the Company. 07. Proposal for the “Statement of Internal Control System". Please proceed to discuss. 08. Proposal for the establishment of the Company’s “Internal Control System Amendment Procedure”. Please proceed to discuss. 09. Proposal for the distribution of the remuneration to the employees and directors in 2021. Please proceed to discuss. 10. Proposal for 2021 final accounting reports and establishment of 2022 business plan. Please proceed to discuss. 11. Proposal for earnings distribution for 2021. Please proceed to discuss. 12. Proposal for matters on convention of 2022 annual general meeting of shareholders. Please proceed to discuss. 13. Proposal for bank credit facility. Please proceed to discuss. 14. Proposal of the change of the Company’s managerial officers. Pleaseproceed to discuss.		01. Reported. 02. Reported. 03. Reported. 04. Reported. 05. Reported. 06. Reported. 07. Approved and reported. 08. Approved. 09. Approved. 10. Approved and reported. 11. Approved and reported. 12. Approved and convened. 13. Approved. 14. Approved and reported.
	2022/5/5	01. Last meeting minutes and implementation status. 02. Result report on the acceptance of shareholder’s proposal. 03. Internal audit activity report. 04. 2022 Q1 financial reports 05. Proposal of the change of the Company’s CFO. Please proceed to discuss. 06. Proposal for bank credit facility. Pleaseproceed to discuss.		01. Reported. 02. Reported. 03. Reported. 04. Approved and announced. 05. Approved and reported. 06. Approved.
	2022/5/31	01. Last meeting minutes and implementation status. 02. Proposal for distribution of remuneration to directors in 2021. Please proceed to discuss. 03. Proposal for distribution of remuneration to managerial officers and employees in 2021. Please proceed to discuss. 04. Proposal for bank credit facility. Pleaseproceed to discuss.		01. Reported. 02. Approved and distributed. 03. Approved and distributed. 04. Approved.
	2022/8/4	01. Last meeting minutes and implementation status. 02. Internal audit activity report. 03. 2022 Q2 financial reports. 04. Proposal for the “GHG Inventory Schedule Planning”. Please proceed to discuss. 05. Proposal for bank credit facility. Please proceed to discuss. 06. Proposal for amendment of the “Internal Control System”, “Internal Audit Implementation Rules”, and “Internal Control Self-Evaluation Regulations”. Pleaseproceed to discuss.		01. Reported. 02. Reported. 03. Approved and announced. 04. Approved. 05. Approved. 06. Approved.

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Three. Corporate Governance Report

	Three. Corporate Governance Report
Date	Major resolutions of the Board of Directors	Implementation status
2022/11/3	01. Last meeting minutes and implementation status. 02. Internal audit activity report. 03. 2022 Q3 financial reports 04. Report on the greenhouse gas inventory and CSR report. 05. Report on the implementation of the ethical corporate management. 06. Proposal for amendment of the “Internal Control System” and “Internal Audit Implementation Rules” under the preparation management of financial reports. Please proceed to discuss. 07. Proposal for adjustment of remuneration to independent directors. Please proceed to discuss. 08. Proposal for the audit plans for 2023. Please proceed to discuss. 09. Proposal of the adjustment of the remuneration to managerial officers. Please proceed to discuss. 10. Proposal for bank credit facility. Please proceed to discuss. 11. Proposal for the endorsements/guaranteesprovided bythe Company. Pleaseproceed to discuss.	01. Reported. 02. Reported. 03. Approved and announced. 04. Reported. 05. Reported. 06. Approved. 07. Approved. 08. Approved and announced. 09. Approved. 10. Approved. 11. Approved.

• (XIII). Records or written statements made by any director or supervisor who expressed dissent to major resolutions adopted by the Board of Directors in the most recent year up to the publication date of the annual report: None.

• (XIV). Summery of resignation and dismissal of the Company’s President, President, CAO, CFO, internal chief audit officer, chief corporate governance officer and R&D officer in the most recent year up to the publication date of this annual report:

Title	Name	Dated dismissed	Reason of resignation or dismissal
President	Wang Kuan-Hsiang	2022/04/01	Personnel relocation; Lo Cheng-Chou was appointed as President on 04/01/2022
CFO	Cheng Huai-Chih	2022/05/06	Retirement and dismissal; Hsu Sen-Yuan was appointed as CFO on 05/06/2022

V. Information on CPA professional fees

• (I). The audit and non-audit fees paid to a certified public accountant or the CPA firm of a certified public accountant or its affiliate enterprises, and the scope of the non-auditing services (Table 2-4), shall be disclosed. The following particulars, if any, shall be disclosed:

• Information on CPA professional fees

Unit: NTD thousand

CPA firm	Name ofCPA	Audit period	Auditfee	Non-auditfee	Total	Remarks
KPMG Taiwan	Kuo Shih-Hua	2022.01.01~2022.12.31	2,870	910	3,780
	Wu Chun-Yuan	2022.01.01~2022.12.31

Please describe the specific services under non-audit fees: Compensation for tax compliance audit, direct deduction method, transfer pricing and master file services, and other business registration services.

(II). When the Company changes the CPA firm and the audit fees paid for the fiscal year in which such change took place are lower than those for the previous fiscal year, the amounts of the audit fees before and after the change and the reasons shall be disclosed: N/A.

• (III). If the audit fees are reduced by more than 10% as compared with the previous year, the amount, proportion and reason for reduction of the audit fee shall be disclosed. The aforementioned audit fees mean the professional fees that the Company pays to CPAs for the audit, review and secondary review of financial reports, and for the review of the financial forecast. : N/A

VI. Information on change of CPAs

(I). About the former CPA:

(I). About the former CPA:
Date of change Reason and description of the change Whether the appointment is terminated or not accepted by the client or CPA Opinions and reasons for issuance of audit reports in the most recent twoyears,excludingunqualified opinions Any differences in opinions between CPA and issuer Other disclosures (to be disclosed in accordance with Article 10(6)(1)(d) to (1)(g) of the Guidelines)	N/A
	N/A.
	Party		CPA	Client
	Voluntarytermination of appointment
	Declination of appointment(renewal)
	N/A
	Yes			Accounting principle orpractice
				Disclosure of financial reports
				Audit scope or step
				Others
	None
	Description
	The CPAs,Kuo Shih-Hua and Chen Chun-Man, of the K due to internaljob adjustment of the said CPA firm.	PMG Taiwan, were changed to the CPAs, Kuo Shih-Hua and Wu Chun-Yuan

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Three. Corporate Governance Report

(II). About the succeedingCPA
CPA firm	KPMG Taiwan
Name of CPA	Kuo Shih-Hua,Wu Chun-Yuan
Date of appointment	March 28,2019
Matters and results of the consultation on accounting treatment methods or accounting principles for specific transactions andpossible issuance of financial statementsprior to the appointment	N/A
Written opinions of the succeedingCPA on the matters regardingwhich the former CPA has expressed dissent	N/A

Note: Since KPMG Taiwan conducted internal job adjustment, the change with respect to auditing and certification of financial reports started from 2019 Q1.

(III). The former CPA's written response to the matters in Article 10(5)(1) and (2)(c) of these Guidelines: N/A.

VII. CPA firm or its affiliates at which the Company’s President, General Manager, or managerial officers responsible for financial or accounting matters ever served as an employee in the most recent year

• (I). Where the Company’s President, President, or managerial officers responsible for financial or accounting matters ever served as an employee in the most recent year at the CPA firm or any of its affiliates which the CPA works for, his/her name, title and the employment period at such firm or affiliate must be disclosed. The affiliate of the CPA firm which the CPA works for means the company or institution in which such CPA firm holds more than 50% of the shares or acquires a majority of director seats, or the company or institution which such CPA firm lists as its facilitate in the documents made public or published by such CPA firm: None.

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Three. Corporate Governance Report

• VIII. Details of equity transferred or pledged by directors, supervisors, managerial officers, or shareholders with more than 10% ownership interest in the most recent year up to the publication date of the annual report. Where the counterpart involved in the transfer or pledge of equity is a related party, the name of such counterpart, his/her relations with the Company, directors, supervisors, managerial officers, or shareholders with more than 10% ownership interest, and the number of shares acquired or pledged must be disclosed.

• (I). Changes in equity of shareholders

Unit: Share

Title	Name	2022	2022	As of April 01 for the current year	As of April 01 for the current year
		Increase (decrease) in shares held	Increase (decrease) in shares pledged	Increase (decrease) in shares held	Increase (decrease) in shares pledged
President	Wang Kuan-Hsiang	0	0	2,635.827	0
Director	Kun Forever Co., Ltd. Representative: Wang Chen, Li-Mei	0	0	1,460,698	0
Director	Lin Shyi-Ying	0 (155,000)	0	0 (4,000)	0
Director Concurrent Vice President	Huang Chin-Hsiang	0	0	0	0
Director Current Director	Kuo Pu-Chao	10,000	0	0	0
Independent director	Hung Chao-Nan	0	0	0	0
Independent director	Liu Pei-Yao	0	0	0	0
Independent director	Lee Cherng	0	0	0	0
Independent director	Wu Chwan-Chyuan	0	0	0	0
General Manager	Lo Cheng-Chou (Date of assuming office: 4/1/2022)	10,000	0	0	0
Vice President Current R&D officer	Cheng Mei-Ling	10,000	0	0	0
Vice President	George Ku	0	0	0	0
Vice President Concurrent Accounting Manager	He Hsiu-Yuan	11,000	0	0	0
Vice President	Peng Meng-Wei	10,000 (14,000)	0	0	0
Vice President	Chang Yu-Ming	5,000	0	0	0
Vice President	Tank Chuang	5,000	0	0	0
VicePresident	HuangLiang-Wei	5,000	0	0	0
Vice President	Chiang Yao-Tsung	0	0	0	0
Director	LiWen-Yu	0	0	0	0
Director	Chen Kuo-Jung	5,000	0	0	0
Director	Feng Hsu-Hui	5,000	0	0	0
Director	Chang Chih-Hao	5,000	0	0	0
Director	Kuo Han-Yu	0 (16,000)	0	0	0
Director Concurrent CFO	Hsu Sen-Yuan (Date of assuming office: 5/6/2022)	5,000	0	0	0
General Manager	Wang Kuan-Hsiang	0	0	2,635.827	0
Vice President	Wang Kuan-Ling (Date of dismissal: 3/31/2022)	0 (490,000)	0	0	0
Vice President ConcurrentCFO	Cheng Huai-Chih (Date ofdismissal: 5/6/2022)	0	0	0	0
Vice President	Chang Yun-Chi (Date of dismissal: 6/28/2022)	0 (11,517)	0	0	0
Vice President	Lin Hsun-Li (Date of dismissal: 6/28/2022)	0 (20,000)	0	0	0
Vice President	Lin Hui-Yuan (Date of dismissal:8/30/2022)	0 (39,855)	0	0	0
Vice President	Hans Hsieh (Date of dismissal: 10/28/2022)	40 (73,009)	0	0	0
Director	Huang Shih-Wen (Date of dismissal: 8/1/2022)	0	0	0	0

• 47 -

Unit: Share

Three. Corporate Governance Report

(II). Transfer and change of equity

		Reason of equity	Reason of equity					Relationship of the counterparty with any director, supervisor, and shareholder with more than 10% ownership interest	Relationship of the counterparty with any director, supervisor, and shareholder with more than 10% ownership interest	Relationship of the counterparty with any director, supervisor, and shareholder with more than 10% ownership interest
Name				Trade date		Counterparty					Number of shares		Trade price
		transfer
								Father and Child of Wang Kuan-Hsiang Husband and Wife of WangChen,Li-Mei
Wang Kuan-Hsiang		Inheritance		2023.03.24		Wang Kun-Fu					2,635,827		77.7
(III).		Equity pledge information
	Rea	son					Relationship of the counterparty with
									Number of	Shareholding			Amount of pledged
Name	of change		Date of change		Counterparty		any director, supervisor, and shareholder					Pledge ratio
									shares	ratio			loan (redemption)
	topledge						with more than 10% ownership interest
No information fits this criteria

IX. Relationship information, if any one of the 10 largest shareholders is a related party, or is the spouse or a relative within the second degree of kinship with another shareholder:

							The title or name and relationship of the 10 largest	The title or name and relationship of the 10 largest	Remarks
	Shares h	eld by the	Shares held b	y spouse or	Total shar	es held in the	shareholders who are related parties to each other, in a
	share	holder	minor c	hildren	names	of others	spousal relationship or within the seco	nd degree of kinship
Name							referred to in SFAS N	o.6
	Number of	Shareholdin	Number of	Shareholdin	Number of	Shareholding
							Title (name)	Relationship
	shares	g ratio	shares	g ratio	shares	ratio
Kun Forever Co., Ltd. Responsible Persons: Wang Chen, Li-Mei	20,196,000	11.13%	0	0%	0	0%	Responsible Person of Wei Dian Investment Co.,Ltd.: Wang Kuan-Hsiang Responsible Person of Chen Xi Co.,Ltd.: Wang Kuan- Hsiang Wang Kuan-Chuan Wang Kuan-Hsiang Responsible Person of Fu Mei Co.,Ltd.: Wang Chen, Li- Mei Responsible Person of Li Tai Investment Co.,Ltd.: Wang Kuan-Hsiang Chen Wu Zhao	Within second degree of kinship Within second degree of kinship Within second degree of kinship Within second degree of kinship Subject person Within second degree of kinship Within second degree of kinship
Li Tai Investment Co.,Ltd. entrusted with a asset trust account by Chen Shu-Chi	12,275,599	6.76%	0	0%	0	0%	Chen Wu Zhao	Within second degree of kinship
Li Tai Investment Co.,Ltd. entrusted with a asset trust account by Chen Chun-Wei	7,700,000	4.24%	0	0%	0	0%	None	None
Wei Dian Investment Co.,Ltd. Responsible Persons: Wang Kuan-Hsiang	7,341,485	4.05%	0	0	0	0%	Responsible Person of Kun Forever Co., Ltd.: Wang Chen, Li-Mei Responsible Person of Chen Xi Co.,Ltd.: Wang Kuan- Hsiang Wang Kuan-Chuan Wang Kuan-Hsiang Responsible Person of Fu Mei Co.,Ltd.: Wang Chen, Li- Mei Responsible Person of Li Tai Investment Co.,Ltd.: Wang Kuan-Hsiang	Within second degree of kinship Subject person Within second degree of kinship Subject person Within second degree of kinship Subject person
Chen Xi Co.,Ltd. Responsible Persons: Wang Kuan-Hsiang	4,481,563	2.47%	0	0%	0	0%	Responsible Person of Kun Forever Co., Ltd.: Wang Chen, Li-Mei Responsible Person of Wei Dian Investment Co.,Ltd.: Wang Kuan-Hsiang Wang Kuan-Chuan Wang Kuan-Hsiang Responsible Person of Fu Mei Co.,Ltd.: Wang Chen, Li- Mei Responsible Person of Li Tai Investment Co.,Ltd.: Wang Kuan-Hsiang	Within second degree of kinship Subject person Within second degree of kinship Subject person Within second degree of kinship Subject person
Wang Kuan-Chuan	4,338,674	2.39%	1,774,643	0.98%	1,309,782	0.72%	Responsible Person of Kun Forever Co., Ltd.: Wang Chen, Li-Mei Responsible Person of Wei Dian Investment Co.,Ltd.: Wang Kuan-Hsiang Responsible Person of Chen Xi Co.,Ltd.: Wang Kuan- Hsiang Wang Kuan-Hsiang Responsible Person of Fu Mei Co.,Ltd.: Wang Chen, Li- Mei Responsible Person of Li Tai Investment Co.,Ltd.: Wang Kuan-Hsiang	Within second degree of kinship Within second degree of kinship Within second degree of kinship Within second degree of kinship Within second degree of kinship Within second degree of kinship
Wang Kuan-Hsiang	3,750,178	2.07%	0	0%	5,791,345	3.19%	Responsible Person of Kun Forever Co., Ltd.: Wang Chen, Li-Mei Responsible Person of Wei Dian Investment Co.,Ltd.: Wang Kuan-Hsiang Responsible Person of Chen Xi Co.,Ltd.: Wang Kuan- Hsiang Wang Kuan-Chuan Responsible Person of Fu Mei Co.,Ltd.: Wang Chen, Li- Mei Responsible Person of Li Tai Investment Co.,Ltd.: Wang Kuan-Hsiang	Within second degree of kinship Subject person Subject person Within second degree of kinship Within second degree of kinship Subject person

• 48 -

Three. Corporate Governance Report

						The title or name and relationship of the 10 largest	The title or name and relationship of the 10 largest
Shares h	eld by the	Shares held	by spouse or	Total shar	es held in the	shareholders who are related parties to each other, in a		Remarks
share	holder	minor c	hildren	names	of others	spousal relationship or within the seco	nd degree of kinship
						referred to in SFAS N	o.6
Number of	Shareholdin	Number of	Shareholdin	Number of	Shareholding
						Title (name)	Relationship
shares	g ratio	shares	g ratio	shares	ratio
3,073,472	1.69%	0	0%	0	0%	Responsible Person of Kun Forever Co., Ltd.: Wang Chen, Li-Mei Responsible Person of Wei Dian Investment Co.,Ltd.: Wang Kuan-Hsiang Responsible Person of Chen Xi Co.,Ltd.: Wang Kuan- Hsiang Wang Kuan-Chuan Wang Kuan-Hsiang Responsible Person of Li Tai Investment Co.,Ltd.: Wang Kuan-Hsiang	Subject person Within second degree of kinship Within second degree of kinship Within second degree of kinship Within second degree of kinship Within second degree of kinship
1,900,309	1.05%	0	0%	0	0%	Responsible Person of Kun Forever Co., Ltd.: Wang Chen, Li-Mei Responsible Person of Wei Dian Investment Co.,Ltd.: Wang Kuan-Hsiang Responsible Person of Chen Xi Co.,Ltd.: Wang Kuan- Hsiang Wang Kuan-Chuan Wang Kuan-Hsiang Responsible Person of Fu Mei Co.,Ltd.: Wang Chen, Li- Mei	Within second degree of kinship Subject person Subject person Within second degree of kinship Subject person Within second degree of kinship
1,791,550	0.99%	1,303,786	0.72%	0	0%	Responsible Person of Kun Forever Co., Ltd.: Wang Chen, Li-Mei Casey Wang Responsible Person of Fu Mei Co.,Ltd.: Wang Chen, Li- Mei Li Tai Investment Co.,Ltd. entrusted with a asset trust account by Chen Shu-Chi	Within second degree of kinship Within second degree of kinship Within second degree of kinship

• X. The total number of shares and total equity stake held in the same investee by the Company, its directors and supervisors, managerial officers, and any companies controlled either directly or indirectly by the Company

Unit: Thousand shares; % April 01, 2023

Investee	Investment of the	Investment of the	Investment of directors,	Investment of directors,	Aggregate investment	Aggregate investment
	Company		supervisors, managerial
			officers and directly or
			indirectly controlled
			business
	Number of	Shareholding	Number of	Shareholding	Number of	Shareholding
	shares	ratio	shares	ratio	shares	ratio
Fine Clear Co., Ltd.	1,600	16	0	-	1,600	16
Rexon TechnologyCorp.,Ltd.	7,851	82.87	192	2.02	8,043	84.89
Power Tool Specialists Inc.	0.096	96	0.004	4	0.1	100
Gold Item GroupLimited	25,000	100	0	0	25,000	100
Gold Tech GroupLtd.	0	0	10	100	10	100
Tongxiang Rexon Industrial Co., Ltd.	0	0	25,000	100	25,000	100

• 49 -

Four. Offering of Securities

Four. Offering of Securities

I. Capital and share

(I). Sources of capital

1. Sources of capital

April 01, 2023; Unit: Share/thousand; Amount: Thousand

		Authorized capital		Paid-in capital		Remarks
Month/	Issue						Investment
year	price	Shares	Amount	Shares	Amount	Sources of capital	by properties	Others
							other than
							cash
1996.08	10	114,600	1,146,000	95,264	952,640	Follow-on offering valued at NT$200,000 thousand Capitalization of earnings valued at NT$53,760 thousand Capitalization of capital reserves valued at NT$26,880 thousand	None	A
1997.08	10	150,000	1,500,000	126,696	1,266,956	Follow-on offering valued at NT$200,000 thousand Capitalization of earnings valued at NT$9,527 thousand Capitalization of capital reserves valued at NT$104,790 thousand	None	B
1998.08	10	208,000	2,080,000	154,569	1,545,688	Capitalization of earnings valued at NT$152,035 thousand Capitalization of capital reserves valued at NT$126,696 thousand	None	C
1999.08	10	380,000	3,800,000	204,804	2,048,036	Capitalization of earnings valued at NT$347,779 thousand Capitalization of capital reserves valued at NT$154,569 thousand	None	D
2000.09	10	380,000	3,800,000	238,801	2,388,010	Capitalization of earnings valued at NT$237,572 thousand Capitalization of capital reserves valued at NT$102,402 thousand	None	E
2001.02	10	380,000	3,800,000	249,713	2,497,131	Merger-related issue of new shares valued at NT$109,121 thousand	None	F
2003.08	10	380,000	3,800,000	252,210	2,522,103	Capitalization of earnings valued at NT$24,972 thousand	None	G
2007.06	10	380,000	3,800,000	228,784	2,287,843	Cancelation of treasury shares for capital reduction valued at NT$234,260 thousand	None	H
2012.10	10	380,000	3,800,000	181,474	1,814,735	Capital reduction to cover losses valued at NT$473,108 thousand	None	I

Note 1: Approval letters for the aforementioned capital increase in respective fiscal years:

• A. (1996) Tai-Tsai-Zheng (I) No. 38780 dated July 03, 1996

B. (1997) Tai-Tsai-Zheng (I) No. 49505 dated July 04, 1997

C. (1998) Tai-Tsai-Zheng (I) No. 58634 dated July 09, 1998

D. (1999) Tai-Tsai-Zheng (I) No. 64544 dated July 13, 1999

• E. (2000) Tai-Tsai-Zheng (I) No. 61390 dated July 15, 2000

• F. (2000) Tai-Tsai-Zheng (I) No. 99387 dated December 18, 2000

• G. (2003) Tai-Tsai-Zheng (I) No. 0920134232 dated July 29, 2003

• H. Jing-Shou-Shang-Zheng No. 09601138800 dated June 26, 2007

• I. Jing-Shou-Shang-Zheng No. 10101211760 dated October 15, 2012

• 50 -

Four. Offering of Securities

2. Type of share

March 31, 2022 Unit: Share

Type of	Authorized capital	Authorized capital	Authorized capital	Remarks
share	Outstanding	Unissued	Total
	shares	shares
	(listed companies’
	shares)
Ordinary share	181,473,500	198,526,500	380,000,000

(II). Shareholdercomposition Base date: 05.30.2023	(II). Shareholdercomposition Base date: 05.30.2023	(II). Shareholdercomposition Base date: 05.30.2023	(II). Shareholdercomposition Base date: 05.30.2023	(II). Shareholdercomposition Base date: 05.30.2023	(II). Shareholdercomposition Base date: 05.30.2023	(II). Shareholdercomposition Base date: 05.30.2023	(II). Shareholdercomposition Base date: 05.30.2023	(II). Shareholdercomposition Base date: 05.30.2023	(II). Shareholdercomposition Base date: 05.30.2023	(II). Shareholdercomposition Base date: 05.30.2023
Shareholder					Other		Foreign
		Government	Financial
composition					corporate		institution and	Individual		Total
		agency	institution
Quantity					entities		foreigner
Number of shareholders		0	1		152		78	20,781		21,012
Shareholding		0	1,407,266		58,830,126		11,892,871	109,343,237		181,473,500
Shareholding ratio %		0.00%	0.78%		32.42%		6.55%	60.25%		100.00%
III)	. Shareholdingdistribution table
				Number of					Shareholding ratio
	Shareholding range						Shareholding
				shareholders					%
	1-999			5,810			863,677		0.48%
	1,000-5,000			11,880			24,798,668		13.67%
	5,001-10,000			1,818			14,326,747		7.89%
	10,001-15,000			508			6,544,560		3.61%
	15,001-20,000			298			5,514,624		3.04%
	20,001-30,000			262			6,668,137		3.67%
	30,001-40,000			120			4,302,079		2.37%
	40,001-50,000			71			3,312,004		1.83%
	50,001-100,000			138			9,776,818		5.39%
	100,001-200,000			50			7,204,829		3.97%
	200,001-400,000			17			4,512,890		2.49%
	400,001-600,000			9			4,627,914		2.55%
	600,001-800,000			6			4,132,973		2.28%
	800,001-1,000,000			8			7,335,642		4.04%
	More than 1,000,001 shares			17			77,551,938		42.72%
	Total			21,012			181,473,500		100.00%

(III). Shareholding distribution table

• 51 -

Four. Offering of Securities

• (IV). Major shareholder

		Shareholding
Name of major shareholder	Shareholding
		ratio %
Kun Forever Co., Ltd.	20,196,000	11.13%
Li Tai Investment Co.,Ltd. entrusted with a asset trust accountby ChenShu-Chi	12,275,599	6.76%
Li Tai Investment Co.,Ltd. entrusted with a asset trust accountby ChenJun-Wei	7,700,000	4.24%
Wei Dian Investment Co., Ltd.	7,341,485	4.05%
Chen Xi Co.,Ltd.	4,481,563	2.47%
Wang Kuan-Chuan	4,338,674	2.39%
Wang Kuan-Hsiang	3,750,178	2.07%
Fu Mei Co.,Ltd.	3,073,472	1.69%
Li Tai Investment Co., Ltd.	3,029,312	1.67%
Chen Wu Zhao	1,791,550	0.99%

(V). Information on market price, net worth, earnings, and dividend per share and related information in the most recent two years

	Year	Year			As of March 31, 2023
			2021	2022
**Item **					for the currentyear
Market price per share	Max.		108.00	57.10	32.65
	Min.		55.50	26.00	28.50
	Average		75.30	36.25	30.26
Net worth per share	Before distribution		23.28	19.20	N/A
	Afterdistribution		20.28	19.20
Earnings per Share	Weightedaverage		181,473,500	181,473,500
	Earnings pershare		4.50	(1.65)
Dividend per share	Cashdividend		3.00	0
	Stock dividend	0	0	0
		0	0	0
	Accumulated unpaid dividend		0	0
ROI analysis	P/E		12.98	(21.97)
	P/D		25.10	None
	Cashdividend yield		3.98%	None

Note: The year in which quarterly data were audited (reviewed) by CPAs is 2022.

• (VI). Dividend policy and its implementation

• Dividend policy stipulated in the Articles of Incorporation:

  • (1). Article 25: If there is a profit in a fiscal year, the Company shall allocate at least 5% of the profit as the remuneration to the employees and no higher than 5% as the remuneration to the directors and supervisors. However, if the

• 52 -

Four. Offering of Securities

Company has accumulated loss, an amount used to cover the loss shall be set aside first. The employees to which remuneration is paid in shares or cash may include those of the affiliated companies who meet certain criteria. If there are earnings for a year, the Company shall first pay taxes and make up previous losses, followed by setting aside 10% of the earnings as legal reserve; however, no further provision is needed when legal reserve has accumulated to the same amount as the Company's paid-in capital. A portion of the earnings shall be set aside as special reserve if this is required by the operations of the Company or laws and regulations. The remaining earnings, if any, shall be combined with the undistributed earnings at the beginning of the period, and the Board of Directors shall draft an earnings distribution proposal and submit it to the shareholders’ meeting for approval.

• (2). Article 25-1: The Company’s dividend policy: The Company, currently in the stage of operational growth, will choose cash dividends as the first option for the distribution of dividends in the future. The dividends may also be distributed in shares; however, the ratio of distributed share dividends shall not be more than 50% of the total dividends. The amount of earning distribution and the type and ratio of dividends, which may be determined based on the actual profit and capital status in the current year, shall be submitted to the shareholders’ meeting for resolution after being adopted by the Board of Directors.

• Dividend distribution proposed at the current shareholders’ meeting: For the Company’s 2022 earnings distribution, the Board of Directors resolved on February 23, 2023 that no cash dividends will be distributed to the shareholders (NT$0 per share).

Undistributed earnings at beginning ofperiod	1,389,424,627
Plus: Remeasurement of defined benefitplan	82,649,517
Plus: Special reserve as reserved deduction of equity	19,259,182
Plus: Netprofit(loss) in currentyear	(298,920,877)
Minus: Appropriation of legal reserve
**Distributable earnings **	1,192,412,449
Distribution:
Minus: Undistributable shareholder dividends
Undistributed earnings at end ofperiod	1,192,412,449

1. Where there are any anticipated significant changes to dividend policy, details shall be provided: None.

2. (VII). The influence of the share dividends proposed at the current shareholders’ meeting on the operation performance and EPS of the Company

3. It is proposed in the current shareholders’ meeting that no share dividends will be distributed, so there is no such influence.

4. (VIII). Remuneration to employees, directors and supervisors

5. The percentage or scope of the remuneration to employees, directors and supervisors according to the Articles of Incorporation

   • (1). If there is a profit in a fiscal year, the Company shall allocate at least 5% of the profit as the remuneration to the employees and no higher than 5% as the remuneration to the directors and supervisors. However, if the Company has accumulated loss, an amount used to cover the loss shall be set aside first. The employees to which remuneration is paid in shares or cash may include those of the affiliated companies who meet certain criteria.

6. The basis for the estimation of the remuneration to employees, directors and supervisors, the basis for the calculation of the number of shares for the share-based remuneration to employees, and the accounting treatment of any discrepancies between the actually distributed and estimated amounts in the current period: If

7. 53 -

Four. Offering of Securities

there is any significant change to the distributed amount resolved by the Board of Directors before the annual consolidated financial reports are published, the original allocated expenses of the year will be adjusted to include the change. Any change to the amount after the annual consolidated financial reports are published will be considered as the change in accounting estimate and covered in the following year.

1. The distribution of remuneration approved by the Board of Directors

2. (1). The amount of the remuneration to employees, directors and supervisors distributed in cash or shares. If there is any discrepancy from the estimated amount of the expenses recognized in the year, the discrepancy, the reason for the discrepancy, and the status of the treatment shall be disclosed: The Company’s cash remuneration to employees and remuneration to directors proposed for 2022 are both NT$0; there is no discrepancy from the estimated amount of remuneration to employees and directors on the book.

3. (2). The amount of the remuneration to employees in the form of stocks, and the share of that amount as a percentage of the sum of the net income after tax stated in the separate or individual financial reports for the current period, and total employee remuneration: N/A.

4. The actual distribution of the remuneration to employees, directors and supervisors in the previous year (including the number and amount of shares distributed and the stock price); if there is any difference from the recognized amount of the remuneration to employees, directors and supervisors, the difference, the reason for the difference, and the treatment shall be disclosed: No difference.

Item	Amount resolved by Board of Directors	Amount actually distributed	Distribution method
Employee remuneration	NT$69,326,720	NT$69,326,720	Cash
Director and supervisor remuneration	NT$7,000,000	NT$7,000,000	Cash

• (IX). Buyback of shares by the Company:

• Completed: The Company shall describe, for the most recent year and the period up to the annual report publication date, the reported purpose of share buyback, period of share buyback, buyback price range, type and number and amount of shares bought back, actual and expected buyback quantity ratio, number of shares canceled and transferred, accumulated number of the Company’s shares held, and accumulated quantity of the Company’s shares held to the total quantity of the issued shares in the most recent year and up to the publication date of the annual report: N/A.

• In progress: The Company shall describe the purpose of share buyback, type of shares to be brought back, maximum total monetary amount of buyback, expected period and quantity of buyback, and buyback price range; the type, number and amount of shares already bought back, and the actual and expected buyback quantity ratio up to the publication date of the annual report shall also be specified: N/A.

II. Issuance of corporate bonds

• 54 -

Four. Offering of Securities

• (I). Information on the company’s issuance of corporate bonds shall include outstanding bonds and bonds for which an issue is currently under preparation, and the related matters and effect on shareholders’ equity shall be disclosed as per Article 248 of the Company Act; any privately placed corporate bonds shall be conspicuously identified as such: None.

III. Issuance of preferred shares

• (I). Information on preferred shares shall include both outstanding shares and unissued shares for which an issue is currently under preparation, and shall disclose any conditions attached to issuance, the effect on shareholders’ equity, and matters set forth in Article 157 of the Company Act; any privately placed preferred shares shall be conspicuously identified as such: None.

IV. Issuance of overseas depositary receipts

• (I). Information on overseas depositary receipts shall include receipts issues that remain partially outstanding, and on unissued receipts for which an issue is currently under preparation, and shall disclose the date of issuance, total monetary amount issued, rights and obligations of the holders of the overseas depositary receipts, etc.; any privately placed overseas depositary receipts shall be conspicuously identified as such: None.

V. Employee share subscription warrants

• (I). The annual report shall disclose unexpired employee subscription warrants issued by the Company in existence as of the date of publication of the annual report, and shall explain the effect of such warrants upon shareholders’ equity; any privately placed employee subscription warrants shall be conspicuously identified as such: None.

• (II). The annual report shall disclose the names, acquisition and subscription of managerial officers holding employee share subscription warrants and of the ten employees holding employee subscription warrants authorizing purchase of the most shares, cumulative to the date of publication of the annual report: None.

  1. The section on “new restricted employee shares” shall specify the following matters:

     • (1). For all new restricted employee shares for which the vesting conditions have not yet been met for the full number of shares, the annual report shall disclose the status up to the date of publication of the annual report and the effect on shareholders’ equity: None.

     • (2). The annual report shall disclose the names and acquisition status of managerial officers who have acquired new restricted employee shares and of employees who rank among the top ten in the number of new restricted employee shares acquired, cumulative to the date of publication of the annual report: None.

• VI. Issuance of new shares in connection with mergers or acquisitions or with acquisitions

• 55 -

Four. Offering of Securities

of shares of other companies

• (I). If, during the most recent year up to the date of publication of the annual report, the Company has completed any issuance of new shares in connection with a merger or acquisition or with acquisition of shares of any other company, the following matters shall be specified:

  1. In the case of a company whose shares are listed on the TWSE (“TWSE listed company”) or listed on the TPEx in accordance with the provisions of Article 3 or Article 3-1 of the Taipei Exchange Rules Governing the Review of Securities for Trading on the TPEx (“TPEx listed company”), the annual report shall include a clear opinion prepared by the managing underwriter concerning any issuance of new shares in connection with any merger or acquisition or with any acquisition of shares of any other company within the past quarter: None.

  2. In addition to requirements set forth in the preceding item, the annual report shall also disclose the implementation status of any of the aforementioned matters during the most recent quarter. If the progress or benefits of such implementation were not as good as expected, the annual report shall explain specifically how the situation is likely to affect shareholders’ equity, and shall put forward a plan for corrective action: None.

• (II). Where the Board of Directors has, during the most recent year up to the date of publication of the annual report, adopted a resolution approving any issuance of new shares in connection with a merger or acquisition or with acquisition of shares of any other company, the annual report shall disclose the implementation status together with the basic information of the company (or companies) to be merged or acquired or whose shares are to be acquired. Where any issuance of new shares in connection with a merger or acquisition or with acquisition of shares of any other company is currently in progress, the implementation status and its effect upon shareholders’ equity shall be disclosed: None.

• VII. Implementation of the Company’s capital utilization plans

• (I). Description of the plans: For the period as of the quarter preceding the publication date of the annual report, with respect to each uncompleted public issue or private placement of securities, and to such issues and placements that were completed in the most recent three years but have not yet fully yielded the planned benefits, the annual report shall provide a detailed description of the plan for each such public issue and private placement. Such descriptions shall include any and all changes to the plan, the source and utilization of funds, the reason(s) for any changes to the plan, the benefits yielded by the funds before and after any change to the plan, the date on which the change to the plan was reported at a shareholders’ meeting, and the date on which such information was uploaded to the information disclosure website specified by the FSC: None.

• 56 -

Four. Offering of Securities

• (II). Implementation status: With respect to funds usage under the plans referred to in the preceding subparagraph, the annual report shall (for the period as of the quarter preceding the publication date of the annual report) analyze the implementation status and compare actual benefits with expected benefits. Where implementation has failed to yield the expected progress or benefits, the annual report shall provide specific reasons for such failure, explain any effect it might have upon shareholders’ equity, and outline the plan for correcting the situation. Where any of the following items apply to the funds usage plan descriptions referred to in the preceding subparagraph, the annual report shall further disclose the following information: None.

• If the funds are used to merge, acquire, or purchase another company through share acquisition, to expand fixed assets, or to acquire new property, plant and equipment, the annual report shall compare and describe the property, plant and equipment, operating revenues, operating costs, and operating income: None.

• If the funds are invested in another company, the annual report shall describe the condition of the invested company and explain the effect upon the Company’s gain or loss from investments: None.

• If the funds are used to strengthen the Company’s working capital or pay off debts, the annual report shall: (1) note any increase or decrease in the Company’s current assets, current liabilities, and total liabilities; (2) compare and explain the Company’s interest expenses, operating revenues, and earnings per share; and (3) analyze the Company’s financial structure: None.

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Five. Operational Overview

Five. Operational Overview

I. Business contents

• (I). Business scope

• Main business items of the Company

  • (1). Manufacturing, machining, purchase and sales of all machines, hardware, tools and their parts.

  • (2). Manufacturing, machining, purchase and sales of all kinds of plastic, rubber, ink, synthetic resin, handicrafts, woodenware and footwear as well as the dyeing and finishing of man-made foam.

  • (3). Manufacturing, machining, purchase and sales of drill presses, lathes, milling and saw machines and all kinds of other power tools as well as their parts.

  • (4). Manufacturing, machining, purchase and sales of automated parking facilities.

  • (5). Manufacturing, machining, purchase and sales of all electrical home products and parts.

  • (6). Manufacturing, machining, purchase and sales of exercise and fitness equipment as well as its relevant parts and accessories.

• Revenue percentage

ercentage
		Year: 2022
Product	2022	2021
Power tool	30.15%	8.52%
Fitness device	64.94%	89.63%
Others	4.91%	1.85%
Total(consolidated)	100.00%	100.00%

1. Current commodities (services) of the Company

   • The main products of the Company are the power tool(including outdoor power 、

   • tools) fitness device series and E-Mobility .

2. New commodities (services) to be developed With a focus on ESG sustainability development, our company has combined the core technologies in various types of motors, electronic controls, and mechanical design that have been developed over 50 years. Together with automation equipment and lean production, REXON has launched a series of the next-two-year product plans which cover auxiliary mobility tools under the trend of oil-to-electricity conversion, including sports, consumer goods, and commercial fields.

3. (II). Industry overview

4. Status quo and development of the industry

Due to the pandemic outbreak, the global GDP decreased by approximately 3% in 2022 according to the statistics made by the World Bank. The “Global Risk

Report 2020” released by the World Economic Forum (WEF) indicated that environmental risks had become the difficulties that the world must face at present and the ESG (environmental, social, governance) management principles should be combined to create a concept of “sustainable new economy.” This concept blossomed in 2021 with countries responding to it one after another. It was further

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Five. Operational Overview

implemented through policies. Governments of many countries appropriately developed a variety of policies to stimulate economic recovery and activities to strengthen the economy. A strong growing momentum was then provided. The global economy has been gradually recovering from the depression induced by COVID-19 under the effort of governments around the world. However, in the long run, the global economic growth will still be lower than or close to the growing trend before the pandemic outbreak.

(1). In the aspect of power tools:

The scale of the global power tool market reached US$30.9 billion in 2022 according to the research report published by the international research institute, Ocean Report, on Taiwan News in 2022. It was estimated to grow at a compound growth rate of 5.2% and reach US$43.3 billion by 2030. Breaking it down into distributors and brand manufacturers, the major large home improvement retail chain stores in the U.S. such as The Home Depot and Lowe’s had a revenue growth at a rate between 7% and 14% based on the 2021 annual report (which compared the revenue in 2021 with that in 2020). Stanley Black & Decker, the main and wellknown brand manufacturer of power tools, grew 11% in 2022 on the other hand.

There are two main categories of power tools: desktop and portable types, while the latter being the majority in the market. Portable power tools can be further divided into plug-in and charging types. The charging-type portable power tools have currently become the mainstream thanks to the ever-changing development of the battery technology. Desktop power tools were all plug-in types at an early stage, but more and more charging-type products including charging miter、table saws and outdoor power tools have emerged on the market in recent years. At present, professional personnel and DIYers increasingly favor portable power tools mainly due to their portability and usability. According to survey, we can find that charging power tools have become one of the main causes of the market growth. Thus, large power tool companies have constantly developed the wireless power tools and technologies with an active attitude. This is also the growing momentum for all companies.

(2). In terms of fitness devices

The fitness device market has been continuously growing based on the Grand View Research’s observation and estimation. In 2022, the scale of the global fitness device market was US$13.5 billion, and it was estimated to grow at a compound growth rate of 5.3% and reach US$19.4 billion by 2030.

The data from IHRSA’s survey shows that the health and fitness industry in the U.S., which has an output value of up to US$30 billion, has been growing at a rate

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Five. Operational Overview

between 3% to 4% per year for the last 10 years. Another market that is neck-andneck with the U.S. market is from China, which has been actively developing the sports business in recent years.

Though there are hundreds of companies in the global fitness device market, it is still occupied by several major brands. These brands lead the industry trends as well as the new brands that have quickly risen in more recent times. The new brands have combined the commercial model of online teaching through membership. Not only did this affect the whole fitness device industry in the past and brought tremendous change in it, but also created a trend in the home fitness device market. For example, new brands of strength training and aerobic exercise equipment brands has entered the home fitness device market in succession.

Fitness equipment is used for physical training to control weight, increase stamina, develop muscle strength and improve cardiopulmonary function. Fitness equipment varies in types, allowing the users to do aerobic or anaerobic exercises in a smaller space. The common exercise and fitness equipment at present includes treadmills, elliptical trainers, spin bikes, rowing machines, stair climbers, fitness bikes, to name a few. When it comes to the trend of product development, new digital fitness including video streaming, wearable technology and functional fitness wear has been introduced due to the constant improvement of the 3C technologies, facilitating fitness to become a common practice around the world and promoting its development trend.

To sum up, Rexon will continue to work closely with the major customers in the constant development of conforming markets and new products that meet the users’ requirements in order to grow endlessly and maintain competitiveness, and further increase our share in the market.

1. Correlation among upstream, midstream and downstream in the industry

2. (1). In terms of power tools

The main sales channels in the power tool industry include the traditional hardware retailers, large home improvement retail stores and the emerging online shopping in the last few years. The physical channels are increasingly centralized on two retailers, The Home Depot and Lowe’s. As a result, distributors have actively developed self-owned brands and sought more innovative products along with pricing strategies in order to increase market share.

The power tools produced in China are more competitively priced; however, due to the increasing manpower costs for manufacturing in China and focus on environmental regulations as well as the impact of Trump’s tariff policy since 2018, brand owners that originally had factories in China or OEMs begin to think of

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Five. Operational Overview

strategies for transferring the supply chain from China to other countries to reduce the impact brought by the trade war and diversify risks. Moreover, the recent global outbreak of the coronavirus pandemic has disrupted the global supply chain. Brand owners and distributors has been looking for non-Chinese suppliers or returning to their countries for factory establishment in order to minimize the loss.

In terms of marketing and service, the main collaboration models between Rexon and the retailers are a) understanding customers’ requirements of products, and b) being responsible for commercial activities including retail brand (the Rexon brand) operation, after-sales services and the provision of market analysis and information. For the division of work, product and pricing requirements are proposed by the retailers while Rexon is responsible for all the other works. At this stage, Rexon still collaborates closely with large retail stores around the world while actively expanding the professional and DIY markets in Europe and global emerging countries. We also improve our market position and share in regions around the world.

In the aspect of R&D and innovation, Rexon has input a large number of human resources to improve and innovate product development though methods such as usability testing and feedback, focus group operation and construction site visiting. By doing so, we develop products that meet the customers’ requirements and get them closer to the users. Our folding slide miter saw even won the international award - iF DESIGN AWARD 2022. The design made us the only manufacturer winning the award for a desktop power tool in 2022; it also won the U.S. International Design Excellence Awards (IDEA) in the same year.

Rexon has built a collaboration model - OEM - with some of the customers for production and manufacturing. Also affected by Trump’s tariff policy in 2018, many well-known, large power tool companies have cooperated with Rexon and conducted OEM to reduce the impact of the tariff. We have developed many products that contribute significantly to our revenue.

Rexon has two production bases that are respectively located in Taiwan and Tongxiang, Zhejiang, mainland China as places of production. We are able to make flexible strategic plans in response to Trump’s tariff policy in order to achieve the best combination of costs and manufacture. This allows us to have excellent competitive advantages.

(2). In terms of fitness devices

The markets of the fitness device industry are mainly distributed over North America and Europe, though new markets in Asia-Pacific, Latin America, the Middle-East and Africa are growing rapidly. The current channels for commercial

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Five. Operational Overview

fitness devices are mainly fitness clubs, professional fitness equipment chain stores and hotels. Commercial customers can be further divided into hotels, corporate offices, hospitals, medical centers and public institutions. On the other hand, the channels for home fitness devices include large retail and membership chain stores. In recent years, even online membership channels have been added.

Rexon takes OEM as the current core of our business and manufactures products for famous brand owners. Our customers are responsible for the channels, brand operation and services while we provide all-around services from R&D and design to production.

1. Development trend of products and their competition status

2. (1). In terms of power tools

Rexon still faces the impact of the market competition with the peers in Taiwan and mainland China in terms of power tools. Not only that, we have to brace for uncertainties such as the unclear U.S.-China trade and tariff policies as well as the subsequent impact in the post-coronavirus pandemic era. We must carefully respond to these factors to turn a crisis into an opportunity. Regardless of how the competitive environment and trade conditions change, Rexon has continuously focused on core capabilities with respect to innovation, R&D, production, marketing and service. In addition, we have been establishing responsive countermeasures and development plans based on the external situation.

Based on our current business development plan, we not only target global large retailers as major customer groups, but also continue to actively make plans and designs for ODM products and brand authorization with world famous strong brands. Furthermore, Rexon makes use of the strategic partnership to assist in the process of commercial operation, from which we learn about and control the final users as well as the individual and overall market requirements. For the famous strong brands, we utilize our profession in R&D and manufacturing to collaborate with partners and learn about design, manufacturing and marketing from one another under the framework of OEM/ODM cooperation. With this, we constantly accumulate and improve corporate momentum along with the Company itself. The starting point is making a profit for the Company.

(2). In terms of fitness devices

At present, Rexon mainly manufactures elliptical trainers, stair climbers, treadmills, spin and exercise bikes, rowing machines, smart strength machines and smart bike trainers, etc. We have built a great reputation and confidence in the industry due to the accumulation of capability and experience over the years.

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Five. Operational Overview

In addition to being recognized by existing customers, we have other new customers that actively contact us and discuss opportunities for cooperation.

Rexon mainly works as an OEM for brands in the fitness equipment industry with the majority of customers being the strong fitness device brands. In recent years, we continue to dedicate ourselves to seeking new customers and opportunities for cooperation. The number of the co-developed products are also increasing. We constantly improve the level of technology based on our existing R&D and production capability. We also add more equipment to expand production capacity and scale to meet with the high demand for treadmills and spin bikes from the existing and new customers. It is expected that in the future, the performance of fitness devices will have a substantial growth every year and increase Rexon’s profits significantly.

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Five. Operational Overview

• (III). Overview of technology and R&D:

• R&D expenses invested in the most recent year and up to the publication date of the annual report

Unit: NTD thousand

	Year	R&D expenses	R&D expenses	Percentage in the	Percentage in the
				revenue of the current
				year
	2021	215,937		1%
	2022	142,903		3%
	As of February2023	19,656		7%
2. T	echnology orproductdeveloped successfully
					As of February
	Product	2021		2022
					2023
	Power tool	6		12	4
	Fitness device	4		2	0
	Subtotal	10		14	4

2.	Technology orproductdeveloped successfully	Technology orproductdeveloped successfully
	Product	2021	2022	As of February 2023
	Power tool	6	12	4
	Fitness device	4	2	0
	Subtotal	10	14	4

• (IV). Long and short-term business development plans 1. In terms of power tools:

Rexon is facing the impact of the market competition with the peers in Taiwan and mainland China in terms of power tools. We have to brace for uncertainties such as the unclear U.S.-China trade and tariff policies as well as the subsequent impact in the post-coronavirus pandemic era. We must carefully response to these factors to turn a crisis into an opportunity. Regardless of how the competitive environment and trade conditions change, Rexon has continuously focused on core capabilities with respect to innovation, R&D, production, marketing and service. In addition, we have been establishing responsive countermeasures and development plans based on the external situation. Based on our current business development plan, we not only target global large retailers as major customer groups, but also actively make plans and designs for ODM products and brand authorization with world famous strong brands. Furthermore, Rexon assists in the process of commercial operation through strategic partnership, from which we learn about and control the final users as well as the individual and overall market requirements. For the famous strong brands, we utilize our profession in R&D and manufacturing to collaborate with partners and learn about design, manufacturing and marketing from one another under the framework of OEM/ODM cooperation. With this, we constantly accumulate and improve corporate momentum along with the Company itself. Our major

development strategies for the future with corporate profits as the starting point are respectively described below:

• (1). Continuously increasing our market share in North America with innovative products as well as actively promoting them to Europe and developing new markets in order to maximize the benefits.

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Five. Operational Overview

• (2). Setting goals for product development based on user requirements to learn about users’ expectations and study their buying motives and behaviors. This is to provide users in different markets with products that meet their requirements.

• (3). Passing down the business mode of being an OEM for world-famous brands and expanding the scope of revenue brought by automobile relevant accessories with our core advantages on R&D and channels and brands.

• (4). Rexon collaborates with well-known OEM customers and brands to strive for shares in professional markets of high-value products together with their advantage of fame as well as the Company’s core competitiveness - manufacturing and quality.

• (5). Rexon actively cooperates with customers in online sales to assist them in muscling for advantageous e-commerce platforms at the forefront of the global competition. This will boost the growth of Rexon’s business development in the future.

2. Fitness device:

With regard to fitness devices, new customers’ demand for products has tipped the scale of the revenue share of Rexon’s power tools and fitness devices and become the growing momentum in recent 2-3 years. Rexon has originally been an OEM in the field of commercial fitness devices. We have not only built a robust basis for technology development and production, but seized the opportunity to enter the home products market and further increased fitness device revenue. Henceforth, we will continue to utilize our profession in R&D and manufacturing to collaborate with partners and learn about design, manufacturing and marketing from one another in the OEM/ODM business model. With this, we will constantly accumulate and improve corporate momentum along with the Company itself.

• (1). The expansion of product categories: At present, Rexon mainly manufactures elliptical trainers, stair climbers, treadmills, spin and exercise bikes, rowing machines, smart strength machines and smart bike trainers. We have built a great reputation and confidence in the industry due to the accumulation of capability and experience over the years. In addition to being recognized by the existing customers, we have other new customers that actively contact us and discuss opportunities for cooperation.

• (2). The continual development of new customers: Rexon mainly works as an OEM for brands in the fitness equipment industry with the majority of customers being the strong fitness device brands. In recent years, we continue to dedicate ourselves to seeking new customers and opportunities for cooperation. The number of co-developed products are also increasing. We constantly improve the level of technology based on our existing R&D and production capability. We also add more equipment to expand production capacity and scale to meet with the high demand for treadmills and spin bikes from existing and new customers. It is expected that in the future, the performance of fitness devices will have a substantial growth every year and increase Rexon’s profits significantly.

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Five. Operational Overview

3. E-Mobility

Under the trend of ESG, reducing and eliminating carbon emissions has become a common goal for the whole world. Leveraging the electromechanical integration foundation established over 50 years, REXON has combined the core competencies in motors, electric machines and mechanisms to develop a range of products to replace the fuel-powered systems with electric energy, such as E- Mobility applications which contain high-growth products including E-bikes, electric scooters, electric skateboards, smart robot mowers and etc. In response to the increasingly popular environmental awareness in the market, REXON will continue to explore and cultivate the applications derived from electric motor drive, which will be the direction of REXON's investment as the target of the next robust and prosperous new industry for the next 50 years.

II. Overview of market and production/sales

• (I). Market analysis

• Regions of distribution (provision) for the Company’s major products (services) analysis: The major products of the consolidated company are power tools and fitness equipment, which are mainly for international sales and sold in North America (the U.S.) in terms of region.

Region	2022	2022	2021	2021
	Sales amount	Percentage in net	Sales amount	Percentage in net
		sales %		sales %
America	3,928,957	86%	17,748,698	96%
Europe	366,938	8%	480,107	3%
Asia	174,864	4%	133,905	1%
Others	78,549	2%	4,113	0%
Total	4,549,308	100.00%	18,366,823	100.00%

1. Market share:

2. (1). Power tools: North America is the major sales region of Rexon’s products, followed by Europe and other regions. Desktop power tools such as miter and table saws are dominant in Europe and America while the main products that Rexon exports are miter saws and tile cutters. According to a market survey report released in 2023, the main momentum that will drive the growth of the power tool market in the future comes from three aspects: infrastructure and construction markets in growing, emerging countries; high demand for power tools of automated industries; and the viral trend of battery-operated power tools in the global market. Moreover, with the support of the strategies of major retail chain stores in the U.S. including The Home Depot and Lowe’s, the Company has confirmed that the future trends of products will shift towards semi-professional/professional users. The green design related to energy saving and carbon reduction also should be utilized to increase profits. Rexon has made many preparations for production optimization and corporate enhancement since 2019, aiming at the direction of sustainable operation and carbon emission reduction. We have developed ESG projects, set up a

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Five. Operational Overview

production line for brushless DC motors (BLDC), made product plans and designs that comply with the goal of carbon reduction more, and others. As a result, we are able to completely meet the customers’ requirements on and conditions for future products.

(2). Fitness devices: In terms of the fitness market, the report of the “Worldwide Survey of Fitness Trends for 2023” released by ACSM's Health & Fitness Journal indicated that the Top 10 fitness trends around the world in 2023 are: the application of wearable technology, strength training with free weights, body weight training, fitness programs for older adults, functional fitness training, outdoor activities, high-intensity interval training, exercise for weight loss, employing certified fitness professionals and personal training with a trainer. Though the popularity of online fitness courses has fallen, the most direct change that happened to people during the period of global pandemic is the attachment of importance to themselves. They are willing to spend more time and energy on doing exercises suitable for them to maintain or improve their body and health. The prevailing trend of exercising around the globe has been created. In addition to enhancing product functionality for the existing customers, Rexon also actively keeps up with the global fitness trends and conducts R&D in the direction of fitness and functional training for older adults.

1. The supply, demand and growth of the power tool and fitness device market in the future.

2. (1). In terms of power tools:

The current power tool market demands for professional and high-quality products; moreover, people are placing more and more importance on ergonomic and lightweight product designs. In recent years, battery-operated power tool products are also being more and more acceptable in the market. The brand owners are making more complete arrangements for these kinds of product lines, which become the main source of profits for their revenue growth. In this area, Rexon has finished the development of cordless charging products with brand owners as well as extending the product concept and technology to the R&D of outdoor power tools. We expect to start mass production and shipment this year. These shall be part of the Rexon’s growing momentum in the future.

• (2). In terms of fitness devices:

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Five. Operational Overview

• A. The mitigation of the pandemic makes people desire to get out of their houses and do some activities. As such, exercise has become an activity in daily life due to the importance to their health. The modes of exercise has changed accordingly and become a mixed type. They have transformed into an alternate use of gym and home exercises. The requirements of fitness equipment are also diversifying. The networking function, health management, precise statistics of exercise and inclusiveness of entertainment functions have become what the consumers care about other than the basic functionalities.

• B. In the North America consumer market, “made in the U.S.” has become a major ideology and topic. By contrast, it can have a certain impact on the competitiveness of the products. As a manufacturer that mainly conducts OEM, how to achieve the balance between the place of manufacture and revenue growth for the brand owners, assist the customers in growing from their perspectives, and obtain a key position in the supply chain accordingly are part of the main points that we need to comprehensively consider about and analyze.

• C. The fitness market is no longer limited to the traditional fitness equipment. It can help people obtain all activities related to a healthy life, and these activities are opportunities that are worth the investment. Rexon will closely combine the changing fitness market and industry as well as actively develop new products and focusing on the latest product development in the market.

• Competitive niche

Rexon being the leader of the domestic power tool industry and fitness equipment constantly improves our technologies and innovative R&D capabilities and utilizes the core technologies, such as motors, electronic controls and mechanical design . We keep introducing innovative products every year and actively making arrangements for patents. As of today, we have a total of over 300 patents. In addition, Rexon has been promoting the patented EPS management system since 2019, sufficiently utilizing its value as a patent. For collaborative product commerce (CPC), the corporate electronic aids that have been used over the years, such as the CPC system and ERP, allow the customers to quickly connect with Rexon in Taiwan and Tongxiang, Zhejiang, China and further implement collaborative product development.

In the era of Industry 4.0, Rexon has introduced intelligent logistics and electronic signage management for material management in order to control the

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Five. Operational Overview

inventory status of the materials more effectively and timely. Lean manufacturing can be fully practiced with this. For the manufacturing process, we have led the peers in the traditional industries in introducing the airborne warehouse system and expanded the factories to actively bring in the automated production equipment. The aim is to meet the requirements of different customers. In the aspects of internal efficiency and quality, we have constantly improved the Company through the application of activities such as improvement proposals, the Taiwan Continuous Improvement Award and internal innovation. Hence, Rexon has optimal infrastructure with respect to production, R&D, marketing and service. We widen the gap between us and the fellow competitors, reduce the impact brought by lowprice competition, and build stable strategic partnership with the customers based on the approaches of innovation, service and differentiation.

Rexon also completed the carbon inventory in 2022 for the ESG and environmental issues that the world faced together. We have started the compilation of the CSR report, which is expected to be finished by 2023. In practice, we have made arrangements starting from the selection of raw materials for the source of product design to the manufacturing process/supply chain planning with respect to carbon emission reduction. We have also planned for reducing the use of packaging materials as well as proposing for the decrease of packaging volume to reduce carbon emission during transportation. With these, Rexon aims to co-prosper with the brand-based customers and march towards the next stage together.

1. Advantageous and disadvantageous factors for the development in the future

2. (1). Advantageous factors

   • A. The high-quality products manufactured by Rexon have been praised and recognized by the retailers and large OEMs. Since we started collaborating with global large retailers in 1998, we have constantly gaining experience and increasing the number of customers (retail chain stores). Rexon has strived to expand the existing business and add famous retail chain stores as customers for our power tools year by year and to this day, allowing the Company’s overall production and sales network to grow continuously. As for fitness devices, Rexon has developed business relationships with well-known brands, expanded the existing business in an active manner year by year, and accumulated R&D and production technologies continuously.

   • B. With the four main advantages - quality, cost, delivery date and service, Rexon has maintained stable and continuous collaborations not only with well-known

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Five. Operational Overview

power tool brand owners, but also with famous brands related to fitness

devices, automotive parts and accessories.

• C. In addition to actively pursuing shareholders' equity, we have invested in the development of factories and equipment. We have also made new plans for them to improve capacity along with production efficiency. Furthermore, Rexon has been dedicated to building friendly work environments. Gyms, onsite resting areas and replanned “happy farms” for employees have been added. At the same time, we have promoted policies regarding green energy and electrification of transportation equipment while installing additional solar panels to contribute our share to the Earth.

• (2). Disadvantageous factors

• A. ACSM's Health & Fitness Journal included an annual global survey of the industry trends that targeted professionals. Based on it, the fitness trend after the pandemic shifted from home fitness (for the avoidance of social contacts) to the pre-pandemic mode of group fitness. The survey results also showed that the demands for commercial fitness equipment and group trainers were higher than that for home fitness, which could impact the home fitness devices and cause a requirement slowdown. Regarding this, Rexon had planned market strategies in 2022 H2 to change the percentages of the pre- and post-pandemic manufacturing for home and commercial brands

• B. The impact that the Russia-Ukraine war brings is the unstable global material supply and the fluctuation in exchange rate. These are disadvantageous factors for the whole manufacturing industry. The force majeure in the general environment cannot be prevented. However, we can minimize the impact by risk control. With respect to exchange rate, we manipulated the forward exchange rate fluctuation by establishing a communication channel with banking professionals to avoid foreign exchange risks.

• C. In terms of raw material supply, we comply with the principle of lean manufacturing and prevent the goods from being returned due to quality issues, and further avoid idle time at work and waste of costs by providing the suppliers with quality counseling. We not only reduce the waste of raw materials, but also make plans for orders in advance and precisely control the preparation of raw materials through procurement and the systematic network between the suppliers.

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Five. Operational Overview

• D. China’s low-price competition: The labor and land costs in China have been rising every year, but they are still comparatively lower than those of Taiwan. “Made in Taiwan” is still in a disadvantageous position when it comes to pricing. For this reason, Rexon considers the establishment of intelligent and lights-out factories when the new plant is designed and built. We set the optimization of production efficiency as the starting point and overcome the issue by purchasing and designing labor-saving and efficient equipment.

Countermeasures

• A. Create the best benefit for related parties with sustainable operations as the goal.

• B. Provide premium products and services for brand customers with our leading electromechanical technique.

• C. Uphold the philosophy of getting to the bottom of matters and continual

improvement to achieve lean manufacturing and management.

• (II). Key purpose and manufacturing process of major products

• Key purpose

Major product	Key purpose
Power tool	Functions such as cutting, planing, drilling, sawing, grinding and grooving for the materials, e.g. woods, metal, plastics,tiles and acrylic.
Fitness device	Body health improvement, medical treatment, body rehabilitation, weight loss, muscle-building and cardiopulmonary training as well as the enhancement of physical fitness.
E-Mobility	Auxiliary mobility tools under the trend of oil-to-electricity conversion, includes the products of sports, consumer goods,and commercial fields.

1. Production processes

2. (1). Power tool(including outdoor power tools) related products production flowchart

==> picture [431 x 198] intentionally omitted <==

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

Raw material
Cast iron Casting Machining
Aluminum Die casting Machining Paint Assembly End product
ingot spraying
Steel plate Unloading Stamping and Machining
forming
Heat Surface
Round iron Machining Grinding
treatment treatment
Plastic Injection
Motor
Hardware
accessory
----- End of picture text -----

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Five. Operational Overview

(2). Fitness device and E-Mobility related products production flowchart

			Baking varnish	Assembly
Major raw		Major supplier		Supply status
**material **
Aluminum ingot		A01,A02		Good
Ball bearing		B01,B02,B03,B04,B05,B06,B07		Good
Motor		C01, C02, C03, C04, C05		Good
Saw blade		D01,D02		Good
Magnesiumalloy		E01		Good
Plastic		F01,F02,F03,F04,F05,F06,F07		Good
Steelplate		G01, G02, G03		Good
Steelpipe		H01,H02,H03,H04		Good
Controlpanel		I01,I02,I03,I04,I05,I06,I07		Good

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Five. Operational Overview

• (IV). The name of the customer that accounted for more than 10% of the total purchase (sales) amount in any of the most recent two years, the proportion of the purchase (sales) amount, and the reason for the changes.

• Information on major suppliers for the most recent two years:

	1. Information on major suppliers for the most recent two years:	1. Information on major suppliers for the most recent two years:	1. Information on major suppliers for the most recent two years:	1. Information on major suppliers for the most recent two years:
						Unit: NTD thousand
Item	2021					2022
	Name	Amount	Percentage in	Relationship with	Name	Amount	Percentage in	Relationship with
			annual net	the issuer			annual net	the issuer
			purchase (%)				purchase (%)
Major suppliers that accounted for more than 10% of the total purchase: None
	Net purchase	15,101,161	100		Net purchase	2,642,496	100

• Note 1: The name of the major supplier that accounted for more than 10% of the total purchase in the most recent two years, the amount and proportion of the purchase shall be indicated. Where the name of the supplier cannot be disclosed due to a contractual agreement or the counterparty is an non-related individual, the name may be substituted by a code.

• Note 2: Where the Company has stocks listed on the Taiwan Stock Exchange or the Taipei Exchange and there is financial information audited, certified or reviewed by CPAs in the most recent year prior to the publication date of this annual report, the information must also be disclosed.

• Information on major customers for the most recent two years

Unit: NTD thousand

Item
		2021				2022
	Name	Amount	Percentage in annual net sales (%)	Relationship with the issuer	Name	Amount	Percentage in annual net sales (%)	Relationship with the issuer
1	D	16,233,829	88	None	D	2,157,534	47	None
2	B	491,917	3	None	A	652,518	14	None
3	A	384,726	2	None	B	629,779	14	None
	Others	1,256,351	7		Others	1,109,477	25
	Net sales (consolidated)	18,366,823	100		Net sales (consolidated)	4,549,308	100

• Note 1: The name of the major customer that accounted for more than 10% of the total sales in the most recent two years, the amount and proportion of the sales shall be indicated. Where the name of the customer cannot be disclosed due to a contractual agreement or the counterparty is an non-related individual, the name may be substituted by a code.

• Note 2: Where the Company has stocks listed on the Taiwan Stock Exchange or the Taipei Exchange and there is financial information audited, certified or reviewed by CPAs in the most recent year prior to the publication date of this annual report, the information must also be disclosed.

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Five. Operational Overview

• (V). Production volume and value in the most recent two years

Unit: capacity/set; production volume/set; production value/NTD thousand

Year Pdi	2021	2021	2021	2022	2022	2022
roucton volume and value	Capacity	Production	Production	Capacity	Production	Production
Major product		volume	value		volume	value
Power tool	400,000	398,574	1,345,613	400,000	377,609	1,256,525
Fitness device	1,200,000	1,189,306	14,876,642	1,200,000	160,670	2,559,671
Total	1,600,000	1,587,880	16,222,255	1,600,000	538,279	3,816,196

• (VI). Sales volume and value in the most recent two years

Unit: volume/set; value/NTD thousand

Year	2021	2021	2021	2021	2022	2022	2022	2022
Sales volume	Domestic sales		International sales		Domestic sales		International sales
and value
Major product
	Volume	Value	Volume	Value	Volume	Value	Volume	Value
Power tool	20,867	54,532	498,717	1,520,759	27,235	73,982	448,327	1,296,981
Fitness device	0	0	1,152,248	16,467,810	0	0	160,670	2,521,372
Others		2,514	0	321,208		2,692	0	654,281
Total	20,867	57,046	1,650,965	18,309,777	27,235	76,674	608,997	4,472,634

III. Employees

• (I). Number of employees, average years of service, average age, and education degree distribution ratio in the most recent two years and up to the publication of this annual report

				February 28, 2023
	Year	2021	2022	As of February 28, 2023 for the current year
Number of employees	Technical personnel	258	151	149
	Management and administrative personnel	439	324	315
	On-site personnel	1,467	550	519
	Total	2,164	1,025	983
Average age		36	40	40
Average years of service		5	8	8
Education degree distribution ratio	PhD	0%	0%	0%
	Master	3%	5%	4%
	Bachelor	35%	38%	39%
	Senior high school	33%	28%	29%
	Below senior high school	29%	29%	28%

Note: The information of the year and up to the publication date of the annual report shall be provided.

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Five. Operational Overview

IV. Information on environmental protection expenses

• (I). Losses arising as a result of environmental pollution incidents in the most recent year and up to the publication date of the annual report (including any compensation paid and any violations of environmental protection laws or regulations identified in environmental inspection; the disciplinary date, number of the disciplinary letter, provisions violated, requirements of the provisions violated, and specific punishment shall be specified), the estimated amount of the losses that may incur currently or in the future and the responsive actions taken, and the reasons in case the losses cannot be reasonably estimated: None.

• The Company adopts the production method of the central satellite system for our power tool and fitness device manufacturing business. The central plant is responsible for development, design, assembly and marketing while 80% of the parts and accessories are provided by the third party. Hence, the central plant has not polluted the external environment during the manufacturing process, much less damage the ecological environment. The Company did not suffer losses related to environmental pollution in the most recent two years as a result. Currently, we continue the implementation of the following schemes:

  • (1). Promoting the prohibitions of toxic substances as well as the recovery/reuse rate for raw materials and implementing the goal of green production in compliance with the EU’s environmental policies and the launch of WEEE and RoHS.

  • (2). Monitoring the surrounding noise to meet the factory noise control standards.

  • (3). Operating the local exhaust ventilation equipment to protect air quality and prevent pollution.

  • (4). Conducting environment protection related inspections and handling such as drinking water testing, operation environment inspections, waste removal and handling, domestic sewage tank maintenance, surrounding noise testing and waste oil removal and handling.

• Management goals for environmental protection:

Rexon has established explicit goals for environmental protection and energy saving. We manage and regulate every use of energy resources as well as pollution emission through the environmental management system. Furthermore, continuous improvements are made in the hope of achieving eco-friendly goals including low pollution, low energy consumption and easy recovery during the processes of product development, production, use and scrapping. Roughly speaking, we have set up several important management goals for the long-term environmental protection.

• (1). Goals for power saving and carbon reduction

The impact caused by climate change has been one of the common

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Five. Operational Overview

environmental issues that the world faces. Thus, the countries around the world should bear the responsibility for mitigating the greenhouse effect together. In order to be in line with the government’s policies and achieve energy saving and carbon reduction, Rexon has established a long-term management goal for renewable energy. We have also collaborated with a third party and entrusted them with installing solar power systems on the roofs of the existing factories. We started applying for installation in 2019 and have officially generated electricity since July 2019. The total installed electricity capacity was 646KW.

• (2). Goals for waste reduction

Waste is deemed a misplaced resource. In order to improve the resource use efficiency, Rexon consistently adopts measures such as reducing general and recyclable waste, requiring all employees to sort waste and assigning dedicated personnel to the waste recovery field for control. With these, Rexon will continue to reduce hazardous business waste and increase the amount of the recyclable waste resources based on the generation of business waste.

• (3). Goals for water saving

Under global environmental change, water resources are getting scarce day by day, which is another material environmental impact that humans will face in addition to energy saving and carbon reduction issues. We have improved the manufacturing process and hardly generated process wastewater in order to protect water resources and operate the corporation sustainably. In terms of the water used by the employees for domestic demands, we strive to disseminate the concept and measures of water saving to the employees and reduce domestic wastewater in an active manner.

V. Labor-management relationship

• (I). A specification of the Company’s employee welfare measures, continuing education, training, retirement systems and implementation status thereof, as well as labor-management agreements and employee rights protection measures.

• Employee benefit measures

  • (1). Two-day weekend.

  • (2). Direct employee retention bonuses.

  • (3). Quality gyms for employees, table tennis rooms, breastfeeding rooms, “happy organic farms” for employees, classrooms for woodworking and free parking lots.

  • (4). Spacious and clean restaurants with the provision of free lunch and dinner for the employees.

  • (5). The Employee Welfare Committee and industrial unions.

  • (6). Labor and health insurance and a 6% pension contribution.

  • (7). Menstrual and paid pregnancy checkup leaves.

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Five. Operational Overview

• (8). A five-day paternity leave.

• (9). Annual, regular and free health checkups for the care of employee health.

• (10). Dedicated industrial nurses and doctors stationed at the factories monthly for service.

• (11). Regular conduction of Employee and Family Activity Days (e.g. large barbeque activities, mountain climbing, fishing and singing karaoke).

• (12). Gift vouchers for Labor Day, Moon Festival and birthday as well as year-end dinner party and lot drawing.

• (13). Subsidies for marriage, funeral, festivities and childbirth, emergency aid and allowances for clubs (e.g. yoga, badminton, mountain climbing, softball, craft and singing clubs).

• (14). Travel subsidies for the employees and their families and employee gathering subsidies.

• (15). Multiple contracted stores for employees to enjoy discounts.

• (16). Cooperative contracted child care centers.

• Employees’ training and continuing education:

• (1). The Company’s employees should participate in the pre-service training courses for new employees and the in-service vocational training after they registered for the duties. In addition, an annual training plan was established and then conducted according to the annual training requirement survey. Performance evaluations have been implemented based on the training results to enhance employee competency and improve the operational performance and competitiveness of the Company.

• (2). To be in line with the log-term development of the Company and boost the quality of employees, we have arranged general training and professional courses as well as inviting the employees to hold internal sharing and courses on professional techniques. The Company has allowed every employee to fulfil his or her maximum potential by talent cultivation and training.

  • A. General training: Fire safety training and educational training on labor safety.

  • B. Professional training: Sending the employees to training institutions to participate in courses (according to the profession of each department) and training with respect to the knowledge needed for work, such as audit, accounting, management of managerial officers, professional technique, market promotion and business training.

• (3). The Company has set up the “Implementation of Educational Training Guidelines” for the employees to follow.

• (4). 4,305 of the Company’s employees actually participated in the training in 2022, including internal, self-funded and all free training courses held by the competent authority, accounting firms and the industry. In 2022, the actual training expense of the Company was NT$1,092 thousand.

• The code of employee conduct and ethics:

• (1). For the code of employee conduct and ethics, the Company has established

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Five. Operational Overview

     - many relevant regulations and guidelines as the criteria that the employees should follow for their behaviors. The main contents are:

  - A. Agreements related to ethical standards, recusal due to conflict of interest, profiteering prevention, prohibition of wrongdoings, banquet specifications, recusal from reception, other agreements and non-disclosure agreements subject to the Company, non-disclosure with respect to Intellectual property and non-compete restrictions as well as personnel management shall be observed.

  - B. Disciplinary measures.

  - C. Specifications on the duties of each unit and the functions of the organization. D. Establishment of employee performance management plans along with the management procedure of performance evaluation and development. This is for effectively achieving the Company’s operational goals as well as making the employees pursue the achievement and development regarding their positions through performance management at present and in the future.

• (2). The Company evaluates the employees according to regulations such as the duties of each unit and personnel management guidelines, employee reward and disciplinary policy, and performance management and evaluation regulations. The employees have been informed to comply with all reward and disciplinary regulations, and rewards and punishments shall be given in accordance with the aforementioned regulations.

• Retirement system and its implementation status

• (1). We make monthly contributions to the pension and remit it to the labor pension reserve funds account opened by the Labor Pension Fund Supervisory Committee in line with the Labor Standards Act. The “Labor Pension Act” has also been enforced since July 1, 2005.

  • A. The “Labor Pension Act” is applicable to all employees that took office on July 1, 2005.

  • B. Those who took office before July 1, 2005 may choose the pension regulations specified in the “Labor Pension Act” or the “Labor Standards Act.”

• (2). Where any of the following occurs, an employee may voluntarily apply for retirement:

  • A. Where the employee has continuously worked for the Company for more than fifteen years and has reached the age of fifty-five years old.

  • B. Where the employee has continuously worked for the Company for more than twenty-five years.

  • C. Where the employee has continuously worked for the Company for more than ten years and has reached the age of sixty years old.

• (3). Standards for pension provision

  • A. For the employees to whom the “Labor Standards Act” is applicable:

    • a. We make monthly contributions to the pension and remit it to the labor

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Five. Operational Overview

pension reserve funds account at the Bank of Taiwan in line with the Labor Standards Act.

     - b. Two bases are given for each full year of service rendered. However, for the rest of the years over fifteen years, one base is given for each full year of service rendered. The total number of bases shall be no more than forty-five. The length of service is calculated as half year when it is less than six months and as one year when it is more than six months. The pension is calculated according to the bases given for the years of service rendered as well as the average wage six months before the employee’s retirement.

  - B. For the employees to whom the Labor Pension Act is applicable, the Company shall contribute 6% of the employee’s monthly wage to the personal labor pension account at the Bureau of Labor Insurance.

  - C. The Company appropriate 15% of the total monthly wage of an employee as the pension and remit the amount to the labor pension reserve funds account at the Bank of Taiwan in the name of the Labor Pension Fund Supervisory Committee. As of December 31, 2022, the balance of the labor pension reserve funds account at the Bank of Taiwan was NT$373,928 thousand, and the value of defined benefit obligation was NT$167,923 thousand.

  - D. In 2022, the pension expenses of the Company under the specific pension allocation guidelines was NT$24,447 thousand. These had been contributed to the Bureau of Labor Insurance.

1. Remuneration policy

2. (1). Employee remuneration: According to Article 25 of the Articles of Incorporation: If there is a profit in a fiscal year, the Company shall allocate at least 5% of the profit as the remuneration to the employees and no higher than 5% as the remuneration to the directors. However, if the Company has accumulated loss, an amount used to cover the loss shall be set aside first. The employees to which remuneration is paid in shares (treasury or new shares) or cash may include those of the controlled or affiliated companies who meet certain criteria.

3. (2). The year-end and relevant bonuses shall be distributed based on the Company’s operational performance and personal performance.

4. Material Internal Information Handling Procedure:

5. (1). The Company established the Material Internal Information Handling Procedure for the employees, managerial officers, directors and supervisors to follow.

Material Internal Information Handling Procedure Established by the Board of Directors and published on December 31, 2009

Chapter I General Provisions

• I. Purpose of establishment

This Procedure is specifically established to set up a good mechanism for the handling and disclosure of the Company’s material internal information, avoid inappropriate

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Five. Operational Overview

information leakage and ensure the consistency and accuracy of the external information released by the Company. The employees are subject to this Procedure.

II. Implementation in line with laws and regulations and this Procedure

The Company shall handle and disclose the material internal information in accordance with relevant laws, the regulations of the Taiwan Stock Exchange Corporation and this Procedure.

III. Scope of application

This Procedure is applicable to all directors, supervisors, managerial officers and employees of the Company.

The Company shall ensure that any other person who acquires knowledge of the Company's material internal information due to identity, occupation or controlling interest complies with the regulations related to this Procedure. …………(part of the contents are omitted owing to space limitations)

Chapter II Procedure for the Non-Disclosure of Material Internal Information VI. Firewall operations for non-disclosure - personnel

The directors, supervisors, managerial officers and employees of the Company shall fulfill the duty of care and the fiduciary duty of a good administrator as well as acting in good faith in the conduct of business operations. Further, the non-disclosure agreements shall be signed.

No director, supervisor, managerial officer or employee with the knowledge of material internal information of the Company shall disclose the known information to others. …………(part of the contents are omitted owing to space limitations) Chapter III Procedure for the Disclosure of Material Internal Information

X. Principles of material internal information disclosure

The Company shall comply with the following principles when making external disclosures of material internal information: the information disclosed shall be accurate, complete and timely; there shall be a well-founded basis for the disclosure of information; and the information shall be disclosed fairly. ……(part of the contents are omitted owing to space limitations)

Chapter IV Handling of Abnormal Events XIV. Reporting of abnormal events

Where the directors, supervisors, managerial officers or employees of the Company are aware of any disclosure of material internal information, they shall report to the dedicated unit and the internal audit department as soon as possible.

The dedicated unit shall draw up countermeasures after receiving an aforementioned report. It may invite members from the internal audit and other departments for discussion and keep a record of the handling results for future reference when necessary. The internal audit unit shall also perform audits as their duties may require. …………(part of the contents are omitted owing to space limitations)

Chapter V Internal Control and Educational Dissemination Chapter VI Additional Rules

XVIII. Implementation and amendment

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Five. Operational Overview

This Procedure shall take effect after having been submitted to and approved at the Board

of Directors. Subsequent amendments thereto shall be effected in the same manner.

1. Work environment and employee’s personal safety protection measures:

2. (1). The Company established the Industrial Safety and Health Work Rules to regulate matters related to safety management and for the employees to follow.

3. (2). The Company has appointed qualified first-aid personnel and prepared sufficient first-aid kits in accordance with the “occupational safety and health” relevant laws and regulations.

4. (3). The Company has set up an emergency response team to organize and define procedures, e.g. Emergency Response Procedure and Industrial Safety and Health Work Rules to respond to emergencies and accidents, including power failure, water outage, fires, floods, typhoons, earthquakes, personnel injuries (that may cause temporary or permanent disability), food poisoning, statutory communicable diseases (SARS) and water pollution. The Procedure and the Rules are applicable to any emergency that may result in environmental pollution as well as causing the personnel to lose their lives and properties.

5. (4). Educational training: Educational training on safety and health

   • A. Implemented for new personnel. In 2022, a total of 30 people participated in the training.

   • B. For those who shift their jobs.

   • C. Educational training on safety and health for new managerial officers.

6. (5). Equipment safety:

   • A. Inspections on each part of a forklift shall be implemented annually on a regular basis. Braking, directional, stowage and oil-pressure devices as well as clutches, roofs and masts shall also be inspected for abnormalities every month.

   • B. The machines and protection devices shall be inspected for their normality before work. Where they make unusual sounds or if other abnormalities are identified during their operation, they must be shut down and inspected as soon as possible. Compliance with this matter along with the focus on it are especially required for high-speed and high-pressure machines.

   • C. Where the sound made by machines and equipment in the workplace exceeds the standard decibel level, measures such as engineering improvement and machine repair shall be taken to reduce or isolate noises. Soundproofing protection devices (e.g. earplugs and earmuffs) may be worn to prevent hearing damage.

   • D. A special health checkup was implemented for special operators in 2022.

7. (6). Environmental safety:

   • A. Sorting and rectifying the places of operations on a daily basis.

   • B. Inspecting domestic drinking water and the water dispensers periodically.

   • C. Inspecting noises, dust and illuminance periodically.

   • D. The 5S movement for all factories were conducted in 2022.

8. (7). Medical treatment and health care:

   • A. Implementing annual health checkups for employees and special health checkups for special operators.

   • B. Hiring nurses and doctors to be stationed at the factories and provide consulting services. In 2022, doctors were stationed at the factories for a total

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Five. Operational Overview

of 30 times.

     - C. Breastfeeding rooms have been set up in accordance with the Act of Gender Equality in Employment.

  - (8). Fire safety: A completed fire protection system has been set up in accordance with the Fire Services Act and the established Fire Protection Plan while the educational training on reporting, fire extinguishment and refuge is conducted. In 2022, we conducted these kinds of training once.

1. For other important agreements, the Company implements regular labormanagement meetings in line with the implementation of the labor-management meeting regulations specified in Article 83 of the Labor Standards Act. Thus, the both parties are able to voice their opinions and achieve adequate communication and coordination.

2. (II). A specification of losses arising as a result of labor-management disputes in the most recent year and up to the publication date of the annual report (including any violations of the Labor Standard Act identified in labor inspection; the disciplinary date, number of the disciplinary letter, provisions violated, requirements of the provisions violated, and specific punishment shall be specified), the estimated amount of the losses that may incur currently or in the future and the responsive actions taken, and the reasons in case the losses cannot be reasonably estimated.

3. A specification of losses arising as a result of labor-management disputes in the most recent year and up to the publication date of the annual report: None.

4. The estimated amount of the losses that may incur currently or in the future and the responsive actions taken: The Company has reached a consensus between labor and management. With a harmonious labor-management relation, we have not suffered any losses due to labor-management disputes. The possibility of suffering any losses due to these disputes in the future is expected to be extremely low.

VI. Cyber security management

• (I). Descriptions of the cyber security risk management structure, cyber security policies, specific management plans and resources invested in cyber security management.

• Information security risk management structure: The Company has enhanced the information safety management to ensure the confidentiality, completeness and availability of the information assets. The goal is to provide an information environment for the continuous operation of the Company’s business. The Company has not established a cross-department Information Security Committee. As a result, the officer of the General Administration Division (which is superior to the Information Management Department) is currently responsible for this matter.

• Cyber security policy

  • (1). The Information Management Department under the General Administration Division is currently responsible for organizing all matters related to information security management.

  • (2). Establishing a list of information assets and personal data for regular inventory; Conducting risk management with risk assessment on information security and

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Five. Operational Overview

personal data as well as implementing all control measures.

  - (3). Holding irregular educational training and dissemination on information security and personal data protection; The new personnel shall sign a nondisclosure agreement for cyber security.

  - (4). The employees of the Company shall comply with the Company’s security specifications on information or confidentiality.

  - (5). The suppliers and outsourced companies of Rexon shall comply with the Company’s information security specifications and agreements.

  - (6). Proper backups and redundancy are set up for important information systems or equipment.

  - (7). The installation of antivirus software in all personal computers as well as regular updates are required while the use of unauthorized software is prohibited.

  - (8). Establishing the management mechanism of continuous business operation and implementing regular internal audits every year to ensure the effectiveness of the information security and personal data protection management system.

1. Specific cyber management plans and the resources input for the cyber security management:

   • (1). Security management with respect to information assets.

   • (2). Security management with respect to networks and computer systems.

   • (3). System access control and security management with respect to the development and maintenance of the systems.

   • (4). Maintenance services of the outsourced professional computer and information companies.

   • (5). Listing the inspection and control on information security and personal data protection as items to be covered in the annual audit.

   • (6). Self-inspections shall be implemented annually based on the internal control system, and the implementation performance shall be reported to the Board of Directors along with the Statement of Internal Control System.

2. (II). A specification of losses arising as a result of material cyber security incidents in the most recent year and up to the publication date of this annual report, possible impact thereof and responsive actions therefor, and the reasons in case the losses cannot be reasonably estimated: None.

VII. Important contracts:

Unit: NTD thousand

March 31, 2023

Nature of			Financing	Financing
	Party	Contract start/end date			Restrictive clause
contract			limit	balance
Long-term borrowings	Hua Nan Commercial Bank	From February 2020 to April 2025	630,000	450,000	“Returning overseas Taiwanese businesses” of the National Development Council
Long-term borrowings	Hua Nan Commercial Bank	From December 2021 to January 2025	500,000	316,667
Long-term borrowings	Chang Hwa Bank	From May 2022 to May 2026	200,000	158,333

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Six. Overview of Finance

Six. Overview of Finance

I. Condensed balance sheet and income statement for the most recent five years

• (I). Condensed balance sheet and statement of comprehensive income 1. Consolidated condensed balance sheet - IFRSs

Unit: NTD thousand

Year	Year	Financial Information for the Most Recent Five Years	Financial Information for the Most Recent Five Years	Financial Information for the Most Recent Five Years	Financial Information for the Most Recent Five Years	Financial Information for the Most Recent Five Years
		2018	2019	2020	2021	2022
Item
Current assets		4,470,163	4,105,697	6,345,935	8,517,980	3,439,260
Property, Plant and Equipment		2,182,088	2,337,281	2,852,873	3,266,653	3,119,127
Intangibleassets		56,503	58,581	62,728	62,399	66,904
Other assets		301,344	402,875	279,612	674,401	1,128,666
Total assets		7,010,098	6,904,434	9,541,148	12,521,433	7,753,957
Current liabilities	Before distribution	4,097,955	3,350,997	5,418,990	7,636,914	3,582,385
	After distribution	4,460,902	3,895,418	6,072,295	8,181,335	Note 3,582,385
non-current liabilities		362,585	101,947	360,965	634,116	662,245
Total liabilities	Before distribution	4,460,540	3,452,944	5,779,955	8,271,030	4,244,630
	After distribution	4,823,487	3,997,365	6,433,260	8,815,451	Note 4,244,630
Equity attributable to owners of the parent
Share capital		1,814,735	1,814,735	1,814,735	1,814,735	1,814,735
Capitalsurplus		433	433	433	586	586
Retained earnings	Before distribution	694,728	1,665,229	2,098,057	2,572,950	1,812,259
	After distribution	331,782	1,120,808	1,444,752	2,028,529	Note 1,812,259
Otherequityinterest		18,926	-49,668	-177,225	-163,182	-143,923
Treasury share		-	-	-	-	-
non-controllinginterest		20,736	20,761	25,193	25,314	25,670
Total equity interest	Before distribution	2,549,558	3,451,490	3,761,193	4,250,403	3,509,327
	After distribution	2,186,611	2,907,069	3,107,888	3,705,982	Note 3,509,327

Note 1: The financial data from 2018 to 2022 have been audited by CPAs.

Note 2: The proposal for 2022 distribution of earnings has been approved by the Board of Directors.

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Six. Overview of Finance

2. Consolidated condensed statement of comprehensive income - IFRSs

Unit: NTD thousand

Year		Financial Information for the Most Recent Five Years	Financial Information for the Most Recent Five Years	Financial Information for the Most Recent Five Years	Financial Information for the Most Recent Five Years	Financial Information for the Most Recent Five Years	Financial Information for the Most Recent Five Years	Financial Information for the Most Recent Five Years	Financial Information for the Most Recent Five Years
Item	2018		2019		2020			2021		2022
Operatingrevenue	6,185,512		7,902,085		11,374,207		18,366,823			4,549,308
Grossprofit	1,234,074		1,572,411			1,971,122		2,517,770		154,860
Operating profit/loss		543,584		693,724		1,156,066		1,425,215		(429,577)
Non-operatingrevenue and expense		31,547		49,249		(97,143)		(106,098)		29,006
Profit before tax		575,131		742,973		1,058,923		1,319,117		(400,571)
Net profit of continuing operations in		461,204		558,368		822,190		1,055,949		(299,120)
currentperiod
Loss from discontinuingoperation		(62,227)		713,994		0		0		0
Net income(loss)in currentperiod		398,977	1,272,362			822,190		1,055,949		(299,120)
Other comprehensive income in	(112,002)			(7,483)		31,933		69,448		102,464
currentperiod (net after tax)
Total comprehensive income in		286,975	1,264,879			854,123		1,125,397		(196,656)
currentperiod
Net profit attributable to owners of the		398,728	1,272,197			817,480		1,052,892		(298,921)
parent
Net profit attributable to non-		249		165		4,710		3,057		(199)
controllinginterests
Comprehensive income attributable to		286,544	1,264,854			849,691		1,125,276		(197,012)
owners of the parent
Comprehensive income attributable to		431		25		4,432		121		356
non-controllinginterests
Earningsper Share		2.20		7.01		4.50		5.80		(1.65)
Note 1: The financial data from 2018 to 2022 have been audited by CPAs.
3. Separate condensed statement of comprehensive income -								IFRSs
								Unit: NTD thousand
Year			Financial Information for the				Most	Recent Five Years
Item		2018		2019		2020		2021		2022
Operatingrevenue		6,104,808		7,819,568		11,294,487		18,311,982		4,439,027
Grossprofit		1,005,232		1,357,649		1,791,272		2,478,088		87,410
Operating profit/loss		501,052		652,932		1,091,589		1,497,634		(399,581)
Non-operatingrevenue and expense			10,474	859,084		(44,563)		(187,427)		(1,562)
Profit before tax		511,526		1,512,016		1,047,026		1,310,207		(401,143)
Net profit of continuing operations in current		398,728		1,272,197		817,480		1,052,892		(298,921)
period
Loss from discontinuingoperation			0		0		0		0		0
Net income(loss)in currentperiod		398,728		1,272,197		817,480		1,052,892		(298,921)
Other comprehensive income in current period		(112,184)		(7,343)		32,211		72,384		101,909
(net after tax)
Total comprehensive income in current	period	286,544		1,264,854		849,691		1,125,276		(197,012)
Netprofit attributable to owners of the	parent	398,728		1,272,197		817,480		1,052,892		(298,921)
Net profit attributable to non-controlling
interests
Comprehensive income attributable to owners		286,544		1,264,854		849,691		1,125,276		(197,012)
of theparent
Comprehensive income attributable to non-
controllinginterests
Earningsper Share			2.20		7.01		4.50		5.80	(1.65)

Note 1: The financial data from 2018 to 2022 have been audited by CPAs.

Note 1: The financial data from 2018 to 2022 have been audited by CPAs.

• 85 -

Six. Overview of Finance

4. Separate condensed balance sheet - IFRSs

Unit: NTD thousand

Year Item	Year Item	Financial Information for the Most Recent Five Years	Financial Information for the Most Recent Five Years	Financial Information for the Most Recent Five Years	Financial Information for the Most Recent Five Years	Financial Information for the Most Recent Five Years
		2018	2019	2020	2021	2022
Current assets		3,954,225	3,763,690	5,939,971	8,169,337	3,202,200
Property, Plant and Equipment		1,357,917	1,559,048	2,121,317	2,546,689	2,443,817
Intangible assets		7,277	9,435	13,504	14,057	19,426
Other assets		1,384,775	1,357,015	1,255,949	1,557,904	2,029,106
Total assets		6,704,194	6,689,188	9,330,741	12,287,987	7,694,549
Current liabilities	Before distribution	3,813,064	3,237,939	5,259,408	7,428,782	3,587,034
	After distribution	4,176,011	3,782,360	5,912,713	7,973,203	Note 3,587,034
non-current liabilities		362,308	20,520	335,333	634,116	623,858
Total liabilities	Before distribution	4,175,372	3,258,459	5,594,741	8,062,898	4,210,892
	After distribution	4,538,319	3,802,880	6,248,046	8,607,319	Note 4,210,892
Equity attributable to owners of the parent
Share capital		1,814,735	1,814,735	1,814,735	1,814,735	1,814,735
Capital surplus		433	433	433	586	586
Retained earnings	Before distribution	694,728	1,665,229	2,098,057	2,572,950	1,812,259
	After distribution	331,781	1,120,808	1,444,752	2,028,529	Note 1,812,259
Other equity interest		18,926	(49,668)	(177,225)	(163,182)	(143,923)
Treasury share
non-controlling interest
Total equity interest	Before distribution	2,446,487	2,528,822	3,736,000	4,225,089	3,483,657
	After distribution	2,228,719	2,165,875	3,082,695	3,680,668	Note 3,483,657

Note 1: The financial data from 2018 to 2022 have been audited by CPAs. Note 2: The proposal for 2022 distribution of earnings has been approved by the Board of Directors.

(II). Namesandauditopinions ofCPAs	(II). Namesandauditopinions ofCPAs
Year	Name of CPA	Audit opinion	Reason for change of CPA
2016	ChangTzu-Hsin,Chen Chun-Man	Unqualified opinion
2017	Kuo Shih-Hua, Chen Chun-Man	Unqualified opinion	Changes of internal administrative organization
2018	Kuo Shih-Hua,Chen Chun-Man	Unqualified opinion
2019	Kuo Shih-Hua, Wu Chun-Yuan	Unqualified opinion	Changes of internal administrative organization
2020	Kuo Shih-Hua,Wu Chun-Yuan	Unqualified opinion
2021	Kuo Shih-Hua,Wu Chun-Yuan	Unqualified opinion
2022	Kuo Shih-Hua,Wu Chun-Yuan	Unqualified opinion

• 86 -

Six. Overview of Finance

II. Financial analysis for the most recent five years

(I). Financial analysis - IFRs

1. Consolidated financial analysis – IFRSs

Year	Year
		2018	2019	2020	2021	2022
Analysis item
Financial structure (%)	Debt to assets ratio%	63.63	50.01	60.58	66.05	54.74
	Long-term capital to property, plant and equipment	133.46	152.03	144.49	149.53	133.74
Solvency %	Current ratio%	109.08	122.52	117.11	111.54	96.00
	Quick ratio%	89.67	102.2	95.83	84.91	78.64
	Interest coverage ratio	16.08	30.18	91.54	169.53	-16.85
Operating capacity	Receivables turnover(times)	4.00	5.73	6.56	8.86	3.59
	Average days of collection	91.25	63.70	55.64	41.20	101.67
	Inventoryturnover(times)	6.93	9.22	10.86	10.32	3.44
	Payables turnover(times)	2.88	4.01	3.28	4.79	1.73
	Average days in sales	52.67	39.59	33.61	35.37	106.1
	Property, plant and equipment turnover (times)	2.84	3.50	4.38	6.00	1.42
	Total assets turnover(times)	0.92	1.14	1.38	1.66	0.45
Profitability	Return on assets(%)	6.41	18.58	10.11	9.63	-2.77
	Return on equity (%)	15.91	42.40	22.80	26.36	-7.71
	Net income before tax to paid-in capital (%)	31.69	40.94	58.35	72.69	-22.07
	Netprofit margin(%)	6.45	16.10	7.23	5.75	-6.58
	Earningsper Share(%)	2.2	7.01	4.50	5.80	-1.65
Cash flow	Cash flow ratio(%)	24.92	46.66	28.22	37.14	-52.31
	Cash flow adequacyratio(%)	98.71	191.88	153.61	153.04	95.38
	Cash reinvestment ratio(%)	17.69	22.83	16.5	32.87	-38.81
Leverage	Degree of operatingleverage	2.51	2.42	2.04	2.08	-1.56
	Degree of financial leverage	1.08	1.04	1.01	1.01	0.95
Please describe the reasons for the variation of the financial ratio in the most recent two years. (The analysis is not required if the variation is less than 20%.)  The interest coverage ratio in 2022 is less than 2021, primarily as a result of the reduced net profit and increased financial cost before income tax and interest expense.  The receivables turnover (times) in 2022 is less than 2021 and the average days of collection in 2022 is more than 2021, primarily as a result of the reduced net sales and accounts receivable.  The inventory turnover (times) in 2022 is less than 2021, primarily as a result of the reduced cost of sales and inventories.  The payables turnover (times) in 2022 is less than 2021 and the average days in sales in 2022 is more than 2021, primarily as a result of the reduced net sales and cost of sales.  The property, plant and equipment turnover in 2022 is less than 2021, primarily as a result of the reduced net sales.  Return on assets, return on equity, net income before tax to paid-in capital, net profit margin, and earnings per share in 2022 are less than 2021, primarily as a result of the reduced post-tax profit or loss.  The net profit margin in 2022 is less than 2021, primarily as a result of the reduced net sales.  The cash flow ratio in 2022 is less than 2021, primarily as a result of the reduced net cash flow from operating activities.  The cash flow adequacy ratio in 2022 is less than 2021, primarily as a result of the less increase rate of the net cash flow from operating activities in the previous five years than the capital expenditure + inventory increase + cash dividends.  The cash reinvestment ratio in 2022 is less than 2021, primarily as a result of the reduced net cash flow from operating activities.  The Degree of operatingleverage in 2022 is less than 2021, primarilyas a result of the reduced net sales.

Note 1: The financial data from 2018 to 2022 have been audited by CPAs.

• 87 -

Six. Overview of Finance

2. Financial analysis - separate financial analysis – IFRSs

	Year
		2018	2019	2020	2021	2022
	Analysisitem
Financial structure (%)	Debt toassetsratio %	62.28	48.71	59.96	65.62	54.73
	Long-term capital to property, plant and equipment	212.91	221.37	191.92	190.80	168.08
Solvency %	Current ratio %	103.70	116.24	112.94	109.97	89.27
	Quick ratio %	91.47	102.31	96.43	86.11	76.05
	Interestcoverageratio	19.35	111.41	233.67	278.41	26.13
Operating capacity	Receivablesturnover(times)	3.98	5.75	6.60	8.87	3.54
	Average days ofcollection	91.71	63.48	55.30	41.15	103.11
	Inventoryturnover(times)	12.54	14.87	14.96	12.30	3.97
	Payablesturnover(times)	3.28	3.58	3.35	3.64	1.48
	Average daysinsales	29.11	24.55	24.40	29.67	91.94
	Property, plant and equipment turnover (times)	4.76	5.36	6.14	7.85	1.78
	Total assetsturnover(times)	0.96	1.17	1.41	1.69	0.44
Profitability	Returnon assets (%)	6.63	19.16	10.25	9.78	-3.12
	Returnonequity (%)	16.03	42.69	22.81	26.45	-7.76
	Net income beforetax to paid-incapital(%)	28.19	83.32	57.70	72.20	-22.10
	Netprofit margin(%)	6.53	16.27	7.24	5.75	-6.73
	Earnings perShare (%)	2.20	7.01	4.50	5.80	-1.65
Cash flow	Cash flowratio (%)	26.23	48.62	26.00	37.73	-51.18
	Cash flowadequacyratio (%)	179.82	230.36	146.45	149.76	95.95
	Cash reinvestment ratio (%)	19.22	25.82	15.07	3.95	-40.92
Leverage	Degree ofoperatingleverage	2.08	2.12	1.76	1.83	-1.13
	Degree of financial leverage	1.06	1.02	1.00	1.00	1.04
Please describe the reasons for the variation of the financial ratio in the most recent two years. (The analysis is not required if the variation is less than 20%.)  The interest coverage ratio in 2022 is less than 2021, primarily as a result of the reduced net profit and increased financial cost before income tax and interest expense.  The receivables turnover (times) in 2022 is less than 2021 and the average days of collection in 2022 is more than 2021, primarily as a result of the reduced net sales and accounts receivable.  The inventory turnover (times) in 2022 is less than 2021, primarily as a result of the reduced cost of sales and inventories.  The payables turnover (times) in 2022 is less than 2021 and the average days in sales in 2022 is more than 2021, primarily as a result of the reduced net sales and cost of sales.  The property, plant and equipment turnover in 2022 is less than 2021, primarily as a result of the reduced net sales.  Return on assets, return on equity, net income before tax to paid-in capital, net profit margin, and earnings per share in 2022 are less than 2021, primarily as a result of the reduced post-tax profit or loss.  The net profit margin in 2022 is less than 2021, primarily as a result of the reduced net sales.  The cash flow ratio in 2022 is less than 2021, primarily as a result of the reduced net cash flow from operating activities.  The cash flow adequacy ratio in 2022 is less than 2021, primarily as a result of the less increase rate of the net cash flow from operating activities in the previous five years than the capital expenditure + inventory increase + cash dividends.  The cash reinvestment ratio in 2022 is less than 2021, primarily as a result of the reduced net cash flow from operating activities.  The Degree of operatingleverage in 2022 is less than 2021, primarilyas a result of the reduced net sales.

Note 1: The financial data from 2018 to 2022 have been audited by CPAs.

• 88 -

Six. Overview of Finance

Calculation formula:

1. Financial structure

2. (1) Debt to asset ratio = total liabilities / total assets.

3. (2) The ratio of long-term capital to property, plant and equipment = (total equity + non-current liabilities)/ net amount of property, plant and equipment.

4. Solvency

5. (1) Current ratio = current assets / current liabilities.

6. (2) Quick ratio = (current assets - inventory - prepayments) / current liabilities.

7. (3) Interest coverage ratio = net profit before interest and tax / interest expenses for the current period.

8. Operating capacity

9. (1) Receivables (including accounts receivable and notes receivable from business activities) turnover ratio = net sales / average receivables balance (including accounts receivable and notes receivable from business activities).

10. (2) Average days of collection = 365 / receivables turnover.

11. (3) Inventory turnover = cost of sales / average inventory amount.

12. (4) Payables (include payable amounts and payable bills from operation) turnover = sales cost / average accounts payable in each period (include payable amounts and payable bills from operation) balance.

13. (5) Average days in sales = 365 / inventory turnover.

14. (6) Property, plant and equipment turnover = net sales / average net amount of property, plant and equipment.

15. (7) Total assets turnover = net sales / average total assets.

16. Profitability

17. (1) Return on assets = [net profits after tax + interest expense x (1 - tax rate)]/average total assets.

18. (2) Return on equity = after tax net profit / average total equity.

19. (3) Net profit margin = after tax net profit/net sales.

20. (4) Earnings per share = (profit/loss attributable to owners of the parent - preferred dividends) / weighted average number of shares issued. (Note 4)

21. Cash flow

22. (1) Cash flow ratio = net cash flow from operating activities / current liabilities.

23. (2) Cash flow adequacy ratio = net cash flow from operating activities in the most recent five years / (capital expenditure + inventory increase + cash dividends) in the most recent five years.

24. (3) Cash reinvestment ratio = (net cash flow from operating activities - cash dividends) / (gross amount of property, plant and equipment + long term investment + other non-current assets + working capital). (Note 5)

6. Leverage

• (1) Degree of operating leverage = (net operating revenue - variable operating cost and expense) / operating income (Note 6).

• (2) Degree of financial leverage = operating income / (operating income - interest expense).

• III. If the Company or the affiliates have experienced financial difficulties in the most recent year up to the publication date of the annual report, the impact on the finance status of the Company shall be specified. The term "affiliates" as used in Subparagraph (6) above refers to entities meeting the requirements set forth under Article 369-1 of the Company Act.

• (I). The Company and affiliates dies not experience financial difficulties in the most recent year up to the publication date of the annual report.

• 89 -

Six. Overview of Finance

IV. The Audit Committee’s audit report on the financial reports in the most recent year

Audit Report of the Audit Committee

We, the Audit Committee of the Company, hereby acknowledge that the Board of Directors has worked out and submitted hereto the business report, financial statements, and earnings distribution proposal of the Company for 2022 and that among them, the financial statement have been duly audited by KPMG with an audit report issued. The above business report, financial reports and earnings distribution proposal have been audited by the Audit Committee and no discrepancy has been found. We, therefore, prepare this report for your reference in accordance with Article 14-4 of the Securities and Exchange Act and Article 219 of the Company Act.

To

Rexon 2023 Annual Shareholders’ Meeting

Rexon Industrial Corp., Ltd.

Audit Committee Convener: Hung Chao-Nan

February 23, 2023

• 90 -

Seven. Review and Analysis of Financial Status and Operational Results, and Risk Assessment

Seven. Review and Analysis of Financial Status and Operational Results, and Risk Assessment

I. Financial status

• (I). The main reasons for any material change in the Company's assets, liabilities, or equity in the most recent two years, and the effect thereof; where the effect is of material significance, describe the measures to be taken.

• The current assets in the current period are reduced by NT$5,078,720 thousand in comparison with the previous period:

  • (1). The cash and bank deposit is reduced by NT$2,603,960 thousand as a result of the reduced sales amount and the adjustment of the funds.

  • (2). The net accounts receivable are reduced by NT$979,493 thousand as a result of the reduced net sales of NT$13,817,515 thousand in 2022 compared with that in 2021.

  • (3). The inventory is reduced by NT$1,392,459 thousand as a result of the operating requirements.

• The non-current assets in the current period are increased by NT$311,244 thousand in comparison with the previous period:

  • (1). The deferred tax assets are increased by NT$83,775 thousand.

  • (2). The non- current defined benefit assets are increased by NT$115,340 thousand as a result of the actuarial pension.

  • (3). Other non-current assets as a result of the increased prepayments for business facilities.

• The current liabilities in the current period are reduced by NT$4,054,529 thousand in comparison with the previous period:

  • (1). The current contract liabilities are reduced by NT$504,442 thousand as a result of the adjusted amount of NT$491,831 thousand generated from amendment of contracts.

  • (2). The notes payable are reduced by NT$955,360 thousand, the accounts payable are reduced by NT$2,901,730 thousand, and other payables are reduced by NT$159,105 thousand as a result of the reduced sales amount and thus the reduced accounts payable.

  • (3). The tax liabilities in the current period are reduced by NT$185,745 thousand.

  • (4). The long-term borrowings due within one year are increased by NT$319,769 thousand as a result of fund procurement.

  • (5). Other current liabilities are increased by NT$321,378 thousand as a result of the increased temporary credits.

• The non-current liabilities in the current period are increased by NT$28,129 thousand in comparison with the previous period:

  • (1). The long-term borrowings are increased by NT$44,221 thousand as a result of fund procurement.

  • (2). The deferred tax liabilities are reduced by NT$(6,491) thousand.

  • (3). The current lease liabilities are reduced by NT$9,601 thousand as a result of amortization of car and factory building rentals.

• The equity attributable to owners of the parent is reduced by NT$741,432 thousand.

  • (1). The retained earnings are reduced by NT$760,691 thousand as a result of the reduced net profit in current period.

• Countermeasures of the Company:

  • (1). Develop operation models and innovative technologies in line with the trends and opportunities to increase product and technology innovation results and improve the overall added value.

  • (2). Improve the production and operation efficiency of the Company by implementing lean management throughout the Company to enhance the competitive advantages.

  • (3). Enhance the competitive advantages in the supply chain by improving the supply chain quality, productivity, cost, and lead time.

  • (4). Meet the needs of the customers in every aspect by providing comprehensive and attentive services.

• 91 -

Seven. Review and Analysis of Financial Status and Operational Results, and Risk Assessment

II. Financial performance

• (I). The main reasons for any material change in the Company's operating revenue, operating net profit, and net profit before tax in the most recent two years, expected sales volume and its basis, potential impact on the finance and business of the Company, and countermeasures

• The operating revenue is reduced by NT$13,817,515 thousand in comparison with the previous period as a result of the decline of the customer needs and thus the reduced purchase from the customers.

• The gross profit is reduced by NT$2,362,910 thousand as a result of the less operating revenue than the amount in the previous period.

• The operating expenses are reduced by NT$508,118 thousand primarily as a result of the reduction of the marketing administrative expenses by NT$303,674 thousand and NT$131,410 thousand, respectively.

• The operating income is reduced by NT$1,854,792 thousand in comparison with the previous period, primarily as a result of the reduction of the gross profit and operating expenses by NT$2,362,910 thousand and NT$508,118 thousand, respectively.

• The non-operating revenue is increased by NT$135,104 thousand in comparison with the previous period, primarily as a result of the increased foreign exchange gains by NT$138,967 thousand.

• The profit before tax is reduced by NT$1,719,688 thousand in comparison with the previous period, primarily as a result of the reduced operating income by NT$1,854.,792 thousand and the increased non-operating revenue by NT$135,104 thousand.

III. Cash flow

(I). Analysis and description of variations in cash flow in the most recent year

Year	2022	2021	Increase (decrease)
**Item **			ratio %
Cash flow ratio	-52.31	37.14	-240.85%
Cash flow adequacy
	95.37	153.04	-37.68%
ratio
Cash reinvestment
	-38.80	32.87	-218.07%
ratio

1. The cash flow ratio in 2022 is less than 2021, primarily as a result of the reduced net cash flow from operating activities.

2. The cash flow adequacy ratio in 2022 is less than 2021, primarily as a result of the less increase rate of the net cash flow from operating activities in the previous five years than the capital expenditure + inventory increase + cash dividends.

3. The cash reinvestment ratio in 2022 is less than 2021, primarily as a result of the reduced net cash flow from operating activities.

4. (II). Cash liquidity analysis for the next fiscal year

Unit: NTD thousand

Cash balance at the	Annual net cash flow from	Annual cash	Cash surplus
beginning ofperiod	operating activities	outflow(inflow)	(deficit)
1,970,759	100,000	600,000	1,470,759

1. Operating activities: The Company estimates a net cash inflow from operating activities valued at about NT$100,000 thousand.

2. Investment activities: The Company estimates an increased amount of investment in equipment.

3. Financing activities: The Company estimates an increased bank loan.

(III). Improvement plan for insufficient liquidity: N/A.

• 92 -

Seven. Review and Analysis of Financial Status and Operational Results, and Risk Assessment

• IV. The Impact of major capital expenditures in the most recent year on finance and business

• (I). The impact of major capital expenditures in the most recent year on finance and business: In response to the expansion of our operation scale, the Company will focus on fitness devices in Taiwan plants and investment in related automated machinery and equipment is needed. If the Company cannot increase the revenue correspondingly, the finance will be affected negatively.

• V. The reinvestment policy for the most recent year, the main reasons for the profit/loss generated thereby, the improvement plan, and the investment plan for the coming year

• (I). Reinvestment policy: Direct services to customers, complete product lines, and assurance of capacity.

• (II). Profit/loss from reinvestment:

Name of investee	Cost of investment	Carrying amount	Current (loss) gain	Investment (loss) gain	Main reason and improvement plan
Fine Clear Co.,Ltd.	14,197	16,420	1,177	188
Rexon Technology Corp.,Ltd.	293,741	97,871	309	256
Power Tool Specialists Inc.	196,465	154,890	(6,289)	(6,046)	As the sales on the domestic market in the U.S.A were less than the economic scale, the Company will reduce the cost and expense in 2023 to achieve operating income.
Gold Item Group Limited	747,858	702,524	(3,919)	(3,919)	Tongxiang Rexon Industrial was affected by the pandemic in 2022. Improvement of the efficiency and reduction of the cost and expense will be performed in 2023 to achieve operatingincome.
Subtotal	1,252,261	971,705	(8,722)	(9,521)

• (III). Investment plans for the future: Develop operation models and innovative technologies in line with the trends and opportunities in 2023 to increase product and technology innovation results and improve the overall added value. Improve the production and operation efficiency of the Company by implementing lean management throughout the Company to enhance the competitive advantages, meet the needs of the customers, create a win-win situation in the partnership, and pursue optimal growth and sustainable operations of the Company.

VI. Risk management and assessment

(I). The impact of the fluctuation in interest, exchange rates and inflation on the profit and loss of the Company, and the countermeasures in the future:

1. Impact on the profit and loss of the Company: (NTD thousand; %)

Item	Net interest income (expense)	Net exchange profit (loss)	Ratio of net interest income/expense to net operating revenue	Ratio of net interest income/expense to profit before tax	Ratio of net exchange profit/loss to net operating revenue	Ratio of net exchange profit/loss to profit before tax
2022	(16,581)	50,388	0.36%	-4.14%	-1.11%	12.58%

• (1). Fluctuation in interest rate: The borrows of the Company are floating rate liabilities. Thus, the fluctuation of the market interest rate will lead to the change in the effective interest rate of the borrowings and, if other variables remain unchanged, the net profit will fluctuate. With the level of borrowing in 2022 as the reference, whenever the interest rate increases or decreases by 1%, the net profit of the consolidated company in 2022 will decrease or increase by NT$14,816 thousand.

• (2). Fluctuation in exchange rate: The Company has financial assets and liabilities denominated in foreign currencies. Assuming that other variables remain unchanged, when the exchange rate of TWD against USD, Euro, JPY and GBP fluctuates by 1% at the end of period, the net profit after tax will change by NT$17,694 thousand.

• (3). Inflation: The Company purchases most of the merchandises from foreign countries while purchasing finished products mainly on the domestic market. Taking the purchase amount of about NT$2.6 billion for merchandises and materials in 2022 as an example, whenever the inflation rate increases by 1%, the cost of the Company in 2022 will increase by about

• 93 -

Seven. Review and Analysis of Financial Status and Operational Results, and Risk Assessment

NT$26,000 thousand.

1. Countermeasures in the future:

   • (1). Countermeasures for fluctuation in interest rate: Control the fluctuation in interest rate for all the related financial products through analysis and assessment based on the flow of funds in the future to effectively cope with different potential risks brought about by the fluctuation in interest rate. As for long-term and short-term borrowings, maintain good interaction with banks to acquire the best interest rate level.

   • (2). Countermeasures for fluctuation in exchange rate: Build foreign exchange hedging mechanisms based on working capital plans and exchange development trends in the future. Operate hedging instruments under these mechanisms and maintain good relationship with banks to acquire the latest exchange information and perform hedging operation in a timely manner.

   • (3). Countermeasures for inflation: The Company meets customer needs for quality, after-sales services, R&D, and design on an ongoing basis to mitigate the impact of inflation (variation of economy). In addition, the Company continues to reduce the failure cost and waste to the extent of more than 10% by improving the revenue by more than 10% through the REXON101 project to mitigate the impact of inflation.

2. (II). Policies on engaging in high risk and high leverage investments, loaning funds to others, endorsement and guarantee as well as derivative transactions, main reasons for profit and loss, and countermeasures in the future:

3. The Company is not engaged in high risk and high leverage investments in the current year.

4. The loaning funds to others, endorsement and guarantee in which the Company is engaged in the current year are subjected to the “Procedure for Loaning Funds to Others” and the “Endorsement/Guarantee Procedure”.

5. The derivative transactions in which the Company is engaged are mainly for the mitigation of the foreign currency risk. Since the counterparties are international leading banks and premium domestic banks, the Company finds the probability of their violation is extremely low and, in case this occurs, the amount is not big.

(III). R&D plans and expected investment funds in the future.

Item no.	Plans for the most recent year	Current progress	R&D funds to be invested	Time to finish for mass production	Main factors influencing R&D success in the future
1	Development of new PET portable product	Depending on the development progress of the department	5,000	Depending on the development progress of the department	Lead time, quality, cost
2	Development of winch machine	Depending on the development progress of the department	5,000	Depending on the development progress of the department	Lead time, quality, cost
3	Woodworking machine: Development of new product	Depending on the development progress of the department	20,000	Depending on the development progress of the department	Lead time, quality, cost
4	Fitness device: Development of new product	Depending on the development progress of the department	60,000	Depending on the development progress of the department	Lead time, quality, cost
5	Fitness device and woodworking machine: R&D of instrument and control system	Depending on the development progress of the department	30,000	Depending on the development progress of the department	Reliability and life of control system
6	Development of innovative product	Preparation of samples for design and development	30,000	Depending on the market demand for theproduct	Lead time, quality, cost

• 94 -

Seven. Review and Analysis of Financial Status and Operational Results, and Risk Assessment

• (IV). Impact of the variations in important domestic/foreign policies and laws on the finance and business of the Company and countermeasures:

• The Company pays attention to the variations in important domestic/foreign policies and laws at all times and assesses their impact on the Company. There is no material adverse effect on the finance and business of the Company in the most recent year.

• (V). Impacts of changes in technology (including cyber security risk) and industry on the finance and business of the Company and countermeasures: None.

• The Company ensures understanding the development of the industry quickly by keeping close to the market and enhancing customer relationship. The Company is dedicated to innovation and research, and maintains relationship with the academic cycle to understand the changes in technology. There is no material adverse effect on the finance and business of the Company in the most recent year.

• (VI). Impacts on crisis management and response measures in the event of changes in the corporate image: None.

• (VII). Expected benefits and possible risks associated with mergers and acquisitions, and countermeasures: None.

• (VIII). Expected benefits and possible risks associated with any plant expansion and countermeasures: The Company continues to expand the plant and equipment, and improve the process thoroughly in response to the needs of the customers. If the Company cannot increase the revenue correspondingly, the finance will be affected negatively. The Company will continuously perform leveling in the planning of the capacity to reduce the risk.

• (IX). Risks associated with any centralization of purchasing or sales operations, and countermeasures: With this respect, the Company serves a handful of customers and continues to assess their financial status, the actual collection situation, and regularly assess the possibility of collecting receivables in order to reduce the risk.

• (X). Impacts and risks from large transfers of shares held by our company’s directors, supervisors, and large shareholders holding more than 10% of shares, and countermeasures: None.

• (XI). Impacts and risks from variations in the Company’s management rights and countermeasures: None.

• (XII). Litigation and non-contentious cases: None.

• (XIII). Other major risks and countermeasures: None

VII. Other important matters

(I). Risk	management organization:	management organization:
Risk management	Responsible department	Risk responsibility
Financial risk	General Administration Division	Responsible for calculation of the costs, funds procurement and control, and exchange and interest rate risk
Liquidity risk
Market risk	Marketing&Product Dept and Sales Dept	Responsible for assessment of customer’s financial status, investigation and assessment of domestic and overseas markets, development of business,and sales
Credit risk
Strategic risk and operational risk	General Administration Division	Responsible for planning the operating strategies of the Company
	Manufacturing Division and Global Procurement Dept	Responsible for global procurement of (raw) materials, improvement of manufacturing capacity, minimum production costs, and products of optimalquality.
	Technical Division	Responsible for product strategies, improvement and development of new products, protection the intellectual property rights of the Company, and establishment andmaintenance of the quality system.
	HR Division	Responsible for the personnel policy and corporate image of the Company

• 95 -

Eight. Special Items

Eight. Special Items

I. Information on affiliated companies

• (I). Consolidated business report of affiliated companies

• Organizational chart

==> picture [210 x 165] intentionally omitted <==

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

Rexon Industrial Corp., Ltd.
Rexon Technology Corp., Ltd.
(Rexon Tech)
Gold Tech Group Ltd.
Tongxiang Rexon Industrial Co., Ltd.
(Tongxiang Rexon)
----- End of picture text -----

1. Basic information on affiliated companies

March 31, 2023

Company	Establishm	Address	Paid-up capital	Primary business or	Division of work among the
name	ent date			production item	affiliated companies that have
					mutual business relationship
Rexon Industrial Corp., Ltd.	1973/4/30	No. 261, Renhua Rd., Dali Dist., Taichung City	1,814,735,000	Development, design and sale of drilling machines, power tools and fitness devices	Manufacturing of the machines at high unit price and development of newproducts
Power Tool Specialist, INC	1980/9/4	684 Huey Road, Rock Hill ,SC ,29730 USA	US$100	Marketing and services of woodworking machines and power tools	Sales and service sites in the USA
Gold Item Group Ltd.	1990/01	P.O.Box957,Offshore Incorporations Centre, Road Town, Tortola, British Virgin Islands	US$25,000,000	A holding company engaging in international investment	None
Gold Tech Group Ltd.	2011/5/31	Rooms 1806-7,Bank Centre 636 Nathan Rd, Kowloon	US$ 25,000,000	A holding company engaging in international investment	None
Tongxiang Rexon Industrial Co., Ltd.	2012/6/27	No. 258, Gaoxinxi 2nd Rd., Tongxiang Economic Development Zone, Tongxiang City	RMB 154,424,322	Production and sale of electrical equipment, woodworking machines and their parts	Production of some drilling machines and woodworking machines that Rexon needs
Rexon Technology Corp., Ltd.	1990/1/23	No. 261, Renhua Rd., Dali Dist., Taichung City	94,740,650	Research, development, design, manufacture, processing, and transaction of IT and communication product and components	Production of some controllers, instruments and parts that Rexon needs

• 96 -

Eight. Special Items

1. Information on the same directors of entities presumed to have a controlling and subordinate relationship: None.

2. Basic information on the directors, supervisors and President of the affiliated companies

			April 1,2023	April 1,2023
			Shareholding
Company name	Title	Name or representative	Number of	Shareholding
			shares	ratio
Rexon Industrial Corp., Ltd.	President	WangKuan-Hsiang	3,750,178	2.07%
	Director	Representative of Kun Forever Co.,Ltd.: WangChen,Li-Mei	20,196,000	11.13%
	Director	Lin Shyi-Ying	892,824	0.49%
	Director	HuangChin-Hsiang	852,094	0.47%
	Director	Kuo Pu-Chao	10,000	0.01%
	Independent director	Hung Chao-Nan	0	0.00%
	Independent director	Liu Pei-Yao	0	0.00%
	Independent director	Lee Cherng	0	0.00%
	Independent director	Wu Chwan-Chyuan	0	0.00%
	General Manager	Lo Cheng-Chou	82,145	0.05%
Power Tool Specialist, INC	President	WangKuan-Hsiang	0	0.00%
	General Manager	RayHolbrook	0	0.00%
	Director serving as CFO concurrently	Wang Kuan-Chuan	0	0.00%
	Director serving as secretary concurrently	Chen Shu-Ping	0	0.00%
Gold Item Group Ltd.	Director	Corporate representative of Rexon: WangKuan-Hsiang	25,000,000	100%
Tongxiang Rexon Industrial Co., Ltd.	President	Corporate representative of Gold Tech: Liu Kang	25,000,000	100%
	Director	Tsai Peng-Chi	0	0.00%
	Director	Hsu Sen-Yuan	0	0.00%
	Director	Hans Hsieh	0	0.00%
	Director	ChengMei-Ling	0	0.00%
	Director	ChangYu-Ming	0	0.00%
	Supervisor	He Hsiu-Yuan	0	0.00%
	Supervisor	Tsai Hsiu-Feng	0	0.00%
Gold Tech Group Ltd.	Director	WangChen,Li-Mei	0	0.00%
	Director	WangKuan-Hsiang	0	0.00%
	Director	Chen Shu-Ping	0	0.00%
	Director	HuangChin-Hsiang	0	0.00%
	Director	Chen Chun-Wei	0	0.00%
	Director	Lo Cheng-Chou	0	0.00%
	Director	He Hsiu-Yuan	0	0.00%
	Shareholder	Gold Item GroupLtd.	10,000	100 %
Rexon Technology Corp., Ltd.	President	Corporate representative of Rexon: Li Huang-Chang	7,851,427	82.87%
	Director	Corporate representative of Rexon: Chen Chun-Wei	7,851,427	82.87%
	Director	Corporate representative of	7,851,427	82.87%

• 97 -

Eight. Special Items

			Shareholding	Shareholding
Company name	Title	Name or representative	Number of	Shareholding
			shares	ratio
		Rexon: He Hsiu-Yuan
	Director	Corporate representative of Rexon: Kuo Pu-Chao	7,851,427	82.87%
	Director	Corporate representative of Rexon: ChangYu-Ming	7,851,427	82.87%
	Supervisor	Corporate representative of Weidian: WangChen,Li-Mei	56,102	0.59%
	Supervisor	Corporate representative of Weidian: Chen Shu-Chi	56,102	0.59%

5. Operational overview of affiliated companies

Unit: NTD thousand

							Current
					Operating	Operation
Company name	Paid-up capital	Total assets	Total liabilities	Net worth			profit/loss (after
					revenue	income (loss)
							tax)
Rexon Industrial	1,814,735	7,694,549	4,210,892	3,483,657	4,439,027	(399,581)	(298,921)
Gold Item	747,858	683,493	0	683,493	0	0	(3,919)
	US$25,000	US$22,256	US$0	US$22,256	US$0	US$0	(US$131)
Tongxiang Rexon Industrial	745,565	1,005,884	323,872	682,012	986,051	(23,564)	(3,924)
	US$25,000	US$32,754	US$10,546	US$22,208	US$33,078	(US$790)	(US$132)
P.T.S.	130,871	147,889	11,817	136,072	20,652	(47,890)	(6,298)
	US$4,058	US$4,816	US$385	US$4,431	US$693	(US$1,607)	(US$211)
Rexon Technology	94,741	178,027	59,929	118,098	145,895	3,378	309

1. Consolidated financial statements of affiliated companies and information on endorsement, guarantee, loaning funds to others as well as derivative transactions: The companies that shall be included in the consolidated financial statements of affiliated companies in 2022 under the “Criteria Governing Preparation of Affiliation Reports, Consolidated Business Reports and Consolidated Financial Statements of Affiliated Enterprises” are identical with the companies to be included into the consolidated financial statements of the parent company and subsidiaries pursuant to IFRS 10 approved by the Financial Supervisory Commission. Furthermore, the information to be disclosed in the consolidated financial statements of the affiliated companies has also been disclosed in the aforementioned consolidated financial statements of the parent company and subsidiaries, and thereby it is not necessary to compile the consolidated financial statements of the affiliated companies.

2. Affiliation report: N/A.

II. Private placement of securities in the most recent year up to the publication date of the annual report

• (I). Private placement of securities in the most recent year up to the publication date of the annual report: None.

III. Holding or disposal of the Company’s shares by subsidiaries in the most recent year up to the publication date of the annual report

• (I). Holding or disposal of the Company’s shares by subsidiaries in the most recent year up to the

• 98 -

Eight. Special Items

publication date of the annual report: None.

IV. Additional information required to be disclosed

• (I). Additional information required to be disclosed: None.

• V. Any of the matters stated in Article 36, Paragraph 3, Subparagraph 2 of the Securities and Exchange Act which may have significant impact on the shareholders’ equity or the price of the securities in the most recent year up to the publication date of the annual report

• (I). Any of the matters stated in Article 36, Paragraph 3, Subparagraph 2 of the Securities and Exchange Act which may have significant impact on the shareholders’ equity or the price of the securities in the most recent year up to the publication date of the annual report: None.

• 99 -

Nine. Financial Reports

I. Financial Reports in the Most Recent Year

INDEPENDENT AUDITORS’ REPORT

To the Board of Directors of Rexon Industrial Corp., Ltd.:

Opinion

We have audited the financial statements of Rexon Industrial Corp., Ltd.(“the Company”), which comprise the balance sheets of December 31, 2022 and 2021, the statement of comprehensive income, changes in equity and cash flows for the years then ended, and notes to the parent company only financial statements, including a summary of significant accounting policies.

In our opinion, the accompanying parent company only financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2022 and 2021, and its financial performance and its cash flows for the years then ended in accordance with the Regulations Governing the Preparation of Financial Reports by Securities Issuers.

Basis for Opinion

We conducted our audits in accordance with the Regulations Governing Auditing and Attestation of Financial Statements by Certified Public Accountants and Standards on Auditing of the Republic of China. Our responsibilities under those standards are further described in the Auditors’ Responsibilities for the Audit of the parent company only Financial Statements section of our report. 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 believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis of our opinion.

Key Audit Matters

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

1. Revenue recognition

Please refer to Note 4(o) and Note 6(t) of the parent company only financial statements for accounting policies on revenue recognition and revenue recognition, respectively.

• 100 -

Description of key audit matter:

Revenue is recognized when the control over a product has been transferred to the customer as specified in each individual contract with customers. Revenue is recognized in each individual contract with customers. The improper timing in recognition of revenue before and after the financial reporting date may materially impact financial statements. Therefore, revenue recognition is one of the key areas our audit focused on.

How the matter was addressed in our audit:

In relation to the key audit matter above, our principal audit procedures include testing the effectiveness of internal control on recognition of revenue; ensuring the transaction conditions and revenue of the sale contracts have been properly recorded; random sampling of sales transactions within a certain period before and after the financial reporting date; analyzing the client contract of the sample; and evaluating the transaction conditions contained in the sales contract to confirm that revenue recognition has been recorded in an appropriate period.

2. Valuation of Inventories

The accounting principle of inventory, refer to parent company only financial statements Note 4 (g), the assessment of accounting estimate and assumption uncertainty, refer to parent company only financial statements Note 5 (a); the explanation of inventory assessment refers to parent company only financial statements Note 6 (e).

Description of key audit matter:

Due to the introduction of new products such as machine tools or fitness machines may cause significant changes in consumer demand, the original product outdated may no longer meet the market demand, or by the electric tool market recession and competitors’ low-cost strategy and other factors so that the sale of related products may be volatile, it easily leads to the cost of inventory may exceed its net realizable value of the risk; therefore, inventory valuation is considered as one of a key audit matter.

How the matter was addressed in our audit:

In relation to the key audit matter above, includes the allowance for uncollectible inventory valuation losses of the Company and the rationale of calculation method, implementation of the sampling procedures to check the inventory and the net realized value to compare with the past period situation and analyze whether the loss of the value of the deposit in the current period is disclosure appropriately.

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

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

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

• 101 -

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

Auditor’s Responsibilities for the Audit of the Parent Company Only Financial Statements

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

As part of an audit in accordance with the Standards on Auditing of the Republic of China, we exercise professional judgment and professional skepticism throughout the audit. We also:

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

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

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

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

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

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

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

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

• 102 -

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

The engagement partners on the audit resulting in this independent auditors’ report are Shyh-Huar, Kuo and Chun-Yuan, Wu.

KPMG

Taipei, Taiwan (Republic of China) Febuary 23, 2023

• 103 -

(English Translation of Parent Company Only Financial Statements Originally Issued in Chinese) REXON INDUSTRIAL CORP., LTD. Balance Sheets December 31, 2022 and 2021 (Expressed in thousands of New Taiwan Dollar)

Assets Current assets: 1100 Cash and cash equivalents (note 6 (a)) 1110 Current financial assets at fair value through profit or loss 1150 Notes receivable, net (note 6 (c)) 1160 Notes receivable due from related parties, net (note 6 (c) and 7) 1170 Accounts receivable, net (note 6 (c)) 1180 Accounts receivable due from related parties, net (note 6 (c) and 7) 1200 Other receivables, net (note 6 (d)) 1210 Other receivables due from related parties, net (note 6 (d) and 7) 1220 Current tax assets 130X Inventories (note 6 (e) ) 1479 Other current assets (note 6 (j)) Non-current assets: 1550 Investments accounted for using equity method, net (note6(f)) 1600 Property, plant and equipment (note6(g)and 8) 1755 Right-of-use assets (note 6 (h)) 1780 Intangible assets (note 6 (i)) 1840 Deferred tax assets (note 6 (q)) 1920 Guarantee deposits paid 1975 Net defined benefit asset, non-current (note 6 (p)) 1990 Other non-current assets(note 6 (j)) Total assets	December 31, 2022 Amount % $ 1,892,911 25 96 - 51 - 31,722 - 720,949 10 8,794 - 168 - 8,784 - 16,441 - 458,313 6 64,971 1	December 31, 2021 Amount % 4,492,307 36 96 - 40 - 27,543 - 1,705,296 14 13,821 - 114 - 7,941 - - - 1,732,899 14 189,280 2 8,169,337 66 957,632 8 2,546,689 21 68,280 - 14,057 - 84,127 1 7,812 - 90,665 1 349,388 3 4,118,650 34 12,287,987 100 Liabilities and Equity Current liabilities: 2100 Short-term borrowings (note 6 (k) and 8) 2130 Current contract liabilities (note 6 (t)) 2150 Notes payable 2160 Notes payable to related parties(note 7) 2170 Accounts payable 2180 Accounts payable to related parties (note 7) 2200 Other payables(note 6 (p)) 2220 Other payables to related parties (note 7) 2230 Current tax liabilities 2250 Current provisions (note 6 (o)) 2280 Current lease liabilities (note 6 (n)) 2320 Long-term borrowing, current portion (note 6 (m) and 8) 2399 Other current liabilities, others (note 6 (l) and (t)) Non-Current liabilities: 2540 Long-term borrowings (note 6 (m) and 8) 2570 Deferred tax liabilities (note 6 (q)) 2580 Non-current lease liabilities (note 6 (n)) Total liabilities Equity:(note 6 (b) and(r)) 3100 Share capital 3200 Capital surplus 3300 Retained earnings 3400 Other equity Total equity Total liabilities and equity	December 31, 2022	December 31, 2022	December 31, 2022
			Amount	%	Amount
	3,203,200 42
	971,705 13 2,443,817 32 34,921 - 19,426 - 167,880 2 1,926 - 206,005 3 645,669 8
			3,587,034 46 7,428,782 61
			599,167 8 593,333 5 - - 6,491 - 24,691 - 34,292 -
			623,858 8 634,116 5
			4,210,892 54 8,062,898 66
			1,814,735 24 1,814,735 15 586 - 586 - 1,812,259 24 2,572,950 21 (143,923) (2) (163,182) (2)
	4,491,349 58
			3,483,657 46 4,225,089 34
	$ 7,694,549 100		$ 7,694,549 100 12,287,987 100

• 104 -

(English Translation of Parent Company Only Financial Statements Originally Issued in Chinese) REXON INDUSTRIAL CORP., LTD. Statements of Comprehensive Income For the years ended December 31, 2022 and 2021 (Expressed in thousands of New Taiwan Dollar, except earnings per share)

4100 Operating revenue (note 6 (t) and 7) 5000 Operating costs (note 6 (e)、(i)、(p) and (7)) Gross profit from operations 6000 Operating expenses(note 6 (i)、(p)、(u) and 7): 6100 Selling expenses 6200 Administrative expenses 6300 Research and development expenses Net operating (loss) income 7000 Non-operating income and expenses: 7100 Interest income (note 6 (v)) 7010 Other income (note 6 (v)) 7020 Other gains and losses, net (note 6 (g) and (v)) 7050 Finance costs (note 6 (n) and (v)) 7070 Share of loss of subsidiaries and associates for using equity method, net (note 6 (f)) 7900 Profit (loss) before income tax 7950 Income tax (benefit) expense (note 6 (q)) 8200 (Loss) profit 8300 Other comprehensive income: 8310 Items that may not be reclassified subsequently to profit or loss: 8311 Gains on remeasurements of defined benefit obligation (note 6 (p)) 8316 Unrealized gains from investments in equity instruments measured at fair value through other comprehensive income (note 6 (r)) 8360 Items that may be reclassified subsequently to profit or loss: 8361 Exchange differences on translation (note 6 (r)) 8399 Income tax related to components of other comprehensive income that will be reclassified to profit or loss (note 6 (q)) 8300 Other comprehensive income (after tax) 8500 Comprehensive income Earnings (loss) per share(NT dollars)(note 6 (s)) 9750 Basic earnings (loss) per share 9850 Diluted earnings (loss) per share	2022	% 100 98	2021	% 100 87
	Amount $ 4,439,027 4,351,617		Amount 18,311,982 15,833,894
	87,410	2	2,478,088	13
	225,482 130,316 131,193	5 3 3	518,063 260,840 201,551	3 1 1
	486,991	11	980,454	5
	(399,581)	(9)	1,497,634	8
	5,336 15,888 2,698 (15,963) (9,521)	- - - - -	984 37,314 (131,024) (4,723) (89,978)	- - (1) - -
	(1,562)	-	(187,427)	(1)
	(401,143) (102,222)	(9) (2)	1,310,207 257,315	7 1
	(298,921)	(7)	1,052,892	6
	82,650 -	2 -	61,559 17,184	- -
	82,650	2	78,743	-
	24,074 (4,815)	- -	(7,947) 1,588	- -
	19,259	-	(6,359)	-
	101,909	2	72,384	-
	$ (197,012)	(5)	1,125,276	6
	$	(1.65)		5.80
	$	(1.65)		5.76

• 105 -

(English Translation of Parent Company Only Financial Statements Originally Issued in Chinese) REXON INDUSTRIAL CORP., LTD. Statements of Changes in Equity For the years ended December 31, 2022 and 2021 (Expressed in thousands of New Taiwan Dollar)

Balance on January 1, 2021 Appropriation and distribution of retained earnings: Legal reserve Special reserve Cash dividends of ordinary share Profit for the year ended December 31, 2021 Other comprehensive income for the year ended December 31, 2021 Comprehensive income Changes in ownership of subsidiaries Disposal of investments in equity instruments designated at fair value through other comprehensive income Beginning adjustment of net delined benefit assets Balance on December 31, 2021 Balance on January 1, 2022 Appropriation and distribution of retained earnings: Legal reserve Reversal of special reserve Cash dividends of ordinary share Loss for the year ended December 31, 2022 Other comprehensive income for the year ended December 31, 2022 Comprehemsive income Balance on December 31, 2022	Share capital	Capital surplus		Retained earnings	Retained earnings			Total other equity		Total equity
							Exchange differences on translation of foreign financial statements	Unrealized gains (losses) from financial assets measured at fair value through other comprehensive income	Total other equity interest
	Qrdinary share		Legal reserve	Special reserve	Unappropriated retained earnings	Total
	$ 1,814,735 433 265,379 49,668 1,783,010 2,098,057 (156,823) (20,402) (177,225) 3,736,000
	- - 97,724 - (97,724) - - - - - - - - 127,558 (127,558) - - - - - - - - - (653,305) (653,305) - - - (653,305)
	- - 97,724 127,558 (878,587) (653,305) - - - (653,305)
	- - - - 1,052,892 1,052,892 - - - 1,052,892 - - - - 61,559 61,559 (6,359) 17,184 10,825 72,384
	- - - - 1,114,451 1,114,451 (6,359) 17,184 10,825 1,125,276
	- 153 - - - - - - - 153 - - - - (3,218) (3,218) - 3,218 3,218 - - - - - 16,965 16,965 - - - 16,965
	$ 1,814,735 586 363,103 177,226 2,032,621 2,572,950 (163,182) - (163,182) 4,225,089
	$ 1,814,735 586 363,103 177,226 2,032,621 2,572,950 (163,182) - (163,182) 4,225,089
	. - - 112,820 - (112,820) - - - - - - - - (14,044) 14,044 - - - - - - - - - (544,420) (544,420) - - - (544,420)
	- - 112,820 (14,044) (643,196) (544,420) - - - (544,420)
	- - - - (298,921) (298,921) - - - (298,921) - - - - 82,650 82,650 19,259 - 19,259 101,909
	- - - - (216,271) (216,271) 19,259 - 19,259 (197,012)
	$ 1,814,735 586 475,923 163,182 1,173,154 1,812,259 (143,923) - (143,923) 3,483,657

• 106 -

(English Translation of Parent Company Only Financial Statements Originally Issued in Chinese) REXON INDUSTRIAL CORP., LTD.

Statements of Cash Flows For the years ended December 31, 2022 and 2021 (Expressed in thousands of New Taiwan Dollar)

Cash flows from operating activities: (Loss) profit before tax Adjustments: Adjustments to reconcile profit: Depreciation expense Amortization expense Interest expense Interest income Dividend income Share of loss of subsidiaries and associates for using equity method Loss on disposal of property, plant and equipment Impairment loss of property, plant and equipment Gain on lease modification Total adjustments to reconcile profit Changes in operating assets and liabilities: Changes in operating assets: Decrease in financial assets at fair value through profit or loss Increase in notes receivable Increase in notes receivable due from related parties Decrease in accounts receivable Decrease (Increase) in accounts receivable due from related parties (Increase) Decrease in other receivable Increase in other receivable due from related parties Decrease (Increase) in inventories Decrease (Increase) in other current assets Decrease (Increase) in other operating assets Total changes in operating assets Changes in operating liabilities: (Decrease) increase in contract liabilities (Decrease) increase in notes payable Increase in notes payable to related parties (Decrease) increase in accounts payable Increase (decrease) in accounts payable to related parties (Decrease) increase in other payable Increase in other payable to related parties (Decrease) increase in other current liabilities Decrease in net defined benefit assets Total changes in operating liabilities Total changes in operating assets and liabilities Total adjustments Cash (outflow) inflow generated from operations Interest received Dividends received Interest paid Income taxes paid Net cash flows (uesd in) from operating activities Cash flows used in investing activities: Proceeds from disposal of financial assets at fair value through other comprehensive income Changes in ownership of Subsidiaries Acquisition of property, plant and equipment Proceeds from disposal of property, plant and equipment Decrease in restricted assets Decrease (increase) in refundable deposits Acquisition of intangible assets Increase in prepayments for business facilities Net cash flows used in investing activities Cash flows from (used in) financing activities: Increase in short-term borrowings Decrease in short-term borrowings Increase from long-term borrowings Repayments of long-term borrowings Cash dividends paid Payment of lease liabilities Net cash flows from (used in) financing activities Net increase (decrease) in cash and cash equivalents Cash and cash equivalents at beginning of period Cash and cash equivalents at end of period	2022 $ (401,143)	2021 1,310,207
	279,041 15,101 15,963 (5,336) - 9,521 3,538 15,971 (39)	196,996 11,928 4,723 (984) (13) 89,978 4,526 52,723 -
	333,760	359,877
	- (11) (4,179) 984,347 5,027 (54) (843) 1,274,586 124,309 1,978	18,374 (40) (21,209) 658,698 (4,080) 39 (3,562) (890,995) (27,400) (3,319)
	2,385,160	(273,494)
	(10,841) (887,126) 25,960 (2,852,830) 50,239 (111,715) 6,493 (139,069) (32,690)	509,242 569,551 2,956 549,114 (283,554) 234,216 16,001 18,986 (12,061)
	(3,951,579)	1,604,451
	(1,566,419)	1,330,957
	(1,232,659)	1,690,834
	(1,633,802) 5,336 480 (15,208) (192,477)	3,001,041 984 813 (5,265) (194,571)
	(1,835,671)	2,803,002
	- - (83,949) 2,573 - 5,886 (20,470) (422,255)	53,360 (2,635) (443,216) 1,632 8,000 (3,725) (12,481) (498,171)
	(518,215)	(897,236)
	2,900,000 (2,900,000) 500,000 (170,833) (544,420) (30,257)	1,900,000 (1,480,000) 851,600 (500,000) (653,305) (29,043)
	(245,510)	89,252
	(2,599,396) 4,492,307	1,995,018 2,497,289
	1,892,911	4,492,307

• 107 -

(English Translation of Parent Company Only Financial Statements Originally Issued in Chinese) REXON INDUSTRIAL CORP., LTD. Notes to the Parent Company Only Financial Statements For the years ended December 31, 2022 and 2021 (Expressed in thousands of New Taiwan Dollar unless otherwise specified)

(1) Company history

Rexon Industrial Corp., Ltd. (the “Company”) was incorporated on April 30, 1973 and registered under the Ministry of Economic Affairs, R.O.C. The address of the company’s registered office is No.261, Renhua Rd., Dali Dist., Taichung City 412, and Taiwan (R.O.C.). The Company’s common shares were listed on the Taiwan Stock Exchange (TWSE) on February 4, 1995. The company is in the business of manufacturing and selling drills, woodworking tools and fitness equipment.

(2) Approval date and procedures of the financial statements

The parent company only financial statements were authorized for issue by the Board of Directors on Febuary 23, 2023.

(3) New standards, amendments and interpretations adopted

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

The Company has initially adopted the following new amendments, which do not have a significant impact on its financial statements, from January 1, 2022:

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

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

• Annual Improvements to IFRS Standards 2018–2020

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

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

The Company assesses that the adoption of the following new amendments, effective for annual period beginning on January 1, 2023, would not have a significant impact on its financial statements:

• Amendments to IAS 1 “Disclosure of Accounting Policies”

• Amendments to IAS 8 “Definition of Accounting Estimates”

• Amendments to IAS 12 “Deferred Tax related to Assets and Liabilities arising from a Single Transaction”

• 108 -

REXON INDUSTRIAL CORP., LTD.

Notes to the Parent Company Only Financial Statements

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

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

Standards or Interpretations Amendments to IAS 1 “Classification of Liabilities as Current or Non-current” Amendments to IAS 1 “Non- current Liabilities with Covenants”	Content of amendment Under existing IAS 1 requirements, companies classify a liability as current when they do not have an unconditional right to defer settlement for at least 12 months after the reporting date. The amendments has removed the requirement for a right to be unconditional and instead now requires that a right to defer settlement must exist at the reporting date and have substance. The amendments clarify how a company classifies a liability that can be settled in its own shares – e.g. convertible debt. After reconsidering certain aspects of the 2020 amendments1, new IAS 1 amendments clarify that only covenants with which a company must comply on or before the reporting date affect the classification of a liability as current or non-current. Covenants with which the company must comply after the reporting date (i.e. future covenants) do not affect a liability’s classification at that date. However, when non-current liabilities are subject to future covenants, companies will now need to disclose information to help users understand the risk that those liabilities could become repayable within 12 months after the reporting date.	Effective date per **IASB **
		January 1, 2024 January 1, 2024

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

• 109 -

REXON INDUSTRIAL CORP ., LTD.

Notes to the Parent Company Only Financial Statements

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

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

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

• Amendments to IFRS 17 “Initial Application of IFRS 17 and IFRS 9 – Comparative Information “

• ●IFRS16 “Requirements for Sale and Leaseback Transactions”

(4) Summary of significant accounting policies

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

(a) Statement of compliance

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

• (b) Basis of preparation

• (i) Basis of measurement

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

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

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

• (ii) Functional and presentation currency

The functional currency is determined based on the primary economic environment in which the entity operates. The parent company only financial statements are presented in New Taiwan Dollar(NTD), which is the Company’s functional currency. All financial information presented in NTD has been rounded to the nearest thousand.

• 110 -

REXON INDUSTRIAL CORP ., LTD.

Notes to the Parent Company Only Financial Statements

(c) Foreign currencies

• (i) Foreign currency transactions

Transactions in foreign currencies are translated into the respective functional currencies of the Company entities at exchange rates at the dates of the transactions. At the end of each subsequent reporting period, monetary items denominated in foreign currencies are translated into the functional currencies using the exchange rate at that date.

Exchange differences are generally recognized in profit or loss, except for those differences relating to the following, which are recognized in other comprehensive income :

• 1) An investment in equity securities designated as at fair value through other comprehensive income;

• 2) A financial liability designated as a hedge of the net investment in a foreign operation to the extent that the hedge is effective; or

• 3) Qualifying cash flow hedges to the extent the hedges are effective.

• (ii) Foreign operations

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

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

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

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REXON INDUSTRIAL CORP ., LTD.

Notes to the Parent Company Only Financial Statements

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

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

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

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

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

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

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

An entity shall classify a liability as current when :

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

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

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

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

(e) Cash and cash equivalents

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

(f)

Financial instruments

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

• (i) Financial assets

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

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REXON INDUSTRIAL CORP ., LTD.

Notes to the Parent Company Only Financial Statements

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

• 1) Financial assets measured at amortized cost

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

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

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

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

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

All financial assets not classified as amortized cost described as above are measured at FVTPL, including derivative financial assets. On initial recognition, the Company may irrevocably designate a financial asset, which meets the requirements to be measured at amortized cost or at FVOCI, as at FVTPL if doing so eliminates or significantly reduces an accounting mismatch that would otherwise arise.

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

• 3) Business model assessment

Financial assets that are held for trading or are managed and whose performance is evaluated on a fair value basis are measured at FVTPL.

• 4) Impairment of financial assets

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

• 113 -

REXON INDUSTRIAL CORP ., LTD.

Notes to the Parent Company Only Financial Statements

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

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

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

Loss allowance for trade receivables and contract assets are always measured at an amount equal to lifetime ECL.

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

The Company assumes that the credit risk on a financial asset has increased significantly if it is more than 90 days past due.

The Company considers a financial asset to be in default when the financial asset is more than 180 days past due or the debtor is unlikely to pay its credit obligations to the Company in full.

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

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

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

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

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

• significant financial difficulty of the borrower or issuer；

• a breach of contract such as a default or being more than 180 days past due；

• 114 -

REXON INDUSTRIAL CORP ., LTD.

Notes to the Parent Company Only Financial Statements

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

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

• the disappearance of an active market for a security because of financial difficulties.

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

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

• 5) Derecognition of financial assets

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

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

(ii) Financial liabilities and equity instrument

• 1) Classification of debt or equity

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

2) Equity instrument

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

• 115 -

REXON INDUSTRIAL CORP ., LTD.

Notes to the Parent Company Only Financial Statements

• 3) Derecognition of financial liabilities

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

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

• 4) Offsetting of financial assets and liabilities

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

(g) Inventories

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

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

(h) Investment in associates

Associates are those entities in which the Company has significant influence, but not control or joint control, over their financial and operating policies.

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

The parent company only financial statements include the Company’s share of the profit or loss and other comprehensive income of those associates, after adjustments to align their accounting policies with those of the Company, from the date on which significant influence commences until the date on which significant influence ceases. The Company recognizes any changes of its proportionate share in the investee within capital surplus, when an associate’s equity changes due to reasons other than profit and loss or comprehensive income, which did not result in changes in actual significant influence.

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

• 116 -

REXON INDUSTRIAL CORP ., LTD.

Notes to the Parent Company Only Financial Statements

(i) Investment in subsidiaries

The investees which are controlled by the Company were measured using the equity method in preparing the parent company only financial statements. The profit or loss, other comprehensive income and equity in the parent company only financial statements are equal to those attributable to the shareholders of the parent in the consolidated financial statements.

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

(j) Property, plant and equipment

(i) Recognition and measurement

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

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

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

(ii) Subsequent expenditure

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

• (iii) Depreciation

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

Land is not depreciated.

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

1)	Buildings	2 ~ 60 years
2)	Machinery and equipment	5 ~ 10 years
3)	Mold and tooling equipment	2 ~ 10 years
4)	Office equipment and other facilities	2 ~ 10 years

• 117 -

REXON INDUSTRIAL CORP ., LTD.

Notes to the Parent Company Only Financial Statements

5) The significant portion of building consists of its main building, miscellaneous parts, machinery and equipment, and the estimated useful lives are as following:

Compose item	Useful Lives	Compose item	Useful Lives
Buildings: Main building 41~60 years Fire engineering 43 years Electrical and mechanical in construction 38 years Other 2 years		Machinery and equipment: Welding machine and circular saw Conveyer Other	10 years 10 years 5 years

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

(k) Leases

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

• (i) As a leasee

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

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

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

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

• fixed payments, including in-substance fixed payments;

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

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

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

• 118 -

REXON INDUSTRIAL CORP ., LTD.

Notes to the Parent Company Only Financial Statements

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

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

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

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

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

• there is any lease modification.

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

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

The Company presents right-of-use assets that do not meet the definition of investment and lease liabilities as a separate line item respectively in the statement of financial position.

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

• (ii) As a lessor

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

The Company recognizes lease payments received under operating leases as income on a straight-line basis over the lease term as part of ‘other income’.

• 119 -

REXON INDUSTRIAL CORP ., LTD.

Notes to the Parent Company Only Financial Statements

(l) Intangible assets

• (i) Recognition and measurement

Goodwill arising on the acquisition of subsidiaries is measured at cost, less accumulated impairment losses.

Expenditure on research activities is recognized in profit or loss as incurred.

Development expenditure is capitalized only if the expenditure can be measured reliably, the product or process is technically and commercially feasible, future economic benefits are probable and the Company intends to, and has sufficient resources to, complete development and to use or sell the asset. Otherwise, it is recognized in profit or loss as incurred. Subsequent to initial recognition, development expenditure is measured at cost, less accumulated amortization and any accumulated impairment losses.

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

(ii) Subsequent expenditure

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

• (iii) Amortization

Amortization is calculated over the cost of the asset, less its residual value, and is recognized in profit or loss on a straight-line basis over the estimated useful lives of intangible assets, other than goodwill, from the date that they are available for use.

The estimated useful lives for current and comparative periods are as follows:

Computer software cost 1~10years

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

(m) Impairment of non-financial assets

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

For impairment testing, assets are grouped together into the smallest group of assets that generates cash inflows from continuing use that are largely independent of the cash inflows of other assets or cashgenerating units (CGUs). Goodwill arising from a business combination is allocated to CGUs or groups of CGUs that are expected to benefit from the synergies of the combination.

• 120 -

REXON INDUSTRIAL CORP ., LTD.

Notes to the Parent Company Only Financial Statements

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

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

Impairment losses are recognized in profit or loss. They are allocated first to reduce the carrying amount of any goodwill allocated to the CGU, and then to reduce the carrying amounts of the other assets in the CGU on a pro rata basis.

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

(n) Provisions

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

A provision for warranties is recognized when the underlying products or services are sold, based on historical warranty data and a weighting of all possible outcomes against their associated probabilities.

(o) Revenue from contracts with customers

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

1) Sale of goods

The Company manufactures and sells woodworking tools and fitness equipment to retail stores, fitness club, and fitness equipment specialty chain stores around the world. The Company recognizes revenue when control of the products has transferred, being when the products are delivered to the customer, the customer has full discretion over the channel and price to sell the products, and there is no unfulfilled obligation that could affect the customer’s acceptance of the products. Delivery occurs when the products have been shipped to the specific location, the risks of obsolescence and loss have been transferred to the customer, and either the customer has accepted the products in accordance with the sales contract, the acceptance provisions have lapsed, or the Group has objective evidence that all criteria for acceptance have been satisfied.

The Company’s obligation to provide a refund for faulty drilling machine under the standard warranty terms is recognized as a provision for warranty; please refer to note 4(n).

• 121 -

REXON INDUSTRIAL CORP ., LTD.

Notes to the Parent Company Only Financial Statements

A receivable is recognized when the goods are delivered as this is the point in time that the Company has a right to an amount of consideration that is unconditional.

2) Financing components

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

(p) Employee benefits

(i) Defined contribution plans

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

(ii) Defined benefit plans

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

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

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

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

• (iii) Short-term employee benefits

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

• 122 -

REXON INDUSTRIAL CORP ., LTD.

Notes to the Parent Company Only Financial Statements

• (q) Income taxes

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

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

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

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

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

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

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

Deferred taxes are measured at tax rates that are expected to be applied to temporary differences when they reserve, using tax rates enacted or substantively enacted at the reporting date.

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

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

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

• 1) the same taxable entity; or

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

• 123 -

REXON INDUSTRIAL CORP ., LTD.

Notes to the Parent Company Only Financial Statements

(r) Earnings per share

The Company discloses the Company’s basic and diluted earnings per share attributable to ordinary shareholders of the Company. Basic earnings per share is calculated as the profit attributable to ordinary shareholders of the Company divided by the weighted-average number of ordinary shares outstanding. Diluted earnings per share is calculated as the profit attributable to ordinary shareholders of the Company divided by the weighted-average number of ordinary shares outstanding after adjustment for the effects of all potentially dilutive ordinary shares, such as employee compensation.

(s) Operating segments

The Company has provided the disclosure of the operating segments in its consolidated financial statements. Thus, the disclosure of the segment information in the parent company only financial statements is no longer required.

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

In preparing these parent company only financial statements, management has made judgments, estimates and assumptions that affect the application of the accounting policies and the reported amount of assets, liabilities, income and expenses. Actual results may differ from these estimates.

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

Information about judgments made in applying accounting policies that have the most significant effects on the amounts recognized in the parent company only financial statements is as follows:

(a) Valuation of inventories

As inventories are stated at the lower of cost or net realizable value, the Company estimates the net realizable value of inventories for obsolescence and unmarketable items at the end of the reporting period and then writes down the cost of inventories to net realizable value. The net realizable value of the inventory is mainly determined based on assumptions as to future demand within a specific time horizon. Due to the rapid industrial transformation, there may be significant changes in the net realizable value of inventories. Refer to note 6(e) for further description of the valuation of inventories.

(b) Recognition and measurement of provisions

Provision for warranty is estimated when product revenue is recognized. The estimate has been made based on the historical defective rate of the products. The Company regularly reviews the basis of the estimate and, if necessary, amends it as appropriate. There could be a significant impact on provision for warranty for any change in the basis of the estimate.

• 124 -

REXON INDUSTRIAL CORP ., LTD.

Notes to the Parent Company Only Financial Statements

The Company’s accounting policies and disclosures include the use of fair value to measure its financial and non-financial assets and liabilities. The Company has established relevant internal control system for the fair value. This includes establishing an evaluation team responsible for reviewing all significant fair value (including Level 3 fair value) and reporting directly to the financial executive. The evaluation team regularly reviews the significant unobservable input values and adjustments. If the input values used for measuring the fair values of financial and non-financial instruments come from external third party (such as a broker or a pricing service agency), the evaluation team will evaluate the supporting evidence provided by the third party to ensure the evaluation and the level of fair values conform to IFRS requirements.

The Company strives to use market observable inputs when measuring assets and liabilities. Different levels of the fair value hierarchy to be used in determining the fair value of financial instruments are as follows:

• a. Level 1: quoted prices (unadjusted) in active markets for identifiable assets or liabilities.

• b. Level 2: inputs other than quoted prices included within Level 1 that are observable for the asset orliability, either directly (i.e. as prices) or indirectly (i.e. derived from prices).

• c. Level 3: inputs for the assets or liability that are not based on observable market data (unobservable parameters).

(6) Explanation of significant accounts:

(a) Cash and cash equivalents

Petty cash and cash on hand Checking and demand deposits Cash and cash equivalents in the statement of cash flows	December 31, 2022 $ 1,024 1,891,887	December 31, 2021 456 4,491,851
	$ 1,892,911	4,492,307

Please refer to note 6(w) for the exchange rate risk, interest rate risk, and sensitivity analysis of the financial assets and liabilities of the Company.

(b) Financial assets at fair value through other comprehensive income

In 2021 , the Company has sold equity instrument investment measured at fair value through other comprehensive income for strategic purposes. The shares sold had a fair value of $53,360 thousand. The Company realized a loss of $(3,218) thousand. The gain has been transferred to retained earnings.

• 125 -

REXON INDUSTRIAL CORP ., LTD.

Notes to the Parent Company Only Financial Statements

(c) Notes and accounts receivables (include related party)

Notes receivable from operating activities Notes receivable from operating activities-related parties Less: Loss allowance Accounts receivable-measured at amortized cost Accounts receivable from related parties-measured at amortized cost Less: Loss allowance	December 31, 2022 $ 51 31,722 -	December 31, 2021 40 27,543 -
	$ 31,773	27,583
	$ 722,552 8,794 (1,603)	1,706,899 13,821 (1,603)
	$ 729,743	1,719,117

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

Current 1 to 90 days past due 91 to 180 days past due 181 to 360 days past due Over 360 days past due Total	December 31, 2022	December 31, 2022	December 31, 2022	December 31, 2022
	Gross carrying amount	Weighted- average loss rate		Loss allowance **provision **
	$ 628,893 134,225 - - 1	0.04% 0.99% - - 100%		273 1,329 - - 1
	$ 763,119			1,603

Current 1 to 90 days past due 91 to 180 days past due 181 to 360 days past due Over 360 days past due Total	December 31, 2021	December 31, 2021	December 31, 2021	December 31, 2021
	Gross carrying amount	Weighted- average loss rate		Loss allowance **provision **
	$ 874,365 872,018 1,370 549 1	0.02% 0.02% 50.00% 100% 100%		184 184 685 549 1
	$ 1,748,303			1,603

• 126 -

REXON INDUSTRIAL CORP ., LTD.

Notes to the Parent Company Only Financial Statements

(ii) The movement in the allowance for notes and accounts receivables were as follows:

Balance at January 1 (which is balance at December 31)	2022 $ 1,603	2021 1,603

(iii) None of the receivables was pledged as collateral as of December 31, 2022 and 2021.

(d) Other receivables

Other receivables Other receivables-related parties Less: Loss allowance	December 31, 2022 $ 11,415 8,784 (11,247)	December 31, 2021
		11,361 7,941 (11,247)
	$ 8,952	8,055

• (i) As of December 31, 2022 and 2021, there are no other receivables which are past due but not impaired.

(ii) The movement in the allowance for other receivables was as follows:

Balance on January 1 (which is balance at December 31)	2022 $ 11,247	2021 11,247

(e) Inventories

Finished goods Work in progress Materials Parts Merchandise	December 31, 2022 $ 101,093 42,715 105,002 204,873 4,630	December 31, 2021 624,327 202,393 153,319 749,504 3,356
	$ 458,313	1,732,899

Details of inventory related losses (profit) were as follows:

Write-down of inventories Inventory scrap loss Inventory deficit Revenue from sale of scraps	2022 $ 32,186 5,579 167 (2,770)	2021
		- 36,501 275 (24,854)
	$ 35,162	11,922

As of December 31, 2022 and 2021, inventories were not pledged as collateral.

• 127 -

REXON INDUSTRIAL CORP ., LTD.

Notes to the Parent Company Only Financial Statements

(f) Investments accounted for using equity method

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

Subsidiary Associates	December 31, 2022 $ 955,285 16,420	December 31, 2021 940,920 16,712
	$ 971,705	957,632

(i) Subsidiary

Please refer to the consolidated financial report of the 2022.

(ii) Associates

Affiliated company’s information:

Name of Associates Fine Clear Corp., Ltd.	Nature of relationship with the Company	Main operating location/ Registered Country of the Company	Proportion of shareholding and voting rights
			December 31, 2022 December 31, 2021 16% 16%
	Sale of pneumatic nail gun and accessories, which is the Company’s investment	Taiwan

The Company’s financial information for investments accounted for using the equity method that are individually insignificant was as follows:

Carrying amount of individually insignificant associates’ equity Attributable to the Company: Profit from continuing operations Other comprehensive income Comprehensive income	December 31, 2022 $ 16,420	December 31, 2021 16,712
	2022 $ 188 -	2021 518 -
	$ 188	518

(iii) As of December 31, 2022 and 2021, the Company did not provide any investments accounted for using the equity method as collateral for its loans.

• 128 -

REXON INDUSTRIAL CORP ., LTD.

Notes to the Parent Company Only Financial Statements

(g) Property, plant and equipment

The cost, depreciation, and impairment of the property, plant and equipment of the Company for the years ended December 31, 2022 and 2021, were as follows:

Cost or deemed cost: Balance on January 1, 2022 Additions Disposal Reclassification Balance on December 31, 2022 Balance on January 1,2021 Additions Disposal Reclassification Balance on December 31,2021 Depreciation and impairment loss: Balance on January 1, 2022 Depreciation for the year Impairment loss Disposal Balance on December 31, 2022 Balance on January 1,2021 Depreciation for the year Impairment loss Disposal Balance on December 31, 2021 Carrying amounts: Balance on December 31, 2022 Balance on January 1,2021 Balance on December 31, 2021	Land $ 1,125,541 929 - -	Buildiings 1,429,208 12,453 - 43,330	Machinery and equipment 652,167 7,453 (7,714) 33,671	Mold and tooling equipment 696,768 20,020 (6,180) 45,118	Office equipment and other facilities 129,186 3,106 (14,829) 1,877	Construction in Progress - - - -	Total 4,032,870 43,961 (28,723) 123,996
	$ 1,126,470	1,484,991	685,577	755,726	119,340	-	4,172,104
	$ 943,858 181,683 - -	1,330,220 109,903 - (10,915)	444,792 43,755 (27,147) 190,767	583,923 46,129 (3,600) 70,316	122,700 18,822 (13,554) 1,218	- - - -	3,425,493 400,292 (44,301) 251,386
	$ 1,125,541	1,429,208	652,167	696,768	129,186	-	4,032,870
	$ - - - -	678,809 76,638 - -	233,298 87,144 - (7,009)	481,017 74,209 15,971 (5,198)	93,057 10,756 - (10,405)	- - - -	1,486,181 248,747 15,971 (22,612)
	$ -	755,447	313,433	565,999	93,408	-	1,728,287
	$ - - - -	622,436 56,373 - -	198,110 59,031 - (23,843)	386,984 44,345 52,723 (3,035)	96,646 7,676 - (11,265)	- - - -	1,304,176 167,425 52,723 (38,143)
	$ -	678,809	233,298	481,017	93,057	-	1,486,181
	$ 1,126,470	729,544	372,144	189,727	25,932	-	2,443,817
	$ 943,858	707,784	246,682	196,939	26,054	-	2,121,317
	$ 1,125,541	750,399	418,869	215,751	36,129	-	2,546,689

• (i) In response to the need for expansion in the future, the Company bought the farmland near to its factory, costing $316,060 thousand, but the ownership of the land is temporarily not allowed to be transerred to the Company because the farmland is legally for agricultural purpose. Therefore, the farmland now is registered in the name of a shareholder who has the identity of natural person and has been pledged to the Company for security concerns.

• (ii) As of December 31, 2022 and 2021,the Company recognized impairment loss of $15,971 thousand and $52,723 thousand for part of the carrying amount of mold equipment that are over the useful life and are expected to scrap.

• (iii) Gain or losses of disposal, please refer to Note 6(v).

• (iv) As of December 31, 2022 and 2021, property, plant and equipment of the Company had been pledged as collateral for long-term loans; please refer to note 8.

• 129 -

REXON INDUSTRIAL CORP., LTD.

Notes to the Parent Company Only Financial Statements

(h) Right-of-use assets

The Company leases many assets including land, buildings and vehicles. Information about leases for which the Company as a lessee was presented below:

Cost: Balance at January 1, 2022 Additions Reductions Balance at December 31, 2022 Balance at January 1, 2021 Additions Reductions Balance at December 31, 2021 Accumulated depreciation and impairment losses:： Balance at January 1, 2022 Depreciation for the year Reductions Balance at December 31, 2022 Balance at January 1, 2021 Depreciation for the year Balance at December 31, 2021 Carrying amount: Balance at December 31, 2022 Balance at January 1, 2021 Balance at December 31, 2021	Land	Buildings	Vehicles 20,899 4,228 (5,049)	Total 100,507 4,228 (41,877)
	$ 27,981 51,627 - - - (36,828)
	$ 27,981 14,799		20,078	62,858
	$ - 21,388 27,981 30,239 - -		5,142 15,757 -	26,530 73,977 -
	$ 27,981 51,627		20,899	100,507
	$ 2,099 22,898 2,798 21,062 - (30,394)		7,230 6,434 (4,190)	32,227 30,294 (34,584)
	$ 4,897 13,566		9,474	27,937
	$ - 594 2,099 22,304		2,062 5,168	2,656 29,571
	$ 2,099 22,898		7,230	32,227
	$ 23,084 1,233		10,604	34,921
	$ - 20,794		3,080	23,874
	$ 25,882 28,729		13,669	68,280

• 130 -

REXON INDUSTRIAL CORP ., LTD.

Notes to the Parent Company Only Financial Statements

(i) Intangible assets

The costs, amortization and impairment loss of the intangible assets of the Company for the years ended December 31, 2022 and 2021, were as follows:

Costs: Balance at January 1, 2022 Additions Reductions Balance at December 31,2022 Balance at January 1, 2021 Additions Balance at December 31,2021 Amortization and impairment Loss: Balance at January 1, 2022 Amortization for the year Balance at December 31, 2022 Balance at January 1, 2021 Amortization for the year Balance at December 31, 2021 Carrying value: Balance at December 31,2022 Balance at January 1, 2021 Balance at December 31, 2021	Computer Software $ 120,831 20,470 -
	$ 141,301
	108,350 $ 12,481
	$ 120,831
	$ 106,774 15,101
	$ 121,875
	$ 94,846 11,928
	$ 106,774
	$ 19,426
	$ 13,504
	$ 14,057

(i) Amortization

The amortization of intangible assets is included in the statement of comprehensive income:

Operating cost Operating expenses	2022 $ 3,781 11,320	2021 2,200 9,728
	$ 15,101	11,928

(ii) Disclosure on pledges

As of December 31, 2022 and 2021, the intangible assets of the Company were not pledged as collateral.

• 131 -

REXON INDUSTRIAL CORP ., LTD.

Notes to the Parent Company Only Financial Statements

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

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

Other current assets: Prepayments Bussiness tax receivables Others Other non-current assets: Prepayments for equipment Others	December 31, 2022 $ 15,952 35,379 13,640	December 31, 2021
		39,458 136,670 13,152
	$ 64,971	189,280
	December 31, 2022 $ 641,030 4,639	December 31, 2021
		342,771 6,617
	$ 645,669	349,388

(k) Short-term borrowings

Unsecured bank loans Secured bank loans Unused short-term credit lines Range of interest rate	December 31, 2022	December 31, 2022	December 31, 2021 700,000 -
	$ 500,000 200,000
	$ 700,000		700,000
	$ 3,300,000		3,350,000
		1.41%~1.725%	0.67%~1.1%

For the collateral for short-term borrowings, please refer to note 8.

(l) Other current liabilities

The details of other current liabilities were summarized as follows:

Advance receipts Temporary receipt Others	December 31, 2022 $ 3,566 458,352 5,340	December 31, 2021 3,566 138,872 10,848
	$ 467,258	153,286

Temporary receipt is mainly received from mold sharing payment and cancellation payment.

• 132 -

REXON INDUSTRIAL CORP., LTD. Notes to the Parent Company Only Financial Statements

The cancellation payment of temporary receipts is because the customer has reached an agreement with the Company and paid $1,054,375 thousand (USD$34,601 thousand) to cancel the contractual rights and obligations of both parties due to the cancellation of the order, of which $491,831 thousand, the Company had received it in November, 2021, and was transferred from contract liabilities to temporary receipts. Please refer to at note 6 (t).Remaining payments has been received in November 2022. The Company will then transfer the part of the payment to the supplier in the form of payment on behalf of others or receipts under custody with the agreement. As of December 31, 2022, the remaining balance of temporary receipts for the cancellation payment is $279,101 thousand.

(m) Long-term borrowings

The details of long-term borrowings were as follows:

Currency Secured bank loans NTD Unsecured bank loans NTD Less : current portion Total Unused long-term credit lines Currency Secured bank loans NTD Less: current portion Total Unused long-term credit lines			December 31, 2022	December 31, 2022
			Rate Maturity year 0.95%~1.56% 2025~2026 1.55% 2026 December 31, 2021	Maturity year	Amount $ 818,334 170,833 989,167 (390,000) $ 599,167 $ 170,000 Amount $ 660,000 (66,667) $ 593,333 $ 470,000
		Currency	Rate 0.45%~1.05%	Maturity year
				2024~2025

For the collateral for long-term borrowings, please refer to note 8.

(n) Lease liabilities

Current Non-current	December 31, 2022 $ 10,501	December 31, 2021 34,261
	$ 24,691	34,292

For the maturity analysis, please refer to note 6(w).

The amounts recognized in profit or loss were as follows:

Interest on lease liabilities	2022 $ 506	2021
		663

• 133 -

REXON INDUSTRIAL CORP ., LTD.

Notes to the Parent Company Only Financial Statements

The amounts recognized in the statement of cash flows for the Company were as follows:

Total cash outflow for leases	2022 $ 30,763	2021 29,706

The lease period for the Company’s lease of lands, buildings and vehicles is two to ten years.

(o) Provisions

Balance at January 1, 2022 Provisions made during the year Provisions used during the year Balance at December 31, 2022 Balance at January 1, 2021 Provisions made during the year Provisions used during the year Balance at December 31, 2021	Warranties
	$ 162,599 83,544 (44,754)
	$ 201,389
	$ 165,973 155,503 (158,877)
	$ 162,599

The provision for warranties relates mainly to automatic facilities and fitness equipment sold during the years ended December 31, 2022 and 2021. The provision is based on estimates made from historical defect rate associated with similar products and services. The Company expects to settle the liability over the next two quarters.

(p) Employee benefits

(i) Defined benefit plans

Reconciliation of the defined benefit obligations at present value and plan asset at fair value were as follows:

December 31, 2022 December 31, 2021 Present value of the defined benefit obligations $ 167,923 310,038 Fair value of plan assets (373,928) (400,703) Net defined benefit asset $ (206,005) (90,665) The Company’s employee benefit liabilities were as follows:	December 31, 2022	December 31, 2021
	$ 167,923 310,038 (373,928) (400,703)
	$ (206,005) (90,665)

Vacation liability	December 31, 2022 $ 21,813	December 31, 2021 21,813

• 134 -

REXON INDUSTRIAL CORP ., LTD. Notes to the Parent Company Only Financial Statements

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

1) Composition of plan assets

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

The Company’s Bank of Taiwan labor pension reserve account balance amounted to $373,928 thousand as of December 31, 2022. For information on the utilization of the labor pension fund assets, including the asset allocation and yield of the fund, please refer to the website of the Bureau of Labor Funds, Ministry of Labor.

• 2) Movements in present value of the defined benefit obligations

The movements in present value of the defined benefit obligations of the Company for the years ended December 31, 2022 and 2021 were as follows:

Defined benefit obligations at January 1 Beginning adjustment Current service costs and interest cost Remeasurements of the net defined benefit liability (asset) －Due to experience adjustments of actuarial (losses) gains －Due to changes in financial assumption of actuarial (losses) gains Benefits paid Defined benefit obligations at December 31	2022	2021 401,954 (16,808) 4,528 (1,143) (55,689) (22,804)
	$ 310,038 - 3,232 (29,705) (21,289) (94,353)
	$ 167,923	310,038

• 135 -

REXON INDUSTRIAL CORP., LTD.

Notes to the Parent Company Only Financial Statements

• 3) Movements of defined benefit plan assets

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

Fair value of plan assets at January 1 Beginning adjustment Interest income Remeasurement of the net defined benefit liability (asset) －Return on plan assets (excluding interest income) Benefits paid Expected return on plan assets Fair value of plan assets at December 31	2022	2021 402,034 157 2,488 4,727 1,837 (10,540)
	$ 400,703 - 2,470 31,656 1,367 (62,268)
	$ 373,928	400,703

• 4) Expenses recognized in profit or loss

Expenses recognized in profits or losses for the Company were as follows:

Current service costs Net interest of net liabilities (asset) for defined benefit obligations Recognized pension expenses	2022 $ 1,358 (596)	2021 2,139 (100)
	$ 762	2,039
	2022 $ 762	2021 2,039

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

The Company’s remeasurement in the net defined benefit liability (asset) recognized in other comprehensive income for the years ended December 31, 2022 and 2021, were as follows:

Cumulative amount at January 1 Recognized during the period Accumulated amount at December 31	2022 $ (91,131) 82,650	2021 (152,690) 61,559
	$ (8,481)	(91,131)

• 136 -

REXON INDUSTRIAL CORP ., LTD.

Notes to the Parent Company Only Financial Statements

6) Actuarial assumptions

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

Discount rate Future salary increase rate	December 31, 2022	December 31, 2021
	1.750% 2.000%	0.625% 2.000%

The expected allocation payment to be made by the Company to the defined benefit plans for the one-year period after the reporting date is $935 thousand.

The weighted average lifetime of the defined benefit plans is 12.26 years.

7) Sensitivity analysis

If the actuarial assumptions had changed, the impact on the present value of the defined benefit obligation shall be as follows:

December 31, 2022 Discount rate Future salary increases December 31, 2021 Discount rate Future salary increases	Influences of defined benefit obligations Increased 0.25% Decreased 0.25% $ (4,294) 4,445 4,337 (4,212) $ (7,271) 7,535 7,269 (7,035)
	Increased 0.25% $ (4,294) 4,337 $ (7,271) 7,269

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

There is no change in the method and assumptions used in the preparation of sensitivity analysis for 2022 and 2021.

(ii) Defined contribution plans

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

The pension costs incurred from the contributions to the Bureau of the Labor Insurance amounted to $22,426 thousand and $31,854 thousand for the years ended December 31, 2022 and 2021, respectively.

• 137 -

REXON INDUSTRIAL CORP ., LTD.

Notes to the Parent Company Only Financial Statements

(q) Income taxes

(i) Income tax (benefit) expense

The components of income tax in the years 2022 and 2021 were as follows:

Current tax (benefit) expense Current period Adjustment for prior periods Deferred tax (benefit) expense Origination and reversal of temporary differences Income tax (benefit) expense	2022 $ - (7,163)	2021 282,687 (688)
	$ (7,163)	281,999
	(95,059)	(24,684)
	$ (102,222)	257,315

The amounts of income tax recognized directly in other comprehemsive income for 2022 and 2021 were as follows:

Item that may be reclassified subsequently to profit or loss Exchange differences on translation	2022 $ 4,815	2021 (1,588)

Reconciliation of income tax and profit before tax for 2022 and 2021 was as follows:

Profit excluding income tax Income tax using the Company’s domestic tax rate Other tax effect generated from adjustment of tax rule Non-deductible expenses Tax effect of investment loss generated from investment accounted for using equity method Recognition of previously unrecognized tax gains Income tax (benefit) expense	2022 $ (401,143)	2021 1,310,207
	$ (80,228) (14,764) 22 (89) (7,163)	262,041 (1,144) 127 (3,021) (688)
	$ (102,222)	257,315

• (ii) Deferred tax assets and liabilities

• 1) Unrecognized deferred tax assets

Deferred tax assets have not been recognized in respect of the following items:

Tax effect of deductible temporary differences	December 31, 2022 $ 5,111	December 31, 2021 5,111

• 138 -

39

REXON INDUSTRIAL CORP., LTD.

Notes to the Parent Company Only Financial Statements

• 2) Recognized deferred tax assets and liabilities

Changes in the amount of deferred tax assets and liabilities for 2022 and 2021 were as follows:

Deferred tax assets: Balance at January 1, 2022 Recognized in profit or loss Recognized in other comprehensive income Balance at December 31, 2022 Balance at January 1,2021 Recognized in profit or loss Recognized in other comprehensive income Balance at December 31, 2021 Deferred tax liabilities: Balance at January 1, 2022 Recognized in profit or loss Balance at December 31, 2022 Balance at January 1, 2021 Recognized in profit or loss **Balance at December 31, 2021 **	Unrealized inventory valuation loss	Provision	Provision	Unrealized inrestment loss	Unrealized inrestment loss	Loss deductions	Exchange on translation of foreign financial statement	Other	Total
	$ 9,168 6,438 -		32,520 7,758 -	5,615 1,993 -		- 61,388 -	26,022 - (4,815)	10,802 10,991 -	84,127 88,568 (4,815)
	$ 15,606		40,278	7,608		61,388	21,207	21,793	167,880
	$ 9,168 - -		33,195 (675) -	- 5,615 -		- - -	24,433 - 1,589	257 10,545 -	67,053 15,485 1,589
	$ 9,168		32,520	5,615		-	26,022	10,802	84,127
	Unrealized investment gains $ - -		Unrealized exchange gains			Total
			6,491 (6,491)
	$ -		-
	$ 15,402 (15,402)		288 6,203
	$ -		6,491

• 3) Assessment of tax

The income tax returns of the Company and Rexon Tech. for the years through 2020 were assesed by the tax authorities.

(r) Capital and other equity

As of December 31, 2022 and 2021, the authorized capital totaled $3,800,000 thousand, and the total paid-in capital amounted to $1,814,735 thousand with a par value of NT$10 per share on common stock.

Reconciliation of shares outstanding for the years ended December 31, 2022 and 2021 were as follows:

(In thousands of shares) Balance at January 1(which is balance at December 31)		Ordinary shares 2022 2021 181,473 181,473
		2022
		181,473

• 139 -

REXON INDUSTRIAL CORP ., LTD.

Notes to the Parent Company Only Financial Statements

(i) Capital Surplus

Balance of capital surplus was as following:

Treasury share transactions Changes in the net equity value of subsichiaries recognized using the equity method	December 31, 2022 $ 433 153	December 31, 2021 433 153
	$ 586	586

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

(ii) Retained earnings

The Company's article of incorporation stipulate that Company's net earnings should first be used to offset the prior years' deficits, if any, before paying any income taxes. Of the remaining balance, 10% is to be appropriated as legal reserve, and then any remaining profit together with any undistributed retained earnings shall be distributed according to the distribution plan proposed by the Board of Directors and submitted to the stockholders’ meeting for approval.

The Company shall first take into consideration its current and future development plan, investment environment, capital requirement, the domestic and global competition, as well as the long-term interests of stockholders in determining the stock or cash dividends to be paid. The dividends appropriated for distribution shall not be less than 20% of the current and prior-period earnings that remain undistributed. The cash dividends shall not be less than 20% of total dividends.

1) Legal reserve

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

2) Special reserve

In accordance with the requirement of Financial Supervisory Commission, a portion of earnings shall be allocated as special earnings reserve during earnings distribution. The special earnings reserve was distributed from the current undistributed earnings, which was income after income tax plus other items, and undistributed earnings of prior period. A portion of undistributed priorperiod earnings shall be reclassified as special earnings reserve and does not qualify for earnings distribution to account for cumulative changes to other shareholders’ equity pertaining to prior periods. Amounts of subsequent reversals pertaining to the net reduction of other shareholders’ equity shall qualify for additional distributions. The special reserve was $163,182 thousand and $177,226 thousand for the years ended December 31,2022 and 2021, respectively.

• 140 -

REXON INDUSTRIAL CORP ., LTD.

Notes to the Parent Company Only Financial Statements

3) Earnings distribution

The amounts of cash dividends on the appropriation of earnings for 2021 had been approved during the board meeting on March 15, 2022, as follow:

Dividends distributed to ordinary shareholders: Cash	2021 Amount per share Total amount $ 3.0 544,420	2020 Amount per share Total amount 3.6 653,305
	Amount per share $ 3.0	Amount per share 3.6

(iii) OCI accumulated in reserves, net of tax

Balance at January 1, 2022 Exchange differences on foreign operations Balance at December 31, 2022 Balance at January 1, 2021 Exchange differences on translation of foreign Unrealized gains (losses) from financial assets measured at fair value through other comprehensive income Disposal of investments in equity instruments designated at fair value through other comprehensive income Balance at December 31, 2021	Exchange differences on translation of foreign financial statements	Unrealized (losses) gains from financial assets measured at fair value through other comprehensive income	Total (163,182) 19,259
	$ (163,182) - 19,259 -
	$ (143,923) -		(143,923)
	$ (156,823) (20,402) (6,359) - - 17,184 - 3,218		(177,225) (6,359) 17,184 3,218
	$ (163,182) -		(163,182)

• 141 -

REXON INDUSTRIAL CORP., LTD.

Notes to the Parent Company Only Financial Statements

(s) Earnings (loss) per share

The details on the calculation of basic earnings (loss) per share and diluted earnings per share for years 2022 and 2021 were as follows:

Basic earnings (loss) per share

Net (loss) profit attributable to ordinary shareholders of the Company Weighted-average number of ordinary shares Diluted earnings (loss) per share Net (loss) profit attributable to ordinary shaleholders of the Company Weighted-average number of ordinary shares Effect of employee share bonus Weighted average number of ordinary shares (diluted)	2022
	181,473 181,473
	$ (1.65) 5.80
	$ (298,921) 1,052,892
	181,473 181,473 - 1,349
	181,473 182,822
	$ (1.65) 5.76

(t) Revenue from contracts with customers

(i) Details of revenue

Primary geographical markets America Europe Asia Other Major products/services lines Woodworking tools Fitness equipment Other	2022 $ 3,870,274 345,617 145,749 77,387	2021 17,700,390 466,307 141,677 3,608
	$ 4,439,027	18,311,982
	$ 1,361,789 2,954,518 122,720	1,555,839 16,463,705 292,438
	$ 4,439,027	18,311,982

(ii) Contract balances

Contract liabilities	December 31, 2022	December 31, 2021	January 1, 2021
	$ 27,552	530,224	20,982

• 142 -

REXON INDUSTRIAL CORP ., LTD.

Notes to the Parent Company Only Financial Statements

The amount of revenue recognized for the years ended December 31, 2022 and 2021 that was included in the contract liability balance at the beginning of the period were $9,761 thousand and $6,161 thousand, respectively.

Contract liabilities mainly arise from the deferred revenue from sales contract of woodworking tools and fitness equipment. The Company will recognize revenue when the goods are transferred to customers.

The opening balance of contract liabilities on January 1, 2022 was adjusted due to contract modification for 2022, the adjustment was $491,831 thusands, which has been transferred to other current liabilities. Please refer to Note 6 (l) for details.

(u) Remunerations to employees, directiors and supervisors

According to the Articles of Association, once the Company has annual profit, it should at least appropriate 5% of the profit to its employees and 5% or less to its directors and supervisors as remuneration. However, if the Company has accumulated deficits, the profit should be reserved to offset the deficit. The pervading target given via cash or shares includes those dependent employees of the Company’s subsidiaries under certain requirements.

For the years ended December 31, 2022 and 2021, the Company estimated its employee remuneration amounting to $0 and $69,327 thousand, and directors' and supervisors' remuneration amounting to $0 and $7,000 thousand, respectively. The estimated amounts mentioned above are calculated based on the net profit before tax, excluding the remuneration to employees, directors and supervisors of each period, multiplied by the percentage of remuneration to employees, directors and supervisors as specified in the Company's articles. The amounts, as stated in the consolidated financial statements, are identical to those of the actual distributions for 2022 and 2021.

(v) Non-operating income and expenses

(i) Interest income

The details of interest income for years 2022 and 2021 were as follows:

Interest income－bank deposits (ii) Other income	2022 $ 5,336	2021 984

The details of other income for years 2022 and 2021 were as follows:

Rent income Dividend income Other	2022 $ 5,589 - 10,299	2021 3,535 13 33,766
	$ 15,888	37,314

• 143 -

REXON INDUSTRIAL CORP ., LTD.

Notes to the Parent Company Only Financial Statements

(iii) Other income and losses

The details of other income and losses for years 2022 and 2021 were as follows:

Net foreign exchange gains (losses) Net losses on disposal of properey, plant and equipment Gain on financial assets measured at fair value through profit Impairment loss on property, plant and equipment Others Net other income and losses	2022 $ 26,218 (3,538) - (15,971) (4,011)	2021
		(79,683) (4,526) 5,908 (52,723) -
	$ 2,698	(131,024)

• (iv) Finance expenses

The details of finance expenses for years 2022 and 2021 were as follows:

Interest expenses Less: capitalization of interest	2022 $ (19,613) 3,650	2021 (6,123) 1,400
	$ (15,963)	(4,723)

(w) Financial Instruments

(i) Credit risk

1) Credit risk exposure

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

2) Concentration of credit risk

Major clients of the Company are concentrated in automatic facilities and fitness machines market. Sales to the major clients in 2022 and 2021 are accounted for 49% and 89% of revenue, respectively. To minimize credit risk, the Company periodically evaluates their financial positions and requests collateral if deemed necessary. As of December 31, 2022 and 2021, three customers accounted for 78% and 82% respectively of notes receivable and accounts receivable, which resulted in concentration of credit risk.

3) Receivables

For credit risk exposure of notes and accounts receivable, please refer to note 6(c). Other financial assets at amortized cost inlcudes other receivables. For the details and loss allowance, please refer to note 6(d).

• 144 -

REXON INDUSTRIAL CORP ., LTD.

Notes to the Parent Company Only Financial Statements

(ii) Liquidity risk

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

December 31, 2022 Non-derivative financial liabilities Secured bank loans Unsecured loans Leased liabilities (current and non-current) Other payables December 31, 2021 Non-derivative financial liabilities Secured bank loans Unsecured loans Lease liabilities (current and non-current) Other payables	Carrying amount	Contractual cash flows 1,032,911 678,461 36,289 1,790,334	1-12months	1-2years 401,103 51,686 6,146 -	2-5years	More than 5 years - - 9,555 -
	$ 1,018,334 670,833 35,192 1,790,334		549,696 554,852 10,808 1,790,334		82,112 71,923 9,780 -
	$ 3,514,693	3,537,995	2,905,690	458,935	163,815	9,555
	$ 660,000 700,000 68,553 5,598,546	664,825 701,348 70,100 5,598,546	68,914 701,348 34,778 5,598,546	241,770 - 12,241 -	354,141 - 10,586 -	- - 12,495 -
	$ 7,027,099	7,034,819	6,403,586	254,011	364,727	12,495

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

(iii) Currency risk

• 1) Exposure to foreign currency risk

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

Financial Assets Monetary items USD EUR JPY GBP	December 31, 2022	December 31, 2022	December 31, 2022	December 31, 2021 Foreign Currency Exchange Rates TWD 93,848 27.68 2,597,713 2 31.32 63 196,874 0.2405 47,348 5 37.30 187	December 31, 2021 Foreign Currency Exchange Rates TWD 93,848 27.68 2,597,713 2 31.32 63 196,874 0.2405 47,348 5 37.30 187	December 31, 2021 Foreign Currency Exchange Rates TWD 93,848 27.68 2,597,713 2 31.32 63 196,874 0.2405 47,348 5 37.30 187
	Foreign Currency $ 72,250 20 209,838 5	Exchange Rates 30.71 32.72 0.2324 37.09	TWD 2,218,798 654 48,766 185	Foreign Currency 93,848 2 196,874 5	Exchange Rates 27.68 31.32 0.2405 37.30
						2,597,713 63 47,348 187

• 145 -

REXON INDUSTRIAL CORP., LTD.

Notes to the Parent Company Only Financial Statements

Financial Liabilities Monetary items USD EUR JPY	December 31, 2022	December 31, 2022	December 31, 2022	December 31, 2021 Foreign Currency Exchange Rates TWD 12,879 27.68 356,491 783 31.32 24,524 579 0.2405 139	December 31, 2021 Foreign Currency Exchange Rates TWD 12,879 27.68 356,491 783 31.32 24,524 579 0.2405 139	December 31, 2021 Foreign Currency Exchange Rates TWD 12,879 27.68 356,491 783 31.32 24,524 579 0.2405 139
	Foreign Currency 8,264 230 -	Exchange Rates 30.71 32.72 -	TWD 253,787 7,526 -	Foreign Currency 12,879 783 579	Exchange Rates 27.68 31.32 0.2405
						356,491 24,524 139

• 2) Sensitivity analysis

The Company’s exposure to foreign currency risk arises from the translation of the foreign currency exchange gains and losses on cash and cash equivalents, accounts and other receivables, borrowings, and accounts and other payables that are denominated in foreign currency. A strengthening (weakening) of 1% of the TWD against the USD, EUR, JPY, and GBP as of December 31, 2022 and 2021 would have increased (decreased) the net profit after tax by $16,058 thousand and $18,114 thousand, respectively. The analysis assumes that all other variables remain constant and ignores any impact of forecasted sales and purchases. The analysis is performed on the same basis for perior year.

• 3) Foreign exchange gain and loss on monetary items

Since the Company has many kinds of functional currency, the information on foreign exchange gain (loss) on monetary items is disclosed by total amount. For years 2022 and 2021, foreign exchange gain (loss) (including realized and unrealized portions) amounted to $26,218 thousand and $(79,683) thousand, respectively.

(iv) Interest rate analysis

Please refer to the note on liquidity risk management and interest rate exposure of the Company’s financial assets and liabilities.

The following sensitivity analysis is based on the exposure to the interest rate risk of derivative and non-derivative financial instruments on the reporting date.

Regarding liabilities with variable interest rates, the analysis is based on the assumption that the amount of liabilities at the reporting date was outstanding throughout the year. The rate of change is expressed as the interest rate which increases or decreases by 1% when reporting to management internally, which also represents the Company management's assessment of the reasonably possible interest rate change.

If the interest rate had increased/decreased by 1%, with all other variable factors remaining constant, the Company’s net income would have increasd/decreased by $13,513 thousand and $10,880 thousand for the years ended December 31, 2022 and 2021, respectively. This is mainly due to the Company’s borrowings in variable rates.

• 146 -

REXON INDUSTRIAL CORP ., LTD.

Notes to the Parent Company Only Financial Statements

• (v) Fair value of financial instruments

• 1) Categories and fair value of financial instruments

The fair value of financial assets at fair value through profit or loss and financial assets measured at fair value through other comprehensive income is measured on a recurring basis. The carrying amount and fair value of the Company’s financial assets and liabilities, including the information on fair value hierarchy were as follows; however, except as described in the following paragraphs, for financial instruments not measured at fair value whose carrying amount is reasonably close to the fair value, and lease liabilities, disclosure of fair value information is not required:

Carrying amount Financial assets at fair value through profit or loss Mandatorily measured at fair value through profit or loss $ 96 Financial assets measured at amortized cost Cash and cash equivalents 1,892,911 Notes receivable, trade receivable, and other receivable (including related parties) 770,468 Guarantee deposits paid 1,926 $ 2,665,401 Financial liabilities at amortized cost Short-term borrowings $ 700,000 Notes payable, accounts payable, and other payable (including related parties) 1,790,334 Long-term borrowings, due 1year portion 390,000 Loan-term borrowings 599,167 Leases liabiliteis 35,192 $ 3,514,693 Carrying amount Financial assets at fair value through profit or loss Mandatorily measured at fair value through profit or loss $ 96 Financial assets measured at amortized cost Cash and cash equivalents 4,492,307 Notes receivable, trade receivable, and other receivable (including related parties) 1,754,755 Guarantee deposits paid 7,812 $ 6,254,970		December 31, 2022	December 31, 2022	December 31, 2022	Total 96 - - -
			FairValue
		Level 1 - - - -	Level 2 - - - -	Level 3 96 - - -
	$ 2,665,401	-	-	96	96
		- - - - -	- - - - -	- - - - -	- - - - -
	$ 3,514,693	-	-	-	-
		December 31, 2021			Total 96 - - -
			FairValue
		Level 1 - - - -	Level 2 - - - -	Level 3 96 - - -
	$ 6,254,970	-	-	96	96

• 147 -

REXON INDUSTRIAL CORP ., LTD.

Notes to the Parent Company Only Financial Statements

Carrying amount Financial liabilities at amortized cost Short-term borrowings $ 700,000 Notes payable, accounts payable, and other payable(including related parties) 5,598,546 Long-term borrowings, due 1 year portion 66,667 Loan-term borrowings 593,333 Lease liabilities 68,553 $ 7,027,099		December 31, 2021	December 31, 2021	December 31, 2021
			FairValue		**Total **
		Level 1 - - - - -	Level 2 - - - - -	Level 3 - - - - -
					- - - - -
	$ 7,027,099	-	-	-	-

• 2) Valuation techniques for financial instruments not measured at fair value

The Company’ s valuation techniques and assumptions used for financial instruments not measured at fair value are as follows:

For financial liabilities measured at amortized cost, if there is quoted price generated bytransactions, the recent transaction price and quoted price data is used as the basis for fair value measurement. However, if no quoted prices are available, the discounted cash flows are used to estimate fair values.

• 3) Valuation techniques for financial instruments measured at fair value.

The fair value of financial instruments is quoted prices if quoted prices are from an active market. Published prices from the main exchange and central government bonds regarded as usually-traded securities are both basis of fair values of listed equity instruments and debt instruments with quoted prices from an active market.

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

The Company holds the financial instruments with the active market, the categories and characteristics of fair value are listed as follow: Fair values of listed stocks are based on market quoted prices.

• 4) Transfer between Level 1 and Level 2

There were no transfers from one level to another in 2022 and 2021.

• 148 -

REXON INDUSTRIAL CORP., LTD.

Notes to the Parent Company Only Financial Statements

• 5) Quantified information for significant unobservable inputs (Level 3) used in fair value measurement

The Company’s financial instruments that use Level 3 inputs to measure fair value include “ financial assets measured at fair value through profit or loss – equity investments”.

Most of the Company’s fair values are Level 3 “only with single significant unobservable inputs” , and only equity instruments without active market have plural significant unobservable inputs. Since significant unobservable inputs of equity instruments without an active market are independent, they are not correlated.

(x) Financial risk management

• (i) Overview

The Company has exposures to the following risks from its financial instruments:

• 1) Credit risk

• 2) Liquidity risk

• 3) Market risk

In this note expressed the information on risk exposure and objectives, policies and procedures of risk measurement and management. For detailed information, please refer to the related notes of each risk.

(ii) Structure of risk management

The Company’s finance management department provides business services for the overall internal department. It sets the objectives, policies and processes for managing the risk and the methods used to measure the risk arising from both the domestic and international financial market operations. The Group minimizes the risk exposure through derivative financial instruments. The board of directors regulated the use of derivative financial instruments in accordance with the Group’s policy on risks arising from financial instruments such as credit risk, currency risk, and interest rate risk, the use of derivative and non-derivative financial instruments, and the investments of excess liquidity. The internal auditors of the Company continue to review the amount of the risk exposure in accordance with the Company's policies and the risk management's policies and procedures. The Company has no transactions in financial instruments (including derivative financial instruments) for the purpose of speculation.

• (iii) Credit risk

Credit risk is the risk of financial loss to the Company if a customer or counterparty to a financial instrument fails to meet its contractual obligations, and arises principally from the Company’s receivables from customers and investment securities.

• 149 -

REXON INDUSTRIAL CORP ., LTD.

Notes to the Parent Company Only Financial Statements

1) Accounts receivable and other receivables

The Company established a credit policy to obtain the necessary collateral to mitigate risks arising from financial loss due to default risk. The Company will transact with corporations having credit ratings equivalent to investment grade, and such ratings are provided by independent rating agencies. Where it is not possible to obtain such information, the Company will assess the ratings based on other publicly available financial information and records of transactions with its major customers. The Company continuously monitors the exposure to credit risk and counterparty credit ratings, and establish sales limits based on credit rating for each of its approved customer. The credit limits for each counterparty are approved and reviewed annually by the Risk Management Committee.

The Company did not have any collateral or other credit enhancement to avoid credit risk of the financial assets.

2) Investments

The exposure to credit risk for the bank deposits and other financial instruments is measured and monitored by the Company’s finance department. The Company only deals with banks, other external parties, corporate organizations, government agencies and financial institutions with good credit rating. The Company does not expect any counterparty above fails to meet its obligations hence there is no significant credit risk arising from these counterparties.

• 3) Guarantees

The Company’s policy is to provide financial guarantees only to wholly-owned subsidiaries. As of December 31, 2022 and 2021, the Company provided financial guarantee to its subsidiaries amounted to $61,420 thousand and $138,400 thousand, respectively.

• (iv) Liquidity risk

The Company manages sufficient cash and cash equivalents so as to cope with its operations and mitigate the effects of fluctuations in cash flows. The Company’s management supervises the banking facilities to ensure they are in compliance with the terms of the loan agreements.

Loans and borrowings from the bank form an important source of liquidity for the Company. The Company has unused long-term and short-term credit line of $3,470,000 thousand and $3,820,000 thousand as of December 31, 2022 and 2021, respectively.

(v) Market risk

Market risk is the risk that changes in market prices, such as foreign exchange rates, interest rates, and equity prices that will affect the Company’s income or the value of its holdings of financial instruments. The objective of market risk management is to manage and control market risk exposures within acceptable parameters, while optimizing the return.

• 150 -

REXON INDUSTRIAL CORP., LTD.

Notes to the Parent Company Only Financial Statements

• 1) Currency risk

The Company is exposed to currency risk on sales and purchases . The currencies used in these transactions are the EUR, USD, GBP and JPY.

• 2) Interest rate risk

The Company maintains an appropriate proportion of the fixed and variable interest rate instruments and using interest rate swap contracts to mitigate the floating interest rate risk. The Company will assess the hedging activities for consistent interest rates within its risk preferences and use the most cost-effective hedging strategy on a regular basis.

(y) Capital management

The Company meets its objectives for managing capital to safeguard the capacity to continue to operate, to continue to provide a return on shareholders, and to maintain an optimal capital structure to reduce the cost of capital.

In order to maintain or adjust the capital structure, the Company may adjust the dividend payment to the shareholders, reduce the capital for redistribution to shareholders, and issue new shares or sell assets to settle any liabiltiies.

The Company and other entities in the simialr industry use the debt-to-equity ratio to manage capital. This ratio uses the total net debt divided by the total capital. The net debt from the balance sheet is derived from the total liabilities, less cash and cash equivalents. The total capital and equity include share capital, capital surplus, retained earnings, other equity, and non-controlling interest, plus, net debt.

As of December 31, 2022, the Company’s capital management strategy is consistent with the prior year as of December 31, 2021. The Company’s debt to equity ratio as of December 31, 2022 and 2021, were as follows:

Total liabilities Less: cash and cash equivalents Net debt Total equity Adjusted equity Debt-to-equity ratio	December 31, 2022	December 31, 2022		December 31, 2021 8,062,898 (4,492,307)
	$ 4,210,892 (1,892,911)
	2,317,981 3,483,657			3,570,591 4,225,089
	$ 5,801,638			7,795,680
		40%		46%

The debt-to equity ratio was reduced on December 31, 2022, due to the substantial decrease in revenue during the current period, hence, the relative decrease in purchases from suppliers has led to an decrease in the amount of account payable.

• 151 -

REXON INDUSTRIAL CORP ., LTD.

Notes to the Parent Company Only Financial Statements

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

Reconciliation of liabilities arising from financing activities were as follows:

Long-term borrowings (Including due within 1 year) Short-term borrowings Lease liabilities Total liabilities from financing Long-term borrowings (Including due within 1 year) Short-term borrowings Lease liabilities Total liabilities from financing	January 1,2022 $ 660,000 700,000 68,553	Cash flows 329,167 - (30,257)	Non-cash changes Acquistion Changes in lease payments Foreign exchange movement - - - - - - 4,228 (7,332) -	Non-cash changes Acquistion Changes in lease payments Foreign exchange movement - - - - - - 4,228 (7,332) -	Non-cash changes Acquistion Changes in lease payments Foreign exchange movement - - - - - - 4,228 (7,332) -	December 31,2022 989,167 700,000 35,192
				Changes in lease payments - - (7,332)
			- - 4,228
	$ 1,428,553	298,910	4,228	(7,332)	-	1,724,359
	January 1,2021 $ 308,400 280,000 23,619	Cash flows 351,600 420,000 (29,043)	Non-cash changes Acquistion Changes in lease payments Foreign exchange movement - - - - - - 73,977 - -			December 31,2021 660,000 700,000 68,553
				Changes in lease payments - - -
			- - 73,977
	$ 612,019	742,557	73,977	-	-	1,428,553

(7) Related-party transactions:

(a) Names and relationship with the Company

The following is the entity that have had transactions with the Company during the periods covered in the financial statements.

Name of related parey Power Tool Specialists Inc. (P.T.S.) Gold Item Group Ltd. (Gold Item) GoldTechGroup Ltd. (Gold Tech) Tongxiang Rexon Industrial Co., Ltd. (Tongxiang Rexon) Rexon Technology Corp., Ltd. (Rexon Tech) Fine Clear Co., Ltd. (Fine Clear)	Relationship with the Company
	Subsidiaries Subsidiaries Subsidiaries Subsidiaries Subsidiaries An associate

• 152 -

REXON INDUSTRIAL CORP ., LTD.

Notes to the Parent Company Only Financial Statements

(b) Significant transactions with related parties

(i) Sale of goods to related parties

The amounts of significant sales by the Company to related parties were as follows:

Associates－Fine Clear Subsidiaries－Other	2022 2021 $ 76,674 56,115 7,157 4,317 $ 83,831 60,432

The price changed to related party is incomparable to normal price because there were no similar items sold to both related and non-related parties. The credit term was 150 days, while the credit term for routine sales transaction was ranged from 30 days to 120 days. Amounts receivable from related parties were uncollateraliged, and no expected credit loss were required after the assussment by the management.

ii) Purchase of goods from related-parties

Subsidiaries－Tongxiang Rexon Subsidiaries－Rexon Tech	2022 $ 980,602 45,383 $ 1,025,985	2021 942,986 480,388
		1,423,374

In 2022 and 2021, the subsidiaries were purchased the parts from the company $9,174 thousand and $19,452 thousand. The amount is not counted as the Company’ s revenue. Such part of sale of the parts was already being written-off against the cost of goods purchased of the parts in the financial statements.

、 The Company’s payment term on related-parties is based on factors such as working capital Industry characteristics and Industry status of related-parties. The term of purchase payment of the Company to related-parties is about 90 days to 150 days.

iii) Receivables from related-parties

Account Notes receivable Accounts receivable Accounts receivable Other receivables	Related-party type	December 31, 2022
	Associates－Fine Clear Associates－Fine Clear Subsidiaries－P.T.S Subsidiaries－Tongxiang Rexon

• 153 -

REXON INDUSTRIAL CORP ., LTD.

Notes to the Parent Company Only Financial Statements

iv) Payables to related-parties

Account	Related-party type	December 31, 2022
Notes payable Notes payable Accounts payables Accounts payables Other payables Other payables Other payables Other payables	Associates－Fine Clear Subsidiaries－Rexon Tech Subsidiaries－Tongxiang Rexon Subsidiaries－Rexon Tech Subsidiaries－P.T.S Subsidiaries－Tongxiang Rexon Subsidiaries－Rexon Tech Associates－Fine Clear

－ － Other payables to Subsidiaries P.T.S consist of various operating expense that Subsidiaries P.T.S has paid in advance for the Company. The amounts of other payables are $101,111 thousand and $94,376 thousand, respectively, on December 31, 2022 and 201.

v) Guarantee and endorsements

As of December 31, 2022 and 2021, the Company had provided a guarantee for loans taken out by subsidiaries-Tongxiang Rexon. The credit limit of the guarantee was $61,420 thousand and $138,400 thousand, respectively.

vi) Service fee

In 2022 and 2021, the Company's Service fee to subsidiaries due to sales to foreign manufactures whom subsidiaries provide service for is as follows:

Subsidiaries－P.T.S	Service fee 2022 2021 $ 44,836 41,936	Service fee	Service fee
			2021
			41,936

• 154 -

REXON INDUSTRIAL CORP ., LTD.

Notes to the Parent Company Only Financial Statements

• (c) Key management personnel compensation

Key management personnel compensation comprised:

Short-term employee benefits Post-employment benefits Other long-term benefits Termination benefits Share-based payments	2022 $ 31,407 1,358 - - -	2021 54,540 1,384 - - -
	$ 32,765	55,924

(8) Pledged assets

The carrying values of pledged assets were as follows:

Pledged assets Land Buildings	Object Guarantee for bank loans Guarantee for bank loans	December 31, 2022 $ 296,916 562,467	December 31, 2021 296,916 557,572
		$ 859,383	854,488

(9) Significant commitments and contingencies

• i) The Company’s unrecognized contractual commitments were as follows:

Acquisition of property, plant and equipment	December 31, 2022 $ 293,285	December 31, 2021 265,343

ii) Other:

The Company received civil complaint of trade price and notice trial which Yi-Zong Hardware Co., Ltd. claim that the Company should pay $37,154 thousand for purchase. The complaint is on trial in Taiwan Taichung District Court, therefore, the Company has not estimated relevant provisions and does not expect material impact in the Company's operation and business.

(10) Losses due to major disasters:None.

(11) Subsequent events: None.

• 155 -

REXON INDUSTRIAL CORP ., LTD.

Notes to the Parent Company Only Financial Statements

(12) Other

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

By function By item	2022	2022	2022	2021	2021	2021
	Cost of sales	Operating expenses	Total	Cost of sales	Operating expenses	Total
Employee benefits
Salary	321,035	144,034	465,069	605,798	281,211	887,009
Labor and health insurance	43,232	17,474	60,706	72,862	18,735	91,597
Pension	18,159	5,029	23,188	26,343	7,550	33,893
Remuneration of directors	-	-	-	-	7,000	7,000
Others	6,121	1,248	7,369	14,088	1,547	15,635
Depreciation	242,660	36,381	279,041	170,479	26,517	196,996
Amortization	3,781	11,320	15,101	2,200	9,728	11,928

Additional information of the number of employees and employees benefits of the Company in 2022 and 2021 were as follows:

The number of employees The number of directors excluding the employees The average of employees' benefit The average of salary The average of salary adjustment Remuneration of supervisor	2022 958	2021
		1,744
	4	5
	$ 583	589
	$ 487	508
	(4)% $ -	(14)%
		-

The Company's payroll and benefit policy (directors, supervisors, managers and employees included) :

• (i) Attendance fee and distribution in earnings are included in Directors' and supervisors' remuneration. Based on the standars of the industry, attendance fee would be paid depending on attendance of each director and supervisor. The Board of Directors have been authorized to evaluate the remuneration for directors and managers in accordance with their participation and contribution, and the Company could pay the remuneration no matter where there are earnings or losses no more than the highest level of Company's payroll and benefit policy.

• (ii) Manager’s remuneration includes salary, bonus, employee remuneration and employee stock options, wherein the employee’s position, responsibilities, and the level of other industry, are being taken into consideration.

• (iii) Employees’ payroll and benefit policy takes personal abilities, contributions to the Company, performance, competitiveness, and the future operating risks of the Company into consideration.

• 156 -

REXON INDUSTRIAL CORP., LTD.

Notes to the Parent Company Only Financial Statements

(13) Other disclosures

• (a) Information on significant transactions

The following is the information on significant transactions required by the “Regulations Governing the Preparation of Financial Reports by Securities Issuers” for the Company:

• (i) Lending to other parties: None

• (ii) Guarantees and endorsements for other parties:

(Amounts in Thousands of New Taiwan Dollar)

No.	Name of guarantor	Counter-party of guarantee and endorsement	Counter-party of guarantee and endorsement	Limitation on amount of guarantees and endorsements for a specific enterprise	Highest balance for guarantees and endorsements during theperiod	Balance of guarantees and endorsements as of reporting date	Actual usage amount during the period	Property pledged for guarantees and endorsements (Amount)	Ratio of accumulated amounts of guarantees and endorsements to net worth of the latest financial statements	Maximum amount for guarantees and endorsements	Parent company endorsements/ guarantees to third parties on behalf of subsidiary	Subsidiary endorsements/ guarantees to third parties on behalf of parent company	Endorsements/ guarantees to third parties on behalf of companies in Mainland China
		Name	Relationshi p with the Company
0	REXON INDUSTRI AL CORP., LTD.	Tongxiang Rexon	2	1,393,463	(USD5,000) 158,750	(USD2,000) 61,420	(USD2,000) 61,420	-	1.76%	1,393,463	Y	N	Y

Note1：The total amount and the limited amount of the guarantee provided by the company to any individual subsidiary shall not exceed forty percent (40%) of the Company’s net worth.

Note2：No.0 represents the parent company.

Note3：The relationship between guarantee provider and guarantee party were as follows :

• 1) Companies which were in business relationship.

• 2) Subsidiaries which the company directly or indirectly held more than fifty percent (50%).

• 3) Companies with substantial control

(iii) Securities held as of December 31, 2022 (excluding investment in subsidiaries, associates and joint ventures):

(Amounts in Thousands of New Taiwan Dollars)

Name of holder	Category and name of security	Relationship with company	Account title	Endingbalance	Endingbalance	Endingbalance	Endingbalance	Note
				Shares/Units (thousands)	Carrying value	Percentage of ownership (%)	Fair value
REXON INDUSTRIAL CORP., LTD.	Stock-Hwa Chung Venture Capital Corp.		Financial assets at fair value through profit or loss- current	10	96	-	96

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

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

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

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

(Amounts in Thousands of New Taiwan Dollars)

Name of company	Relatedparty	Nature of relationship	Transaction details	Transaction details	Transaction details	Transaction details	Transactions with terms different from others	Transactions with terms different from others	Notes/Accounts receivable (payable)	Notes/Accounts receivable (payable)	Note
			Purchase/Sale	Amount	Percentage of total purchases/sales	Payment terms	Unitprice	Payment terms	Endingbalance	Percentage of total notes/accounts receivable (payable)
REXON INDUSTRIAL CORP., LTD.	Tongxiang Rexon	The subsidiary	Purchase	980,602	37%	90~150Days	Note 1	Note 2	(214,202)	(19)%

• Note1：The price charged to related party is incomparable to normal price because there were no similar iterms purchased from both related and non-related parties.

• Note2：The payment term for the related party is 90-150 days. Apart from according to the established payment policy, the related working capital, industry characteristics, and industrial prosperity are also considered.

• 157 -

REXON INDUSTRIAL CORP., LTD.

Notes to the Parent Company Only Financial Statements

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

Name of company	Name of Counter-party	Nature of relationship	Ending balance	Turnover rate	Overdue	Overdue	Amounts received in subsequentperiod	Allowance for bad debts
					Amount	Action taken
Tongxiang Rexon	REXON INDUSTRIAL CORP., LTD.	Parent company	Account receivable 214,202	6.62%	-	-	The recovery amount as of January 30, 2023 : 63,274	-

• (ix) Trading in derivative instruments: None

• (b) Information on investees:

The following is the information on investees for the year ended December 31, 2022 (excluding information on investees in Mainland China):

(Amounts in Thousands of New Taiwan Dollars)

Name of investor	Name of investee	Location	Main businesses and products	Original investment amount	Original investment amount	Balance as of December 31,2022	Balance as of December 31,2022	Balance as of December 31,2022	Net income (losses) of investee	Share of profits/losses of investee	Note
				December 31,2022	December 31,2021	Shares (thousands)	Percentage of wnership	Carrying value
REXON INDUSTRIAL CORP., LTD.	Fine Clear Co.,Ltd	R.O.C	Buying and selling accessories	14,197	14,197	1,600	16%	16,420	1,177	188	Investment Using Equity Method
REXON INDUSTRIAL CORP., LTD.	Rexon Technology Corp., Ltd. (Rexon Tech)	R.O.C	Manufacture and sale of electric components	293,741	293,741	7,851	82.87%	97,871	309	256	Direct subsidiaries of the Company
REXON INDUSTRIAL CORP., LTD.	Power Tool Specialists Inc.	U.S.A	Merchandise trading	196,465	196,465	0.1	96%	154,890	(6,289)	(6,046)	Direct subsidiaries of the Company
REXON INDUSTRIAL CORP., LTD.	Gold Item Group Ltd.	British Virgin Islands	Investing and holding	747,858	747,858	US$ 25,000 (Note 1)	100%	702,524	(3,919)	(3,919)	Direct subsidiaries of the Company
Gold Item	Gold Tech Group Ltd.	Hong Kong	Investing and holding	US$ 25,000	US$ 25,000	US$ 25,000 (Note 1)	100%	682,012	(3,924)	(3,924)	Direct subsidiaries of Gold Item

Note1：Company Limited without issuing Shares. The amount of capital invested is disclosed.

• (c) Information on investment in mainland China:

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

(Amounts in Thousands of New Taiwan Dollar)

Investee company	Main businesses and products	Total amount of paid-in capital	Method of investment	Accumulated outflow of investment from Taiwan as of January1,2022	Investment flows	Investment flows	Accumulated outflow of investment from Taiwan as of December 31,2022	Net income (losses) of the investee	Percentage of ownership	Net income (losses) recognized	Carrying value as of December 31, 2022	Accumulated remittance of earnings as of December 31,2022
					Outflow	Inflow
Tongxiang Rexon	Manufacture of drills, woodworking tools and fitness equipment	RMB 154,465 (USD25,000) -	Note 1	USD 25,000 (NTD745,565)	-	-	USD 25,000 (NTD745,565)	(3,924)	100%	(3,924)	682,012	-

Note 1：The Company invested companies in Mainland China through investees in Third Region, and investees in Third Region invested companies in Mainland China through their investees in Hong Kong.

• (ii) Limitation on investment in Mainland China:

Accumulated Investment in Mainland China as of December 31,2022	Investment Amounts Authorized by Investment Commission,MOEA	Upper Limit on Investment
US$25,000 (NT$745,565)	US$25,000 (NT$745,565)	2,090,194

• (iii) Significant transactions:

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

• 158 -

REXON INDUSTRIAL CORP., LTD.

Notes to the Parent Company Only Financial Statements

(d) Major shareholders:

Shareholding Shareholder’s Name	Shares	Percentage
Kun-Ju Co.,Ltd.	18,735,302	10.32%
Trust Account entrusted byShu-Qi Chen in Li-Tai InvestingCorp.,Ltd.	12,275,599	6.76%

• Note:(l) The information of major shareholders in this table is calculated by Taiwan Depository & Clearing Corporation based on the last business day at the end of each quarter, disclosing shareholders with more than 5% of the Company's ordinary shares and preferred shares that have been delivered without physical registration (including treasury shares). As for the share capital reported in the Company's financial statements and the Company's actual number of shares delivered without physical registration, there may be differences due to different calculation bases.

• (2) In a situation where a shareholder entrusted the holdings, the individual account of the settlor opened by the trustee was disclosed. As for the shareholder's declaration of insider's equity holding more than 10% of the shares in accordance with the Securities and Exchange Act, his shareholding includes his own shareholding plus the shares delivered to the trust and the right to use the trust property, etc. For information on insider equity declaration, please refer to Market Observation Post System.

(14) Segment information

Please refer to 2022 consolidated financial report.

• 159 -

II. The consolidated financial reports audited and certified by CPAs for the most recent year.

Representation Letter

The entities that are required to be included in the combined financial statements of Rexon Industrial Corp., Ltd. as of and for the year ended December 31, 2022 under the Criteria Governing the Preparation of Affiliation Reports, Consolidated Business Reports, and Consolidated Financial Statements of Affiliated Enterprises are the same as those included in the consolidated financial statements prepared in conformity with International Financial Reporting Standards No. 10, "Consolidated Financial Statements." endorsed by the Financial Supervisory Commission of the Republic of China. In addition, the information required to be disclosed in the combined financial statements is included in the consolidated financial statements. Consequently, Rexon Industrial Corp., Ltd. and Subsidiaries do not prepare a separate set of combined financial statements.

Company name: Rexon Industrial Corp., Ltd. President: Wang Kuan-Hsiang Date: Febuary 23, 2023

• 160 -

INDEPENDENT AUDITORS’ REPORT

To the Board of Directors of Rexon Industrial Corp., Ltd.:

Opinion

We have audited the consolidated financial statements of Rexon Industrial Corp., Ltd. and its subsidiaries (“the Group”), which comprise the consolidated balance sheets of December 31, 2022 and 2021, the consolidated statement of comprehensive income, changes in equity and cash flows for the years then ended, and notes to the consolidated financial statements, including a summary of significant accounting policies.

In our opinion, the accompanying consolidated financial statements present fairly, in all material respects, the consolidated financial position of the Group as of December 31, 2022 and 2021, and its consolidated financial performance and its consolidated cash flows for the years then ended in accordance with the Regulations Governing the Preparation of Financial Reports by Securities Issuers and with the International Financial Reporting Standards (“IFRSs”), International Accounting Standards (“IASs”), Interpretations developed by the International Financial Reporting Interpretations Committee (“IFRIC”) or the former Standing Interpretations Committee (“SIC”) endorsed and issued into effect by the Financial Supervisory Commission of the Republic of China.

Basis for Opinion

We conducted our audits in accordance with the Regulations Governing Auditing and Attestation of Financial Statements by Certified Public Accountants and Standards on Auditing of the Republic of China. Our responsibilities under those standards are further described in the Auditors’ Responsibilities for the Audit of the Consolidated Financial Statements section of our report. We are independent of the Group in accordance with the Norm of Professional Ethics for Certified Public in Republic of China, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis of our opinion.

Key Audit Matters

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

1. Revenue recognition

Please refer to Note 4(o) and Note 6(t) of the consolidated financial statements for accounting policies on revenue recognition and revenue recognition, respectively.

• 161 -

Description of key audit matter:

The Group recognizes revenue when the control over a product has been transferred to the customer as specified on the various sales terms in each individual contract with customers. Revenue is recognized in each individual contract with customers. The improper timing in recongnition of revenue before and after the financial reporting date may materially impact financial statements. Therefore, revenue recognition is one of the key areas our audit focused on.

How the matter was addressed in our audit:

In relation to the key audit matter above, our principal audit procedures include testing the effectiveness of internal control on recongnition of revenue; ensuring the transaction conditions and revenue of the sale contracts have been properly recorded; random sampling of sales transactions within a certain period before and after the financial reporting date; analyzing the client contract of the sample; and evaluating the transaction conditions contained in the sales contract to confirm that revenue recognition has been recorded in an appropriate period.

2. Valuation of Inventories

The accounting principle of inventory, refer to consolidated financial statements Note 4 (h), the assessment of accounting estimate and assumption uncertainty, refer to consolidated financial statements Note 5 (b); the explanation of inventory assessment refers to consolidated financial statements Note 6 (e).

Description of key audit matter:

Due to the introduction of new products such as machine tools or fitness machines may cause significant changes in consumer demand, the original product outdated may no longer meet the market demand, or by the electric tool market recession and competitors’ low-cost strategy and other factors so that the sale of related products may be volatile, it easily leads to the cost of inventory may exceed its net realizable value of the risk; therefore, inventory valuation is considered as one of a key audit matter.

How the matter was addressed in our audit:

In relation to the key audit matter above, includes the allowance for uncollectible inventory valuation losses of the Group and the rationale of calculation method, implementation of the sampling procedures to check the inventory and the net realized value to compare with the past period situation and analyze whether the loss of the value of the deposit in the current period is disclosure appropriately.

Other Matter

Rexon Industrial Corp., Ltd. has prepared its parent-company-only financial statements as of and for the years ended December 31, 2022 and 2021, on which we have issued an unmodified opinion.

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

Management is responsible for the preparation and fair presentation of the consolidated financial statements in accordance with the Regulations Governing the Preparation of Financial Reports by Securities Issuers and with the IFRSs, IASs, IFRC, SIC endorsed and issued into effect by the Financial Supervisory Commission of the Republic of China, and for such internal control as management determines is necessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.

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

• 162 -

Those charged with governance (including the Audit Committee) are responsible for overseeing the Group’s financial reporting process.

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

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

As part of an audit in accordance with the Standards on Auditing of the Republic of China, we exercise professional judgment and professional skepticism throughout the audit. We also:

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

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

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

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

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

6. Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Group to express an opinion on the consolidated financial statements. We are responsible for the direction, supervision and performance of the group audit.We remain solely responsible for our audit opinion.

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

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

• 163 -

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

The engagement partners on the audit resulting in this independent auditors’ report are Shyh-Huar, Kuo and ChunYuan, Wu.

KPMG

Taipei, Taiwan (Republic of China) Febuary 23, 2023

• 164 -

(English Translation of Consolidated Financial Statements Originally Issued in Chinese) REXON INDUSTRIAL CORP., LTD. AND SUBSIDIARIES Consolidated Balance Sheets December 31, 2022 and 2021 (Expressed in thousands of New Taiwan Dollar)

Assets Current assets: 1100 Cash and cash equivalents (note 6 (a)) 1110 Current financial assets at fair value through profit or loss 1150 Notes receivable, net (note 6 (c)) 1160 Notes receivable due from related parties, net (note 6 (c) and 7) 1170 Accounts receivable, net (note 6 (c)) 1180 Accounts receivable due from related parties, net (note 6 (c) and 7) 1200 Other receivables, net (note 6 (d)) 1220 Current tax assets 130X Inventories (note 6 (e) ) 1479 Other current assets (note 6 (j)) Non-current assets: 1550 Investments accounted for using equity method, net (note 6 (f)) 1600 Property, plant and equipment (note 6(g) and 8) 1755 Right-of-use assets (note 6 (h)) 1780 Intangible assets (note 6 (i)) 1840 Deferred tax assets (note 6 (q)) 1920 Guarantee deposits paid 1975 Net defined benefit asset, non-current (note 6 (p)) 1990 Other non-current assets(note 6 (j)) Total assets	December 31, 2022 Amount % $ 1,970,759 25 96 - 287 - 31,722 - 737,714 10 8,794 - 277 - 18,332 - 582,816 8 88,463 1	December 31, 2021 Amount % 4,574,719 36 96 - 2,276 - 27,543 - 1,717,113 14 11,078 - 140 - - - 1,975,275 16 209,740 2 8,517,980 68 16,712 - 3,266,653 26 122,650 1 62,399 - 84,195 1 9,053 - 90,665 1 351,126 3 4,003,453 32 12,521,433 100 Liabilities and Equity Current liabilities: 2100 Short-term borrowings (note 6 (k) and 8) 2130 Current contract liabilities (note 6 (t)) 2150 Notes payable 2160 Notes payable to related parties(note 7) 2170 Accounts payable 2200 Other payables(note 6 (p)) 2220 Other payables to related parties (note 7) 2230 Current tax liabilities 2250 Current provisions (note 6 (o)) 2280 Current lease liabilities (note 6 (n)) 2320 Long-term borrowing, current portion (note 6 (m) and 8) 2399 Other current liabilities, others (note 6 (l) and (t)) Non-Current liabilities: 2540 Long-term borrowings (note 6 (m) and 8) 2570 Deferred tax liabilities (note 6 (q)) 2580 Non-current lease liabilities (note 6 (n)) Total liabilities Equity attributable to owners of parent: (note 6 (b) and(r)) 3100 Share capital 3200 Capital surplus 3300 Retained earnings 3400 Other equity Total equity attributable to owners of parent: 36XX Non-controlling interests Total equity Total liabilities and equity	December 31, 2022	December 31, 2022	December 31, 2022
			Amount	%	Amount
	3,439,260 44
	16,420 - 3,119,127 40 88,796 1 66,904 1 167,970 2 1,926 - 206,005 3 647,549 9
			3,582,385 46 7,636,914 61
			637,554 9 593,333 5 - - 6,491 - 24,691 - 34,292 -
			662,245 9 634,116 5
			4,244,630 55 8,271,030 66
			1,814,735 24 1,814,735 14 586 - 586 - 1,812,259 23 2,572,950 21 (143,923) (2) (163,182) (1)
	4,314,697 56
	$ 7,753,957 100
			3,483,657 45 4,225,089 34
			25,670 - 25,314 -
			3,509,327 45 4,250,403 34
			$ 7,753,957 100 12,521,433 100

• 165 -

(English Translation of Consolidated Financial Statements Originally Issued in Chinese) REXON INDUSTRIAL CORP., LTD. AND SUBSIDIARIES Consolidated Statements of Comprehensive Income For the years ended December 31, 2022 and 2021 (Expressed in thousands of New Taiwan Dollar , except earnings per share)

4100 Operating revenue, (note 6 (t) and 7) 5000 Operating costs (note 6 (e)、(i)、(p) and 7) Gross profit from operations 6000 Operating expenses(note 6 (i)、(p) and (u)): 6100 Selling expenses 6200 Administrative expenses 6300 Research and development expenses Net operating (loss) income 7000 Non-operating income and expenses: 7100 Interest income (note 6 (v)) 7010 Other income (note 6 (v)) 7020 Other gains and losses, net (note 6 (g) and (v)) 7050 Finance costs (note 6 (n) and (v)) 7060 Share of profit of associates accounted for using equity method (note 6 (f)) 7900 Profit (loss) before income tax 7950 Income tax (benefit) expense(note 6 (q)) 8200 (Loss) profit 8300 Other comprehensive income: 8310 Items that may not be reclassified subsequently to profit or loss: 8311 Gains on remeasurements of defined benefit obligation (note 6 (p)) 8316 Unrealized gains from investments in equity instruments measured at fair value through other comprehensive income (note 6 (r)) 8360 Items that may be reclassified subsequently to profit or loss: 8361 Exchange differences on translation(note 6 (r)) 8399 Income tax related to components of other comprehensive income that will be reclassified to profit or loss (note 6 (q)) 8300 Other comprehensive income (after tax) 8500 Comprehensive income Profit (loss) attributable to: 8610 Owners of parent 8620 Non-controlling interests Comprehensive income attributable to: 8710 Owners of parent 8720 Non-controlling interests Earnings (losses) per share(NT dollars)(note 6 (s)) 9750 Basic earnings (loss) per share 9850 Diluted earnings (loss) per share	2022	% 100 96	2021	% 100 86
	Amount $ 4,549,308 4,394,448		Amount 18,366,823 15,849,053
	154,860	4	2,517,770	14
	258,145 183,389 142,903	6 4 3	561,819 314,799 215,937	3 2 1
	584,437	13	1,092,555	6
	(429,577)	(9)	1,425,215	8
	5,858 19,894 25,505 (22,439) 188	- - 1 - -	2,030 39,792 (140,611) (7,827) 518	- - (1) - -
	29,006	1	(106,098)	(1)
	(400,571) (101,451)	(8) (2)	1,319,117 263,168	7 1
	(299,120)	(6)	1,055,949	6
	82,650 -	2 -	61,559 17,184	- -
	82,650	2	78,743	-
	24,629 (4,815)	- -	(10,883) 1,588	- -
	19,814	-	(9,295)	-
	102,464	2	69,448	-
	$ (196,656)	(4)	1,125,397	6
	$ (298,921) (199)	(6) -	1,052,892 3,057	6 -
	$ (299,120)	(6)	1,055,949	6
	$ (197,012) 356	(4) -	1,125,276 121	6 -
	$ (196,656)	(4)	1,125,397	6
	$	(1.65)		5.80
	$	(1.65)		5.76

• 166 -

(English Translation of Consolidated Financial Statements Originally Issued in Chinese) REXON INDUSTRIAL CORP., LTD. AND SUBSIDIARIES Consolidated Statements of Changes in Equity For the years ended December 31, 2022 and 2021 (Expressed in thousands of New Taiwan Dollar)

Equity attributable to owners of parent

Balance on January 1, 2021 Appropriation and distribution of retained earnings: Legal reserve Special reserve Cash dividends of ordinary share Profit for the year ended December 31, 2021 Other comprehensive income for the year ended December 31, 2021 Comprehensive income Changes in ownership interests in subsidiaries Disposal of investments in equity instruments designated at fair value through other comprehensive income Beginning adjustment of net delined benefit assets Balance on December 31, 2021 Balance on January 1, 2022 Appropriation and distribution of retained earnings: Legal reserve Reversal of special reserve Cash dividends of ordinary share Loss for the year ended December 31, 2022 Other comprehensive income for the year ended December 31, 2022 Comprehemsive income Balance on December 31, 2022	Share capital	Capital surplus		Retained earnings	Retained earnings			Total other equity	Total other equity	Total equity attributable to owners of parent	Non- controlling interests
							Exchange differences on translation of foreign financial statements	Unrealized gains (losses) from financial assets measured at fair value through other comprehensive income	Total other equityinterest
	Ordinary share		Legal reserve	Special reserve	Unappropriated retained earnings	Total
	- - 97,724 - (97,724) - - - - - - - - - - 127,558 (127,558) - - - - - - - - - - - (653,305) (653,305) - - - (653,305) - (653,305)
	- - 97,724 127,558 (878,587) (653,305) - - - (653,305) - (653,305)
	- - - - 1,052,892 1,052,892 - - - 1,052,892 3,057 1,055,949 - - - - 61,559 61,559 (6,359) 17,184 10,825 72,384 (2,936) 69,448
	- - - - 1,114,451 1,114,451 (6,359) 17,184 10,825 1,125,276 121 1,125,397
	- 153 - - - - - - - 153 - 153 - - - - (3,218) (3,218) - 3,218 3,218 - - - - - - - 16,965 16,965 - - - 16,965 - 16,965
	$ 1,814,735 586 363,103 177,226 2,032,621 2,572,950 (163,182) - (163,182) 4,225,089 25,314 4,250,403
	$ 1,814,735 586 363,103 177,226 2,032,621 2,572,950 (163,182) - (163,182) 4,225,089 25,314 4,250,403
	- - 112,820 - (112,820) - - - - - - - - - - (14,044) 14,044 - - - - - - - - - - - (544,420) (544,420) - - - (544,420) - (544,420)
	- - 112,820 (14,044) (643,196) (544,420) - - - (544,420) - (544,420)
	- - - - (298,921) (298,921) - - - (298,921) (199) (299,120) - - - - 82,650 82,650 19,259 - 19,259 101,909 555 102,464
	- - - - (216,271) (216,271) 19,259 - 19,259 (197,012) 356 (196,656)
	$ 1,814,735 586 475,923 163,182 1,173,154 1,812,259 (143,923) - (143,923) 3,483,657 25,670 3,509,327

• 167 -

(English Translation of Consolidated Financial Statements Originally Issued in Chinese) REXON INDUSTRIAL CORP., LTD. AND SUBSIDIARIES Consolidated Statements of Cash Flows For the years ended December 31, 2022 and 2021 (Expressed in thousands of New Taiwan Dollar)

Cash flows from operating activities: (Loss) profit before tax Adjustments: Adjustments to reconcile profit: Depreciation expense Amortization expense Interest expense Interest income Dividend income Share of profit of associates accounted for using equity method Loss on disposal of property, plant and equipment Impairment loss of property, plant and equipment Gain on lease modification Total adjustments to reconcile profit Changes in operating assets and liabilities: Changes in operating assets: Decrease in financial assets at fair value through profit or loss Decrease (increase) in notes receivable Increase in notes receivable due from related parties Decrease in accounts receivable Decrease (increase) in accounts receivable due from related parties (Increase) decrease in other receivable Decrease (increase) in inventories Decrease (increase) in other current assets Decrease (increase) in other operating assets Total changes in operating assets Changes in operating liabilities: (Decrease) increase in contract liabilities (Decrease) increase in notes payable (Decrease) increase in notes payable to related parties (Decrease) increase in accounts payable (Decrease) increase in other payable Decrease in other payable to related parties (Decrease) increase in other current liabilities Decrease in net defined benefit liabilities Total changes in operating liabilities Total changes in operating assets and liabilities Total adjustments Cash (outflow) inflow generated from operations Interest received Dividends received Interest paid Income taxes paid Net cash flows (used in) from operating activities Cash flows used in investing activities: Proceeds from disposal of financial assets at fair value through other comprehensive income Changes in ownership of interest in subsidiaries Acquisition of property, plant and equipment Proceeds from disposal of property, plant and equipment Decrease in restricted assets Decrease (increase) in refundable deposits Acquisition of intangible assets Increase in prepayments for business facilities Net cash flows used in investing activities Cash flows from (used in) financing activities: Increase in short-term borrowings Decrease in short-term borrowings Increase from long-term borrowings Repayments of long-term borrowings Cash dividends paid Payment of lease liabilities Net cash flows (used in) from financing activities Effect of exchange rate changes on cash and cash equivalents Net (decrease) increase in cash and cash equivalents Cash and cash equivalents at the beginning of period Cash and cash equivalents at the end of period	2022 $ (400,571)	2021 1,319,117
	347,728 17,969 22,439 (5,858) - (188) 4,132 15,971 (39)	263,492 14,665 7,827 (2,030) (13) (518) 4,987 52,723 -
	402,154	341,133
	- 1,989 (4,179) 979,399 2,284 (137) 1,392,459 121,277 1,978	18,374 (2,167) (21,209) 663,028 (7,726) 382 (879,081) (17,883) (3,318)
	2,495,070	(249,600)
	(12,611) (955,360) (3,705) (2,901,730) (119,366) (11) (131,663) (32,690)	515,701 602,227 2,956 269,876 233,197 (444) 20,014 (12,061)
	(4,157,136)	1,631,466
	(1,662,066)	1,381,866
	(1,259,912)	1,722,999
	(1,660,483) 5,858 480 (22,190) (197,707)	3,042,116 2,030 813 (8,369) (200,424)
	(1,874,042)	2,836,166
	- - (95,446) 4,243 - 7,127 (22,422) (422,649)	53,360 153 (502,972) 4,893 8,000 (4,650) (14,355) (498,114)
	(529,147)	(953,685)
	3,014,060 (3,014,060) 562,607 (198,174) (544,420) (30,257)	2,016,870 (1,556,357) 851,600 (547,369) (653,305) (29,043)
	(210,244)	82,396
	9,473	(3,287)
	(2,603,960) 4,574,719	1,961,590 2,613,129
	$ 1,970,759	4,574,719

• 168 -

(English Translation of Consolidated Financial Statements Originally Issued in Chinese) REXON INDUSTRIAL CORP., LTD. AND SUBSIDIARIES Notes to the Consolidated Financial Statements For the years ended December 31, 2022 and 2021 (Expressed in thousands of New Taiwan Dollar unless otherwise specified)

(1) Company history

Rexon Industrial Corp., Ltd. (the “Company”) was incorporated on April 30, 1973 and registered under the Ministry of Economic Affairs, R.O.C. The address of the company’s registered office is No.261, Renhua Rd., Dali Dist., Taichung City 412, and Taiwan (R.O.C.). The Company’s common shares were listed on the Taiwan Stock Exchange (TWSE) on February 4, 1995. The company’s and its subsidiaries (“together referred to as the Group”) is in the business of manufacturing and selling drills, woodworking tools and fitness equipment.

(2) Approval date and procedures of the consolidated financial statements

These consolidated financial statements were authorized for issue by the Board of Directors on Febuary 23, 2023.

(3) New standards, amendments and interpretations adopted

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

The Group has initially adopted the following new amendments, which do not have a significant impact on its consolidated financial statements, from January 1, 2022:

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

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

• Annual Improvements to IFRS Standards 2018–2020

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

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

The Group assesses that the adoption of the following new amendments, effective for annual period beginning on January 1, 2023, would not have a significant impact on its consolidated financial statements:

• Amendments to IAS 1 “Disclosure of Accounting Policies”

• Amendments to IAS 8 “Definition of Accounting Estimates”

• Amendments to IAS 12 “Deferred Tax related to Assets and Liabilities arising from a Single Transaction”

• 169 -

REXON INDUSTRIAL CORP ., LTD. AND SUBSIDIARIES Notes to the Consolidated Financial Statements

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

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

Standards or Interpretations Amendments to IAS 1 “Classification of Liabilities as Current or Non-current” Amendments to IAS 1 “Non- current Liabilities with Covenants”	Content of amendment Under existing IAS 1 requirements, companies classify a liability as current when they do not have an unconditional right to defer settlement for at least 12 months after the reporting date. The amendments has removed the requirement for a right to be unconditional and instead now requires that a right to defer settlement must exist at the reporting date and have substance. The amendments clarify how a company classifies a liability that can be settled in its own shares – e.g. convertible debt. After reconsidering certain aspects of the 2020 amendments1, new IAS 1 amendments clarify that only covenants with which a company must comply on or before the reporting date affect the classification of a liability as current or non-current. Covenants with which the company must comply after the reporting date (i.e. future covenants) do not affect a liability’s classification at that date. However, when non-current liabilities are subject to future covenants, companies will now need to disclose information to help users understand the risk that those liabilities could become repayable within 12 months after the reporting date.	Effective date per **IASB **
		January 1, 2024 January 1, 2024

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

• 170 -

REXON INDUSTRIAL CORP ., LTD. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

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

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

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

• ●Amendments to IFRS 17 “Initial Application of IFRS 17 and IFRS 9 – Comparative Information “

• ●IFRS16 “Requirements for Sale and Leaseback Transactions”

(4) Summary of significant accounting policies

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

(a) Statement of compliance

These consolidated financial statements have been prepared in accordance with the Regulations Governing the Preparation of Financial Reports by Securities Issuers (hereinafter referred to as “the Regulations”) and the International Financial Reporting Standards, International Accounting Standards, IFRIC Interpretations, and SIC Interpretations endorsed and issued into effect by the Financial Supervisory Commission, R.O.C..

• (b) Basis of preparation

• (i) Basis of measurement

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

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

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

• (ii) Functional and presentation currency

The functional currency of each Group entity is determined based on the primary economic environment in which the entity operates. The consolidated financial statements are presented in New Taiwan Dollar(NTD), which is the Company’s functional currency. All financial information presented in NTD has been rounded to the nearest thousand.

• 171 -

REXON INDUSTRIAL CORP ., LTD. AND SUBSIDIARIES Notes to the Consolidated Financial Statements

(c) Basis of consolidation

• (i) Principles of preparation of the consolidated financial statements

The consolidated financial statements comprise the Company and subsidiaries. Subsidiaries are entities controlled by the Company. The Company “controls” an entity when it is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity.

The financial statements of subsidiaries are included in the consolidated financial statements from the date on which control commences until the date on which the control ceases. Intragroup balances and transactions and any unrealized income and expenses arising from intragroup transactions, are eliminated in preparing the consolidated financial statements. The Group attributes the profit or loss and each component of other comprehensive income to the owners of the parent and to the non-controlling interests, even if this results in the non-controlling interests having a deficit balance.

The Group prepares consolidated financial statements using uniform accounting policies for like transactions and other events in similar circumstances.

Changes in the Group’s ownership interest in a subsidiary that do not result in a loss of control are accounted for as equity transactions. Any difference between the amount by which the noncontrolling interests are adjusted and the fair value of the consideration paid or received will be recognized directly in equity, and the Group will attribute it to the owners of the parent.

• (ii) List of subsidiaries in the consolidated financial statements

Name of investor	Name of subsidiary Power Tool Specialists Inc. (P.T.S.) Gold Item Group Ltd.(Gold Item) Rexon Technology Corp., Ltd. (Rexon Tech) Gold Tech Group Ltd. Tongxiang Rexon Industrial Co.,Ltd. (Tongxiang Rexon)	Principal activity Merchandise trading Investing and holding Manufacture and sale of electric components Investing and holding Manufacture of drills, woodworking tools and fitness equipment	Shareholding	Shareholding
			December 31, 2022	December 31, 2021
The Company The Company The Company Gold Item Gold Tech Group Ltd.			96% 100% 82.87% 100% 100%	96% 100% 82.87% 100% 100%

(iii) Subsidiaries excluded from the consolidation financial statements: None.

(d) Foreign currencies

• (i) Foreign currency transactions

Transactions in foreign currencies are translated into the respective functional currencies of the Group entities at exchange rates at the dates of the transactions. At the end of each subsequent reporting period, monetary items denominated in foreign currencies are translated into the functional currencies using the exchange rate at that date.

• 172 -

REXON INDUSTRIAL CORP ., LTD. AND SUBSIDIARIES Notes to the Consolidated Financial Statements

Exchange differences are generally recognized in profit or loss, except for those differences relating to the following, which are recognized in other comprehensive income :

1) an investment in equity securities designated as at fair value through other comprehensive income;

2) a financial liability designated as a hedge of the net investment in a foreign operation to the extent that the hedge is effective; or

3) qualifying cash flow hedges to the extent the hedges are effective.

• (ii) Foreign operations

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

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

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

(e) Classification of current and non-current assets and liabilities

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

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

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

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

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

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

• 173 -

REXON INDUSTRIAL CORP ., LTD. AND SUBSIDIARIES Notes to the Consolidated Financial Statements

An entity shall classify a liability as current when :

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

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

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

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

(f) Cash and cash equivalents

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

(g) Financial instruments

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

(i) Financial assets

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

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

1) Financial assets measured at amortized cost

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

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

• 174 -

REXON INDUSTRIAL CORP ., LTD. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

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

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

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

All financial assets not classified as amortized cost described as above are measured at FVTPL, including derivative financial assets. On initial recognition, the Group may irrevocably designate a financial asset, which meets the requirements to be measured at amortized cost or at FVOCI, as at FVTPL if doing so eliminates or significantly reduces an accounting mismatch that would otherwise arise.

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

3) Business model assessment

Financial assets that are held for trading or are managed and whose performance is evaluated on a fair value basis are measured at FVTPL.

• 4) Impairment of financial assets

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

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

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

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

Loss allowance for trade receivables and contract assets are always measured at an amount equal to lifetime ECL.

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

• 175 -

REXON INDUSTRIAL CORP ., LTD. AND SUBSIDIARIES Notes to the Consolidated Financial Statements

The Group assumes that the credit risk on a financial asset has increased significantly if it is more than 90 days past due.

The Group considers a financial asset to be in default when the financial asset is more than 180 days past due or the debtor is unlikely to pay its credit obligations to the Group in full.

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

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

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

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

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

• significant financial difficulty of the borrower or issuer；

• a breach of contract such as a default or being more than 180 days past due；

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

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

• the disappearance of an active market for a security because of financial difficulties.

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

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

• 176 -

REXON INDUSTRIAL CORP ., LTD. AND SUBSIDIARIES Notes to the Consolidated Financial Statements

• 5) Derecognition of financial assets

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

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

• (ii) Financial liabilities and equity instrument

• 1) Classification of debt or equity

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

• 2) Equity instrument

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

• 3) Derecognition of financial liabilities

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

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

• 4) Offsetting of financial assets and liabilities

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

• 177 -

REXON INDUSTRIAL CORP ., LTD. AND SUBSIDIARIES Notes to the Consolidated Financial Statements

(h) Inventories

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

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

(i) Investment in associates

Associates are those entities in which the Group has significant influence, but not control or joint control, over their financial and operating policies.

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

The consolidated financial statements include the Group’s share of the profit or loss and other comprehensive income of those associates, after adjustments to align their accounting policies with those of the Group, from the date on which significant influence commences until the date on which significant influence ceases. The Group recognizes any changes of its proportionate share in the investee within capital surplus, when an associate’s equity changes due to reasons other than profit and loss or comprehensive income, which did not result in changes in actual significant influence.

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

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

(j) Property, plant and equipment

• (i) Recognition and measurement

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

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

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

• 178 -

REXON INDUSTRIAL CORP ., LTD. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

• (ii) Subsequent expenditure

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

• (iii) Depreciation

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

Land is not depreciated.

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

1)	Buildings	2 ~ 60 years
2)	Machinery and equipment	2 ~ 10 years
3)	Mold and tooling equipment	2 ~ 10 years
4)	Office equipment and other facilities	2 ~ 10 years

• 5) The significant portion of building consists of its main building, miscellaneous parts, machinery and equipment, and the estimated useful lives are as following:

Compose item	Useful Lives	Compose item	Useful Lives
Buildings: Main building 41~60 years Fire engineering 43 years Electrical and mechanical in construction 38 years Other 2 years		Machinery and equipment: Welding machine and circular saw Conveyer Other	10 years 10 years 5 years

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

(k) Leases

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

(i) As a leasee

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

• 179 -

REXON INDUSTRIAL CORP ., LTD. AND SUBSIDIARIES Notes to the Consolidated Financial Statements

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

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

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

• fixed payments, including in-substance fixed payments;

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

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

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

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

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

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

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

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

• there is any lease modification.

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

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

The Group presents right-of-use assets that do not meet the definition of investment and lease liabilities as a separate line item respectively in the statement of financial position.

• 180 -

REXON INDUSTRIAL CORP ., LTD. AND SUBSIDIARIES Notes to the Consolidated Financial Statements

The Group has elected not to recognize right-of-use assets and lease liabilities for short-term leases of machinery that have a lease term of 12 months or less and leases of low-value assets, including photocopying equipment, dormitory and sporadic leases. The Group recognizes the lease payments associated with these leases as an expense on a straight-line basis over the lease term.

(ii) As a lessor

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

The Group recognizes lease payments received under operating leases as income on a straightline basis over the lease term as part of ‘other income’.

(l) Intangible assets

• (i) Recognition and measurement

Goodwill arising on the acquisition of subsidiaries is measured at cost, less accumulated impairment losses.

Expenditure on research activities is recognized in profit or loss as incurred.

Development expenditure is capitalized only if the expenditure can be measured reliably, the product or process is technically and commercially feasible, future economic benefits are probable and the Group intends to, and has sufficient resources to, complete development and to use or sell the asset. Otherwise, it is recognized in profit or loss as incurred. Subsequent to initial recognition, development expenditure is measured at cost, less accumulated amortization and any accumulated impairment losses.

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

(ii) Subsequent expenditure

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

• (iii) Amortization

Amortization is calculated over the cost of the asset, less its residual value, and is recognized in profit or loss on a straight-line basis over the estimated useful lives of intangible assets, other than goodwill, from the date that they are available for use.

• 181 -

REXON INDUSTRIAL CORP ., LTD. AND SUBSIDIARIES Notes to the Consolidated Financial Statements

The estimated useful lives for current and comparative periods are as follows:

Computer software cost 1~10years

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

(m) Impairment of non-financial assets

At each reporting date, the Group reviews the carrying amounts of its non-financial assets (other than inventories, deferred tax assets) to determine whether there is any indication of impairment. If any such indication exists, then the asset’s recoverable amount is estimated. Goodwill is tested annually for impairment.

For impairment testing, assets are grouped together into the smallest group of assets that generates cash inflows from continuing use that are largely independent of the cash inflows of other assets or cashgenerating units (CGUs). Goodwill arising from a business combination is allocated to CGUs or groups of CGUs that are expected to benefit from the synergies of the combination.

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

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

Impairment losses are recognized in profit or loss. They are allocated first to reduce the carrying amount of any goodwill allocated to the CGU, and then to reduce the carrying amounts of the other assets in the CGU on a pro rata basis.

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

(n) Provisions

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

A provision for warranties is recognized when the underlying products or services are sold, based on historical warranty data and a weighting of all possible outcomes against their associated probabilities.

• 182 -

REXON INDUSTRIAL CORP ., LTD. AND SUBSIDIARIES Notes to the Consolidated Financial Statements

(o) Revenue from contracts with customers

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

1) Sale of goods

The Group manufactures and sells woodworking tools and fitness equipment to retail stores, fitness club, and fitness equipment specialty chain stores around the world. The Group recognizes revenue when control of the products has transferred, being when the products are delivered to the customer, the customer has full discretion over the channel and price to sell the products, and there is no unfulfilled obligation that could affect the customer’s acceptance of the products. Delivery occurs when the products have been shipped to the specific location, the risks of obsolescence and loss have been transferred to the customer, and either the customer has accepted the products in accordance with the sales contract, the acceptance provisions have lapsed, or the Group has objective evidence that all criteria for acceptance have been satisfied.

The Group’s obligation to provide a refund for faulty drilling machine under the standard warranty terms is recognized as a provision for warranty; please refer to note 4(n).

A receivable is recognized when the goods are delivered as this is the point in time that the Group has a right to an amount of consideration that is unconditional.

2) Financing components

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

(p) Employee benefits

(i) Defined contribution plans

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

(ii) Defined benefit plans

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

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

• 183 -

REXON INDUSTRIAL CORP ., LTD. AND SUBSIDIARIES Notes to the Consolidated Financial Statements

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

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

(iii) Short-term employee benefits

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

(q) Income taxes

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

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

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

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

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

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

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

• 184 -

REXON INDUSTRIAL CORP ., LTD. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

Deferred taxes are measured at tax rates that are expected to be applied to temporary differences when they reserve, using tax rates enacted or substantively enacted at the reporting date.

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

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

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

• 1) the same taxable entity; or

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

(r) Earnings per share

The Group discloses the Company’s basic and diluted earnings per share attributable to ordinary shareholders of the Company. Basic earnings per share is calculated as the profit attributable to ordinary shareholders of the Company divided by the weighted-average number of ordinary shares outstanding. Diluted earnings per share is calculated as the profit attributable to ordinary shareholders of the Company divided by the weighted-average number of ordinary shares outstanding after adjustment for the effects of all potentially dilutive ordinary shares, such as employee compensation.

(s) Operating segments

An operating segment is a component of the Group that engages in business activities from which it may earn revenues and incur expenses (including revenues and expenses relating to transactions with other components of the Group). Operating results of the operating segment are regularly reviewed by the Group’s chief operating decision maker to make decisions about resources to be allocated to the segment and to assess its performance. Each operating segment consists of standalone financial information.

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

In preparing these consolidated financial statements, management has made judgments, estimates and assumptions that affect the application of the accounting policies and the reported amount of assets, liabilities, income and expenses. Actual results may differ from these estimates.

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

Information about judgments made in applying accounting policies that have the most significant effects on the amounts recognized in the consolidated financial statements is as follows:

• 185 -

REXON INDUSTRIAL CORP ., LTD. AND SUBSIDIARIES Notes to the Consolidated Financial Statements

• (a) Judgment of whether the Group has substantive control over its investees

The Group holds 16% of the outstanding voting shares of Fine Clear Corp., Ltd and is the single largest shareholder of the investee. Although the remaining 84% of Fine Clear Corp., Ltd’s shares are not concentrated within specific shareholders, the Group still cannot obtain more than half of the total number of Fine Clear Corp., Ltd’s directors, and it also cannot obtain more than half of the voting rights at a shareholders’ meeting. Therefore, it is determined that the Group has significant influence on Fine Clear Corp., Ltd.

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

(b) Valuation of inventories

As inventories are stated at the lower of cost or net realizable value, the Group estimates the net realizable value of inventories for obsolescence and unmarketable items at the end of the reporting period and then writes down the cost of inventories to net realizable value. The net realizable value of the inventory is mainly determined based on assumptions as to future demand within a specific time horizon. Due to the rapid industrial transformation, there may be significant changes in the net realizable value of inventories. Refer to note 6(e) for further description of the valuation of inventories.

• (c) Recognition and measurement of provisions

Provision for warranty is estimated when product revenue is recognized. The estimate has been made based on the historical defective rate of the products. The Group regularly reviews the basis of the estimate and, if necessary, amends it as appropriate. There could be a significant impact on provision for warranty for any change in the basis of the estimate.

The Group’s accounting policies and disclosures include the use of fair value to measure its financial and non-financial assets and liabilities. The Group has established relevant internal control system for the fair value. This includes establishing an evaluation team responsible for reviewing all significant fair value (including Level 3 fair value) and reporting directly to the financial executive. The evaluation team regularly reviews the significant unobservable input values and adjustments. If the input values used for measuring the fair values of financial and non-financial instruments come from external third party (such as a broker or a pricing service agency), the evaluation team will evaluate the supporting evidence provided by the third party to ensure the evaluation and the level of fair values conform to IFRS requirements.

The Group strives to use market observable inputs when measuring assets and liabilities. Different levels of the fair value hierarchy to be used in determining the fair value of financial instruments are as follows:

• a. Level 1: quoted prices (unadjusted) in active markets for identifiable assets or liabilities.

• b. Level 2: inputs other than quoted prices included within Level 1 that are observable for the asset orliability, either directly (i.e. as prices) or indirectly (i.e. derived from prices).

• c. Level 3: inputs for the assets or liability that are not based on observable market data (unobservable parameiers).

• 186 -

REXON INDUSTRIAL CORP ., LTD. AND SUBSIDIARIES Notes to the Consolidated Financial Statements

(6) Explanation of significant accounts:

(a) Cash and cash equivalents

Petty cash and cash on hand Checking and demand deposits Cash and cash equivalents in the consolidated statement of cash flows	December 31, 2022 $ 1,651 1,969,108	December 31, 2021 1,051 4,573,668
	$ 1,970,759	4,574,719

Please refer to note 6(w) for the exchange rate risk, interest rate risk, and sensitivity analysis of the financial assets and liabilities of the Group.

(b) Financial assets at fair value through other comprehensive income

In 2021, the Group has sold equity instrument investment measured at fair value through other comprehensive income for strategic purposes. The shares sold had a fair value of $53,360 thousand. The Group realized a loss of $(3,218) thousand. The gain has been transferred to retained earnings.

(c) Notes and accounts receivables (include related party)

Notes receivable from operating activities Notes receivable from operating activities-related parties Less: Loss allowance Accounts receivable-measured at amortized cost Accounts receivable from related parties-measured at amortized cost Less: Loss allowance	December 31, 2022 $ 287 31,722 -	December 31, 2021 2,276 27,543 -
	$ 32,009	29,819
	$ 739,317 8,794 (1,603)	1,718,716 11,078 (1,603)
	$ 746,508	1,728,191

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

• 187 -

REXON INDUSTRIAL CORP ., LTD. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

Current 1 to 90 days past due 91 to 180 days past due 181 to 360 days past due Over 360 days past due Total Current 1 to 90 days past due 91 to 180 days past due 181 to 360 days past due Over 360 days past due Total	December 31, 2022	December 31, 2022	December 31, 2022	December 31, 2022
	Gross carrying amount	Weighted- average loss rate		Loss allowance **provision **
	$ 645,894 134,225 - - 1			273 1,329 - - 1
	$ 780,120			1,603
	Gross carrying amount	Weighted- average loss rate		Loss allowance **provision **
	$ 885,675 872,018 1,370 549 1	0.02% 0.02% 50.00% 100% 100%		184 184 685 549 1
	$ 1,759,613			1,603

(ii) The movement in the allowance for notes and accounts receivables were as follows:

Balance at January 1 (which is balance at December 31)	2022 $ 1,603	2021 1,603

(iii) None of the receivables was pledged as collateral as of December 31, 2022 and 2021.

(d) Other receivables

Other receivables Less: Loss allowance	December 31, 2022		December 31, 2021
	$ 11,524 (11,247) $ 277		11,387 (11,247) 140

(i) As of December 31, 2022 and 2021, there are no other receivables which are past due but not impaired.

• 188 -

REXON INDUSTRIAL CORP ., LTD. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

(ii) The movement in the allowance for other receivables was as follows:

(e)

Balance on January 1 (which is balance at December 31) Inventories Finished goods Work in progress Materials Parts Merchandise	2022 $ 11,247	2021
		11,247
	December 31, 2022 $ 156,348 52,493 163,768 204,873 5,334	December 31, 2021 756,447 220,523 240,165 725,566 32,574
	$ 582,816	1,975,275

Details of inventory related losses (profit) were as follows:

Write-down of inventories Inventory scrap loss Inventory deficit (surplus) Revenue from sale of scraps	2022 $ 32,186 5,579 199 (2,834)	2021
		3,732 36,501 293 (24,970)
	$ 35,130	15,556

As of December 31, 2022 and 2021, inventories were not pledged as collateral.

(f) Investments accounted for using equity method

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

Associates	December 31, 2022		December 31, 2021 16,712
	$ 16,420

• 189 -

REXON INDUSTRIAL CORP ., LTD. AND SUBSIDIARIES Notes to the Consolidated Financial Statements

• (i) Associates

Affiliated company’s information:

Name of Associates Fine Clear Corp., Ltd.	Nature of relationship with the Group	Main operating location/ Registered Country of the Company	Proportion of shareholding and voting rights
			December 31, 2022 December 31, 2021
	Sale of pneumatic nail gun and accessories, which is the Group’s investment	Taiwan	16% 16%

The Group’s financial information for investments accounted for using the equity method that are individually insignificant was as follows:

Carrying amount of individually insignificant associates’ equity Attributable to the Group: Profit from continuing operations Other comprehensive income Comprehensive income	December 31, 2022 $ 16,420	December 31, 2021 16,712
	2022 $ 188 -	2021 518 -
	$ 188	518

• (ii) As of December 31, 2022 and 2021, the Group did not provide any investments accounted for using the equity method as collateral for its loans.

(g) Property, plant and equipment

The cost, depreciation, and impairment of the property, plant and equipment of the Group for the years ended December 31, 2022 and 2021, were as follows:

Cost or deemed cost: Balance on January 1, 2022 Additions Disposal Reclassification Effect of movements in exchange rates Balance on December 31, 2022	Land $ 1,139,930 929 - - 288	Buildiings 2,165,757 12,453 - 43,330 14,695	Machinery and equipment 811,116 7,513 (8,951) 33,671 2,354	Mold and tooling equipment 791,094 29,541 (10,093) 45,118 1,349	Office equipment and other facilities 177,288 4,177 (17,990) 2,129 1,062	Construction in Progress - - - - -	Total 5,085,185 54,613 (37,034) 124,248 19,748
	$ 1,141,147	2,236,235	845,703	857,009	166,666	-	5,246,760

• 190 -

REXON INDUSTRIAL CORP ., LTD. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

Balance on January 1,2021 Additions Disposal Reclassification Effect of movements in exchange rates Balance on December 31,2021 Depreciation and impairment loss: Balance on January 1, 2022 Depreciation for the year Disposal Impairment loss Effect of movements in exchange rates Balance on December 31, 2022 Balance on January 1,2021 Depreciation for the year Disposal Impairment loss Effect of movements in exchange rates Balance on December 31, 2021 Carrying amounts: Balance on December 31, 2022 Balance on January 1,2021 Balance on December 31, 2021	Land $ 946,564 193,442 - - (76)	Buildiings 2,068,956 112,456 - (10,914) (4,741)	Machinery and equipment 725,055 52,579 (157,067) 191,338 (789)	Mold and tooling equipment 866,514 65,283 (211,954) 71,635 (384)	Office equipment and other facilities 154,644 36,286 (14,764) 1,417 (295)	Construction in Progress 79 - - (79) -	Total 4,761,812 460,046 (383,785) 253,397 (6,285)
	$ 1,139,930	2,165,757	811,116	791,094	177,288	-	5,085,185
	$ - - - - -	866,637 109,987 - - 3,822	305,252 102,261 (7,634) - 1,034	528,974 88,742 (8,283) 15,971 619	117,669 15,085 (12,742) - 239	- - - - -	1,818,532 316,075 (28,659) 15,971 5,714
	$ -	980,446	400,913	626,023	120,251	-	2,127,633
	$ - - - - -	778,946 88,758 - - (1,067)	385,480 73,839 (153,759) - (308)	625,001 59,082 (207,671) 52,723 (161)	119,512 10,917 (12,475) - (285)	- - - - -	1,908,939 232,596 (373,905) 52,723 (1,821)
	$ -	866,637	305,252	528,974	117,669	-	1,818,532
	$ 1,141,147	1,255,789	444,790	230,986	46,415	-	3,119,127
	$ 946,564	1,290,010	339,575	241,513	35,132	79	2,852,873
	$ 1,139,930	1,299,120	505,864	262,120	59,619	-	3,266,653

• (i) In response to the need for expansion in the future, the Group bought the farmland near to its factory, costing $316,060 thousand, but the ownership of the land is temporarily not allowed to be transerred to the Group because the farmland is legally for agricultural purpose. Therefore, the farmland now is registered in the name of a shareholder who has the identity of natural person and has pledged to the Group for security concerns.

• (ii) As of December 31, 2022 and 2021,the Group recognized impairment loss of $15,971 thousand and $52,723 thousand for part of the carrying amount of mold equipment that are over the useful life and are expected to scrap.

• (iii) Gain or losses of disposal, please refer to Note 6(v).

• (iv) As of December 31, 2022 and 2021, property, plant and equipment of the Group was pledged as collateral for long-term loans; please refer to note 8.

• 191 -

REXON INDUSTRIAL CORP ., LTD. AND SUBSIDIARIES Notes to the Consolidated Financial Statements

(h) Right-of-use assets

The Group leases many assets including land, buildings and vehicles. Information about leases for which the Group as a lessee was presented below:

Land Buildings Cost: Balance at January 1, 2022 $ 86,329 51,627 Additions - - Reductinns - (36,828) Effect of movement in exchange rates 914 - Balance at December 31, 2022 $ 87,243 14,799 Balance at January 1, 2021 $ 58,663 21,388 Additions 27,981 30,239 Effect of movement in exchange rates (315) - Balance at December 31, 2021 $ 86,329 51,627 Accumulated depreciation and impairment losses:： Balance at January 1, 2022 $ 6,076 22,898 Depreciation for the year 4,158 21,062 Reductinns - (30,394) Effect of movement in exchange rates 50 - Balance at December 31, 2022 $ 10,284 13,566 Balance at January 1, 2021 $ 2,667 594 Depreciation for the year 3,423 22,304 Effect of movement in exchange rates (14) - Balance at December 31, 2021 $ 6,076 22,898 Carrying amount: Balance at December 31, 2022 $ 76,959 1,233 Balance at January 1, 2021 $ 55,996 20,794 Balance at December 31, 2021 $ 80,253 28,729	Land	Buildings	Vehicles 20,899 4,228 (5,049) -	Total 158,855 4,228 (41,877) 914
	$ 87,243 14,799		20,078	122,120
	$ 58,663 21,388 27,981 30,239 (315) -		5,142 15,757 -	85,193 73,977 (315)
	$ 86,329 51,627		20,899	158,855
	$ 6,076 22,898 4,158 21,062 - (30,394) 50 -		7,231 6,433 (4,190) -	36,205 31,653 (34,584) 50
	$ 10,284 13,566		9,474	33,324
	$ 2,667 594 3,423 22,304 (14) -		2,062 5,169 -	5,323 30,896 (14)
	$ 6,076 22,898		7,231	36,205
	$ 76,959 1,233		10,604	88,796
	$ 55,996 20,794		3,080	79,870
	$ 80,253 28,729		13,668	122,650

• 192 -

REXON INDUSTRIAL CORP ., LTD. AND SUBSIDIARIES Notes to the Consolidated Financial Statements

(i) Intangible assets

The costs, amortization and impairment loss of the intangible assets of the Group for the years ended December 31, 2022 and 2021, were as follows:

Costs: Balance at January 1, 2022 Additions Reductinns Effect of movement in exchange rates Balance at December 31,2022 Balance at January 1, 2021 Additions Effect of movement in exchange rates Balance at December 31,2021 Amortization and impairment Loss: Balance at January 1, 2022 Amortization for the year Reductinns Effect of movement in exchange rates Balance at December 31, 2022 Balance at January 1, 2021 Amortization for the year Effect of movement in exchange rates Balance at December 31, 2021 Carrying value: Balance at December 31,2022 Balance at January 1, 2021 Balance at December 31, 2021	Goodwill $ 43,293 - -	Computer Software 141,692 22,422 (1,949) 111	Total
			184,985 22,422 (1,949) 111
	$ 43,293	162,276	205,569
	$ 43,293 - -	127,372 14,355 (35)	170,665 14,355 (35)
	$ 43,293	141,692	184,985
	$ - - - -	122,586 17,969 (1,949) 59	122,586 17,969 (1,949) 59
	$ -	138,665	138,665
	$ - - -	107,937 14,665 (16)	107,937 14,665 (16)
	$ -	122,586	122,586
	$ 43,293	23,611	66,904
	$ 43,293	19,435	62,728
	$ 43,293	19,106	62,399

(i) Amortization

The amortization of intangible assets is included in the statement of comprehensive income:

Operating cost Operating expenses	2022 $ 3,967 14,002	2021 2,887 11,778
	$ 17,969	14,665

(ii) Disclosure on pledges

As of December 31, 2022 and 2021, the intangible assets of the Group were not pledged as collateral.

• 193 -

REXON INDUSTRIAL CORP ., LTD. AND SUBSIDIARIES Notes to the Consolidated Financial Statements

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

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

Other current assets: Prepayments Bussiness tax receivables Others Other non-current assets: Prepayments for equipment Other t-term borrowings Unsecured bank loans Secured bank loans Unused short-term credit lines Range of interest rate		December 31, 2022 39,224 35,379 13,860	December 31, 2022 39,224 35,379 13,860	December 31, 2021 58,328 136,889 14,523
	$
	$	88,463		209,740
		December 31, 2022 642,910 4,639		December 31, 2021 344,509 6,617
	$
	$	647,549		351,126
		December 31, 2022		December 31, 2021 700,000 102,025
	$	500,000 301,417
	$	801,417		802,025
	$	3,389,004		3,386,903
		1.41%~4.785%		0.67%~4.785%

(k) Short-term borrowings

For the collateral for short-term borrowings, please refer to note 8.

(l) Other current liabilities

The details of other current liabilities were summarized as follows:

Advance receipts Temporary receipt Others	December 31, 2022 $ 3,566 458,352 15,714	December 31, 2021
		3,572 147,005 5,677
	$ 477,632	156,254

Temporary receipt is mainly received from mold sharing payment and cancellation payment.

• 194 -

REXON INDUSTRIAL CORP ., LTD. AND SUBSIDIARIES Notes to the Consolidated Financial Statements

The cancellation payment of temporary receipts is because the customer has reached an agreement with the Group and paid $1,054,375 thousand (USD$34,601 thousand) to cancel the contractual rights and obligations of both parties due to the cancellation of the order, of which $491,831 thousand, the Group had received it in November, 2021, and was transferred from contract liabilities to temporary receipts. Please refer to at note 6 (t).Remaining payments has been received in November 2022.The Group will then transfer the part of the payment to the supplier in the form of payment on behalf of others or receipts under custody with the agreement. As of December 31, 2022, the remaining balance of temporary receipts for the cancellation payment is $279,101 thousand.

(m) Long-term borrowings

The details of long-term borrowings were as follows:

Currency Secured bank loans NTD Unsecured bank loans NTD Unsecured bank loans USD Less : current portion Total Unused long-term credit lines Currency Unsecured bank loans USD Secured bank loans NTD Less: current portion Total Unused long-term credit lines			December 31, 2022	December 31, 2022
			Rate Maturity year 0.95%~1.56% 2025~2026 1.55% 2026 5.24% 2024 December 31, 2021	Maturity year	Amount $ 818,334 170,833 61,420 1,050,587 (413,033) $ 637,554 $ 170,000 Amount $ 26,597 660,000 686,597 (93,264) $ 593,333 $ 470,000
		Currency USD NTD	Rate 2.21%~2.3% 0.45%~1.05%	Maturity year
				2022 2024~2025

For the collateral for long-term borrowings, please refer to note 8.

(n) Lease liabilities

Current Non-current	December 31, 2022 $ 10,501	December 31, 2021
		34,261
	$ 24,691	34,292

For the maturity analysis, please refer to note 6(w).

• 195 -

REXON INDUSTRIAL CORP ., LTD. AND SUBSIDIARIES Notes to the Consolidated Financial Statements

The amounts recognized in profit or loss were as follows:

Interest on lease liabilities	2022 $ 506	2021 663

The amounts recognized in the statement of cash flows for the Group were as follows:

Total cash outflow for leases	2022 $ 30,763	2021 29,706

The lease period for the Group’s lease of loands, buildings and vehicles is two to ten years.

(o) Provisions

Balance at January 1, 2022 Provisions made during the year Provisions used during the year Balance at December 31, 2022 Balance at January 1, 2021 Provisions made during the year Provisions used during the year Balance at December 31, 2021	Warranties
	$ 162,599 83,544 (44,754)
	$ 201,389
	$ 165,973 155,503 (158,877)
	$ 162,599

The provision for warranties relates mainly to automatic facilities and fitness equipment sold during the years ended December 31, 2022 and 2021. The provision is based on estimates made from historical defect rate associated with similar products and services. The Group expects to settle the liability over the next two quarters.

(p) Employee benefits

(i) Defined benefit plans

Reconciliation of the defined benefit obligations at present value and plan asset at fair value were as follows:

Present value of the defined benefit obligations Fair value of plan assets Net defined benefit asset	December 31, 2022
	$ (206,005) (90,665)

• 196 -

REXON INDUSTRIAL CORP ., LTD. AND SUBSIDIARIES Notes to the Consolidated Financial Statements

The Group’s employee benefit liabilities were as follows:

Vacation liability	December 31, 2022 $ 22,397	December 31, 2021 22,397

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

1) Composition of plan assets

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

The Group’s Bank of Taiwan labor pension reserve account balance amounted to $373,928 thousand as of December 31, 2022. For information on the utilization of the labor pension fund assets, including the asset allocation and yield of the fund, please refer to the website of the Bureau of Labor Funds, Ministry of Labor.

2) Movements in present value of the defined benefit obligations

The movements in present value of the defined benefit obligations of the Group for the years ended December 31, 2022 and 2021, were as follows:

2022 Defined benefit obligations at January 1 $ 310,038 Beginning adjustment - Current service costs and interest cost 3,232 Remeasurements of the net defined benefit liability (asset) －Due to experience adjustments of actuarial (losses) gains (29,705) －Due to changes in financial assumption of actuarial (losses) gains (21,289) Benefits paid (94,353) Defined benefit obligations at December 31 $ 167,923	2022	2021 401,954 (16,808) 4,528 (1,143) (55,689) (22,804)
	$ 167,923	310,038

• 197 -

REXON INDUSTRIAL CORP ., LTD. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

• 3) Movements of defined benefit plan assets

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

Fair value of plan assets at January 1 Beginning adjustment Interest income Remeasurement of the net defined benefit liability (asset) －Return on plan assets (excluding interest income) Benefits paid Expected return on plan assets Fair value of plan assets at December 31	2022	2021 402,034 157 2,488 4,727 1,837 (10,540)
	$ 400,703 - 2,470 31,656 1,367 (62,268)
	$ 373,928	400,703

• 4) Expenses recognized in profit or loss

Expenses recognized in profits or losses for the Group were as follows:

Current service costs Net interest of net liabilities (asset) for defined benefit obligations Recognized pension expenses	2022 $ 1,358 (596)	2021 2,139 (100)
	$ 762	2,039
	2022 $ 762	2021 2,039

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

The Group’s remeasurement in the net defined benefit liability (asset) recognized in other comprehensive income for the years ended December 31, 2022 and 2021, were as follows:

Cumulative amount at January 1 Recognized during the period Accumulated amount at December 31	2022 $ (91,131) 82,650	2021 (152,690) 61,559
	$ (8,481)	(91,131)

• 198 -

REXON INDUSTRIAL CORP ., LTD. AND SUBSIDIARIES Notes to the Consolidated Financial Statements

6) Actuarial assumptions

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

Discount rate Future salary increase rate	December 31, 2022	December 31, 2021
	1.750% 2.000%	0.625% 2.000%

The expected allocation payment to be made by the Group to the defined benefit plans for the one-year period after the reporting date is $935 thousand.

The weighted average lifetime of the defined benefit plans is 12.26 years.

7) Sensitivity analysis

If the actuarial assumptions had changed, the impact on the present value of the defined benefit obligation shall be as follows:

December 31, 2022 Discount rate Future salary increases December 31, 2021 Discount rate Future salary increases	Influences of defined benefit obligations Increased 0.25% Decreased 0.25% $ (4,294) 4,445 4,337 (4,212) $ (7,271) 7,535 7,269 (7,035)
	Increased 0.25% $ (4,294) 4,337 $ (7,271) 7,269

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

There is no change in the method and assumptions used in the preparation of sensitivity analysis for 2022 and 2021.

(ii) Defined contribution plans

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

The pension costs incurred from the contributions to the Bureau of the Labor Insurance amounted to $24,447 thousand and $34,984 thousand for the years ended December 31, 2022 and 2021, respectively.

• 199 -

REXON INDUSTRIAL CORP ., LTD. AND SUBSIDIARIES Notes to the Consolidated Financial Statements

Except for the Company and Rexon Technology Corp., Ltd., other subsidiaries adopted the defined contribution method under their local law, and accordingly, the pension costs were $5,396 thousand and $5,234 thousand.

(q) Income taxes

(i) Income tax (benetit) expense

The components of income tax in the years 2022 and 2021 were as follows:

Current tax (benefit) expense Current period Adjustment for prior periods Deferred tax (benefit) expense Origination and reversal of temporary differences Income tax (benefit) expense	2022 $ - (6,370)	2021 288,316 (517)
	$ (6,370)	287,799
	(95,081)	24,631
	$ (101,451)	263,168

The amounts of income tax recognized directly in other comprehemsive income for 2022 and 2021 were as follows:

Item that may be reclassified subsequently to profit or loss Exchange differences on translation	2022 $ 4,815	2021 (1,588)

Reconciliation of income tax and profit before tax for 2022 and 2021 was as follows:

Profit excluding income tax Income tax using the Company’s domestic tax rate Other tax effect generated from adjustment of tax rule Non-deductible expenses Tax effect of investment loss generated from investment accounted for using equity method Recognition of previously unrecognized tax gains Additional tax on undistributed earnings Income tax (benetit) expense	2022 $ (400,571)	2021 1,319,117
	$ (80,013) (15,001) 22 (89) (6,370) -	266,699 (1,143) 880 (3,021) (518) 271
	$ (101,451)	263,168

• 200 -

REXON INDUSTRIAL CORP ., LTD. AND SUBSIDIARIES Notes to the Consolidated Financial Statements

(ii) Deferred tax assets and liabilities

• 1) Unrecognized deferred tax assets

Deferred tax assets have not been recognized in respect of the following items:

Tax effect of deductible temporary differences	December 31, 2022 $ 5,111	December 31, 2021
		5,111

• 2) Recognized deferred tax assets and liabilities

Changes in the amount of deferred tax assets and liabilities for 2022 and 2021 were as follows:

Deferred tax assets: Balance at January 1, 2022 Recognized in profit or loss Recognized in other comprehensive income Balance at December 31, 2022 Balance at January 1,2021 Recognized in profit or loss Recognized in other comprehensive income Balance at December 31, 2021 Deferred tax liabilities: Balance at January 1, 2022 Recognized in profit or loss Balance at December 31, 2022 Balance at January 1, 2021 Recognized in profit or loss **Balance at December 31, 2021 **	Unrealized inventory valuation loss	Provision	Provision	Unrealized inrestment loss	Loss deductions - 61,388 -	Exchange on translation of foreign financial statement	Other	Total
	$ 9,168 6,438 -		32,520 7,758 -	5,615 1,993 -		26,022 - (4,815)	10,870 11,013 -	84,195 88,590 (4,815)
	$ 15,606		40,278	7,608	61,388	21,207	21,883	167,970
	$ 9,168 - -		33,195 (675) -	- 5,615 -	- - -	24,433 - 1,589	378 10,492 -	67,174 15,432 1,589
	$ 9,168		32,520	5,615	-	26,022	10,870	84,195
	Unrealized investment gains $ - -		Unrealized exchange gains		Total	6,491 (6,491) 15,690 (9,199) 6,491
			6,491 (6,491)
	$ -		-		-
	$ 15,402 (15,402)		288 6,203
	$ -		6,491

3) Assessment of tax

The income tax returns of the Company and Rexon Tech. for the years through 2020 were assesed by the tax authorities.

• 201 -

REXON INDUSTRIAL CORP ., LTD. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

(r) Capital and other equity

As of December 31, 2022 and 2021, the authorized capital totaled $3,800,000 thousand, and the total paid-in capital amounted to $1,814,735 thousand with a par value of NT$10 per share on common stock.

Reconciliation of shares outstanding for the years ended December 31, 2022 and 2021 were as follows:

(In thousands of shares) Balance at January 1(which is balance at December 31) (i) Capital Surplus		Ordinary shares 2022 2021 181,473 181,473	Ordinary shares 2022 2021 181,473 181,473
		2022
		181,473

Balance of capital surplus was as following:

Treasury share transactions Changes in the net equity value of subsichiaries recognized using the equity method	December 31, 2022 $ 433 153	December 31, 2021 433 153
	$ 586	586

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

(ii) Retained earnings

The Company's article of incorporation stipulate that Company's net earnings should first be used to offset the prior years' deficits, if any, before paying any income taxes. Of the remaining balance, 10% is to be appropriated as legal reserve, and then any remaining profit together with any undistributed retained earnings shall be distributed according to the distribution plan proposed by the Board of Directors and submitted to the stockholders’ meeting for approval.

The Company shall first take into consideration its current and future development plan, investment environment, capital requirement, the domestic and global competition, as well as the long-term interests of stockholders in determining the stock or cash dividends to be paid. The dividends appropriated for distribution shall not be less than 20% of the current and prior-period earnings that remain undistributed. The cash dividends shall not be less than 20% of total dividends.

• 202 -

REXON INDUSTRIAL CORP ., LTD. AND SUBSIDIARIES Notes to the Consolidated Financial Statements

1) Legal reserve

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

2) Special reserve

In accordance with the requirement of Financial Supervisory Commission, a portion of earnings shall be allocated as special earnings reserve during earnings distribution. The special earnings reserve was distributed from the current undistributed earnings, which was income after income tax plus other items, and undistributed earnings of prior period. A portion of undistributed prior-period earnings shall be reclassified as special earnings reserve and does not qualify for earnings distribution to account for cumulative changes to other shareholders’ equity pertaining to prior periods. Amounts of subsequent reversals pertaining to the net reduction of other shareholders’ equity shall qualify for additional distributions.

The special reserve was $163,182 thousand and $177,226 thousand for the years ended December 31, 2022 and 2021, respectively.

3) Earnings distribution

The amounts of cash dividends on the appropriation of earnings for 2021 had been approved during the board meeting on March 15, 2022, as follow:

Dividends distributed to ordinary shareholders: Cash	2021 Amount per share Total amount $ 3.0 544,420	2020 Amount per share Total amount 3.6 653,305
	Amount per share $ 3.0	Amount per share 3.6

• 203 -

REXON INDUSTRIAL CORP ., LTD. AND SUBSIDIARIES Notes to the Consolidated Financial Statements

(iii) OCI accumulated in reserves, net of tax

Balance at January 1, 2022 Exchange differences on foreign operations Balance at December 31, 2022 Balance at January 1, 2021 Exchange differences on translation of foreign Unrealized gains (losses) from financial assets measured at fair value through other comprehensive income Disposal of investments in equity instruments designated at fair value through other comprehensive income Balance at December 31, 2021	Exchange differences on translation of foreign financial statements	Unrealized (losses) gains from financial assets measured at fair value through other comprehensive income	Total
	$ (163,182) 19,259 -		(163,182) 19,259
	$ (143,923) -		(143,923)
	$ (156,823) (20,402) (6,359) - - 17,184 - 3,218		(177,225) (6,359) 17,184 3,218
	$ (163,182) -		(163,182)

(s) Earnings (loss) per share

The details on the calculation of basic earnings (loss) per share and diluted earnings per share for years 2022 and 2021 were as follows:

Basic earnings (loss) per share

Basic earnings (loss) per share
Net (loss) profit attributable to ordinary shareholders of the Company Weighted-average number of ordinary shares Diluted earnings (loss) per share Net (loss) profit attributable to ordinary shaleholders of the Company Weighted-average number of ordinary shares Effect of employee share bonus Weighted average number of ordinary shares (diluted)	2022
	181,473 181,473
	$ (1.65) 5.80
	$ (298,921) 1,052,892
	181,473 181,473 - 1,349
	181,473 182,822
	$ (1.65) 5.76

• 204 -

REXON INDUSTRIAL CORP ., LTD. AND SUBSIDIARIES Notes to the Consolidated Financial Statements

(t) Revenue from contracts with customers

(i) Details of revenue

(ii)	Primary geographical markets America Europe Asia Other Major products/services lines Woodworking tools Fitness equipment Other Contract balances Contract liabilities	December 31, 2022	2022 $ 3,928,957 366,938 174,864 78,549	2022 $ 3,928,957 366,938 174,864 78,549	2021 17,748,698 480,107 133,905 4,113 18,366,823 1,564,139 16,463,705 338,979 18,366,823 January 1, 2021
			$ 4,549,308
			$ 1,371,558 2,954,518 223,232
			$ 4,549,308
				December 31, 2021
		$ 38,713		543,155	27,454

The amount of revenue recognized for the years ended December 31, 2022 and 2021 that was included in the contract liability balance at the beginning of the period were $21,432 thousand and $10,194 thousand, respectively.

Contract liabilities mainly arise from the deferred revenue from sales contract of woodworking tools and fitness equipment. The Group will recognize revenue when the goods are transferred to customers.

The opening balance of contract liabilities on January 1, 2022 was adjusted due to contract modification for 2022, the adjustment was $491,831 thousand, which has been transferred to other current liabilities account. Please refer to note 6 (l) for details .

(u) Remunerations to employees, directors and supervisors

According to the Articles of Association, once the Company has annual profit, it should at least appropriate 5% of the profit to its employees and 5% or less to its directors and supervisors as remuneration. However, if the Company has accumulated deficits, the profit should be reserved to offset the deficit. The pervading target given via cash or shares includes those dependent employees of the Company’s subsidiaries under certain requirements.

For the years ended December 31, 2022 and 2021, the Company estimated its employee remuneration amounting to $0 and $69,327 thousand, and directors' and supervisors' remuneration amounting to $0 and $7,000 thousand, respectively. The estimated amounts mentioned above are calculated based on the net profit before tax, excluding the remuneration to employees, directors and supervisors of each period, multiplied by the percentage of remuneration to employees, directors and supervisors as specified in the Company's articles. The amounts, as stated in the consolidated financial statements, are identical to those of the actual distributions for 2022 and 2021.

• 205 -

REXON INDUSTRIAL CORP ., LTD. AND SUBSIDIARIES Notes to the Consolidated Financial Statements

(v) Non-operating income and expenses

(i) Interest income

The details of interest income for years 2022 and 2021 were as follows:

Interest income－bank deposits	2022 $ 5,858	2021 2,030

(ii) Other income

The details of other income for years 2022 and 2021 were as follows:

Rent income Dividend income Other	2022 $ 5,589 - 14,305	2021 3,535 13 36,244
	$ 19,894	39,792

(iii) Other income and losses

The details of other income and losses for years 2022 and 2021 were as follows:

Net foreign exchange gains (losses) Net losses on disposal of properey, plant and equipment Gain financial assets measured at fair value through profit Impairment loss on property, plant and equipment Other Net other income and losses	2022 $ 50,388 (4,132) - (15,971) (4,780)	2021 (88,579) (4,987) 5,908 (52,723) (230)
	$ 25,505	(140,611)

• (iv) Finance expenses

The details of finance expenses for years 2022 and 2021 were as follows:

Interest expenses Less: capitalization of interest	2022 $ (26,089) 3,650	2021 (9,227) 1,400
	$ (22,439)	(7,827)

• 206 -

REXON INDUSTRIAL CORP ., LTD. AND SUBSIDIARIES Notes to the Consolidated Financial Statements

(w) Financial Instruments

(i) Credit risk

1) Credit risk exposure

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

2) Concentration of credit risk

Major clients of the Group are concentrated in automatic facilities and fitness machines market. Sales to the major clients in 2022 and 2021 are accounted for 47% and 88% of consolidated revenue, respectively. To minimize credit risk, the Group periodically evaluates their financial positions and requests collateral if deemed necessary. As of December 31, 2022 and 2021, three customers accounted for 82% and 80% respectively of notes receivable and accounts receivable, which resulted in significant concentration of credit risk.

3) Receivables

For credit risk exposure of notes and accounts receivable, please refer to note 6(c). Other financial assets at amortized cost inlcudes other receivables. For the details and loss allowance, please refer to note 6(d).

(ii) Liquidity risk

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

December 31, 2022 Non-derivative financial liabilities Secured bank loans Unsecured loans Leased liabilities (current and non-current) Other payable December 31, 2021 Non-derivative financial liabilities Secured bank loans Unsecured loans Lease liabilities (current and non-current) Other payable	Carrying amount	Contractual cash flows 1,137,492 742,453 36,289 1,639,700	1-12months	1-2 years 401,103 51,686 6,146 -	2-5 years	more than 5 years - - 9,555 -
	$ 1,119,751 732,253 35,192 1,639,700		654,277 618,844 10,808 1,639,700		82,112 71,923 9,780 -
	$ 3,526,896	3,555,934	2,923,629	458,935	163,815	9,555
	$ 762,025 726,597 68,553 5,659,611	770,243 728,219 70,100 5,659,611	174,332 728,219 34,778 5,659,611	241,770 - 12,241 -	354,141 - 10,586 -	- - 12,495 -
	$ 7,216,786	7,228,173	6,596,940	254,011	364,727	12,495

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

• 207 -

REXON INDUSTRIAL CORP ., LTD. AND SUBSIDIARIES Notes to the Consolidated Financial Statements

(iii) Currency risk

• 1) Exposure to foreign currency risk

The Group’s significant exposure to foreign currency risk were as follows:

Financial Assets Monetary items USD EUR JPY GBP Financial Liabilities Monetary items USD EUR JPY	December 31, 2022	December 31, 2022	December 31, 2022	December 31, 2021	December 31, 2021	December 31, 2021
	Foreign Currency $ 79,128 31 209,838 5 8,491 230 -	Exchange Rates 30.71 32.72 0.2324 37.30 30.71 32.72 -	TWD 2,430,021 1,014 48,766 187 260,759 7,526 -	Foreign Currency 96,986 13 196,874 5 13,042 783 579	Exchange Rates 27.68 31.32 0.2405 37.30 27.68 31.32 0.2405	TWD
						2,684,572 407 47,348 187 361,003 24,524 139

• 2) Sensitivity analysis

The Group’s exposure to foreign currency risk arises from the translation of the foreign currency exchange gains and losses on cash and cash equivalents, accounts and other receivables, borrowings, and accounts and other payables that are denominated in foreign currency. A strengthening (weakening) of 1% of the TWD against the USD, EUR, JPY, and GBP as of December 31, 2022 and 2021 would have increased (decreased) the net profit after tax by $17,694 thousand and $19,021 thousand, respectively. The analysis assumes that all other variables remain constant and ignores any impact of forecasted sales and purchases.

The analysis is performed on the same basis for perior year.

• 3) Foreign exchange gain and loss on monetary items

Since the Group has many kinds of functional currency, the information on foreign exchange gain (loss) on monetary items is disclosed by total amount. For years 2022 and 2021, foreign exchange gain (loss) (including realized and unrealized portions) amounted to $50,388 thousand and $(88,579) thousand, respectively.

(iv) Interest rate analysis

Please refer to the note on liquidity risk management and interest rate exposure of the Group’s financial assets and liabilities.

The following sensitivity analysis is based on the exposure to the interest rate risk of derivative and non-derivative financial instruments on the reporting date.

Regarding liabilities with variable interest rates, the analysis is based on the assumption that the amount of liabilities at the reporting date was outstanding throughout the year. The rate of change is expressed as the interest rate which increases or decreases by 1% when reporting to management internally, which also represents the Group management's assessment of the reasonably possible interest rate change.

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REXON INDUSTRIAL CORP ., LTD. AND SUBSIDIARIES Notes to the Consolidated Financial Statements

If the interest rate had increased/decreased by 1%, with all other variable factors remaining constant, the Group’s net income would have increasd/decreased by $14,816 thousand and $11,909 thousand for the years ended December 31, 2022 and 2021, respectively. This is mainly due to the Group’s borrowings in variable rates.

• (v) Fair value of financial instruments

• 1) Categories and fair value of financial instruments

The fair value of financial assets at fair value through profit or loss and financial assets measured at fair value through other comprehensive income is measured on a recurring basis. The carrying amount and fair value of the Group’s financial assets and liabilities, including the information on fair value hierarchy were as follows; however, except as described in the following paragraphs, for financial instruments not measured at fair value whose carrying amount is reasonably close to the fair value, and lease liabilities, disclosure of fair value information is not required:

Carrying amount Financial assets at fair value through profit or loss Mandatorily measured at fair value through profit or loss $ 96 Financial assets measured at amortized cost Cash and cash equivalents 1,970,759 Notes receivable, trade receivable, and other receivable (including related parties) 778,794 Guarantee deposits paid 1,926 $ 2,751,575 Financial liabilities at amortized cost Short-term borrowings $ 801,417 Notes payable, accounts payable, and other payable (including related parties) 1,639,700 Long-term borrowings, due in 1 year 413,033 Loan-term borrowings 637,554 Leases liabilities 35,192 $ 3,526,896		December 31, 2022	December 31, 2022	December 31, 2022	Total 96 - - -
			FairValue
		Level 1 - - - -	Level 2 - - - -	Level 3 96 - - -
	$ 2,751,575	-	-	96	96
	$ 801,417 1,639,700 413,033 637,554 35,192	- - - - -	- - - - -	- - - - -	- - - - -
	$ 3,526,896	-	-	-	-

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REXON INDUSTRIAL CORP ., LTD. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

Carrying amount Financial assets at fair value through profit or loss Mandatorily measured at fair value through profit or loss $ 96 Financial assets measured at amortized cost Cash and cash equivalents 4,574,719 Notes receivable, trade receivable, and other receivable (including related parties) 1,758,150 Guarantee deposits paid 9,053 $ 6,342,018 Financial liabilities at amortized cost Short-term borrowings $ 802,025 Notes payable, accounts payable, and other payable(including related parties) 5,659,611 Long-term borrowings, due in 1 year 93,264 Loan-term borrowings 593,333 Lease liabilities 68,553 $ 7,216,786		December 31, 2021	December 31, 2021	December 31, 2021	Total 96 - - -
			FairValue
		Level 1 - - - -	Level 2 - - - -	Level 3 96 - - -
	$ 6,342,018	-	-	96	96
	$ 802,025 5,659,611 93,264 593,333 68,553	- - - - -	- - - - -	- - - - -	- - - - -
	$ 7,216,786	-	-	-	-

• 2) Valuation techniques for financial instruments not measured at fair value

The Group’s valuation techniques and assumption used for financial instruments not measured at fair value are as follows:

For financial liabilities measured at amortized cost, if there is quoted price generated by transactions, the recent transaction price and quoted price data is used as the basis for fair value measurement. However, if no quoted prices are available, the discounted cash flows are used to estimate fair values.

• 3) Valuation techniques for financial instruments measured at fair value

The fair value of financial instruments is quoted prices if quoted prices are from an active market. Published prices from the main exchange and central government bonds regarded as usually-traded securities are both basis of fair values of listed equity instruments and debt instruments with quoted prices from an active market.

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REXON INDUSTRIAL CORP ., LTD. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

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

The Group holds the financial instruments with the active market, the categories and characteristics of fair value are listed as follow: Fair values of listed stocks are based on market quoted prices.

• 4) Transfer between Level 1 and Level 2

There were no transfers from one level to another in 2022 and 2021.

• 5) Quantified information on significant unobservable inputs (Level 3) used in fair value measurement.

The Group’s financial instruments that use Level 3 inputs to measure fair value include “financial assets measured at fair value through profit or loss – equity investments”.

Most of the Group’s fair values are Level 3 “only with single significant unobservable inputs” , and only equity instruments without active market have plural significant unobservable inputs. Since significant unobservable inputs of equity instruments without an active market are independent, they are not correlated.

(x) Financial risk management

• (i) Overview

The Group has exposures to the following risks from its financial instruments:

• 1) Credit risk

• 2) Liquidity risk

• 3) Market risk

In this note expressed the information on risk exposure and objectives, policies and procedures of risk measurement and management. For detailed information, please refer to the related notes of each risk.

• 211 -

REXON INDUSTRIAL CORP ., LTD. AND SUBSIDIARIES Notes to the Consolidated Financial Statements

(ii) Structure of risk management

The Group’s finance management department provides business services for the overall internal department. It sets the objectives, policies and processes for managing the risk and the methods used to measure the risk arising from both the domestic and international financial market operations. The Group minimizes the risk exposure through derivative financial instruments. The board of directors regulated the use of derivative financial instruments in accordance with the Group’s policy on risks arising from financial instruments such as credit risk, currency risk, and interest rate risk, the use of derivative and non-derivative financial instruments, and the investments of excess liquidity. The internal auditors of the Group continue to review the amount of the risk exposure in accordance with the Group's policies and the risk management's policies and procedures. The Group has no transactions in financial instruments (including derivative financial instruments) for the purpose of speculation.

(iii) Credit risk

Credit risk is the risk of financial loss to the Group if a customer or counterparty to a financial instrument fails to meet its contractual obligations, and arises principally from the Group’s receivables from customers and investment securities.

1) Accounts receivable and other receivables

The Group established a credit policy to obtain the necessary collateral to mitigate risks arising from financial loss due to default risk. The Group will transact with corporations having credit ratings equivalent to investment grade, and such ratings are provided by independent rating agencies. Where it is not possible to obtain such information, the Group will assess the ratings based on other publicly available financial information and records of transactions with its major customers. The Group continuously monitors the exposure to credit risk and counterparty credit ratings, and establish sales limits based on credit rating for each of its approved customer. The credit limits for each counterparty are approved and reviewed annually by the Risk Management Committee.

The Group did not have any collateral or other credit enhancement to avoid credit risk of the financial assets.

2) Investments

The exposure to credit risk for the bank deposits and other financial instruments is measured and monitored by the Group’s finance department. The Group only deals with banks, other external parties, corporate organizations, government agencies and financial institutions with good credit rating. The Group does not expect any counterparty above fails to meet its obligations hence there is no significant credit risk arising from these counterparties.

• 3) Guarantees

The Group’s policy is to provide financial guarantees only to wholly-owned subsidiaries. As of December 31, 2022 and 2021, the Group provided financial guarantee to its subsidiaries amounted to $61,420 thousand and $138,400 thousand, respectively.

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REXON INDUSTRIAL CORP ., LTD. AND SUBSIDIARIES Notes to the Consolidated Financial Statements

• (iv) Liquidity risk

The Group manages sufficient cash and cash equivalents so as to cope with its operations and mitigate the effects of fluctuations in cash flows. The Group’s management supervises the banking facilities to ensure they are in compliance with the terms of the loan agreements.

Loans and borrowings from the bank form an important source of liquidity for the Group. The Group has unused long-term and short-term credit line of $3,559,004 thousand and $3,856,903 thousand as of December 31, 2022 and 2021, respectively.

(v) Market risk

Market risk is the risk that changes in market prices, such as foreign exchange rates, interest rates, and equity prices that will affect the Group’s income or the value of its holdings of financial instruments. The objective of market risk management is to manage and control market risk exposures within acceptable parameters, while optimizing the return.

1) Currency risk

The Group is exposed to currency risk on sales, purchases and borrowings that are denominated in a currency other than the respective functional currencies of the Group’s entities, primarily the New Taiwan Dollar (NTD). The currencies used in these transactions are the NTD,RMB, EUR, USD, GBP and JPY.

2) Interest rate risk

The Group maintains an appropriate proportion of the fixed and variable interest rate instruments and using interest rate swap contracts to mitigate the floating interest rate risk. The Group will assess the hedging activities for consistent interest rates within its risk preferences and use the most cost-effective hedging strategy on a regular basis.

(y) Capital management

The Group meets its objectives for managing capital to safeguard the capacity to continue to operate, to continue to provide a return on shareholders, and to maintain an optimal capital structure to reduce the cost of capital.

In order to maintain or adjust the capital structure, the Group may adjust the dividend payment to the shareholders, reduce the capital for redistribution to shareholders, and issue new shares or sell assets to settle any liabiltiies.

The Group and other entities in the simialr industry use the debt-to-equity ratio to manage capital. This ratio uses the total net debt divided by the total capital. The net debt from the balance sheet is derived from the total liabilities, less cash and cash equivalents. The total capital and equity include share capital, capital surplus, retained earnings, other equity, and non-controlling interest, plus, net debt.

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REXON INDUSTRIAL CORP ., LTD. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

As of December 31, 2022, the Group’s capital management strategy is consistent with the prior year as of December 31, 2021. The Group’s debt to equity ratio as of December 31, 2022 and 2021, were as follows:

Total liabilities Less: cash and cash equivalents Net debt Total equity Adjusted equity Debt-to-equity ratio	December 31, 2022	December 31, 2022		December 31, 2021
	$ 4,244,630 (1,970,759)			8,271,030 (4,574,719)
	2,273,871 3,509,327			3,696,311 4,250,403
	$ 5,783,198			7,946,714
		39%		47%

The debt-to equity ratio was reduced on December 31,2022, due to the substantial decrease in revenue during the current period, hence, the relative decrease in purchases from suppliers has led to an decrease in the amount of account payable.

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

Reconciliation of liabilities arising from financing activities were as follows:

Long-term borrowings (Including due within 1year) Short-term borrowings Lease liabilities Total liabilities from financing Long-term borrowings (Including due within 1year) Short-term borrowings Lease liabilities Total liabilities from financing	January 1,2022 $ 686,597 802,025 68,553	Cash flows 364,433 - (30,257)	Non-cash changes Acquistion Changes in lease payments Foreign exchange movement - - (443) - - (608) 4,228 (7,332) -	Non-cash changes Acquistion Changes in lease payments Foreign exchange movement - - (443) - - (608) 4,228 (7,332) -	Non-cash changes Acquistion Changes in lease payments Foreign exchange movement - - (443) - - (608) 4,228 (7,332) -	December 31,2022 1,050,587 801,417 35,192
				Changes in lease payments - - (7,332)
			- - 4,228
	$ 1,557,175	334,176	4,228	(7,332)	(1,051)	1,887,196
	January 1,2021 $ 380,739 336,960 23,619	Cash flows 304,231 460,513 (29,043)	Non-cash changes Acquistion Changes in lease payments Foreign exchange movement - - 1,627 - - 4,552 73,977 - -			December 31,2021 686,597 802,025 68,553
				Changes in lease payments - - -
			- - 73,977
	$ 741,318	735,701	73,977	-	6,179	1,557,175

(7) Related-party transactions:

• (a) Names and relationship with the Group

The following is the entity that have had transactions with the Group during the periods covered in the consolidated financial statements.

Name of related parey Relationship with the Group

Fine Clear Co., Ltd

An associate

• 214 -

REXON INDUSTRIAL CORP ., LTD. AND SUBSIDIARIES Notes to the Consolidated Financial Statements

(b) Significant transactions with related parties

(i) Sale of goods to related parties

The amounts of significant sales by the Group to related parties were as follows:

2022 2021
Associates－Fine Clear Co., Ltd $ 76,674 56,115
The price changed to related party is incomparable to normal price because there were no
similar items sold to both related and non-related parties. The credit term was 150 days, while
the credit term for routine sales transaction was ranged from 30 days to 120 days. Amounts
receivable from related parties were uncollateraliged, and no expected credit loss were required
after the assussment by the management.

ii) Receivables from related-parties

Account Notes receivable Accounts receivable	**Related-party type **	December 31, 2022	December 31, 2021
	Associates－Fine Clear Co., Ltd Associates－Fine Clear Co., Ltd	$ 31,722 27,543
		$ 8,794 11,078

iii) Payables to related-parties

The payables to related parties were as follows:

Account	**Related-party type **	December 31, 2022
Notes payable Other payables	Associates－Fine Clear Co., Ltd Associates－Fine Clear Co., Ltd
		$ 6 17

(c) Key management personnel compensation

Key management personnel compensation comprised:

Short-term employee benefits Post-employment benefits Other long-term benefits Termination benefits Share-based payments	2022 $ 31,407 1,358 - - -	2021 54,540 1,384 - - -
	$ 32,765	55,924

• 215 -

REXON INDUSTRIAL CORP., LTD. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

(8) Pledged assets

The carrying values of pledged assets were as follows:

Pledged assets Land Buildings	Object Guarantee for bank loans Guarantee for bank loans	December 31, 2022 $ 296,916 844,913	December 31, 2021 296,916 853,440 1,150,356
		$ 1,141,829

(9) Significant commitments and contingencies

i) The Group’s unrecognized contractual commitments were as follows:

Acquisition of property, plant and equipment	December 31, 2022 $ 293,285

ii)The Group received civil complaint of trade price and notice trial which Yi-Zong Hardware Co., Ltd. claim that the Group should pay $37,154 thousands for purchase. The complaint is on trial in Taiwan Taichung District Court, therefore, the Group has not estimated relevant provisions and does not expect material impact in the Group's operation and business.

(10) Losses due to major disasters: None.

(11) Subsequent events: None.

(12) Other

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

By function **By item **	2022	2022	2022	2021	2021	2021
	Cost of sales	Operating expenses	Total	Cost of sales	Operating expenses	Total
Employee benefits
Salary	359,763	258,386	618,149	741,723	340,663	1,082,386
Labor and health insurance	46,460	26,807	73,267	82,370	23,491	105,861
Pension	20,006	10,599	30,605	33,338	8,919	42,257
Others	7,181	5,404	12,585	19,336	2,515	21,851
Depreciation	255,696	92,032	347,728	228,643	34,849	263,492
Amortization	3,967	14,002	17,969	2,887	11,778	14,665

• 216 -

REXON INDUSTRIAL CORP., LTD. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

(13) Other disclosures:

• (a) Information on significant transactions

The following is the information on significant transactions required by the “Regulations Governing the Preparation of Financial Reports by Securities Issuers” for the Group:

• (i) Lending to other parties: None.

• (ii) Guarantees and endorsements for other parties:

(Amounts in Thousands of New Taiwan Dollar)

No.	Name of guarantor	Counter-party of guarantee and endorsement	Counter-party of guarantee and endorsement	Limitation on amount of guarantees and endorsements for a specific enterprise	Highest balance for guarantees and endorsements during theperiod	Balance of guarantees and endorsements as of reporting date	Actual usage amount during the period	Property pledged for guarantees and endorsements (Amount)	Ratio of accumulated amounts of guarantees and endorsements to net worth of the latest financial statements	Maximum amount for guarantees and end orsements	Parent company endorsements/ guarantees to third parties on behalf of subsidiary	Subsidiary endorsements/ guarantees to third parties on behalf of parent company	Endorsements/ guarantees to third parties on behalf of companies in Mainland China
		Name	Relationshi p with the Company
0	REXON INDUSTRIAL CORP., LTD.	Tongxiang Rexon	2	1,393,463	(USD5,000) 158,750	(USD2,000) 61,420	(USD2,000) 61,420	-	1.76%	1,393,463	Y	N	Y

Note1：The total amount and the limited amount of the guarantee provided by the company to any individual subsidiary shall not exceed forty percent (40%) of the Company’s net worth.

Note2：No.0 represents the parent company.

Note3：The relationship between guarantee provider and guarantee party were as follows :

• 1) Companies which were in business relationship.

• 2) Subsidiaries which the company directly or indirectly held more than fifty percent (50%).

• 3) Companies with substantial control

• (iii) Securities held as of December 31, 2022 (excluding investment in subsidiaries, associates and joint ventures):

(Amounts in Thousands of New Taiwan Dollars)

Name of holder	Category and name of security	Relationship with company	Account title	Endingbalance	Endingbalance	Endingbalance	Endingbalance	Highest Shares/Units (thousands)	Highest Percentage of ownership (%)	Note
				Shares/Units (thousands)	Carrying value	Percentage of ownership (%)	Fair value
REXON INDUSTRIAL CORP., LTD.	Stock-Hwa Chung Venture Capital Corp.		Financial assets at fair value through profit or loss- current	10	96	-	96	10	-

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

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

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

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

(Amounts in Thousands of New Taiwan Dollars)

Name of company	Relatedparty	Nature of relationship	Transaction details	Transaction details	Transaction details	Transaction details	Transactions with terms different from others	Transactions with terms different from others	Notes/Accounts receivable (payable)	Notes/Accounts receivable (payable)	Note
			Purchase/Sale	Amount	Percentage of total purchases/sales	Payment terms	Unitprice	Payment terms	Endingbalance	Percentage of total notes/accounts receivable (payable)
REXON INDUSTRIAL CORP., LTD.	Tongxiang Rexon	The subsidiary	Purchase	980,602	37%	90~150Days	Note 1	Note 2	(214,202)	(19)%

Note1：The price charged to related party is incomparable to normal price because there were no similar iterms purchased from both related and non-related parties.

• 217 -

REXON INDUSTRIAL CORP., LTD. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

Note2：The payment term for the related party is 90-150 days. Apart from according to the established payment policy, the related working capital, industry characteristics, and industrial prosperity are also considered.

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

Name of company	Name of Counter-party	Nature of relationship	Ending balance	Turnover rate	Overdue	Overdue	Amounts received in subsequentperiod	Allowance for bad debts
					Amount	Action taken
Tongxiang Rexon	REXON INDUSTRIAL CORP., LTD.	Parent company	Account receivable 214,202	6.62%	-	-	The recovery amount as of January 30, 2023 : 63,274	-

• (ix) Trading in derivative instruments: None.

• (x) Business relationships and significant intercompany transactions:

No.	Name of company	Name of counter-party	Nature of relationship	Intercompanytransactions	Intercompanytransactions	Intercompanytransactions	Intercompanytransactions
				Account name	Amount	Trading terms	Percentage of the consolidated net revenue or total assets
0	REXON INDUSTRIAL CORP., LTD.	Tongxiang Rexon	1	Purchases	980,602	The prices were agreed upon by the two parties to the transaction.	21.55%
0	REXON INDUSTRIAL CORP., LTD.	Tongxiang Rexon	1	Account payable	214,202	The payment terms were agreed upon by the two parties to the transaction.	2.76%
0	REXON INDUSTRIAL CORP., LTD.	Rexon Technology Corp., Ltd.	1	Purchases	45,383	The prices were agreed upon by the two parties to the transaction.	1.00%
0	REXON INDUSTRIAL CORP., LTD.	Rexon Technology Corp., Ltd.	1	Account payable and notes payable	33,426	The payment terms were agreed upon by the two parties to the transaction.	0.43%
0	REXON INDUSTRIAL CORP., LTD.	P.T.S.	1	Service fee	44,836	The prices were agreed upon by the two parties to the transaction.	0.99%
0	REXON INDUSTRIAL CORP., LTD.	P.T.S.	1	Other payable	101,110	The payment terms were agreed upon by the two parties to the transaction.	1.30%
0	REXON INDUSTRIAL CORP., LTD.	P.T.S.	1	Sales	7,157	The prices were agreed upon by the two parties to the transaction.	0.16%

Note1：Representations of No. were as follows:

• 1) No.0 represents the parent company.

• 2) Subsidiaries were numbered in sequence from No.1.

Note2：Type of intra-group transactions were as follows:

• 1) represents the transactions form parent company to subsidiary.

• 2) represents the transactions from subsidiary to parent company.

• 3) represents the transactions between subsidiaries.

• 218 -

REXON INDUSTRIAL CORP., LTD. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

• (b) Information on investees:

The following is the information on investees for the year ended December 31, 2022 (excluding information on investees in Mainland China):

(Amounts in Thousands of New Taiwan Dollars)

Name of investor	Name of investee	Location	Main businesses and products	Original investment amount	Original investment amount	Balance as of December 31,2022	Balance as of December 31,2022	Balance as of December 31,2022	Net income (losses) of investee	Share of profits/losses of investee	Highest Shars/Units (thousands)	Highest Percentage of ownership(%)	Note
				December 31,2022	December 31,2021	Shares (thousands)	Percentage of wnership	Carrying value
REXON INDUSTRI AL CORP., LTD.	Fine Clear Co.,Ltd	R.O.C	Buying and selling accessories	14,197	14,197	1,600	16%	16,420	1,177	188	1,600	16%	Investment Using Equity Method
REXON INDUSTRI AL CORP., LTD.	Rexon Technology Corp., Ltd. (Rexon Tech)	R.O.C	Manufacture and sale of electric components	293,741	293,741	7,851	82.87%	97,871	309	256	7,851	82.87%	Direct subsidiaries of the Company
REXON INDUSTRI AL CORP., LTD.	Power Tool Specialists Inc.	U.S.A t	Merchandise rading	196,465	196,465	0.1	96%	154,890	(6,289)	(6,046)	0.1	96%	Direct subsidiaries of the Company
REXON INDUSTRI AL CORP., LTD.	Gold Item Group Ltd.	British Virgin Islands	Investing and holding	747,858	747,858	US$ 25,000 (Note 1)	100%	702,524	(3,919)	(3,919)	US$ 25,000 (Note 1)	100%	Direct subsidiaries of the Company
Gold Item	Gold Tech Group Ltd.	Hong Kong	Investing and holding	US$ 25,000	US$ 25,000	US$ 25,000 (Note 1)	100%	682,012	(3,924)	(3,924)	US$ 25,000 (Note 1)	100%	Direct subsidiaries of Gold Item

Note1：Company Limited without issuing Shares. The amount of capital invested is disclosed.

• (c) Information on investment in mainland China:

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

(Amounts in Thousands of New Taiwan Dollar)

Investee company	Main businesses and products	Total amount of paid-in capital	Method of investment	Accumulated outflow of investment from Taiwan as of January1,2022	Investme	nt flows	Accumulated outflow of investment from Taiwan as of December 31,2022	Net income (losses) of the investee	Percentage of ownership	Highest Percentage of ownership	Net income (losses) recognized	Carrying value as of December 31, 2022	Accumulated remittance of earnings as of December 31, 2022
					Outflow	Inflow
Tongxian Rexon	g Manufacture o drills woodworking tool and fitnes equipment	f , s s RMB 154,465 USD25,000	Note 1	USD 25,000 (NTD745,565)	-	-	USD 25,000 (NTD745,565)	(3,924)	100%	100%	(3,924)	682,012	-

(Amounts in Thousands of New Taiwan Dollars)

Note 1：The Group invested companies in Mainland China through investees in Third Region, and investees in Third Region invested companies in Mainland China through their investees in Hong Kong.

(ii) Limitation on investment in Mainland China:

Accumulated Investment in Mainland China as of December 31,2022	Investment Amounts Authorized by Investment Commission,MOEA	Upper Limit on Investment
US$25,000 (NT$745,565)	US$25,000 (NT$745,565)	2,090,194

• (iii) Significant transactions:

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

(d) Major shareholders:

Shareholding Shareholder’s Name	Shares	Percentage
Kun-Ju Co.,Ltd.	18,735,302	10.32%
Trust Account entrusted byShu-Qi Chen in Li-Tai InvestingCorp.,Ltd.	12,275,599	6.76%

Note:(l) The information of major shareholders in this table is calculated by Taiwan Depository & Clearing Corporation based on the last business day at the end of each quarter, disclosing shareholders with more than 5% of the Company's ordinary shares and preferred shares that have been delivered without physical registration (including treasury shares). As for the share capital reported in the Company's financial statements and the Company's actual

• 219 -

REXON INDUSTRIAL CORP., LTD. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

number of shares delivered without physical registration, there may be differences due to different calculation bases.

• (2) In a situation where a shareholder entrusted the holdings, the individual account of the settlor opened by the trustee was disclosed. As for the shareholder's declaration of insider's equity holding more than 10% of the shares in accordance with the Securities and Exchange Act, his shareholding includes his own shareholding plus the shares delivered to the trust and the right to use the trust property, etc. For information on insider equity declaration, please refer to Market Observation Post System.

• 220 -

(14) Segment information

(a) General information

The Group has only one reportable segment which is automatic facilities and fitness equipment segment. The automatic facilities and fitness equipment segment engages mainly in the manufacturing and selling of drills, woodworking tools, automatic facilities, and fitness equipment. The Group’s operating segment revenue, the profit and loss of reportable segment and the assets of the reportable segment are in consistent with consolidated financial statements. Please refer to consolidated balance sheet and consolidated income statement.

(b) Product information

Product Automatic facilities Fitness equipment Other	2022 $ 1,371,558 2,954,518 223,232	2021
		1,564,139 16,463,705 338,979
	$ 4,549,308	18,366,823

(c) Geographical information

In presenting the information on the basis of geography, segment revenue is based on the geographical location of the customers and the segment non-current assets are based on the geographical location of the assets.

Revenue from the external customers of the Group was as follows:

Region America Europe Asia Other Non-current assets:	2022 $ 3,928,957 366,938 174,864 78,549	2021 17,748,698 480,107 133,905 4,113
	$ 4,549,308	18,366,823

Region Taiwan Other	December 31, 2022 $ 3,188,997 733,379	December 31, 2021 3,030,047 772,781
	$ 3,922,376	3,802,828

Non-current assets include property, plant and equipment, right-of-use assets, intangible assets, and other assets, not including financial instruments, deferred tax assets and defined benefit assets.

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(d) Major customers’ information

Sale revenues from individual customers representing over 10% of the total revenue were summarized as follows:

Customer D Company A Company B Company D Company	2022 Amount Percentage 2,157,534 47 652,518 14 629,779 14	2022 Amount Percentage 2,157,534 47 652,518 14 629,779 14	2022 Amount Percentage 2,157,534 47 652,518 14 629,779 14
	Amount 2,157,534 652,518 629,779
	$ 3,439,831		75
	2021 Amount Percentage $ 16,233,829 88	2021
		Amount	Percentage 88

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Rexon Industrial Corp., Ltd.

President: Wang Kuan-Hsiang

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