Weikeng — Audit Report / Information 2021

Dec 15, 2021

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Stock Code:3033

WEIKENG INDUSTRIAL CO., LTD.

Parent Company Only Financial Statements

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

Address: 11F., No.308, Sec.1, Neihu Rd., Neihu Dist., Taipei City Telephone: (02)2659-0202

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

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Table of contents

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

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KPMG

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

Independent Auditors’ Report

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

Opinion

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

In our opinion, the accompanying financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2021 and 2020, and its financial performance and 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 the auditing standards generally accepted in the Republic of China. Our responsibilities under those standards are further described in the Auditors’ Responsibilities for the Audit of the Financial Statements section of our report. We are independent of the Company in accordance with the Certified Public Accountants Code of Professional Ethics in Republic of China (“the Code”), and we have fulfilled our other ethical responsibilities in accordance with the Code. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis of our opinion.

Key Audit Matters

Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the financial statements of the current period. These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. The key audit matters we judged shall be presented in the auditors’ report as follows:

1. Recognition of Operating Revenue

Please refer to note (4)(m) “ Revenue recognition” for accounting policies with respect to recognizing revenue, and to note (6)(s) “Revenue from contracts with customers ” for explanatory notes about revenue.

Description of key audit matters:

Weikeng Industrial Co., Ltd. is a listed company. The Company is a distributor for the sale of electronic components and computer peripheral equipment. Operating revenue is one of the significant items in the financial statements, and the amounts and changes of operating revenue may affect the users’ understanding of the entire financial statements. Therefore, the testing over revenue recognition is considered a key matter in our audit.

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

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How the matter was addressed in our audit:

Our main audit procedures for the aforementioned key audit matters include testing the Company’s controls surrounding revenue recognition in the order-to-cash transaction cycle, including reconciliations between the general ledger and sales system; performing the detailed test of relevant vouchers, as well as assessing whether the Company’s timing on revenue recognition and the amounts recognized are in accordance with related standards.

1. Valuation of Inventories

Please refer to note (4)(g) “ Inventories” for accounting policies with respect to valuating inventories, to note (5) "Valuation of inventories" for accounting estimates and uncertainties of affairs for inventory valuation; and to note (6)(f) “Inventories” for explanatory notes about inventories and related expenses.

Description of key audit matters:

The Company is a distributor for the sale of electronic components and computer peripheral equipment. Due to the horizontal competition in the industry and constant advancement of related technologies, the price of end electronic products are volatile, and thus, affects the price of electronic components and computer peripheral equipment. Therefore, the testing over the valuation of inventories is considered a key matter in our audit.

How the matter was addressed in our audit:

Our main audit procedures for the aforementioned key audit matters include testing the related control over the cost operating cycle; evaluating whether the policies for setting aside allowance for inventory valuation and obsolescence losses are in accordance with the Company’s policies and related standards; and executing the implementation of sampling procedures to check the correctness of stock age. In addition, we also examined the inventory aging reports, understood the subsequent sales status of slow-moving inventories; and evaluated the adopted basis of net realizable value to verify the rationality of the management’ s estimates on the allowance for inventory valuation.

1. The share of profit (loss) of subsidiaries and investments accounted for using equity method

Please refer to note (4)(h) ”Investments of subsidiaries” for the accounting policies; note (6)(g) ”Investments accounted for using equity method”for explanatory notes about the investments under equity method.

Description of key audit matters:

The subsidiaries, which are recognized under equity method, are distributors for the sale of electronic components and computer peripheral equipment with holding material assets, such as accounts receivable and inventories. Therefore, the share of profit of subsidiaries and investments accounted for using equity method which is one of the material items in the financial statements is considered a key matter in our audit.

How the matter was addressed in our audit:

Our main audit procedures for the aforementioned key audit matters include understanding the related control over investments accounted for using equity method; testing the changes of the investment under equity method within the year, including the recognition of investments gains (losses) and the share of comprehensive income; as well as assessing whether the Company’ s recognition of investments are in accordance with the related standards.

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

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

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

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

Auditor’s Responsibilities for the Audit of the Financial Statements

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

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

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

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

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

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

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1. Obtain sufficient and appropriate audit evidence regarding the financial information of the investments in other entities accounted for using the equity method to express an opinion on this 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.

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

The engagement partners on the audit resulting in this independent auditors’ report are Jui-Lan Lo and YiuKwan Au.

KPMG

Taipei, Taiwan (Republic of China) March 25, 2022

Notes to Readers

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

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

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

Balance Sheets

December 31, 2021 and 2020

(Expressed in Thousands of New Taiwan Dollars)

Assets Current assets: 1100 Cash and cash equivalents (note (6)(a)) 1110 Financial assets at fair value through profit or loss-current(note (6)(b)) 1170 Notes and accounts receivable, net (note (6)(d) and note (7)) 1200 Other receivables (note (6)(e) and note (7)) 1300 Inventories, net (note (6)(f)) 1470 Prepaid expenses and other current assets Non-current assets: 1510 Non-current financial assets at fair value through profit or loss (note (6)(b)) 1517 Non-current financial assets at fair value through other comprehensive income (note (6)(c)) 1550 Investments accounted for using equity method, net (note (6)(g)) 1600 Property, plant and equipment (note (6)(h)) 1755 Right-of-use assets (note (6)(i)) 1780 Intangible assets 1840 Deferred tax assets (note (6)(p)) 1900 Other non-current assets Total assets	December 31, 2021 Amount % $ 1,553,378 9 607 - 6,585,185 37 434,566 2 3,034,102 17 107,722 1 11,715,560 66 375 - 40,065 - 5,624,937 31 94,045 1 95,094 1 9,012 - 210,282 1 22,826 - 6,096,636 34 $ 17,812,196 100	December 31, 2020 Amount % 1,479,458 10 624 - 4,813,408 32 958,178 6 2,939,187 20 166,302 1 10,357,157 69 - - 44,822 - 4,106,990 28 96,552 1 88,652 1 13,899 - 201,743 1 22,719 - 4,575,377 31 14,932,534 100 December 31, 2021 Liabilities and Equity Amount % Current liabilities: 2100 Short-term borrowings (note (6)(j)) $ 4,911,346 27 2130 Contract liabilities-current (note (6)(s)) 34,902 - 2170 Notes and accounts payable 2,900,255 16 2200 Other payables (note (6)(k) and note (7)) 505,138 3 2230 Current tax liabilities 101,863 1 2280 Current lease liabilities (note (6)(m)) 58,825 - 2300 Other current liabilities 295,095 2 8,807,424 49 Non-current liabilities: 2500 Non-current financial liabilities at fair value through profit or loss (notes (6)(b) and (6)(l)) - - 2530 Convertible bonds payable (note (6)(l)) 126,336 1 2570 Deferred tax liabilities (note (6)(p)) 696,744 4 2580 Non-current lease liabilities (note (6)(m)) 36,795 - 2640 Non-current net defined benefit liabilities (note (6)(o)) 122,222 1 2670 Other non-current liabilities 187 - 982,284 6 Total liabilities 9,789,708 55 Equity (Note (6)(q)): 3100 Ordinary share 4,159,342 23 3200 Capital surplus 1,275,927 7 Retained earnings: 3310 Legal reserve 960,709 5 3320 Special reserve 365,705 2 3350 Unappropriated retained earnings 1,715,388 10 3,041,802 17 Other equity interest: 3410 Exchange differences on translation of foreign financial statements (373,405) (2) 3420 Unrealized gains (losses) on financial assets measured at fair value through other comprehensive income (81,178) - (454,583) (2) Total equity 8,022,488 45 Total liabilities and equity $ 17,812,196 100	December 31, 2021		December 31, 2020 Amount % 4,647,106 31 8,489 - 1,438,566 10 949,583 6 13,859 - 49,297 - 244,019 2 7,350,919 49 9,600 - 929,322 6 407,666 3 39,788 - 120,974 1 187 - 1,507,537 10 8,858,456 59 3,677,513 25 941,349 6 890,626 6 229,459 2 700,837 5 1,820,922 13 (282,193) (2) (83,513) (1) (365,706) (3) 6,074,078 41 14,932,534 100
			Amount %

See accompanying notes to financial statements.

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

Statements of Comprehensive Income

For the years ended December 31, 2021 and 2020

(Expressed in Thousands of New Taiwan Dollars, Except for Earnings Per Share)

4100 Net sales revenue (notes (6)(s) and note (7)) 5000 Cost of sales (note (6)(f) and note (7)) Gross profit Operating expenses (notes (6)(n), (6)(o), note (7) and (12)): 6100 Selling expenses 6200 Administrative expenses 6450 Expected credit (gains) losses (note (6)(d)) Net operating income Non-operating income and expenses: 7100 Interest income 7010 Other income (notes (6)(n) and note (7)) 7230 Foreign currency exchange gains (losses), net (note (6)(u)) 7235 Gains on financial assets (liabilities) at fair value through profit or loss 7375 Share of profit of associates accounted for using equity method (note (6)(g)) 7050 Financial costs (note ((6)(m) and note (7)) 7590 Miscellaneous disbursements 0 7900 Profit before tax 7950 Less: Income tax expenses (note (6)(p)) Profit Other comprehensive income: 8310 Items that will not be reclassified to profit or loss 8311 (Losses) gains on remeasurements of defined benefit plans (note (6)(o)) 8316 Unrealized gains from investments in equity instruments measured at fair value through other comprehensive income 8349 Less: Income tax related to components of other comprehensive income that will not be reclassified to profit or loss (note (6)(p)) 8360 Items that may be reclassified to profit or loss 8361 Exchange differences on translation of foreign financial statements 8399 Less:Income tax related to components of other comprehensive income that may be reclassified to profit or loss (note (6)(p)) Components of other comprehensive income that will be reclassified to profit or loss 8300 Other comprehensive income 8500 Comprehensive income Earnings per share: (note (6)(r)) 9750 Basic earnings per share 9850 Diluted earnings per share	2021 Amount % $ 29,964,915 100 28,361,656 95 1,603,259 5 822,502 3 343,001 1 (7,284) - 1,158,219 4 445,040 1 525 - 375,504 1 58,442 - 7,921 - 1,354,664 5 (86,956) - (633) - 1,709,467 6 2,154,507 7 433,367 1 1,721,140 6 (8,145) - 3,099 - (1,629) - (3,417) - (114,017) (1) (22,805) - (91,212) (1) (94,629) (1) $ 1,626,511 5 $ 4.54 $ 4.02	2020
		Amount % 27,706,010 100 26,467,370 96 1,238,640 4 656,547 2 271,854 1 25,090 - 953,491 3 285,149 1 1,796 - 284,683 1 112,975 - 3,203 - 322,024 1 (126,777) - (571) - 597,333 2 882,482 3 183,173 1 699,309 2 1,910 - 1,639 - 382 - 3,167 - (172,356) - (34,471) - (137,885) - (134,718) - 564,591 2 1.90
		1.84

See accompanying notes to financial statements.

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

Statements of Changes in Equity

For the years ended December 31, 2021 and 2020

(Expressed in Thousands of New Taiwan Dollars)

Balance at January 1, 2020 Appropriation and distribution of retained earnings: Legal reserve appropriated Special reserve appropriated Cash dividends Net income Other comprehensive income Total comprehensive income Conversion of convertible bonds Balance at December 31, 2020 Appropriation and distribution of retained earnings: Legal reserve appropriated Special reserve appropriated Cash dividends Net income Other comprehensive income Total comprehensive income Conversion of convertible bonds Disposal of investments in equity instruments designated at fair value through other comprehensive income Balance at December 31, 2021	Ordinary shares		Capital surplus			Retained earnings	Retained earnings	Retained earnings	Retained earnings		Other equity interest Exchange differences on translation of Unrealized gains (losses) on financial assets at fair value through other foreign financial statements comprehensive income	Other equity interest Exchange differences on translation of Unrealized gains (losses) on financial assets at fair value through other foreign financial statements comprehensive income	Total equity 5,664,925 - - (212,452) (212,452) 699,309 (134,718) 564,591 57,014 6,074,078 - - (494,508) (494,508) 1,721,140 (94,629) 1,626,511 816,407 - 8,022,488
											Exchange differences on translation of foreign financial statements
					Legal reserve		Special reserve	Unappropriated retained earnings
	$ 3,677,513 - - - - - - - - 3,677,513 - - - - - - - 481,829 - $ 4,159,342		884,335		864,760		138,615		329,162		(144,308) - - - - - (137,885) (137,885) - (282,193) - - - - - (91,212) (91,212) - - (373,405)	(85,152) - - - - - 1,639 1,639 - (83,513) - - - - - 3,099 3,099 - (764) (81,178)
			- - -		25,866 - -		- 90,844 -
			-		25,866		90,844
			- -		- -		- -
			-		-		-
			57,014		-		-
			941,349		890,626		229,459
			- - -		70,083 - -		- 136,246 -
			-		70,083		136,246
			- -		- -		- -
			-		-		-
			334,578		-		-
			-		-		-
			1,275,927		960,709		365,705

See accompanying notes to financial statements.

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

Statements of Cash Flows

For the years ended December 31, 2021 and 2020

(Expressed in Thousands of New Taiwan Dollars)

Cash flows from (used in) operating activities: Profit before tax Adjustments: Adjustments to reconcile profit (loss): Depreciation expense Amortization expense Expected credit (gains) losses Net gains on financial assets or liabilities at fair value through profit or loss Interest expense Interest income Share of profit of subsidiaries,associates and joint ventures accounted for using equity method Changes in operating assets and liabilities: Decrease (increase) in financial assets at fair value through profit or loss Decrease (increase) in notes and accounts receivable Decrease (increase) in other receivable Decrease (increase) in inventories Decrease (increase) in prepaid expenses and other current assets Increase (decrease) in accounts payable Increase (decrease) in other payable Increase (decrease) in contract liabilities and other current liabilities Increase (decrease) in net defined benefit liability－non-current Total changes in operating assets and liabilities Total adjustments Cash flow from operations Interest received Interest paid Income taxes paid Net cash flows from operating activities Cash flows from (used in) investing activities: Proceeds from disposal of financial assets at fair value through other comprehensive income Proceeds from capital reduction of financial assets at fair value through other comprehensive income Acquisition of investment accounted for using equity method Acquisition of property, plant and equipment Increase in refundable deposits Acquisition of intangible assets Increase in other prepayments Net cash flows used in investing activities Cash flows from (used in) financing activities: Increase (decrease) in short-term loans Proceeds from issuing bonds Decrease in guarantee deposits received Payment of lease liabilities Cash dividends paid Net cash flows (used in) from financing activities Net Increase (decrease) in cash and cash equivalents Cash and cash equivalents at beginning of period Cash and cash equivalents at end of period	2021 $ 2,154,507 64,432 8,573 (7,284) (7,921) 86,956 (525) (1,354,664) (1,210,433) 11 (1,764,493) 523,612 (94,915) 58,580 (1,277,205) 1,461,689 (443,201) 77,489 (6,897) 1,089,080 (188,125) (1,398,558) 755,949 525 (76,855) (40,391) 639,228 7,451 405 (277,300) (2,357) 170 (3,686) (277) (275,594) 264,240 - - (59,446) (494,508) (289,714) 73,920 1,479,458 $ 1,553,378	2020 882,482 58,474 5,291 25,090 (3,203) 126,777 (1,796) (322,024) (111,391) (2,339) (1,084,054) 341,624 648,806 3,875 (92,088) (486,402) (220,087) 44,760 (6,123) (667,852) (759,940) (871,331) 11,151 1,796 (131,257) (108,177) (226,487) - 1,979 (270,720) (1,492) (1,062) (14,483) - (285,778) (98,563) 1,000,000 (30) (52,871) (212,452) 636,084 123,819 1,355,639 1,479,458

See accompanying notes to financial statements.

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

Notes to the Financial Statements

For the years ended December 31, 2021 and 2020

(Expressed in Thousands of New Taiwan Dollars, Unless Otherwise Specified)

(1) Company history

Weikeng Industrial Co., Ltd. (the Company) was incorporated in Taiwan as a company limited by shares in January 1977 and registered under the Ministry of Economic Affairs, R.O.C. The address of the Company’ s registered office is 11F, No.308 Sec. 1, Neihu Rd., Neihu Dist., Taipei City. The major activities of the Company are the purchase and sale of electronic components and computer peripherals, technical service, and the import-export trade business. The Company’s common shares were listed on the Taiwan Stock Exchange (TSE).

(2) Approval date and procedures of the financial statements:

The accompanying parent company only financial statements were authorized for issuance by the Board of directors on March 25, 2022.

(3) New standards, amendments and interpretations adopted:

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

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

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

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

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

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

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

• －

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

• －

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

• ●Annual Improvements to IFRS Standards 2018–2020

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

(Continued)

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

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

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

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

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

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

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

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

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

(4) Summary of significant accounting policies

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

• (a) Statement of compliance

These annual 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).

• (b) Basis of preparation

• (i) Basis of measurement

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

• 1) Financial assets at fair value through profit or loss are measured at fair value (including derivative financial instruments);

• 2) Financial assets at fair value through other comprehensive income are measured at fair value;

• 3) The defined benefit liabilities are measured at fair value of the plan assets less the present value of the defined benefit obligation limited as explained in to note 4(n).

(Continued)

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

(ii) Functional and presentation currency

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

(c) Foreign currencies

• (i) Foreign currency transactions

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

Non-monetary items denominated in foreign currencies that are measured at fair value are translated into the functional currencies using the exchange rate at the date that the fair value was determined. Non-monetary items denominated in foreign currencies that are measured based on historical cost are translated using the exchange rate at the date of the transaction.

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

• ‧ an investment in equity securities designated as at fair value through other comprehensive income;

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

• ‧ qualifying cash flow hedges to the extent that 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 functional currency at the exchange rates at the reporting date. The income and expenses of foreign operations are translated into the functional currency at the 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 noncontrolling interests. When the Company disposes of only part of its investment in an associate or joint venture that includes a foreign operation while retaining significant influence or joint control, the relevant proportion of the cumulative amount is reclassified to profit or loss.

(Continued)

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

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

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

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

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

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

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

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

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

An entity shall classify a liability as current when:

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

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

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

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

• (e) Cash and cash equivalents

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

(Continued)

12

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

• (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 other comprehensive income (FVOCI) – debt investment; FVOCI – equity investment; or 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.

A financial asset measured at amortized cost is initially recognized at fair value, plus any directly attributable transaction costs. These assets are subsequently measured at amortized cost using the effective interest method. The amortized cost is reduced by impairment losses. Interest income, foreign exchange gains and losses, and impairment loss, are recognized in profit or loss. Any gain or loss on derecognition is recognized in profit or loss.

• 2) Fair value through other comprehensive income (FVOCI)

A debt investment is measured at FVOCI 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 achieved by both collecting contractual cash flows and selling financial assets; 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.

Some accounts receivables are held within a business model whose objective is achieved by both collecting contractual cash flows and selling by the Company, therefore, those receivables are measured at FVOCI. However, they are included in the “ accounts receivables” line item.

(Continued)

13

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

On initial recognition of an equity investment that is not held for trading, the Company may irrevocably elect to present subsequent changes in the investment’ s fair value in other comprehensive income. This election is made on an instrument-by-instrument basis.

Debt investments at FVOCI are subsequently measured at fair value. Interest income calculated using the effective interest method, foreign exchange gains and losses and impairment are recognized in profit or loss. Other net gains and losses are recognized in other comprehensive income. On derecognition, gains and losses accumulated in other comprehensive income are reclassified to profit or loss.

Equity investments at FVOCI are subsequently measured at fair value. Dividends are recognized as income in profit or loss unless the dividend clearly represents a recovery of part of the cost of the investment. Other net gains and losses are recognized in other comprehensive income and are never reclassified to profit or loss.

Dividend income is recognized in profit or loss on the date on which the Company’s right to receive payment is established, which in the case of quoted securities is normally the ex-dividend date.

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

All financial assets not classified as amortized cost or FVOCI 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.

Financial assets in this category are measured at fair value at initial recognition. Attributable transaction costs are recognized in profit or loss as incurred. Subsequent changes that are measured at fair value, which take into account any dividend and interest income, are recognized in profit or loss.

• 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, financial assets measured at amortized costs, notes and accounts receivable, other receivable and guarantee deposit paid), accounts receivable measured at FVOCI and contract assets.

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.

(Continued)

14

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

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 30 days past due.

The Company considers a financial asset to be in default when the financial asset is more than 90 days past due or the debtor is unlikely to pay its credit obligations to the Company in full.

The Company considers a debt security to have low credit risk when its credit risk rating is equivalent to the globally understood definition of ‘ investment grade which is considered to be BBB- or higher per Standard & Poor’s, Baa3 or higher per Moody’s or twA or higher per Taiwan Ratings’.

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

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

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

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

At each reporting date, the Company assesses whether financial assets carried at amortized cost 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 90 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;

(Continued)

15

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

• ‧ 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 Company recognizes the amount of expected credit losses (or reversal) in profit or loss.

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 instruments

• 1) Classification of debt or equity

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

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.

(Continued)

16

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

3) Compound financial instruments

Compound financial instruments issued by the Company comprise convertible bonds that can be converted to ordinary shares at the option of the holder, when the number of shares to be issued is fixed and does not vary with changes in fair value.

The liability component of compound financial instruments is initially recognized at the fair value of a similar liability that does not have an equity conversion option. The equity component is initially recognized at the difference between the fair value of the compound financial instrument as a whole and the fair value of the liability component. Any directly attributable transaction costs are allocated to the liability and equity components in proportion to their initial carrying amounts.

Subsequent to initial recognition, the liability component of a compound financial instrument is measured at amortized cost using the effective interest method. The equity component of a compound financial instrument is not remeasured.

Interest related to the financial liability is recognized in profit or loss.

On conversion at maturity, the financial liability is reclassified to equity and no gain or loss is recognized.

4) Financial liabilities

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

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

5) 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.

(Continued)

17

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

6) 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.

• (iii) Derivative financial instruments and hedge accounting

The Company holds derivative financial instruments to hedge its foreign currency and interest rate exposures. Embedded derivatives are separated from the host contract and accounted for separately if the host contract is not a financial asset and certain criteria are met. Derivatives are initially measured at fair value. Subsequent to initial recognition, derivatives are measured at fair value, and changes therein are generally recognized in profit or loss.

(g) Inventories

Inventories are measured at the lower of cost and net realizable value. The cost of inventories is based on the weighted-average-cost principle and includes expenditure incurred in acquiring the inventories, production or transition costs, and other costs incurred in bringing them to their present location and condition.

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 subsidiaries

The subsidiaries in which the Company holds controlling interest are accounted for using equity method in the parent-company-only financial statements. Under equity method, the net income, other comprehensive income and equity in the parent-company-only financial statements are the same as those attributable to the owners of parent in the consolidated financial statements.

Changes in the Company's ownership of subsidiaries which have not resulted in the loss of control are treated as equity transactions with the owner.

(i) Property, plant and equipment

• (i) Recognition and measurement

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

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

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

(Continued)

18

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

(ii) Subsequent expenditure

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

• (iii) Depreciation

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

Land is not depreciated.

The estimated useful lives for the current and comparative periods are as follows:

• 1) Buildings: 59 years

• 2) Transportation equipment: 5~6 years

• 3) Machinery equipment: 1~6 years

• 4) Office and other equipment: 1~7 years

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

(j) 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 assessed periodically and is reduced by impairment losses, if any, and adjusted for certain remeasurements of the lease liability.

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

(Continued)

19

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

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

• 1) fixed payments, including in-substance fixed payment;

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

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

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

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

• 3) there is any lease modifications in lease subject, scope of the lease or other terms.

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

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

The Company 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 shortterm leases and leases of low-value assets, including part of offices and transportation equipment. 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.

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

(Continued)

20

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

(k) Intangible assets

• (i) Other intangible assets

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. Computer software costs are amortized, on the average, by 1to 3 years.

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

(l) Impairment of non-financial assets

At each reporting date, the Company reviews the carrying amounts of its non-financial assets (other than inventories, contract assets and 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.

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.

The recoverable amount of an asset or CGU is the greater of its value in use and its fair value less costs to sell. If the recoverable amount of an asset is less than its carrying amount, the carrying amount of the asset shall be reduced to its recoverable amount. That reduction is an impairment loss. An impairment loss shall be recognized immediately in profit or loss.

(m) Revenue recognition

• (i) 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.

(Continued)

21

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

1) Sale of goods

The Company sells electronic components and computer peripherals to customers. 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 Company has objective evidence that all criteria for acceptance have been satisfied.

The Company often offers commercial discounts and volume discounts to its customers. Revenue from these sales is recognized based on the price specified in the contract, net of the estimated volume discounts. Accumulated experience is used to estimate the discounts, using the expected value method, and revenue is only recognized to the extent that it is highly probable that a significant reversal will not occur. A Refund liability is recognized for expected discounts payable to customers in relation to sales made at the end of the reporting period.

For certain contracts that permit a customer to return products, revenue would not be recognized for the products expected to be returned. In addition, the Company recognized a refund liability for these contracts and an asset (and corresponding adjustment to cost of sales) for its right to recover products from customers on settling the refund liability.

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) Commissions

For every specific product or service which the Company promises to provide to customers, the Company should determine whether it is a principal or an agent. The Company is an agent when the other party joins to provide products or services to the customers, and the performance obligation of the Company is arranged by the other party as well. If the Company is an agent, the revenue will be recognized as the net amount from receivables of the products or services provided and payments to the other party; or be recognized based on the commission agreed upon in the contract.

3) Financing components

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

(Continued)

22

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

(n) 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

A defined benefit plan is a post-employment benefit plan other than a defined contribution plan. The Company’ s net obligation in respect of the defined benefit pension plans is calculated separately for each plan by estimating the amount of future benefit that employees have earned in return for their service in the current and prior periods; that benefit is discounted to determine its present value. The fair value of any plan assets are deducted. The discount rate is the yield at the reporting date on government bonds that have maturity dates approximating the terms of the Company’s obligations and that are denominated in the same currency in which the benefits are expected to be paid.

The calculation is performed annually by a qualified actuary using the projected unit credit method. When the calculation results in a benefit to the Company, the recognized asset is limited to the total of the present value of the economic benefits available in the form of any future refunds from the plan or reductions in the future contributions to the plan. In order to calculate the present value of the economic benefits, consideration is given to any minimum funding requirements that apply to any plan in the Company. An economic benefit is available to the Company if it is realizable during the life of the plan, or on the settlement of the plan liabilities.

When the benefits of a plan are improved, the expense of the increased benefit relating to past service by employees is recognized immediately in profit or loss.

Remeasurements of the net defined benefit liability (asset), which comprise (1) actuarial gains and losses, (2) the return on plan assets (excluding interest) and (3) the effect of the asset ceiling (if any, excluding interest), are recognized immediately in other comprehensive income. The Company can reclassify the amounts recognized in other comprehensive income to retained earnings or other equity. If the amounts recognized in other comprehensive income are transferred to other equity, they shall not be reclassified to profit or loss or recognized in retained earnings in a subsequent period.

The Company recognizes gains or losses on the curtailment or settlement of a defined benefit plan when the curtailment or settlement occurs. The gain or loss on curtailment comprises any resulting change in the fair value of plan assets and the change in the present value of the defined benefit obligation.

(Continued)

23

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

(iii) Termination benefits

Termination benefits are recognized as an expense when the Company is demonstrably committed, without realistic possibility of withdrawal, to a formal detailed plan to either terminate employment before the normal retirement date, or to provide termination benefits as a result of an offer made to encourage voluntary redundancy. Termination benefits for voluntary redundancies are recognized as an expense if the Company has made an offer of voluntary redundancy, it is probable that the offer will be accepted, and the number of acceptances can be estimated reliably. If benefits are payable more than 12 months after the reporting period, then they are discounted to their present value.

(iv) Short-term employee benefits

Short-term employee benefit obligations are measured on an undiscounted basis and are expensed as the related service is provided.

A liability is recognized for the amount expected to be paid under short-term cash bonus or profit-sharing plans 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.

(o) Share-based payment

The grant-date fair value of equity-settled share-based payment arrangements granted to employees is generally recognized as an expense, with a corresponding increase in equity, over the vesting period of the awards. The amount recognized as an expense is adjusted to reflect the number of awards for which the related service and non-market performance conditions are expected to be met, such that the amount ultimately recognized is based on the number of awards that meet the related service and non-market performance conditions at the vesting date.

For share-based payment awards with non-vesting conditions, the grant-date fair value of the sharebased payment is measured to reflect such conditions and there is no true-up for differences between expected and actual outcomes.

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

(p) Income Taxes

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

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

(Continued)

24

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

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, and reflect uncertainty related to income taxes, (if any).

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

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

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

• 1) the same taxable entity; or

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

The surtax on unappropriated earnings is recoded as current tax expense in the following year after the resolution to appropriate retained earnings is approved in a stockholders’ meeting.

(Continued)

25

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

(q) Earnings per share

The Company discloses the Company’s basic and diluted earnings per share attributable to ordinary equity holders of the Company. The calculation of basic earnings per share is based on the profit attributable to the ordinary shareholders of the Company divided by the weighted-average number of ordinary shares outstanding. The calculation of diluted earnings per share is based on the profit attributable to ordinary shareholders of the Company, divided by the weighted-average number of ordinary shares outstanding after adjustment for the effects of all dilutive potential ordinary shares, such as convertible bonds and employee compensation.

(r) Operating segments

The operating segment information is disclosed within the consolidated financial statements but not disclosed in the parent company only financial statement.

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

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

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

There are no critical judgments in applying accounting policies that have significant effect on amounts recognized in the financial statements.

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

(a) 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 normal consumption, obsolescence on 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. Please refer to note (6)(f) for further description of the valuation of inventories.

(Continued)

26

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

(6) Explanation of significant accounts

(a) Cash and cash equivalents

December 31, 2021 Cash on hand $ 134 Checking accounts and demand deposits 1,553,244 $ 1,553,378	December 31, 2020
	134 1,479,324
	1,479,458

Please refer to note (6)(u) for the exchange risk, interest rate risk and the sensitivity analysis of the financial assets of the Company.

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

December 31, 2021 Current financial assets measured at fair value through profit or loss: Non-derivative financial assets Stock listed on domestic markets $ 607 Non-current financial assets at fair value through profit or loss: Convertible bonds embedded options $ 375 Non-current financial liabilities at fair value through profit or loss: Convertible bonds embedded options $ -	December 31, 2020 624 - 9,600

As of December 31, 2021 and 2020, the Company did not provide any financial assets and liabilities at fair value through profit or loss as collateral for its loans.

(c) Financial assets at fair value through other comprehensive income – non-current

December 31, 2021 Equity investments at fair value through other comprehensive income: Domestic emerging market stock $ 516 Domestic unlisted stock 16,941 Foreign unlisted stock 22,608 $ 40,065	December 31, 2020 4,348 17,866 22,608
	44,822

(i) Equity investments at fair value through other comprehensive income

The Company designated the investments shown above as equity securities at fair value through other comprehensive income because these equity securities represent those investments that the Company intends to hold for long-term strategic purposes.

(Continued)

27

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

In September 2021, the Company sold all of its shares in Feature Integration Technology Inc., which was measured at fair value through other comprehensive income, at $7,451. The cumulative gains on disposal amounted to $764, which had been transferred to retained earnings from other equity. No strategic investments were disposed of for the year ended December 31, 2020, and there were no transfers of any cumulative gain or loss within equity relating to these investments.

• (ii) The investee companies, Paradigm Venture Capital Corporation (PVC Corp.) and Paradiam I Venture Capital Company (Paradigm I) classified as financial assets at fair value though other comprehensive income – non-current, refunded capital in 2021 and 2020, and the Company recorded the receivable amounting to $405 and $1,979, respectively. The amounts have been fully received.

• (iii) Shin Kong Global Venture Capital Corp., the Company’s investee recognized as non-current financial assets at fair value through other comprehensive income, reduced its capital to offset accumulated deficits in 2021. The number of shares held by the Company decreased from 3,000 thousand shares to 960 thousand shares.

• (iv) For credit risk and market risk, please refer to note (6)(u).

• (v) As of December 31, 2021 and 2020, the Company did not provide any financial assets at fair value through other comprehensive income as collateral for its loans.

• (d) Notes and accounts receivable

December 31, 2021 Notes receivable $ 22,710 Accounts receivable-measured as amortized cost 5,172,582 Accounts receivable-fair value through other comprehensive income 1,443,573 6,638,865 Less: Loss allowance (53,680) $ 6,585,185	December 31, 2020 14,284 3,430,740 1,429,348 4,874,372 (60,964) 4,813,408

The Company has assessed a portion of its accounts receivable that was held within a business model whose objective is achieved by selling financial assets; therefore, such accounts receivable was measured at fair value through other comprehensive income.

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, trade receivables have been grouped based on shared credit risk characteristics of the customer's ability to pay all due amounts in accordance with contract terms, as well as incorporated forward looking information, including macroeconomic and relevant industry information. The loss allowance provision was determined as follows:

(Continued)

28

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

Credit rating Carrying amount Listed company (assessed by group) Level A $ 4,009,216 Level B 1,150,808 Unlisted company 1,436,928 (Related-party) subsidiaries and sub-subsidiaries 41,913 $ 6,638,865 Credit rating Carrying amount Listed company (assessed by group) Level A $ 2,754,068 Level B 988,347 Unlisted company 1,118,185 (Related-party) subsidiaries and sub-subsidiaries 13,772 $ 4,874,372		December	31, 2021
	Carrying amount $ 4,009,216 1,150,808 1,436,928 41,913 $ 6,638,865	Expected credit loss rate 0.52% 1.40% 1.16% -% December	Loss allowance provision Credit impaired 20,909 No 16,108 No 16,663 No - No 53,680 31, 2020
		Expected credit loss rate 0.85% 0.96% 2.42% -%	Loss allowance provision Credit impaired 23,534 No 9,456 No 27,060 No - No 60,050

The aging analysis of notes and accounts receivable were determined as follows:

December 31, 2021 Not past due $ 6,452,984 Overdue less than 90 days 181,547 Overdue 91 to 180 days 2,595 Overdue more than 181 days 1,739 $ 6,638,865	December 31, 2020
	4,685,025 187,117 1,836 394
	4,874,372

(Continued)

29

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

For the years ended December 31, 2021 and 2020, the movement in the allowance for notes and accounts receivable were as follows:

Balance at January 1 Impairment loss recognized (reversed) Balance at December 31	For the years ended December 31,	For the years ended December 31,
	2021 $ 60,964 (7,284) $ 53,680	2020
		35,874 25,090
		60,964

The Company has entered into accounts receivable factoring agreements with banks. According to the factoring agreement, the Company does not bear the loss if the account debtor does not have the ability to make payments upon the transfer of the accounts receivable factoring. The Company has not provided other guarantee except for the promissory notes, which have the same amount with the factoring used as the guarantee for the sales return and discount. The Company received the proceeds from the discounted accounts receivable determined by agreement on the selling date. Interest is calculated and paid based on the duration and interest rate of the agreement, and the remaining amounts are received when the accounts receivable are paid by the customers. In addition, the Company has to pay a service charge based on a certain rate.

The Company derecognized the above trade receivables because it has transferred substantially all of the risks and rewards of their ownership, and it does not have any continuing involvement in them. The amounts receivable from the financial institutions were recognized as “other receivables” upon the derecognition of those trade receivables.

As of December 31, 2021 and 2020, the Company sold its trade receivable without recourse as follows:

December 31, 2021

Purchaser	Amount Derecognized $ 3,076,785	Amount Paid Advanced Unpaid 2,771,749 - December 31, 2020	Amount Paid Advanced Unpaid 2,771,749 - December 31, 2020	Amount Recognized in Other Receivables 305,036	Range of Interest Rate Significant Transferring Terms 0.53%~1.14% None
Financial institutions
Purchaser	Amount Derecognized $ 2,776,227	Amount Paid 2,500,209	Advanced Unpaid -	Amount Recognized in Other Receivables 276,018	Range of Interest Rate Significant Transferring Terms 0.64%~1.37% None
Financial institutions

As of December 31, 2021 and 2020, the Company did not provide any receivables as collaterals for its loans.

Please refer to note (6)(u) for further credit risk information.

(Continued)

30

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

(e) Other receivables

December 31, 2021 Other receivables－the receivables of the Company as an agent (note (6)(s)) $ - Other receivables－accounts receivable factored 305,036 Other receivables－related parties 84,941 Tax refund 32,623 Overdue receivable 22,016 Others 11,966 456,582 Less: Loss allowance (22,016) $ 434,566	December 31, 2020 580,597 276,018 73,204 28,037 22,016 322 980,194 (22,016) 958,178

For the years ended December 31, 2021 and 2020, the movement in the allowance for other receivables were as follows:

Balance at January 1 Amounts written off Balance at December 31	2021 $ 22,016 - $ 22,016	2020 22,150 (134) 22,016

As of December 31, 2021 and 2020, the Company did not provide any other receivables as collaterals for its loans.

For further credit risk information, please refer to note (6)(u).

(f) Inventories

December 31, 2021 Merchandise inventories $ 2,813,896 Goods in transit 220,206 $ 3,034,102 The details of inventory-related losses and expenses were as follows: 2021 Inventory valuation loss and obsolescence (Gain from price recovery of inventory) $ (98,339) Loss on scrapping of inventory and others 2,997 $ (95,342)	December 31, 2020 2,760,252 178,935 2,939,187 2020 (267,317) 1,202 (266,115)

(Continued)

31

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

The aforementioned gain from price recovery is due to the fact that part of the inventories previously recognized as loss on valuation have been sold or scrapped, resulting in the disappearance of the reason that the net realized value of the inventory is lower than the cost, the net realizable value recovery was recognized as the deduction of operating costs.

As of December 31, 2021 and 2020, the Company did not provide any inventories as collaterals for its loans.

• (g) Investments accounted for using equity method

Subsidiaries	December 31, 2021 $ 5,624,937	December 31, 2020
		4,106,990

• (i) For the financial statements of the subsidiaries, please refer to the consolidated financial statements.

• (ii) For the years ended December 31, 2021 and 2020, the profits of the subsidiaries and related parties recognized by the Company were $1,354,664 and $322,024, respectively.

• (iii) The Company subscribed for the cash increase stocks of its subsidiaries, Weikeng International Company Limited (WKI), with the amount of $277,300 and 270,720, respectively, with the shareholding ratio of 100%.

• (iv) The relevant information on major foreign currency equity investments of the reporting date is as follows:

USD	December 31, 2021	December 31, 2021	December 31, 2021	December 31, 2020 Foreign currency Exchange rate TWD 143,291 28.480 4,080,925	December 31, 2020 Foreign currency Exchange rate TWD 143,291 28.480 4,080,925
	Foreign currency $ 202,276	Exchange rate 27.68	TWD		Exchange rate TWD 28.480 4,080,925
			5,599,006

• (v) As of December 31, 2021 and 2020, the Company did not provide any investments accounted for using equity method as collaterals for its loan.

(h) Property, plant and equipment

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

Cost or deemed cost: Balance on January 1, 2021 Additions Disposals Balance on December 31, 2021 Balance on January 1, 2020 Additions Disposals Balance on December 31, 2020	Land $ 60,526 - - $ 60,526 $ 60,526 - - $ 60,526	Buildings and construction 48,540 - - 48,540 48,540 - - 48,540	Transportation equipment 8,516 - - 8,516 8,516 - - 8,516	Machinery equipment 15,590 1,330 (154) 16,766 14,741 849 - 15,590	Office and other facilities equipment Total 70,264 203,436 1,027 2,357 (270) (424) 71,021 205,369 72,133 204,456 643 1,492 (2,512) (2,512) 70,264 203,436 (Continued)	Total 203,436 2,357 (424)
						205,369
						204,456 1,492 (2,512)
						203,436

32

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

Land Depreciation and impairment loss: Balance on January 1, 2021 $ - Depreciation for the year - Disposals - Balance on December 31,2021 $ - Balance on January 1,2020 $ - Depreciation for the year - Disposals - Balance on December 31, ,2020 $ - Book value: Balance on December 31, 2021 $ 60,526 Balance on December 31, 2020 $ 60,526 Balance on January 1, 2020 $ 60,526	Buildings and construction 20,311 809 - 21,120 19,502 809 - 20,311 27,420 28,229 29,038	Transportation equipment 7,195 661 - 7,856 6,450 745 - 7,195 660 1,321 2,066	Machinery equipment 12,720 1,100 (154) 13,666 11,832 888 - 12,720 3,100 2,870 2,909	Office and other facilities equipment 66,658 2,294 (270) 68,682 65,887 3,283 (2,512) 66,658 2,339 3,606 6,246	Total 106,884 4,864 (424) 111,324 103,671 5,725 (2,512) 106,884 94,045 96,552 100,785

For management purpose, the Company has leased its own office building and rented other office building for operation. The purpose of this leasing was not for earning rental income or capital appreciation, so it is classified as property, plant, and equipment.

As of December 31, 2021 and 2020, the Company did not provide any property, plant, and equipment as collaterals for its loans.

(i) Right-of-use assets

The Company leases many assets including buildings and transportation equipment. Information about leases for which the Company as a lessee was presented below:

Buildings Cost: Balance on January 1, 2021 $ 187,109 Additions 66,010 Reductions (46,293) Balance on December 31, 2021 $ 206,826 Balance on January 1, 2020 $ 175,894 Additions 11,215 Balance on December 31, 2020 $ 187,109 Accumulated depreciation: Balance on January 1, 2021 $ 100,490 Depreciation 57,878 Reductions (46,293) Balance on December 31, 2021 $ 112,075 Balance on January 1, 2020 $ 50,268 Depreciation 50,222 Balance on December 31, 2020 $ 100,490	Transportation equipment 7,548 - (3,653) 3,895 7,548 - 7,548 5,515 1,690 (3,653) 3,552 2,988 2,527 5,515	Total 194,657 66,010 (49,946) 210,721 183,442 11,215 194,657 106,005 59,568 (49,946) 115,627 53,256 52,749 106,005

(Continued)

33

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

Buildings Carrying amount: Balance on December 31, 2021 $ 94,751 Balance on December 31, 2020 $ 86,619 Balance on January 1, 2020 $ 125,626	Transportation equipment 343 2,033 4,560	Total
		95,094
		88,652
		130,186

(j) Short-term borrowings

The details of Company’s short-term borrowings were as follows:

December 31, 2021 Unsecured loans $ 3,992,844 Short-term notes and bills payable, net 918,502 $ 4,911,346 Unused short-term credit lines $ 3,333,763 Range of interest rates 0.52%~1.02%	December 31, 2020 3,978,260 668,846 4,647,106 2,467,301 0.52%~1.12%

(i) Issuance and repayment of borrowings

The Company’s additional amounts in loans for the years ended December 31, 2021 and 2020 were $20,008,422 and $21,781,774, respectively, with maturities from January to November, 2022 and from January to September 2021, respectively; and the repayments were $19,744,182 and $21,880,337, respectively.

(ii) For information on the Company’ s interest risk, exchange rate, foreign currency risk and liquidity risk, please refer to note (6)(u).

(k) Other payables

December 31, 2021 Other payable — the payables of the Company’s as an agent (note(6)(s)) $ - Accrued expenses 109,630 Bonus payable 149,974 Remuneration to employees and directors 239,390 Interest payable 6,144 $ 505,138	December 31, 2020 632,478 106,178 105,486 98,053 7,388 949,583

The accrued expenses include import and export fees, processing expense, professional services fees, pension, insurance, and payable for unused vacation time etc.

(Continued)

34

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

(l) Convertible bonds payable

• (i) Non-guaranteed convertible bonds:

December 31, 2021 Aggregate principal amount $ 1,000,000 Bond discount (7,564) Cumulative converted amount (866,100) 126,336 Less: Convertible bonds payable – could be repaid within one year - Bonds payable at end of period $ 126,336 Embedded derivative – call and put options Included in non-current financial liabilities at fair value through profit or loss $ - Included in non-current financial assets at fair value through profit or loss $ 375 Equity component – conversion options (included in capital surplus – conversion options) $ 7,634

December 31, 2020 1,000,000 (70,678) - 929,322 - 929,322 9,600 - 57,014

(ii) The Company issued the fifth domestic unsecured convertible bonds, with a face value of $1,000,000 on November 3, 2020. The Company separated its equity and debt components as follows:

The compound interest present values of the convertible bonds’ face value at issuance The embedded derivative liabilities at issuance – redemption rights The equity components at issuance The total amounts of the convertible bonds at issuance	The Fifth $ 931,700 11,000 57,300 $ 1,000,000

The equity components were accounted for as capital surplus – conversion options. In accordance with IFRSs, the face value of the fifth domestic unsecured convertible bonds was allocated at $286 to the capital surplus – conversion options.

The gain or loss resulting from changes in fair value of the embedded derivative liabilities were gains of $7,927 and $1,400 for the years ended December 31, 2021 and 2020, respectively.

The effective interest rates of the fifth convertible bonds were 1.53%. The annual interest expenses on convertible bonds payable for the years ended December 31, 2021 and 2020, were $11,374 and $2,280, respectively.

(Continued)

35

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

(iii) The significant terms of the fifth convertible bonds were as follows:

• 1) Duration: five years (November 3, 2020 to November 3, 2025)

• 2) Interest rate: 0%

• 3) Redemption at the option of the Company: The Company may redeem the bonds under the following circumstances:

• a) Within the period between three months after the issuance date and 40 days before the last convertible date, the Company may redeem the bonds at their principal amount if the closing price of the Company’s common stock on the Taiwan Stock Exchange for a period of 30 consecutive trading days has been 30% more than the conversion price in effect on each such trading day.

• b) If at least 90% of the principal amount of the bonds has been converted, redeemed, or purchased and cancelled, the Company may redeem the bonds at their principal amount within the period between three months after the issuance date and 40 days before the last convertible date.

• 4) Redemption at the option of the bondholders:

The bondholders have the right to request the Company to repurchase the bonds at a price equal to the face value, plus, an accrued premium three and four years after the issuance date. The annual interest rate for the redemption, both three and four years after the issuance date, is 0.5%.

• 5) Terms of conversion:

• a) Bondholders may opt to have the bonds converted into the common stock of the Company from February 4, 2021 to November 3, 2025.

• b) Conversion price: NTD18.92 per share. Starting from August 1, 2021, the adjusted conversion price due to the distribution of retained earnings for 2020 was $17.91.

(m) Lease liabilities

Lease liabilities
Current Non-current	December 31, 2021 $ 58,825 $ 36,795	December 31, 2020
		49,297
		39,788

For the maturity analysis, please refer to note (6)(u) of financial instruments.

The amounts recognized in profit or loss were as follows:

The amounts recognized in profit or loss were as follows:
Interest on lease liabilities Expenses relating to short-term leases	2021	2020
	$ 1,050 $ 2,050	1,746
		1,095

(Continued)

36

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

The amounts recognized in the statement of cash flows for the Company was as follows:

Total cash outflow for leases	2021 $ 62,546	2020
		55,712

• (i) Real estate leases

The Company leases buildings for its office space and warehouses. The leases of office space typically run for a period of 1 to 5 years, and warehouses for 1 to 4 years. Some leases include an option to renew the lease for an additional period of the same duration after the end of the contract term.

Some leases of office buildings contain extension or cancellation options exercisable by the Company before the end of the non-cancellable contract period. These leases are negotiated and monitored by local management, and accordingly, contain a wide range of different terms and conditions. The extension options held are exercisable only by the Company and not by the lessors. In which leasee is not reasonably certain to use an optional extended lease term, payments associated with the optional period are not included within lease liabilities.

(ii) Other leases

The Company leases transportation equipment and parking space with lease terms of one year. These leases are short-term. The Company has elected not to recognize right-of-use assets and lease liabilities for these leases.

－ (n) Operating lease As a lessor

As of December 31, 2021 and 2020, the future minimum lease receivables under non-cancellable leases are as follows:

Less than one year Between one and five years	December 31, 2021 $ 5,049 11,897 $ 16,946	December 31, 2020
		1,474 1,554
		3,028

For the years ended December 31, 2021 and 2020, the rental revenue under operating leases were $5,501 and $5,366, respectively.

The department office leases were combined leases of land and buildings. The Company has classified these leases as operating leases, because it does not transfer substantially all of the risks and rewards incidental to the ownership of the assets.

(Continued)

37

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

(o) Employee benefits

(i) Defined benefit plans

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

Present value of defined benefit obligations Fair value of plan assets Net defined benefit liabilities	December 31, 2021 $ 242,018 (119,796) $ 122,222	December 31, 2020 230,850 (109,876) 120,974

The Company makes defined benefit plan contributions to the pension fund account at the Bank of Taiwan that provides pensions for employees upon retirement. The plans entitle a retired employee to receive an payment based on years of service and average 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 Labor Funds, Ministry of Labor. With regard to the utilization of the funds, minimum earnings shall be no less than the earnings attainable from two-year time deposits with interest rates offered by local banks.

The Company’ s Bank of Taiwan labor pension reserve account balance amounted to $119,796 at the end of the reporting period. 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 Labor Pension Fund Supervisory Committee.

2) Movements in present value of the defined benefit obligations

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

Defined benefit obligation at January 1 Current service costs and interest Remeasurement in net defined benefit liability (assets) Benefits paid by the plan Defined benefit obligation at December 31	2021 $ 230,850 1,762 9,406 - $ 242,018	2020 227,394 2,664 1,000 (208) 230,850

(Continued)

38

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

• 3) Movements of defined benefit plan assets

The movements in defined benefit plan assets for the Company were as follows:

Fair value of plan assets at January 1 Contributions made Expected return on plan assets Remeasurement of the net defined benefit liability (assets) Fair value of plan assets at December 31	2021 $ 109,876 7,994 665 1,261 $ 119,796	2020
		98,387 7,630 948 2,911
		109,876

• 4) Expenses recognized in profit or loss

The expenses recognized in profit or loss for the Company were as follows:

2021 Service cost $ 366 Net interest on net defined benefit liability (assets) 1,396 Expected return on plan assets (665) $ 1,097 Selling expenses $ 801 Administrative expenses 296 $ 1,097	2020 464 2,200 (948) 1,716 1,233 483 1,716

• 5) Actuarial assumptions

The following are the Company’s principal actuarial assumptions:

Discount rate Future salary increases	December 31, 2021 December 31, 2020 % 0.625 % 0.625 % 3.000 % 3.000

The expected allocation payment made by the Company to the defined benefit plans for the one year period after the reporting date was $8,358.

The weighted-average duration of the defined benefit obligation is 13.27 years.

(Continued)

39

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

6) Sensitivity analysis

As of December 31, 2021 and 2020, if the actuarial assumptions had changed, the impact on the present value of the defined benefit obligation shall be as follows:

December 31, 2021 Discount Rate Future salary increases December 31, 2020 Discount Rate Future salary increases	Impact on the defined benefit obligation Increase 0.25% Decrease 0.25% $ (5,368) 5,572 5,324 (5,153) (5,610) 5,820 5,573 (5,401)

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 2021 and 2020.

(ii) Defined contribution plans

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

The Company recognized the pension costs under the defined contribution method amounting to $22,841 and $22,081 for the years ended December 31, 2021 and 2020, respectively. Payment was made to the Bureau of Labor Insurance.

(Continued)

40

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

(p) Income taxes

(i) Income tax expenses

• 1) The components of income tax in the years 2021 and 2020 were as follows:

2021 Current tax expense Current period $ 130,002 Adjustment for prior periods (1,608) 128,394 Deferred tax expense Origination and reversal of temporary differences 304,973 Income tax expense $ 433,367	2020 64,395 (4,209) 60,186 122,987 183,173

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

Items that will not be reclassified subsequently to profit or loss: Remeasurement from defined benefit plans Items that may be reclassified subsequently to profit or loss: Exchange differences on translation of foreign financial statements	2021 $ (1,629) $ (22,805)	2020 382 (34,471)

• 3) The reconciliation of income tax and profit before tax for 2021 and 2020 was as follows:

Profit before tax Income tax using the Company’s legal tax rate Net investment income and tax-exempt income Under (Over) provision in prior periods and others Income tax expense	2021 $ 2,154,507 430,901 (42) 2,508 $ 433,367	2020
		882,482 176,496 (8) 6,685 183,173

(Continued)

41

WEIKENG INDUSTRIAL CO., LTD. Notes to the 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, 2021 $ 19,814	December 31, 2020
		19,814

The Company assessed that the income tax deductible items which can be offsetted with the taxable income are not probable to be utilized. Hence, such temporary differences are not recognized under deferred tax assets.

• 2) Recognized deferred tax assets and liabilities

The changes in the amount of deferred tax assets and liabilities for 2021 and 2020 were as follows:

Defined Benefit Plans Deferred tax assets: Balance at January 1, 2021 $ 2,883 Recognized in profit or loss - Recognized in other comprehensive income 1,629 Balance at December 31, 2021$ 4,512 Balance at January 1, 2020 $ 3,265 Recognized in profit or loss - Recognized in other comprehensive income (382) Balance at December 31, 2020$ 2,883	Exchange differences on translation 70,547 - 22,805 93,352 36,076 - 34,471 70,547	Bad debt expense over the tax limitation 6,803 (4,986) - 1,817 10,860 (4,057) - 6,803	Loss on valuation of inventory 44,510 (19,668) - 24,842 98,377 (53,867) - 44,510	Allowance for sales discount 50,592 9,834 - 60,426 37,676 12,916 - 50,592	Others 26,408 (1,075) - 25,333 28,528 (2,120) - 26,408	Total 201,743 (15,895) 24,434 210,282 214,782 (47,128) 34,089 201,743

(Continued)

42

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

Temporary difference from subsidiary investment Deferred tax liabilities: Balance at January 1,2021 $ 394,474 Recognized in profit or loss 270,960 Balance at December 31, 2021 $ 665,434 Balance at January 1, 2020 329,964 Recognized in profit or loss 64,510 Balance at December 31,2020 $ 394,474	Others 13,192 18,118 31,310 1,843 11,349 13,192	Total
		407,666 289,078
		696,744
		331,807 75,859
		407,666

(iii) The income tax return of the Company was authorized through 2019.

(q) Capital and other equities

As of December 31, 2021, the number of authorized ordinary shares was 550,000 shares (2020: 450,000 shares) with par value of $10 per share. The total value of authorized ordinary shares was amounted to $5,500,000 (2020: $4,500,000). As of that date, 415,934 shares (2020: 367,751 shares) of ordinary shares amounting to $4,159,342 (2020: $3,677,513) were issued. All issued shares were paid up upon issuance.

(i) Common stock

For the year ended December 31, 2020, 48,183 thousand new common shares, with a par value of $10, amounting to $481,829, were issued due to the conversion of convertible bonds. As of reporting date, the related registration procedures for 48,021 shares were completed.

(ii) Capital surplus

Balance on capital surplus of the Company were as follows:

December 31, 2021 Additional paid in capital $ 1,229,711 Treasury share transactions 37,617 Donation from shareholders 712 Convertible bonds–conversion options 7,634 Others 253 $ 1,275,927	December 31, 2020
	845,753 37,617 712 57,014 253
	941,349

For the year ended December 31, 2020, the capital surplus deriving from those convertible bonds, which were converted to common stock, amounted to $334,578. (Including the capital surplus-conversion options transferred to the capital surplus-additional paid-in capital of $49,380).

(Continued)

43

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

In accordance with the Company Act, realized capital reserves can be utilized for issuing new shares or being distributed as cash dividends only after offsetting losses. The aforementioned capital reserves include share premiums and donation gains. In accordance with the Securities Offering and Issuance Guidelines, the amount of capital reserves to be utilized for issuing new shares shall not exceed 10 percent of paid-in capital every year. Capital reserve increased by transferring paid-in capital in excess of par value may not be capitalized until the fiscal year after the competent authority for company registrations approves registration of the capital increase.

(iii) Retained earnings

The Company's Article of Incorporation stipulates that Company's earnings should first be used to pay any taxes, offset the prior years' deficits, be set aside as legal reserve, and then set aside or reverse special reserve, any remaining profit, together with any undistributed retained earnings at the beginning, be distributed according to the distribution plan proposed by the Board of Directors to be submitted during the stockholders’ meeting for approval. Before the distribution of dividends, the Board of Directors shall first take into consideration its profitability, plan of capital expenditure, business expansion and capital, requirements for cash flow, regulations, and degree of dilution of earnings per share in determining the proportion of stock and cash dividends to be paid. After the above appropriations, current and prior-period earnings that remain undistributed will be proposed for distribution by the Board of Directors, and a meeting of shareholders will be held to adopt this resolution. The total distribution shall not be less than 50% of the current distributable earnings, and the cash dividends shall not be less than 20% of the total dividends.

The Company authorize dividends, bonus and the legal reserve and capital surplus in whole or in part be paid in cash based on the resolution of the Board of Directors with over two-thirds directors present and approved by a majority vote of the present directors, then shall be reported to shareholders meeting.

1) Legal reverse

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

2) Special reverse

In accordance with the guidelines of the FSC, net earnings after income taxes, plus any other item recognized in undistributed retained earnings and undistributed prior-period earnings shall be reclassified as a special earnings reserve during earnings distribution. Aforementioned amount equal to the difference between the carry net amount of other reductions from equity and the carrying amount of special reserve. Similarly, a portion of undistributed prior-period earnings shall be reclassified as a special earnings reserve (which does not qualify for earnings distribution) to account for cumulative amount of other reductions from equity pertaining to prior periods. The subsequent reversals of the contra accounts in shareholders' equity shall qualify for additional distributions.

(Continued)

44

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

3) Earnings distribution

The amount for cash dividends on the appropriation of earnings for 2020 and 2019 had been approved during the Board meeting on March 26, 2021 and March 27, 2020, as well as the shareholders’ meeting on July 20, 2021 and June 17, 2020, respectively. The relevant dividend distributions to shareholders were as follows:

Dividends distributed to ordinary shareholders: Cash dividends	2020 Amount per share Total amount $ 1.33341226 494,508	2019 Amount per share Total amount 0.57770670 212,452	2019 Amount per share Total amount 0.57770670 212,452
	Amount per share $ 1.33341226		Total amount
			212,452

On March 25, 2022, the Company's Board of Directors resolved to appropriate the 2021 earnings. These earnings were appropriated as follows:

Dividends distributed to ordinary shareholders Cash dividends	2021	2021
	Amount per share $ 3.05392536	Total amount
		1,270,232

• (r) Earnings per share

• (i) Basic earnings per share

The calculation of basic earnings per share at December 31, 2021 and 2020 was based on the profit attributable to ordinary shareholders of the Company and the weighted average number of ordinary shares outstanding as follows:

• 1) Profit attributable to ordinary shareholders of the Company

2021 Profit attributable to ordinary shareholders of the Company $ 1,721,140 2) Weighted-average number of ordinary shares (thousands) 2021 Weighted-average number of ordinary shares 378,742 2021 3) Basic earnings per share (TWD) $ 4.54	2020
	699,309
	2020
	367,751
	2020
	1.90

(Continued)

45

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

(ii) Diluted earnings per share

The calculation of diluted earnings per share on December 31, 2021 and 2020 was based on profit attributable to ordinary shareholders of the Company, and the weighted average number of ordinary shares outstanding after adjustment for the effects of all dilutive potential ordinary shares calculated as follows.

• 1) Profit attributable to ordinary shareholders of the Company (diluted)

2021 Profit attributable to ordinary shareholders of the Company (basic) $ 1,721,140 Convertible bonds payable 3,447 Profit attributable to ordinary shareholders of the Company (diluted) $ 1,724,587 2) Weighted-average number of ordinary shares (thousand, diluted) 2021 Weighted-average number of ordinary shares (basic) 378,742 Effect of convertible bonds 43,039 Effect of employee stock remuneration 6,818 Weighted-average number of ordinary shares (diluted) on December 31 428,599 2021 3) Diluted earnings per share (TWD) $ 4.02 (s) Revenue from contracts with customers (i) Disaggregation of revenue 2021 Primary geographical markets: Taiwan $ 7,089,380 China 20,559,210 Others 2,316,325 $ 29,964,915 Major products/services lines Chipset/memory components $ 11,162,086 Mixed and other components 18,795,684 Others 7,145 $ 29,964,915	2020
	699,309 880
	700,189
	2020
	367,751 8,376 4,614
	380,741
	2020
	1.84
	2020
	5,614,084 19,978,884 2,113,042
	27,706,010
	12,550,321 15,082,925 72,764
	27,706,010

(Continued)

46

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

For the years ended December 31, 2021 and 2020, the Company was determined in some specific transactions as an agent that the other party sold some merchandises to end-customer by delivering them to the Company. In these cases, the Company did not obtain the control of the merchandises, therefore, the Company recognized the remaining sales amounts which have been offset against the payment to the other party from the transactions; or recognized the commission signed with the other party, as revenue.

For the years ended December 31, 2021 and 2020, the Company was determined as an agent in the aforementioned transactions which revenue amounted to $3,643 and $72,001, respectively. Due to the above transactions, the other receivables amounted to $0 and $580,597 as of December 31, 2021 and 2020, respectively; and the other payables amounted to $0 and $632,478 as of the years then ended respectively. Please refer to note (6)(e) and (6)(k).

(ii) Contract balance

December 31, 2021 Notes and accounts receivable (included related parties) $ 6,638,865 Less: allowance for impairment (53,680) $ 6,585,185 Contract liabilities $ 34,902	December 31, 2020 4,874,372 (60,964) 4,813,408 8,489	January 1, 2020 3,790,318 (35,874) 3,754,444 20,173

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

The amounts of revenue recognized for the years ended December 31, 2021 and 2020 that were included in the contract liability balance at the beginning of the period were $2,640 and $12,920, respectively.

The major change in the balance of contract assets and contract liabilities is the difference between the time frame in the performance obligation to be satisfied and the payment to be received.

(t) Remuneration to employees and directors

The Company’s Articles of Incorporation require that earning shall first be offset against any deficit, then, 6% to 10% of profit before tax (before deducting remuneration to employees and directors) will be distributed as employee remuneration and a maximum of 2.5% will be allocated as directors’ remuneration. Employees who are entitled to receive the above-mentioned employee remuneration, in share or cash, include the employees of the subsidiaries of the Company who meet certain specific requirements. Actual distribution should be determined in the Board of Directors’ meeting, with no less than two-thirds of directors present, and approved by more than half of the directors attending the meeting, then shall be report to the meeting of shareholders.

(Continued)

47

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

For the years ended December 31, 2021 and 2020, the accrued remuneration of the Company's employees were $191,512 and $78,442, as well as directors were $47,878 and $19,611, respectively. These amounts were calculated by using the Company’ s profit before tax for the period before deducting the amount of remuneration to employees and directors, multiplied by the distribution ratio of remuneration to employees and directors under the Company’s articles of Incorporation, and expensed under operating expenses. If the Board of Directors resolved to distribute employees’ remuneration in the form of shares, the numbers of shares to be distributed were calculated based on the closing price of the Company’s ordinary shares one day before the date of the meeting of the Board of Directors.

The amounts, as stated in the financial statements, are identical to those of the actual distributions for 2021 and 2020. Related information would be available at the Market Observation Post System website.

(u) Financial Instruments

• (i) Credit risk

• 1) Exposure to credit risk

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

2) Concentration of credit risk

Because the Company caters to a wide variety of customers and has a diverse market distribution, the Company does not concentrate in any single individual customer. Therefore, there is no significant credit risk of concentration in trade receivable. In order to reduce credit risk, the Company monitors the financial conditions of its customers regularly. However, the Company does not require its customers to provide any collateral.

• 3) Receivables

For credit risk exposure of notes and trade receivables, please refer to note (6)(d).

The amount of other financial assets at amortized cost include other receivables which had been impaired. For the loss allowance provision, please refer to the note (6)(e).

(Continued)

48

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

(ii) Liquidity risk

The following table shows the contractual maturities of financial liabilities, including estimated interest payments.

December 31, 2021 Non-derivative financial liabilities Unsecured loans Short-term notes and bill payable Lease liabilities Accounts payables Other payables Bonds payable December 31, 2020 Non-derivative financial liabilities Unsecured loans Short-term notes and bill payable Lease liabilities Accounts payables Other payables Bonds payable Derivative financial liabilities Convertible bonds payable embedded derivatives	Carrying Amount $ 3,992,844 918,502 95,620 2,900,255 505,138 126,336 $ 8,538,695 $ 3,978,260 668,846 89,085 1,438,566 949,583 929,322 9,600 $ 8,063,262	Contractual cash flows (4,002,108) (920,000) (96,909) (2,900,255) (505,138) (133,900) (8,558,310) (3,986,640) (670,000) (91,188) (1,438,566) (949,583) (1,000,000) - (8,135,977)	Within a year (4,002,108) (920,000) (59,672) (2,900,255) (505,138) - (8,387,173) (3,986,640) (670,000) (51,034) (1,438,566) (949,583) - - (7,095,823)	Over 1 year - - (37,237) - - (133,900) (171,137) - - (40,154) - - (1,000,000) - (1,040,154)

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

(iii) Market risk

1) Currency risk

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

Financial assets Monetary items USD Non-monetary items USD Financial liabilities Monetary items USD	December 31, 2021	December 31, 2021	December 31, 2021	December 31, 2020 Foreign currency Exchange rate TWD	December 31, 2020 Foreign currency Exchange rate TWD
	Foreign currency	Exchange rate	TWD		Exchange rate TWD
	$ 294,173 745 196,128	27.68 27.68 27.68	8,142,724 20,622 5,428,819	257,434 745 172,906	28.480 7,331,728 28.480 21,218 28.480 4,924,379

(Continued)

49

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

2) Currency risk 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, notes and account receivables, other receivables, financial assets at fair value through other comprehensive income, loans and borrowings, notes and accounts payables and other payables that are denominated in foreign currency. A change of 5% in the exchange rate of TWD or USD against foreign currency for the years ended December 31, 2021 and 2020 would have increase (decreased) the other comprehensive income (before tax) $1,031 and $1,061, respectively. For the years ended December 31, 2021 and 2020 would have increased (decreased) the net profit before tax as follows. The analysis is performed on the same basis for both periods.

		2021	2020
USD (against the TWD)
Strengthening 5%	$	135,695	120,367
Weakening 5%		(135,695)	(120,367)

• 3) Exchange gains and losses of monetary items

As the Company deals in diverse foreign currencies, gains or losses on foreign exchange were summarized as a single amount. For the years ended December 31, 2021 and 2020, the foreign exchange gain (loss), including both realized and unrealized, amounted to a gain of $58,442 and $112,975, respectively.

• 4) Equity market price risk

If the price of the fair value of equity instruments (including the stocks listed on domestic market at stock exchange (over-the-counter) market share, domestic emerging market stocks and domestic and foreign unlisted stocks) changed at the report date. (with the same analysis performed for both periods, assuming all other variable factors remain constant), it would have resulted in the change in the comprehensive income as illustrated below.

illustrated below.
Securities prices at reporting date Increasing 5% Decreasing 5%	2021 Other comprehensive income before tax Net income before tax $ 2,003 30 $ (2,003) (30)	2020 Other comprehensive income before tax Net income before tax 2,241 31 (2,241) (31)
	Other comprehensive income before tax $ 2,003 $ (2,003)	Other comprehensive income before tax 2,241 (2,241)
			(31)

(Continued)

50

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

(iv) Interest rate analysis

The details of financial assets and liabilities exposed to interest rate risk were as follows:

Variable rate instruments: Financial assets Financial liabilities	Carrying amount
	December 31, 2021 December 31, 2020 $ 1,413,572 1,341,919 (3,992,844) (3,978,260)

The following sensitivity analysis is based on the risk exposure to interest rate on the derivative and non-derivative financial instruments on the reporting date. Regarding the assets and liabilities with variable interest rates, the analysis is on the basis of the assumption that the amount of assets and liabilities outstanding at the reporting date were outstanding throughout the year. The rate of change is expressed as the interest rate increase or decrease by 0.25% when reporting to management internally, which also represents the Company’s management's assessment of the reasonably possible interest rate change.

If the interest rate had increased or decreased by 0.25%, the Company's net profit before tax would have decreased or increased by $6,448 and $6,591 for the years ended December 31, 2021 and 2020, respectively, which would be mainly resulting from demand deposits, and unsecured loans with variable interest rates.

(v) Fair value

• 1) Categories and the fair value of financial instruments

The fair value of financial assets and liabilities at fair value through profit or loss, and financial assets at fair value through other comprehensive income are 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 :

(Continued)

51

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

Financial assets mandatorily measured at fair value through profit or loss Stocks listed on domestic markets Convertible bonds payable embedded derivatives Subtotal Financial assets at fair value through other comprehensive income Notes and accounts receivable, net Emerging market stock Stocks unlisted on domestic markets and foreign market Subtotal Financial assets measured at amortized cost Cash and cash equivalents Notes and accounts receivable, net Other receivables Guarantee deposits paid Subtotal Financial liabilities measured at amortized cost Bank loans Lease liabilities Accounts payable Other payables Bonds payable Subtotal		December 31, 2021	December 31, 2021	December 31, 2021
	Carrying amount $ 607 375 982 1,443,573 516 39,549 1,483,638 1,553,378 5,141,612 401,943 22,549 7,119,482 $ 8,604,102 $ 4,911,346 95,620 2,900,255 505,138 126,336 8,538,695 $ 8,538,695		Fair Value
		Level 1 607 - - 516 - - - - - - - - - -	Level 2 - 375 - - - - - - - - - - - -	Level 3 Total - 607 - 375 - - - 516 39,549 39,549 - - - - - - - - - - - - - - - - - -

(Continued)

52

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

Financial assets mandatorily measured at fair value through profit or loss Stocks listed on domestic markets Financial assets at fair value through other comprehensive income Notes and accounts receivable, net Emerging market stock Stocks unlisted on domestic markets and foreign market Subtotal Financial assets measured at amortized cost Cash and cash equivalents Notes and accounts receivable, net Other receivables Guarantee deposits paid Subtotal Financial liabilities measured at fair value through profit or loss Convertible bonds embedded options Financial liabilities measured at amortized cost Bank loans Lease liabilities Accounts payable Other payables Bonds payable Subtotal		December 31, 2020	December 31, 2020	December 31, 2020
	Carrying amount $ 624 1,429,348 4,348 40,474 1,474,170 1,479,458 3,384,060 930,141 22,719 5,816,378 $ 7,291,172 $ 9,600 4,647,106 89,085 1,438,566 949,583 929,322 8,053,662 $ 8,063,262		Fair Value
		Level 1 624 - 4,348 - - - - - - - - - - -	Level 2 - - - - - - - - 9,600 - - - - -	Level 3 Total - 624 - - - 4,348 40,474 40,474 - - - - - - - - - 9,600 - - - - - - - - - -

There were no transfers of financial instruments between any levels for the years ended December 31, 2021 and 2020.

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:

(Continued)

53

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

a) Financial assets 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 technique of financial instruments measured at fair value

a) Non-derivative financial instruments

If the financial instrument has a public quoted price in an active market, the public quoted price will be determined as the fair value. The measurements on fair value of the financial instruments without an active market are determined using the valuation technique or the quoted market price of its counterparty. Fair value measured using the valuation technique can be extrapolated from similar financial instruments, discounted cash flow method, or other valuation techniques which include the model used in calculating the observable market data at the balance sheet date.

The Company holds the unquoted equity investments of financial instruments without an active market. The measurement of fair value of the equity instruments is based on the Guideline Public Company method, which mainly assumes the evaluation by the price to book value ratio of similar public company and by the discount for lack of marketability. The estimation has been adjusted by the effect resulting from the discount for lack of marketability of the securities.

b) Derivative financial instruments

Measurement of fair value of derivative instruments is based on the valuation techniques that are generally accepted by the market participants. For instance, discount method or option pricing models. Fair value of forward currency exchange is usually determined by using the forward currency rate.

4) Reconciliation of Level 3 fair values

		Fair value through
		other comprehensive
		income
		Unquoted equity
		instruments
Opening balance, January 1, 2021	$	40,474
Capital refunded		(405)
Total gains and losses recognized:
In other comprehensive income		(520)
Ending Balance, December 31, 2021	$	39,549
Opening balance, January 1, 2020	$	42,453
Capital refunded		(1,979)
Ending Balance, December 31, 2020	$	40,474

(Continued)

54

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

• 5) Quantified information on 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 other comprehensive income - equity investments”.

Quantified information of significant unobservable inputs was as follows:

Inter-relationships between significant unobservable inputs Valuation Significant and fair value Item technique unobservable inputs measurement Financial assets at fair Guideline Public ‧ Enterprise value to sale ‧ The higher the pricevalue through other Company method ratio as of December 31, to-sales ratio,pricecomprehensive income 2021 was 1.61 book ratio, and the ‧ Price-to-sale ratio as of enterprise value to December 31, 2020 was sale ratio, the higher 1.44 the fair value ‧ Price-book ratio (as of ‧ The higher the market December 31, 2021 and liquidity discount 2020 was 0.9 and 0.88, rate,the lower the fair respectively) value ‧ Market liquidity discount rate (as of December 31, 2021 and 2020 were 17.45% and 17.25%, respectively) Financial assets at fair Net Asset Value ‧ Net asset value ‧ Not applicable value through profit or Method loss

• (v) Financial risk management

• (i) Briefings

The Company is exposed to the following risks arising from 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.

(Continued)

55

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

(ii) Structure of risk management

The Company’ s finance 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 Company minimizes the risk exposure through derivative financial instruments. The Board of Directors regulated the use of derivative and non-derivative financial instruments in accordance with the Company’ s policy about risks arising from financial instruments such as currency risk, interest rate risk, credit risk, the use of derivative and non-derivative financial instruments and the investments of excess liquidity. The internal auditors of the Company continue with the review of the amount of the risk exposure in accordance with the Company’ s policies and the risk management 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.

1) Accounts receivable and other receivables

The Company has established a credit policy under which each new customer is analyzed individually for creditworthiness before the Company’s standard payment and delivery terms and conditions are offered. The Company’s review includes external ratings, when available, and in some cases bank references. Purchase limits are established for each customer, and these limits are reviewed periodically. The customers evaluated as low credit rating by the Company only have prepayment transactions with the Company.

Trade and other receivables mainly relate to a wide range of customers from different industries and geographic regions. The Company continued to assess the financial condition and credit risk of its customers, by grouping trade and other receivables based on their characteristics and will purchase credit guarantee insurance contracts if necessary.

Because the Company caters to a wide variety of customers and has a diverse market distribution, the Company does not concentrate in any single individual customer. Therefore, there is no significant credit risk of concentration in trade receivable. In order to reduce the credit risk, the Company monitors the financial conditions of its customers regularly. However, the Company does not require its customers to provide any collateral.

(Continued)

56

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

2) Investments

The credit risks exposure in the bank deposits, investments with fixed income and other financial instruments are measured and monitored by the Company’s finance department. Since the Company’ s transaction counterparties and the contractually obligated counterparties are banks, financial institutes and corporate organizations with good credits, there are no compliance issues, and therefore, no significant credit risk. The finance department evaluates the counterparty’s credit condition when investing in bond investment without an active market, and do not expect to have any significant credit risk.

(iv) Liquidity risk

Liquidity risk is the risk that the Company will encounter difficulty in meeting the obligations associated with its financial liabilities that are settled by delivering cash or another financial asset.

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 and ensures in compliance with the terms of the loan agreements.

Borrowings from the banks and accounts receivable factoring are important sources of liquidity for the Company. Please refer to note (6)(d) and note (6)(j) for unused short-term bank facilities and factoring amount as of December 31, 2021 and 2020.

(v) Market risk

Market risk is the risk that changes in market prices, such as foreign exchange rates, interest rates and equity prices 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.

1) Currency risk

The Company is exposed to currency risk on sales, purchases and borrowings that are denominated in a currency other than the functional currencies of the Company, primarily the USD, CNY and HKD.

When short-term assets and liabilities denominated in a foreign currency are unbalanced, the Company uses exchange rate to buy or sell about foreign currency to ensure that the net risk is maintained at an acceptable level.

2) Interest rate risk

As the Company’ s borrowings position are based on USD and NTD, the Company’ s capital cost will result in an decrease (increase) when Federal Reserve (“ Fed” ) and Central Bank of the Republic of China (Taiwan) decrease (increase) the interest rate of USD and NTD. The Company adjusts the proportion of the USD and NTD borrowings to minimize the cost of capital, in order to reduce interest rate risk to an acceptable level.

(Continued)

57

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

3) Other price risk

The management of the Company monitors the listed or OTC share investments and open-end mutual funds based on the market price.

(w) Capital management

The policy of the Board of Directors is to maintain a strong capital base so as to maintain investor, creditor and market confidence and to sustain future development of the business. Capital consists of ordinary shares, capital surplus, and retained earnings.

The Company monitors the capital structure by way of periodical review on the liability ratio. As of December 31, 2021 and 2020 the liability ratios were as follows:

Total liabilities Total assets Liability ratio	December 31, 2021 December 31, 2020 $ 9,789,708 8,858,456 17,812,196 14,932,534 55 % 59 %

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

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

The Company’s investing and financing activities which did not affect the current cash flow for the years ended December 31, 2021 and 2020, were as follows:

• (i) For the acquisition of right-of-use assets from leases, please refer to note (6)(i).

• (ii) For conversion of convertible bonds to ordinary shares, please refer to note (6)(l).

The reconciliation of liabilities arising from financing activities was as follows:

Non-cash changes

Short-term loans Lease liabilities Bonds payable Total liabilities from financing activities	January 1, 2021 $ 4,647,106 89,085 929,322 $ 5,665,513	Cash flows 264,240 (59,446) - 204,794	Acquisition - 66,010 - 66,010	Decrease - - (802,986) (802,986)	Foreign exchange movement - (29) - (29)	December 31, 2021
						4,911,346 95,620 126,336
						5,133,302

(Continued)

58

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

Short-term loans Lease liabilities Bonds payable Total liabilities from financing activities	January 1, 2020 $ 4,745,669 130,745 - $ 4,876,414	Cash flows (98,563) (52,871) 1,000,000 848,566	Non-cash changes Acquisition Decrease Foreign exchange movement - - - 11,215 - (4) - (70,678) - 11,215 (70,678) (4)	December 31, 2020
				4,647,106 89,085 929,322
				5,665,513

(7) Related-party transactions

(a) Name and relationship with related parties

The following are entities that have had transactions with the Company and its Subsidiaries during the period covered in the financial report were as follows:

Related-party	Relationship
Weikeng International Co., Ltd. (WKI)	Subsidiary
Weikeng Technology Co., Ltd. (WKZ)	Subsidiary
Weikeng Technology Pte. Ltd. (WTP)	Subsidiary
Weikeng International (Shanghai) Co., Ltd. (WKS)	Sub-Subsidiary
Weitech International Co., Ltd. (Weitech)	Sub-Subsidiary
Weikeng Electronic Technology (Shanghai) Co., Ltd.	Sub-Subsidiary
(WKE)
Weiji Investment Co., Ltd.	The same chairman
Genlog Industrial Co., Ltd.	Substantive related-party

• (b) Other related party transactions

• (i) Sale of goods to related parties

The amounts of significant sales transactions between the Company and related parties were as follows:

2021 Subsidiaries $ 177,120 Sub-subsidiaries 2,111 Other related parties 13 $ 179,244	2020
	378,925 1,546 14
	380,485

(Continued)

59

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

There was no significant difference in the pricing on sales to related parties and general customers, except for the sales to the subsidiaries and sub-subsidiaries, whose prices are based on the price, plus, cost. The collection period for certain subsidiaries is based on their accounts receivable which depend on OA30 days after offsetting the accounts payable generated from their purchase and sales; and the collection period for other related parties ranges from 30 to 60 days after delivery.

• (ii) Purchase of goods from related parties

The amounts of significant purchase transactions between the Company and related parties were as follows:

Subsidiaries	2021 $ 569,551	2020
		641,718

There was no significant difference in pricing on purchase from related parties and general suppliers, except for the purchase from subsidiaries and sub-subsidiaries, whose prices are based on the purchase, plus, cost. The payment period for certain subsidiaries is based on their accounts payable which depend on OA30 days after offsetting the accounts receivable generated from their purchase and sales; and the payment period for other related parties ranges from 30 to 60 days after the arrival date.

• (iii) Processing fee and consultancy fees from related Parties

Other related parties were commissioned to provide processing services and consulting services to the Company, as well as the payment for the commission to subsidiaries. For the years ended December 31, 2021 and 2020, the amounts were as follows:

2021 Other related parties $ 6,594	2020
	9,554

(iv) Lease

The Company leased a portion of its building to its subsidiaries and related parties for office use purpose. The rentals is collected monthly, were as follows:

2021 Subsidiaries $ 23 Other related parties 1,145 $ 1,168	2020
	23 1,191
	1,214

The Company signed a 2-3year lease contract with its subsidiaries to lease the office and warehouse, at a total value of the $48,744 and $47,117, respectively, for the years ended December 31, 2021 and 2020, and the interest expenditure of $250 and $703 in 2021 and 2020, respectively. As of December 31, 2021 and 2020, the balance of lease liability amounted to $40,497 and $17,513, respectively.

(Continued)

60

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

• (v) Management and credit service income

As of December 31, 2021 and 2020, the Company incurred the management and credit service income of $369,247 and $278,748, respectively, from its subsidiaries and sub-subsidiaries, recognized in non-operating income – other.

• (vi) Receivables from relate parties

Account Notes and accounts receivables Notes and accounts receivables Notes and accounts receivables Other receivables	Related party categories December 31, 2021 Subsidiaries $ 41,560 Sub-subsidiaries 353 Other related parties - Subsidiaries 84,941 $ 126,854	December 31, 2020
		13,389 383 12 73,204
		86,988

• (vii) Payable to related parties

Account Other payables Other payables	Related party categories December 31, 2021 Subsidiaries $ 80 Other related parties 355 $ 435	December 31, 2020
		83 460
		543

(viii) Guarantee

As of December 31, 2021 and 2020, the Company's endorsement guarantees for subsidiaries were $7,505,908 and $8,080,608, respectively.

• (c) Key management personnel compensation

Key management personnel compensation comprised:

2021 Short-term employee benefits $ 194,296 Post-employment benefits 839 $ 195,135	2020
	118,030 830 118,860

(Continued)

61

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

(8) Pledged assets: None.

(9) Commitments and contingencies:

As of December 31, 2021 and 2020 the balance of L/Cs for deferred payment of import value added tax and the purchase of merchandise were as follows:

December 31, 2021 $ 188,312	December 31, 2020
	167,400

(10) Losses Due to Major Disasters: None

(11) Subsequent Events: None

(12) Other:

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

By function By item	2021	2020
	Operating expense	Operating expense
Employee benefits Salary Labor and health insurance Pension Remuneration of directors Others Depreciation Amortization	763,133 44,602 23,938 47,878 31,637 64,432 8,573	583,272 38,590 23,797 19,611 29,353 58,474 5,291

For the years ended December 31, 2021 and 2020, the information on the number of employees and employee benefit expense of the Company is as follows:

Number of employees Number of directors who were not employees The average employee benefit The average salaries and wages The adjustment of theaverage salaries and wagesadjustment Remuneration for supervisors

(Continued)

62

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

The Company's salary and remuneration policy (including directors, managers and employees) are as follows:

• (i) The remunerations to employees and managers is divided into two parts: fixed salary and variable salary. Fixed salary (including principal salary, job allowance and food expenses) is based on the education, experience, skills, and the degree of responsibility for decision-making of business risks. Factors such as the degree, contribution to the Company, and payment levels in the same industry, etc., are subject to verification. Variable salaries include performance bonuses, year-end bonuses and employee compensation. Among them, performance bonuses are mainly paid to business and technical application personnel, and bonuses are issued based on product operating performance and personal performance; The year-end bonus is based on the achievement of the budget profit target, and considers the annual bonus, and the performance, education, skills of employees and managers, the degree of responsibility for decision making of business risks, the contribution to the company, and the level of payment in the same industry. Employee remuneration is the total amount of remuneration expenses in the employee’s remuneration set in accordance with the Company’s articles of association. After the approval of shareholders’ meeting, factors such the performance, education, experience, skills of employees and managers, the degree of responsibility for decision-making of business risks, the contribution to the Company, and the level of payment in the same industry shall be considered. Then the payment will be paid in cash or stocks.

• (ii) The remuneration paid by the company to the directors shall be the remuneration and business execution expenses provided in accordance with Article 22 of the Company’ s Article of Incorporation (only the fees for attending the meeting).

• (iii) The Company's cautiously evaluates the payments of salary and remuneration. The remuneration and salary of managers and directors shall be approved by the Salary and Remuneration Committee and the Board of Directors.

(13) Other disclosures:

• (a) Information on significant transactions:

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

• (i) Loans to other parties: None

(Continued)

63

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

(ii) Guarantees and endorsements for other parties:

								(in thousands of new Taiwan dollars)	(in thousands of new Taiwan dollars)	(in thousands of new Taiwan dollars)	(in thousands of new Taiwan dollars)	(in thousands of new Taiwan dollars)	(in thousands of new Taiwan dollars)
No.	Name of guarantor	Counter-party of guarantee and endorsement		Limitation on amount of guarantees and endorsements for a specific enterprise	Highest balance for guarantees and endorsements during the period e	Balance of guarantees and ndorsements 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 t	Parent company endorsements/ guarantees to hird parties on behalf of subsidiary (note 2)	Subsidiary endorsements/ guarantees to third parties on behalf of parent company (note 2)	Endorsements/ guarantees to third parties on behalf of companies in Mainland China (note 2)
		Name	Relationship with the Company
0 〃 〃	The Company 〃 〃	WKI WTP WKS	100％owned subsidiary 100％owned subsidiary 100％owned subsidiary	12,033,732 12,033,732 12,033,732	6,137,694 611,490 1,052,550	6,071,848 525,920 908,140	5,446,030 464,755 174,503	- - -	% 75.68 % 6.55 % 11.31	24,067,464 24,067,464 24,067,464	Y Y Y	N N N	N N Y

Note 1：The total amount of the guarantee provided by the Company shall not exceed three hundred percent (300%) of the higher amount between the Company’s capital amount and net worth. However, for any individual entity whose voting shares are 50% owned or more, directly or indirectly, by the Company shall not exceed fifty percent (50%) of the maximum amount for guarantee on recent audited or reviewed financial statements.

Note 2：For those entities as the guarantor to the subsidiary, subsidiary as the guarantor to the company, or the guarantor that located in China, please fill in “Y”.

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

joint ventures):	joint ventures):	joint ventures):	joint ventures):
					(Shares/units (thousands))
Name of holder	Category and name of security	Relationship with company	Account title		Ending balance			Note
				Shares/Units (thousands)	Carrying amount	Percentage of ownership (%)	Fair value
The Company 〃 〃 〃 〃 〃 〃	Securities of listed companies EBM Technologies Inc. Clientron Corp. Paradigm I Venture Capital Company (Paradigm I) Paradigm Venture Capital Corporation (PVC Corp.) InnoBridge Venture Fund ILP. (InnoBridge) Shin Kong Global Venture Capital Corp. Vision Wide Technology Co., Ltd. (VTEC)	- - - - - - -	Financial assets mandatorily measured at fair value through profit or loss-current Financial assets at fair value through other comprehensive income-noncurrent 〃 〃 〃 〃 〃	34 15 750 230 - 960 800	$ 607 516 $ 7,458 2,301 15,150 4,800 9,840 $ 39,549	- 0.02 6.79 10.49 9.90 12.00 1.67	$ 607 516 $ 7,458 2,301 15,150 4,800 9,840 $ 39,549

• (iv) Individual securities acquired or disposed of with accumulated amount exceeding the lower of NTD300 million or 20% of the capital stock: None

• (v) Acquisition of individual real estate with amount exceeding the lower of NTD300 million or 20% of the capital stock: None

• (vi) Disposal of individual real estate with amount exceeding the lower of NTD300 million or 20% of the capital stock: None

(Continued)

64

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

• (vii) Related-party transactions for purchases and sales with amounts exceeding the lower of NTD100 million or 20% of the capital stock:

Name of company	Related party	Nature of relationship	Transaction details	Transaction details	Transaction details	Transaction details	Transaction different f	s with terms rom others	Notes/Accounts receivable (payable)	Notes/Accounts receivable (payable)	Note
			Purchases/ (Sales)	Amount	Percentage of total purchases/ (sales)	Payment terms	Unit price	Payment terms	Ending balance	Percentage of total notes/accounts receivable (payable)
The Company 〃 WKI 〃 〃 WKS	WKI 〃 The Company 〃 WKS WKI	100%owned subsidiary 〃 Parent company 〃 Subsidiary Parent company	(Sales) Purchases Purchases (Sales) (Sales) Purchases	(111,687) (USD(4,010)) 569,546 (USD20,347) 111,687 (USD4,010) (596,546) (USD(20,347)) (4,930,339) (USD(175,966)) 4,930,339 (USD175,966)	(0.37) % 2.00 % 0.30 % (1.53) % (13.25)% 64.83 %	OA30 〃 〃 〃 OA60 〃	No significant difference with other customer 〃 〃 〃 〃 〃	- - - - - -	Accounts Receivable 12,744 (USD460) - Accounts Payable (12,744) (USD(460)) - Accounts Receivable 686,938 (USD24,817) Accounts Payable (686,938) (USD(24,817))	0.19 % - % (0.65) % - % 12.11 % (66.95) %

Note: The transactions have been eliminated in the consolidated financial statement.

• (viii) Receivables from related parties with amounts exceeding the lower of NTD100 million or 20% of the capital stock:

					(in thousands of foreign currency)	(in thousands of foreign currency)	(in thousands of foreign currency)	(in thousands of foreign currency)	(in thousands of foreign currency)
Name of company	Counter-party	Nature of relationship	Ending balance	Turnover rate	Overdue		Amounts received in subsequent period (Note)	Allowance for bad debts	Note
					Amount	Action taken
WKI	WKS	Subsidiary	686,938 (USD24,817)	7.94	-	-	USD 22,607	-

Note: Information as of Mar. 15, 2022.

• (ix) Trading in derivative instruments: Please refer to note (6)(b)

(Continued)

65

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

(b) Information on investees:

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

investees in Mainland China):	investees in Mainland China):	investees in Mainland China):	investees in Mainland China):
								(in thou		sands of foreign currency)
Name of investor	Name of investee	Location	Main businesses and products	Original invest	ment amount	Highest			Net income (losses) of investee	Investment income (losses) of investor	Note
				December 31, 2021	December 31, 2020	Shares (In Thousands)	Percentage of Ownership	Carrying amount
The Company 〃 〃 WKI	WKI WKZ WTP Weitech	Hong Kong Taipei Singapore Hong Kong	Electronic components computer peripherals products distribution and technical support Electronic components and technical support 〃 Import and export trade of electronic components	$ 1,322,295 12,983 293,327 $ 1,628,605 0.41 (HKD0.1)	1,044,995 12,983 293,327	473,950 1,589 12,413 -	100% 100% 100% 100%	$ 5,232,263 25,931 366,743	1,309,121 (134) 45,677 172 (USD6)	$ 1,309,121 (134) 45,677	Subsidiary 〃 〃 Subsidiary's subsidiary
					1,351,305			$ 5,624,937		$ 1,354,664
					0.41 (HKD0.1)			2,076 (USD75)		172 (USD6)

• (c) Information on investment in mainland China:

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

										(	in thousands of f	oreign currency)
Name of investee	Main businesses and products	Total amount of paid-in capital	Method of investment	Accumulated outflow of investment from Taiwan as of January 1, 2021	Inves flo	tment ws	Accumulated outflow of investment from Taiwan as of December 31, 2021	Net income (losses) of the investee	Percentage of ownership	Investment income (losses) of investor (Note 2)	Book value	Accumulated remittance of earnings in current period
					Outflow (Note 3)	Inflow
WKS WKE	Electronic components computer peripherals products distribution and technical support Electronic technology development and technical advisory	786,647 (USD25,000) 5,067 (RMB1,000)	Note 1、4 Note 1、5	304,594 (USD9,800) -	- -	- -	304,594 (USD9,800) -	66,503 (USD2,374) (Note 2) 147 (USD5)	100% 100%	66,503 (USD2,374) (Note 2) 147 (USD5)	716,500 (USD25,885) 5,635 (USD204)	- -

• (ii) Limitation on investment in Mainland China:

Accumulated Investment in Mainland China as of December 31, 2021 I	nvestment Amounts Authorized by Investment Commission, MOEA (note 3)	Upper Limit on Investment
304,594 (USD9,800)	692,000 (USD25,000)	4,813,493

• Note 1: Investment in Mainland China was through a company in the third area.

• Note 2: The investment gains and losses of the current period are recognized according to the financial statements, which have been reviewed by the Company’ s independent auditors, and were translated into New Taiwan Dollars at the average exchange rates.

• Note 3: The currency was translated into New Taiwan Dollars at the exchange rates at the end of reporting period.

• Note 4: The difference was due to Weikeng International Co. Ltd.'s investment of US15,200 thousand dollars on Weikeng International (Shanghai) Co. Ltd. using its own funds.

• Note 5: The difference was due to Weikeng International (Shanghai) Co. Ltd.'s investment of RMB1,000 thousand dollars on Weikeng Electronic Technology (Shanghai) Co. Ltd. using its own funds.

(Continued)

66

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

• (iii) Significant transactions:

Please refer to Information on significant transactions of the consolidated financial statements for the information on significant direct or indirect transactions, which were eliminated in the preparation of consolidated financial statements, between the Company and the investee companies in Mainland China in 2021.

• (d) Major shareholders:

Major shareholders:
Shareholding Shareholder’s Name	Shares	Percentage
Weiji Investment Co., Ltd.	30,426,876	% 7.32

• Note (i): The information of major shareholders is based on the last business day of the end of each quarter set by Taiwan Depository & Clearing Corporation, wherein the shareholders hold more than 5% of the Company's ordinary shares, which have been completely registered non-physically (including treasury shares). There may be differences between the share capital recorded in the Company's financial statements and the actual number of the delivered shares, which have been completely registered non-physically due to the different methods used in their calculation.

• Note (ii):In the case of the above information, if the shareholder delivers the shares to the trust, the shares will be disclosed as a personal account under the trust account of the principal opened by the trustee. As for the shareholders’ declaration of more than 10% of the insider’s shareholdings under the Securities and Exchange Act, the shareholders’ stocks should be include in their own shareholdings, plus, the shares delivered to the trust, wherein the shareholders have the right of decision on using the trust property. For information on insider’s equity declaration, please refer to market observation post system.

(14) Segment information:

Please refer the consolidated financial statements.

67

WEIKENG INDUSTRIAL CO., LTD.

Statement of cash and cash equivalents

December 31, 2021

(Expressed in thousands of New Taiwan Dollars)

Item	Description		Amount
Cash on hand		$	134
Checking accounts and			217,295
demand deposits
Foreign currency in banks	Foreign currency(USD47,694、HKD735and CNY3,029)
			1,335,949
		$	1,553,378
Note：Exchange rate: USD/TWD 27.68; HKD/TWD3.549; CNY/TWD4.344.

Statement of trade receivables

Customer names Notes receivable Accounts receivable Related Parties： Other（Note） Non-related parties： TC131 Other（Note） Less: Loss allowance Notes and accounts receivable, net. Note: The amount of individual client included	Description Amount Revenue from non-related parties $ 22,710 Revenue from related parties 41,913 Revenue from non-related parties 1,019,794 5,554,448 6,616,155 53,680 6,562,475 $ 6,585,185 in others does not exceed 5% of the account balance.

68

WEIKENG INDUSTRIAL CO., LTD.

Statement of inventories

December 31, 2021

(Expressed in thousands of New Taiwan Dollars)

Item Merchandise inventories Goods in transit	Amount	Amount
	Cost $ 2,813,896 220,206 $ 3,034,102	Net realizable value
		3,656,806 232,654
		3,889,460

Note：The market price of inventories was determined by the net realizable value.

Statement of prepayments

Item Net Input VAT Other（Note）	Description Amount Business tax $ 96,208 Includes prepaid expenses, prepayments to suppliers and temporary payments, etc. 11,514 $ 107,722

Note: The amount of individual client included in others does not exceed 5% of the account balance.

69

WEIKENG INDUSTRIAL CO., LTD.

Statement of changes in investments accounted for using the equity method

December 31, 2021

(Expressed in thousands of New Taiwan Dollars)

Company name WKI WKZ WTP Exchange differences on translation of foreign financial statements	Opening balance Shares Amount 396,250 $ 4,061,770 1,589 26,065 12,413 371,894 (352,739) $ 4,106,990	Increase Shares Amount 77,700 277,300 - - - - - 277,300	Decrease Shares Amount - - - - - - (114,017) (114,017)	Recognized revenue Ending balance Amount Shares 1,309,121 473,950 % 100 (134) 1,589 % 100 45,677 12,413 % 100 - 1,354,664	Recognized revenue Ending balance Amount Shares 1,309,121 473,950 % 100 (134) 1,589 % 100 45,677 12,413 % 100 - 1,354,664
		Shares 77,700 - -	Shares - - -			Amount

70

WEIKENG INDUSTRIAL CO., LTD.

Statement of financial assets measured at fair value through other

comprehensive income - non-current

December 31, 2021

(Expressed in thousands of New Taiwan Dollars)

Name of investee Share: Feature Integration Technology Inc. Pavadigam I PVC Corp. InnoBridge Clientron Corp. Shin Kong Global Venture Capital Corp. VTEC	Beginning balance Shares Amount 158 $ 4,085 750 7,458 271 3,226 - 15,150 15 263 3,000 4,800 800 9,840 $ 44,822	Increase Shares Amount - - - - - - - - - - - - - - -	Increase Shares Amount - - - - - - - - - - - - - - -	Decrease Shares Amount 158 (6,687) (Note 1) - - 41 (405) (Note 2) - - - - 2,040 - (Note 3) - - (7,092)	Decrease Shares Amount 158 (6,687) (Note 1) - - 41 (405) (Note 2) - - - - 2,040 - (Note 3) - - (7,092)	Value of financial assets after value adjustment 2,602 - (520) - 253 - - 2,335	Ending balance Shares Amount Collateral - - None 750 7,458 〃 230 2,301 〃 - 15,150 〃 15 516 〃 960 4,800 〃 800 9,840 〃 40,065	Ending balance Shares Amount Collateral - - None 750 7,458 〃 230 2,301 〃 - 15,150 〃 15 516 〃 960 4,800 〃 800 9,840 〃 40,065
	Shares	Shares		Shares			Shares
	158 750 271 - 15 3,000 800	- - - - - - -		158 - 41 - - 2,040 -			- 750 230 - 15 960 800

Note 1: The disposal of the non-current financial assets at fair value through other comprehensive income. Note 2: The investee companies refunded the capital. Note 3: The investee companies reduced its capital to offset accumulated deficits in 2021.

71

WEIKENG INDUSTRIAL CO., LTD.

Statement of short-term borrowings

December 31, 2021

(Expressed in thousands of New Taiwan Dollars)

Type	Description Contract period unsecured loans 2021.08.13~2022.03.25 〃 2021.08.18~2022.08.18 〃 2021.10.08~2022.04.14 〃 2021.08.17~2022.11.03 〃 2021.12.22~2022.03.23 〃 2021.09.10~2022.06.07 〃 2021.10.25~2022.03.23 〃 2021.10.08~2022.05.28	Interest rate 0.76%~0.95% 0.80%~1% 0.84%~0.85% 0.52%~0.53% 0.95% 0.78%~0.91% 0.95% 0.91%	Financing amount 550,000 700,000 415,200 300,000 300,000 450,000 300,000 415,200	Ending balance Collateral $ 483,394 None 336,294 〃 310,624 〃 300,000 〃 300,000 〃 281,068 〃 270,000 〃 252,459 〃 2,377,507 〃 $ 4,911,346
Financial institution Loans 〃 〃 〃 〃 〃 〃 〃 Others (Note)

Note: The amount of each institution included in others does not exceed 5% of the account balance.

72

WEIKENG INDUSTRIAL CO., LTD.

Statement of trade payables

December 31, 2021

(Expressed in thousands of New Taiwan Dollars)

Account Accounts payable: TV008 TV002 TV052 TV004 TV018 TV007 Others (Note)	Description Amount Operating expense for non related party $ 650,449 〃 561,623 〃 296,878 〃 206,164 〃 178,486 〃 153,995 〃 852,660 $ 2,900,255

Note: The amount of individual supplier included in others does not exceed 5% of the account balance.

Statement of other non-current liabilities

Item	Description		Amount
Refund liabilities	Allowance for sales refund	$	291,335
Other (Note)	Collect labor insurance and advance rent etc.		3,760
		$	295,095

Note: The amount of each item included in others does not exceed 5% of the account balance.

73

WEIKENG INDUSTRIAL CO., LTD.

Statement of lease liabilities

December 31, 2021

(Expressed in thousands of New Taiwan Dollars)

Item Rental period Discount rate Buildings 1.7~5.2 years 0.84%~1.2% Transportation equipment 3~3.6 years 1.20% Note: For right-of-use-asset, please refer note 6(i).	Current $ 58,476 349 $ 58,825	Non-current
		36,795 -
		36,795

Statement of operating revenue

For the year ended December 31, 2021

Item Sale revenue: Chipset/memory components Mixed and other components Others Net operating revenue	Amount (thousand) Amount 294,884 $ 11,162,086 4,569,282 18,795,684 7,145 $ 29,964,915

74

WEIKENG INDUSTRIAL CO., LTD.

Statement of operating costs

For the year ended December 31, 2021

(Expressed in thousands of New Taiwan Dollars)

	Item		Amount
Inventory, January, 1		$	3,161,738
Add: Purchase			28,417,387
Outsourcing processing expense			39,184
Less: Inventory, December, 31			(3,158,314)
Inventory scrapping			(2,997)
Cost of goods sold			28,456,998
Add: Allowance for inventory	valuation and obsolescence losses		(98,339)
Allowance for inventory scrapping			2,997
Operating costs		$	28,361,656

Statement of sales and administration expenses

Item Salary and expense Depreciation expense Export expense Insurance expense Remuneration of directors Other (Note) Total	Sales expense $ 542,765 55,255 49,456 44,006 - 131,020 $ 822,502	Administration expense
		220,368 9,177 - 13,348 47,878 52,230 343,001

Note: The amount of each item in others does not exceed 5% of the account balance.