Coretronic : 2023 Financial Report

CORETRONIC CORPORATION AND SUBSIDIARIES

CONSOLIDATED FINANCIAL STATEMENTS

WITH

REPORT OF INDEPENDENT AUDITORS

FOR THE YEARS ENDED

DECEMBER 31, 2023 AND 2022

Address: No.11, Lixing Rd., East Dist., Hsinchu City 300, Taiwan (R.O.C.)

Telephone: [phone]

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REPRESENTATION LETTER

The entities included in the consolidated financial statements as of December 31, 2023 and for the year then ended prepared under the International Financial Reporting Standards, No.10 are the same as the entities to be included in the Combined Financial Statements of the Company, if any to be prepared, pursuant to the Criteria Governing Preparation of Affiliation Reports, Consolidated Business Reports and Consolidated Financial Statements of Affiliated Enterprises (referred to as "Combined Financial Statements"). Also, the footnotes disclosed in the consolidated financial statements have fully covered the required information in such Combined Financial Statements. Accordingly, the Company did not prepare any other set of Combined Financial Statements than the consolidated financial statements.

Very truly yours,

Coretronic Corporation

Chairman: Wade Chang

February 26, 2024

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安永聯合會計師事務所

30078 新⽵市新⽵科學園區⼒⾏⼀路1號E-3

E-3, No. 1, Lixing 1st Rd., Hsinchu Science Park Hsinchu City, Taiwan, R.O.C.

電話 Tel: [phone]

傳真 Fax: [phone] ey.com/zh_tw

Independent Auditors' Report

To Coretronic Corporation

Opinion

We have audited the accompanying consolidated balance sheets of Coretronic Corporation and its subsidiaries ("the Group") as of December 31, 2023 and 2022, and the related consolidated statements of comprehensive income, changes in equity and cash flows for the years ended December 31, 2023 and 2022, and notes to the consolidated financial statements, including the summary of significant accounting policies (together "the consolidated financial statements").

In our opinion, based on our audits and the reports of other auditors (please refer to the Other Matter

• Making Reference to the Audits of Other Auditors section of our report), the consolidated financial statements referred to above 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 cash flows for the years ended December 31, 2023 and 2022, in conformity with the requirements of the Regulations Governing the Preparation of Financial Reports by Securities Issuers and International Financial Reporting Standards, International Accounting Standards, Interpretations developed by the International Financial Reporting Interpretations Committee or the former Standing Interpretations Committee as endorsed by Financial Supervisory Commission of the Republic of China.

Basis for Opinion

We conducted our audits in accordance with the Regulations Governing Financial Statement Audit and Attestation Engagements of 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 (the "Norm"), and we have fulfilled our other ethical responsibilities in accordance with the Norm. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

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Key Audit Matters

Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of 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, and we do not provide a separate opinion on these matters.

Valuation for inventories

The Group recognized the allowance write-down of inventories amounted to NT$561,216 thousand for the year ended December 31, 2023, due to the rapid technological changes and innovation for projectors, backlight, and FPD-related products. Considering the amount of inventories was significant and the assessment of the amount of inventories write-downs requires the management's important judgement, we determined this is a key audit matter. Our audit procedures included, but not limited to, evaluating and testing the design and operating effectiveness of internal controls around inventories; evaluating the methodologies and assumptions used, including the reasonableness of the allowance write-down of inventories; testing the source of the basic data, including the aging and net realizable value of inventories, and recalculating its correctness; evaluating the overall adequacy of the allowance write-down of inventories through analytical review procedures. We also assessed the adequacy of disclosures of inventories. Please refer to Notes 5 and 6 to the Group's consolidated financial statements.

Revenue recognition

The Group recognized the revenue amounted to NT$39,491,708 thousand for the year ended December 31, 2023. Main source of revenue comes from projectors, backlight, and FPD-related sales of products and related services. As revenue is the main operating activity of the Group, the Group recognized revenue when transferring a promised product or service to a customer. The terms of trade in the products agreed in their contracts are different when the performance obligations were satisfied. As a result of the higher complexity of revenue recognition, we determined the matter to be a key audit matter. Our audit procedures include, but not limited to, assessing the appropriateness of the accounting policy for revenue recognition; evaluating and testing the effectiveness of internal controls within the revenue recognition; performing product-specific analytical procedures; viewing their transactions certificate and performing cut-off procedures on selected samples for a period before and after the reporting date; tracing to relevant documentation, and testing details of transaction, including sales contracts, terms of trade and other contents, and verifying the appropriateness of the timing of revenue recognition. Please refer to Notes 4 and 6 to the Group's consolidated financial statements.

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Other Matter - Making Reference to the Audit of Other Auditors

We did not audit the financial statements of certain associates and joint ventures accounted for under the equity method whose statements are based solely on the reports of the other auditors. These associates and joint ventures under equity method amounted to NT$40,975 thousand and NT$50,117 thousand, representing 0.07% and 0.09% of consolidated total assets as of December 31, 2023 and 2022, respectively. The related shares of gain (loss) from the associates and joint ventures under the equity method amounted to NT$(9,128) thousand and NT$7,071 thousand, representing (0.57)% and 0.22% of the consolidated net income before tax for the years ended December 31, 2023 and 2022, 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 requirements of the Regulations Governing the Preparation of Financial Reports by Securities Issuers and International Financial Reporting Standards, International Accounting Standards, Interpretations developed by the International Financial Reporting Interpretations Committee or the former Standing Interpretations Committee as endorsed by 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 ability to continue as a going concern of the Group, 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 audit committee, are responsible for overseeing the financial reporting process of the Group.

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

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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 internal control of the Group.
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 ability to continue as a going concern of the Group. 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 accompanying notes, and whether the consolidated financial statements represent the underlying transactions and events in a manner that achieves fair presentation.
6. 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.

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 2023 consolidated financial statements 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.

Others

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

Kuo, Shao-Pin

Chen, Chih-Chung

Ernst & Young, Taiwan

February 26, 2024

Notice to Readers

The reader is advised that these financial statements have been prepared originally in Chinese. In the event of a conflict between these financial statements and the original Chinese version or difference in interpretation between the two versions, the Chinese language financial statements shall prevail.

The accompanying consolidated financial statements are intended only to present the consolidated financial position, results of operations and cash flows in accordance with accounting principles and practices generally accepted in the R.O.C. and not those of any other jurisdictions. The standards, procedures and practices to review such consolidated financial statements are those generally accepted and applied in the R.O.C

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English Translation of Consolidated Financial Statements Originally Issued in Chinese

CORETRONIC CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

As of December 31, 2023 and 2022

(Amounts in thousands of New Taiwan Dollars)

ASSETS	Note	December 31, 2023	%	December 31, 2022	%
Current assets
Cash and cash equivalents	4, 6(1)	$	16,555,958	29.77	$	12,364,999	22.14
Financial assets at fair value through profit or loss - current	4, 6(2)		452,577	0.82		155,286	0.28
Financial assets at amortized cost - current	4, 6(4)		1,258,522	2.26		4,722,945	8.46
Notes receivable, net	4, 6(5), 6(21)		28,264	0.05		29,671	0.05
Trade receivables, net	4, 6(6), 6(21)		9,885,356	17.78		10,235,833	18.32
Trade receivables - related parties, net	4, 6(6), 6(21), 7		639	-		530	-
Other receivables	4,7,8		888,419	1.60		1,358,812	2.43
Current tax assets	4, 6(26)		39,742	0.07		35,699	0.06
Inventories, net	4, 5, 6(7)		8,588,936	15.45		10,444,982	18.70
Prepayments			921,490	1.66		792,007	1.42
Other current assets			146,781	0.27		195,308	0.35
Total current assets			38,766,684	69.73		40,336,072	72.21
Non-current assets
Financial assets at fair value through other comprehensive income - noncurrent	4, 6(3)		5,308,046	9.55		3,895,009	6.97
Investments accounted for using the equity method	4, 6(8)		40,975	0.07		50,117	0.09
Property, plant and equipment, net	4, 6(9), 8		8,431,972	15.16		8,092,453	14.49
Right-of-use assests	4, 6(22)		1,804,091	3.24		2,206,646	3.95
Investment property, net	4, 6(10), 8		136,161	0.24		144,231	0.26
Intangible assets	4, 6(11)		310,952	0.56		358,509	0.64
Deferred tax assets	4, 6(26)		238,534	0.43		342,533	0.61
Net defined benefit assets - noncurrent	4, 6(16)		55,891	0.10		33,703	0.06
Other noncurrent assets	8		510,598	0.92		398,542	0.72
Total non-current assets			16,837,220	30.27		15,521,743	27.79
Total assets		$	55,603,904	100.00	$	55,857,815	100.00

(continued)

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English Translation of Consolidated Financial Statements Originally Issued in Chinese

CORETRONIC CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

As of December 31, 2023 and 2022

(Amounts in thousands of New Taiwan Dollars)

LIABILITIES AND EQUITY	Note	December 31, 2023	%	December 31, 2022	%
Current liabilities
Short-term borrowings	6(12)	$	13,512,487	24.30	$	9,823,849	17.59
Financial liabilities at fair value through profit or loss - current	4, 6(13)		347,557	0.62		450,431	0.81
Hedging financial liabilities - current	4, 6(14)		-	-		1,483	-
Contract liabilities - current	6(20)		776,210	1.40		529,246	0.95
Notes payable			352	-		881	-
Accounts payable			7,567,334	13.61		7,284,148	13.04
Accounts payable - related parties	7		34,476	0.06		49,010	0.09
Other payables	7		3,934,309	7.08		4,520,234	8.09
Current tax liabilities	4, 6(26)		691,243	1.24		999,196	1.79
Provisions - current	4, 6(17)		522,524	0.94		651,105	1.16
Lease liabilities - current	4, 6(22)		188,905	0.34		321,631	0.58
Other current liabilities			789,580	1.42		872,025	1.56
Current portion of long-term borrowings	6(15)		301,879	0.54		414,871	0.74
Total current liabilities			28,666,856	51.55		25,918,110	46.40
Non-current liabilities
Long-term borrowings	6(15)		114,838	0.21		3,412,106	6.11
Deferred tax liabilities	4, 6(26)		46,387	0.08		61,665	0.11
Lease liabilities - noncurrent	4, 6(22)		1,045,656	1.88		1,291,459	2.31
Net defined benefit liabilities - noncurrent	4, 6(16)		50,273	0.09		70,509	0.13
Other noncurrent liabilities			32,491	0.06		23,482	0.04
Total non-current liabilities			1,289,645	2.32		4,859,221	8.70
Total liabilities			29,956,501	53.87		30,777,331	55.10
Equity attributable to owners of the parent
Share capital
Common stock	6(18)		3,909,811	7.03		3,909,811	7.00
Capital surplus	4, 6(18)		2,507,703	4.51		2,808,225	5.03
Retained earnings	6(18)
Legal reserve			4,364,561	7.85		4,121,627	7.38
Special reserve			1,322,902	2.38		1,276,610	2.28
Unappropriated retained earning			11,755,209	21.14		12,024,401	21.53
Total retained earnings			17,442,672	31.37		17,422,638	31.19
Other equity			(375,897)	(0.67)		(1,411,129)	(2.53)
Total equity attributable to owners of the parent			23,484,289	42.24		22,729,545	40.69
Non-controlling interests	6(18)		2,163,114	3.89		2,350,939	4.21
Total equity			25,647,403	46.13		25,080,484	44.90
Total liabilities and equity		$	55,603,904	100.00	$	55,857,815	100.00

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

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English Translation of Consolidated Financial Statements Originally Issued in Chinese

CORETRONIC CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME For the years ended December 31, 2023 and 2022

(Amounts in thousands of New Taiwan Dollars, except for earnings per share)

Description	Note	For the year ended December 31		For the year ended December 31
	2023	%		2022	%
Net sales	4, 5, 6(20), 7	$	39,491,708	100.00	$	49,783,157	100.00
Operating costs	4, 6(7), 6(11), 6(16), 6(22), 6(23), 7		31,620,007	80.07		40,328,961	81.01
Gross profit			7,871,701	19.93		9,454,196	18.99
Operating expenses	6(11), 6(16), 6(21), 6(22), 6(23)
Selling expenses			1,807,683	4.58		1,952,260	3.92
General and administrative expenses			2,220,479	5.62		2,282,457	4.58
Research and development expenses			2,901,998	7.35		3,056,452	6.14
Expected credit loss			10,871	0.03		12,405	0.03
Total operating expenses			6,941,031	17.58		7,303,574	14.67
Operating income			930,670	2.35		2,150,622	4.32
Non-operating income and expenses
Interest income	6(24)		407,553	1.03		342,036	0.69
Other income	4, 6(24)		481,600	1.22		332,218	0.67
Other gains and losses	6(24)		220,990	0.56		737,479	1.48
Finance costs	6(24)		(443,307)	(1.12)		(396,446)	(0.80)
Share of (loss) gain of associates and joint ventures accounted for using the equity method	4, 6(8)		(9,128)	(0.02)		7,071	0.01
Total non-operating income and expenses			657,708	1.67		1,022,358	2.05
Income before income tax			1,588,378	4.02		3,172,980	6.37
Income tax expense	4, 6(26)		(386,349)	(0.98)		(759,546)	(1.52)
Net income			1,202,029	3.04		2,413,434	4.85
Other comprehensive income
Items that will not be reclassified subsequently to profit or loss
Remeasurements of defined benefit pension plans	6(25)		(4,289)	(0.01)		89,306	0.18
Unrealized gain (loss) from equity instrument investments measured at fair value	6(25)		1,413,047	3.58		(1,400,799)	(2.81)
through other comprehensive income
Income tax related to items that will not be reclassified subsequently to profit or loss	6(25), 6(26)		1,112	-		(22,687)	(0.05)
Items that may be reclassified subsequently to profit or loss
Exchange differences on translation of foreign operations	6(25)		(406,506)	(1.03)		856,307	1.72
Share of other comprehensive (loss) income of associates and joint ventures accounted for using the equity method	6(25)		(14)	-		7,071	0.01
Other comprehensive income (loss), net of tax			1,003,350	2.54		(470,802)	(0.95)
Total comprehensive income		$	2,205,379	5.58	$	1,942,632	3.90
Net income for the periods attributable to :
Shareholders of the parent	6(27)	$	1,391,923		$	2,358,935
Non-controlling interests	6(18), 6(28)
Total comprehensive income (loss) for the periods attributable to :
Shareholders of the parent		$	2,423,700		$	1,835,602
Non-controlling interests		$	(218,321)		$	107,030
Basic Earnings Per Share (in New Taiwan Dollars)	6(27)	$	3.56		$	6.03
Diluted Earnings Per Share (in New Taiwan Dollars)	6(27)	$	3.53		$	5.92

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

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