NANTEX Industry : PARENT COMPANY ONLY FINANCIAL STATEMENTS 20223

NANTEX INDUSTRY CO., LTD.

PARENT COMPANY ONLY FINANCIAL

STATEMENTS AND INDEPENDENT AUDITORS'

REPORT

DECEMBER 31, 2023 AND 2022

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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 parent company only balance sheets of NANTEX INDUSTRY CO., LTD. (the "Company") as at December 31, 2023 and 2022, and the related parent company only statements of comprehensive income, of changes in equity and of cash flows for the years then ended, and notes to the parent company only financial statements, including a summary of material accounting policies.

In our opinion, the accompanying parent company only financial statements present fairly, in all material respects, the financial position of the Company as at December 31, 2023 and 2022, and its financial performance and its cash flows for the years then ended in accordance with the Regulations Governing the Preparation of Financial Reports by Securities Issuers.

Basis for opinion

We conducted our audits in accordance with the Regulations Governing 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 parent company only financial statements section of our report. We are independent of the Company 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 Company's 2023 parent company only financial statements. These matters were addressed in the context of our audit of the parent company only 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 Company's 2023 parent company only financial statements are stated as follows:

Evaluation of inventories

Description

Refer to Note 4(9) for description of accounting policies on inventory, Note 5 for accounting estimates and assumption uncertainty in relation to inventory valuation, and

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Note 6(5) for description of inventory. As at December 31, 2023, the balances of inventories and allowance for inventory valuation losses were NT$506,369 thousand and NT$38,594 thousand, respectively.

The Company is primarily engaged in manufacturing, processing and sales of various types of latex, rubbers and related products. As the Company'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 from export sales

Description

Refer to Note 4(25) for the accounting policies on revenue recognition. The Company 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$3,220,392 thousand, a decrease of 36% compared to the prior year. Since the export sales transactions are numerous, accounting for 89% 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 from export sales 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.

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

Responsibilities of management and those charged with governance for the parent company only financial statements

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

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

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

Auditors' responsibilities for the audit of the parent company only financial statements

Our objectives are to obtain reasonable assurance about whether the parent company only financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditors' report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with the 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 financial statements.

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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 parent company only 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 Company'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 Company's ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditors' report to the related disclosures in the parent company only 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 Company to cease to continue as a going concern.

E. Evaluate the overall presentation, structure and content of the parent company only financial statements, including the disclosures, and whether the parent company only 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 Company to express an opinion on the parent company only financial statements. We are responsible for the direction, supervision and performance of the audit. We remain solely responsible for our audit opinion.

We communicate with those charged with governance (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.

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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 parent company only 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 parent company only 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 parent company only 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.

PARENT COMPANY ONLY 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)		$	2,016,300		13	$	2,253,516	14
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)
	cost					-		-			767,750	5
1150	Notes receivable, net	6(4)			32,632		-			34,827	-
1170	Accounts receivable, net		6(4) and 7		269,397		2			245,068	2
1200	Other receivables					21,228		-			37,268	-
1210	Other receivables - related parties	7			-		-			20,528	-
130X	Inventory		5 and 6(5)		467,775		3			603,423	4
1410	Prepayments					88,489		1			82,476	1
11XX	Total current assets
				2,925,971		19			4,075,906	26
	Non-current assets
1517	Non-current financial assets at fair	6(6)
	value through other comprehensive
	income					563,357		4			449,246	3
1550	Investments accounted for under		6(7) and 7
	equity method					9,888,362		65			9,322,449	60
1600	Property, plant and equipment		6(8) and 8		1,393,275		9			1,517,203	10
1755	Right-of-use assets		6(9) and 7		175,563		1			55,704	-
1780	Intangible assets	6(10)			350		-			540	-
1840	Deferred income tax assets	6(23)			19,794		-			21,304	-
1920	Guarantee deposits paid	8			413		-			413	-
1975	Net defined benefit asset	6(13)			178,888		1			149,460	1
1990	Other non-current assets					55,533		1			33,971	-
15XX	Total non-current assets
				12,275,535		81			11,550,290	74
1XXX	Total assets
			$	15,201,506		100	$	15,626,196	100

(Continued)

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NANTEX INDUSTRY CO., LTD.

PARENT COMPANY ONLY 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(11)	$	100,000		1	$	100,000		1
2130	Current contract liabilities		6(16) and 7			8,284		-			16,199		-
2170	Accounts payable					119,439		1			138,521		1
2200	Other payables		6(12) and 7			262,325		2			349,545		2
2230	Current income tax liabilities	6(23)			23,700		-			176,994		1
2280	Current lease liabilities		6(9) and 7			29,799		-			15,258		-
21XX	Total current liabilities
				543,547		4			796,517		5
	Non-current liabilities
2570	Deferred income tax liabilities	6(23)			364,877		2			362,620		3
2580	Non-current lease liabilities		6(9) and 7			150,130		1			43,493		-
25XX	Total non-current liabilities
				515,007		3			406,113		3
2XXX	Total liabilities
				1,058,554		7			1,202,630		8
	Equity
	Share capital
3110	Common stock	6(14)			4,924,167		32			4,924,167		31
	Capital surplus
3200	Capital surplus	6(7)			28,939		-			28,939		-
	Retained earnings	6(15)
3310	Legal reserve					2,547,956		17			2,420,743		15
3320	Special reserve					433,442		3			433,442		3
3350	Unappropriated retained earnings					6,270,471		41			6,652,642		43
	Other equity interest
3400	Other equity interest	6(7)	(		62,023)	-	(		36,367)	-
3XXX	Total equity
				14,142,952		93			14,423,566		92
	Significant contingent liabilities and	9
	unrecognised contract commitments
	Significant events after the balance	11
	sheet date
3X2X	Total liabilities and equity			$	15,201,506		100	$	15,626,196		100

The accompanying notes are an integral part of these parent company only financial statements.

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NANTEX INDUSTRY CO., LTD.

PARENT COMPANY ONLY 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(16) and 7	$	3,220,392		100		$	5,013,577		100
5000	Operating costs	6(5)(13)(21)(22)	(		2,688,795) (	83) (		3,895,575) (	77)
5900	Net operating margin					531,597		17				1,118,002		23
	Operating expenses	6(10)(13)(21)(22)
6100	Selling expenses			(		221,341) (	7) (		421,515) (	9)
6200	General and administrative expenses			(		285,083) (	9) (		359,099) (	7)
6300	Research and development expenses			(		60,750) (	2) (		62,519) (	1)
6000	Total operating expenses
		(		567,174) (	18) (		843,133) (	17)
6900	Operating (loss) profit
		(		35,577) (	1)			274,869		6
	Non-operating income and expenses
7100	Interest income	6(3)(6)(17)			75,429		2				42,141		1
7010	Other income		6(6)(18) and 7			9,581		-				41,580		1
7020	Other gains and losses		6(2)(6)(19) and 12	(		7,231)	-				423,550		8
7050	Finance costs		6(9)(20) and 7	(		2,955)	-		(		1,123)	-
7070	Share of profit of subsidiaries,	6(7)
	associates and joint ventures
	accounted for using equity method					759,953		24				713,482		14
7000	Total non-operating income and
	expenses					834,777		26				1,219,630		24
7900	Profit before income tax					799,200		25				1,494,499		30
7950	Income tax expense	6(23)	(		85,161) (	3) (		301,867) (	6)
8200	Profit for the year				$	714,039		22			$	1,192,632		24
	Other comprehensive income (loss)
	Components of other comprehensive
	income (loss) that will not be
	reclassified to profit or loss
8311	Actuarial gains on defined benefit	6(13)
	plans			$	19,886		1		$	99,273		2
8316	Unrealised gains on financial assets	6(6)
	measured at fair value through other
	comprehensive income					144,499		5				47,592		1
8330	Share of other comprehensive (loss)	6(7)
	income of associates and joint
	ventures accounted for using equity
	method			(		84,865) (	3)			73		-
8349	Income tax related to components of	6(23)
	other comprehensive income that
	will not be reclassified to profit or
	loss			(		3,977)	-		(		19,854)	-
	Components of other comprehensive
	income that will be reclassified to
	profit or loss
8361	Financial statements translation	6(7)
	differences of foreign operations			(		85,879) (	3)			313,083		6
8367	Unrealised gains on valuation of	6(6)
	investments in debt instruments
	measured at fair value through other
	comprehensive income, net					516		-				2,154		-
8300	Other comprehensive (loss) income
	for the year			($	9,820)	-		$	442,321		9
8500	Total comprehensive income for the
	year			$	704,219		22		$	1,634,953		33
	Earnings per share (in dollars)	6(24)
9750	Basic				$				1.45			$			2.42
9850	Diluted				$				1.45			$			2.42

The accompanying notes are an integral part of these parent company only financial statements.

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NANTEX INDUSTRY CO., LTD.

PARENT COMPANY ONLY STATEMENTS OF CHANGES IN EQUITY

YEARS ENDED DECEMBER 31, 2023 AND 2022(Expressed in thousands of New Taiwan dollars)

						Share Capital				Capital Surplus								Retained Earnings									Other Equity Interest
																																			Unrealised gains
																																		from financial assets
																													Financial statements			measured at fair
											Changes in																			translation		value through other
										ownership interest														Unappropriated				differences of				comprehensive
		Notes			Common stock				of subsidiaries				Legal reserve				Special reserve			retained earnings			foreign operations				income				Total
Year ended December 31, 2022
Balance at January 1, 2022					$	4,924,167			$	608			$	1,683,582			$	433,442			$	9,564,596		($	453,613 )	$	54,417		$	16,207,199
Profit for the year
					-					-					-					-				1,192,632					-					-					1,192,632
Other comprehensive income for the year	6(6)(7)				-					-					-					-				79,492					313,083					49,746					442,321
Total comprehensive income
					-					-					-					-				1,272,124					313,083					49,746					1,634,953
Distribution of 2021 net income:
Legal reserve						-					-					737,161					-	(		737,161 )				-					-					-
Cash dividends	6(15)				-					-					-					-	(		3,446,917 )				-					-		(		3,446,917 )
Changes in equity of associates and joint	6(7)				-					28,082					-					-				-					-					-					28,082
ventures accounted for using equity
method from acquiring shares
unproportionately to ownership
Changes in equity of associates and joint	6(7)				-					249					-					-				-					-					-					249
ventures accounted for using equity
method
Balance at December 31, 2022				$	4,924,167		$	28,939		$	2,420,743		$	433,442			$	6,652,642		($	140,530 )	$	104,163		$	14,423,566
Year ended December 31, 2023
Balance at January 1, 2023					$	4,924,167			$	28,939			$	2,420,743			$	433,442			$	6,652,642		($	140,530 )	$	104,163		$	14,423,566
Profit for the year
					-					-					-					-				714,039					-					-					714,039
Other comprehensive income (loss) for the	6(6)(7)
year						-					-					-					-				15,836		(		85,879 )				60,223		(		9,820 )
Total comprehensive income (loss)
					-					-					-					-				729,875		(		85,879 )				60,223					704,219
Distribution of 2022 net income:
Legal reserve						-					-					127,213					-	(		127,213 )				-					-					-
Cash dividends	6(15)				-					-					-					-	(		984,833 )				-					-		(		984,833 )
Balance at December 31, 2023
				$	4,924,167			$	28,939			$	2,547,956			$	433,442			$	6,270,471		($	226,409 )	$	164,386		$	14,142,952

The accompanying notes are an integral part of these parent company only financial statements.

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