YFY : 2023Q4 Consolidated Financial Statements

YFY Inc. and Subsidiaries

Consolidated Financial Statements for the Years Ended December 31, 2023 and 2022 and Independent Auditors' Report

DECLARATION OF CONSOLIDATION OF FINANCIAL STATEMENTS OF AFFILIATES

The companies required to be included in the consolidated financial statements of affiliates in accordance with the "Criteria Governing Preparation of Affiliation Reports, Consolidated Business Reports and Consolidated Financial Statements of Affiliated Enterprises" for the year ended December 31, 2023 are all the same as the companies required to be included in the consolidated financial statements of parent and subsidiary companies as provided in International Financial Reporting Standard No. 10, "Consolidated Financial Statements." 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. Hence, we have not prepared a separate set of consolidated financial statements of affiliates.

Very truly yours,

YFY INC.

By:

HUI-JEAN LIU

Chairman

March 14, 2024

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INDEPENDENT AUDITORS' REPORT

The Board of Directors and Shareholders

YFY Inc.

Opinion

We have audited the accompanying consolidated financial statements of YFY Inc. and its subsidiaries (collectively referred to as the "Group"), which comprise the consolidated balance sheets as of December 31, 2023 and 2022, and the consolidated statements of comprehensive income, changes in equity and cash flows for the years then ended, and the 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 of 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 International Financial Reporting Standards (IFRS), International Accounting Standards (IAS), IFRIC Interpretations (IFRIC), and SIC Interpretations (SIC) endorsed and issued into effect by the Financial Supervisory Commission of the Republic of China.

Basis for Opinion

We conducted our audits in accordance with the Regulations Governing Auditing and Attestation of Financial Statements by Certified Public Accountants and the 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 consolidated financial statements for the year ended December 31, 2023. These matters were addressed in the context 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 these matters.

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Key audit matters of the Group's consolidated financial statements for the year ended December 31, 2023 are stated as follows:

Estimation of Expected Credit Loss of Accounts Receivable

The accounts receivable of the Group's significant components are material in amount. In consideration of transactions with various counterparties, the recoverability of accounts receivable is subject to not only each customer's financial condition but also management's judgment. Therefore, we identified the estimation of expected credit loss recognized on accounts receivable as a key audit matter.

For related policies and relevant information on the estimation of expected credit loss of accounts receivable, refer to Notes 4, 5 and 12 to the accompanying consolidated financial statements.

The key audit procedures that we performed in respect of the expected credit loss on accounts receivable included the following:

1. We obtained and assessed the reasonableness of the method and the information used by management for the estimation of expected credit loss recognized on accounts receivable.
2. We tested sample items in the aging report on the balance sheet date and verified the correctness of the calculation of the expected credit loss.
3. We tested the recoverability of receivables by analyzing overdue accounts and by verifying cash receipts in the subsequent period. For a receivable that was past due but not yet received, we assessed the reasonableness of the expected credit loss based on the customer's payment history, customer's credit policy control and tracking of overdue receivables.

Other Matter

We have also audited the financial statements of YFY Inc. as of and for the years ended December 31, 2023 and 2022 on which we have issued an unmodified opinion, respectively.

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 IFRS, IAS, IFRIC, and SIC endorsed and issued into effect by the Financial Supervisory Commission of the Republic of China, 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.

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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 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:

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 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.
2. 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.
3. Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management.
4. 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.
5. 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.
6. Obtain sufficient and appropriate audit evidence regarding the financial information of 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.

We communicate with those charged with 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 charged with 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.

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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 for the year ended December 31, 2023 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.

The engagement partners on the audit resulting in this independent auditors' report are Chih-Ming Shao and Hui-Min Huang.

Deloitte & Touche

Taipei, Taiwan

Republic of China

March 14, 2024

Notice to Readers

The accompanying consolidated financial statements are intended only to present the consolidated financial position, financial performance and cash flows in accordance with accounting principles and practices generally accepted in the Republic of China and not those of any other jurisdictions. The standards, procedures and practices to audit such consolidated financial statements are those generally accepted and applied in the Republic of China.

For the convenience of readers, the independent auditors' report and the accompanying consolidated financial statements have been translated into English from the original Chinese version prepared and used in the Republic of China. If there is any conflict between the English version and the original Chinese version or any difference in the interpretation of the two versions, the Chinese-language independent auditors' report and consolidated financial statements shall prevail.

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YFY INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS DECEMBER 31, 2023 AND 2022

(In Thousands of New Taiwan Dollars)

			2023						2022
ASSETS			Amount	%					Amount	%
CURRENT ASSETS (Note 4)
Cash and cash equivalents (Note 6)	$	8,917,405	6		$	8,698,263		6
Current financial assets at fair value through profit or loss (Note 7)			1,109,842		1					914,843	1
Current financial assets at fair value through other comprehensive income (Notes 8 and 33)			10,393,391		7					7,967,004		6
Current financial assets at amortized cost (Note 9)			2,458,360		2					3,045,337		2
Notes receivable, net (Notes 12, 23 and 34)			2,279,143		2					2,842,143		2
Accounts receivable, net (Notes 12 and 23)			11,655,418		8					12,120,124		9
Accounts receivable due from related parties, net (Notes 23 and 33)			113,464	-					64,230	-
Current inventories (Note 13)			11,489,250		8					11,872,315	8
Current biological assets (Note 14)			3,339,318		2					3,255,711		2
Prepayments			1,700,401		1					2,198,126		2
Other current financial assets (Note 34)			457,639	-					827,945	1
Other current assets, others (Note 33)			1,118,335		1					651,794	-
Total current assets			55,031,966		38					54,457,835		39
NON-CURRENT ASSETS (Note 4)
Non-current financial assets at fair value through profit or loss (Note 7)			118,492	-					-		-
Non-current financial assets at fair value through other comprehensive income (Notes 8 and 33)			20,215,348		14					18,132,758		13
Non-current financial assets at amortized cost (Note 9)			2,737,304		2					1,918,107		1
Investments accounted for using equity method (Note 16)			8,299,432		6					7,466,226		5
Property, plant and equipment (Notes 17, 33 and 34)			48,167,524		33					49,015,451		35
Right-of-use assets (Notes 18 and 34)			2,260,380		2					2,097,384		2
Investment property, net (Notes 17, 19 and 33)			4,090,086		3					3,958,773		3
Goodwill			520,261	-					521,064	-
Deferred tax assets (Note 25)			493,434	-					305,525	-
Prepayments for business facilities (Notes 17 and 19)			1,040,934		1					712,614	1
Net defined benefit asset, non-current (Note 21)			1,045,848		1					576,233	1
Other non-current assets, others (Note 34)			371,605	-					310,354	-
Total non-current assets			89,360,648		62					85,014,489	61
TOTAL ASSETS	$	144,392,614		100		$	139,472,324		100
LIABILITIES AND EQUITY
CURRENT LIABILITIES (Note 4)
Current borrowings (Notes 20 and 34)	$	9,887,216		7		$	8,812,071		7
Short-term notes and bills payable (Note 20)			15,744,335		11					2,723,116		2
Current financial liabilities at fair value through profit or loss (Note 7)			28,414	-					45,843	-
Current contract liabilities (Note 23)			391,775	-					496,039	-
Notes and accounts payable			9,682,757		7					10,759,751		8
Accounts payable to related parties (Note 33)			53,991	-					110,870	-
Other payables, others (Note 17)			4,346,946		3					4,124,484	3
Current tax liabilities			416,806	-					484,546	-
Current lease liabilities (Note 18)			273,385	-					203,868	-
Other current liabilities, others (Notes 11 and 33)			1,172,732		1					1,237,851		1
Total current liabilities			41,998,357		29					28,998,439		21
NON-CURRENT LIABILITIES (Note 4)
Non-current portion of non-current borrowings (Notes 20 and 34)			23,652,786		16					36,344,562	26
Deferred tax liabilities (Note 25)			3,656,140		3					3,565,188		3
Non-current lease liabilities (Note 18)			578,820	1					514,916	-
Net defined benefit liability, non-current (Note 21)			15,193	-					7,814	-
Other non-current liabilities, others			420,110	-					448,012	-
Total non-current liabilities			28,323,049		20					40,880,492		29
Total liabilities			70,321,406		49					69,878,931		50
EQUITY ATTRIBUTABLE TO OWNERS OF PARENT (Notes 4, 22, 27, and 30)
Share capital			16,603,715		11					16,603,715		12
Capital surplus			3,760,772		3					3,459,112		2
Retained earnings			23,192,955		16					22,536,470		16
Other equity interest			14,915,141		10					12,037,107		9
Total equity attributable to owners of parent			58,472,583		40					54,636,404		39
NON-CONTROLLING INTERESTS			15,598,625		11					14,956,989	11
Total equity			74,071,208		51					69,593,393		50
TOTAL LIABILITIES AND EQUITY	$	144,392,614		100		$	139,472,324	100

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

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YFY INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME FOR THE YEARS ENDED DECEMBER 31, 2023 AND 2022

(In Thousands of New Taiwan Dollars, Except Earnings Per Share)

	2023				2022
			Amount	%				Amount	%
OPERATING REVENUE (Notes 4, 23 and 33)
Net sales revenue	$ 65,101,797		88		$ 69,663,113	87
Other operating revenue, net		8,765,577		12			9,972,765	13
Total operating revenue		73,867,374		100			79,635,878	100
OPERATING COSTS (Notes 21, 24 and 33)
Cost of sales	57,146,884		77		60,979,239	77
Other operating costs		6,636,319		9			7,538,681	9
Total operating costs		63,783,203		86			68,517,920	86
LOSSES ON CHANGES IN FAIR VALUE LESS
COSTS TO SELL OF BIOLOGICAL ASSETS
(Notes 4 and 14)		(875)	-		(2,403)	-
GROSS PROFIT FROM OPERATIONS		10,083,296		14			11,115,555	14
OPERATING EXPENSES (Notes 21, 24 and 33)
Selling expenses	5,550,575		8		5,619,924	7
Administrative expenses	3,854,523		5		3,794,503	5
Research and development expenses		541,133		1			554,228	1
Total operating expenses		9,946,231		14			9,968,655	13
NET OPERATING INCOME		137,065		-			1,146,900	1
NON-OPERATING INCOME AND EXPENSES
Finance costs, net (Notes 4 and 24)	(1,061,687)	(1)	(862,303)	(1)
Share of profit of associates accounted for using
equity method, net (Notes 4 and 16)	1,256,462		2		1,590,502	2
Interest income	415,955		1		264,015	-
Rent income (Notes 19 and 33)	65,702		-		57,756	-
Dividend income	856,642		1		1,028,392	1
Other income, others	601,660		1		454,299	1
Gains on disposal of investment property (Note 33)	154,677		-		140,241	-
Gains on financial assets or liabilities at fair value
through profit or loss (Note 4)	350,434		-		734,828	1
Miscellaneous disbursements (Note28)	(76,992)	-		(145,566)	-
Gains (losses) on disposal of property, plant and
equipment	(13,943)	-		41,779	-
Foreign exchange losses (Note 35)		(123,900)	-		(864,421)	(1)
Total non-operating income and expenses		2,425,010		4			2,439,522	4
									(Continued)
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YFY INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME FOR THE YEARS ENDED DECEMBER 31, 2023 AND 2022

(In Thousands of New Taiwan Dollars, Except Earnings Per Share)

			2023							2022
			Amount	%					Amount	%
PROFIT FROM CONTINUING OPERATIONS
BEFORE TAX	$	2,562,075		4		$	3,586,422	5
TAX EXPENSE (Notes 4 and 25)			(461,736)	(1)				(739,844)	(1)
PROFIT FROM CONTINUING OPERATIONS			2,100,339		3					2,846,578	4
OTHER COMPREHENSIVE INCOME (Notes 4, 21,
22 and 25)
Components of other comprehensive income that
will not be reclassified to profit or loss:
Gains (losses) on remeasurements of defined
benefit plans			271,752		-					(200,189)	-
Unrealized gains from investments in equity
instruments measured at fair value through
other comprehensive income			3,014,686		4					1,919,191	2
Share of other comprehensive income of
associates accounted for using equity method			447,034		1					50,068	-
			3,733,472		5					1,769,070	2
Components of other comprehensive income that
will be reclassified to profit or loss:
Exchange differences on translation			(308,002)	(1)				1,754,694	2
Losses on hedging instruments			(6,034)	-					-		-
Share of other comprehensive income of
associates accounted for using equity method			(70,429)	-					259,841	-
			(384,465)	(1)				2,014,535	2
Other comprehensive income, net			3,349,007		4					3,783,605	4
TOTAL COMPREHENSIVE INCOME FOR THE
YEAR	$	5,449,346		7		$	6,630,183	8
PROFIT, ATTRIBUTABLE TO:
Profit, attributable to owners of parent	$	1,826,693		3		$	2,169,510	3
Profit, attributable to non-controlling interests			273,646		-					677,068	1
		$	2,100,339		3			$	2,846,578	4
										(Continued)

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YFY INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME FOR THE YEARS ENDED DECEMBER 31, 2023 AND 2022

(In Thousands of New Taiwan Dollars, Except Earnings Per Share)

				2023								2022
			Amount	%					Amount	%
COMPREHENSIVE INCOME, ATTRIBUTABLE
TO:
Comprehensive income, attributable to owners of
parent	$	5,013,165	7		$	5,726,038	7
Comprehensive income, attributable to
non-controlling interests			436,181		-					904,145	1
		$	5,449,346		7			$	6,630,183	8
EARNINGS PER SHARE (Note 26)
Basic earnings per share			$	1.10							$	1.31
Diluted earnings per share			$	1.10							$	1.31

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

(Concluded)

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