Tatung : Parent Company Statements 2023

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Stock Code:2371

TATUNG CO.

Parent Company Only Financial Statements

With Independent Auditors' Report

For the Years Ended December 31, 2023 and 2022(Restatement)

Address:	No. 22, Sec. 3, Zhongshan N. Rd., Zhongshan Dist., Taipei City 104427,
	Taiwan (R.O.C.)
Telephone:	[phone]

The independent auditors' report and the accompanying parent company only financial statements are the English translation of the Chinese version prepared and used in the Republic of China. If there is any conflict between, or any difference in the interpretation of the English and Chinese language independent auditors' report and parent company only financial statements, the Chinese version shall prevail.

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Table of contents

		Contents		Page
1.	Cover Page	1
2.	Table of Contents	2
3.	Independent Auditors' Report	3
4.	Balance Sheets	4
5.	Statements of Comprehensive Income	5
6.	Statements of Changes in Equity	6
7.	Statements of Cash Flows	7
8.	Notes to the Financial Statements
	(1)	Company history	8
	(2)	Approval date and procedures of the financial statements	8
	(3)	New standards, amendments and interpretations adopted		9～10
	(4)	Summary of material accounting policies		10～36
	(5)	Significant accounting assumptions and judgments, and major sources		36～38
		of estimation uncertainty
	(6)	Explanation of significant accounts		38～86
	(7)	Related-party transactions		86～95
	(8)	Pledged assets	95
	(9)	Significant commitments and contingencies		96～116
	(10)	Losses due to major disasters	117
	(11)	Subsequent events	117
	(12)	Others		117～118
	(13)	Other disclosures
		(a) Information on significant transactions		118～119
		(b) Information on investees	119
		(c) Information on investment in mainland China	119
		(d) Major shareholders	119
	(14)	Segment information	119
9.	Appendix	120~136
10.	List of major account titles		137～142

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Independent Auditors' Report

To the Board of Directors of Tatung Co.:

Opinion

We have audited the financial statements of Tatung Co.("the Company"), which comprise the balance sheet as of December 31, 2023 and 2022 (restated), the statement of comprehensive income, changes in equity and cash flows for the years ended December 31, 2023 and 2022 (restated), and notes to the financial statements, including a summary of material accounting policies.

In our opinion, based on our audits and the report of other auditors (please refer to Other Matter paragraph), the accompanying financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2023, and 2022 (restated), 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 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 of our opinion.

Emphasis of Matter- Contingent Liabilities

As stated in Note 9(e)(iii) 7), in December 2018, Chunghwa Picture Tubes Technology (Group) Co., Ltd. (" CPTTG" ) filed a civil lawsuit against Chunghwa Picture Tubes (Bermuda) Ltd. (" CPTB" ) for non- performance of a payment. Later on March 28, 2019, Tatung Co. and Chunghwa Picture Tubes, Ltd. ("CPT") were added as defendants in the lawsuit. CPTTG claimed that Tatung Co. and CPTTG were jointly and severally liable for the claimed payment. On June 30, 2023, the High People's Court of Fujian Province has made a judgement. The court ruled that CPTB shall be liable for the claimed payment, and CPT and Tatung Co. shall be jointly and severally liable for the claimed payment. Tatung Co. has appointed attorneys to review the judgement and has come to a conclusion that the possibility of the Supreme People's Court of the People's Republic of China upholding the judgment is low. Hence, Tatung Co. has filed an appeal. Tatung Co. stated that it is difficult to determine whether the above requests should be compensated. The content and amount of the above requests may be resolved through lawsuits in the future, and it is not clear whether enterprise have existing obligations, and/or it is not probable that there will be an outflow of resources for the settlement of claims, thus, there are not recognized as a provision for liabilities in accordance with IAS 37. Therefore, our conclusion is not modified in respect of this matter.

3-1

Key Audit Matters

Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the financial statements for the year ended December 31, 2023 of Tatung Co. These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. We have determined the matters described below to be the key audit matters to be communicated in our report.

1. Revenue recognition
   Please refer to Note 4(q) for the accounting principles on revenue recognition and Note 6(ac) for the description on revenue recognition.
2. 1. Description of key audit matter:
      The timing for the transfer of commodity control is more complicated not only because of the diversity of income sources and huge transaction volume of the Company, but also the transaction terms vary with each client. These factors expose the Company to a significant risk of untimely recognition of revenue.
      Therefore, the test of revenue recognition is one of our key audit matters.
   2. Auditing procedures performed:
      The main audit procedures of the key audit matter mentioned above include:

‧ Understanding and testing the internal control design and implementation of the sales cycle.

‧Sampling the original order or contract and reviewing the transaction terms in order to evaluate the accuracy of the timing for revenue recognition.

1. • Performing cut off test for revenues during the periods before and after the balance sheet date and reviewing whether there are significant sales returns and discounts after the period to confirm the reasonableness of revenue recognition.
2. Contingent Liabilities
   Please refer to Note 9(e) of non-consolidated financial report for the disclosure of contingent liabilities.
3. 1. Description of key audit matter:
      In December 2018, Chunghwa Picture Tubes Technology (Group) Co., Ltd. ("CPTTG") filed a civil lawsuit against Chunghwa Picture Tubes (Bermuda) Ltd. (" CPTB" ) for non-performance of a payment. Later on March 28, 2019, Tatung Co. and Chunghwa Picture Tubes, Ltd. ("CPT") were added as defendants in the lawsuit. CPTTG claimed that Tatung Co. and CPTTG were jointly and severally liable for the claimed payment. On June 30, 2023, the High People's Court of Fujian Province has made a judgement. The court ruled that CPTB shall be liable for the claimed payment, and CPT and Tatung Co. shall be jointly and severally liable for the claimed payment. Tatung Co. has appointed attorneys to review the judgement and has come to a conclusion that the possibility of the Supreme People's Court of the People's Republic of China upholding the judgment is low. Hence, Tatung Co. has filed an appeal. Tatung Co. stated that it is difficult to determine whether the above requests should be compensated. The content and amount of the above requests may be resolved through lawsuits in the future, and it is not clear whether enterprise have existing obligations, and/or it is not probable that there will be an outflow of resources for the settlement of claims, thus, there are not recognized as a provision for liabilities in accordance with IAS 37. Since Tatung Co. and CPT claimed the amount mentioned above would possibly be solved through litigation procedures and the assertion involved significant judgement, assessment and estimation of the management.
      Therefore, the assessment of contingent liabilities is one of our key audit matters.

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1. 1. Auditing procedures performed:
      The main audit procedures of the key audit matter mentioned above include:
   2. • Obtaining the assertion and statement of the Company for the contingent liability.
      • Interviewing with the Company' s management and internal legal personnel, and reviewing documents related to legal cases.
      • Obtaining the legal opinion from lawyers appointed by the Company concerning the case and appointed the auditor's expert to assist in reviewing the legal opinion, understanding the process of forming the opinion and confirming the reasonableness of the conclusion.
      • Assessing whether the accounting judgments and estimations are consistent and reasonable in accordance with the accounting standards.
2. Investment using the equity method

Please refer to Notes 4(i) and (j) for accounting policies for investing in affiliated enterprises and subsidiaries; Note 5 for the judgment of control; and Note 6(h) and (i) for details on the investment using the equity method.

1. Description of key audit matter:
   As of December 31, 2023, the investment of the Company using the equity method was $64,217,168
   thousand, representing 73% of the total assets, which is significant for the financial statements. We evaluate whether each invested enterprise has substantial control ability, and every time the aforementioned statement applies, we evaluate further on whether it has been regarded as a subsidiary in accordance with the regulations and included in the preparation of the consolidated financial statements. We also examine whether the long-term equity investments that have a significant influence over the invested enterprise are evaluated using the equity method. Furthermore, we assess the accuracy of the aforementioned accounting treatment, which has a significant impact on the financial statements.
   Therefore, the use of the equity method to assess the control or significant influence of the investment individual is one of our key audit matters.
2. Auditing procedures performed:
   The main audit procedures of the key audit matter mentioned above include:
3. • Obtaining the latest investment structure chart of the Company, inquiring the reasons for relevant changes, and understanding the accounting basis and the appropriateness of the classification of the Company's investment using the equity method.
   • Evaluating the shareholding status of the Company in each reinvested enterprise, understanding the composition of the board of directors, management, shareholder structure, and related investment contracts, to evaluate whether the Company's identification of each reinvested enterprise is handled in accordance with the relevant standards.
   • Examining whether the financial statements audited by an accountant have been obtained in accordance with the regulations when recognizing investment gains and losses and other comprehensive gains and losses for investments using the equity method and understanding the impact of major events in the investee company's financial statements on the non-consolidated financial statements.
   • Requesting confirmation or taking physical count to verify the existence and ownership of equity method investments on the books.

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1. Fair value evaluation of investment property
   Please refer to Note 4(k) for the accounting policies of investment property; Note 5 for the accounting estimates and assumptions on the fair value of investment property; and Note 6(m) for relevant details of investment property.
2. 1. Description of key audit matter:
      Since the subsequent measurement of investment property adopts the fair value model, the method and process of fair value assessment involves subjective accounting estimates and judgments of the management. Also, the inclusion of changes in fair value in profit or loss will significantly affect the fair value adjustment benefits of investment property in the current year.
      Therefore, the fair value evaluation of investment property is one of our key audit matters.
   2. Auditing procedures performed:
      The main audit procedures of the key audit matter mentioned above include:
   3. • Assessing the professions, competence, and independence of external independent evaluators used by management, and verifying the evaluators' qualifications to confirm that there are no issues that affect their objectivity or limit their scope of work.
      • Appointing auditor's experts to assist in reviewing the fair value valuation report, understanding whether the valuation methods and assumptions comply with the financial reporting standards for securities issuers and the technical rules for real estate valuation, as well as assessing the relevance and reliability of the data sources and important parameters used in the valuation report to confirm the reasonableness of its valuation results.
      • Querying and re-accounting to confirm the correctness of the accounting process.
3. Deferred income tax assets
   Please refer to Notes 4 (u) for the accounting policies of deferred income tax assets； Note 5 for the accounting estimate and assumption on the deferred income tax assets； and Notes 6 (y) for relevant details of evaluation of deferred income tax assets.
4. 1. Description of key audit matter:
      The recognition and evaluation which made by the Company of future growth and the realization year for deferred income assets of the temporary difference between deferred tax assets and those aren't recognized as deferred tax assets, considered as significant unsure and management judgment.
      Therefore, the deferred income tax assets is one of our key audit matters in the audit.
   2. Auditing procedures performed:
      The main audit procedures of the key audit matter mentioned above include:
      ‧Evaluating the reasonableness of the expect growth and assumption used by the management that deferred income tax assets will be realized.
   3. • Evaluating the Company disclosure related to deferred income tax assets is appropriate.

3-4

Other Matter

We did not audit the financial statements of certain equity-accounted investees. Those statements were audited by other auditors whose reports have been furnished to us, and our opinion, insofar as it related to the amounts included for certain equity-accounted investees, are based solely on the reports of the other auditors. The amount of long-term investments in these investee companies represented 2%and 8% of the related total assets at December 31, 2023 and 2022 (restated), and the related investment gain represented 4% and 3% of total profit before tax for the years ended December 31, 2023 and 2022 (restated).

Responsibilities of Management and Those Charged with Governance for the Non-Consolidated Financial Statements

Management is responsible for the preparation and fair presentation of the 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 financial statements that are free from material misstatement, whether due to fraud or error.

In preparing the 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 or supervisors) are responsible for overseeing the Company's financial reporting process.

Auditors' Responsibilities for the Audit of the Non-Consolidated Financial Statements

Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor' s 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.

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 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 Company's internal control.
3. Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management.

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1. 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 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.
2. Evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation.
3. Obtain sufficient and appropriate audit evidence regarding the financial information of the investment in other entities accounted for using the equity method to express an opinion on these 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 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.

From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the 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.

The engagement partners on the audit resulting in this independent auditors' report are Chen, Chung-Che and Lai, Li-Chen.

KPMG

Taipei, Taiwan (Republic of China)

March 11, 2024

Notes to Readers

The accompanying parent company only financial statements are intended only to present the statement of financial position, financial performance and its cash flows in accordance with the 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 parent company only financial statements are those generally accepted and applied in the Republic of China.

The auditors' report and the accompanying parent company only financial statements are the English translation of the Chinese version prepared and used in the Republic of China. If there is any conflict between, or any difference in the interpretation of the English and Chinese language auditors' report and parent company only financial statements, the Chinese version shall prevail.

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(English Translation of Parent Company Only Financial Statements and Report Originally Issued in Chinese)

TATUNG CO.

Balance Sheets

December 31, 2023 and 2022

(Expressed in Thousands of New Taiwan Dollars)

											December 31, 2022	January 1, 2022
	Assets		December 31, 2023	(Restatement)					(Restatement)
		Amount	%				Amount	%				Amount	%
	Current assets:
1100	Cash and cash equivalents (Note 6(a))	$	2,037,095			2			2,729,155			3			1,998,202			3
1110	Current financial assets at fair value through profit or loss (Note 6(b))		4,830			-			388			-			184			-
1120	Current financial assets at fair value through other comprehensive income		339,528			-			406,044			-			481,316			1
	(Note 6(c))
1136	Current financial assets at amortized cost, net (Notes 6(d) and 8)		3,212,221			4			3,222,987			4			2,824,137			4
1140	Contract assets－current (Note 6(ac))		925,655			1			933,312			1			686,189			1
1150	Notes receivable, net (Note 6(e))		199,329			-			236,296			-			179,503			-
1170	Accounts receivable, net (Note 6(e))		1,392,887			2			1,600,769			2			1,357,503			2
1180	Accounts receivable－related parties, net (Notes 6(e) and 7)		664,680			1			606,678			1			1,274,577			2
1196	Lease payments receivable, net		31			-			61			-			67			-
1200	Other receivables		256,900			-			254,888			-			299,258			-
1210	Other receivables－related parties (Note 7)		614,027			1			265,312			-			279,598			-
1220	Current tax assets		12,608			-			12,066			-			12,859			-
130X	Inventories (Note 6(f))		5,976,327			7			5,784,267			7			3,836,119			5
1410	Prepayments (Note 7)		307,465			-			470,132			1			114,261			-
1460	Non-current assets classified as held for sale, net (Note 6(g))		-			-			-			-			26,017			-
	Total current assets		15,943,583			18			16,522,355			19			13,369,790			18
	Non-current assets:
1517	Financial assets at fair value through other comprehensive income－non-current		134,280			-			98,568			-			109,162			-
	(Note 6(c))
1535	Non-current financial assets at amortized cost, net (Notes 6(d) and 8)		51,219			-			464,817			1			566,419			1
1550	Investment accounted for using the equity method (Notes 6(h), (i), (j) and 8)		64,217,168			73			57,989,993			72			53,179,329			69
1560	Non-current contract assets (Note 6(ac))		941,817			1			666,299			1			764,625			1
1600	Property, plant and equipment (Notes 6(k) and 8)		5,199,550			6			4,514,066			5			4,352,195			6
1755	Right-of-use assets (Note 6(l))		307,528			-			80,845			-			282,057			-
1760	Investment property, net (Note 6(m))		-			-			559,000			1			260,312			-
1780	Intangible assets (Note 6(n))		10,430			-			3,229			-			1,146			-
1975	Net defined benefit asset, non-current (Note 6(x))		43,864			-			50,957			-			-			-
1840	Deferred tax assets (Note 6(y))		1,372,636			2			395,873			-			421,479			1
1995	Other non-current assets, others (Notes 6(o) and 7)		148,299			-			145,003			-			264,780			-
1920	Guarantee deposits paid (Note 8)		364,523			-			388,900			-			303,100			-
1932	Long-term accounts receivables (Note 6(p))		1,897			-			606			-			1,514			-
1942	Long-term accounts receivables due from related parties (Notes 6(p) and 7)		416,961			-			442,284			1			2,710,484			4
	Total non-current assets		73,210,172			82			65,800,440			81			63,216,602			82
	Total assets	$	89,153,755			100			82,322,795			100			76,586,392			100

See accompanying notes to parent company only financial statements.

4-1

(English Translation of Parent Company Only Financial Statements and Report Originally Issued in Chinese)

TATUNG CO.

Balance Sheets (CONT'D)

December 31, 2023 and 2022

(Expressed in Thousands of New Taiwan Dollars)

											December 31, 2022		January 1, 2022
	Liabilities and Equity		December 31, 2023		(Restatement)					(Restatement)
		Amount	%				Amount	%				Amount	%
	Current liabilities:
2100	Short-term borrowings (Note 6(q))	$	2,823,169		4		1,895,058			3		1,041,036			2
2110	Short-term notes and bills payable (Note 6(r))		599,770		1		99,795			-		349,813			-
2120	Current financial liabilities at fair value through profit or loss (Note 6(b))		2,075		-		654			-		869			-
2130	Contract liabilities－current (Note 6(ac))		991,874		1		1,191,009			1		1,414,510			2
2170	Accounts payable		2,821,284		3		2,571,307			3		2,351,734			3
2180	Accounts payable－related parties (Note 7)		243,969		-		420,349			1		478,890			1
2200	Other payables (Note 6(x))		957,505		1		1,135,509			1		884,380			1
2220	Other payables－related parties (Note 7)		80,479		-		60,035			-		121,574			-
2250	Provisions－current (Note 6(u))		944,747		1		297,144			-		154,860			-
2280	Lease liabilities－current (Notes 6(t) and 7)		271,330		-		31,816			-		248,304			-
2310	Advance receipts		2,515		-		476			-		5,137			-
2313	Unearned revenue (Note 6(v))		-		-		13,295			-		7,800			-
2322	Long-term borrowings, current portion (Note 6(s))		371,760		-		23,955			1		1,895,682			2
2399	Other current liabilities		79,611			-			67,926			-			74,122			-
	Total current liabilities		10,190,088		11		7,808,328			10		9,028,711			11
	Non-Current liabilities:
2540	Long-term borrowings (Note 6(s))		22,318,295		26		22,648,345			28		16,449,913			22
2550	Provisions－non-current (Note 6(u))		130,678		-		132,983			-		114,229			-
2570	Deferred tax liabilities (Note 6(y))		299,721		-		295,370			-		271,494			-
2580	Lease liabilities－non-current (Notes 6(t) and 7)		29,924		-		40,609			-		35,009			-
2612	Long-term accounts payable		99,846		-		-			-		-			-
2640	Defined benefit liabilities, net (Note 6(x))		-		-		-			-		200,753			-
2645	Guarantee deposits received		2,124		-		6,461			-		6,964			-
2650	Credit balance of investments accounted for using the equity method (Note 6(h))		1,420,267			2			188,936			-			12,290,633			16
	Total non-current liabilities		24,300,855			28			23,312,704			28			29,368,995			38
	Total liabilities		34,490,943		39		31,121,032			38		38,397,706			49
	Equity attributable to owners of parent (Notes 6(c) and (z)):
3110	Ordinary shares		23,395,367		26		23,395,367			28		23,395,367			31
3200	Capital surplus		3,449,138		4		3,441,732			4		3,452,748			5
	Retained earnings:
3310	Legal reserve		1,652,805		2		693,620			1		323,942			-
3320	Special reserve		20,077,899		22		11,536,279			14		8,809,617			12
3350	Unappropriated retained earnings		2,653,711			3			9,581,279			12			3,696,785			5
	Total retained earnings		24,384,415		27		21,811,178			27		12,830,344			17
	Other equity interest:
3410	Exchange differences on translation of foreign financial statements		(739,610)	(1)	(659,390)		(1)	(1,503,727)		(2)
3420	Unrealised gains (losses) from financial assets measured at fair value through		(76,394)	-		(200,167)		-		(221,971)		-
	other comprehensive income
3460	Revaluation surplus		4,500,897			5			3,529,084			4			266,779			-
	Total other equity interest		3,684,893			4			2,669,527			3			(1,458,919)		(2)
3500	Treasury shares		(251,001)	-		(116,041)		-		(30,854)		-
	Total equity		54,662,812			61			51,201,763			62			38,188,686			51
	Total liabilities and equity	$	89,153,755		100		82,322,795			100		76,586,392			100

See accompanying notes to parent company only financial statements.