NANTEX Industry : CONSOLIDATED FINANCIAL STATEMENTS 2023

NANTEX INDUSTRY CO., LTD. AND

SUBSIDIARIES

CONSOLIDATED FINANCIAL STATEMENTS AND

INDEPENDENT AUDITORS' REPORT

DECEMBER 31, 2023 AND 2022

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For the convenience of readers and for information purpose only, the auditors' report and the accompanying financial statements have been translated into English from the original Chinese version prepared and used in the Republic of China. In the event of any discrepancy between the English version and the original Chinese version or any differences in the interpretation of the two versions, the Chinese-language auditors' report and financial statements shall prevail.

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NANTEX INDUSTRY CO., LTD.

Declaration of Consolidated Financial Statements of Affiliated Enterprises

For the year ended December 31, 2023, pursuant to Criteria Governing Preparation of Affiliation Reports, Consolidated Business Reports and Consolidated Financial Statements of Affiliated Enterprises, the companies that are required to be included in the consolidated financial statements of affiliates, are the same as the Company required to be included in the consolidated financial statements under International Financial Reporting Standard 10. And if relevant information that should be disclosed in the consolidated financial statements of affiliates has all been disclosed in the consolidated financial statements of parent and subsidiary companies, it shall not be required to prepare consolidated financial statements of affiliates.

Hereby declare,

NANTEX INDUSTRY CO., LTD.

March 6, 2024

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INDEPENDENT AUDITORS' REPORT TRANSLATED FROM CHINESE

To the Board of Directors and Shareholders of NANTEX INDUSTRY CO., LTD.

Opinion

We have audited the accompanying consolidated balance sheets of NANTEX INDUSTRY CO., LTD. and subsidiaries (the "Group") as at December 31, 2023 and 2022, and the related consolidated statements of comprehensive income, of changes in equity and of cash flows for the years then ended, and notes to the consolidated financial statements, including a summary of significant accounting policies.

In our opinion, the accompanying consolidated financial statements present fairly, in all material respects, the consolidated financial position of the Group as at December 31, 2023 and 2022, and its consolidated financial performance and its consolidated cash flows for the years then ended in accordance with the Regulations Governing the Preparation of Financial Reports by Securities Issuers and the International Financial Reporting Standards, International Accounting Standards, IFRIC Interpretations, and SIC Interpretations that came into effect as endorsed by the Financial Supervisory Commission.

Basis for opinion

We conducted our audits in accordance with the Regulations Governing Financial Statement Audit and Attestation Engagements of Certified Public Accountants and Standards on Auditing of the Republic of China. Our responsibilities under those standards are further described in the Auditors' responsibilities for the audit of the consolidated financial statements section of our report. We are independent of the Group in accordance with the Norm of Professional Ethics for Certified Public Accountant of the Republic of China, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Key audit matters

Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the Group's 2023 consolidated financial statements. These matters were addressed in the context of our audit of the consolidated financial statements as a whole and, in forming our opinion thereon, we do not provide a separate opinion on these matters.

Key audit matters for the Group's 2023 consolidated statements are stated as follows:

Evaluation of inventories

Description

Refer to Note 4(10) for description of accounting policies on inventories, Note 5 for

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accounting estimates and assumption uncertainty in relation to inventory valuation, and Note 6(5) for description of inventory. As at December 31, 2023, the balances of inventories and allowance for inventory valuation losses were NT$1,403,065 thousand and NT$70,212 thousand, respectively.

The Group is primarily engaged in the manufacturing, processing and sales of various types of latex, rubbers and related products. As the Group's inventories are mostly chemicals, they are subject to deterioration and fluctuations in global commodity prices. Since the measurement of net realisable value for inventories involves subjective judgment resulting in a high degree of estimation uncertainty, we considered the evaluation of inventories a key audit matter.

How our audit addressed the matter

We performed the following audit procedures on the above key audit matter:

A. Compared whether the provision policies of inventory valuation losses were adopted consistently in all periods and assessed the reasonableness of the provision policies.

B. Obtained an understanding on warehousing control procedures, reviewed the annual physical inventory count plan and participated in the annual physical inventory count to assess the effectiveness of the management's classification of and control over obsolete inventories.

C. Examined the accuracy of inventory aging reports, sampled the last movement of inventories before the balance sheet date to calculate the accuracy of inventory aging ranges and assessed the possibility of obsolescence in inventories aged over a certain period.

D. Sampled the calculation of net realisable value of individual inventories and compared with the recorded amounts.

Existence of sales revenue recognition apart from Taiwan region

Description

Refer to Note 4(26) for accounting policies on revenue recognition.

The Group is primarily engaged in the manufacture, processing and sales of various types of latex, rubbers and related products, and is involved in domestic and international sales. Affected by the economic environment, the net sales revenue in 2023 was NT$8,942,042 thousand, a decrease of 23% compared to prior year. Since the export sales transactions are numerous, accounting for 78% of the overall net sales revenue, and the verification of transaction authenticity also takes a long time, we considered the existence of sales revenue recognition apart from Taiwan region a key audit matter.

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How our audit addressed the matter

We performed the following audit procedures on the above key audit matter:

A. Obtained an understanding on the design of internal control system related to sales transaction process and tested the effectiveness of its operation.

B. Assessed basic information of the major customers apart from Taiwan region, including representative, registered address, actual business address and relationship, and assessed the reasonableness of transactions.

C. Selected samples of sales transactions and checked against related supportin g documentation, including customer orders, shipping orders, export declaration documents and subsequent cash collection.

Other matter - Parent company only financial reports

We have audited and expressed an unqualified opinion on the parent company only financial statements of NANTEX INDUSTRY CO., LTD. as at and for the years ended December 31, 2023 and 2022.

Responsibilities of management and those charged with governance for the consolidated financial statements

Management is responsible for the preparation and fair presentation of the consolidated financial statements in accordance with the Regulations Governing the Preparation of Financial Reports by Securities Issuers and the International Financial Reporting Standards, International Accounting Standards, IFRIC Interpretations, and SIC Interpretations that came into effect as endorsed by the Financial Supervisory Commission, and for such internal control as management determines is necessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.

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

Those charged with governance, including the audit committee, are responsible for overseeing the Group's financial reporting process.

Auditors' responsibilities for the audit of the consolidated financial statements

Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditors' report that includes our opinion. Reasonable assurance is a high

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level of assurance, but is not a guarantee that an audit conducted in accordance with the Standards on Auditing of the Republic of China will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these consolidated financial statements.

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

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

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

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

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

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

F. Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Group to express an opinion on the consolidated financial statements. We are responsible for the direction, supervision and performance of the group audit. We remain solely responsible for our audit opinion.

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

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

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

Hsu, Huei-Yu

Independent Accountants

Lin, Tzu-Shu

PricewaterhouseCoopers, Taiwan

Republic of China

March 6, 2024

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The accompanying consolidated financial statements are not intended to present the financial position and results of operations and cash flows in accordance with accounting principles generally accepted in countries and jurisdictions other than the Republic of China. The standards, procedures and practices in the Republic of China governing the audit of such financial statements may differ from those generally accepted in countries and jurisdictions other than the Republic of China. Accordingly, the accompanying consolidated financial statements and independent auditors' report are not intended for use by those who are not informed about the accounting principles or auditing standards generally accepted in the Republic of China, and their applications in practice.

As the financial statements are the responsibility of the management, PricewaterhouseCoopers cannot accept any liability for the use of, or reliance on, the English translation or for any errors or misunderstandings that may derive from the translation.

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NANTEX INDUSTRY CO., LTD. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

DECEMBER 31, 2023 AND 2022

(Expressed in thousands of New Taiwan dollars)

						December 31, 2023				December 31, 2022
	Assets		Notes		AMOUNT	%			AMOUNT	%
	Current assets
1100	Cash and cash equivalents	6(1)		$	8,253,468		48	$	7,497,677	43
1110	Current financial assets at fair value	6(2)
	through profit or loss					30,150		-			31,050	-
1136	Current financial assets at amortised		6(1)(3) and 8
	cost					2,015,576		12			2,858,386	17
1150	Notes receivable, net	6(4)			120,945		1			146,524	1
1170	Accounts receivable, net	6(4)			706,319		4			664,687	4
1200	Other receivables					47,011		-			50,726	-
130X	Inventories		5 and 6(5)		1,332,853		8			1,617,070	9
1410	Prepayments					294,661		2			314,796	2
11XX	Total current assets
				12,800,983		75			13,180,916	76
	Non-current assets
1517	Non-current financial assets at fair	6(6)
	value through other comprehensive
	income					607,220		4			577,922	3
1600	Property, plant and equipment		6(7) and 8		2,633,936		15			2,784,917	16
1755	Right-of-use assets		6(8) and 7		249,556		1			136,376	1
1780	Intangible assets	6(9)			11,097		-			13,629	-
1840	Deferred income tax assets	6(24)			29,840		-			31,411	-
1915	Prepayments for equipment	6(7)			102,008		1			60,730	-
1920	Guarantee deposits paid	8			3,345		-			6,893	-
1975	Net defined benefit asset	6(13)			178,888		1			149,460	1
1990	Other non-current assets	6(7)			489,898		3			453,652	3
15XX	Total non-current assets
				4,305,788		25			4,214,990	24
1XXX	Total assets
			$	17,106,771		100	$	17,395,906	100

(Continued)

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NANTEX INDUSTRY CO., LTD. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

DECEMBER 31, 2023 AND 2022

(Expressed in thousands of New Taiwan dollars)

						December 31, 2023				December 31, 2022
	Liabilities and Equity		Notes			AMOUNT	%			AMOUNT	%
	Current liabilities
2100	Short-term borrowings	6(10)	$	180,000		1	$	180,000		1
2130	Current contract liabilities	6(17)			46,392		-			70,985		-
2170	Accounts payable					256,649		2			271,835		2
2200	Other payables		6(11) and 7			673,581		4			802,976		5
2230	Current income tax liabilities	6(24)			105,800		1			244,131		1
2280	Current lease liabilities		6(8) and 7			35,468		-			21,783		-
2320	Long-term liabilities, current portion		6(12) and 8			10,000		-			17,500		-
21XX	Total current liabilities
				1,307,890		8			1,609,210		9
	Non-current liabilities
2540	Long-term borrowings		6(12) and 8			2,500		-			12,500		-
2570	Deferred income tax liabilities	6(24)			364,877		2			362,620		2
2580	Non-current lease liabilities		6(8) and 7			186,700		1			83,780		1
2640	Net defined benefit liabilities	6(13)			7,194		-			8,831		-
25XX	Total non-current liabilities
				561,271		3			467,731		3
2XXX	Total liabilities
				1,869,161		11			2,076,941		12
	Equity
	Equity attributable to owners of
	parent
	Share capital
3110	Common stock	6(15)			4,924,167		29			4,924,167		28
	Capital surplus
3200	Capital surplus	4(3)			28,939		-			28,939		-
	Retained earnings	6(16)
3310	Legal reserve					2,547,956		15			2,420,743		14
3320	Special reserve					433,442		2			433,442		3
3350	Unappropriated retained earnings					6,270,471		37			6,652,642		38
	Other equity interest
3400	Other equity interest	6(6)	(		62,023)	-	(		36,367)	-
31XX	Total equity attributable to
	owners of the parent					14,142,952		83			14,423,566		83
36XX	Non-controlling interest
				1,094,658		6			895,399		5
3XXX	Total equity					15,237,610		89			15,318,965		88
	Significant contingent liabilities and		7 and 9
	unrecognised contract commitments
	Significant events after the balance	11
	sheet date
3X2X	Total liabilities and equity			$	17,106,771		100	$	17,395,906		100

The accompanying notes are an integral part of these consolidated financial statements.

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NANTEX INDUSTRY CO., LTD. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

YEARS ENDED DECEMBER 31, 2023 AND 2022

(Expressed in thousands of New Taiwan dollars, except earnings per share amount)

						Year ended December 31
						2023						2022
	Items		Notes			AMOUNT	%			AMOUNT	%
4000	Operating revenue	6(17)	$	8,942,042		100	$	11,668,543		100
5000	Operating costs	6(5)(9)(13)(22)(2
		3)	(		6,845,930)(	77) (		8,586,830)(	73)
5900	Net operating margin
				2,096,112		23			3,081,713		27
	Operating expenses	6(9)(13)(22)(23),
			7 and 12
6100	Selling expenses			(		456,673)(	5) (		669,066)(	6)
6200	General and administrative
	expenses			(		714,555)(	8) (		837,170)(	7)
6300	Research and development
	expenses			(		88,032)(	1) (		93,360)(	1)
6450	Expected credit impairment	12
	(loss) gain			(		200)	-			526		-
6000	Total operating expenses
		(		1,259,460)(	14) (		1,599,070)(	14)
6900	Operating profit
				836,652		9			1,482,643		13
	Non-operating income and
	expenses
7100	Interest income	6(3)(6)(18)			402,106		5			147,752		1
7010	Other income	6(6)(19)			19,466		-			27,983		-
7020	Other gains and losses	6(2)(6)(7)(8)(20)
			and 12			14,221		-			583,728		5
7050	Finance costs		6(7)(8)(21) and 7 (	4,975)	-	(		2,717)	-
7000	Total non-operating income
	and expenses					430,818		5			756,746		6
7900	Profit before income tax
				1,267,470		14			2,239,389		19
7950	Income tax expense	6(24)	(		320,543)(	4) (		863,021)(	7)
8200	Profit for the year
		$	946,927		10	$	1,376,368		12
			(Continued)

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