Consolidated Financial Statements Fourth Quarter

Stock No: 4532

RECHI PRECISION CO., LTD.

and its subsidiaries

Consolidated financial statements and Auditor's Report

2024 and 2023

Address: No. 943, Sec. 2, Chenggong Rd., Guanyin Dist., Taoyuan City, Taiwan (R.O.C.)

TEL: (03)483-7201

§Table of Contents§

Items Page

Notes to financial the statements No.

Statement of Affiliate's Consolidated Financial Report

The companies to be included by the Bank in the Sale or Contribution of Assets between an Investor and its Associate or Joint Venture of affiliates in accordance with the "Rules Governing the Preparation of Affiliated Company's Consolidated Business Report, Affiliated Company's Sale or Contribution of Assets between an Investor and its Associate or Joint Venture and Relationship Report" in 2024 (from January 1 to December 31, 2024) are identical to those to be included in the Sale or Contribution of Assets between an Investor and its Associate or Joint Venture of the Parent Company and subsidiaries in accordance with the International Financial Reporting Standards No. 10. Also, the information to be disclosed in the Sale or Contribution of Assets between an Investor and its Associate or Joint Venture of the affiliated companies has been disclosed in said Sale or Contribution of Assets between an Investor and its Associate or Joint Venture of the Parent Company and subsidiaries. Therefore, the Bank will not separately prepare the Sale or Contribution of Assets between an Investor and its Associate or Joint Venture of the affiliated companies.

Hereby declare

Company name: RECHI PRECISION CO., LTD.

Chairman: CHEN, SHENG TIEN

March 14, 2025

To RECHI PRECISION CO., LTD.:

We have audited the accompanying individual balance sheet of RECHI PRECISION CO., LTD. and subsidiary as of December 31, 2024 and 2023, and the related consolidated statement of income, consolidated statement of changes in shareholders equity, consolidated statement of cash flows, and Note of the consolidated financial statements (including major accounting policy) for the years then ended.

In my opinion, the financial statements as referred to present fairly, in all material aspects the financial position of RECHI PRECISION CO., LTD. as of December 31, 2024 and 2023, and the results of its operations and cash flows for the years then ended in conformity with the Regulation Governing the Preparation of Financial Reports by Securities Issuers, and applicable IFRS, IAS, SIC, and IFRIC as recognized by the Financial Supervisory Commission.

We are engaged to conduct our audit in accordance with the Regulations Governing Auditing and Attestation of Financial statements by Certified Public Accountants and auditing standards. Our responsibilities under those standards are further described in the responsibilities of auditors for the audit of the consolidated financial statements. We are independent of RECHI Group in accordance with the Code of Ethics for certified public accountants in the part relevant to the audit of the consolidated financial statements of RECHI Group, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believed that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the consolidated financial statements of RECHI Group in 2024. These matters were addressed in the content of our audit of the consolidated financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on those matters.

The key audit matters of the 2024 consolidated financial statements of RECHI PRECISION CO., LTD (RECHI Group) and its subsidiaries are described as follows:

The basis for recognition of the revenue on export sales

RECHI Group is mainly engaged in the business focused on the manufacturing and selling of refrigerant compressors, by exporting and importing the product, our market covers a wide range of areas globally, therefore, the terms and conditions apply to different clients might also vary.

The sales revenue from exported goods sold was recognized by the Group when transaction conditions were fulfilled in accordance with that applied to different clients as predetermined and the control over the goods sold was transferred to the buyers. The relatively longer transportation period needed for part of export transactions and the terms and conditions apply to specific clients required human judgment in the process of revenue recognition, which might result in an incorrect time record of sales revenue, thus we have made the timing of recognizing sales revenue from exported goods with specific transaction conditions as one of the most important audit matters of the year.

The main audit procedures that we have implemented for the above timing of sales revenue recognition are as follows:

1. Understand and evaluate the procedures for the timing of sales revenue recognition plus the policy for internal control, and test the effectiveness of such controls.

2. Terminate the above test on the sales transactions with specific clients within a certain period before and after the balance sheet date, which includes verification of transaction conditions of the specific transaction, papers like import/export declarations, and inquiry of shipping schedule, in order to be sure if revenue recognition was recorded with a proper period.

3. Obtain the shipment details of the manual operation summary for a specific period for inspection, and check the relevant vouchers randomly to confirm whether the adjustment of the time point of revenue recognition is correct.

The Company has also prepared the parent company only financial statements for the years ended December 31, 2024 and 2023, for which we have issued an unqualified opinion.

The responsibility of management is to prepare fairly presented consolidated financial statements in conformity with the Regulations Governing the Preparation of Financial Reports by Securities Issuers and International Financial Reports Standards, International Accounting Standards interpretations, and announcements of interpretations recognized and published by the Financial Supervisory Commission and maintain necessary internal control related to the preparation of consolidation of financial statements in order to ensure the material misstatement caused by fraud or error does not exist in the consolidated financial statements.

In preparing the consolidated financial statements, the management is responsible for assessing the ability of the Group in continuing as a going concern, disclosing relevant matters, and adopting the going concern basis of accounting unless the management intends to liquidate the Group or cease the operations without other viable alternatives.

The governing body of the Group (including the Audit Committee) are responsible for supervising the financial reporting process.

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

As part of an audit in accordance with the accounting principles of the Republic of China, we exercise professional judgment and professional skepticism throughout the audit. We also perform the following works:

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

2. Understand the internal control related to the audit in order to design appropriate audit procedures under the circumstances, while not for the purpose of expressing an opinion on the effectiveness of the Group's internal control.

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

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

5. Evaluate the overall presentation, structure, and content of the consolidated statements, including related notes, whether the consolidated statements represent the underlying transactions and events in a matter that achieves fair presentation.

6. Obtain sufficient and appropriate audit evidence on the financial information of business entities within the Group in order to express an opinion on the consolidated financial statements. We are responsible for guiding, supervising, and performing the audit and forming an audit opinion on the Group.

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

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

From the matters communicated with the governing body, we determined the key audit matters for the audit of the Group's consolidated financial statements for the year ended December 31, 2024. We describe these matters in our auditor's report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communications.

Deloitte & Touche

CPA CHANG, CHING Hsia CPA CHENG, CHIN TSUNG

Financial Supervisory Commission Approval Document No.

Chin-Kuan-Cheng-Shen-Zi No. 1090347472

Financial Supervisory Commission Approval Document No.

Chin-Kuan-Cheng-Shen-Zi No. 1010028123

March 14, 2025

RECHI PRECISION CO., LTD. and its subsidiaries Consolidated Balance Sheet

December 31, 2024 and 2023

Unit: NTD thousand

December 31, 2024 December 31, 2023

The notes attached shall constitute an integral part of this Consolidated financial statement.

Chairman: CHEN, SHENG TIEN Manager: FENG, MING FA Accounting Manager: WU, CHIN MEI

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RECHI PRECISION CO., LTD. and its subsidiaries Consolidated Statements of Comprehensive Income For the Years Ended December 31, 2024 and 2023

Unit: NTD thousand, except Earnings Per Share (NTD)

on associates accounted for using the equity method

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Total comprehensive income attributable to:

Earnings per share (Note 24)

Business units in continuing operation

The notes attached shall constitute an integral part of this Consolidated financial statement.

Chairman: CHEN, SHENG TIEN Manager: FENG, MING FA Accounting Manager: WU, CHIN MEI

RECHI PRECISION CO., LTD. and its subsidiaries Consolidated Statements of Changes in Equity

For the Years Ended December 31, 2024 and 2023

Unit: NTD thousand

Equity of the company

Other equity Exchange

Share capital Retained earnings Shares (in

differences from the translation of financial statements of

Unrealized gain or loss on financial assets at fair value through other

thousand

Statutory

Special surplus

Undistributed

foreign

comprehensive

Non-controlling

Q1 Disposal of equity instrument investments

The notes attached shall constitute an integral part of this Consolidated financial statement.

Chairman: CHEN, SHENG TIEN Manager: FENG, MING FA Accounting Manager: WU, CHIN MEI

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RECHI PRECISION CO., LTD. and its subsidiaries Consolidated Statements of Cash Flows

For the Years Ended December 31, 2024 and 2023

Unit: NTD thousand

Code 2024 2023 Cash flow from operating activities

equity method over the associates 5,470 ( 5,819 )

A22500 Net loss from the disposal and obsolescence of property, plant,

equipment and right-of-use assets 35,134 24,056

A23200 Gains on disposal of investment

under the equity method - ( 22,420 )

A23700 Inventory valuation and

obsolescence losses - 13,332

A23700 Impairment loss of property, plant

and equipment - 796

A24100 Unrealized foreign currency

exchange loss (gain) ( 80,283 ) 49,516 A29900 Gains on lease modification ( 905 ) ( 1 )

A30000 Net change in operating assets and

liabilities

A31115 Increase in financial assets mandatorily measured at fair

A31130 Decrease (increase) in notes

related parties ( 3,214 ) ( 50,805 )

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Cash flow from investing activities

B00020 Disposal of financial assets at fair value

through other comprehensive income 34 -B00040 Financial assets acquired on the basis of

B00050 Financial assets on the basis of cost after

B09900 Acquisition of government subsidies - 10,038 BBBB Net cash outflow from investing

activities ( 1,717,156 ) ( 271,334 )

Cash flow from financing activities

C00100 Increase of short-term loans 2,180,000 -

C00200 Decrease in short-term loans - ( 523,555 ) C00500 Increase in short-term notes payable 79,852 79,557 C01600 Proceeds from long-term loan 500,000 280,000 C01700 Repayments of long-term borrowings ( 2,066,830 ) ( 275,233 ) C01900 Decrease in long-term notes payable ( 350,000 ) -C03100 Decrease in guarantee deposits received ( 4,028 ) ( 6,235 )

C04020 Repayments of principal portion of the

lease ( 7,676 ) ( 12,142 )

C04500 Pay owners' dividends ( 499,995 ) ( 449,996 ) C05400 Acquisition of equity of subsidiaries ( 312,249 ) ( 248,000 )

C05800 Cash dividends paid to non-controlling

interests ( 14,752 ) ( 48,989 )

CCCC Net cash outflow from financing

activities ( 495,678 ) ( 1,204,593 )

DDDD Impact of changes in exchange rate on cash

and cash equivalents 249,333 ( 66,395 )

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The notes attached shall constitute an integral part of this Consolidated financial statement.

Chairman: CHEN, SHENG TIEN Manager: FENG, MING FA Accounting Manager: WU, CHIN MEI

RECHI PRECISION CO., LTD. and its subsidiaries Notes to Consolidated Financial Statements

For the Years Ended December 31, 2024 and 2023 (Unless otherwise provided, Unit: NTD thousand)

1. Organization and operations

   RECHI PRECISION CO., LTD. (formerly known as RECHI INDUSTRIAL CO.,

   LTD., hereinafter referred to as the Company) was established in December 1989 in accordance with the Company Act of the Republic of China, mainly engaged in the assembly and processing, manufacturing and repairing, and trading of refrigerant compressors, and design services of relevant products, as well as import and export business.

   The Company's shares had been listed for trading on the Taipei Exchange since February 2002, and have changed to be listed on the Taiwan Stock Exchange since August 2003.

   The consolidated financial statements are presented in the Company's functional currency - New Taiwan dollars.

2. Financial reporting date and procedures

   The consolidated financial statements were approved by the board of directors and authorized for issue on March 11, 2025.

3. Application of new and revised standards and interpretation

   1. Initial application of the International Financial Reporting Standards (IFRS), International Accounting Standards (IAS), IFRIC Interpretations (IFRIC), and SIC Interpretations (SIC) (collectively, the "IFRSs") endorsed and issued into effect by the Financial Supervisory Commission (FSC)

      The application of the amendments to the IFRSs endorsed and issued into effect by the FSC does not have material impact on the Group's accounting policies:

   2. The IFRSs endorsed by the FSC for application starting from 2025

      The new/amended/revised standards or interpretation Effective Date per IASB Amendments to IAS 21 "Lack of Exchangeability" January 1, 2025 (Note 1)

      Amendments to IFRS 9 and IFRS 7 - "Amendments to the Classification and Measurement of Financial Instruments" regarding the application of the classification of financial assets

      January 1, 2026 (Note 2)

      Note 1: The amendments apply to the annual reporting periods beginning on or after January 1, 2025. Upon the initial application of the amendments, the financial statements for comparative period shall not be restated. Instead, the effect shall be recognized in the retained earnings on the date of initial application or the exchange differences of foreign operation under equity (if appropriate), along with affected assets and liabilities.

      Note 2: Applicable to annual reporting periods beginning on or after January 1, 2026. Enterprises may also choose to apply the same earlier on January 1, 2025. When the amendments are first applied, the effects of the amendments shall be recognized on the date of initial application, but without restatement of the comparative period. However, if an entity opts to restate without the use of hindsight, it may choose the comparative periods for restatement.

      Amendments to IAS 21 "Lack of Exchangeability"

      The amendments stipulate that a currency is exchangeable into another currency when an entity is able to obtain the other currency within a timeframe that allows for a normal administrative delay and through a market or exchange mechanism in which an exchange transaction would create enforceable rights and obligations. The Group shall estimate the spot exchange rate at a measurement date when a currency is not exchangeable into another currency to reflect the rate at which an orderly exchange transaction would take place at the measurement date between market participants under prevailing economic conditions. In this situation, the Group shall disclose any information that enables users of its financial statements to evaluate how the currency not being exchangeable into the other currency affects, or is expected to affect, its financial performance, financial position and cash flows.

   3. The IFRSs released by the IASB but not yet approved and announced effective by the Financial Supervisory Commission

      The new/amended/revised standards or interpretation

      IASB publication effective

      date (Note)

      "IFRS Annual Improvements - Volume 11" January 1, 2026

      Amendments to IFRS 9 and IFRS 7 "Amendments to the Classification and Measurement of Financial Instruments" regarding the application of derecognitions of financial liabilities

      Amendments to IFRS 9 and IFRS 7 "Contracts Referencing Nature-dependent Electricity"

      Amendment to IFRS 10 and IAS 28, "Sale or Contribution of Assets between an Investor and its Associate or Joint Venture and Investment in Associates."

      January 1, 2026

      January 1, 2026 To be determined

      IFRS 17 "Insurance Contracts" January 1, 2023

      Amendments to IFRS 17 January 1, 2023

      Amendments to IFRS 17 "Initial Application of IFRS 17 and IFRS 9 - Comparative Information"

      IFRS 18 "Presentation and Disclosure in Financial Statements"

      IFRS 19 "Subsidiaries without Public Accountability: Disclosures"

      January 1, 2023

      January 1, 2027

      January 1, 2027

      Note: Unless stated otherwise, the above New IFRSs are effective for annual periods beginning on or after their respective effective dates.

      IFRS 18 "Presentation and Disclosure in Financial Statements"

      IFRS 18 will supersede IAS 1 "Presentation of Financial Statements" and the main changes include:

      • Items of income and expenses included in the income statement shall be classified into operating, investing, financing, income tax, and discontinued operations categories.

      • The income statement shall present operating profit or loss, profit or loss before financing and income tax, as well as subtotal and total profit and loss.

      • Provides guidance to enhance the requirements of aggregation and disaggregation: The Group shall identify the assets, liabilities, equity, income, expenses, and cash flows that arise from individual transactions or other events and classify and aggregate them into groups based on shared characteristics, so as to result in the presentation in the primary financial statements of line items that have at least one similar characteristic. Items with non-similarity characteristics in the main financial statements and notes should be divided. The Group only marks "other" in the absence of more information.

      • Adds disclosures on management-defined performance measures: When in public communications outside financial statements and communicating to users of financial statements management's view of an aspect of the financial performance of the Group as a whole, the Group shall disclose related information about its management-defined performance measures in a single note to the financial statements, including the description of such measures, calculations, reconciliations to the subtotal or total specified by IFRS Accounting Standards, and the income tax and non-controlling interests effects of related reconciliation items.

      In addition to the aforementioned influence, the Group will continue to evaluate the effect of the amendment to each standard and interpretation on its financial position and performance up to the date when this consolidated company financial statement approved and released. The Group will make appropriate disclosures upon completing this evaluation.

4. Summary of significant accounting policies

   1. Compliance Statement

      The consolidated financial statements are prepared in accordance with the Regulations Governing the Preparation of Financial Reports by Securities Issuers and the IFRSs approved and published by the FSC.

   2. Basis of preparation

      Except for the financial instruments on the basis of fair value and the recognition of net defined benefit liabilities on the basis of the present value of net defined benefit obligation net of the fair value of planned assets, this consolidated financial statement was compiled on the basis of historical cost.

      The evaluation of fair value could be classified into Level 1 to Level 3 by the observable intensity and importance of related input value:

      1. Level 1 input value: refers to the quotation of the same asset or liability in an active market as of the evaluation (before adjustment).

      2. Level 2 input value: refers to the direct (the price) or indirect (inference of price) observable input value of asset or liability further to the quotation of Level 1.

      3. Level 3 input value: the unobservable input value of asset or liability.

   3. Standards in differentiating current and non-current assets and liabilities. Current assets including:

      1. Assets held mainly for trading purpose:

      2. Assets expected to be realized within 12 months after the balance sheet date; and

      3. Cash and cash equivalents (not including those that are limited to exchange or repay liabilities exceeding 12 months after the balance sheet date).

         Current liabilities include:

         1. Liabilities held for trading purposes;

         2. Liabilities to be repaid within 12 months after the balance sheet date, and

         3. The entity on the balance sheet date does not have in substance the right to defer settlement of the liability for at least 12 months after the balance sheet date.

         For those that are not current assets or liabilities above are classified as non-current assets or liabilities.

   4. Basis of consolidation

      This consolidated financial statement contains the information of the financial statements of the Bank and its controlled entities (subsidiaries). The Consolidated Statement of Comprehensive Income already covered the operating profit and/or loss of the subsidiaries, which have been acquired or disposed of the current term, from the date of acquisition until the date of disposal. The subsidiaries' financial statements have been properly adjusted to keep the accounting policies consistent with the accounting policies of the Group. In preparing these consolidated financial statements, the transactions, account balances, incomes and loss and expenses among the individual entities are written off in full amount. The total comprehensive incomes of the subsidiaries were non-controlling interest attributed to the Company's owners and the non-controlling interest, to become the balance of loss even as the non-controlling interest.

      When the changes of interest of the subsidiaries' ownership by the Group do not lead to the loss of control, it is disposed of as interest transactions. The book value of the Group and non-controlling interest has been adjusted to reflect the changes of the relative interest of subsidiaries. The differential between the adjustment amount of non-controlling interest and the fair value of consideration received is directly recognized as interest and belongs to the owner of the Company.

      For details of subsidiaries, shareholding ratios, and business items, please refer to Note 12 and Table 8.

   5. Foreign currency

      For the transactions conducted in a currency other than the business entity's functional currency (foreign currency), it is to be translated to the functional currency in accordance with the exchange rate on the transaction date when preparing the individual financial statements.

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

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

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

      When preparing the consolidated financial statements, the assets and liabilities of the Group's foreign operations (including subsidiaries and associates that operate in countries or adopt the functional currencies different from the Group) are translated into New Taiwan dollars. The profits and losses are translated in accordance with the current average exchange rates, and the exchange differences resulted is booked in other comprehensive income (and attributable to the Company's shareholders and non-controlling equity respectively).

      If the Group disposes of the ownership interest of a foreign operation, or disposes of part of the equity of a foreign operation's subsidiary and loses control, or disposes of a foreign operation's associate, and the retained equity is a financial asset and is treated based on the accounting policies adopted for financial instruments, then all accumulated exchange differences attributable to the owners of the Company and related to the foreign operation will be reclassified to profit or loss.

      If the partial disposal of the subsidiaries of the foreign operation institution did not result in a loss of control, the cumulative exchange differences are reattributed proportionally as non-controlling equity of the subsidiaries without any profit and loss recognized. In any other event of partial disposal of an overseas operating institution, the accumulated difference in foreign exchange was reclassified to profit and/or loss pro rata to the percentage of disposal.

   6. Inventories

      Inventories are raw materials, materials, finished goods, and work-in-process. Inventory is valued in accordance with the lower of cost or net cash value. When comparing cost and net cash value, except for the homogeneous inventories, it is based on the itemized lower of cost or net cash value. Net realizable value refers to the estimated sale price under normal circumstances net of the estimated cost needed to complete the project and the estimated expenses needed to complete the sale. The cost of inventory is calculated using the weighted average method.

   7. Investments in the affiliated company

      The term "associate" as set forth herein denotes an enterprise, which has significant effect upon the Group, but is not a subsidiary or a joint venture.

      The Group adopts equity method for investment in associates.

      Under the equity method, investments in the affiliated companies were originally recognized at cost; the book value after the acquisition date fluctuates along with the distribution of profit or loss from the affiliated company and other comprehensive income by the Group. In addition, the changes in the equity of affiliates shall be recognized in proportion to the proportion of shareholding.

      When assessing impairment, the Group regards the overall book value of the investment as a single asset to compare the recoverable amount with the book value, and conducts an impairment test. The impairment loss recognized is also part of the book value of the investment. Any reversal of the impairment loss can be recognized within the range of the recoverable amount of the subsequently increased investment.

      The profit or loss resulting from the countercurrent, downstream and side-stream transactions between the Group and the affiliated company is recognized in the consolidated financial statement within the range that is irrelevant to the Group's interest in the affiliated company.

   8. Property, plant, and equipment

      Real property, plant and equipment are recognized as costs, and they will be measured by the amount after the costs less the amount of accumulated depreciation and accumulated impairment losses afterwards.

      Those real estate, plant buildings, equipment & facilities under construction were recognized at the amount of the costs after deducting the loss in the accumulated impairment. Costs include professional service expanses and loan costs that meet the capitalization conditions. When such assets are completed and reach expected use status, such assets will be classified to proper items under real property, plant and equipment and the provision of depreciation shall begin.

      Each material part of property, plants, and equipment shall be depreciated separately in accordance with the useful year and a straight-line method. The Group shall at least inspect the estimated service life, residual value and depreciation method by the day of the end of each fiscal year and postpone the effect of applying estimated accounting changes.

      In the case of delisting real estate, plants, and equipment, the difference between the net disposal price and the book value of the asset is recognized in profit or loss.

   9. Intangible assets

      The intangible asset with limited useful life acquired separately was originally measured at cost and subsequently measured at cost, net of accumulated amortization and accumulated impairment losses. Intangible assets are amortized using the straight-line method over the useful lives. The Group conducts at least one annual review at the end of each year to assess the estimated useful life, residual value, and amortization methods. And the impact of changes in accounting estimates should be delayed.

      In removing intangible assets, the difference between the net proceeds of disposition and the book value shall be recognized as income.

   10. Impairment of property, plant and equipment, right-of-use assets, and intangible assets

       The Group assesses if there are any signs of possible impairment in property, plant, and equipment as well as right-of-use and intangible assets at each balance sheet date. If there is any indication of impairment occurring, the recoverable amount of the asset should be estimated. If the recoverable amount of an individual asset cannot be estimated, the Group is to estimate the recoverable amount of the respective cash-generating unit. The common asset is amortized to each cash-generating unit in accordance with a consistent and reasonable sharing basis.

       The recoverable amount is the fair value net of cost or the value in use whichever is higher. When the recoverable amount of an individual asset or cash-generating unit is less than its book amount, the book amount of the asset or cash-generating unit should be reduced to its recoverable amount. The impairment loss is recognized in the profit or loss.

       When the impairment loss was reversed subsequently, the book amount of the asset or cash-generating unit is increased to the adjusted recoverable amount, but the increased book amount may not exceed the book amount of the asset or cash-generating unit without recognizing the impairment loss in prior periods (net of amortization or depreciation). The reversed impairment loss is recognized in the profit or loss.

   11. Financial instruments

       When the Group has become a party to the instrument contract, the financial assets and financial liabilities are to be recognized in the consolidated balance sheet.

       For the initial recognition of the financial assets and financial liabilities, if the financial assets or financial liabilities are not measured at fair value through profit or loss, it is measured at fair value plus transaction cost that is directly attributable to the acquisition or issuance of financial assets or financial liabilities. The transaction cost directly attributable to the acquisition or issuance of financial assets or financial liabilities that are measured at fair value through profit or loss is immediately recognized in the profit or loss.

       1. Financial assets

          The regular way of purchase or sale of financial assets are recognized and derecognized based on the accounting on the transaction date.

          1. Classification of measurement

             Financial assets held by the Group are those measured at fair value through profit or loss (FVTPL) and at amortized cost, as well as investments in equity instruments measured at fair value through other comprehensive income (FVTOCI).

             1. Financial assets at FVTPL

                Financial assets measured at FVTPL are those mandatorily measured at FVTPL Financial instruments designated at fair value through income statements included the investment of equity instruments not designated at fair value through other comprehensive income and those not conforming to the standard of debt instruments on the basis of cost after amortization or at fair value through other comprehensive income.

                Financial assets measured at FVTPL are measured at fair value, and the dividends and interest generated are recognized in other income and interest revenue, respectively, and gains or losses generated from remeasurement are recognized in other profits and losses. Please refer to Note 28 for the determination of fair value.

             2. Financial assets based on cost after amortization

                If the financial assets of the Group met both of the following conditions, classify as financial assets on the basis of cost after amortization:

                1. Financial assets held under particular mode of operation and the purpose of holding is for the collection of cash flow from contracts

                2. Cash flow generated on particular dates deriving from the contacts and the cash flow is wholly for the payment of principal and interest accrued from the outstanding amount of the principal.

                   Financial assets on the basis of cost after amortization (including cash and cash equivalents and accounts receivable on the basis of cost after amortization) shall be determined for the total book value under the effective interest rate method after the initial recognition net of the cost of any impairment after amortization for measurement. Any exchange gains or loss will be recognized as income.

                   Interest revenue is calculated by multiplying the effective interest rate by the total carrying amount of financial assets.

                   Cash equivalents are time deposits within 3 months from the date of acquisition, with high liquidity, can be converted into cash with marginal risk on the change in value, and are used for the fulfillment of short-term commitment in cash settlement.

             3. Investment of equity instruments at fair value through other comprehensive income

                The Group may make an irrevocable choice at the time of initial recognition for designating the investment of equity instruments not available-for-sale and not recognized by the acquirer under corporate merger and acquisition or with consideration at fair value through other comprehensive income for measurement.

                The investment of equity instruments at fair value through other comprehensive income is measured at fair value. Subsequent changes in fair value will be recognized as other comprehensive income and accumulated into other equity. In the disposition of assets, accumulated gains or loss shall be directly transferred to retained earnings without classification as income.

                The dividend of the investment of equity instruments at fair value through other comprehensive income shall be recognized as income when the right of the Group in the collection of dividends is ascertained, unless the dividend is obviously representing the recovery of the cost of investment in part.

          2. Impairment of financial assets

             The Group at each balance sheet date assesses the impairment loss of financial assets (including accounts receivable) at amortized cost according to the expected credit loss.

             Accounts receivable are recognized in allowance for loss based on the lifetime expected credit losses (ECLs). Other financial assets shall be evaluated for any significant increase of risk from the day of initial recognition. If none is found, recognize for provision for anticipated credit loss along a period of 12 months. If it is, recognize for provision of anticipated credit risk within the perpetuity of the assets.

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

             For internal credit risk management purpose, the Group, without considering the collateral, determines the following circumstances indicating that a default has occurred on the financial instrument:

             1. There is internal or external information indicating that the debtor is no longer able to pay off a debt.

             2. Payments are overdue for more than 180 days, unless there are reasonable and supporting information showing that the delayed default benchmark is more appropriate.

                All impairment of financial assets is recognized through the reduction of the book value of the provisioned account.

          3. The derecognition of financial assets

             The Group has financial assets derecognized only when the contractual rights from the cash flows of a financial asset become invalid or when the financial assets are transferred and almost all the risks and rewards of the asset ownership have been transferred to other enterprises.

             If the Group neither transfers nor retains almost all the risks and rewards of the ownership of a financial asset, and retains control of the asset, it will continue to recognize the asset within the scope of continuous participation in the asset and recognize relevant liabilities for the amount that may have to be paid. If the Group retains almost all the risks and rewards of the ownership of a financial asset, it will continue to recognize the asset and recognize the payments received as secured borrowings.

             When a financial asset measured at amortized cost is derecognized as a whole, the difference between its book value and the consideration received is recognized in profit or loss. When equity instrument investments measured at FVTOCI are derecognized as a whole, accumulated gains and losses are directly transferred to retained earnings and are not reclassified to profit or loss.

       2. Equity instruments

          The debt and equity instruments issued by the Group are classified as financial liabilities or equity pursuant to the contractual agreements and the definition of financial liabilities and equity instruments.

          Equity instruments issued by the Group are recognized for an amount after deducting the direct issuing cost from the proceeds collected.

          The Company's equity instruments redeemed are recognized and deducted under equity, and the carrying amounts are calculated using the weighted average method based on the stock types and reasons for redemption. The Company's equity purchased, sold, issued, or cancelled is not recognized in the profit or loss.

       3. Financial liabilities

          1. Subsequent measurement

             All financial liabilities are evaluated at the amortized cost using the effective interest method.

          2. Derecognition of financial liabilities

             When derecognizing financial liabilities, the difference between the book amount and the consideration paid (including any transferred non-cash assets or assumed liabilities) is recognized as profit or loss.

   12. Liability reserve

       The recognized liability reserve amount is with the risk and uncertainty of the obligation considered, and it is the optimum estimate of the expenditure required to settle the obligations on the balance sheet date. Provision for liabilities shall be measured based on the discount value of the estimated cash flow for the settlement of obligation.

       Warranty

       The warranty obligation under a sales contract is the best estimated expense by management in clearing the Group's obligations and it is recognized when the related instrument income is recognized.

   13. Recognition of revenue

       The Group, after identifying the performance obligations, had the transaction price amortized to each performance obligation and recognized as income when the performance obligations were fulfilled.

       Commodity sales revenue

       When the sales arrive at a customer's designated location or when the goods are shipped, and the customer has the right to set the price and use of the goods and bears the main responsibility for resale and the risk of obsolescence, the Group recognizes the sales in revenue and accounts receivable.

       When the material is supplied for processing, the ownership of the processed product is not transferred; therefore, the income is not recognized when the material is supplied.

   14. Leasing

       The Group assesses whether the contract is (or includes) a lease arrangement on the agreement date.

       For contracts that include lease and non-lease components, the Group allocates the consideration in the contracts based on the relative stand-alone prices and treats them separately.

       1. The Group is the lessor

          When the lease term is to have all risks and returns attached to the ownership of assets transferred to the lessee, it is classified as a financing lease. All other leases are classified as operating leases.

          Lease payments for operating leases upon deduction of lease incentives are recognized as income on a straight-line basis in relevant lease periods. Initial direct costs generated in the acquisition of operating leases are added to the underlying asset carrying amount and recognized as expenses on a straight-line basis in lease periods.

       2. The consolidated company is the lessee

          Except for recognizing low-value asset leases applying to exemption and lease payments for short-term leases being recognized as an expense on a straight-line basis over the lease term, other leases will be recognized as right-of-use assets and lease liabilities at the lease commencement date.

          The right-of-use asset is measured at cost (including the amount equal to the lease liability at its initial recognition, lease payments made before the commencement of the lease less any received, any incurred by the lessee, and an estimate of costs to be incurred by restoring the underlying asset to the condition required) less any depreciation and any accumulated impairment losses. Additionally, the cost is subsequently adjusted for any. Right-of-use assets are separately presented on the Consolidated Balance Sheet.

          Right-of-use assets are depreciated on a straight-line basis over the period from the commencement date of the lease to expiration of its useful life or expiration of the lease term, whichever date is earlier. If the ownership of the underlying asset will be acquired at the end of the lease period, or if the cost of the right-of-use asset reflects exercising an option, the asset will be depreciated over the period from the commencement date of the lease to expiration of the useful life of the underlying asset.

          Lease liabilities are initially measured at the present value of lease payments (including fixed payments, less lease incentives received). If the implied interest rate of the lease is easily determined, the lease payments will be discounted to their present value using that interest rate. If such interest rate is not easily determined, the incremental borrowing rate will be used.

          Subsequently, the lease liabilities are measured at amortized cost using the effective interest method, and the interest expenses are amortized over the lease term. If changes in the lease term lead to changes in future lease payments, the Group will remeasure the lease liabilities and adjust the right-of-use asset accordingly. However, if the book value of the right-of-use asset has been reduced to zero, the remaining remeasured amount is recognized in profit or loss. For lease modifications that are not treated as a separate lease, remeasurement of lease liabilities due to the reduction in the scope of the lease is to reduce the right-of-use assets, and to recognize the profit or loss of partial or full termination of the lease. Remeasurement of lease liabilities due to other modifications is an adjustment to the right-of-use asset. Lease liabilities are separately presented on the Consolidated Balance Sheet.

          Changes in rent as stipulated in lease agreements not determined by indices or rates are recognized as expenses in the current period.

   15. Loan costs

       Borrowing costs directly belonging to acquiring, building or producing assets that meet the requirements are part of the costs of such assets until the completion of all necessary activities that the assets reaching the status of expected use or sale.

       The income of a temporary investment with a specific loan that has not yet met the essential requirement of capital expenditure is deducted from the loan cost that meets the essential requirement of capitalization.

       In addition to the transaction stated in the preceding paragraph, all other loan costs are recognized as profit and loss upon occurring.

   16. Government grant

       A government subsidy can only be recognized when it is firmly believed that the Group will comply with the terms added to the government subsidy and will receive such subsidy.

       Government grants related to income are recognized in other income on a systematic basis over the periods, in which the Group recognizes as expenses the relevant costs for which the grants are intended to compensate. Government grants whose primary condition is that the Group should purchase, construct, or otherwise acquire non-current assets are debited to the carrying amount of said assets and recognized in profit or loss over the useful lives of said assets by reducing the depreciation or amortization expenses of said assets.

       If the government subsidy is used for compensating expenses or losses that have already occurred or for the purpose of immediate financial support to the Group without any related cost in the future, it will be recognized as income during the receivable period.

   17. Employee benefits

       1. Short-term employee benefits

          Liabilities relating to short-term employee benefits are measured by the non-discounted amount of the expected payment in exchange for employee services.

       2. Retirement benefits

          Under the defined contribution pension plan, the pension amount appropriated during the service years of the employees is recognized as an expense.

          The determined cost of benefit for determined benefit retirement plan (including the cost of service, net interest, and reevaluation) is based on the actuary of projected unit method. The net interests of the service cost (including the service cost for the current period) and net defined benefit liability (asset) are recognized as employee benefit expenses when they occur. The value of second measurement (including the profits and loss under actuary and the return on assets of the plan net or interest) shall be recognized as other comprehensive incomes and as retained earnings, if realized. No reclassification as profits and loss in subsequent periods.

          Net defined benefit liability (asset) is the appropriation deficit (surplus) of the defined benefit pension plan. Net defined benefit asset shall not exceed the refund of the appropriated fund or decrease the present value of appropriation of fund in the future.

   18. Income tax

       Income tax expense is the sum of the current income tax and deferred income

       tax.

       1. Income tax expenses in the current period

          The Group determines the income (loss) of the current year in accordance with the laws and regulations in each jurisdiction area for income tax filings, and calculates the income tax payable (recoverable) accordingly.

          Additional income tax on unappropriated earnings is calculated in accordance with the provisions of the Income Tax Act of the Republic of China, to be recognized in the year of the shareholder resolution meeting.

          The adjustment to prior period income tax payable is booked as current income tax.

       2. Deferred tax

          Deferred tax is computed in accordance with the temporary differences between the book value of assets and liabilities and the tax bases of taxable income.

          Deferred income tax liabilities are generally recognized in accordance with all taxable temporary differences. Deferred income tax assets are recognized when there is the likelihood of having taxable income to be used for the income tax credit resulting from the temporary difference, accumulated deficit or machinery equipment purchase, R&D, and personnel training expense.

          All taxable provisional differences relevant to the investment in subsidiaries and associates were recognized as deferred income tax liabilities, except an event while the Group could control the time point of recovery of the control over the provisional difference or while the said provisional difference would be very likely not recoverable in the foreseeable future. The deductible temporary differences related to such investments are recognized as deferred

          income tax assets when there is likely a sufficient taxable income available for realizing a temporary difference and within the expected reverse in the foreseeable future.

          The book amount of deferred income tax asset must be reviewed at each balance sheet date. The book amount of those that no longer have any sufficient taxable income to recover all or part of the asset should be adjusted down. Those that are not originally recognized as deferred income tax assets should also be reexamined at each balance sheet date. The book amount of those that are likely to generate taxable income in the future for the recovery of all or part of its assets should be adjusted up.

          Deferred income tax assets and liabilities are measured in accordance with the expected liability liquidation or the tax rate in the period when the asset is realized. The tax rate is based on the tax rate and tax laws that are legislated or substantively legislated at the balance sheet date. The measurement of deferred income tax liabilities and assets reflects the tax consequence resulted from the book value of the assets or liabilities expected to be recovered or liquidated on the balance sheet date.

       3. Current and deferred income tax for the year

          Current and deferred income taxes are recognized in the profit or loss, except for the current and deferred income taxes related to the items recognized in other comprehensive income or directly included in the equity are recognized in the other comprehensive income or directly included in the equity.

5. Main source of significant accounting judgment, estimates and assumptions uncertainty The Group at the time of adopting accounting policies, for the information hard to

   obtain from other sources, should have the relevant judgments, estimates, and assumptions made by the management in accordance with the historical experience and other essential factors. Actual results may differ from the estimates.

   The Group's management has evaluated its accounting policies, estimates, and basic assumptions, determining that they are not subject to significant uncertainties of significant accounting judgments, estimates, and assumptions.

6. Cash and cash equivalents