Zyxel Group — Annual Report 2021

Nov 4, 2021

Stock Code:3704

Unizyx Holding Corporation and Subsidiaries

Consolidated Financial Statements

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

Address: 3F, No. 363, Section 2, Gongdao 5th Rd, Hsinchu City, Taiwan Telephone: (03)578-8838

The independent auditors' report and the accompanying consolidated 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 consolidated financial statements, the Chinese version shall prevail.

Table of contents

Contents	Page
1. Cover Page	1
2. Table of Contents	2
3. Representation Letter	3
4. Independent Auditors' Report	4
5. Consolidated Balance Sheets	5
6. Consolidated Statements of Comprehensive Income	6
7. Consolidated Statements of Changes in Equity	7
8. Consolidated Statements of Cash Flows	8
9. Notes to the Consolidated Financial Statements
(1) Company history	9~10
(2) Approval date and procedures of the consolidated financial statements	10
(3) New standards, amendments and interpretations adopted	10~11
(4) Summary of significant accounting policies	11~31
(5) Major sources of accounting judgments, estimations and assumptions of uncertainty	32~33
(6) Explanation of significant accounts	33~71
(7) Related-party transactions	71~73
(8) Pledged assets	73
(9) Commitments and contingencies	74~75
(10) Losses due to major disasters	75
(11) Subsequent events	75
(12) Other	75
(13) Other disclosures
(a) Information on significant transactions	75~76、79~90
(b) Information on investees (excluding information on investees in Mainland China)	76、91~94
(c) Information on investment in Mainland China	76、95~96
(d) Major shareholders	76
(14) Segment information	77~78

Representation Letter

The entities that are required to be included in the combined financial statements of Unizyx Holding Corporation as of and for the year ended December 31, 2021 under the Criteria Governing the Preparation of Affiliation Reports, Consolidated Business Reports, and Consolidated Financial Statements of Affiliated Enterprises are the same as those included in the consolidated financial statements prepared in conformity with International Financial Reporting Standards No. 10, "Consolidated Financial Statements", endorsed by the Financial Supervisory Commission. In addition, the information required to be disclosed in the combined financial statements is included in the consolidated financial statements. Consequently, Unizyx Holding Corporation and Subsidiaries do not prepare a separate set of combined financial statements.

Company name: Unizyx Holding Corporation Chairman: Shun-I Chu Date: March 14, 2022

Consolidated Balance Sheets

December 31, 2021 and 2020

(Expressed in thousands of New Taiwan Dollars)

	December 31, 2021			December 31, 2020			December 31, 2021		December 31, 2020
Assets	Amount	%		Amount	%	Liabilities and Equity	Amount	%	Amount	%
Current assets:						Current liabilities:
Cash and cash equivalents (note 6(1))	\$ 5,293,484	25		4,078,159	21	Short-term borrowings (notes 6(12) and 8)	\$ 1,557,000	7	1,614,247	8
Financial assets at fair value through profit or loss-current (note 6(2))	147,076		1	-	-	Short-term notes and bills payable (note 6(13))	200,000	1	300,000	2
Financial assets at amortized cost-current (notes 6(3) and 8)	281,149		1	569,159	3	Financial liabilities at fair value through profit or loss-current (note 6(2))	124	-	46,359	-
Notes and accounts receivable, net (note 6(5))	5,520,935	26		5,841,093	30	Contract liabilities-current (note 6(22))	175,314	1	74,760	-
Accounts receivable-related parties, net (note 7)	21,995	-		4,794	-	Notes and accounts payable	4,820,240	23	5,232,851	27
Other receivables-related parties (note 7)	3,071	-		5,959	-	Accounts payable-related parties (note 7)	181,775	1	546,513	3
Inventories (note 6(6))	6,212,269	29		4,900,890	25	Payroll and bonus payable	867,201	4	788,435	4
Other financial assets-current	28,415	-		89,467	-	Royalty payable	96,361	-	169,340	1
Other current assets, others	496,219		2	918,884	5	Other payables-related parties (note 7)	8,618	-	46,489	-
	18,004,613	84		16,408,405	84	Income tax payable	179,272	1	91,938	-
Non-current assets:						Provision for warranty obligations-current (note 6(15))	495,545	3	546,982	3
Financial assets at fair value through other comprehensive income-non-current	25,713	-		26,999	-	Lease liabilities-current (note 6(16))	39,181	-	46,575	-
(note 6(4))						Other current liabilities, others	903,698	4	1,077,049	6
Financial assets at amortized cost-non-current (notes 6(3) and 8)	104,659	-		70,669	-		9,524,329	45	10,581,538	54
Investments accounted for using the equity method (note 6(7))	16,292	-		24,059	-	Non-current liabilities:
Property, plant and equipment, net (notes 6(9) and 8)	1,699,145		8	1,592,121	8	Bonds payable (note 6(14))	1,896,234	9	-	-
Right-of-use assets (note 6(10))	418,997		2	471,029	3	Deferred income tax liabilities (note 6(18))	339,904	1	251,828	2
Intangible assets, net (note 6(11))	361,893		2	259,758	1	Lease liabilities-non-current (note 6(16))	399,908	2	443,497	2
Deferred income tax assets (note 6(18))	547,606		3	513,652	3	Net defined benefit liabilities (note 6(17))	12,979	-	5,496	-
Refundable deposits (note 8)	135,391		1	131,690	1	Guarantee deposits received	711	-	575	-
Net defined benefit assets (note 6(17))	66,075	-		69,783	-		2,649,736	12	701,396	4
Other non-current assets	13,290	-		21,000	-	Total liabilities	12,174,065	57	11,282,934	58
	3,389,061	16		3,180,760	16	Equity (note 6(19)):
						Equity attributable to the shareholders of the parent company:
						Capital stock	4,536,148	21	4,476,438	23
						Capital surplus	3,680,924	17	3,827,886	20
						Retained earnings	1,513,771	7	447,480	2
						Other equity	(462,103)	(2)	(351,910)	(2)
						Treasury stock	(198,448)	(1)	(120,861)	(1)
							9,070,292	42	8,279,033	42
						Non-controlling interests	149,317	1	27,198	-
						Total equity	9,219,609	43	8,306,231	42
Total assets	\$ 21,393,674 100			19,589,165 100		Total liabilities and equity	\$ 21,393,674 100		19,589,165 100

December 31, 2021		December 31, 2020
9,524,329	45	10,581,538	54
2,649,736	12	701,396	4
9,070,292	42	8,279,033	42

Consolidated 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)

		2021		2020
	Amount	%	Amount	%
Operating revenues (notes 6(22) and 7)	\$ 25,681,970	100	22,250,630	100
Cost of goods sold (notes 6(6) and 7)	19,621,452	76	16,470,531	74
Gross profit	6,060,518	24	5,780,099	26
Operating expenses (note 7):
Selling and marketing	2,021,928	8	2,044,671	9
General and administrative	893,502	3	845,039	4
Research and development	1,718,432	7	1,599,814	7
Expected credit loss (reversed gain) (note 6(5))	1,222	-	(2,119)	-
Total operating expenses	4,635,084	18	4,487,405	20
Operating income (loss)	1,425,434	6	1,292,694	6
Non-operating income (expenses):
Other income (notes 6(23) and 7)	73,430	-	185,179	1
Other gains and losses (note 6(23))	171,074	1	(71,072)	-
Shares of gain (loss) of associates accounted for using the equity method, net
(note 6(7))	(6,585)	-	(12,450)	-
Interest income	16,351	-	14,471	-
Interest expense (note 6(23))	(29,133)	-	(23,311)	-
Foreign exchange loss, net (note 6(25))	(212,507)	(1)	(209,623)	(1)
	12,630	-	(116,806)	-
Income (loss) before income taxes	1,438,064	6	1,175,888	6
Income tax expenses (note 6(18))	342,605	2	344,887	2
Net income (loss)	1,095,459	4	831,001	4
Other comprehensive income (loss):
Items that will not be reclassified subsequently to profit or loss
Remeasurements of defined benefit plans (note 6(17))	(11,069)	-	(18,094)	-
Unrealized gains (losses) from investments in equity instruments measured at
fair value through other comprehensive income (note 6(19))	(1,286)	-	9,068	-
Total items that will not be reclassified subsequently to profit or loss	(12,355)	-	(9,026)	-
Items that may be reclassified subsequently to profit or loss
Exchange differences on translation of foreign financial statements	(162,198)	-	127,975	-
Income tax related to components of other comprehensive income that will
be reclassified to profit or loss (note 6(18))	32,124	-	(25,562)	-
Total items that may be reclassified subsequently to profit or loss	(130,074)	-	102,413	-
Other comprehensive income for the year	(142,429)	-	93,387	-
Total comprehensive income for the year	\$ 953,030	4	924,388	4
Net income (loss) attributable to:
Shareholders of the parent company	\$ 1,096,700	4	827,944	4
Non-controlling interests	(1,241)	-	3,057	-
	\$ 1,095,459	4	831,001	4
Total comprehensive income attributable to:
Shareholders of the parent company	\$ 956,098	4	921,167	4
Non-controlling interests	(3,068)	-	3,221	-
	\$ 953,030	4	924,388	4
Earnings per share (New Taiwan Dollars) (note 6(21)):
Basic earnings per share	\$	2.49		1.91
Diluted earnings per share	\$	2.45		1.90

(English Translation of Consolidated Financial Statements Originally Issued in Chinese)

Unizyx Holding Corporation and subsidiaries

Consolidated Statements of Changes in Equity

For the years ended December 31, 2021 and 2020

(Expressed in thousands of New Taiwan Dollars)

							Equity attributable to the shareholders of the parent company
										Total other equity interest
					Retained earnings			Exchange	Unrealized gains (losses) on financial assets			Subtotal of
	Capital stock	Advance receipts for share capital	Total share capital	Capital surplus		Legal Special reserve reserve		Unappropriated retained earnings (Accumulated deficits) Total		differences measured at on translation fair value of foreign through other financial comprehensive statements income		Treasury stock	equity attributable to the shareholders of the parent	Non controlling interests	Total equity
Balance at January 1, 2020 \$	4,411,773	-	4,411,773	3,755,876	279,833	200,347	(842,550)	(362,370)	(395,821)	(67,406)	(463,227)	(120,861)	7,221,191	20,777	7,241,968
Net income (loss) for the period	-	-	-	-	-	-	827,944	827,944	-	-	-	-	827,944	3,057	831,001
Other comprehensive income (loss) for the period	-	-	-	-	-	-	(18,094)	(18,094)	102,249	9,068	111,317	-	93,223	164	93,387
Total comprehensive income (loss) for the period	-	-	-	-	-	-	809,850	809,850	102,249	9,068	111,317	-	921,167	3,221	924,388
Share-based payments	-	-	-	37,563	-	-	-	-	-	-	-	-	37,563	-	37,563
Exercise of employee stock options	-	64,665	64,665	14,226	-	-	-	-	-	-	-	-	78,891	-	78,891
Changes in ownership interests in subsidiaries accounted for using the equity method	-	-	-	20,221	-	-	-	-	-	-	-	-	20,221	(20,221)	-
Increase in non-controlling interests	-	-	-	-	-	-	-	-	-	-	-	-	-	40,000	40,000
Decrease in non-controlling interests due to losing control	-	-	-	-	-	-	-	-	-	-	-	-	-	(16,579)	(16,579)
Balance at December 31, 2020	4,411,773	64,665	4,476,438	3,827,886	279,833	200,347	(32,700)	447,480	(293,572)	(58,338)	(351,910)	(120,861)	8,279,033	27,198	8,306,231
Net income (loss) for the period	-	-	-	-	-	-	1,096,700	1,096,700	-	-	-	-	1,096,700	(1,241)	1,095,459
Other comprehensive income (loss) for the period	-	-	-	-	-	-	(10,946)	(10,946)	(128,370)	(1,286)	(129,656)	-	(140,602)	(1,827)	(142,429)
Total comprehensive income (loss) for the period	-	-	-	-	-	-	1,085,754	1,085,754	(128,370)	(1,286)	(129,656)	-	956,098	(3,068)	953,030
Appropriation and distribution of retained earnings:
Legal reserve used to offset accumulated deficits	-	-	-	-	(32,700)	-	32,700	-	-	-	-	-	-	-	-
Exercise of disgorgement	-	-	-	2	-	-	-	-	-	-	-	-	2	-	2
Cash dividends distributed from capital surplus	-	-	-	(223,822)	-	-	-	-	-	-	-	-	(223,822)	-	(223,822)
Reorganization	-	-	-	-	-	-	(19,463)	(19,463)	19,463	-	19,463	-	-	-	-
Share-based payments Changes in ownership interests in subsidiaries accounted for using the equity method	- -	- -	- -	41,124 (15,041)	- -	- -	- -	- -	- -	- -	- -	- -	41,124 (15,041)	9,106 15,041	50,230 -
Cash dividends received by subsidiaries from the parent company	-	-	-	4,062	-	-	-	-	-	-	-	-	4,062	-	4,062
Disposal of the Company's share by subsidiaries recognized as treasury share transactions	-	-	-	34,510	-	-	-	-	-	-	-	16,022	50,532	-	50,532
Exercise of employee stock options	78,235	(18,525)	59,710	12,203	-	-	-	-	-	-	-	-	71,913	-	71,913
Purchase of treasury stock	-	-	-	-	-	-	-	-	-	-	-	(93,609)	(93,609)	-	(93,609)
Increase in non-controlling interests	-	-	-	-	-	-	-	-	-	-	-	-	-	102,040	102,040
Cash dividends paid to non-controlling interests	-	-	-	-	-	-	-	-	-	-	-	-	-	(1,000)	(1,000)
Balance at December 31, 2021 \$	4,490,008	46,140	4,536,148	3,680,924	247,133	200,347	1,066,291	1,513,771	(402,479)	(59,624)	(462,103)	(198,448)	9,070,292	149,317	9,219,609

Consolidated Statements of Cash Flows

For the years ended December 31, 2021 and 2020

(Expressed in thousands of New Taiwan Dollars)

	2021	2020
Cash flows from operating activities:
Income (loss) before income tax	\$ 1,438,064	1,175,888
Adjustments:
Adjustments to reconcile profit (loss):
Depreciation expense	273,734	268,051
Amortization expense	93,155	95,806
Expected credit loss (reversed gain)	1,222	(2,119)
Provision for warranties and after service cost	21,454	54,620
Provision of allowance for sales discounts	66,833	119,161
Net loss (profit) on financial assets or liabilities at fair value through profit or loss	(162,875)	57,091
Interest expense	29,133	23,311
Interest income	(16,351)	(14,471)
Dividend income	(2,830)	-
Share-based payments	50,230	37,563
Share of loss of associates accounted for using the equity method	6,585	12,450
Gain on disposal of property, plant and equipment	(2,397)	(109)
Loss on disposal of intangible assets	-	164
Loss on liquidation of subsidiaries	-	71
Reversal of inventory obsolescence loss	(35,515)	(113,239)
Others	2,111	859
Total adjustments to reconcile profit (loss)	324,489	539,209
Changes in operating assets and liabilities:
Changes in operating assets:
Financial assets or liabilities at fair value through profit or loss	81,725	(11,150)
Notes and accounts receivable (including related parties)	308,466	(1,096,506)
Other receivables-related parties	2,888	(4,227)
Inventories	(1,245,722)	(1,244,079)
Other operating assets	385,435	(176,900)
Total changes in operating assets	(467,208)	(2,532,862)
Changes in operating liabilities:
Notes and accounts payable (including related parties)	(777,349)	2,350,568
Other payables-related parties	(37,871)	46,489
Other operating liabilities Net defined benefit assets and liabilities	(186,197) 122	44,111 (573)
Total changes in operating liabilities	(1,001,295)	2,440,595
Total changes in operating assets and liabilities	(1,468,503)	(92,267)
Total adjustments	(1,144,014)	446,942
Cash inflow generated from operations	294,050	1,622,830
Interest received	15,908	13,826
Dividends received	3,768	2,158
Interest paid	(22,534)	(23,188)
Income taxes paid	(85,843)	(68,873)
Net cash flows from operating activities	205,349	1,546,753

(Continued)

Consolidated Statements of Cash Flows (continue)

For the years ended December 31, 2021 and 2020

(Expressed in thousands of New Taiwan Dollars)

	2021	2020
Cash flows from investing activities:
Acquisition of financial assets at amortized cost	(892,574)	(1,039,062)
Proceeds from repayments of financial assets at amortized cost	1,139,766	419,062
Acquisition of financial assets at fair value through profit or loss	(304,723)	-
Proceeds from disposal of financial assets at fair value through profit or loss	192,564	-
Net cash outflow from loss of control of subsidiaries	-	(33,584)
Net cash outflow from acquisition of subsidiaries	(8,755)	(85,273)
Acquisition of property, plant and equipment	(379,636)	(175,819)
Proceeds from disposal of property, plant and equipment	35,714	962
Decrease (increase) in refundable deposits	(3,701)	24,265
Acquisition of intangible assets	(183,994)	(187,833)
Proceeds from disposal of intangible assets	280	-
Increase in other non-current assets	(17,047)	(27,181)
Net cash flows used in investing activities	(422,106)	(1,104,463)
Cash flows from financing activities:
Increase in short-term borrowings	14,819,598	6,595,762
Decrease in short-term borrowings	(14,876,384)	(6,611,976)
Increase in short-term notes and bills payable	1,390,000	806,000
Decrease in short-term notes and bills payable	(1,490,000)	(506,000)
Proceeds from issuing bonds (deducting issuance costs)	1,895,650	-
Increase in guarantee deposits received	178	33
Payment of lease liabilities	(46,440)	(49,439)
Cash dividends distributed from capital surplus	(219,760)	-
Exercise of employee stock options	71,913	78,891
Purchase of treasury shares	(93,609)	-
Proceeds from disposal of treasury shares	50,532	-
Exercise of disgorgement	2	-
Increase in non-controlling interests	102,040	40,000
Cash dividends paid to non-controlling interests	(1,000)	-
Net cash flows from financing activities	1,602,720	353,271
Effect of exchange rate changes on cash and cash equivalents	(170,638)	63,250
Net increase in cash and cash equivalents	1,215,325	858,811
Cash and cash equivalents at the beginning of period	4,078,159	3,219,348
Cash and cash equivalents at the end of period \$	5,293,484	4,078,159

Notes to the Consolidated Financial Statements

For the years ended December 31, 2021 and 2020

(expressed in thousands of New Taiwan Dollars unless otherwise specified)

1. Company history

Unizyx Holding Corporation (the " Unizyx" ) was incorporated on August 16, 2010. Unizyx was set up through a share swap with Zyxel Communications Corp. (" Zyxel" ). The shares of Unizyx have been authorized by the Financial Supervisory Commission, R.O.C. ("FSC") and are traded on the Taiwan Stock Exchange (TSE). The address of its registered office and principal place of business is 3F, No. 363, Sec. 2, Gongdao 5th Rd., Hsinchu City, Taiwan. Unizyx's main activity is investment.

As approved by the Unizyx's and Zyxel's Board of Directors meeting on October 15, 2010, MitraStar Technology Corp. ("MitraStar" ), an OEM/ODM Business Unit of Zyxel, was spun off from Zyxel and became a 100%-held subsidiary of Unizyx on January 1, 2011. Zyxel and MitraStar will focus on and optimize their operations in different areas of the communication product value chain, with one focusing on Zyxel brand communication product marketing and sales, and the other concentrating on communication technology development and product manufacturing. The focused and optimized operation of each subsidiary is expected to increase the overall efficiency of the Zyxel group. Zyxel spun off net operating assets amounting to \$3,530,734 to MitraStar and exchanged one share of MitraStar's common stock valued at New Taiwan Dollars (TWD) 10 per share for each share of Zyxel's stock valued at TWD 10.51 per share. Unizyx acquired 336,081 thousand shares of MitraStar's new issued common stock, and Zyxel and MitraStar became 100%-held subsidiaries of Unizyx.

Zyxel was incorporated on August 16, 1989, at the Hsinchu Science-based Industrial Park. The shares of Zyxel were traded on the TSE beginning on August 12, 1999. Zyxel's main activities include the research, development, production and sale of high-speed multi-mode modems and application-specific chipsets (ASICs), secure telephones, network modems, digital video coders and decoders, wide area networks (WANs), local area networks (LANs), and integrated service digital network (ISDN) equipment. In addition, it provides related consulting and design services and imports and exports related products. The stock of Zyxel stopped being publicly traded on September 2, 2010, as approved by the Securities and Futures Bureau.

MitraStar was incorporated on November 12, 2010, at the Hsinchu Science-based Industrial Park. MitraStar's main activities included manufacturing of wired communication equipment and apparatus, electronic parts and components, restrained telecom radio frequency equipment and materials, computer and computing peripheral equipment, data storage media and duplicating, wholesaling of computer software, restrained telecom radio frequency equipment and materials importing, software design services, digital information supply services, etc.

As approved by Unizyx's and Zyxel's Board of Directors meeting on February 26, 2019, in order to improve market competitiveness and increase the overall operating efficiency of the Company, Zyxel Networks Corporation ("ZNet") and its subsidiary Zyxel Networks A/S ("ZNet AS") were spun off from Zyxel and its subsidiary to become 100%-held subsidiaries of Unizyx on April 1, 2019. Zyxel spun off its channel business related net operating assets amounting to \$1,200,000 to ZNet, and exchanged one share of ZNet's common stock valued at TWD 10 per share for each share of Zyxel' s stock valued at TWD 16.56 per share. Unizyx acquired 72,450 thousand shares of ZNet's new issued common stock in total, and Zyxel and ZNet were 100%-held subsidiaries of Unizyx.

The consolidated financial statements as of December 31, 2021 and 2020, included Unizyx and its subsidiaries (hereinafter refer to as the "Company").

2. Approval date and procedures of the consolidated financial statements:

The consolidated financial statements were authorized for issue by the Board of Directors on March 14, 2022.

3. New standards, amendments and interpretations adopted:

(1) The impact of the International Financial Reporting Standards ("IFRSs") endorsed by FSC 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, IAS 39, IFRS 7, IFRS 4 and IFRS 16 " Interest Rate Benchmark Reform—Phase 2"

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

• Amendments to IFRS 16 "Covid-19-Related Rent Concessions beyond June 30, 2021"
• (2) 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 consolidated financial statements.

• Annual Improvements to IFRS Standards 2018–2020
• Amendments to IFRS 3 "Reference to the Conceptual Framework"
• Amendments to IAS 16 "Property, Plant and Equipment-Proceeds before Intended Use"
• Amendments to IAS 37 "Onerous Contracts-Cost of Fulfilling a Contract"

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

The new and amended standards, which have yet to be endorsed by the FSC, are as follows:

• 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"

As of the reporting date, except for IFRS 17 " Insurance Contracts" and its related amendments are not relevant to the Company, the Company is evaluating the impact of its initial adoption of the remaining standards or interpretations on its consolidated financial position and consolidated financial performance. The results thereof will be disclosed when the Company completes its evaluation.

4. Summary of significant accounting policies:

The significant accounting policies presented in the consolidated financial statements are summarized as follows. Except for those described individually, the significant accounting policies have been applied consistently to all the periods presented in the consolidated financial statements.

(1) Statement of compliance

The accompanying consolidated financial statements have been prepared in accordance with the Regulations Governing the Preparation of Financial Reports by Securities Issuers in the Republic of China (hereinafter referred to as the Regulations), International Financial Reporting Standards, International Accounting Standards, IFRIC Interpretations and SIC Interpretations endorsed by the FSC (hereinafter referred to as "IFRS endorsed by the FSC").

• (2) Basis of preparation
• A. Basis of measurement

The consolidated financial statements have been prepared on a historical cost basis except for the following material items in the consolidated statement of balance sheets:

• (a) Financial assets at fair value through other comprehensive income are measured at fair value;
• (b) Financial assets at fair value through profit or loss are measured at fair value (including derivative financial instruments);
• (c) The net defined benefit liability (asset) is recognized based on the fair value of the plan assets, less, the present value of the defined benefit obligation.

B. Functional and presentation currency

The functional currency of each entity is determined based on the primary economic environment in which the entity operates. TWD is Unizyx's functional currency, which is also the Company' s presentation currency. Unless otherwise noted, all financial information presented in TWD has been rounded to the nearest thousand.

• (3) Basis of consolidation
• A. Principle of preparation of the consolidated financial statements

The consolidated financial statements comprise Unizyx and its subsidiaries.

The financial statements of subsidiaries are included in the consolidated financial statements from the date on which control commences until the date on which control ceases. Intragroup balances and transactions, and any unrealized income and expenses arising from Intragroup transactions are eliminated in preparing the consolidated financial statements. The Company attributes the profit or loss and each component of other comprehensive income to the owners of Unizyx and to the non-controlling interests, even if this results in the non-controlling interests having a deficit balance.

The Company prepares consolidated financial statements using uniform accounting policies for alike transactions and other events in similar circumstances.

Changes in the Company's ownership interest in a subsidiary that do not result in a loss of control are accounted for as equity transactions. Any difference between the amount by which the non-controlling interests are adjusted and the fair value of the consideration paid or received will be recognized directly in equity, and the Company will attribute it to the owners of Unizyx.

B. List of subsidiaries in the consolidated financial statements

The consolidated entities were as follows:

			Percentage of Ownership (%)
Name of Investor	Name of Subsidiary	Business Nature	December 31, 2021	December 31, 2020	note
Unizyx	Zyxel	Development, manufacturing and sales of communications and networking products	100 %	100 %
Unizyx	MitraStar	Development, manufacturing and sales of communications and networking products	100 %	100 %
Unizyx	ZNet	Development and sales of communications and networking products	94 %	100 %	note 1

			Percentage of Ownership (%)
Name of Investor	Name of Subsidiary	Business Nature	December 31, 2021	December 31, 2020	note
Unizyx	Black Cat Incorporation (Black Cat)	Development and sales of information security products, and consultant management services	67 %	67 %
Zyxel	ZyChamp Investment Co., Ltd. (Zychamp)	Investment activities	100 %	100 %
Zyxel	Zyxel Communications Inc. (ZyUSA)	Sales and marketing	100 %	100 %
Zyxel	Zyxel Communications A/S (ZyAS)	Sales and marketing	100 %	100 %
Zyxel	Zyxel R&D Center GmbH (Gemini)	Development of communications and networking products	-	100 %	note 2
Zyxel	Zyxel Iletisim Teknolojileri A.S. (ZyTR)	Sales and marketing	100 %	100 %
Zyxel	Zyxel Communications Do Brasil Ltda. (ZyBR)	Sales and marketing	100 %	100 %
MitraStar	Bluebell Overseas Ltd. (Bluebell)	Investment activities	100 %	100 %
MitraStar	Wuxi Genezys Technology Ltd. (Genezys)	Development of communications and networking products	100 %	100 %
MitraStar	Shanghai Monetics Telecommunications Corporation (Monetics)	Sales of communications, networking products and network technology transfer service	100 %	100 %
MitraStar	XSquare Communications Corporation (XSquare)	Development and sales of communications and networking products	92 %	100 %	note 1
ZNet	Zytpe Communications Corporation (ZyTPE)	Development and sales of communications and networking products	100 %	100 %
ZNet	Zyxel Technology India Pvt Ltd. (ZNet IN)	Sales and marketing	100 %	100 %

			Percentage of Ownership (%)
Name of Investor	Name of Subsidiary	Business Nature	December 31, 2021	December 31, 2020	note
ZNet	Zyxel Online OU (ZNet EE)	Sales and marketing	-	100 %	note 3
ZNet	Zyxel Communications (Shanghai) Co., Ltd. (ZNet SHA)	Sales of communications, networking products and technical consulting service	100 %	100 %
ZNet	Zyxel Networks A/S (ZNet AS)	Sales and marketing	100 %	100 %
ZNet	Zyxel (Thailand) Company, Ltd. (ZNet TH)	Sales and marketing	100 %	100 %
ZNet	Tianjin Huagin Communications Equipment Co., Ltd. (Tianjin Huagin)	Sales of communications and networking products and technical consulting service	95 %	95 %
ZNet	Zyxel Korea Co., Ltd. (ZNet KR)	Sales and marketing	65 %	65 %
Bluebell	Wuxi MitraStar Technology Co., Ltd. (Wuxi MSTC)	Manufacturing and sales of communications and networking products and technical consulting service	100 %	100 %
ZyAS	Zyxel Deutschland GmbH (ZyDE)	Sales and marketing	100 %	100 %
ZyAS	Zyxel Communications UK Ltd. (ZyUK)	Sales and marketing	100 %	100 %
ZyAS	Zyxel Communications Czech s.r.o. (ZyCZ)	Sales and marketing	100 %	100 %
ZyAS	Zyxel Communications Iberia S.L (ZyES)	Sales and marketing	100 %	100 %
ZyAS	Zyxel Communications Italy S.r.l (ZyIT)	Sales and marketing	100 %	100 %
ZyAS	Gemini	Development of communications and networking products	100 %	-	note 2
ZNet AS	Zyxel Communications B.V. (ZNet BNL)	Sales and marketing	100 %	100 %

			Percentage of Ownership (%)
Name of Investor	Name of Subsidiary	Business Nature	December 31, 2021	December 31, 2020	note
ZNet AS	Zyxel Communications RU LLC (ZNet RUS)	Sales and marketing	100 %	100 %
ZNet AS	Zyxel France (ZNet FR)	Sales and marketing	100 %	100 %
ZyUSA	Flatworld Networks LLC (Flatworld)	Sales and marketing	-	-	note 4

• Note 1: ZNet and XSquare increased its authorized share capital by cash and reserved new shares for subscription by employees in December 2021 and October 2021, respectively. Therefore, the percentage of ownership in ZNet and XSquare by the Company decreased from 100% to 94% and from 100% to 92%, respectively.
• Note 2: Sphairon GmbH (a Zyxel Company) changed its name to Zyxel R&D Center GmbH (Gemini) in September 2021. For the purpose of adjustment of group structure, in October 2021, Zyxel sold the holding shares in Gemini to ZyAS with the carrying amount of the investment in Gemini.
• Note 3: ZNet EE was liquidated in July 2021.
• Note 4: Flatworld is a structured entity. The entity is established only with nominal capital, with its main source of funding from ZyUSA. It is controlled by ZyUSA, providing sale and marketing of obsolete stocks for ZyUSA. As a result, it is considered as a subsidiary of ZyUSA.
• C. Subsidiaries not included in the consolidated financial statements: None.
• D. Change in subsidiaries included in the consolidated financial statements:

The Company did not obtain the majority seats of the board of Ardomus Networks Corporation (Ardomus) during the election in July 2020, resulting in a loss of control over Ardomus. Thereafter, Ardomus was no longer included in the consolidated financial statements since the date of loss of control. For detailed description, please refer to note 6(8).

• (4) Foreign currencies
• A. Foreign currency transactions

Transactions in foreign currencies are translated into the respective functional currencies of consolidated entities at the exchange rates at the dates of the transactions. At the end of each subsequent reporting period (hereinafter referred as " the reporting date" ), 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 an investment in equity securities designated as at fair value through other comprehensive income, which are recognized in other comprehensive income.

B. Foreign operations

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

When a foreign operation is disposed of such that control or significant influence 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 any part of its interest in a subsidiary that includes a foreign operation while retaining control, the relevant proportion of the cumulative amount is reclassified to non-controlling interests. When the Company disposes of only part of investment in an associate or joint venture that includes a foreign operation while retaining significant influence, the relevant proportion of the cumulative amount is reclassified to profit or loss.

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

(5) 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.

An entity shall classify an asset as current when:

• A. It is expected to be realized, or intended to be sold or consumed, in the normal operating cycle;
• B. It is held primarily for the purpose of trading;
• C. It is expected to be realized within twelve months after the reporting period; or
• D. 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:

• A. It is expected to be settled in the normal operating cycle;
• B. It is held primarily for the purpose of trading;
• C. It is due to be settled within twelve months after the reporting period; or
• D. It 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.
• (6) Cash and cash equivalents

Cash and cash equivalents comprise cash, cash in bank, and time deposits with maturities of less than three months. 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 with maturities of less than three months used for short-term cash commitments instead of investment or other purposes are classified as cash and cash equivalents.

(7) Financial instruments

Accounts receivable are recognized when they are originated. All other financial assets and liabilities are 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 transaction costs that are directly attributable to its acquisition or issue. An accounts receivable without a significant financing component is initially measured at the transaction price.

A. Financial assets

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

On initial recognition, a financial asset is classified as measured at amortized cost, FVTOCI – 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.

(a) Financial assets measured at amortized cost

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

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

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

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

(b) Fair value through other comprehensive income (FVTOCI)

A debt investment is measured at FVTOCI 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.

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.

Equity investments at FVTOCI 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.

(c) Fair value through profit or loss (FVTPL)

All financial assets not classified as amortized cost or FVTOCI described as above are measured at FVTPL, including derivative financial assets.

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

(d) 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 at amortized costs, notes and accounts receivable (including from related parties), other receivables (including from related parties), refundable deposits and other financial assets).

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

• debt securities that are determined to have low credit risk at the reporting date;and
• other debt securities and bank balances for which credit risk (i.e. the risk of default occurring over the expected life of the financial instrument) has not increased significantly since initial recognition.

Loss allowance for trade receivables 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.

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 months 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.

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

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

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 and debt securities at FVTOCI 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 asset is credit-impaired includes the following observable data:

• significant financial difficulty of the borrower or issuer;

• a breach of contract such as a default or being more than 180 days past due;
• the lender of the borrower, for economic or contractual reasons relating to the borrower's financial difficulty, having granted to the borrower a concession that the lender would not otherwise consider;
• it is probable that the borrower will enter bankruptcy or other financial reorganization; or
• •the disappearance of an active market for a security because of financial difficulties.

Loss allowances for financial assets measured at amortized cost are deducted from the gross carrying amount of the assets. The Company recognizes the amount of expected credit losses (or reversal) in profit or loss, as an impairment gain or loss. For debt securities at FVTOCI, the loss allowance is charged to profit or loss and is recognized in other comprehensive income instead of reducing the carrying amount of the asset.

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. Furthermore, 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.

(e) 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.

• B. Financial liabilities and equity instruments
• (a) Classification of debt or equity

Debt and equity instruments issued by Unizyx 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.

(b) Equity instruments

Equity instruments refer to residual interests of the assets after the deduction of all the debts for any contracts. Equity instruments issued are recognized as the amount of consideration received less the direct cost of issuance.

(c) Treasury stocks

When Unizyx' s shares recognized as equity are repurchased, the amount of the consideration paid, which includes directly attributable costs, is recognized as a deduction from equity. Repurchased shares are classified as treasury stocks. When treasury stocks are sold or reissued subsequently, the amount received is recognized as an increase in equity, and the resulting surplus or deficit on the transaction is recognized in capital surplus or retained earnings (if the capital surplus is not sufficient to be written down).

(d) 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.

(e) 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.

(f) 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.

C. Derivative financial instruments

The Company holds derivative financial instruments to hedge its foreign currency exposures. 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.

(8) Inventories

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

Net realizable value is the estimated selling price in the ordinary course of business, less the estimated costs of completion and the estimated costs necessary to make the sale.

(9) Investment in associates

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

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

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

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

When the Company's share of losses of an associate equals or exceeds its interests in an associate, it discontinues recognizing its share of further losses. After the recognized interest is reduced to zero, additional losses are provided for, and a liability is recognized, only to the extent that the Company has incurred legal or constructive obligations or made payments on behalf of the associate.

• (10) Property, plant and equipment
• A. 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.

B. Subsequent cost

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

C. Depreciation

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

Land is not depreciated. The estimated useful lives of property, plant and equipment for current and comparative periods are as follows:

• (a) Buildings: 25 to 40 years.
• (b) Building improvements: 5 to 15 years.
• (c) Machinery, and research and development equipment: 3 to 12 years.
• (d) Office equipment and others: 3 to 10 years.
• (e) Buildings and building improvements constitute mainly buildings and their related facilities, air-condition systems etc. Each such part depreciates based on its useful life of 5 to 40 years.

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

(11) 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.

A. As a lessee

The Company recognizes a right-of-use asset and a lease liability at the lease commencement date. The right-of-use asset is initially measured at cost, which comprises the initial amount of the lease liability adjusted for any lease payments made at or before the commencement date, plus any initial direct costs incurred and an estimate of costs to dismantle and remove the underlying asset or to restore the underlying asset or the site on which it is located, less any lease incentives received.

The right-of-use asset is subsequently depreciated using the straight-line method from the commencement date to the earlier of the end of the useful life of the right-of-use asset or the end of the lease term. In addition, the right-of-use asset is periodically reduced by impairment losses, if any, and adjusted for certain remeasurements of the lease liability.

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

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

• (a) fixed payments, including in-substance fixed payments;
• (b) variable lease payments that depend on an index or a rate, initially measured using the index or rate as at the commencement date;
• (c) amounts expected to be payable under a residual value guarantee; and
• (d) payments for purchase or termination options that are reasonably certain to be exercised.

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

• (a) there is a change in future lease payments arising from the change in an index or rate; or
• (b) there is a change in the Company's estimate of the amount expected to be payable under a residual value guarantee; or
• (c) there is a change in the lease term resulting from a change of its assessment on whether it will exercise an option to purchase the underlying asset, or
• (d) there is a change of its assessment on whether it will exercise an extension or termination option; or
• (e) there is any lease modification

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

When the lease liability is remeasured to reflect the partial or full termination of the lease for lease modifications that decrease the scope of the lease, the 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 has elected not to recognize right-of-use assets and lease liabilities for shortterm leases of transportation equipment and offices that have a lease term of 12 months or less and leases of low-value assets. The Company recognizes the lease payments associated with these leases as an expense on a straight-line basis over the lease term.

As a practical expedient, the Company elected not to assess whether all rent concessions of lands leasing from SIPA that met all the following conditions were lease modifications or not:

• (a) the rent concessions occurring as a direct consequence of the COVID-19 pandemic;
• (b) the change in lease payments that resulted in revised consideration for the lease that is substantially the same as, or less than, the consideration for the lease immediately preceding the change;
• (c) any reduction in lease payments that affects only those payments originally due on, or before, June 30, 2022; and
• (d) there is no substantive change in other terms and conditions of the lease.

In accordance with the practical expedient, the effect of the change in the lease liability is reflected in profit or loss in the period in which the event or condition that triggers the rent concession occurs.

B. 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.

• (12) Intangible assets
• A. Recognition and measurement

Expenditure on research activities is recognized in profit or loss as incurred.

Development expenditure is capitalized only if the expenditure can be measured reliably, the product or process is technically and commercially feasible, future economic benefits are probable and the Company intends to, and has sufficient resources to, complete development and to use or sell the asset. Otherwise, it is recognized in profit or loss as incurred. Subsequent to initial recognition, development expenditure is measured at cost, less accumulated amortization and any accumulated impairment losses.

Intangible assets of the Company, including intellectual property, trading rights and computer software, are measured at cost less accumulated amortization and any accumulated impairment losses.

B. 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 is recognized in profit or loss as incurred.

C. 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 agreed royalty during the patent or 5~10 years from the date that they are available for use.

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

(13) Impairment of non-financial assets

At each reporting date, the Company reviews the carrying amounts of its non-financial assets (other than inventories, deferred tax assets and employee benefits, measured at fair value, less costs) 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 or cash-generating units (CGUs).

The recoverable amount of an asset or CGU is the greater of its value in use and its fair value less costs to sell. Value in use is based on the estimated future cash flows, discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset or CGU.

An impairment loss is recognized if the carrying amount of an asset or CGU exceeds its recoverable amount.

Impairment losses are recognized in profit or loss. They are allocated first to reduce the carrying amount of any goodwill allocated to the CGU, and then to reduce the carrying amounts of the other assets in the CGU on a pro rata basis.

For non-financial assets except for goodwill, an impairment loss is reversed only to the extent that the asset's carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortization, if no impairment loss had been recognized.

(14) Provisions

A provision is recognized if, as a result of a past event, the Company has a present legal or constructive obligation that can be estimated reliably, and it is probable that an outflow of economic benefits will be required to settle the obligation. Provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects the current market assessments of the time value of money and the risks specific to the liability. The unwinding of the discount is recognized as interest cost.

A provision for warranties is recognized when the underlying products or services are sold. The provision is based on historical warranty data and a weighting of all possible outcomes against their associated probabilities.

• (15) Revenue recognition
• A. 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.

(a) Sale of goods

The Company manufactures and sells wired and wireless broadband communications network products. The Company recognizes its revenue when control of the products has been 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.

When the Company offers 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 contract liability is recognized for expected volume discounts payable to customers in relation to sales made until the end of the reporting period.

The average credit period for the sales of wired and wireless broadband communications network products is 90 to 180 days.

The Company's obligation to provide a refund for faulty products under the standard warranty terms is recognized as a provision for warranty; Please refer to note 6(15).

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.

(b) Rendering of services

The Company recognizes revenue from providing services in the accounting period in which the services are rendered. For fixed-price contracts, revenue is recognized based on the actual service provided to the end of the reporting period as a proportion of the total services to be provided. The proportion of services provided is determined based on the rendered services to date as a proportion of the total estimated rendered services of the transaction.

Estimates of revenues, costs or extent of progress toward completion are revised if circumstances change. Any resulting increases or decreases in estimated revenues or costs are reflected in profit or loss in the period in which the circumstances that give rise to the revision become known by the management.

(c) 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.

B. Rental income

Income from subletting real estate is recognized in profit or loss.

(16) Government grants

The Company recognizes an unconditional government grant in profit or loss as other income when the grant becomes receivable. Grants that compensate the Company for expenses or losses incurred are recognized in profit or loss on a systematic basis in the periods in which the expenses or losses are recognized.

• (17) Employee benefits
• A. Defined contribution plans

Obligations for contributions to defined contribution plans are expensed as the related service is provided.

B. Defined benefit plans

The Company's net obligation in respect of defined benefit plans is calculated separately for each the plan by estimating the amount of future benefit that employees have earned in the current and prior periods, discounting that amount and deducting the fair value of any plan assets.

The calculation of defined benefit obligations is performed annually by a qualified actuary using the projected unit credit method. When the calculation results in a potential asset for the Company, the recognized asset is limited to the present value of economic benefits available in the form of any future refunds from the plan or reductions in future contributions to the plan. To calculate the present value of economic benefits, consideration is given to any applicable minimum funding requirements.

Remeasurements of the net defined benefit liability, which comprise actuarial gains and losses, the return on plan assets (excluding interest) and the effect of the asset ceiling (if any, excluding interest), are recognized in other comprehensive income, and accumulated in retained earnings within equity. The Company determines the net interest expense (income) on the net defined benefit liability (asset) for the period by applying the discount rate used to measure the defined benefit obligation at the beginning of the annual period to the then-net defined benefit liability (asset). Net interest expense and other expenses related to defined benefit plans are recognized in profit or loss.

When the benefits of a plan are changed or when a plan is curtailed, the resulting change in benefit that relates to past service or the gain or loss on curtailment is recognized immediately in profit or loss. The Company recognizes gains and losses on the settlement of a defined benefit plan when the settlement occurs.

C. Short-term employee benefits

Short-term employee benefits are expensed as the related service is provided.

A liability is recognized for the amount expected to be paid if the Company has a present legal or constructive obligation to pay this amount as a result of past service provided by the employee and the obligation can be estimated reliably.

(18) 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 Company's grant date of a share-based payment award is the date which the Company informs its employee of the exercise price and number of exercised shares.

(19) Income tax

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

Current taxes comprise the expected tax payables or receivables on the taxable profits (losses) for the year and any adjustment to the tax payable or receivable in respect of previous years. The amount of current tax payables or receivables are the best estimate of the tax amount expected to be paid or received. 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:

• A. 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; and
• B. temporary differences related to investments in subsidiaries and associates 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.

Deferred taxes are measured at tax rates that are expected to be applied to temporary differences when they reserve, using tax rates enacted or substantively enacted at the reporting date.

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

• A. the Company has a legally enforceable right to set off current tax assets against current tax liabilities; and
• B. the deferred tax assets and the deferred tax liabilities relate to income taxes levied by the same taxation authority on either:
• (a) the same taxable entity; or
• (b) 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.

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.

In accordance with the Article 40 of Business Mergers and Acquisitions Act, the Company has assigned its parent company, Unizyx, as the taxpayer to file a combined corporate income tax return and the 5% surtax on undistributed earnings of Unizyx, Zyxel, MitraStar and ZNet from 2011.

Unizyx, Zyxel, MitraStar and ZNet firstly calculated their respective income tax provision according to IAS 12 "Income Taxes" and reconciled the difference between the separate income tax returns and the combined final business income return. The differences were allocated to all combined entities on a reasonable, systematic and consistent basis and consequently to current year's income tax expense and deferred income tax expenses.

(20) Business combination

The Company accounts for business combinations using the acquisition method. The goodwill arising from an acquisition is measured as the excess of (i) the consideration transferred (which is generally measured at fair value) and (ii) the amount of non-controlling interest in the acquiree, both over the identifiable net assets acquired at the acquisition date. If the amount calculated above is a deficit balance, the Company recognized that amount as a gain on a bargain purchase in profit or loss immediately after reassessing whether it has correctly identified all of the assets acquired and all of the liabilities assumed.

All acquisition-related transaction costs are expensed as incurred, except for the issuance of debt or equity instruments.

For each business combination, the Company measures any non-controlling interests in the acquiree either at fair value or at the non-controlling interest' s proportionate share of the acquiree' s identifiable net assets, if the non-controlling interests are present ownership interests and entitle their holders to a proportionate share of the Company's net assets in the event of liquidation. Other components of non-controlling interests are measured at their acquisition-date fair values, unless another measurement basis is required by the IFRSs endorsed by the FSC.

(21) Earnings per share

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

(22) Operating segment information

An operating segment is a component of the Company that engages in business activities from which it may earn revenues and incur expenses (including revenues and expenses relating to transactions with other components of the Company). Operating results of the operating segment are regularly reviewed by the Company's chief operating decision maker to make decisions about resources to be allocated to the segment and assess its performance. Each operating segment consists of standalone financial information.

5. Major sources of accounting judgments, estimations and assumptions of uncertainty:

The preparation of the consolidated financial statements based on the IFRSs endorsed by the FSC requires management to make judgments, estimates and assumptions that affect the application of the accounting policies and reported amount of assets, liabilities, income and expense. Actual results may differ from these estimates.

Management continues to monitor the accounting assumptions, estimates and judgments. Management recognizes any changes in accounting estimates during the period and the impact of those changes in accounting estimates in the next period.

Information about judgments made in applying accounting policies that have most significant effects on the amounts recognize in the consolidated financial statements is the judgment regarding the period of the lease. The Company determines the lease term as the non-cancellable period of the lease, together with periods covered by an option to extend the lease if the lessee is reasonably certain to exercise that option, and periods covered by an option to terminate the lease if the lessee is reasonably not to exercise that option. In assessing whether a lessee is reasonably to exercise the options, the Company considers all relevant facts and circumstances that create an economic incentive for the lessee. The Company reassesses whether it is reasonably certain to exercise an extension option or not to exercise the option upon the occurrence of either a significant event or a significant change in circumstances that is within the control of the lessee. If there is a change in the lease term, the Company recognizes the amount of the remeasurement of the lease liability as an adjustment to the right-of-use asset. Please refer to notes 6(10) and (16).

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:

(1) Impairment of Accounts Receivable

The Company has its customers spread throughout the globe, wherein they are vulnerable to various changes, such as environmental, economic as well as legal matters. Therefore, the customer credit control is considered to be more complex. When assessing the recoverability of the Company' s receivables, it is necessary to consider any changes in the credit quality of the receivables from the original grant date of credit limits to the reporting date. For those receivables that have not been withdrawn within the credit term, the balance of the accounts receivable is calculated by reference from the transaction in the past, current financial status, and expected credit losses, in order to estimate the amount of allowance for bad debts. Please refer to note 6(5) "Explanation of significant accounts- Notes and accounts receivable" to the consolidated financial statements.

(2) Valuation of Inventories

The Company mainly engages in the research and development, as well as the production of communication and network products. Inventories are stated at the lower of cost or net realizable value. The Company used judgment and estimate to determine the net realizable value of inventory at the end of each reporting period. However, the rapid evolution of technology and the fierce market competition may lead to obsolete inventories and unmarketable items. The net realizable value of the inventory is mainly determined based on assumptions of future demand within a specific time horizon, which could result in significant adjustments. Please refer to note 6(6) " Explanation of significant accounts-Inventories, net" to the consolidated financial statements.

Accounting policies and disclosures of the Company include the fair value measurement for financial or non-financial assets and liabilities. The Company determines the fair value using the independent data sources which reflect the current market condition and confirming the data available are independent, reliable, in consistent with other sources and represent the exercisable price. The Company also periodically assesses the evaluation model, performs retrospective tests, and updates inputs with any other necessary fair value adjustment for the evaluation model in order to ensure the reasonableness of the valuation.

The Company evaluates its assets and liabilities using the observable market inputs. The hierarchy of the fair value depends on the valuation techniques used, and the different levels have been defined as follows:

• (1) Level 1: quoted prices (unadjusted) in active markets for identifiable assets or liabilities.
• (2) Level 2: inputs other than quoted prices included within Level 1 that are observable for the assets or liabilities, either directly (i.e. as prices) or indirectly (i.e. derived from prices).
• (3) Level 3: inputs for assets or liabilities that are not based on observable market data (unobservable inputs).

When there is a transfer between levels of the fair value hierarchy, the Company recognizes the transfer at the reporting date. For the assumptions used in fair value measurement, please refer to note 6(25) "Financial instruments".

6. Explanation of significant accounts

(1) Cash and cash equivalents

	December 31, 2021	December 31, 2020
Petty cash, demand deposits, and checking accounts	\$ 2,235,149	2,495,073
Cash equivalents-time deposits	3,000,335	1,583,086
Cash equivalents-repurchased agreements	58,000	-
	\$ 5,293,484	4,078,159

Please refer to note 6(25) for the fair value sensitivity analysis and interest rate risk of the financial assets and liabilities of the Company.

• (2) Financial assets and liabilities at fair value through profit or loss
• A. Financial assets measured at fair value through profit or loss

	December 31, 2021	December 31, 2020
Beneficiary certificates	\$	54,962	-
Listed stocks		54,364	-
Global depositary receipts		18,219	-
	\$	127,545	-

B. Sensitivity analysis

If the market price of the abovementioned financial assets had changed, the impact would have been as follows (if calculated on the same basis for both years and assuming that all other variables remained the same):

	2021		2020
Fair value at reporting date	Other comprehensive income (loss) before income taxes	Net income (loss) before income taxes	Other comprehensive income (loss) before income taxes	Net income (loss) before income taxes
Increase 10%	\$ -	12,755	-	-
Decrease 10%	\$ -	(12,755)	-	-

C. Non-hedging derivative financial instruments

	December 31, 2021	December 31, 2020
Financial assets at fair value through profit or loss:
Forward exchange contracts	\$ 19,531	-
Financial liabilities at fair value through profit or loss:
Forward exchange contracts	\$ 124	46,359

The Company uses derivative financial instruments to hedge certain foreign exchange risks that the Company is exposed to throughout its operating activities. Based on the accounting standards, the Company's derivative financial instruments do not qualify for hedge accounting.

The forward exchange contracts not settled as of December 31, 2021 and 2020 were as follows:

	December 31, 2021
Contract item	Maturity period	Contract amount (in thousands)
Sell EUR / Buy USD	2022.01~2022.08	EUR 34,610
	December 31, 2020
Contract item	Maturity period	Contract amount (in thousands)
Sell EUR / Buy USD	2021.02~2021.07	EUR 41,300

The Company' s financial assets at fair value through profit or loss mentioned above were not pledged as collateral.

(3) Financial assets at amortized cost-current and non-current

	December 31,	December 31, 2020
Time deposits (over 3 months)	\$	260,651	569,159
Pledged time deposits		125,157	70,669
	\$	385,808	639,828
Current	\$	281,149	569,159
Non-current	\$	104,659	70,669

The Company assessed that the above financial assets are held to maturity to collect contractual cash flows, which consist solely of payments of principal and interest on principal amount outstanding. Therefore, these investments were classified as financial assets at amortized cost.

• A. The Company held domestic time deposits, at an interest rate ranging from 0.35%~2.60% and from 0.08%~0.77% and with maturity date between March 2022 and November 2022 and between February 2021 and December 2021 as of December 31, 2021 and 2020, respectively.
• B. For credit risk, please refer to note 6(25).
• C. The Company's financial assets at amortized costs-current and non-current mentioned above were pledged as collateral; please refer to note 8.

(4) Financial assets at fair value through other comprehensive income

	December 31, 2021	December 31, 2020
Unlisted stocks	\$ 25,713	26,999

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

The investment in ZQAM Communications Corporation (ZQAM) was classified as financial assets at fair value through other comprehensive income – non-current since October 2020; Please refer to note 6(7).

• A. For fair value and market risk, please refer to note 6(25).
• B. For the sensitivity analysis of the financial instruments mentioned above, if the fair value of the securities which are measured at fair value through other comprehensive income had increased or decreased by 10% at the reporting date, the Company's other comprehensive income before income taxes would have increased or decreased by \$2,571 and \$2,700 for the years ended December 31, 2021 and 2020, respectively.
• C. The Company's financial assets at fair value through other comprehensive income mentioned above were not pledged as collateral.
• (5) Notes and accounts receivable, net
• A. Notes and accounts receivable, net

	December 31,	December 31, 2020
Notes receivable	\$	652	16,170
Letters of credit receivable		94,230	1,011
Accounts receivable		5,509,755	5,916,807
		5,604,637	5,933,988
Less: Provision for loss allowance		(83,702)	(92,895)
	\$	5,520,935	5,841,093

As of January 1, 2020, the ending balance of notes and accounts receivable, net was \$4,715,847.

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 and the days past due, as well as incorporated forward looking information, including macroeconomic and relevant industry information.

The loss allowance provision were determined as follows:

		Gross carrying amount	December 31, 2021 Weighted-average loss rate	Loss allowance provision
Current	\$	4,768,051	-	-
Overdue 1~30 days		545,621	-	-
Overdue 31~60 days		161,986	-	-
Overdue 61~90 days		28,302	8.80%	2,491
Overdue 91~180 days		11,616	21.46%	2,493
Overdue 181~360 days		13,855	25.35%	3,512
Overdue more than 361 days		75,206	100.00%	75,206
Total	\$	5,604,637		83,702

	December 31, 2020
		Gross carrying amount	Weighted-average loss rate	Loss allowance provision
Current	\$	5,450,276	-	-
Overdue 1~30 days		220,462	-	-
Overdue 31~60 days		166,304	-	-
Overdue 61~90 days		2,676	15.70%	420
Overdue 91~180 days		2,522	28.83%	727
Overdue 181~360 days		22,586	100.00%	22,586
Overdue more than 361 days		69,162	100.00%	69,162
Total	\$	5,933,988		92,895

B. The movements in the allowance for impairment with respect to notes and accounts receivable were as follows:

	2021	2020
Balance at January 1	\$ 92,895	141,370
Impairment loss recognized (reversed)	1,222	(2,119)
Amounts written off	(3,684)	(34,932)
Effect of movements in exchange rates	(6,731)	(11,424)
Balance at December 31	\$ 83,702	92,895

C. Financial assets pledged as collateral

The Company's notes and accounts receivable mentioned above were not pledged as collateral.

• (6) Inventories
• A. The details of inventories were as follows:

		December 31, 2021	December 31, 2020
	Raw materials	\$ 2,749,679	1,918,737
	Work in process and semi-finished goods	463,939	437,346
	Finished goods and merchandises	2,998,651	2,544,807
		\$ 6,212,269	4,900,890
B.	The details of the cost of goods sold were as follows:
		2021	2020
	Inventories sold	\$ 19,635,513	16,529,150
	Reversal of inventory obsolescence for the period	(35,515)	(113,239)
	Provision for warranties and after service cost for the period	21,454	54,620

• C. The Company's inventories mentioned above were not pledged as collateral.
• (7) Investments accounted for using the equity method

There was no individually significant associate of the Company. The following table summarized the amounts recognized by the Company and included in the consolidated financial statements:

	December 31, 2021	December 31, 2020
Summarized information of the carrying amount of associates that were not individually material	\$ 16,292	24,059
	2021	2020
Net gain (loss) attributable to the Company	\$ (6,585)	(12,450)

In October 2020, ZQAM increased its authorized share capital by cash, in which the Company did not subscribe for additional shares, resulting in the Company's percentage of ownership in ZQAM to decrease from 42% to 13%. Thereafter, the Company lost the significant influence on ZQAM, resulting in the Company to recognize the fair value of ZQAM amounting to \$9,262 as financial assets at fair value through other comprehensive income – non-current at the date of its loss of significant influence.

The Company' s investments accounted for using the equity method mentioned above were not pledged as collateral.

\$ 19,621,452 16,470,531

(8) Loss of control of subsidiaries

In June 2020, Ardomus increased its authorized share capital by cash, in which Zyxel did not subscribe for additional shares, resulting in Zyxel's percentage of ownership in Ardomus to decrease from 61% to 48%. Furthermore, Zyxel did not obtain the majority seats of the Ardomus' board during the election in July 2020, resulting in a loss of control over Ardomus. Hence, the Company recognized the fair value of 48% of its ownership in Ardomus amounting to \$15,556 as investments accounted for using the equity method at the date of loss of control.

The following table summarizes the carrying amounts of assets and liabilities of Ardomus at the date of losing control:

Cash and cash equivalents	\$ 33,584
Inventories	162
Property, plant and equipment, net	1,838
Other current assets	548
Intangible assets	175
Contract liabilities	(840)
Accounts payable (including related parties)	(451)
Other current liabilities	(2,881)
Carrying amount of net assets	\$ 32,135

(9) Property, plant and equipment

The cost and depreciation of the property, plant and equipment of the Company were as follows:

	Land	Building	Machinery and equipment	Research and development equipment	Office and other equipment	Construction in progress and inspection equipment	Total
Cost:
Balance at January 1, 2021	\$ 32,479	2,181,787	528,641	314,073	923,271	36,829	4,017,080
Additions for the period	-	9,709	152,840	127,966	78,166	10,955	379,636
Disposal for the period	-	(220)	(25,928)	(78,079)	(73,672)	-	(177,899)
Reclassification	-	-	20,685	2,383	117	(23,936)	(751)
Effect of movements in exchange rates	(913)	(9,747)	(2,188)	(549)	(18,324)	(846)	(32,567)
Balance at December 31, 2021	\$ 31,566	2,181,529	674,050	365,794	909,558	23,002	4,185,499
Balance at January 1, 2020	\$ 34,189	2,173,112	514,726	294,792	890,710	6,129	3,913,658
Additions for the period	-	11,940	7,596	49,200	71,132	35,951	175,819
Disposal for the period	-	(6,218)	(585)	(29,112)	(45,868)	-	(81,783)
Losing control of subsidiary	-	-	-	(496)	(2,133)	-	(2,629)
Reclassification	-	-	-	(1,584)	1,826	(5,799)	(5,557)
Effect of movements in exchange rates	(1,710)	2,953	6,904	1,273	7,604	548	17,572
Balance at December 31, 2020	\$ 32,479	2,181,787	528,641	314,073	923,271	36,829	4,017,080

	Land	Building	Machinery and equipment	Research and development equipment	Office and other equipment	Construction in progress and inspection equipment	Total
Depreciation:
Balance at January 1, 2021	\$ -	1,048,713	428,669	175,314	772,263	-	2,424,959
Depreciation for the period	-	68,284	52,837	37,954	70,094	-	229,169
Disposal for the period	-	(220)	(25,854)	(46,883)	(71,625)	-	(144,582)
Reclassification	-	-	44	-	(313)	-	(269)
Effect of movements in exchange rates	-	(3,628)	(2,550)	(446)	(16,299)	-	(22,923)
Balance at December 31, 2021	\$ -	1,113,149	453,146	165,939	754,120	-	2,486,354
Balance at January 1, 2020	\$ -	986,950	381,820	168,449	737,172	-	2,274,391
Depreciation for the period	-	66,730	41,441	35,717	73,370	-	217,258
Disposal for the period	-	(6,218)	(585)	(28,880)	(45,247)	-	(80,930)
Losing control of subsidiary	-	-	-	(184)	(607)	-	(791)
Reclassification	-	-	-	(879)	-	-	(879)
Effect of movements in exchange rates	-	1,251	5,993	1,091	7,575	-	15,910
Balance at December 31, 2020	\$ -	1,048,713	428,669	175,314	772,263	-	2,424,959
Carrying amounts:
Balance at December 31, 2021	\$ 31,566	1,068,380	220,904	199,855	155,438	23,002	1,699,145
Balance at December 31, 2020	\$ 32,479	1,133,074	99,972	138,759	151,008	36,829	1,592,121
Balance at January 1, 2020	\$ 34,189	1,186,162	132,906	126,343	153,538	6,129	1,639,267

The Company's property, plant and equipment mentioned above had been pledged as collateral for short-term borrowings; please refer to note 8.

(10) Right-of-use assets

The Company leases land, buildings, vehicles and office equipment. Information about leases for which the Company as a lease was as follows:

	Land	Building	Transportation equipment	Office equipment	Total
Cost:
Balance at January 1, 2021	\$ 404,259	158,189	3,602	6,104	572,154
Additions for the period	-	3,012	1,429	-	4,441
Disposal for the period	-	(19,926)	(1,415)	-	(21,341)
Effect of movements in exchange rates	(49)	(11,158)	(19)	-	(11,226)
Balance at December 31, 2021 \$	404,210	130,117	3,597	6,104	544,028
Balance at January 1, 2020	\$ 404,144	111,827	3,659	6,104	525,734
Additions for the period	-	44,368	538	-	44,906
Disposal for the period	-	(2,009)	(559)	-	(2,568)
Effect of movements in exchange rates	115	4,003	(36)	-	4,082
Balance at December 31, 2020 \$	404,259	158,189	3,602	6,104	572,154

	Land	Building	Transportation equipment	Office equipment	Total
Depreciation:
Balance at January 1, 2021	\$ 33,616	62,062	2,245	3,202	101,125
Depreciation for the period	16,806	24,930	1,229	1,600	44,565
Disposal for the period Effect of movements in	-	(14,355)	(1,415)	-	(15,770)
exchange rates	(3)	(4,873)	(13)	-	(4,889)
Balance at December 31, 2021 \$	50,419	67,764	2,046	4,802	125,031
Balance at January 1, 2020	\$ 16,805	31,079	1,213	1,601	50,698
Depreciation for the period	16,803	30,805	1,584	1,601	50,793
Disposal for the period	-	(1,339)	(534)	-	(1,873)
Effect of movements in exchange rates	8	1,517	(18)	-	1,507
Balance at December 31, 2020 \$	33,616	62,062	2,245	3,202	101,125
Carrying amount:
Balance at December 31, 2021 \$	353,791	62,353	1,551	1,302	418,997
Balance at December 31, 2020 \$	370,643	96,127	1,357	2,902	471,029
Balance at January 1, 2020	\$ 387,339	80,748	2,446	4,503	475,036

(11) Intangible assets

The costs of intellectual property, trading rights and computer software were presented under intangible assets. The cost and amortization of intangible assets of the Company were as follows:

	Intellectual property	Trading rights	Computer software	Total
Costs:
Balance at January 1, 2021	\$ 183,286	231,611	134,269	549,166
Additions for the period	41,608	-	142,386	183,994
Disposal for the period	-	(112)	(11,388)	(11,500)
Effect of movements in exchange rates	(8,662)	(24,389)	(4,258)	(37,309)
Balance at December 31, 2021	\$ 216,232	207,110	261,009	684,351
Balance at January 1, 2020	\$ 1,480	214,585	143,232	359,297
Additions for the period	183,827	118	3,888	187,833
Disposal for the period	(980)	(12,168)	(18,395)	(31,543)
Losing control of subsidiary	-	-	(350)	(350)
Reclassification	(900)	18,879	5,566	23,545
Effect of movements in exchange rates	(141)	10,197	328	10,384
Balance at December 31, 2020	\$ 183,286	231,611	134,269	549,166

	Intellectual property	Trading rights	Computer software	Total
Amortization:
Balance at January 1, 2021	\$ 16,942	166,580	105,886	289,408
Amortization for the period	27,708	15,162	25,192	68,062
Disposal for the period	-	168	(11,388)	(11,220)
Effect of movements in exchange rates	(1,356)	(18,285)	(4,151)	(23,792)
Balance at December 31, 2021	\$ 43,294	163,625	115,539	322,458
Balance at January 1, 2020	\$ 1,009	126,080	107,416	234,505
Amortization for the period	16,884	26,070	15,693	58,647
Disposal for the period	(980)	(12,168)	(18,231)	(31,379)
Losing control of subsidiary	-	-	(175)	(175)
Reclassification	-	18,879	879	19,758
Effect of movements in exchange rates	29	7,719	304	8,052
Balance at December 31, 2020	\$ 16,942	166,580	105,886	289,408
Carrying amounts:
Balance at December 31, 2021	\$ 172,938	43,485	145,470	361,893
Balance at December 31, 2020	\$ 166,344	65,031	28,383	259,758
Balance at January 1, 2020	\$ 471	88,505	35,816	124,792

The Company's intangible assets mentioned above were not pledged as collateral.

(12) Short-term borrowings

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

	December 31,	December 31, 2020
Unsecured borrowings	\$	1,557,000	1,524,247
Secured borrowings		-	90,000
Total	\$	1,557,000	1,614,247
Range of interest rates at year end		0.83%~1.10%	0.45%~1.20%

For the collateral for short-term borrowings facilities, please refer to note 8.

(13) Short-term notes and bills payable

The details of the Company's short-term notes and bills payable were as follows:

	December 31, 2021	December 31, 2020
Commercial papers payable	\$ 200,000	300,000
Range of interest rates at year end	0.89%	0.87%

(14) Bonds payable

The details of the Company's bonds payable were as follows:

	December 31, 2021
Unsecured corporate bonds	\$ 1,900,000
Discount on bonds payable	(3,766)
	\$ 1,896,234

On May 10, 2021, the Company' s Board of Directors resolved the issuance of first unsecured corporate bond in 2021, which Mega International Commercial Bank was engaged to issue on August 5, 2021, with fair value amounting to \$1,900,000, at fixed coupon rate of 0.85%, with maturity of 5 years, and with maturity date on August 5, 2026.

(15) Provision-current

Provisions for warranty and after service cost were as follows:

	2021	2020
Balance at January 1	\$ 546,982	575,449
Provision for the period	21,454	54,620
Write-off for the period	(60,499)	(81,879)
Effect of movements in exchanges rates	(12,392)	(1,208)
Balance at December 31	\$ 495,545	546,982

The Company's provision for warranty and after service cost mentioned above was for sales of networking products. Provision for warranty and after service cost was estimated based on the historical warranty information for similar products or services. The Company expected that most of the cost would occur within 1 or 2 years after sales.

(16) Lease liabilities

Carrying amounts of lease liabilities were as follows:

	December 31, 2021		December 31, 2020
Current	\$	39,181	46,575
Non-current	\$	399,908	443,497

For the maturity analysis, please refer to note 6(25) "Financial instruments".

The amounts recognized in profit or loss were as follows:

	2021	2020
Interest on lease liabilities	\$ 5,194	5,429
Expenses relating to short-term leases	\$ 39,807	29,297
Expenses relating to leases of low-value assets, excluding short-term leases of low-value assets	\$ 10,825	18,937

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

	2021	2020
Total cash outflow for leases	\$ 100,478	91,940

A. Real estate leases

The Company leases land and buildings for its office space and factories. The leases typically run for a period of 20 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 provide for additional rent payments that are based on the fluctuation in local price, plus the expense adjusted for public facilities constructions in each area. Such expense normally occurs once a year.

B. Other leases

The Company leases transportation and office equipment with contract terms of one to five years. These leases are leases of low-value items. The Company has elected not to recognize right-of-use assets and lease liabilities for these leases.

• (17) Employee benefits
• A. Defined benefit plans

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

	December 31, 2021	December 31, 2020
Present value of defined benefit obligations	\$ 257,274	247,545
Fair value of plan assets	(310,370)	(311,832)
Net defined benefit assets	\$ (53,096)	(64,287)

Details of recognized liabilities (assets) were as follows:

	December 31, 2021	December 31, 2020
Net defined benefit assets	\$ (66,075)	(69,783)
Net defined benefit liabilities	12,979	5,496
	\$ (53,096)	(64,287)

The Company's domestic subsidiaries make defined benefit plan contributions to the pension fund account at Bank of Taiwan that provides pensions for employees upon retirement. The plans (covered by the Labor Standards Law) entitle a retired employee to receive an annual payment based on years of service and average salary for the six months prior to retirement.

(a) Composition of plan assets

The Company's domestic subsidiaries contribute to 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 Fund, Ministry of Labor. 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 \$310,370 at the reporting date. For information on the utilization of the labor pension fund assets including the asset allocation and yield of the fund, please refer to the website of the Bureau of Labor Fund.

The accumulated employee retirement reserve provided by Unizyx, Zyxel and MitraStar is sufficient to support the payment, therefore, the Company ceased to contribute to its pension fund from September 1, 2017 to December 31, 2022 after obtaining an approval from the authority, and the Company expects to prolong the cease in the future. Thus, Unizyx, Zyxel and MitraStar do not expect to make any defined benefit plan contribution to their pension fund in the following year after the reporting date.

(b) Movements in present value change of defined benefit obligation

The movements in present value of the defined benefit obligation of the Company were as follows:

		2021	2020
Defined benefit obligation at January 1	\$	247,545	218,707
Current service cost		687	609
Current interest cost		1,782	2,371
Remeasurements of the net defined benefit assets (liabilities)
- Actuarial losses (gains) arising from changes in experience adjustment		7,766	556
- Actuarial losses (gains) arising from changes in demographic assumption		6,584	-
- Actuarial losses (gains) arising from changes in financial assumptions		-	26,420
Paid from pension plan		(7,090)	(1,118)
Defined benefit obligation at December 31	\$	257,274	247,545

(c) Movements of defined benefit plan assets

The movements in fair value of the defined benefit plan assets of the Company were as follows:

2021 2020
Fair value of plan assets at January 1 \$ 311,832	300,515
Interest income 2,272	3,296
Remeasurements of the net defined benefit assets (liabilities)
-Actuarial gains (losses) arising from changes in experience adjustment 3,281	8,882
Contribution to the plan 75	257
Paid from pension plan (7,090)	(1,118)
Fair value of plan assets at December 31 \$ 310,370	311,832

(d) Effect of the asset ceiling

There was no effect on the asset ceiling for the years of 2021 and 2020.

(e) Expenses recognized in profit or loss

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

	2021		2020
Current service cost	\$	687	609
Net interest on the net defined benefit liabilities
(assets)		(490)	(925)
	\$	197	(316)

(f) Remeasurements of net defined benefit liabilities (assets) recognized in other comprehensive income

The Company's remeasurements of net defined benefit liabilities (assets) recognized in other comprehensive income were as follows:

	2021		2020
Accumulated amount at January 1	\$	(16,893)	1,201
Recognized during the period		(11,069)	(18,094)
Accumulated amount at December 31	\$	(27,962)	(16,893)

(g) Actuarial assumptions

The Company's key actuarial assumptions at the reporting date were as follows:

	December 31, 2021	December 31, 2020
Discount rate	0.625%~0.75%	0.625%~0.75%
Future salary increase rate	2.00%~3.00%	2.00%~3.00%

The Company is expecting a contribution of \$962 to its defined benefit plans in the following year after the reporting date.

The weighted-average duration of the defined benefit obligation is 14.97 years.

(h) Sensitivity analysis

If there was a change in the actuarial assumptions, the impact on the present value of the defined benefit obligation would be as follows:

	benefit obligations	Impact on present value of defined
	Increase 0.25%	Decrease 0.25%
December 31, 2021
Discount rate	\$ (7,626)	7,945
Future salary increase rate	7,637	(7,375)

	benefit obligations	Impact on present value of defined
	Increase 0.25%	Decrease 0.25%
December 31, 2020
Discount rate	\$ (7,662)	7,994
Future salary increase rate	7,687	(7,412)

Reasonably possible changes at the reporting date in one of the relevant actuarial assumptions, assuming all other variables remain 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 consolidated balance sheets.

There were no changes in the method and assumptions used in calculating the sensitivity analysis for the years of 2021 and 2020.

B. Defined contribution plans

The Company's domestic company allocates 6% of each employee's monthly wages to the labor pension personal account at the Bureau of Labor Insurance, Ministry of Labor (the Bureau of 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 Labor Insurance without additional legal or constructive obligations thereafter.

The pension costs of the Company's domestic company under the defined contribution method were \$79,021 and \$77,673 for the years ended December 31, 2021 and 2020, respectively. Payment was made to the Bureau of Labor Insurance.

The total pension costs of the Company's overseas subsidiaries under the defined contribution method were \$83,291 and \$55,375 for the years ended December 31, 2021 and 2020, respectively.

Furthermore, due to the Covid-19 pandemic, the amount of pension cost exemption from local government was \$22,867 for the year ended December 31, 2020.

(18) Income tax

A. Income tax expense

The amounts of income tax expense of the Company were as follows:

	2021	2020
Current tax expense
Current period	\$ 263,925	156,038
Adjustment for prior periods	(7,566)	20,429
	256,359	176,467

	2021	2020
Deferred tax expense
Origination and reversal of temporary differences	\$ 86,246	168,420
Income tax expense	\$ 342,605	344,887

The amounts of income tax expense (benefit) recognized in other comprehensive income of the Company were as follows:

	2021	2020
Exchange differences on translation of foreign
financial statements	\$ (32,124)	25,562

Reconciliations of income tax expense and profit (loss) before income taxes were as follows:

	2021	2020
Profit (loss) before income taxes	\$ 1,438,064	1,175,888
Income tax using Unizyx's domestic tax rate	287,613	235,178
Effect of tax rates in foreign jurisdiction	2,170	38,011
Investment (gain) loss of foreign subsidiaries recognized using the equity method	86,642	68,935
Prior-year adjustments	(7,566)	20,429
Effect of unrecognized deferred tax assets and liabilities	10,427	19,575
Others	(36,681)	(37,241)
	\$ 342,605	344,887

B. Deferred tax assets and liabilities

(a) Unrecognized deferred tax assets and liabilities

Deferred tax assets and liabilities have not been recognized in respect of the following items:

	December 31, 2021	December 31, 2020
Loss on overseas investment accounted for using the equity method	\$ 105,959	111,190
Loss carryforward	147,077	141,575
Allowance for inventory obsolescence	35,307	25,151
Gain on overseas investment accounted for using
the equity method	(95,608)	(95,608)
	\$ 192,735	182,308

The Company is able to control the timing of the reversal of the temporary differences associated with investments in subsidiaries. Also, it is probable that the temporary differences will not reverse in the foreseeable future. Hence, such temporary differences are not recognized under deferred tax assets and liabilities.

(b) Recognized deferred tax assets and liabilities

Changes in the amount of deferred tax assets and liabilities were as follows:

	January 1, 2020	Recognized in income statement	Recognized in other comprehensive income	December 31, 2020	Recognized in income statement	Recognized in other comprehensive income	December 31, 2021
Unrealized profit on intercompany sales	\$ 93,515	11,488	-	105,003	(11,265)	-	93,738
Provision for warranties and after service cost	102,918	(4,816)	-	98,102	(9,622)	-	88,480
Exchange differences on translation of foreign financial statements	76,686	-	(19,122)	57,564	-	25,684	83,248
Loss on overseas investment accounted for using the equity method	37,890	31,657	-	69,547	5,861	-	75,408
Allowance for inventory obsolescence	120,887	(44,463)	-	76,424	(17,605)	-	58,819
Temporary difference of subsidiary	46,763	1,056	-	47,819	(332)	-	47,487
Loss carryforward	77,490	(75,654)	-	1,836	9,066	-	10,902
Others	52,936	4,421	-	57,357	32,167	-	89,524
	\$ 609,085	(76,311)	(19,122)	513,652	8,270	25,684	547,606

Deferred tax assets:

Deferred tax liabilities:

	January 1, 2020	Recognized in income statement	Recognized in other comprehensive income	December 31, 2020	Recognized in income statement	Recognized in other comprehensive income	December 31, 2021
Gain on overseas investment accounted for using the equity method	\$ (138,763)	(89,601)	-	(228,364)	(85,544)	-	(313,908)
Net defined benefit assets	(8,873)	(1,649)	-	(10,522)	(22)	-	(10,544)
Exchange differences on translation of foreign financial statements	-	-	(6,440)	(6,440)	-	6,440	-
Others	(5,643)	(859)	-	(6,502)	(8,950)	-	(15,452)
	\$ (153,279)	(92,109)	(6,440)	(251,828)	(94,516)	6,440	(339,904)

According to the R.O.C. Income Tax Act, the previous 10 years' losses of the Company's domestic subsidiaries as assessed by the tax authorities can offset the current year's net taxable income for income tax purposes.

As of December 31, 2021, the unused loss carryforwards and related expiration years of the Company's domestic subsidiaries were as follows:

Year of loss	Expiration year	Unused loss carryforward
2015 (assessed)	2025	\$ 626
2016 (assessed)	2026	117
2018 (assessed)	2028	38
2019 (assessed)	2029	9,707
2020 (filed)	2030	9,943
2021 (estimated)	2031	45,438
		\$ 65,869

In accordance with the tax law of each region where the foreign subsidiaries of the Company are located, losses on foreign subsidiaries as assessed by the tax authorities can be carried forward to offset the future years' taxable profits. As of December 31, 2021, the tax effects of the unused loss on carryforwards amounted to \$144,805.

C. Examination and approval

The income tax returns of Unizyx, Zyxel, and MitraStar had been examined and assessed by the tax authority through 2018.

• (19) Capital and other equity
• A. Common stock

On August 16, 2010, Unizyx was set up through Zyxel's share swap, and the total share capital was \$5,170,483. As of December 31, 2021 and 2020, Unizyx's authorized common stock amounted to \$7,000,000 with par value of \$10 TWD per share, of which \$520,000 was for use as employee stock options, convertible preferred stock, or convertible corporate bonds. The issued common stock amounted to \$4,490,008 and \$4,411,773 as of December 31, 2021 and 2020, respectively.

As of December 31, 2021 and 2020, because the related registration procedures were still in progress, the new shares of common stock arising from the exercise of employee stock options amounting to \$46,140 and \$64,665 were recognized as advance receipts for share capital, respectively.

B. Capital surplus

The details of Unizyx's capital surplus were as follows:

	December 31,	December 31, 2020
Additional paid-in capital	\$	3,309,840	3,513,099
Treasury stock transactions		243,075	204,503
Employee stock options		110,408	77,644
Others		17,601	32,640
	\$	3,680,924	3,827,886

• (a) When Unizyx was set up through Zyxel's share swap on August 16, 2010, the amount of net assets in excess of the par value calculated by the share swap method was \$4,089,976, which was recorded as additional paid-in capital.
• (b) According to Article 30 of the Business Mergers and Acquisitions Act, the additional paid-in capital of the holding company transferred from unappropriated retained earnings of a company through a share swap with other companies is not affected by the restriction of Article 241(i) of the Company Act. According to Article 47 of the Financial Holding Company Act and Ruling No. 0910003413, if the additional paid-in capital resulting from the share swap is originated from previous unappropriated earnings of subsidiaries, it can be appropriated as cash dividends or capitalized in the current year; also the capitalization ratio is not restricted by Article 8 of the Securities and Exchange Act Enforcement Rules. Further, according to Ruling No. 0910016280, since this additional paid-in capital is not generated from the holding company's operations, there is no remuneration of the Board of Directors and bonus to employees. As of December 31, 2021 and 2020, the additional paid-in capital generated from Zyxel's unappropriated earnings before the share swap was \$1,139,082.
• (c) In accordance with the R.O.C. Company Act, realized capital surplus can only be reclassified as share capital or distributed as cash dividends after offsetting losses. The aforementioned capital surplus includes share premiums and donation gains. In accordance with the Securities Offering and Issuance Guidelines, the amount of capital surplus to be reclassified under share capital shall not exceed 10 % of the actual share capital amount.

• (d) As approved by the shareholders' meeting on July 1, 2021, Unizyx distributed cash dividends amounting to \$223,822 by using the capital surplus. The information will be available on the Market Observation Post system website.

• C. Retained earnings

• (a) Legal reserve

If the Company generated profit for the year, the distribution of the legal reserve, either by new shares or by cash, shall be decided at the shareholders' meeting, and the distribution amount is limited to the portion of legal reserve which exceeds 25 % of the paid-in capital.

(b) Special reserve

In accordance with Ruling No. 1010012865 issued by the Financial Supervisory Commission on April 6, 2012, a portion of current-period earnings and undistributed prior-period earnings shall be reclassified as a special reserve during earnings distribution. The amount to be reclassified should be equal to the current-period total net debit balance of other equity components of the shareholders' equity. Similarly, a portion of undistributed prior-period earnings shall be reclassified as a special reserve (and does not qualify for earnings distribution) to account for cumulative changes to other equity components of the shareholders' equity pertaining to prior periods. Any subsequent reversals pertaining to the net debit balance of other equity components of the shareholders' equity shall qualify for additional distributions.

(c) Distribution of earnings

Pursuant to regulations promulgated by the FSC, a special reserve equivalent to the total amount of items that are accounted for as deductions from stockholders' equity shall be set aside from current earnings, and not distributed. The special reserve shall be made available for appropriation to the extent of reversal of deductions from stockholders' equity in subsequent periods.

According to the articles of incorporation, in years of earnings, Unizyx has to offset any accumulated deficit, pay income tax, and appropriate 10% of the balance as a legal reserve before distribution of earnings, unless the amount in the legal reserve is already equal to or greater than the total paid-in capital. Thereafter, an amount shall be set aside or reversed as a special reserve in accordance with related laws, regulations, or provisions of the competent authorities. Distribution of the remaining profit after setting aside the abovementioned amounts, together with the balance of the unappropriated retained earnings of the previous year, shall be proposed by the Board of Directors to be approved at the shareholders' meeting.

The dividend policy of Unizyx is based on Unizyx's profit condition, future operating development, and assurance of stockholders' equity. Considering the common stock, capital structure, operating status, and earnings, Unizyx may distribute dividends in the form proposed by the Board of Directors, including stock issuance based on retained earnings and/or cash dividends. The dividend distribution must be through a resolution passed by the Board of Directors that complies with Unizyx' s balanced and stable dividend policy.

The appropriated earnings will preferably be distributed in the form of cash dividends, with distribution of stock dividends being the other alternative. Distribution of stock dividends should be no more than 50% of total dividends.

On June 12, 2020, the resolution of loss off-setting proposal for the year of 2019 was approved by shareholders' meeting of Unizyx. Furthermore, on July 1, 2021, the resolution of loss off-setting proposal for the year of 2020 to offset accumulated deficits by using the legal reserve amounting to \$32,700 was approved by shareholders' meeting of Unizyx. The related information is available on the Market Observation Post System website.

On March 14, 2022, the earnings distribution proposal for the year of 2021 was approved by the Board of Directors meeting of Unizyx. The plan to distribute the 2021 earnings will need to be approved in the shareholders' meeting of Unizyx. The information will be available on the Market Observation Post System website.

D. Treasury stock

In the second quarter of 2021, Unizyx recognized the gain on disposal of Unizyx shares held by Zychamp amounting to \$34,510 in capital surplus generated from treasury stock transactions. As of December 31, 2021 and 2020, Unizyx's shares held by Zychamp amounted to 8,146 and 9,391 thousand shares, and original costs were \$104,839 and \$120,861; the market values were \$285,526 and \$358,276, respectively.

As approved by the Board of Directors of Unizyx on November 3, 2021, in order to maintain the credit of the Company and shareholders' equity, Unizyx had a plan on repurchasing 20,000 thousand shares of treasury stocks in accordance with the related regulations of stock exchange. Unizyx had repurchased 2,936 thousand shares of treasury stocks, with the cost of which amounted to \$93,609, from November 4 to December 31 in 2021.

• E. Other equity
• (a) Exchange differences on translation of foreign financial statements

	2021	2020
Balance at January 1	\$ (293,572)	(395,821)
Foreign exchange differences (net of tax)	(128,370)	102,249
Reorganization	19,463	-
Balance at December 31	\$ (402,479)	(293,572)

(b) Unrealized gains (losses) from financial assets measured at fair value through other comprehensive income

		2021	2020
	Balance at January 1	\$ (58,338)	(67,406)
	Unrealized gains (losses) from financial assets measured at fair value through other
	comprehensive income (net of tax)	(1,286)	9,068
	Balance at December 31	\$ (59,624)	(58,338)
F.	Non-controlling interests (net of tax)
		2021	2020
	Balance at January 1	\$ 27,198	20,777
	Amounts attributable to the non-controlling interests:
	Net income (loss)	(1,241)	3,057
	Remeasurements of defined benefit plans	(123)	-
	Exchange differences on translation of foreign financial statements (net after tax)	(1,704)	164
	Share-based payments	9,106	-
	Change in ownership interests in subsidiaries accounted for using equity method	15,041	(20,221)
	Increase in non-controlling interests	102,040	40,000
	Cash dividends paid to non-controlling interests	(1,000)	-
	Decrease in non-controlling interests due to losing control	-	(16,579)
	Balance at December 31	\$ 149,317	27,198

(20) Share-based payment

A. Unizyx

Unizyx registered and issued 15,000 thousand and 19,018 thousand units of employee stock options in August 2020 and November 2018, respectively. Each unit can be exercised to purchase one share of Unizyx. The duration of both plans is 5 years, and the plans were approved by the FSC. As of December 31, 2021, the information related to the employee stock options was as follows:

			Issued units		Exercise price per	Adjusted exercise price per
	Authorization	Grant	(in		share	share
Type	date	date	thousands)	Grant period	(TWD)	(TWD)
Employee stock	Aug. 21, 2020	Sep. 22,	15,000	Service periods	24.7	24.2
options in 2020		2020		between 2 to 3 years

					Exercise	Adjusted exercise
	Authorization	Grant	Issued units (in		price per share	price per share
Type	date	date	thousands)	Grant period	(TWD)	(TWD)
Employee stock	Nov. 20, 2018	Nov. 21,	19,018	Service periods	12.2	12.0
options in 2018		2018		between 2 to 3 years

The estimated fair value of the options granted were \$5.4 (TWD) and \$2.1~\$3.1 (TWD) at the date of grant using the Black-Scholes option pricing model. Unizyx granted to the Company's employees 15,000 thousand and 19,018 thousand units of employee stock options, and the Company recognized compensation cost amounting to \$22,863 and \$25,771 for the years ended December 31, 2021 and 2020, respectively. Weighted-average assumptions were as follows:

	2020 stock option	2018 stock option
Expected dividend yield	3.08%	3.08%
Expected volatility	40.256%~46.059%	36.108%~44.619%
Risk-free interest rate	0.1899%~0.2381%	0.608%~0.688%
Expected life	2~3 years	2~3 years

Information related to employee stock options was as follows:

(a) Employee stock options in 2020

		2021	2020
Employee stock options	Weighted average Options exercise (in price (TWD) thousands)		Options (in thousands)	Weighted average exercise price (TWD)
Outstanding at beginning of	15,000	\$ 24.7	-	\$ -
year
Granted	-	-	15,000	24.7
Exercised	-	-	-	-
Forfeited	(124)	-	-	-
Outstanding at end of year	14,876	24.2	15,000	24.7
Exercisable at end of year	-		-

As of December 31, 2021 and 2020, the weighted-average remaining contractual life for outstanding option awards were 3.73 and 4.73 years, respectively.

(b) Employee stock options in 2018

		2021	2020
Employee stock options	Options (in thousands)	Weighted average exercise price (TWD)	Options (in thousands)	Weighted average exercise price (TWD)
Outstanding at beginning of year	10,497	\$ 12.2	17,328	\$ 12.2
Granted	-	-	-	-
Exercised	(5,971)	12.0	(6,466)	12.2
Forfeited	(274)	-	(365)	-
Outstanding at end of year	4,252	12.0	10,497	12.2
Exercisable at end of year	4,252		2,015

As of December 31, 2021 and 2020, the weighted-average remaining contractual life for outstanding option awards were 1.89 and 2.89 years, respectively.

B. ZNet

As approved by the Board of Directors meeting in November 2021, ZNet issued new shares by cash. In accordance with the R.O.C. Company Act, ZNet reserved 6,429 thousand new shares for subscription by the employees of ZNet, Unizyx, and affiliated companies. The duration of the plan is 0.12 years. The estimated fair value of the options granted was \$1.4 (TWD) at the date of grant using the Black-Scholes option pricing model. The Company recognized compensation cost amounting to \$9,056 for the year ended December 31, 2021.

As approved by the Board of Directors meetings in November, 2020 and 2019, ZNet issued 7,000 thousand and 6,000 thousand units of employee stock options, respectively. Each unit can be exercised to purchase one share of ZNet. The duration of both plans is 5 years.

The estimated fair value of the options granted amounted to \$3.3 (TWD) and \$3.9 (TWD) at the date of grant using the Black-Scholes option pricing model, respectively. ZNet granted the Company's employees 7,000 thousand and 5,618 thousand units of employee stock options, and the Company recognized compensation cost amounting to \$18,311 and \$11,792 for the years ended December 31, 2021 and 2020, respectively.

As of December 31, 2021, the related information was as follows:

Type	Grant date	Issued units (in thousands)	Grant period	Exercise price per share (TWD)	Adjusted exercise price per share (TWD)
New shares reserved for subscription by employees in 2021	Nov. 10, 2021	6,429	Service periods 0.12 years	14.0	14.0
Employee stock options in 2020	Nov. 10, 2020	7,000	Service periods 2 years	14.0	14.0
Employee stock options in 2019	Nov. 8, 2019	5,618	Service periods 2 years	14.0	14.0

Weighted-average assumptions were as follows:

	2021 new share subscription	2020 stock option	2019 stock option
Expected dividend yield	-	-	-
Expected volatility	0.2885%	40.000%	40.408%
Risk-free interest rate	0.2179%	0.1923%	0.5432%
Expected life	0.12 years	2 years	2 years

Information related to share-based payments of ZNet was as follows:

(a) New shares reserved for subscription by employees in 2021

	2021
New shares reserved for subscription by employees	Options (in thousands)	Weighted average exercise price (TWD)
Outstanding at beginning of year	-	\$ -
Granted	6,429	14.0
Exercised	(6,429)	14.0
Forfeited	-	-
Outstanding at end of year	-	-
Exercisable at end of year	-

(b) Employee stock options in 2020

		2021	2020
Employee stock options	Options (in thousands)	Weighted average exercise price (TWD)	Options (in thousands)	Weighted average exercise price (TWD)
Outstanding at beginning of year	7,000	\$ 14.0	-	\$ -
Granted	-	-	7,000	14.0
Exercised	-	-	-	-
Forfeited	-	-	-	-
Outstanding at end of year	7,000	14.0	7,000	14.0
Exercisable at end of year	-		-

As of December 31, 2021 and 2020, the weighted-average remaining contractual life for outstanding option awards were 3.86 and 4.86 years, respectively.

(c) Employee stock options in 2019

		2021	2020
Employee stock options	Options (in thousands)	Weighted average exercise price (TWD)	Options (in thousands)	Weighted average exercise price (TWD)
Outstanding at beginning of year	5,136	\$ 14.0	5,603	\$ 14.0
Granted	-	-	-	-
Exercised	-	-	-	-
Forfeited	(423)	-	(467)	-
Outstanding at end of year	4,713	14.0	5,136	14.0
Exercisable at end of year	4,713		-

As of December 31, 2021 and 2020 the weighted-average remaining contractual life for outstanding option awards were 2.85 and 3.85 years, respectively.

• (21) Earnings per share
• A. Basic earnings per share

	2021	2020
Net income (loss) attributable to ordinary shareholders of Unizyx	\$ 1,096,700	827,944
Weighted-average number of shares outstanding during the year (in thousands of shares)	440,430	432,651
Basic earnings per share (TWD)	\$ 2.49	1.91
B. Diluted earnings per share
	2021	2020
Net income (loss) attributable to ordinary shareholders of Unizyx	\$ 1,096,700	827,944
Weighted-average number of shares outstanding during the year (in thousands of shares)	440,430	432,651
Effect of potential dilutive ordinary shares (in thousands of shares)	8,090	3,605
	448,520	436,256
Diluted earnings per share (TWD)	\$ 2.45	1.90

• (22) Revenue from contracts with customers
• A. The details of revenue were as follows:

				2021
	Brand	Product		Channel		Investment		Total
Primary geographical markets:
United States	\$ 2,548,291	3,790,621			17,951	-		6,356,863
France	109,269	2,739,862			431,366	-		3,280,497
Other countries	7,135,609	5,782,293		3,120,108			6,600	16,044,610
	\$ 9,793,169	12,312,776		3,569,425			6,600	25,681,970
Major products lines:
Broadband	\$ 8,043,173	11,484,169			339,533	-		19,866,875
Business	426,317		53,817	2,725,667		-		3,205,801
Others	1,323,679		774,790		504,225		6,600	2,609,294
	\$ 9,793,169	12,312,776		3,569,425			6,600	25,681,970

		2020
	Brand	Product	Channel	Investment	Total
Primary geographical markets:
United States	\$ 2,705,036	2,594,447	10,410	-	5,309,893
France	25,670	2,293,044	400,170	-	2,718,884
Other countries	5,699,314	5,526,039	2,989,900	6,600	14,221,853
	\$ 8,430,020	10,413,530	3,400,480	6,600	22,250,630
Major products lines:
Broadband	\$ 6,527,136	9,413,771	303,079	-	16,243,986
Business	387,469	118,165	2,552,212	-	3,057,846
Others	1,515,415	881,594	545,189	6,600	2,948,798
	\$ 8,430,020	10,413,530	3,400,480	6,600	22,250,630

B. Contract balances

	December 31, 2021	December 31, 2020	January 1, 2020
Contract liabilities	\$ 175,314	74,760	89,595

For details on accounts receivable and allowance for impairment, please refer to note 6(5).

The contract liabilities primarily relate to the advance consideration received from customers for the sales contracts, for which revenue is recognized when products are delivered to customers. The amounts of revenue recognized for the years ended December 31, 2021 and 2020 that were included in the contract liability balances at the beginning of the periods were \$65,292 and \$85,701, respectively.

(23) Non-operating income and expenses

A. Other income

The details of other income of the Company were as follows:

	2021	2020
Government grant	\$ 17,553	7,757
Relief subsidy and rental concession related to COVID-19	22,901	121,571
Compensation income	8,606	26,199
Dividend income	2,830	-
Obligation waived due to expiration of claim rights	40	13,379
Rental and other income	21,500	16,273
	\$ 73,430	185,179

B. Other gains and losses

The details of other gains and losses of the Company were as follows:

		2021	2020
	Net gains (losses) on financial assets (liabilities) at fair value through profit or loss	\$ 162,875	(57,091)
	Gain (loss) on disposal of property, plant and equipment	2,397	109
	Loss on disposal of intangible assets	-	(164)
	Loss on liquidation of subsidiaries	-	(71)
	Others	5,802	(13,855)
		\$ 171,074	(71,072)
C.	Interest expense
	The details of interest expense were as follows:
		2021	2020
	Interest expense from bank borrowings	\$ 16,761	17,882
	Interest expense from lease liabilities	5,194	5,429
	Interest expense from corporate bonds	7,178	-
		\$ 29,133	23,311

(24) Employee compensation and directors' remuneration

In accordance with Unizyx' s Articles of Incorporation, Unizyx shall accrue its remuneration to employees and directors based on a certain percentage of the current-year' s profit (profit before income taxes, excluding remuneration to employees and directors) less, accumulated deficit as follows: no less than 0.01% as employee remuneration and no more than 2% as directors' remuneration. The aforementioned employee remuneration will be distributed in cash or in the form of shares to the employees of the controlling companies and subsidiaries who meet certain criteria approved by the Board of Directors.

The remunerations to employees and directors recognized by Unizyx amounted to \$108 and \$15,028, respectively, for the year ended December 31, 2021. These amounts were calculated using Unizyx's net income before income taxes without the remunerations to employees and directors for each period, multiplied by the proposed percentage which is stated under the Company' s Article of Incorporation. These remunerations were expensed under operating expenses for each period. If there is a change in the proposed amounts after the annual consolidated financial statements are authorized for issue, the differences are accounted for as a change in accounting estimate and adjusted prospectively to the next year's profit or loss.

Furthermore, for the year ended December 31, 2020, Unizyx incurred accumulated deficits; therefore, no remuneration to employees and directors was accrued for the year then ended.

• (25) Financial instruments
• A. Credit risk
  • (a) Credit risk exposures

As of December 31, 2021 and 2020, the Company's maximum exposure to credit risk was mainly from the carrying amount of financial assets amounting to \$11,389,099 and \$10,790,990, respectively.

(b) Concentration of credit risk

The Company's potential credit risk is derived primarily from deposits with banks, cash equivalents, financial assets measured at amortized cost, notes receivable and accounts receivable (including related parties), etc. The Company maintains its cash and cash equivalents and financial assets measured at amortized cost in various creditworthy financial institutions. Credit risk exposure to each financial institution is controlled by the Company. As a result, the Company believes that there is no significant concentration of credit risk of cash, cash equivalents and financial assets.

The main customers of the Company are multinational companies within the network communication industry or companies with good credit ratings. From time to time, the Company monitors customers' credit condition, and hence has not encountered any significant loss due to credit risk.

The Company sets a loss allowance for expected credit losses to reflect the estimated loss on accounts receivable. The main components of this allowance are a specific loss component that relates to individually significant exposures, and a collective loss component established for groups of similar assets in respect of losses that have been incurred but not yet identified. The collective loss allowance is determined based on historical data of payment statistics for similar financial assets.

(c) Credit risk from receivables

For credit risk exposure of note and accounts receivable, please refer to note 6(5).

Financial assets at amortized cost include investments in time deposits and pledged time deposits. For the details on investments, please refer to notes 6(3). All of these financial assets are considered to have low risk, and thus, the impairment provision recognized during the period was limited to 12 months expected losses.

B. Liquidity risk

The following table shows the contractual maturities of financial liabilities, including estimated interest payments and excluding the impact of netting agreements.

	Carrying amount		Cash flow of contract	Within 1 year	1-2 years	2-5 years	Over 5 years
December 31, 2021
Non-derivative financial liabilities
Short-term borrowings	\$	1,557,000	(1,563,792)	(1,563,792)	-	-	-
Short-term notes and bills payable		200,000	(200,000)	(200,000)	-	-	-
Notes and accounts payable		4,820,240	(4,820,240)	(4,820,240)	-	-	-
Accounts payable-related parties		181,775	(181,775)	(181,775)	-	-	-
Payroll and bonus payable		867,201	(867,201)	(867,201)	-	-	-
Royalty payable		96,361	(96,361)	(96,361)	-	-	-
Bonds payable		1,896,234	(1,980,750)	(16,150)	(16,150)	(1,948,450)	-
Other payables-related parties		8,618	(8,618)	(8,618)	-	-	-
Lease liabilities (current and non-current)		439,089	(493,860)	(43,985)	(34,762)	(72,905)	(342,208)
Accrued expense (recognized in other current liabilities)		679,471	(679,471)	(679,471)	-	-	-
Guarantee deposits received		711	(711)	-	(711)	-	-
Derivative financial liabilities
Financial liabilities at fair value through profit or loss-current
Outflows		124	(125)	(125)	-	-	-
	\$	10,746,824	(10,892,904)	(8,477,718)	(51,623)	(2,021,355)	(342,208)
December 31, 2020
Non-derivative financial liabilities
Short-term borrowings	\$	1,614,247	(1,616,516)	(1,616,516)	-	-	-
Short-term notes and bills payable		300,000	(300,000)	(300,000)	-	-	-
Notes and accounts payable		5,232,851	(5,232,851)	(5,232,851)	-	-	-
Accounts Payable-related parties		546,513	(546,513)	(546,513)	-	-	-
Payroll and bonus payable		788,435	(788,435)	(788,435)	-	-	-
Royalty payable		169,340	(169,340)	(169,340)	-	-	-
Other payables-related parties		46,489	(46,489)	(46,489)	-	-	-
Lease liabilities (current and non-current)		490,072	(550,086)	(51,789)	(52,890)	(81,994)	(363,413)
Accrued expense (recognized in other current liabilities)		833,326	(833,326)	(833,326)	-	-	-
Guarantee deposits received		575	(575)	-	(575)	-	-
Derivative financial liabilities
Financial liabilities at fair value through profit or loss-current
Outflows		46,359	(46,693)	(46,693)	-	-	-
	\$	10,068,207	(10,130,824)	(9,631,952)	(53,465)	(81,994)	(363,413)

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

• C. Currency risk
• (a) Exposure to currency risk

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

		December 31, 2021		December 31, 2020
	Foreign currency	Exchange rate	TWD	Foreign currency	Exchange rate	TWD
Financial Assets
Monetary items
USD	\$ 134,413	27.68	3,720,552	114,662	28.48	3,265,574
CNY	183,573	4.34	796,707	221	4.37	966
Non-Monetary items
EUR	33,110	31.32	note	-	-	-
Financial Liabilities
Monetary items
USD	137,437	27.68	3,804,256	140,892	28.48	4,012,604
EUR	251	31.32	7,861	39,951	35.02	1,399,084
Non-Monetary items
EUR	1,500	31.32	note	41,300	35.02	note

Note: Please refer to note 6(2) for the disclosure on the derivative of financial assets (forward exchange) measured at fair value.

(b) Sensitivity analysis

The Company' s exposure to foreign currency risk arises from the foreign currency exchange gains and losses on cash and cash equivalents, notes and accounts receivable (including related parties), other receivables (including related parties), short-term borrowings, and notes and accounts payable (including related parties) that are denominated in foreign currency. 5% depreciation or appreciation of the TWD against the above foreign currency at December 31, 2021 and 2020, would have increased (decreased) the net income as follows. (This analysis is based on foreign currency exchange rate variances that the Company considered to be reasonably possible at the reporting date. The analysis assumes that all other variables remain constant.)

	2021
Depreciation	\$ 35,257	(107,306)
Appreciation	\$ (35,257)	107,306

(c) Exchange gains and losses of functional currency

It is impractical to disclose the foreign exchange losses by each significant foreign currency due to the variety of the functional currencies of the Company. The details of the net foreign currency exchange gains (losses) (including realized and unrealized) were as follows:

2021	2020
\$ (212,507)	(209,623)

D. Interest rate analysis

The following sensitivity analysis is based on the risk exposure to interest rates on the derivative and non-derivative financial instruments on the reporting date. For variable rate instruments, the sensitivity analysis assumes the variable rate liabilities are outstanding for the whole year on the reporting date. The Company's internal management was reported with the exposure to changes in interest rates of 0.25%, which is considered by management to be a reasonable change of interest rate.

If the interest rate had increased or decreased by 0.25%, the Company's net income before income taxes would have increased or decreased by \$1,695 and \$2,202 for the years ended December 31, 2021 and 2020, respectively, with all other variable factors remaining constant. This is mainly due to floating interest rates of the Company's cash and cash equivalents and short-term borrowings.

• E. Fair value of financial instruments
• (a) Categories of financial instruments and fair value

The carrying amounts of the Company' s current non-derivative financial instruments were considered to approximate their fair value due to their short-term nature. This methodology applies to financial assets and financial liabilities at amortized cost, including cash and cash equivalents, financial assets at amortized cost-current and noncurrent, receivables (including related parties), payables (including related parties), other financial assets – current, refundable deposits, short-term borrowings, short-term notes and bills payable and guarantee deposits received.

Disclosures of fair value are not required for the financial instruments mentioned above. Other than those, the carrying amount and fair value of other financial instruments of the Company as of December 31, 2021 and 2020 were as follows:

	December 31, 2021
				Fair Value
		Carrying amount	Level 1	Level 2	Level 3	Total
Financial assets at fair value through profit or loss-current	\$	147,076	127,545	19,531	-	147,076
Financial assets at fair value through other comprehensive
income -non-current		25,713	-	-	25,713	25,713
	\$	172,789	127,545	19,531	25,713	172,789
Financial liabilities at fair value through profit or loss-current	\$	124	-	124	-	124
	December 31, 2020
				Fair Value
		Carrying amount	Level 1	Level 2	Level 3	Total
Financial assets at fair value through other comprehensive income-non-current	\$	26,999	-	-	26,999	26,999
Financial liabilities at fair value through profit or loss-current	\$	46,359	-	46,359	-	46,359

(b) Valuation techniques for financial instruments measured at fair value

• (i) The listed stocks, beneficiary certificates and global depositary receipts held by the Company are measured at fair value according to standard provision and conditions; the fair value is measured using the quoted price in an active market.
• (ii) Derivative financial instruments–forward exchange contracts held by the Company are measured by using the current forward foreign exchange rates.
• (iii) Financial instruments without an active market held by the Company are measured at fair value according to the market approach; the fair value is assessed by using the price-equity ratio and price-earnings ratio of the competitors.
• (c) There is no transfer between the levels for the years ended December 31, 2021 and 2020.
• (d) Reconciliation of Level 3 fair values-equity investment without an active market

	2021	2020
Financial assets at fair value through other comprehensive income
Balance at January 1	\$ 26,999	8,669
Addition for the period	-	9,262
Gains or losses recognized in other comprehensive
income	(1,286)	9,068
Balance at December 31	\$ 25,713	26,999

(e) 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 the fair value include financial assets at fair value through other comprehensive income– equity investments.

The Company classified the equity investments without an active market as recurring level 3 fair values in the value hierarchy due to the use of significant unobservable inputs. The significant unobservable inputs of the equity investments without an active market are independent, therefore, there is no correlation between them.

Quantified information of significant unobservable inputs was as follows:

Item	Valuation technique	Significant unobservable inputs	Inter-relationship between significant unobservable inputs and fair value measurement
Financial assets at fair	Market approach	•Net price ratio multiplier	•The higher the price
value through other		(December 31, 2021:	equity ratio, the higher
comprehensive		1.91~7.74 and December	the fair value
income – equity		31, 2020:1.46~3.10)	•The higher the discount
investment without an		•Liquidity discount	for lack of
active market		(December 31, 2021 and	marketability, the
		December 31, 2020: 30%)	lower the fair value

(26) Financial risk management

A. Overview

The Company is exposed to the following risks due to usage of financial instruments:

• (a) Credit risk
• (b) Liquidity risk
• (c) Market risk

This note presents information about the Company's exposure to each of the above risks and the Company' s objectives, policies, and processes for measuring and managing risk. For further information, please refer to the relevant notes.

B. Risk management framework

The Board of Directors has overall responsibility for the establishment and oversight of the risk management framework. The board is responsible for developing and monitoring the Company's risk management policies, and meets regularly for discussions.

The Company's risk management policies are established to identify and analyze the risks faced by the Company, to set appropriate risk limits and controls, and to monitor risks and adherence to limits. Risk management policies and systems are reviewed regularly to reflect changes in market conditions and the Company's activities. The Company, through its training and management standards and procedures, aims to develop a disciplined and constructive control environment in which all employees understand their roles and obligations.

The Company's Board of Directors oversees how management monitors compliance with the Company's risk management policies and procedures and reviews the adequacy of the risk management framework in relation to the risks faced by the Company. The Board of Directors is assisted in its oversight role by internal audit. Internal audit undertakes both regular and ad hoc reviews of risk management controls and procedures, and the results of which are reported to the Board of Directors.

C. Credit risk

Please refer to note 6(25).

D. Liquidity risk

There is no liquidity risk of being unable to raise capital to settle contract obligations since the Company has sufficient capital and working capital to fulfill contract obligations. As there is no open market for the financial assets at fair value through other comprehensive income; hence, they are subject to liquidity risk.

E. Market risk

The Company's purchases and sales are mainly denominated in foreign currency. As a result, current and future cash flows of foreign currency assets and liabilities are exposed to the risk of foreign currency exchange rate volatility. Therefore, the Company engaged in derivative financial instrument transactions as economic hedges against potential changes in assets or liabilities held in foreign currencies. Gains and losses arising from changes in exchange rates are offset by those of the hedged item. As a result, the market risk is low.

The listed stocks, beneficiary certificates and foreign depositary receipts held by the Company are presented under financial assets measured at fair value. Such assets are measured at fair value, and the Company is exposed to market price volatility.

(a) Currency risk

The Company is exposed to currency risk on sales and purchases that are denominated in a currency other than the respective functional currencies of the Company's entities, primarily the TWD, but also including the US dollar (USD), Euro (EUR), and Chinese Yuan (CNY). The currencies used in these transactions are the TWD, EUR, USD and CNY.

In respect of other monetary assets and liabilities denominated in foreign currencies, the Company ensures that its net exposure is kept to an acceptable level by buying or selling foreign currencies at spot rates when necessary to address short-term imbalances.

(b) Interest rate risk

The Company holds variable-rate financial assets and liabilities. Please refer to note 6(25) for interest rate risk.

(27) Capital management

The board's policy 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 share capital, capital surplus, retained earnings, and non-controlling interests of the Company. The Board of Directors monitors the return on capital as well as the level of dividends to ordinary stockholders.

The Company's debt-to-equity ratios at the reporting date were as follows:

	December 31, 2021		December 31, 2020
Total liabilities	\$	12,174,065	11,282,934
Less: cash and cash equivalents		(5,293,484)	(4,078,159)
Net debt	\$	6,880,581	7,204,775
Total equity (adjusted capital)	\$	9,219,609	8,306,231
Debt-to-adjusted-capital ratio		74.63%	86.74%

As of December 31, 2021, the Company has not changed its capital management method.

(28) Investing and financing activities not affecting current cash flow

The Company's investing and financing activities which did not affect the current cash flow were as follows:

• A. For leased right-of-use assets, please refer to note 6(10).
• B. Reconciliations of liabilities arising from financing activities were as follows:

	January 1,		Foreign exchange movement	December 31,
	2021	Cash flow	and others	2021
Short-term borrowings	\$ 1,614,247	(56,786)	(461)	1,557,000
Short-term notes and bills payable	300,000	(100,000)	-	200,000
Lease liabilities (current and non-current)	490,072	(46,440)	(4,543)	439,089
Bonds payable	-	1,895,650	584	1,896,234
Guarantee deposits received	575	178	(42)	711
Total liabilities from financing activities	\$ 2,404,894	1,692,602	(4,462)	4,093,034

	January 1, 2020	Cash flow	Foreign exchange movement and others	December 31, 2020
Short-term borrowings	\$ 1,626,803	(16,214)	3,658	1,614,247
Short-term notes and bills payable	-	300,000	-	300,000
Lease liabilities (current and non-current)	492,853	(49,439)	46,658	490,072
Guarantee deposits received	539	33	3	575
Total liabilities from financing activities	\$ 2,120,195	234,380	50,319	2,404,894

7. Related-party transactions

(1) Names and relationship with related parties

The followings are related parties that have had transactions with the Company during the periods covered in the consolidated financial statements:

Name of related party	Relationship with the Company
ZYXEL Foundation	The chairman is the same as Unizyx's
ZyFX Technologies Inc. (ZyFX)	ZYXEL Foundation's subsidiary
Zyell Solutions Corporation (Zyell)	ZyFX's subsidiary
ZQAM	Formerly, it was the Company's associate, but became ZyFX's subsidiary since October 2020.
Ardomus	Formerly, it was the Company's subsidiary, but became the Company's associate since July 2020.
ShareTech Information Co., LTD (ShareTech)	The Company's associate

(2) Significant related-party transactions

A. Operating Revenues

Account Name	Related Party Category	2021	2020
Sales of goods	Other related parties	\$ 31,544	78,922
	Associates	3,955	71,292
		35,499	150,214
Others	Other related parties	6,612	6,600
	Associates	85	694
		6,697	7,294
		\$ 42,196	157,508

Except for some products without transaction with other customers to compare with, there was no significant difference between the sales price of the Company for related parties and that of the third parties. The terms of payment are 90 days, and the credit terms for third parties are 30 to 180 days after delivery. Receivables from related parties were not pledged as collateral and were assessed not to provide any loss allowance provision.

B. Purchase

Related Party Category	2021	2020
Other related parties	\$ 265,984	617,487
Associates	-	16,430
	\$ 265,984	633,917

Except for some products without transaction with other vendors to compare with, there was no significant difference between the purchase price of the Company for related parties and that of the third parties. The payment term for purchase from related parties was 30 to 90 days after purchase, which was not materially different from those offered to third parties.

C. Other transactions

Account Name	Related Party Category	2021	2020
Operating	Other related parties	\$ 7,152	25,746
Expenses/Cost of goods sold	Associates	-	8
		\$ 7,152	25,754
Non-operating	Other related parties	\$ 2,162	2,607
income	Associates	-	1,332
		\$ 2,162	3,939

The Company leased out offices to its related parties, with lease terms and prices determined based on mutual agreements. The payment term for rental is 25 days after each quarter, with the related income being classified under non-operating income.

The related parties distributed cash dividends amounting to \$1,182 and \$2,158 to the Company for the years ended December 31, 2021 and 2020, respectively. As of December 31, 2021 and 2020, the aforementioned dividends had been received.

D. Receivables from related parties

Account Name	Related Party Category	December 31, 2021	December 31, 2020
Accounts receivable-	Other related parties	\$ 19,383	4,011
related parties	Associates	2,612	783
		\$ 21,995	4,794

	Account Name	Related Party Category	December 31, 2021	December 31, 2020
	Other receivables-	Other related parties	\$ 2,847	5,709
	related parties	Associates	224	250
			\$ 3,071	5,959
E.	Payables to related parties
		Related Party	December 31, 2021	January 1, 2020
	Account Name Accounts payable- related parties	Category Other related parties	\$ 181,775	546,513

(3) Transactions with key management personnel

Key management personnel compensation comprised:

	2021	2020
Short-term employee benefits	\$ 66,800	51,859
Post-employment benefits	966	926
Share-based payment compensation	4,616	3,845
	\$ 72,382	56,630

Please refer to note 6(20) for further explanations related to share-based payment transactions.

8. Pledged assets

The carrying values of pledged assets were as follows:

Pledged assets	Purpose of pledge	December 31, 2021	December 31, 2020
Property, plant and equipment	Guarantee of short-term borrowings	\$ - (Note)	430,327
Financial assets at amortized cost -current and non-current	Contract fulfillment and warranty guarantee	104,949	50,461
Financial assets at amortized cost -current and non-current	Guarantee of rental of land from SIPA	20,208	20,208
Refundable deposits	Guarantee of quality assurance	41,211	35,195
		\$ 166,368	536,191

Note: The Company pledged its assets as collateral for a guarantee for bank borrowings facilities, and the assets pledged were released on December 16, 2021.

9. Commitments and contingencies

• (1) Significant commitments
• A. The amounts of notes pledged at the bank by Zyxel, MitraStar and ZNet for financing purposes were as follows:

December 31,	December 31,
2021	2020
\$ 5,957,280	5,347,760

B. The amounts of Zyxel's outstanding letters of credit to facilitate Zyxel's purchases were as follows:

(in thousands USD)

December 31,	December 31,
2021	2020
\$ -	649

C. In order to obtain the bid and sales contracts of particular customers, the Company obtained a letter of performance guarantee letter from the bank. The amounts were as follows:

(in thousands)

	December 31, 2021
USD	\$ 5,758	3,608
NTD	\$ 3,941	16,323
EUR	\$ 1,670	1,000
TRY	\$ 100	-

D. MitraStar signed a research agreement with Taiwan SMECF commissioned by the Ministry of Economic Affairs. In order to receive the project grant, MitraStar obtained a letter of performance guarantee letter from the bank and submitted a promissory note. The amounts were as follows:

	December 31, 2021	December 31, 2020
Promissory letter	\$ -	14,900
Guarantee letter	\$ -	14,900

• E. The Company signed technology licensing and patent licensing agreements with certain companies, and was required to pay licensing fees in proportion to sales revenue of the licensed products or agreed royalty during the patent term under the agreements.
• F. The Company signed agency service agreements with certain companies and was required to pay commission fees in proportion to commissioned sales under the agreements.

(2) Contingencies liabilities

In June 2020, UNM Rainforest Innovations asserted that Zyxel' s products infringed its certain patents and filed a lawsuit against Zyxel. Zyxel has engaged a lawyer to defend the case. However, the Company believes that the lawsuit mentioned above will not have any significant impact on its current operations.

10. Losses due to major disasters: None

11. Subsequent events: None

12. Other

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

By function		2021			2020
	Classified	Classified		Classified	Classified
By item	as as cost of operating goods sold expenses		Total	as cost of goods sold	as operating expenses	Total
Employee benefits
Salaries	484,159	2,696,825	3,180,984	360,431	2,580,944	2,941,375
Labor and health insurance	53,003	257,185	310,188	28,950	237,057	266,007
Pension	41,412	121,097	162,509	31,151	101,581	132,732
Others	26,573	83,269	109,842	19,861	85,057	104,918
Depreciation	101,097	172,637	273,734	85,571	182,480	268,051
Amortization	27,846	65,309	93,155	15,292	80,514	95,806

13. Other disclosures:

(a) Information on significant transactions

The following is the information on significant transactions required by the "Regulations Governing the Preparation of Financial Reports by Securities Issuers" for the Company:

• (i) Loans to other parties: Please refer to Table 1.
• (ii) Guarantees and endorsements for other parties: Please refer to Table 2.
• (iii) Securities held as of December 31, 2021 (excluding investment in subsidiaries, associates and joint ventures): Please refer to Table 3.
• (iv) Individual securities acquired or disposed of with accumulated amount exceeding the lower of NT\$300 million or 20% of the capital stock: None

• (v) Acquisition of individual real estate with amount exceeding the lower of NT\$300 million or 20% of the capital stock: None

• (vi) Disposal of individual real estate with amount exceeding the lower of NT\$300 million or 20% of the capital stock: None

• (vii) Related-party transactions for purchases and sales with amounts exceeding the lower of NT\$100 million or 20% of the capital stock: Please refer to Table 4.
• (viii) Receivables from related parties with amounts exceeding the lower of NT\$100 million or 20% of the capital stock: Please refer to Table 5.
• (ix) Trading in derivative instruments: Please refer to note 6(2).
• (x) Business relationships and significant intercompany transactions: Please refer to Table 6.
• (b) Information on investees (excluding information on investees in Mainland China): Please refer to Table 7.
• (c) Information on investment in Mainland China:
• (i) The names of investees in Mainland China, the main businesses and products, and other information: Please refer to Table 8.
• (ii) Limitation on investment in Mainland China: Please refer to Table 8.
• (iii) Significant transactions:

The significant inter-company transactions with the subsidiary in Mainland China, which were eliminated in the preparation of the consolidated financial statements, were disclosed in the "Information on significant transactions".

(d) Major shareholders:

(in units of shares)

Shareholding Shareholder's Name	Shares	Percentage
Shun-I Chu	100,173,833	22.09 %

• Note: (i) The information on major shareholders who hold 5 percent or more of the issuer' s common stocks and preferred stocks, including treasury stocks, is quarterly provided by Taiwan Depository and Clearing Corp. The share capital disclosed on the financial report and the actual numbers of dematerialized securities may be different due to their discrepancies in calculation.
• (ii) If the shareholder entrusts the shares to the trust, the shareholding will be disclosed by the trustee's account individually. As for those shareholders who are responsible for the declaration of insiders' shareholding with more than 10 percent in accordance with the Securities and Exchange Act, their shareholdings shall include their own shares and the trust in which they have the authority to decide the allocation of their trust assets. Please refer to the Market Observation Post System for information on the insiders' shareholding.

14. Segment information

(1) General information and industrial information

There are four segments that need to be reported: the brand business segment, the product business segment, the channel business segment, and the investment segment. The brand business segment uses the brand name to provide telecommunications service providers end-to-end broadband access solutions and to provide customers instant and local services. The channel business segment focused on the development of channel business and provide enterprise users and home users with products and application services. The product business segment develops products for customers and logistics services that focus on the manufacturing of wired and wireless broadband communications network, the new generation of internet, multimedia, and digital home applications in areas such as intellectual life. The investment segment is for general investment business.

Unizyx had allocated income tax expense (benefit) or non-recurring gains and losses to segments that need to be reported. In addition, all the gains and losses of the segments that need to be reported included significant non-cash items except depreciation and amortization. The reported amounts were presented in accordance with the reports used by the chief operating decision maker. The accounting principles of the operating units are not significantly different from the significant accounting policies in note 4. The Company's operating segments' profits and losses are measured based on net income and loss after tax, which also serves as the basis for assessing the segments' performance.

(2) Segment information

The Company's operating segment information and reconciliations were as follows:

			2021
	Brand	Products	Channel	Investment	Reconciliation and elimination	Total
External revenue	\$ 9,793,169	12,312,776	3,569,425	6,600	-	25,681,970
Inter-segment revenue	393,636	4,741,322	353,939	148,221	(5,637,118)	-
Total revenue	\$ 10,186,805	17,054,098	3,923,364	154,821	(5,637,118)	25,681,970
Reportable segment operating income (loss)	\$ 910,739	258,454	339,561	(39,457)	(43,863)	1,425,434
Depreciation and amortization	\$ 99,195	210,140	63,306	1,052	(6,804)	366,889
Reportable segment assets	\$ 8,862,322	10,760,410	3,170,328	1,762,636	(3,178,314)	21,377,382
Investment accounted for using the equity method						16,292
Total assets					\$	21,393,674

			2020
					Reconciliation and
	Brand	Products	Channel	Investment	elimination	Total
External revenue	\$ 8,430,020	10,413,530	3,400,480	6,600	-	22,250,630
Inter-segment revenue	278,862	2,755,062	337,779	123,747	(3,495,450)	-
Total revenue	\$ 8,708,882	13,168,592	3,738,259	130,347	(3,495,450)	22,250,630
Reportable segment operating income (loss)	\$ 778,939	389,017	120,643	(2,992)	7,087	1,292,694
Depreciation and amortization	\$ 110,451	195,414	64,437	601	(7,046)	363,857
Reportable segment assets	\$ 9,198,869	9,419,184	2,846,686	267,089	(2,166,722)	19,565,106
Investment accounted for using the equity method						24,059
Total assets					\$	19,589,165

(3) Information by product and service

For information on products and services for the years ended December 31, 2021 and 2020, please refer to note 6(22).

(4) Geographic information

Sales to customers classified by location of customers is as follows, within which revenue is recognized based on the location of the customer and non-current assets are recognized based on the location of the asset.

A. Revenue from external customers:

For information on revenue from external customers for the years ended December 31, 2021 and 2020, please refer to note 6(22).

B. Non-current assets:

	Area	December 31, 2021	December 31, 2020
	Taiwan	\$ 1,500,392	1,349,662
	China	739,129	653,692
	Other countries	253,804	340,554
		\$ 2,493,325	2,343,908
(5)	Information on major customers

	2021	2020
Customer A	\$ 3,777,147	2,552,786
Customer B	\$ 2,581,149	2,069,060

(Continued)

Unizyx Holding Corporation and Subsidiaries Loans to other parties For the year ended December 31, 2021

|--|--|

Table 1	(In Thousands of New Taiwan Dollars)
Number (Note 1)	Name of lender	Name of borrower	Account name	Related party	Highest balance of financing to other parties during the period	Ending balance (Note 4)	Actual usage amount during the period	Range of interest rates during the period	Purposes of fund financing for the borrower (Note 2)	Transaction amount for business between two parties	Reasons for short-term financing	Loss allowance	Collateral Item	Value	Individual funding loan limits (Note 3)	Maximum limit of fund financing (Note 3)	Note
0	Unizyx	MitraStar	Other receivables- related parties	Yes	800,000	800,000	800,000	1%	2	-	Operating Capital	-	-	-	907,029	3,628,117	Note 7
0	Unizyx	ZNet	"	Yes	500,000	500,000	-	1%	2	-	Operating Capital	-	-	-	907,029	3,628,117	Note 7
1	Zyxel	ZNet IN	"	Yes	14,059	1,300,000 13,638	800,000 13,638	-	2	-	Operating Capital	-	-	-	427,949	1,711,797	Note 7
1	Zyxel	Others (Note 6)	"	Yes	146,950	-	-	-	2	-	Operating Capital	-	-	-	427,949	1,711,797	Note 7
2	ZNet	ZNet IN	"	Yes	36,772	13,638 36,772	13,638 36,772	-	2	-	Operating Capital	-	-	-	195,219	780,876	Notes 5 and 7
2	ZNet	ZNet SHA	"	Yes	5,338	-	-	-	2	-	Operating Capital	-	-	-	195,219	780,876	Note 7
						36,772	36,772

Note 1: The numbers denote the following:

0 represents Unizyx

1 represents Zyxel

2 represents ZNet

Investees are listed in accordance with names and in sequential order starting with 1.

Note 2: Purposes of fund financing for the borrower:

1. For those companies with business transaction with the Company, please fill in 1.

2. For those companies with short-term financing needs, please fill in 2.

79

• Note 3: The policies for the limit on total financing amount and the financing limit for any individual entity are prescribed as follows: The total financing amount shall not exceed 40% of the lender's net worth, which is based on its latest audited or reviewed parent-company-only financial statements. The financing limit for any individual entity varies with different purposes of fund financing, listed as follows:
• 1. For those borrowers with business transaction with the lender, the amount of each fund financing shall not exceed the higher amount of the total purchases from, or sales to, the borrower in the most recent year or in the current year.
• 1. For those borrowers with short-term financing needs, the amount of each funding financing shall not exceed 10% of the lender's net worth, which is based on its latest audited or reviewed parent-company-only financial statements.
• Note 4: The ending balance is the valid loan amount approved by the Board of Directors.
• Note 5: The ending balance included the amount of credit balance of investments accounted for using the equity method amounting to \$262,215.
• Note 6: Financings with amounts less than \$10,000 were included herein.
• Note 7: The inter-company transactions and balances had been eliminated in the consolidated financial statements.

Unizyx Holding Corporation and Subsidiaries

Guarantees and endorsements for other parties

For the year ended December 31, 2021

Table 2 (In Thousands of New Taiwan Dollars)

			Counter-party of	Limitation on
			guarantee and	amount of	Highest	Balance of		Property	Ratio of	Maximum			Guarantee
			endorsement	guarantees and	balance for	guarantees	Actual usage	pledged for	accumulated amounts	amount for	Guarantee	Guarantee	provided to
Number	Name of		Relationship	endorsements	guarantees and	and	amount during the	guarantees and	of guarantees and	guarantees and	provided by	provided by	subsidiaries in
	guarantor		with the	for a specific	endorsements	endorsements as of	period	endorsements	endorsements to net	endorsements	parent	a subsidiary	Mainland
		Name	Company	enterprise	during	reporting date		(Amount)	worth of the latest	(Note 3)	company		China
			(Note 2)	(Note 3)	the period				financial statements
0	Unizyx	MitraStar	2	4,535,146	2,410,700	2,409,920	1,422,660	-	26.57 %	4,535,146	Y	N	N
0	Unizyx	ZNet	2	4,535,146	1,860,000	1,860,000	100,000	-	20.51 %	4,535,146	Y	N	N
						4,269,920	1,522,660
1	ZyAS	ZyIT	2	4,535,146	35,020	31,320	-	-	0.35 %	4,535,146	N	N	N
1	ZyAS	ZyUK	2	4,535,146	39,127	38,046	-	-	0.42 %	4,535,146	N	N	N
						69,366	-

Note 1: The numbers denote the following:

0 represents Unizyx

1 represents ZyAS

Investees are listed in accordance with names and in sequential order starting with 1.

Note 2: The relation between guarantor and guarantee and their endorsement should be disclosed as one of the following:

1. A company with which it does business.

2. A company in which the public company directly and indirectly holds more than 50% of the voting shares.

3. A company that directly and indirectly holds more than 50 % of the voting shares in the public company.

4. A company in which the public company holds, directly or indirectly, 90% or more of the voting shares.

5. 1. A company that fulfills its contractual obligations by providing mutual endorsements/guarantees for another company in the same industry or for joint builders for purposes of undertaking a construction project.
6. 1. A company that all capital contributing shareholders make endorsements/ guarantees for their jointly invested company in proportion to their shareholding percentages.
7. 1. Companies in the same industry provide among themselves joint and several securities for a performance guarantee of a sales contract for pre-construction homes pursuant to the Consumer Protection Act for each other.

8. Note 3: The policies for the limit on the total amount of guarantees and endorsements are prescribed as follows:

9. 1. The total amount of guarantees and endorsements provided by each guarantor to any specific party or subsidiary shall not exceed 50% of Unizyx's net worth. The total amount of guarantees and endorsements provided by each guarantor and Company's subsidiary shall not exceed 50% of Unizyx's net worth. The total amount of guarantees and endorsements provided by each guarantor and Company's subsidiary to any specific-party shall not exceed 50% of Unizyx's net worth. If the total amount of guarantees and endorsements provided by each guarantee and Company's subsidiary exceed 50% of Unizyx's net worth, the Company should disclose its necessity and rationality at the shareholder's meeting.
10. 1. For those companies with business transactions, except for the abovementioned rules of limit, the amount of each guarantee and endorsement shall not exceed the transaction amount between two parties, which is the higher amount of the sales or purchases.

Unizyx Holding Corporation and Subsidiaries

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

For the year ended December 31, 2021

Table 3 (In Thousands of New Taiwan Dollars; In Thousands of Shares)

						Ending balance		Highest percentage
Name of holder	Category and name of security	Relationship with company	Account title	Shares/ Units	Carrying value	Percentage of ownership (%)	Fair Value	of ownership during the year (%)	Note
Unizyx	Stock: ZQAM	Other related party	Financial assets at fair value through other comprehensive income-non current	2,263	9,262	10 %	9,262	13 %
Zyxel	iShares Semiconductor ETF	-	Financial assets at fair value through profit or loss-current	1	19,830	-	19,830	-
Zyxel	Stock: Alphabet Inc. Class C	-	"	-	9,051	-	9,051	-
Zyxel	ADR: Taiwan Semiconductor Manufacturing Co., Ltd.	-	"	2	7,889	-	7,889	-
Zyxel	Stock: Realtek Semiconductor Corp.	-	"	8	4,640	-	4,640	-
Zyxel	Stock: MediaTek Inc.	-	"	3	3,570	-	3,570	-
Zyxel	Yuanta/P-shares Taiwan Top 50 ETF	-	"	2	291	-	291	-
Zyxel	Stock: Ubiik Inc.	-	Financial assets at fair value through other comprehensive income-non current	956	45,271 15,657	8 %	15,657	8 %
Zyxel	Stock: Lionic Corp	-	"	500	794	2 %	794	3 %
Zyxel	Stock: Global Channel Resource Pte. Ltd.	-	"	600	-	8 %	-	8 %
Zyxel	Stock: Zowie Technology Corp.	-	"	19	-	-	-	-
Zyxel	Stock: Aetas Technology Inc.	-	"	296	- 16,451	1 %	-	1 %

						Ending balance		Highest percentage
Name of holder	Category and name of security	Relationship with company	Account title	Shares/ Units	Carrying value	Percentage of ownership (%)	Fair Value	of ownership during the year (%)	Note
ZNet	iShares Semiconductor ETF	-	Financial assets at fair value through profit or loss-current	-	5,419	-	5,419	-
ZNet	ADR: Taiwan Semiconductor Manufacturing Co., Ltd.	-	"	1	2,617	-	2,617	-
ZNet	Yuanta/P-shares Taiwan Top 50 ETF	-	"	13	1,892	-	1,892	-
ZNet	Stock: Taiwan Semiconductor Manufacturing Co., Ltd.	-	"	2	1,230	-	1,230	-
ZNet	Stock: MediaTek Inc.	-	"	1	1,190 12,348	-	1,190	-
MitraStar	iShares Semiconductor ETF	-	Financial assets at fair value through profit or loss-current	1	10,778	-	10,778	-
MitraStar	Stock: Microsoft Corporation	-	"	1	9,793	-	9,793	-
MitraStar	Stock: Goldman Sachs Group, Inc.	-	"	1	7,942	-	7,942	-
MitraStar	ADR: Taiwan Semiconductor Manufacturing Co., Ltd.	-	"	2	7,713	-	7,713	-
MitraStar	Stock: Realtek Semiconductor Corp.	-	"	8	4,640	-	4,640	-
MitraStar	Stock: Skyworks Solutions, Inc.	-	"	1	3,727	-	3,727	-
MitraStar	Stock: MediaTek Inc.	-	"	3	3,570	-	3,570	-
					48,163

						Ending balance		Highest percentage
Name of holder	Category and name of security	Relationship with company	Account title	Shares/ Units	Carrying value	Percentage of ownership (%)	Fair Value	of ownership during the year (%)	Note
Zychamp	iShares MSCI Taiwan ETF	-	Financial assets at fair value through profit or loss-current	6	10,299	-	10,299	-
Zychamp	Yuanta/P-shares Taiwan Top 50 ETF	-	"	25	3,638	-	3,638	-
Zychamp	Stock: Meta Platforms, Inc.	-	"	-	3,259	-	3,259	-
Zychamp	KraneShares CSI China Internet ETF	-	"	2	1,778	-	1,778	-
Zychamp	Stock: MediaTek Inc.	-	"	1	1,190	-	1,190	-
Zychamp	CTBC MSCI China Free 50 ex A and B ETF	-	"	50	1,037	-	1,037	-
Zychamp	Stock: Holtek Semiconductor Inc.	-	"	5	562 21,763	-	562	-
Zychamp	Stock: Unizyx	Final parent company	Financial assets at fair value through other comprehensive income-non current	8,146	285,526	2 %	285,526	2 %	Note
Zychamp	Stock: Homeyen Networks Co., Ltd.	-	"	169	-	11 %	-	11 %
Zychamp	Stock: Essence Technology Solution, Inc.	-	"	91	-	3 %	-	3 %
Zychamp	Stock: Handlink Technologies Inc.	-	"	296	-	1 %	-	1 %
Zychamp	Stock: L7 Networks Inc.	-	"	1	-	1 %	-	1 %
Zychamp	Stock: Accfast Technology Corp.	-	"	113	-	5 %	-	5 %
					285,526

Note: The inter-company transactions and balances had been eliminated in the consolidated financial statements.

Unizyx Holding Corporation and Subsidiaries

Related-party transactions for purchases and sales with amounts exceeding the lower of NT\$100 million or 20% of the capital stock

For the year ended December 31, 2021

Table 4 (In Thousands of New Taiwan Dollars)

Name of Related				Transaction details				Transactions with terms different from others	Notes/Accounts receivable (payable)
company	party	Nature of relationship	Purchase /Sale	Amount	Percentage of total purchases / sales	Payment terms	Unit price	Payment terms	Ending balance (Note 3)	Percentage of total notes / accounts receivable (payable)	Note
Zyxel	ZyAS	Subsidiary to subsidiary	Sales	4,253,402	45 %	150 days after delivery		Note 1	1,973,487	47 %	Note 5
Zyxel	ZyUSA	Subsidiary to subsidiary	Sales	2,555,570	27 %	135 days after delivery		Note 1	1,033,353	24 %	Note 5
Zyxel	ZyIT	Subsidiary to subsidiary	Sales	757,145	8 %	180 days after delivery		Note 1	601,021	14 %	Note 5
Zyxel	ZNet AS	Subsidiary to subsidiary	Sales	194,261	2 %	90 days after delivery		Note 1	65,116	2 %	Note 5
Zyxel	ZyBR	Subsidiary to subsidiary	Sales	132,743	1 %	180 days after delivery		Note 1	219,761	5 %	Note 4 and 5
Zyxel	ZyFX	Subsidiary to other related party	Purchase	(246,489)	(3)%	90 days after receipt		Note 2	(177,757)	(7)%
ZNet	ZNet AS	Subsidiary to subsidiary	Sales	1,740,826	72 %	90~150 days after delivery		Note 1	784,319	80 %	Note 5
ZNet	ZyTPE	Subsidiary to subsidiary	Sales	240,755	10 %	60~90 days after delivery		Note 1	33,953	3 %	Note 5
ZNet	ZyUSA	Subsidiary to subsidiary	Sales	152,324	6 %	135 days after delivery		Note 1	38,983	4 %	Note 5
MitraStar	Zyxel	Subsidiary to subsidiary	Sales	4,595,705	27 %	90 days after delivery		Note 1	1,439,802	39 %	Note 5
MitraStar	Monetics	Subsidiary to subsidiary	Sales	731,047	4 %	45~140 days after delivery		Note 1	189,655	5 %	Note 5
MitraStar	ZNet	Subsidiary to subsidiary	Sales	144,640	1 %	90 days after delivery		Note 1	55,705	2 %	Note 5
MitraStar	XSquare	Subsidiary to subsidiary	Sales	153,820	1 %	90 days after delivery		Note 1	-	-	Note 5

					Transaction details		Transactions with terms different from others		Notes/Accounts receivable (payable)
Name of company	Related party	Nature of relationship	Purchase /Sale	Amount	Percentage of total purchases / sales	Payment terms	Unit price	Payment terms	Ending balance (Note 3)	Percentage of total notes / accounts receivable (payable)	Note
MitraStar	Wuxi MSTC	Subsidiary to subsidiary	Processing and purchase	(6,384,400)	39 %	90 days after receipt		Note 2	-	-	Note 5
MitraStar	Zyxel	Subsidiary to subsidiary	Purchase	(926,927)	6 %	90 days after receipt		Note 2	-	-	Note 5
MitraStar	XSquare	Subsidiary to subsidiary	Purchase	(168,188)	1 %	90 days after receipt		Note 2	(8,383)	-	Note 5
ZyAS	ZyDE	Subsidiary to subsidiary	Sales	558,622	14 %	30~120 days after delivery		Note 1	149,430	15 %	Note 5
ZyAS	ZyCZ	Subsidiary to subsidiary	Sales	231,955	6 %	120~180 days after delivery		Note 1	122,265	12 %	Note 5
ZyAS	ZyUK	Subsidiary to subsidiary	Sales	224,612	6 %	30~120 days after delivery		Note 1	58,846	6 %	Note 5
ZyAS	ZyTR	Subsidiary to subsidiary	Sales	146,851	4 %	130 days after delivery		Note 1	6,017	1 %	Note 5

Note 1: The selling prices of Zyxel and ZNet to its related parties are determined based on the market price, with the payment term of 30~180 days after delivery; however, the collection of payment is currently depended on the capital status of the subsidiaries. The selling prices of MitraStar to its related parties are determined based on the market price, with the payment term of EOM 45~140 days; however, the collection of payment is currently depended on the capital status of the subsidiaries. The selling prices of ZyAS to its related parties are determined based on the market price, with the payment term of 21~180 days after delivery; however, the collection of payment is currently depended on the capital status of the subsidiaries.

• Note 2: There is no significant difference between the payment term of MitraStar for its related parties and that of the third parties. The prices of processing are determined based on the mutual agreement between MitraStar and Wuxi MSTC. There is no significant difference between the payment term and pricing of Zyxel for its related parties and that of the third parties except for products with no transaction with other vendors to compare.
• Note 3: The ending balance abovementioned included the amounts for financing that were classified as other accounts receivable-related parties.
• Note 4: The ending balance included the amount of credit balance of investments accounted for using the equity method amounting to \$449,195.
• Note 5: The inter-company transactions and balances had been eliminated in the consolidated financial statements.

Unizyx Holding Corporation and Subsidiaries

Receivables from related parties with amounts exceeding the lower of NT\$100 million or 20% of the capital stock

For the year ended December 31, 2021

Table 5 (In Thousands of New Taiwan Dollars)

Name			Ending			Overdue	Amounts received
of company	Related party	Nature of relationship	balance (Note 2)	Turnover rate	Amount	Action taken	in subsequent period (Note 1)	Loss allowance	Note
Unizyx	MitraStar	Parent company to subsidiary	815,273	Note 4	-	-	-	-	Note 5
Zyxel	ZyAS	Subsidiary to subsidiary	1,973,487	3	66,071	Enhanced Collecting	643,393	-	Note 5
Zyxel	ZyUSA	Subsidiary to subsidiary	1,033,353	3	-	-	271,338	-	Note 5
Zyxel	ZyIT	Subsidiary to subsidiary	601,021	1	238,648	Enhanced Collecting	217,854	-	Note 5
Zyxel	ZyBR	Subsidiary to subsidiary	219,761	1	170,261	Enhanced Collecting	75,719	-	Notes 3 and 5
ZNet	ZNet AS	Subsidiary to subsidiary	784,319	2	286,758	Enhanced Collecting	326,389	-	Note 5
MitraStar	Zyxel	Subsidiary to subsidiary	1,439,802	4	-	-	1,195,328	-	Note 5
MitraStar	Monetics	Subsidiary to subsidiary	189,655	8	26,282	Enhanced Collecting	113,904	-	Note 5
ZyAS	ZyDE	Subsidiary to subsidiary	149,430	5	-	-	137,334	-	Note 5
ZyAS	ZyCZ	Subsidiary to subsidiary	122,265	2	-	-	50,941	-	Note 5

Note 1: Information as of February 28, 2022.

Note 2: The abovementioned ending balance included the amount for financing, which was recognized as other accounts receivable-related parties.

Note 3: The abovementioned ending balance included the amount of credit balance of investments accounted for using the equity method amounting to \$449,195.

Note 4: The ending balance included the receivable from related parties for the financing purpose amounting to \$800,000.

Note 5: The inter-company transactions and balances had been eliminated in the consolidated financial statements.

Unizyx Holding Corporation and Subsidiaries

Business relationships and significant intercompany transactions

For the year ended December 31, 2021

Table 6 (In Thousands of New Taiwan Dollars)

			Nature	Intercompany transactions
Number (Note 1)	Name of company	Name of counter-party	of relationship (Note 2)	Account name	Amount	Trading terms	Percentage of the consolidated net revenue or total assets
0	Unizyx	MitraStar	1	Other receivables-related parties	800,000		4 %
1	Zyxel	ZyAS	3	Operating revenues	4,253,402	150 days after delivery	17 %
1	Zyxel	ZyUSA	3	Operating revenues	2,555,570	135 days after delivery	10 %
1	Zyxel	ZyIT	3	Operating revenues	757,145	180 days after delivery	3 %
1	Zyxel	Others (Note 3)	3	Operating revenues	571,322	30~180 days after delivery	2 %
1	Zyxel	ZyAS	3	Accounts receivable-related parties, net	1,973,487		9 %
1	Zyxel	ZyUSA	3	Accounts receivable-related parties, net	1,033,353		5 %
1	Zyxel	ZyIT	3	Accounts receivable-related parties, net	601,021		3 %
1	Zyxel	ZyBR	3	Accounts receivable-related parties, net	219,761		1 %
2	ZNet	ZNet AS	3	Operating revenues	1,740,826	90~150 days after delivery	7 %
2	ZNet	Others (Note 3)	3	Operating revenues	549,960	30~180 days after delivery	2 %
2	ZNet	ZNet AS	3	Accounts receivable-related parties, net	784,319		4 %
3	MitraStar	Zyxel	3	Operating revenues	4,595,705	90 days after delivery	18 %
3	MitraStar	Monetics	3	Operating revenues	731,047	45~140 days after delivery	3 %
3	MitraStar	Others (Note 3)	2 and 3	Operating revenues	299,776	60~90 days after delivery	1 %
3	MitraStar	Wuxi MSTC	3	Cost of goods sold	6,384,400	90 days after receipt	25 %
3	MitraStar	Zyxel	3	Cost of goods sold	926,927	90 days after receipt	4 %
3	MitraStar	Zyxel	3	Accounts receivable-related parties, net	1,439,802		7 %
3	MitraStar	Others (Note 3)	3	Accounts receivable-related parties, net	363,260		2 %

			Nature		Intercompany transactions
Number (Note 1)	Name of company	Name of counter-party	of relationship	Account name	Amount	Trading terms	Percentage of the consolidated net
			(Note 2)				revenue or total assets
4	ZyAS	ZyDE	3	Operating revenues	558,622	30~120 days after delivery	2 %
4	ZyAS	Others (Note 3)	3	Operating revenues	773,165	21~180 days after delivery	3 %
4	ZyAS	Others (Note 3)	3	Accounts receivable-related parties, net	406,046		2 %

Note 1: The numbers denote the following:

0 represents Unizyx

1 represents Zyxel

2 represents ZNet

3 represents MitraStar

4 represents ZyAS

Investees are listed by names and numbered starting with 1.

Note 2: The nature of relationship is as follows:

1 represents parent company to subsidiary

2 represents subsidiary to parent company

3 represents subsidiary to subsidiary

Note 3: Other transactions with the amount that less than 1% of the consolidated net revenue or total assets were not disclosed.

Unizyx Holding Corporation and Subsidiaries

Information on investees (excluding information on investees in Mainland China)

For the year ended December 31, 2021

Table 7 (In Thousands of New Taiwan Dollars/Foreign Currency; In Thousands of Shares)

					Original investment amount	Balance as of December 31, 2021			Highest
Name of investor	Name of investee	Location	Main businesses and products	December 31, 2021	December 31, 2020	Shares	Percentage of ownership	Carrying value	percentage of ownership during the year	Net income (losses) of investee	Share of profits/ losses of investee	Note
Unizyx	Zyxel	Taiwan	Development, manufacturing and sales of communications and networking products	3,431,516	3,431,516	72,450	100	3,973,827	100 %	679,583	678,736	Subsidiary, notes 1 and 6
Unizyx	MitraStar	Taiwan	Development, manufacturing and sales of communications and networking products	3,337,920	3,337,920	316,800	100	3,580,255	100 %	260,556	201,262	Subsidiary, notes 1 and 6
Unizyx	ZNet	Taiwan	Development and sales of communications and networking products	1,710,098	1,200,100	108,888	94	1,819,035	100 %	242,014	253,592	Subsidiary, notes 1 and 6
Unizyx	Black Cat	Taiwan	Development and sales of information security products, and consultant management services	10,000	10,000	2,200	67	20,120	67 %	(5,345)		(3,563)Subsidiary and note 6
								9,393,237			1,130,027
Zyxel	ZyUSA	U.S.A.	Sales and marketing	271,810 (USD 9,506)	271,810 (USD 9,506)	9,807	100	286,026	100 %	63,164	Note 2	Subsidiary and note 6
Zyxel	Zychamp	Taiwan	Investment activities	540,000	540,000	8,902	100	333,506	100 %	142	Note 2	Subsidiary and note 6
Zyxel	ZyTR	Turkey	Sales and marketing	362,862 (USD 11,977)	362,862 (USD 11,977)	29,137	100	197,762	100 %	63,418	Note 2	Subsidiary and note 6
Zyxel	ZyAS	Denmark	Sales and marketing	501,390 (EUR 11,980)	501,390 (EUR 11,980)	20,712	100	389,191	100 %	83,200	Note 2	Subsidiary and note 6

					Original investment amount	Balance as of December 31, 2021			Highest
Name of investor	Name of investee	Location	Main businesses and products	December 31, 2021	December 31, 2020	Shares	Percentage of ownership	Carrying value	percentage of ownership during the year	Net income (losses) of investee	Share of profits/ losses of investee	Note
Zyxel	Gemini	Germany	Development of communications and networking products	Note 4	154,320 (EUR 4,000)	-	-	-	100 %	2,193	Note 2	Subsidiary and note 6
Zyxel	ShareTech Taiwan		Development, manufacturing and sales of communications and networking products	10,950	10,950	848	38	13,851	38 %	6,234	Note 2	Associate
Zyxel	Ardomus	Taiwan	Development and sales of network digital control products	48,411	48,411	4,841	48	2,441	48 %	(18,506)	Note 2	Associate
Zyxel	ZyBR	Brazil	Sales and marketing	53,373 (USD 1,668)	53,373 (USD 1,668)	5,849	100	(449,195) 773,582	100 %	(44,702)	Note 2	Subsidiary and note 6
ZyAS	ZyDE	Germany	Sales and marketing	67,461 (EUR 1,525)	67,461 (EUR 1,525)	-	100	119,725	100 %	6,729	Note 2	Subsidiary and note 6
ZyAS	ZyUK	United Kingdom	Sales and marketing	319,542 (EUR 6,450)	319,542 (EUR 6,450)	5,375	100	51,734	100 %	4,467	Note 2	Subsidiary and note 6
ZyAS	ZyIT	Italy	Sales and marketing	78,335 (EUR 2,336)	78,335 (EUR 2,336)	10	100	45,281	100 %	6,133	Note 2	Subsidiary and note 6
ZyAS	Gemini	Germany	Development of communications and networking products	31,565 (EUR 976) Note 4	-	-	100	31,198	100 %	2,193	Note 2	Subsidiary and note 6
ZyAS	ZyCZ	Czech Republic	Sales and marketing	66,283 (EUR 1,543)	66,283 (EUR 1,543)	19,000	100	17,976	100 %	3,016	Note 2	Subsidiary and note 6
ZyAS	ZyES	Spain	Sales and marketing	2,165 (EUR 53)	2,165 (EUR 53)	3	100	3,572	100 %	1,310	Note 2	Subsidiary and note 6
								269,486

				Original investment amount		Balance as of December 31, 2021			Highest
Name of investor	Name of investee	Location	Main businesses and products	December 31, 2021	December 31, 2020	Shares	Percentage of ownership	Carrying value	percentage of ownership during the year	Net income (losses) of investee	Share of profits/ losses of investee	Note
MitraStar	Bluebell	British Virgin Islands	Investment activities	1,519,277 (USD 45,150)	1,519,277 (USD 45,150)	32,856	100	1,917,286	100 %	132,341	Note 2	Subsidiary and note 6
MitraStar	XSquare	Taiwan	Development and sales of communications and networking products	137,960	50,000	13,796	92	102,512	100 %	(31,207)	Note 2	Subsidiary and note 6
								2,019,798	-
ZNet	ZNet AS	Denmark	Sales and marketing	415,320 (EUR 12,000)	415,320 (EUR 12,000)	20,712	100	261,578	100 %	89,834	Note 2	Subsidiary and note 6
ZNet	ZyTPE	Taiwan	Development and sales of communications and networking products	Note 3	Note 3	6,000	100	111,079	100 %	34,408	Note 2	Subsidiary and note 6
ZNet	ZNet TH	Thailand	Sales and marketing	74,969 (USD 2,389)	74,969 (USD 2,389)	8,000	100	55,475	100 %	3,908	Note 2	Subsidiary and note 6
ZNet	ZNet KR	South Korea	Sales and marketing	11,127 (USD 390)	11,127 (USD 390)	72	65	21,322	65 %	(164)	Note 2	Subsidiary and note 6
ZNet	ZNet EE	Estonia	Sales and marketing	- Note 5	88 (EUR 3)	-	-	-	100 %	-	Note 2	Note 5
ZNet	ZNet IN	India	Sales and marketing	17,176 (USD 568)	17,176 (USD 568)	8,470	100	(262,215)	100 %	5,621	Note 2	Subsidiary and note 6
ZNet AS	ZNet FR	France	Sales and marketing	122,449 (EUR 3,603)	122,449 (EUR 3,603)	10	100	187,239 88,497	100 %	2,169	Note 2	Subsidiary and note 6
ZNet AS	ZNet BNL	Netherlands	Sales and marketing	54,089 (EUR 1,350)	54,089 (EUR 1,350)	14	100	45,056	100 %	1,489	Note 2	Subsidiary and note 6
ZNet AS	ZNet RUS	Russia	Sales and marketing	28 (EUR 1)	28 (EUR 1)	-	100	2,364 135,917	100 %	590	Note 2	Subsidiary and note 6

• Note 1: The share of the investee company's loss comprises the share of subsidiary's loss after the elimination of unrealized gross profit on inter-company sales transactions.
• Note 2: The share of profits/losses of the investee company is not disclosed herein as such amount is already included in the share of profits/losses of the investor company.
• Note 3: The issued capital of ZyTPE comprised of \$50,000 capital increase by cash and \$60,000 capital increase by retained earnings. In March 2019, \$50,000 capital was returned to the investor.
• Note 4: In October 2021, Zyxel sold the holding shares in Gemini to ZyAS with the carrying amount of the investment in Gemini.
• Note 5: ZNet EE was liquidated in July 2021.
• Note 6: The inter-company transactions and balances had been eliminated in the consolidated financial statements.

Unizyx Holding Corporation and Subsidiaries

Information on investment in Mainland China

For the year ended December 31, 2021

(1) Information on investment in Mainland China

				Accumulated outflow of		Investment flows	Accumulated outflow of		Direct/indirect	Highest percentage	Share of	Carrying	Accumulated
Name of investee	Main businesses and products	Issued Capital	Method of investment	investment from Taiwan as of January 1, 2021	Out-flow	Inflow	investment from Taiwan as of December 31, 2021	Net income (losses) of investee	shareholding (%) by the Company	of ownership during the year	profits/losses of investee (Note 6)	amount as of December 31, 2021	repatriation of investment income
Tianjin Huagin	Sales of communications and networking products and technical consulting service	44,375	Note 1	42,156	-	-	42,156		(75)ZNet directly holds 95%	95 %	(71)	1,535	-
ZNet SHA	Sales of communications, networking products and technical consulting service	266,259	Note 1	266,259	-	-	266,259	2,718	ZNet directly holds 100%	100 %	3,051 (Note 7)	4,938	-
Wuxi MSTC	Manufacturing and sales of communications and networking products and technical consulting service	1,013,953	Note 2	1,013,953	-	-	1,013,953	132,622	MitraStar indirectly holds 100%	100 %	132,622	1,976,291	-
Genezys	Development of communications and networking products	209,806	Note 3	209,806	-	-	209,806	6,463	MitraStar indirectly holds 100%	100 %	6,463	244,477	-
Monetics	Sales of communications, networking products and network technology transfer service	360,658	Note 3 and 4	282,403	-	-	282,403	25,667	MitraStar indirectly holds 100%	100 %	25,667	232,610	-
Beijing HuaqinWorld	Sales of communications, networking products and network technology transfer and consulting service	236,860	Note 5	-	-	-	-	-	MitraStar indirectly holds 49%	49 %	-	-	-

Table 8 (In Thousands of New Taiwan Dollars)

(2) Limitation on investment in Mainland China

Company	Accumulated investment amount remitted from Taiwan to Mainland China as of December 31, 2021	Approved investment amount by Ministry of Economic Affairs Investment Commission	Limitation on investment in Mainland China in accordance with regulations of Ministry of Economic Affairs Investment Commission (Note 8)
ZNet	308,415	308,415	1,178,948
MitraStar	1,506,162	1,584,417	2,209,918

Note 1: Direct investment in the company in Mainland China by ZNet.

Note 2: Indirect investment in Mainland China through an existing investee company (Bluebell) in a third region.

Note 3: Direct investment in the company in Mainland China by MitraStar.

Note 4: The issued capital of Monetics amounting to \$78,255 was invested by Bluebell through self-funding. In May 2019, 50% ownership of Monetics was transferred to MitraStar due to adjustment of organizational structure.

Note 5: The investment in Beijing HuaqinWorld was invested by Genezys through self-funding, which is not applicable for the calculation of limitation on the investment in Mainland China. However, Beijing HuaqinWorld went out of business, hence, the carrying amount of the investment had been fully recognized a loss.

Note 6: The amounts were calculated based on the financial statements of the investee company audited by the parent company's auditors in accordance with the materiality standards.

Note 7: The amount comprises the share of ZNet SHA's loss amounting to \$2,718 after the elimination of unrealized gross profit on inter-company sales transactions.

Note 8: In accordance with the Regulations Governing the Examination of Investment or Technical Cooperation in Mainland China amended on August 29, 2008, the limitation on investment in Mainland China shall not exceed 60% of the Company's net worth as of December 31, 2021.