Annual Report

[I. [Letter to Shareholders] 1

1. Information on Directors, President, Vice Presidents, Asst. VP, and the chiefs of all the

   company's divisions and branch units 4

2. Remuneration paid to directors, the President, and the Vice Presidents in the most recent year 16

3. Status of Corporate Governance 21

4. Disclosure of the accountant's fee 84

5. Change of CPA 85

6. The Chairman, president, or manager responsible for finance or accounting holding a position at

   a firm belonging to a certifying CPA firm or any affiliated enterprise within the preceding year 86

7. The transfer of shares and changes in pledges of the Directors, managerial officers, and shareholders holding more than 10% of the shares in the most recent year and as of the printing date of this annual report. 87

8. The top ten shareholders who are spouses or relatives within the second degree of kinship of one another 88

9. The total number of shares and total equity stake held in any single enterprise by the company, its directors, managerial officers, and any companies controlled either directly or indirectly by the company 89

1. Shares and Dividends 90

2. Corporate bond 95

3. Preferred shares 95

4. Global depository shares 95

5. The status of employee share option 95

6. New restricted employee shares 95

7. Mergers and acquisitions or transfers (including mergers, acquisitions, and settlements) 95

8. Implementation of the funds allocation plan 95

1. Business Activities 96

2. Analysis of the market as well as production and marketing situation 100

3. Employee information in the last two years up to the publication date of this annual report (consolidated) 104

4. Information on spending on environmental protection 104

5. Work environment and employee safety protection measures 105

6. Labor-management Relations 106

7. Cyber security management 109

8. Important Contracts 111

9. Management of Intellectual Property 112

1. Financial position 115

2. Financial performance 116

3. Cash flow 117

4. Impacts of Major Capital Expenditures in the Most Recent Year to Financial Performance 118

5. The major causes for profits or losses incurred by investments during the most recent year; rectifications and investment plans for the next year 118

6. Risk disclosure 119

7. Other important notes 120

1. Information on the affiliates 121

2. The status of private placement of securities in the most recent year to the date this report was printed 121

3. Holding or disposal of shares in the company by the company's subsidiaries during the most recent fiscal year or during the current fiscal year up to the date of publication of the annual

   report 121

4. Other matters that require additional description 121

※In the event of any discrepancy in the content, the Chinese version shall prevail.

‌

Dear shareholders,

The global political and economic situation changed rapidly in 2024. The Federal Reserve slowed down its expansionary measures and announced a rate cut in Q4. The new US President Trump took office and promoted the MAGA policy. China's economic growth did not meet expectations. The conflicts between Ukraine and Russia and between Israel and Kazakhstan have not yet ceased.

According to the comprehensive report and the Company's statistical analysis, sales in the air conditioning industry in China reached 200 million units, with a year-on-year growth rate of 17.8%. Among them, export sales increased by 17.8%, while domestic sales increased by 4.9%. The sales volume of the rotary compressor reached 290 million units, reflecting a year-on-year increase of 13.7%, and the market scale has continued to grow.

The company achieved the 2024 annual compressor sales of 21.23 million units, a year-on-year increase of 37.0%, and the consolidated revenue of NTD21.54 billion showed a year-on-year increase of 27.8%.

1. Review of business operation results in 2024:

   1. Profitability:

      Consolidated Financial Statements

      Unit: NTD thousand

      Item	2024	2023	Increase (decrease) in amount	Growth rate %
      Operating revenue - net	21,517,109	16,859,695	4,657,414	27.6%
      Operating cost	18,131,326	14,353,857	3,777,469	26.3%
      Gross profit	3,385,783	2,505,838	879,945	35.1%
      Net Operating Income	1,278,357	931,202	347,155	37.3%
      Consolidated pre-tax net profit	1,545,572	1,118,037	427,535	38.2%
      Consolidated net income	1,073,527	801,018	272,509	34.0%
      Net income attributable to the company	1,007,539	750,972	256,567	34.2%

   2. Research & Development:

      • According to the development plan, we have completed the development of inverter compressors for R290 1.5HP single-/twin-cylinder air conditioners for the market in China, the development of horizontal fixed/inverter compressors for R290 heat pump washer-dryers and heat pump dishwashers for the European market, the development of DC35 and DC39 inverter compressors equipped with 8-pole 12-slot low-noise motors, and the development of a new series of 21F and 31F inverter compressors.

      • We also completed the research and development of a new 50F aluminum wire alloy motor, variable frequency motor magneto-solid coupling analysis, electromagnetic noise simulation research, and basic research on the 40F R32 1.5HP twin-cylinder variable frequency air-injection and reheat-increasing compressor.

   3. Sales:

      • The sales of compressors for the whole year grew by 37.0% year-over-year, mainly due to the promotion of the variable frequency market, which increased sales by

        38.5%.

      • Benefiting from the increase in orders, purchase of CDs and production optimization, the overall gross margin of compressors continued to improve.

2. Summary of Business Plan for 2025:

   Looking ahead to 2025, environmental factors affecting the Company's operations are summarized as follows:

   1. Global economic environment:

      • In January 2024, the IMF estimated that the global economic growth rate would remain at 3.3%, which was stable but lower than the average level before the pandemic (3.7%).

      • Asia's emerging market economies remain the main driving force of the global economy, with India, boasting an economic growth rate of 6.5%, continuing to be one of the fastest growing large economies in the world.

      • China's economic growth rate was 4.6%, and it will implement a more proactive fiscal policy along with a moderately loose monetary policy to boost consumption and expand domestic demand in all aspects. The effectiveness of this policy remains to be seen.

   2. Industry status:

      • Air conditioner and compressor industry

        • Large air conditioning companies continue to expand their overseas operations and actively reorganize their supply chain and make core parts in-house.

        • The compound annual growth rate of the air conditioning industry in China is expected to reach 5% to 7%, with 80% attributed to variable frequency air conditioning. Additionally, the sudden emergence of Xiaomi air conditioning in 2024 has impacted the competition among air conditioner brands. The Company will continue to monitor the development trends of small-sized air conditioning in China.

        • The impact of tariff barriers under the US MAGA policy on global political and economic development, which leads to increased uncertainties, along with the sluggish real estate market in China and uncertainties in economic policies, will drive the overseas production planning of the rotary compressor industry.

        • The outlook for the HVAC&R industry remains promising, and it is estimated that the overall rotary compressor industry sales will increase by 3-5% year-on-year in 2025. The global heat pump market is expected to become one of the main growth drivers of the HVAC&R industry, primarily due to trends in building energy conservation, policy support, energy prices, economic considerations, technological advancements, and the availability of applications in various fields.

      • Trend of bulk materials

        • Copper: According to Goldman Sachs' forecast, the global copper price is expected to rise to US$10,160 per ton in 2025, mainly due to the continued strong demand in the energy transition and electric vehicle sectors. The long-term copper price still has support, but the slowdown in China's economic growth will cause fluctuations in the short term, which may put pressure on prices.

        • Steel: The World Steel Association reported that global steel demand will see a modest recovery, with steel demand in India, in particular, remaining robust and becoming the main driver of demand growth. Steel demand in the region is expected to grow by 4.2%.

        • Rare earths: With the continued growth of industries such as new energy vehicles and wind energy, the prices of rare earths are expected to rise. In particular, the demand for high-efficiency rare earth permanent magnet materials will further drive up prices.

The global economy in 2024 was filled with challenges, uncertainties, and opportunities. The competition in the rotary compressor industry was intense, and the market landscape continued to reorganize. We keep abreast of market trends and quickly adjust our business strategy to ensure the achievement of our business goals. The outline of the operating strategy for 2025 is as follows:

1. The target of sales volume of compressors in the whole year is 23 million units or more.

2. Continue to promote variable frequency compressors to increase penetration rate.

3. Promotion to and engagement with new customers and applications.

4. Accelerate the product iteration cycle and invest in the development of forward-looking products.

5. Ensure operational capacity and supply chain for production and sales.

6. Strengthen quality control throughout the entire process, achieve lean production, and increase customer confidence in product quality.

7. Promote the advantages of overseas joint ventures, accelerate the internationalization process, expand market share and balance risks.

8. Continue to improve corporate governance and implement corporate social responsibilities to promote sustainable development of the company.

As RECHI PRECISION celebrates its 35th anniversary, we would like to thank all shareholders, government agencies, customers, suppliers, banking groups, and partners for their trust and support, which have laid the foundation for our success today. In order to achieve continuous profitability and growth, the company has set the future operational theme of "Innovation-Driven, Smart Manufacturing for the Future," to continue expanding production capacity, strengthening strategic partnerships, and collaborating with customers to provide better services and more competitive products. "Efficiency," "Speed" and "Competition" will be key to strengthening competitiveness, and we will continue to match industry benchmarks to maximize corporate value.

Chairman: President: Accounting Supervisor: