KHGEARS — Audit Report / Information 2023

Nov 14, 2023

KHGEARS INTERNATIONAL LIMITED AND ITS SUBSIDIARIES

Consolidated Financial Statements with CPA’s Audit Report

Years Ended Dec. 31, 2023 and 2022

Address: The Grand Pavilion Commercial Centre, Oleander Way, 802 West Bay Road, P.O. Box32052, Grand Cayman KY1-1208, Cayman Islands. Tel: (86)7563971888

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§TABLE OF CONTENTS§

Item Chapter I Cover Chapter II Table of Contents Chapter III CPA’s Audit Report Chapter IV Consolidated Balance Sheet Chapter V Consolidated Statements of Comprehensive Income Chapter VI Consolidated Statements of Changes in Equity Chapter VII Consolidated Statements of Cash Flows Chapter VIII Notes to Consolidated Financial Statements I. Company History II. Dates and Procedures for the Financial Statement Approval III. Application of New and Revised Standards, Amendments, and Interpretations IV. Summary of Significant Accounting Policies V. Major Sources of Uncertainty in Significant Accounting Judgments, Estimations, and Assumptions VI. Description of Significant Accounting Items VII. Related Party Transaction VIII. Pledged Assets IX. Material Contingent Liabilities and Unrecognized Contractual Commitments X. Losses Due to Major Disasters XI. Major Subsequent Events XII. Other XIII. Notes to Disclosures 1. Information on Significant Transactions 2. Information on Investees 3. Information of Investment in Mainland China 4. Information of Major Shareholders XIV. Department Information	Page 1 2 3-7 8 9-10 11 12-13 14 14 14-16 16-27 27 27-49 49 49 - - - 50-51 51, 54-58 51, 59 51-52, 56-58, 60 52, 61	Financial Statement Note
		- - - - - - - I II III IV V VI-XXIV XXV XXVI - - - XXVII XXVIII XXVIII XXVIII XXVIII XXIX

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CPA’s Audit Report

Khgears International Limited:

Opinion

We have audited the accompanying consolidated financial statements of Khgears International Limited and its subsidiaries (collectively referred to as the “Group”), which comprise the consolidated balance sheets as of Dec. 31, 2023 and 2022, and the consolidated statements of comprehensive income, consolidated statements of changes in equity and consolidated statements of cash flows for the years then ended, and the related 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 Dec. 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 (FSC) of the Republic of China (ROC).

Basis for the Audit Opinion

We conducted our audits in accordance with the Regulations Governing Auditing and Attestation of Financial Statements by Certified Public Accountants and auditing standards generally accepted in the ROC. 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 ROC, 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.

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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 the consolidated financial statements for the year ended Dec. 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.

Key audit matters for the Group’s consolidated financial statements for the year ended Dec. 31, 2023 are stated as follows:

The sales revenue of specific customers

The sales revenue growth from specific customers of Khgears International Limited and its subsidiaries is greater than that of other customers in 2023. Given the substantial amount involved, the authenticity of sales to specific customers is listed as a key audit matter. Please refer to Note IV for sales revenue accounting policies and relevant information. Responsive audit procedures are as follows:

1. Understand the relevant operating procedures and internal controls of the Company's sales transactions, and test the design and implementation of these controls.

2. Obtain the sales revenue transaction details of specific customers, check the customer's original order, delivery receipt or customer pickup information, issued invoice and other relevant vouchers for sales revenue recognition, as well as check the actual payment, in order to confirm the authenticity of sales revenue recognition.

Responsibilities of Management and Governing Units for Consolidated Financial Statements

The responsibility of management is to prepare properly represented 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 FSC of the ROC, and maintain the necessary internal control related to the preparation of the consolidated financial statements to ensure no significant misrepresentation are contained in the consolidated financial statements resulting from 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.

The Group’s governance units (including the Audit Committee) are responsible for overseeing the financial reporting process.

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CPA’s 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 auditing standards generally accepted in the ROC 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 auditing standards, 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 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 auditor’s 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.

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7. Obtain sufficient and 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.

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

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Deloitte & Touche CPA Cai, You-Ling CPA Chen, Jun-Hong Approved for recordation by Financial Approved for recordation by Financial Supervisory Commission Supervisory Commission Jin-Guan-Zheng-Shen-Zi No. 1100356048 Jin-Guan-Zheng-Shen-Zi No. 0990031652

Mar. 25, 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 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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KHGEARS INTERNATIONAL LIMITED AND ITS SUBSIDIARIES

CONSOLIDATED BALANCE SHEET

DEC. 31, 2023 AND 2022

(In Thousands of New Taiwan Dollars)

Code 1100 1150 1170 1200 1220 1310 1470 11XX 1535 1600 1755 1780 1840 1915 1920 15XX 1XXX Code 2100 2170 2200 2230 2280 2313 2320 2399 21XX 2540 2570 2580 2630 2645 25XX 2XXX 3110 3200 3310 3320 3350 3300 3410 3491 3400 3500 3XXX	Assets Current assets Cash and cash equivalents (Notes IV and VI) Notes receivable (Notes IV and VII) Accounts receivable (Notes IV and VII) Other receivables (Note IV) Current tax assets (Notes IV and XIX) Inventories (Notes IV, V and VIII) Other current assets (Note XIII) Total current assets Non-current assets Financial assets measured at amortized cost (Notes IV and XXVI) Property, plant and equipment (Notes IV, X and XXVI) Right-of-use assets (Notes IV, XII and XXVI) Intangible assets (Notes IV and XI) Deferred tax assets (Notes IV and XIX) Prepayments for equipment (Note X) Refundable deposits paid Total non-current assets Total assets Liabilities and equity Current liabilities Short-term borrowings (Notes IV and XIV) Accounts payable Other payables (Note XV) Current tax liabilities (Notes IV and XIX) Current lease liabilities (Notes IV and XII) Deferred income (Notes IV and XXII) Long-term liabilities due within one year or one operating cycle (Notes IV and XIV) Other current liabilities (Note V) Total current liabilities Non-current liabilities Long-term borrowings (Notes IV and XIV) Deferred tax liabilities (Notes IV and XIX) Non-current lease liabilities (Notes IV and XII) Long-term deferred income (Notes IV and XXII) Guarantee deposits and margins received Total non-current liabilities Total liabilities Equity attributable to owners of the Company (Notes IV, XVII and XXI) Share capital Capital surplus Retained earnings Legal reserve Special reserve Unappropriated earnings Total retained earnings Other equity Exchange differences on translation of foreign financial statements Unearned remuneration to employees Total other equity Treasury shares Total equity Total liabilities and equity		Dec. 31, 2023		％ 25 1 18 2 - 19 3 68 - 28 2 - - 2 - 32 100 2 7 7 - - 1 1 5 23 - 1 - 1 - 2 25 15 33 4 3 24 31 4 ) - 4) - 75 100		Dec. 31, 2022
			Amount $ 881,110 24,470 616,749 75,724 2,452 665,442 124,063 2,390,010 974 972,577 65,376 4,627 6,119 57,234 438 1,107,345 $ 3,497,355 $ 61,294 255,959 253,710 5,853 13,349 21,539 15,323 176,490 803,517 7,662 47,493 4,207 23,377 88 82,827 886,344 531,090 1,164,842 146,743 86,259 838,258 1,071,260 141,658 ) 711) 142,369) 13,812) 2,611,011 $ 3,497,355				Amount $ 798,574 23,264 750,855 66,984 - 705,147 86,119 2,430,943 1,013 1,023,694 70,838 7,454 9,453 102,685 440 1,215,577 $ 3,646,520 $ 245,600 230,037 232,208 10,271 13,822 45,520 15,350 180,817 973,625 23,025 13,662 5,567 26,671 89 69,014 1,042,639 533,350 1,178,809 111,639 129,988 746,098 987,725 86,259 ) 9,744) 96,003) - 2,603,881 $ 3,646,520		％
		( ( ( (		( (		( ( (		( (	22 1 21 2 - 19 2 67 - 28 2 - - 3 - 33 100 7 6 6 - 1 1 1 5 27 1 - - 1 - 2 29 15 32 3 4 20 27 3 ) - 3) - 71 100

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

Chairman: Kwok Hing Global Limited General Manager: Du, Chun-Hui Head-Finance & Accounting: Chen, Guo-Gang Representative: Gao, Guo-Xing

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KHGEARS INTERNATIONAL LIMITED AND ITS SUBSIDIARIES CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME FOR THE YEARS ENDED DEC. 31, 2023 AND 2022

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

Code 4100 Net sales revenue (Notes IV and XXIX) 5110 Cost of sales (Notes IV, VIII, XVI and XVIII) 5900 Gross profit from operations Operating expenses (Notes XVI and XVIII) 6100 Selling expenses 6200 Administrative expenses 6300 Research and development expenses 6000 Total operating expenses 6900 Net operating income Non-operating income and expenses 7100 Interest income (Note IV) 7010 Other income (Notes IV, XVIII and XXII) 7020 Other gains and losses (Notes IV and XVIII) 7050 Finance costs (Notes IV and XVIII) 7000 Total non-operating income and expenses 7900 Profit before tax 7950 Income tax expense (Notes IV and XIX) 8200 Net income		2023		％ 100 72 28 4 6 6 16 12 1 3 - 1) 3 15 3) 12		2022
						Amount $ 2,443,385 1,750,669 692,716 96,078 195,552 140,943 432,573 260,143 5,992 50,921 87,327 7,190) 137,050 397,193 46,154) 351,039		％
			( (		( (		(	100 71 29 4 8 6 18 11 - 2 3 - 5 16 2) 14

(Continued)

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(Continued from previous page)

Code Other comprehensive income (loss) (Note IV) 8310 Items that will not be reclassified subsequently to profit or loss: 8341 Translation differences from functional currency to presentation currency 8360 Components of other comprehensive income that will be reclassified to profit or loss: 8361 Exchange differences on translation of foreign financial statements 8300 Other comprehensive income (net amount after tax) 8500 Total net comprehensive income this year Earnings per share (Note XX) 9750 Basic earnings per share 9850 Diluted earnings per share	2023	％ ( 2 ) ( 1) ( 3) 9		2022
	Amount ( $ 50,325 ) ( 5,074) ( 55,399) $ 218,500 $ 5.18 $ 5.11			Amount $ 36,116 7,613 43,729 $ 394,768 $ 6.66 $ 6.53		％
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The accompanying notes are an integral part of the consolidated financial statements.

Chairman: General Manager: Head-Finance & Accounting: Kwok Hing Global Limited Du, Chun-Hui Chen, Guo-Gang Representative: Gao, Guo-Xing

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KHGEARS INTERNATIONAL LIMITED AND ITS SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

FOR THE YEARS ENDED DEC. 31, 2023 AND 2022

			FOR THE YEARS ENDED DEC. 31, 2023 AND 2022
Code A1 Balance as of Jan. 1, 2022 Appropriation of 2021 earnings B1 Legal reserve B3 Special reserve B5 Cash dividends N1 Share-based payment T1 Cancellation of restricted stock awards D1 Consolidated net income in 2022 D3 Consolidated other comprehensive income in 2022 D5 Consolidated total comprehensive income in 2022 Z1 Balance as of Dec. 31, 2022 Appropriation of 2022 earnings B1 Legal reserve B3 Special reserve reversed B5 Cash dividends N1 Share-based payment T1 Cancellation of restricted stock awards L1 Treasury shares buyback D1 Consolidated net income in 2023 D3 Consolidated other comprehensive income in 2023 D5 Consolidated total comprehensive income in 2023 Z1 Balance as of Dec. 31, 2023 Chairman: Kwok Hing Global Limited		Share capital	Capital surplus (Notes IV, XVII and XXI) (Note XVII) Retained earnings (Note XVII) Amount Legal reserve Special reserve Unappropriated earnings $ 533,800 $ 1,181,590 $ 72,270 $ 127,893 $ 673,714 - - 39,369 - ( 39,369 ) - - - 2,095 ( 2,095 ) - - - - ( 237,191 ) - - - - - ( 450 ) ( 2,781 ) - - - - - - - 351,039 - - - - - - - - - 351,039 533,350 1,178,809 111,639 129,988 746,098 - - 35,104 - ( 35,104 ) - - - ( 43,729 ) 43,729 - - - - ( 190,364 ) - - - - - ( 2,260 ) ( 13,967 ) - - - - - - - - - - - - 273,899 - - - - - - - - - 273,899 $ 531,090 $ 1,164,842 $ 146,743 $ 86,259 $ 838,258 The accompanying notes are an integral part of the consolidated financial statements. General Manager: Du, Chun-Hui	(In Thousands of New Taiwan Dollars) Other equity (Note IV) Exchange differences on translation of foreign financial statements Unearned remuneration to employees (Note XXI) Treasury shares (Note XVII) Total equity ( $ 129,988 ) ( $ 28,505 ) $ - $ 2,430,774 - - - - - - - - - - - ( 237,191 ) - 15,530 - 15,530 - 3,231 - - - - - 351,039 43,729 - - 43,729 43,729 - - 394,768 ( 86,259 ) ( 9,744 ) - 2,603,881 - - - - - - - - - - - ( 190,364 ) - ( 7,194 ) - ( 7,194 ) - 16,227 - - - - ( 13,812 ) ( 13,812 ) - - - 273,899 ( 55,399) - - ( 55,399) ( 55,399) - - 218,500 ($ 141,658) ($ 711) ($ 13,812) $ 2,611,011 Head-Finance & Accounting: Chen, Guo-Gang
				Exchange differences on translation of foreign financial statements ( $ 129,988 ) - - - - - - 43,729 43,729 ( 86,259 ) - - - - - - - ( 55,399) ( 55,399) ($ 141,658)
		Quantity (in thousands) 53,380 - - - - 45 ) - - - 53,335 - - - - 226 ) - - - - 53,109
	( (		( (	( ( ( ( (	( ( ( (

Chairman: Kwok Hing Global Limited Representative: Gao, Guo-Xing

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KHGEARS INTERNATIONAL LIMITED AND ITS SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE YEARS ENDED DEC. 31, 2023 AND 2022

(In Thousands of New Taiwan Dollars)

Code Cash flows from operating activities A10000 Profit before tax A20010 Adjustments for A20100 Depreciation expense A20200 Amortization expense A20300 Impairment loss (reversal of gain) of expected credit A20900 Finance costs A21200 Interest income A21900 Remuneration cost of share options granted to employees A22500 Gains on disposal and scrapping of property, plant and equipment A23700 Loss on decline in market value and obsolete and slow-moving inventories A29900 Deferred revenue amortization A30000 Changes in operating assets and liabilities A31130 Notes receivable A31150 Accounts receivable A31180 Other receivables A31200 Inventories A31240 Other current assets A32150 Accounts payable A32180 Other payables A32230 Other current liabilities A32250 Deferred income A33000 Net cash inflows generated from operating activities A33100 Interest received A33300 Interest paid A33500 Income taxes paid AAAA Net cash generated from operating activities Cash flows from investing activities B02700 Acquisition of property, plant and equipment B02800 Proceeds from disposal of property, plant and equipment B03700 Increase in refundable deposits	2023 $ 358,384 153,118 2,735 ( 1,488 ) 15,728 ( 17,121 ) ( 7,194 ) ( 2,707 ) 17,273 ( 36,964 ) ( 1,206 ) 135,608 ( 8,740 ) 25,380 ( 37,944 ) 25,922 18,018 ( 4,327 ) 10,604 645,079 17,121 ( 18,180 ) ( 51,101) 592,919 ( 46,282 ) 4,982 ( 7 )	2022
		$ 397,193 143,622 2,705 602 7,190 ( 5,992 ) 15,530 ( 625 ) 90,319 ( 9,934 ) ( 20,248 ) 100,657 ( 35,473 ) ( 92,501 ) 16,894 ( 71,006 ) ( 12,977 ) 11,003 9,197 546,156 5,992 ( 7,192 ) ( 48,918) 496,038 ( 62,028 ) 3,488 -

(Continued)

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(Continued from previous page)

Code B03800 Decrease in refundable deposits B04500 Acquisition of intangible assets B07100 Increase in prepayments for equipment BBBB Net cash used in investing activities Cash flows from financing activities C00100 Increase in short-term borrowings C00200 Decrease in short-term borrowings C01600 Increase in long-term borrowings C01700 Repayments of long-term borrowings C04020 Repayment of the principal portion of lease liabilities C04500 Cash dividends C04900 Purchase treasury shares CCCC Net cash used in financing activities DDDD Effect of exchange rate changes on cash and equivalents EEEE Net increase in cash and cash equivalents E00100 Opening balance of cash and cash equivalents E00200 Ending balance of cash and cash equivalents

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

Chairman: General Manager: Head-Finance & Accounting: Kwok Hing Global Limited Du, Chun-Hui Chen, Guo-Gang Representative: Gao, Guo-Xing

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KHGEARS INTERNATIONAL LIMITED AND ITS SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED DEC. 31, 2023 AND 2022 (Otherwise stated, all amounts are in thousands of NTD)

I. Company history

Khgears International Limited (hereinafter referred to as the Company) was established in the British Cayman Islands on Apr. 30, 2014. In August 2018, the shareholders' meeting approved a resolution to change the Company name from "Khgears International Limited Co.," to "Khgears International Limited".

The Consolidated Company primarily engages in the manufacturing and sales of gears and gearboxes.

The Company's shares have been listed and traded on the Taiwan Stock Exchange since Sep. 17, 2019.

The Company’s functional currency is RMB. To increase the comparability and consistency of the consolidated financial statement, this consolidated financial statement is presented in New Taiwan Dollar.

II. Dates and procedures for the financial statement approval

The consolidated financial statements were approved by the Company’s Board of Directors on Mar. 12, 2024.

III. Application of new and revised standards, amendments, and interpretations

• (I) Initial application of the amendments to the International Financial Reporting Standards (IFRS), International Accounting Standards (IAS), IFRIC Interpretations (IFRIC), and SIC Interpretations (SIC) (collectively, “IFRS Accounting Standards”) endorsed and issued into effect by the Financial Supervisory Commission (FSC)

The application of the amendments to the IFRS endorsed and issued into effect by the FSC does not have a significant effect on the accounting policies of the Consolidated Company.

• (II) Applicable FSC-approved IFRS Accounting Standards in 2024

New, revised or amended standards and Effective date issued by interpretations IASB (Note 1) Amendments to IFRS 16 - Lease Liability in a Jan. 1, 2024 (Note 2) Sale and Leaseback

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Amendments to IAS 1 - Classification of Jan. 1, 2024 Liabilities as Current or Non-Current Amendments to IAS 1 - Non-current Liabilities Jan. 1, 2024 with Covenants Amendments to IAS 7 and IFRS 7 - Supplier Jan. 1, 2024 (Note 3) Finance Arrangements

• Note 1: Unless stated otherwise, the above new/revised/amended standards or interpretations are effective for annual reporting periods beginning on their respective effective dates.

• Note 2: A seller-lessee applies the amendments retrospectively to IFRS 16 to sale and leaseback transactions entered into after the date of initial application.

• Note 3: When the amendments apply for the first time, some requirements for disclosure are exempted.

As of the publication date of this consolidated financial statement, the Consolidated Company has concluded that there is no material impact of amendments of above standards and interpretations on the financial position and financial performance.

(III) New IFRS Accounting Standards in issue by IASB but not yet endorsed and issued into effect by the FSC

New, revised or amended standards and Effective date issued by interpretations IASB (Note 1) Amendments to IFRS 10 and IAS 28 - Sale or To be determined by IASB Contribution of Assets between an Investor and its Associate or Joint Venture IFRS 17 - Insurance Contracts Jan. 1, 2023 Amendments to IFRS 17 Jan. 1, 2023 Amendments to IFRS 17 - Initial Application of Jan. 1, 2023 IFRS 17 and IFRS 9 - Comparative Information Amendments to IAS 21 - Lack of Jan. 1, 2025 (Note 2) Exchangeability

• Note 1: Unless stated otherwise, the above new/revised/amended standards or interpretations are effective for annual reporting periods beginning on their respective effective dates.

• Note 2: The amendments apply to the annual reporting periods beginning on or after Jan. 1, 2025. When the amendments apply for the first time, the effects will be recognized in retained earnings on the initial application

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date. When the Consolidated Company adopts a non-functional currency as the presentation currency, the effects will be reclassified as the exchange differences arising from the translation of the financial statements of foreign operations under equity on the initial application date.

As of the date the consolidated financial statements were authorized, the Consolidated Company is continuously assessing the possible impact that the application of other standards and interpretations will have on the Consolidated Company’s financial position and financial performance and will disclose the relevant impact when the assessment is completed.

IV. Summary of significant accounting policies

• (I) Statement of compliance

This consolidated financial statement has been prepared in accordance with the Regulations Governing the Preparation of Financial Reports by Securities Issuers and the IFRS Accounting Standards endorsed and issued into effect by the FSC.

(II) Basis of preparation

The consolidated financial statements have been prepared on the historical cost basis.

The fair value measurements, which are grouped into Levels 1 to 3 based on the degree to which the fair value measurement inputs are observable and based on the significance of the inputs to the fair value measurement in its entirety, are described as follows:

1. Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities;

2. Level 2 inputs are inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e., as prices) or indirectly (i.e., derived from prices);

3. Level 3 inputs are unobservable inputs for the asset or liability.

4. (III) Criteria for classifying assets and liabilities into current and non-current. Current assets:

5. Assets held primarily for the purpose of trading;

6. Assets expected to be realized within 12 months after the balance sheet date; and

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8. Cash and cash equivalents (unless the asset is to be used for an exchange or to settle a liability, or otherwise remains restricted, at more than 12 months after the balance sheet date).

Current liabilities:

1. Liabilities held primarily for the purpose of trading;

2. Liabilities expected to be settled within 12 months of the balance sheet date, and

3. Liabilities for which does not have an unconditional right to defer settlement of the liability for at least 12 months after the balance sheet date.

Assets or liabilities other than those stated above are classified as non-current assets or non-current liabilities.

(IV) Consolidation basis

This consolidated financial statement includes the financial statement of the Company and the entities (subsidiaries) controlled by the Company. The consolidated statements of comprehensive income have included the operating profits and losses of the acquired or disposed subsidiaries for the current period from the acquisition date or to the disposal date. The financial statements of subsidiaries have been adjusted to ensure the accounting policies are line with those of the Consolidated Company. Transactions between entities, account balances, profit and losses have been fully eliminated in preparing the consolidated financial statements.

For details of subsidiaries, shareholding ratio and business activities, please refer to Note IX and Table 6 and Table 7.

(V) Foreign currency

When preparing financial statements for each individual entity, transactions in currencies other than the entity’s functional currency (foreign currencies) shall be converted into functional currency at the exchange rate on the transaction day. Monetary items denominated in foreign currencies are translated at the closing rates at each balance sheet date. Exchange differences arising on the settlement of monetary items or on translating monetary items shall be recognized in profit or loss in the period in which they arise.

Non-monetary items measured at fair value that are denominated in foreign currencies are retranslated at the rates prevailing at the date when the fair value was determined. Exchange differences arising from the retranslation of

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non-monetary items are included in profit or loss for the period except for exchange differences arising from the retranslation of non-monetary items in respect of which gains and losses are recognized directly in other comprehensive income, in which cases, the exchange differences are also recognized directly in other comprehensive income.

Non-monetary items that are measured in terms of historical cost in a foreign currency shall be translated using the exchange rate at the date of the transaction; and shall not be re-translated.

In preparing the consolidated financial statements, the assets and liabilities of the Company and its foreign operations (including subsidiaries that operate in a foreign country or use a currency different from that of the Company) are translated into the New Taiwan Dollars at the exchange rate on each balance sheet date. Income and expense items are translated at the average exchange rate for the current period, the resulting currency translation differences are recognized in other comprehensive income, which belong to the exchange differences arising from the conversion of the functional currency to the presentation currency (NTD), and will not be recognized in the future to profit and loss.

(VI) Inventories

Inventories include raw materials, supplies, finished goods and work in progress. Inventories shall be measured at the lower of cost and net realizable value, and the comparison between cost and net realizable value is based on individual items except for inventories of the same category. Net realizable value is the estimated selling price under normal circumstances less the estimated cost to complete the project and the estimated cost to complete the sale. The calculation of inventory cost adopts the weighted average method.

(VII) Property, plant and equipment

Property, plant and equipment shall be recognized at cost, and subsequent measurement shall be presented at costs subtracted by accumulated depreciation and accumulated impairment losses.

Each part of an item of property, plant and equipment with a cost that is significant in relation to the total cost of the item shall be depreciated separately portion with a straight-line method over their useful lives. The Consolidated Company shall review the estimated useful life, residual value and depreciation

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method at least at each financial year-end, and the impact of changes in accounting estimates shall be applied prospectively.

Any gain or loss arising on the disposal or retirement of an item of property, plant and equipment is determined as the difference between the sales proceeds and the carrying amount of the asset and is recognized in profit or loss.

• (VIII) Intangible assets

• Additions

Intangible assets with a limited useful life acquired separately shall be initially measured at cost, and subsequent measurement shall be presented at costs subtracted by accumulated depreciation and accumulated impairment losses. Intangible assets are amortized on a straight-line basis over their useful lives. The Consolidated Company shall review the estimated useful life, residual value, and amortization method at least at each financial year-end, and the impact of changes in accounting estimates shall be applied prospectively. Intangible assets with indefinite useful lives are recognized at cost subtracted by accumulated impairment losses.

1. Derecognition

Any gain or loss arising on the disposal or retirement of an item of intangible assets is determined as the difference between the sales proceeds and the carrying amount of the asset and is recognized in profit or loss.

• (IX) Impairment of property, plant and equipment, right-of-use assets and intangible assets

The Consolidated Company assess at the date of statement property, plant and equipment, right-of-use assets and intangible assets project whether there is any indication of impairment. If there is any indication that an asset may be impaired, the recoverable amount shall be estimated for the individual asset. If it is not possible to estimate the recoverable amount of the individual asset, the Consolidated Company shall determine the recoverable amount of the cash-generating unit to which the asset belongs. Shared assets are allocated to the smallest cash-generating unit group on a reasonable and consistent basis.

The recoverable amount of an asset or a cash-generating unit is the higher of its fair value less costs of disposal and its value in use. If the recoverable amount of an asset or cash-generating unit is estimated to be less than its carrying amount, the carrying amount of the asset or cash-generating unit is reduced to its

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recoverable amount. An impairment loss is recognized immediately in profit or loss.

When an impairment loss subsequently reverses, the carrying amount of the asset or a cash-generating unit is increased to the revised estimate of its recoverable amount, but the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognized for the asset or cash-generating unit in prior years. (net of amortisation or depreciation). A reversal of an impairment loss is recognized immediately in profit or loss.

(X)

Financial instrument

Financial assets and liabilities shall be presented in the consolidated balance sheet when the Consolidated Company becomes a party to the contractual provisions of the instruments.

Transaction costs that are directly attributable to the acquisition or issue of financial assets and financial liabilities (other than financial assets and financial liabilities at fair value through profit or loss) are added to or deducted from the fair value of the financial assets or financial liabilities, as appropriate, on initial recognition. Transaction costs directly attributable to the acquisition of financial assets or financial liabilities at fair value through profit or loss are recognized immediately in profit or loss.

1. Financial asset

The Consolidated Company adopts trade-date accounting to recognize and derecognize financial assets.

• (1) Category of financial assets and measurement

• The types of financial assets held by the Consolidated Company are financial assets measured at amortized cost.

Financial assets that meet the following conditions are subsequently measured at amortized cost:

• A. The financial asset is held within a business model whose objective is to hold financial assets in order to collect contractual cash flows; and

• B. The contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.

• 20 -

Subsequent to initial recognition, financial assets measured at amortized cost (including cash and cash equivalents, accounts receivable, other receivables, and refundable deposits) are measured at amortized cost, which equals to gross carrying amount determined by the effective interest method less any impairment loss. Exchange differences are recognized in profit or loss.

Interest income is calculated by applying the effective interest rate to the gross carrying amount of such a financial asset.

A financial asset is credit-impaired when there is a significant financial difficulty for the issuer or the borrower, or the disappearance of an active market for that financial asset because of a breach of contract.

Cash equivalents include time deposits and certificates of deposits investments with original maturities within 3 months from the date of acquisition, which are highly liquid, readily convertible to a known amount of cash and are subject to an insignificant risk of changes in value. These cash equivalents are held for the purpose of meeting short-term cash commitments.

• (2) Impairment of financial assets

On each balance sheet date, the Consolidated Company evaluates the impairment loss of financial assets at amortized cost based on expected credit losses.

Accounts receivable are recognized as allowance losses based on lifetime expected credit losses. Other financial assets are evaluated on whether the credit risk has increased significantly since the original recognition. If there is no significant increase, the loss provision shall be recognized as the 12-month expected credit loss, and if there has been a significant increase, the loss provision shall be recognized as the expected credit loss during the duration.

Expected credit losses reflect the weighted average of credit losses with the respective risks of default occurring as the weights. 12-month ECLs represent the portion of lifetime ECLs that is expected to result from default events on a financial instrument that are possible within 12 months after the reporting date. In contrast, lifetime ECLs

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represent the expected credit losses that will result from all possible default events over the expected life of a financial instrument.

As for the impairment losses on all financial assets, the carrying amounts there are reduced through an allowance account.

• (3) Derecognition of financial assets

The Consolidated Company derecognizes a financial asset only when the contractual rights to the cash flows from the financial asset expire, or when it transfers the financial asset and substantially all the risks and rewards of ownership of the financial asset to another entity.

On derecognition of a financial asset at amortized cost in its entirety, the difference between the asset’s carrying amount and the sum of the consideration received and receivable is recognized in profit or loss.

1. Equity instruments

Debt and equity instruments issued by the Consolidated Company are classified as either financial liabilities or as equity in accordance with the substance of the contractual arrangements and the definitions of a financial liability and an equity instrument.

Equity instruments issued by the Consolidated Company are recognized at the proceeds received, net of direct issue costs.

The Company's own equity instruments subsequently recovered are recognized and deducted under equity. No gain or loss is recognized in profit or loss on the purchase, sale, issuance or cancellation of the Company’s own equity instruments.

1. Financial liabilities

2. (1) Subsequent measurement

All financial liabilities are measured at amortized cost using the effective interest method.

• (2) Derecognition of financial liabilities

The difference between the carrying amount of the financial liability derecognized and the consideration paid (including any non-cash assets transferred or liabilities assumed) is recognized in profit or loss.

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(XI) Revenue recognition

When a performance obligation is satisfied, the Consolidated Company shall recognize as revenue the amount of the transaction price that is allocated to that performance obligation.

Merchandise revenue comes from the sales of products such as gears and machined parts. Since the customer has the right to set the price and use of the product when the product arrives at the customer's designated location/when the product is shipped/when the product is accepted, and has the main responsibility for resale, and bears the risk of obsolescence of the product, the Consolidated Company recognized revenue and accounts receivable at the aforementioned time point.

(XII) Lease

At the inception of a contract, the Consolidated Company assesses whether the contract is, or contains, a lease.

The Consolidated Company as lessee

Except for leases of low-value assets to which the recognition exemption applies and lease payments for short-term leases, which are recognized as expenses on a straight-line basis over the lease term, other leases are recognized as right-of-use assets and lease liabilities on the lease commencement date.

The right-of-use asset is initially measured at cost (including the original measurement amount of the lease liability, the lease payment paid before the lease commencement date, and initial direct costs and estimated costs to restore the underlying assets), and subsequently measured at cost less accumulated depreciation and accumulated impairment losses and adjusted for any remeasurement of the lease liability. Right-of-use assets shall be presented separately in the consolidated balance sheet.

The lessee shall depreciate the right-of-use asset on a straight-line basis from the commencement date to the earlier of the end of the useful life of the right-of-use asset or the end of the lease term. If the ownership of the underlying asset will be obtained at the end of the lease term, or if the cost of the right-of-use asset reflects the exercise of the purchase option, depreciation is allocated from the start of the lease to the expiration of the useful life of the underlying asset.

The lease liability is originally measured based on the present value of the lease payment (including fixed payment, substantially fixed benefits, variable lease

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payment depending on the index or rate, the amount expected to be paid by the lessee under the residual value guarantee, the exercise price of the purchase option that is reasonable assurance to be exercised, and the lease termination penalty reflected during the lease term, less lease incentives received). The lease payments shall be discounted using the interest rate implicit in the lease, if that rate can be readily determined. If that rate cannot be readily determined, the lessee shall use the lessee’s incremental borrowing rate.

Subsequently, the lease liability is measured on an amortized cost basis using the effective interest method, and the interest expense is amortized over the lease term. Lease liabilities shall be presented separately in the consolidated balance sheet.

(XIII) Borrowing costs

All borrowing costs are recognized as profit or loss in the period in which they are incurred.

(XIV) Government subsidy

A government grant is not recognized until there is reasonable assurance that the Consolidated Company will comply with the conditions attaching to it, and that the grant will be received.

Government grants are recognized in profit or loss on a systematic basis over the periods in which the Consolidated Company recognizes as expenses the related costs that the grants intend to compensate. Government subsidies that are conditioned on the Consolidated Company purchasing, constructing, or otherwise acquiring non-current assets are recognized as deferred income and are transferred to profit or loss during the useful life of the relevant assets on a reasonable and systematic basis.

Government grants that are receivables as compensation for expenses already incurred are recognized as profit or loss in the period in which they become receivables.

(XV) Post-employment benefits

The subsidiary participates in the government's pension plan under local laws and regulations, and regularly allocates a certain percentage of pensions based on employees' salaries. This is a pension with a determined retirement allocation method. During the period when employees provide services, the retirement

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amounts that should be allocated are recognized as an expense for the current period.

• (XVI) Share-based payment agreement

The fair value of equity instruments at the grant date of the options and restricted stock for employees, and the best estimates of the number of shares or options that are expected to ultimately vest are recognized as expenses on a straight-line basis over the vesting period, with a corresponding adjustment in capital surplus-stock options or other equity (employees have not earned remuneration). It is recognized as an expense in full at the grant date if vesting immediately. When the Company handles cash capital increases and retains employee subscriptions, the day approved by the Board of Directors is the grant date.

When the Company issues restricted stock for employees, which is recognized as other equity (employees have not earned remuneration) at the grant date, and at the same time adjusts the capital reserve - restricted stock for employees.

The Consolidated Company revises the estimated quantity of expected vested restricted stock for employees on each balance sheet date. If there is a revision to the original estimated quantity, the influenced amount is recognized as profit and loss, so that the accumulated expenses reflect the revised estimate, and the capital surplus- restricted stock for employees is relatively adjusted.

(XVII) Income tax

Income tax expense is the sum of current income tax and deferred income tax.

1. Current income tax

The Consolidated Company calculates income tax payable based on income for the current period determined under laws and regulations enacted by Mainland China and each income tax reporting jurisdiction.

According to the Income Tax Act of the R.O.C., an additional tax on unappropriated earnings is provided for in the year the shareholders approve to retain the earnings.

Adjustments of prior years’ tax liabilities are added to or deducted from the current year’s tax provision.

1. Deferred income tax

Deferred income tax is recognized on temporary differences between the carrying amounts of assets and liabilities and the corresponding tax bases used in the computation of taxable profit.

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Deferred tax liabilities are generally recognized for all taxable temporary differences. Deferred tax assets are generally recognized for all deductible temporary differences and loss deductibles, so taxable profits will probably be available against which those deductible temporary differences can be utilized.

Deferred tax liabilities are recognized for taxable temporary differences associated with investments in subsidiaries and associates, except where the Consolidated Company can control the reversal of the temporary difference time point and, probably, the temporary difference will not reverse in the foreseeable future. Deferred tax assets arising from deductible temporary differences associated with such investments are recognized only to the extent that it is probable that there will be sufficient taxable profits against which to utilize the benefits of the temporary differences and such temporary differences are expected to reverse in the foreseeable future.

The carrying amount of deferred tax assets is reviewed at the end of each reporting period and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the assets to be recovered. A previously unrecognized deferred tax asset is also reviewed at the end of each reporting period and recognized to the extent that it has become probable that future taxable profit will allow the deferred tax asset to be recovered.

Deferred tax liabilities and assets are measured at the tax rates that are expected to apply in the period in which the liabilities are settled or the assets are realized, based on tax rates and tax laws that have been enacted or substantively enacted by the end of the reporting period. The measurement of deferred tax liabilities and assets reflects the tax consequences that would follow from the manner in which the Consolidated Company expects, at the end of the reporting period, to recover or settle the carrying amount of its assets and liabilities.

1. Current and deferred income tax

Current and deferred income taxes are recognized in profit or loss, except when they relate to items that are recognized in other comprehensive income or directly in equity, in which case, the current and deferred taxes

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are also recognized in other comprehensive income or directly in equity, respectively.

V. Major sources of uncertainty in significant accounting judgments, estimations, and

assumptions

When Consolidated Company adopts accounting policies, the management must make relevant judgments, estimates and assumptions based on experience and other relevant factors for the information that is not easily obtained from other sources. Actual results may differ from estimates.

The Consolidated Company will consider the relevant major estimates when making major accounting estimates, such as cash flow estimates, growth rates, discount rates, and profitability. The management will continue to review the estimates and the basic assumptions.

Main sources of uncertainty in estimates and assumptions Impairment loss of inventories

The net realizable value of inventories is an estimate of the balance after the estimated selling price in the normal business process less the estimated costs required to complete the project and the estimated costs required to complete the sale. These estimates are based on current market conditions and empirical assessment of historical sales of similar products. Changes in market conditions may significantly affect these estimated results.

VI. Cash and cash equivalents

Cash and cash equivalents
Cash on hand and working fund Bank demand deposit Cash Equivalent (Investments with original maturity within 3 months) Bank fixed deposit	Dec. 31, 2023 $ 678 597,381 283,051 $ 881,110	Dec. 31, 2022
			$ 962 692,049 105,563 $ 798,574

The interest rate range for bank deposits on the balance sheet date is as follows:

Bank deposit	Dec. 31, 2023 0%~5.2%	Dec. 31, 2022
		0%~5.8%

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VII. Notes/ accounts receivable

Notes/ accounts receivable
Notes receivable Measured at amortized cost Accounts receivable Measured at amortized cost Total amount Less: loss allowances	Dec. 31, 2023 $ 24,470 $ 617,251 ( 502) $ 616,749	Dec. 31, 2022
	(	(	$ 23,264 $ 752,757 1,902) $ 750,855

The average credit period for merchandise sales by the Consolidated Company is 30 to 150 days. Since the credit period is short, no interest will be accrued.

In order to minimize credit risk, the management of the Consolidated Company has delegated a team responsible for determining credit limits, credit approvals and other monitoring procedures to ensure that follow-up action is taken to recover overdue debts.

In addition, the Consolidated Company reviews the recoverable amount of each individual trade debt at the end of the reporting period to ensure that adequate allowance is made for possible irrecoverable amounts. Accordingly, the management of the Consolidated Company believes that the credit risk of the company has been significantly reduced.

The Consolidated Company recognizes loss allowance for accounts receivable based on lifetime expected credit losses. The lifetime expected credit losses are calculated using a provision matrix, which takes into account the customer's past default record and the current financial situation and industrial economic situation. As the Consolidated Company’s credit loss experience shows that there is no significant difference in the provision matrix of different customer groups, the provision matrix does not further differentiate customer groups, and only sets the expected credit loss rate based on the number of days overdue for accounts receivable.

If there is evidence that the counterparty is facing serious financial difficulties and the Consolidated Company cannot reasonably expect the recoverable amount, such as the counterparty is in liquidation, the Consolidated Company will write off the relevant accounts receivable, but will continue to pursue account recovery, and the amount recovered due to pursuit and recovery will be recognized in profit or loss.

The Consolidated Company measures the loss allowance of accounts receivable according to the provision matrix as follows:

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Dec. 31, 2023

Dec. 31, 2023
Expected credit loss rate Total amount Loss allowance (lifetime expected credit losses) Measured at amortized cost Dec. 31, 2022 Expected credit loss rate Total amount Loss allowance (lifetime expected credit losses) Measured at amortized cost	Not past due 0.05% $ 637,783 ( 287) $ 637,496 Not past due 0.05% $ 748,900 ( 360) $ 748,540	1~90 days past due 0.05%～5% $ 3,876 ( 198) $ 3,678 1~90 days past due 0.05%～5% $ 26,747 ( 1,337) $ 25,410	91~180 days past due		181~365 days past due 30%～60% $ - - $ - 181~365 days past due 30%～60% $ - - $ -	Over 365 days past due 100% $ - - $ - Over 365 days past due 100% $ 133 ( 133) $ -		Total
			5%～30% $ 62 ( 17) $ 45 91~180 days past due				(	$ 641,721 502) $ 641,219 Total
	(		(	5%～30% $ 241 72) $ 169		(	(	$ 776,021 1,902) $ 774,119

Changes in lose allowance for accounts receivable is as follows:

Opening balance Less: (Reversal of) impairment loss for the current period this year Withdrawal of bad debts that have been written off Effect of exchange rate changes Ending balance	2023 $ 1,902 ( 1,488 ) 102 ( 14) $ 502		2022
			$ 1,283 602 - 17 $ 1,902

VIII. Inventories

Inventories
Finished goods Work in process Raw material	Dec. 31, 2023 $ 304,368 247,211 113,863 $ 665,442	Dec. 31, 2022 $ 338,543 223,894 142,710 $ 705,147
			$ 338,543 223,894 142,710 $ 705,147

The cost of sales related to inventory in 2023 and 2022 was NTD1,682,452 thousand and NTD1,750,669 thousand, respectively.

The cost of sales in 2023 and 2022 included inventory depreciation and loss on obsolete and slow-moving of NTD17,273 thousand and NTD90,319 thousand, respectively.

IX. Subsidiaries

Subsidiaries included in the consolidated financial statements

The subsidiaries included in the consolidated financial statements are as follows:

Investor The Company	Subsidiary Kwok Hing (China) Development Limited (Kwok Hing (China))	Nature of business Investment holding	Shareholding percentage Dec. 31, 2023 Dec. 31, 2022 100% 100%	Description
			Dec. 31, 2023 100%
				1.

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Investor Kwok Hing (China) The Company The Company The Company	Subsidiary	Nature ofbusiness Manufacture and sale of gears Sale of gears Manufacture and sale of gears Manufacture and sale of gears	Shareholding percentage Dec. 31, 2023 Dec. 31, 2022 100% 100% 100% 100% 100% 100% 100% 100%	Description
			Dec. 31, 2023 100% 100% 100% 100%
	Zhuhai Khgears Limited (Zhuhai Khgears) Forcefive Limited (FFL) Khgears Limited (Khgears Taiwan) Khgears Vietnam Co., Ltd. (Khgears Vietnam)			2. 3. 4. 5.

The subsidiaries listed above have been incorporated into the Company's 2023 and 2022 consolidated financial statements.

1. Kwok Hing (China) was registered and established in Hong Kong on May 25, 2001. It is mainly an investment holding company. The Company obtained 100% equity of Kwok Hing (China) on Sep. 8, 2014.

2. Zhuhai Khgears was registered and established in the People's Republic of China on Jan. 16, 2003. It primarily engages in the manufacturing and sales of gears and gearboxes. Zhuhai Khgears was invested and established by Kwok Hing (China). In December 2023, Kwok Hing (China) increased its capital to Zhuhai Khgears by US$1,500 thousand.

3. FFL was registered and established in Samoa on Apr. 24, 2013. It primarily engages in the sales of gears and gearboxes. The Company obtained 100% equity of FFL on Jul. 1, 2014. In addition, FFL established the FFL Taiwan Branch in the Republic of China on Sep. 17, 2019, mainly engaged in the sales of gears and gearboxes.

4. In August 2019, Khgears Taiwan was established in the Republic of China, primarily engaged in the sales, manufacturing, and research and development of gears and gearboxes. In addition, the Company increased its capital in Khgears Taiwan by NTD30,000 thousand in December 2022.

5. Khgears Vietnam completed its establishment registration in May 2020. It primarily engages in the manufacturing and sales of gears and gearboxes. In addition, the Company increased its capital in Khgears Vietnam by a total of US$5,000 thousand in April and May 2022.

X. Property, plant and equipment

Cost Balance as of Jan. 1, 2023 Enhancements Disposals Reclassification Effect of exchange rate changes		Buildings	Machinery equipment	Transportation equipment	Transportation equipment	Office equipment	Other fixed assets	Construction inprogress	Total
		$ 205,665 22,756 - 63,357 ( 6,649)	$ 1,340,703 88,814 ( 9,001 ) - ( 32,327)	(	$ 23,163 - - - 379)	$ 90,423 11,776 ( 2,217 ) - ( 1,828)	$ 38,564 2,133 ( 1,088 ) - ( 1,338)	$ 61,977 1,736 - ( 63,357 ) ( 178)	$ 1,760,495 127,215 ( 12,306 ) - ( 42,699)

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Balance as of Dec. 31, 2023 Accumulated depreciation Balance as of Jan. 1, 2023 Depreciation expense Disposals Effect of exchange rate changes Balance as of Dec. 31, 2023 Net amount as of Dec. 31, 2023 Cost Balance as of Jan. 1, 2022 Enhancements Disposals Effect of exchange rate changes Balance as of Dec. 31, 2022 Accumulated depreciation Balance as of Jan. 1, 2022 Depreciation expense Disposals Effect of exchange rate changes Balance as of Dec. 31, 2022 Net amount as of Dec. 31, 2022	285,129 1,388,189 77,380 568,619 12,112 119,226 - ( 7,079 ) ( 1,678) ( 12,911) 87,814 667,855 $ 197,315 $ 720,334 $ 186,444 $ 1,147,453 12,190 176,544 - ( 9,371 ) 7,031 26,077 205,665 1,340,703 66,470 455,850 9,929 112,868 - ( 6,827 ) 981 6,728 77,380 568,619 $ 128,285 $ 772,084	22,784 98,154 38,271 21,101 63,602 6,099 730 10,844 7,039 - ( 1,864 ) ( 1,088 ) ( 352) ( 1,308) ( 344) 21,479 71,274 11,706 $ 1,305 $ 26,880 $ 26,565 $ 22,580 $ 74,645 $ 3,772 - 15,645 33,949 - ( 1,006 ) - 583 1,139 843 23,163 90,423 38,564 19,092 51,807 1,220 1,482 11,746 4,812 - ( 687 ) - 527 736 67 21,101 63,602 6,099 $ 2,062 $ 26,821 $ 32,465	178 1,832,705 - 736,801 - 149,951 - ( 10,031 ) - ( 16,593) - 860,128 $ 178 $ 972,577 $ 50,091 $ 1,484,985 11,183 249,511 - ( 10,377 ) 703 36,376 61,977 1,760,495 - 594,439 - 140,837 - ( 7,514 ) - 9,039 - 736,801 $ 61,977 $ 1,023,694

Depreciation expense is accrued on a straight-line basis for the following useful life:

Depreciation expense is accrued on	a straight-line basis for
Buildings	5 to 20 years
Machinery equipment	2 to 10 years
Transportation equipment	4 years
Office equipment	2 to 10 years
Other	3 to 10 years

The construction in progress of the Consolidated Company mainly represents the capital expenditure for the configuration of production lines by Zhuhai Khgears; the other part of prepaid equipment mainly represents the capital expenditure prepaid by Khgears Vietnam for production equipment, which will be transferred to property, plant, and equipment after completion and acceptance.

Since there is no sign of impairment in 2023 and 2022, the Consolidated Company has not assessed impairment.

Please refer to Note XXVI for the Consolidated Company's property, plant, and equipment as pledges for borrowing from banks.

XI. Intangible assets

Intangible assets
Cost Opening balance Additions Effect of exchange rate changes Ending balance Accumulated amortization	2023 Computer software $ 17,212 - ( 311) 16,901	2022
		Computer software
	(		$ 12,545 4,496 171 17,212

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Opening balance Amortization expense Effect of exchange rate changes ( Ending balance Ending net amount	9,758 2,735 219) 12,274 $ 4,627	6,960 2,705 93 9,758 $ 7,454

Computer software are amortized on a straight-line basis over a useful life of 2 to 10

years.

XII. Leasing agreement

(I) Right-of-use assets

Right-of-use assets
Carrying amount of right-of-use assets Land Building Addition of right-of-use assets Depreciation expense on right-of-use assets Land Building Lease liabilities Carrying amounts of lease liabilities Current Non-current	Dec. 31, 2023 $ 59,636 5,740 $ 65,376 2023 $ - $ 1,802 1,365 $ 3,167 Dec. 31, 2023 $ 13,349 $ 4,207	Dec. 31, 2022
			$ 63,727 7,111 $ 70,838 2022
		$ 1,800 $ 1,769 1,016 $ 2,785 Dec. 31, 2022
			$ 13,822 $ 5,567

(II) Lease liabilities

As of Dec. 31, 2023 and 2022, the discount interest rates for the above lease liabilities were 1.15% to 2%.

(III) Important lease activities and terms

Zhuhai Khgears acquired land use rights in Mainland China at an original cost of RMB1,962 thousand. The use rights are valid until August 2053.

In addition, Khgears Vietnam signed a contract in August 2020 and is expected to acquire land use rights in Vietnam for VND48,457,787 thousand. The use rights are valid until October 2058, but as of Dec. 31, 2023, there was still a

• 32 -

balance of VND. 9,691,557 thousand (approximately NTD11,994 thousand, recognized as lease liabilities) has not yet been paid, and the land use right certificate has not yet been obtained.

(IV) Other lease information

Other lease information
Expense on short-term lease Total cash outflow from lease		2023 $ 2,429 $ 3,832)		2022
	(		(	$ 5,811 $ 6,914)

The Consolidated Company has chosen to apply the recognition exemption to building leases that qualify as short-term leases and will not recognize the related right-of-use assets and lease liabilities.

XIII. Other current assets

Other current assets
Prepayments and expenses Input VAT	Dec. 31, 2023 $ 43,702 80,361 $ 124,063	Dec. 31, 2022
			$ 41,637 44,482 $ 86,119

XIV. Borrowings

(I) Short-term borrowings

Short-term borrowings
Unsecured borrowings Bank borrowings	Dec. 31, 2023 $ 61,294	Dec. 31, 2022
			$ 245,600

The interest rates of short-term borrowings were 6.51% and 5.13%-6.05% as of Dec. 31, 2023 and 2022, respectively.

(II) Long-term borrowings

Long-term borrowings
Unsecured borrowings Bank borrowings Less: the part recognized due within 1 year Long-term borrowings		2023 $ 22,985 15,323) $ 7,662		2022
	(		(	$ 38,375 15,350) $ 23,025

The Consolidated Company obtained a bank borrowing of US$1,500 thousand in May 2022. The borrowing interest rate is a flexible interest rate of 6.64%, with monthly interest payments and quarterly repayments in three years.

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XV. Other payables and other current liabilities

Other payables Social insurance premium payable Payable for salaries or bonuses Payable for employees remuneration and directors remuneration Housing provident fund payable Payable for equipment Other Other current liabilities Refund liability Other	Dec. 31, 2023 $ 66,264 53,567 37,299 31,491 7,818 57,271 $ 253,710 $ 165,763 10,727 $ 176,490	Dec. 31, 2022	Dec. 31, 2022
			$ 53,026 57,130 47,719 27,419 4,334 42,580 $ 232,208 $ 168,638 12,179 $ 180,817

XVI. Retirement benefit plans

Determined appropriation plan

The employees of the subsidiaries of the Consolidated Company in Mainland China are enrolled in the pension system operated by the local government. According to the regulations of the government where the subsidiary Zhuhai Khgears is located, it should

allocate a certain proportion of pension insurance premiums to relevant government

departments based on local standard wages. The Consolidated Company’s obligation to this government-operated pension system is only to contribute the specified amount.

The employees of the Consolidated Company's subsidiaries in Vietnam are allocated

according to a certain percentage of salary under the provisions of government laws.

The Consolidated Company’s obligation to this government-operated pension system is only to contribute the specified amount.

The Consolidated Company adopted a pension system under the Labor Pension Act (LPA), which is a state-managed defined contribution plan applied to the Khgears Taiwan and the FFL Taiwan Branch. This system entails monthly contributions to employees’ individual pension accounts at 6% of monthly salaries and wages.

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XVII. Equity

(I) Share capital

Share capital
Number of shares authorized (in thousands) Authorized capital amount Issued and paid shares (in thousands) Issued capital	Dec. 31, 2023 200,000 $ 2,000,000 53,109 $ 531,090	Dec. 31, 2022
			200,000 $ 2,000,000 53,335 $ 533,350

The Company's shareholders meeting resolved to issue restricted stock awards on Jun. 23, 2020, and issued 800,000 shares with Dec. 30, 2020 as the base date. In 2022 and 2023, the issued restricted stock for employees will be recovered free of charge by resolution of the Board of Directors. The restricted stock awards were 45,000 shares and 226,000 shares, respectively. Please refer to Note

XXI.

(II) Capital surplus

Capital surplus
May be used to offset a deficit, distributed as cash dividends or transferred to capital(1) Share premium Share issuance premium - employee stock options Not for any purpose Restricted stock for employees	Dec. 31, 2023 $ 1,116,735 16,651 31,456 $ 1,164,842	Dec. 31, 2022
			$ 1,116,735 16,651 45,423 $ 1,178,809

1. Such capital surplus can be used to offset a deficit, and can be used to distribute cash or transfer to capital when the Company has no deficit. However, the appropriation to the share capital is limited to a certain ratio of the paid-in share capital each year.

2. (III) Retained earning and dividend policy

The Company is currently in the growth stage. Its dividends/dividends can be distributed to the shareholders in the form of cash or/and shares. The distribution of its dividends/dividends should take into consideration the capital expenditures, future business expansion plans, financial planning, and other projects required for sustainable development.

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If the Company has earnings at the end of a fiscal year, it may distribute the earnings under the earnings distribution plan formulated by the Board of Directors and approved by the shareholders' meeting. The Board of Directors should formulate an earnings distribution plan in the following manner: (1) all relevant taxes shall be paid under the law; (2) the annual net profit shall first be used to offset accumulated of previous years; (3) the legal reserve shall be appropriated; (4) the special reserve shall be appropriated (if any), the remaining amount (including the reversal of special reserve) can be determined by an ordinary resolution at the regular shareholders' meetings, not less than 10% of the amount of the distributable earnings, plus the total amount approved by the regular shareholders' meetings. All or part of the unappropriated earnings of the previous years (including adjustments to the amount of unappropriated earnings) as determined by the resolution shall be paid to shareholders in the form of dividends/bonuses according to their shareholding ratios. Among these, the amount of cash dividends/bonuses shall not be less than 10% of total dividends/bonuses paid this time.

Please refer to Note XVIII (VI) Employee Remuneration and Director Remuneration for the employees and directors remuneration policy stipulated in the Articles of Association of the Company.

An appropriation of earnings to a legal reserve shall be made until the legal reserve equals the Company’s paid-in capital. The legal reserve can be used to make up for losses.

The Company held regular shareholders' meetings on May 22, 2023 and May 20, 2022, and approved the resolution of the 2022 and 2021 earnings distribution proposals as follows:

proposals as follows:
Legal reserve (Reversal) Provision of special reserve Cash dividends Cash dividend per share (NTD)		2022 $ 35,104 $ 43,729) $ 190,364 $ 3.6		2021
	(			$ 39,369 $ 2,095 $ 237,191 $ 4.5

On Mar. 12, 2024, the Company's Board of Directors proposed the 2023 earnings distribution as follows:

• 36 -

Legal reserve Special reserve reversed Cash dividends Cash dividend per share (NTD)		2023
		$ 27,390 $ 55,399 $ 160,326 $ 3.1

The earnings distribution proposal for 2023 is yet to be resolved at the regular shareholders' meeting expected to be held on May 29, 2024.

(IV) Treasury shares (Year 2022: None)

Reason for withdrawal Quantity as of Jan. 1, 2023 Add this year Quantity as of Dec. 31, 2023	Transfer of shares to employees (thousand shares) - 172 172	Total (thousand shares)	Total (thousand shares)
			- 172 172

Under the Securities and Exchange Act, the Company shall neither pledge treasury shares nor exercise shareholders’ rights on these shares, such as rights to dividends and to vote.

XVIII. Net income

(I) Other income

Other income
Revenue of molds Government subsidy (Note XXII) Revenue of others		2023 $ 35,074 36,680 6,691 $ 78,445		2022
				$ 24,790 15,501 10,630 $ 50,921

(II) Other gains and losses

Other gains and losses
Gain on foreign exchange Gains on disposal and scrapping of property, plant and equipment Other		2023 $ 2,049 2,707 6,297) $ 1,541)		2022
	( (		(	$ 89,639 625 2,937) $ 87,327

• 37 -

(III) Finance costs

(III)	Finance costs
				2023		2022
	Interest on bank
	borrowings		$	15,670	$	7,124
	Interest expense on lease
	liabilities			58		66
			$	15,728	$	7,190
(IV)	Depreciation and amortization
				2023		2022
	Property, plant and
	equipment		$	149,951	$	140,837
	Right-of-use assets			3,167		2,785
	Intangible assets			2,735		2,705
	Total		$	155,853	$	146,327
	Depreciation expenses
	summarized by function
	Operating costs		$	110,158	$	99,332
	Operating expenses			42,960		44,290
			$	153,118	$	143,622
	Amortization expenses
	summarized by function
	Operating expenses		$	2,735	$	2,705
(V)	Employee benefits expenses
				2023		2022
	Post-employment benefits
	(Note XVI)
	Determined
	appropriation plan		$	31,571	$	31,756
	Share-based payment
	Equity-settled (Note
	XXI)	(		7,194 )		15,530
	Salary expenses			341,451		391,132
	Other employment
	expenses			114,848		124,057
	Total employee benefits
	expenses		$	480,676	$	562,475
	Summarized by function
	Operating costs		$	259,047	$	301,402
	Operating expenses			221,629		261,073
			$	480,676	$	562,475

• 38 -

(VI) Remuneration to the employees and directors

According to the Articles of Association, if the Company makes a profit in the current year, it shall allocate no less than 5% and no more than 5% remuneration for the employees and directors, respectively. They are based on the pre-tax net profit for the year before deducting employee and director remuneration distributions and after making up for losses. The remuneration for the employees and directors for 2023 and 2022 approved by the Board of Directors is as follows:

Estimated ratio

Estimated ratio
Remuneration to employees Remuneration to directors Amount Remuneration to employees Remuneration to directors		2023 8% 4% 2023 Cash $ 24,511 $ 12,256		2022
				8% 4% 2022
				Cash
				$ 31,813 $ 15,906

If there is still a change in the amount after the annual consolidated financial statement is approved, it will be treated as a change in accounting estimates and adjusted and recorded in the following year.

There is no difference between the actual distributed amounts of employee remuneration and director remuneration in 2022 and 2021 and the recognized amounts in the consolidated financial statement for 2022 and 2021.

For information on employee remuneration and director remuneration as approved by the Board of Directors, please visit the “Market Observation Post System” of the Taiwan Stock Exchange.

XIX. Income tax

(I) Main items of income tax expense recognized in profit or loss:

Current income tax Current tax expenses recognized for the current period Deferred income tax	2023 $ 46,872	2022
		$ 38,335

• 39 -

Current tax expenses recognized for the current period Income tax expense recognized in profit or loss	37,613 $ 84,485	7,819 $ 46,154

A reconciliation of accounting profit and income tax expenses is as follows:

Profit before tax Income tax calculated at the statutory rate Items that should be adjusted when determining taxable profits Income tax expense recognized in profit or loss		2023 $ 358,384 $ 48,493 35,992 $ 84,485		2022
			(	$ 397,193 $ 46,951 797) $ 46,154

The Company is registered in the British Cayman Islands and its profits are tax-free under local laws.

Kwok Hing (China) is registered in the Hong Kong Special Administrative Region of the People's Republic of China. According to the provisions of the "Hong Kong Inland Revenue Ordinance", it is only taxed on profits derived from sources within Hong Kong.

The Company's subsidiary FFL is established in a third place that is tax-free. Under local laws and regulations, all income tax for overseas companies is exempt from tax, so there is no profit-seeking enterprise income tax burden.

The applicable tax rate for the Company's subsidiary Khgears Taiwan located in the Republic of China and FFL's branch located in the Republic of China is 20%.

According to the "Enterprise Income Tax Law of the People's Republic of China", the subsidiary Zhuhai Khgears's original applicable tax rate is 25%. In addition, because Zhuhai Khgears has obtained the qualification of a high-tech enterprise, the applicable tax rate is 15%.

The applicable tax rate for Khgears Vietnam, the Company's subsidiary in Vietnam, is 20%.

• 40 -

(II) Current tax liabilities

Current tax liabilities
Current tax assets Tax refund receivable Current tax liabilities Income tax payable	Dec. 31, 2023 $ 2,452 $ 5,853	Dec. 31, 2022
			$ - $ 10,271

(III) Deferred income tax assets and liabilities

Changes in deferred income tax assets and liabilities are as follows: 2023

2023
Deferred tax assets Impact of deferred income tax on government subsidy income Deferred tax liabilities Impact of the deferred income tax on the earnings of subsidiaries Other 2022 Deferred tax assets Impact of deferred income tax on government subsidy income Deferred tax liabilities Impact of the deferred income tax on the earnings of subsidiaries Other		Jan. 1, 2023 $ 9,453 Jan. 1, 2023 $ 12,868 794 $ 13,662 Jan. 1, 2022 $ 10,780 Jan. 1, 2022 $ 20,280 782 $ 21,062	Recognized in profit or loss ($ 3,210) Recognized in profit or loss $ 34,403 - $ 34,403 Recognized in profit or loss ($ 1,490) Recognized in profit or loss ( $ 9,309 ) - ($ 9,309)	Effect of exchange rate changes ($ 124) Effect of exchange rate changes ( $ 557 ) ( 15) ($ 572) Effect of exchange rate changes $ 163 Effect of exchange rate changes $ 1,897 12 $ 1,909	Dec. 31, 2023
					$ 6,119 Dec. 31, 2023
					$ 46,714 779 $ 47,493 Dec. 31, 2022
					$ 9,453 Dec. 31, 2022
			( (			$ 12,868 794 $ 13,662

• 41 -

(IV) Income tax assessment

The reporting proposals of Khgears Taiwan and FFL Taiwan Branch before 2022 have been approved by the tax collection authority.

XX. Earnings per share

Earnings per share
Earnings per share - basic Earnings per share - diluted		2023 $ 5.18 $ 5.11	Unit: NTD per share 2022 $ 6.66 $ 6.53

Earnings and the weighted average number of common shares used to calculate earnings per share:

Net income

Net income
Net profit attributable to owners of the Company Quantity Weighted average number of common shares used to calculate basic earnings per share Effect of potential dilutive common shares: Remuneration to employees Restricted stock awards Weighted average number of common shares used to calculate diluted earnings per share		2023 $ 273,899 Unit: 2023 52,874 390 386 53,650		2022 $ 351,039 thousand shares 2022 52,710 547 533 53,790

If the Consolidated Company can choose to pay employee remuneration in shares or cash, when calculating diluted earnings per share, assumed that employee remuneration

will be issued in shares, the weighted average number of outstanding shares shall be

included in the potentially dilutive common shares to calculate the diluted EPS. When

calculating the diluted EPS before deciding on the number of shares for employee remuneration in the following year, the potentially dilutive common shares will also be considered. In addition, restricted stock awards are based on the assumption that the restrictions have been lifted this year.

• 42 -

XXI. Share-based payment agreement

• (I) Restricted stock awards

On Jun. 23, 2020, the Company's regular shareholders' meeting resolved to issue 800,000 restricted stock awards, which became effective after reporting to the Financial Supervisory Commission. It also issued 800,000 shares free of charge on Dec. 30, 2020. The restricted stock awards did not meet the vested conditions have voting rights, but not allowed to participate in the Company's allotment, dividend distribution, and cash capital increase shares.

After employees are allocated or subscribe for new shares but before the vested conditions are met, their rights are restricted as follows:

1. Employees may not sell, pledge, transfer, gift to others, set up or otherwise dispose of restricted stock awards.

2. Restricted stock awards are not allowed to participate in allotments and dividend distribution.

3. Restricted stock awards have no voting rights.

If an employee fails to meet the vested conditions, the Company has the right to take back the allocated restricted stock awards for free and cancel them.

Relevant information on restricted stock awards is as follows:

Restricted stock awards Circulation at the beginning of the period Expired this year Restrictions lifted this year Circulation at the end of the period	2023 Quantity (in thousands) 456 ( 226 ) ( 140) 90	2022
		Quantity (in thousands)
		671 ( 45 ) ( 170) 456

Information related to the restricted stock awards issued by the Company in 2020 is as follows:

Grant date Dec. 30, 2020	Fair value per share at the grant date (NTD) 71.8	Grant quantity (in thousand shares) 800	Vested period
			2 to 4 years

The cost of restricted stock awards remuneration recognized (reversed) in 2023 and 2022 was NTD7,194 thousand to be reversed and NTD15,530 thousand to be recognized, respectively.

• 43 -

XXII. Government subsidy

Zhuhai Khgears received the first phase of project funds of NTD26,490 thousand (approximately RMB 6,000 thousand) in December 2019 for its compliance with the Zhuhai City Innovation and Entrepreneurship Team Project Plan. However, during the review period for its project plan from Dec. 1, 2019 to Dec. 31, 2022, a portion of the project was reviewed and not approved, resulting in the local government reclaiming some of the funds. A total of NTD4,958 thousand (approximately RMB1,128 thousand) was withdrawn from the project funds in August and October 2023. The project was reviewed and concluded in 2023, and as a result, the remaining funds of NTD21,415 thousand (approximately RMB4,872 thousand) were recognized as subsidy income for the year. In July 2022, Zhuhai Khgears received the first phase of project funds totaling NTD9,183 thousand (approximately RMB2,080 thousand) due to its compliance with the 2020 Provincial Key R&D Program of the Zhuhai Municipal Science and Technology Innovation Bureau. However, the review period for its project plan has to be reviewed from Jan. 1, 2020 to Dec. 31, 2022. If the review fails, the funds will be withdrawn, and deferred income will be recognized when the payment is obtained. Subsidy income will be recognized after the subsequent review results.

As of Dec. 31, 2023, Zhuhai Khgears has received a total of NTD73,566 thousand (approximately RMB17,002 thousand) in local government subsidy funds. This fund is used to subsidize purchased equipment and encourage research and development. When the funds are received, deferred income is recognized, and subsidy income is amortized and recognized based on the useful life of the relevant machinery and equipment.

The deferred income amounts of Zhuhai Khgears that have not been amortized as of Dec. 31, 2023 and Dec. 31, 2022 were NTD44,916 thousand (approximately RMB10,380 thousand) and NTD72,191 thousand (approximately RMB16,377 thousand), respectively.

XXIII. Capital risk management

The Consolidated Company conducts capital management to ensure that companies can continue to operate, and maximize shareholder returns with the best mix of debt and equity. The overall strategy of the Consolidated Company remains unchanged from previous years.

The main management of the Consolidated Company regularly re-examines the capital structure of the Company and balances its overall capital structure by paying dividends, issuing new shares, borrowing, or repaying borrowings.

• 44 -

XXIV. Financial instrument

• (I) Fair value information - financial instruments not measured at fair value The management of the Consolidated Company considers that the carrying amounts of financial assets and financial liabilities not measured at fair value both approximate their fair values.

• (II) Types of financial instruments

Types of financial instruments
Financial asset Financial assets measured at amortized cost (Note 1) Financial liabilities Measured at amortized cost (Note 2)	Dec. 31, 2023 $ 1,599,465 594,036	Dec. 31, 2022
		$ 1,641,130 746,309

• Note 1: The balance includes cash and cash equivalents, financial assets measured at amortized cost, notes receivable, accounts receivable, other receivables and deposits, and other financial assets measured at amortized cost.

• Note 2: The balance includes financial liabilities measured at amortized cost such as borrowings, accounts payable, other payables, and deposits received.

• (III) Financial risk management objectives and policies

The main financial instruments of the Consolidated Company include receivables, short-term borrowings, accounts payable, other payables, and lease liabilities. Risks related to financial instruments include market risk (including exchange rate risk and interest rate risk), credit risk and liquidity risk. The management of the Consolidated Company analyzes each risk exposure situation according to the degree and breadth of the risk, and regularly supervises and manages it to ensure timely and take appropriate measures effectively.

1. Market risk

The main marketing risks borne by the Consolidated Company’s operating activities are the foreign currency exchange rate risk (see (1) below) and the interest rate risk (see (2) below).

• (1) Foreign currency risk

• 45 -

The Consolidated Company is engaged in foreign currencydenominated sales and purchase transactions, thus causing the Consolidated Company to be exposed to foreign currency risk. For the book values of monetary assets and liabilities of the Consolidated Company denominated in non-functional currencies on the balance sheet date (including those monetary items denominated in non-functional currencies that have been eliminated in the consolidated financial statements), please refer to Note XXVII.

Sensitivity analysis

The Consolidated Company is mainly affected by the fluctuation of the US dollar exchange rate. When each functional currency appreciates/depreciates by 3% against the US dollar, the Consolidated Company's pre-tax net profit in 2023 and 2022 will decrease/increase by NTD18,629 thousand and NTD19,866 thousand, respectively. Since the aforementioned sensitivity analysis is calculated based on the foreign currency risk exposure amount on the balance sheet date, management believes that the sensitivity cannot reflect the mid-year risk exposure situation.

(2)

Interest rate risk

Since the Consolidated Company holds financial assets with floating interest rates, it has cash flow exposure to changes in interest rates. The management of the Consolidated Company regularly monitors changes in market interest rates and adopts appropriate risk control mechanisms to respond to risks arising from changes in market interest rates.

The book values of financial assets and financial liabilities of the Consolidated Company subject to interest rate risk exposure on the balance sheet date are as follows:

Fair value interest rate risk - Financial assets - Financial liabilities	Dec. 31, 2023 $ 284,025 $ 17,556	Dec. 31, 2022	Dec. 31, 2022
			$ 106,576 $ 19,389

• 46 -

Cash flow interest rate risk - Financial assets - Financial liabilities	$ 597,381 $ 84,279	$ 692,049 $ 283,975

Sensitivity analysis

The calculation of the Consolidated Company is based on the financial assets and financial liabilities with cash flow interest rate risk on the balance sheet date. The sensitivity analysis is based on the interest rate exposure at the balance sheet date. The analysis for floating rate assets/ liabilities assumes that the amounts of the assets/ liabilities outstanding at the balance sheet date were all outstanding during the reporting period. The rate of change used in reporting interest rates within the Group to key management is a 0.5% increase or decrease in interest rates, which represents management’s assessment of the reasonably possible range of changes in interest rates.

If interest rates increased/decreased by 0.5% when all other variables are held constant, the Consolidated Company’s net income before tax in 2023 and 2022 will increase/decrease by NTD2,566 thousand and NTD2,040 thousand, respectively.

2. Credit risk

Credit risk refers to the risk that the counterparty defaults on its contractual obligations resulting in financial losses. As of the balance sheet date, the maximum credit risk exposure of the Consolidated Company is from the carrying amount of financial assets recognized in the consolidated balance sheet.

The policy adopted by the Consolidated Company is to only conduct transactions with credit-worthy parties in order to reduce the risk of financial losses and to continuously monitor credit risks and the credit status of the counterparty.

The credit risk of the Consolidated Company is concentrated in the top one customer. As of Dec. 31, 2023 and 2022, the ratio for the total amount of accounts receivable and total contract assets that came from the aforementioned customers were 61% and 65%, respectively. The

• 47 -

Consolidated Company assesses that the past credit status and account collection status of the aforementioned customers are good, and therefore assesses that there is no significant credit risk.

1. Liquidity risk

The Consolidated Company manages and maintains a sufficient position of cash to support the Group’s operations and mitigate the impact of fluctuations in cash flow.

• (1) Liquidity and interest rate risk for non-derivative financial liabilities The analysis of the remaining contractual maturity of non-derivative financial liabilities is based on the earliest date on which the Consolidated Company may be required to repay, and is prepared based on the undiscounted cash flows of financial liabilities (including principal and estimated interest). Therefore, the bank borrowings for which the Consolidated Company may be required to repay immediately are within the earliest period in the table below, without considering the probability of the bank immediately executing the right; the maturity analysis of other non-derivative financial liabilities is prepared based on the agreed repayment dates.

Dec. 31, 2023

Non-derivative financial liabilities Non-interest bearing liabilities Variable interest rate liabilities Lease liabilities	Payment at sight or less than 1 month $ 509,669 61,452 11,995 $ 583,116		1 to 3 months $ - 4,046 688 $ 4,734		3 to 12 months $ - 12,138 666 $ 12,804		Over 1 year
							$ - 7,799 4,207 $ 12,006

Dec. 31, 2022

Non-derivative financial liabilities Non-interest bearing liabilities Variable interest rate liabilities Lease liabilities	Payment at sight or less than 1 month $ 462,245 93,140 12,474 $ 567,859		1 to 3 months $ - 159,031 702 $ 159,733		3 to 12 months $ - 12,792 702 $ 13,494		Over 1 year
							$ - 24,083 5,718 $ 29,801

• 48 -

(2) Financing quota

Financing quota
Unsecured borrowings quota - Amount used - Amount unused Secured borrowings quota - Amount unused	Dec. 31, 2023 $ 84,279 1,001,845 $ 1,086,124 $ 194,715	Dec. 31, 2022
			$ 283,975 747,808 $ 1,031,783 $ 198,360

XXV. Related party transaction

Transactions, account balances, income and expenses between the Company and its subsidiaries (which are related parties of the Company) are all eliminated upon consolidation, thus not disclosed in this note. Unless disclosed in other notes, the transactions between the Consolidated Company and other related parties are as follows.

Remuneration for key managerial officers

Short-term employee benefits Share-based payment		2023 $ 30,567 324 $ 30,891		2022
				$ 31,090 960 $ 32,050

The remuneration of directors and other key managerial officers is determined by the Remuneration Committee in accordance with individual performance and market trends.

XXVI. Pledged assets

The following assets have been provided as collateral for applications for borrowing lines and performance guarantees from banks:

Buildings Right-of-use assets Time deposits (recognized as financial assets measured at amortized cost)	Dec. 31, 2023 $ 40,949 5,037 974 $ 46,960	Dec. 31, 2022	Dec. 31, 2022
			$ 44,923 5,304 1,013 $ 51,240

The interest rate range for time deposits (recognized as financial assets measured at amortized cost) on the balance sheet date is as follows:

Fixed deposit	Dec. 31, 2023 7.6%	Dec. 31, 2022
		5.5%

• 49 -

XXVII. Information on significant foreign currency assets and liabilities

The following information is expressed in foreign currencies other than the functional currencies of the Consolidated Companies. The exchange rates disclosed refer to the rates at which these foreign currencies are converted to functional currencies. Significant foreign currency assets and liabilities are as follows:

Unit: Except for the exchange rate, the remainder is foreign currency/

In Thousands of New Taiwan Dollars

Dec. 31, 2023

Dec. 31, 2023
Assets in foreign currency Monetary items USD USD USD EUR EUR Liabilities in foreign currency Monetary items USD USD USD Dec. 31, 2022 Assets in foreign currency Monetary items USD USD USD USD JPY HKD EUR EUR Liabilities in foreign currency Monetary items USD USD USD JPY EUR	Foreign currency $ 53,262 4,048 412 435 350 19,796 16,781 1,211 Foreign currency $ 54,002 3,337 516 2,672 4,555 94 420 196 19,903 15,294 1,276 22,146 107	Exchange rate 7.0807 (USD: RMB) 24,445 (USD: VND) 30.6080 (USD: NTD) 7.8592 (EUR: RMB) 33.9600 (EUR: NTD) 7.0827 (USD: RMB) 24,445 (USD: VND) 30.6080 (USD: NTD) Exchange rate 6.9646 (USD: RMB) 23,845 (USD: VND) 30.7100 (USD: NTD) 7.7967 (USD: HKD) 0.0554 (JPY: RMB) 0.8933 (HKD : RMB) 7.4229 (EUR: RMB) 32.7201 (EUR: NTD) 6.9646 (USD: RMB) 23,845 (USD: VND) 30.7100 (USD: NTD) 0.0554 (JPY: RMB) 32.7201 (EUR: NTD)	Functional currency $ 379,107 98,956,748 12,596 3,413 11,866 140,203 410,195,931 37,070 Functional currency $ 376,106 79,577,025 15,809 20,834 239 84 3,117 6,393 138,615 364,683,937 39,174 1,160 3,507	NTD
				$ 1,640,396 124,298 12,596 14,767 11,866 606,662 515,241 37,070 NTD
				$ 1,657,874 103,617 15,809 82,061 1,051 368 13,740 6,393 611,015 473,611 39,174 5,111 3,507

• 50 -

The Consolidated Company’s Gain on foreign exchange gain and loss (including realized and unrealized) in 2023 and 2022 were NTD2,049 thousand and NTD89,639 thousand, respectively. Due to the wide variety of foreign currency transactions, it is not possible to disclose exchange gains and losses and significant impact on foreign currency.

XXVIII. Notes to disclosures

• (I) Information on significant transactions:

• Lending funds to others: Table 1.

• Providing endorsements or guarantees for others: Table 2.

• Holding of securities at the end of the period: None.

• Aggregate purchases or sales of the same securities reaching NT$300 million or 20% of paid-in capital or more: None.

• Acquisition of real estate reaching NT$300 million or 20% of paid-in capital or more: None.

• Disposal of real estate reaching NT$300 million or 20% of paid-in capital or more: None.

• The purchase and sale of goods with related parties reaching NT$100 million or 20% of paid-in capital or more: Table 3.

• Accounts receivable from related parties reaching NT$100 million or 20% of paid-in capital or more: Table 4.

• Trading in derivative instruments: None.

• Others: The relationship and circumstances and amounts of important transactions between the parent and subsidiary companies and between each subsidiary: Table 5.

• (II) Information on investees: Table 6.

• (III) Information of investment in Mainland China

• Name of the investee company in Mainland China, principal business activities, paid-in capital, method of investment, inward and outward remittance of funds, shareholding ratio, profit or loss this year, and recognized investment gain or loss, carrying amount of the investment at the end of the period, repatriated investment gains, and a limit on the amount of investment in Mainland China: See Table 7.

• 51 -

• Any of the following significant transactions with investees in Mainland China, either directly or indirectly through a third area, and their prices, payment terms, and unrealized gains or losses:

  • (1) The amount and percentage of purchases and the balance and percentage of the related payables at the end of the period: Table 3.

  • (2) The amount and percentage of sales and the balance and percentage of the related receivables at the end of the period: None.

  • (3) The amount of property transactions and the amount of the resultant gains or losses: None.

  • (4) The balance of negotiable instrument endorsements or guarantees or pledges of collateral at the end of the period and the purposes: None.

  • (5) The highest balance, the end of period balance, the interest rate range, and total current period interest with respect to financing of funds: None.

  • (6) Other transactions that have a material effect on the profit or loss for the period or on the financial position, such as the rendering or receiving of services: Tables 3, 4 and 5.

• (IV) Information of major shareholders: the names of shareholders with a shareholding ratio of more than 5% with the amount and proportion of shares held: Table 8.

XXIX. Department information

• (I) Industry information

• In accordance with the requirements of IFRS 8 Operating Segments, the Consolidate Company only operates manufacturing and sales of gears and is a single operating segment, so there is no significant segment information to be disclosed.

• (II) Revenue from key products

The revenue analysis of the key products and services of the continuing operations of the Consolidate Company is as follows:

Gear components		2023 $ 2,348,849		2022
				$ 2,443,385

• 52 -

(III) Regional information

The revenue of the Consolidated Company from external customers by location

of operation and non-current assets by location of assets as listed below:

Non-current assets

Asia America Europe	Revenue from external customers 2023 2022 $ 2,175,962 $ 2,170,178 38,291 93,040 134,596 180,167 $ 2,348,849 $ 2,443,385	Revenue from external customers 2023 2022 $ 2,175,962 $ 2,170,178 38,291 93,040 134,596 180,167 $ 2,348,849 $ 2,443,385	Revenue from external customers 2023 2022 $ 2,175,962 $ 2,170,178 38,291 93,040 134,596 180,167 $ 2,348,849 $ 2,443,385	Dec. 31, 2023 $ 1,099,814 - - $ 1,099,814	Dec. 31, 2022	Dec. 31, 2022
		2023 $ 2,175,962 38,291 134,596 $ 2,348,849
						$ 1,204,671 - - $ 1,204,671

Non-current assets exclude financial assets classified as measured at amortized cost, deferred income tax assets, and refundable deposits paid.

(IV) Information of major customers

Customers accounted for more than 10% of the total revenue of the Consolidated Company are shown below:

Company are shown below:
Customer A		2023 $ 1,359,394		2022
				$ 1,281,073

• 53 -

KHGEARS INTERNATIONAL LIMITED AND ITS SUBSIDIARIES LENDING FUNDS TO OTHERS

FOR THE YEARS ENDED DEC. 31, 2023

Table 1

Unit: Unless otherwise noted, the currency is in thousands of New Taiwan Dollars

No. (Note 1)	Financing Company	Counterparty	Item	Related Party	Maximum Balance for the Period (Note 3)	Ending Balance (Note 3)	Amount Actually Drawn (Note 3)	Interest Rate	Nature of Financing	Business Transaction Amount	Reasons for Short-Term Financing	Allowance for Bad Debts	Collateral	Collateral	Financing Limit for Each Borrower (Note 2)	Aggregate Financing Limit (Note 2)	Remark
													Item	Value
0 0 1 1 2 2	The Company The Company FFL FFL Zhuhai Khgears Zhuhai Khgears	Khgears Taiwan Khgears Vietnam Khgears Vietnam Khgears Taiwan The Company Khgears Vietnam	Other receivables - related parties Other receivables - related parties Other receivables - related parties Other receivables - related parties Other receivables - related parties Other receivables - related parties	Yes Yes Yes Yes Yes Yes	$ 61,410 (USD2,000 thousand) 429,870 (USD14,000 thousand) 237,964 (USD7,750 thousand) 30,705 (USD1,000 thousand) 184,230 (USD6,000 thousand) 153,525 (USD5,000 thousand)	$ 30,705 (USD1,000 thousand) 429,870 (USD14,000 thousand) 122,820 (USD4,000 thousand) - (USD- thousand) 184,230 (USD6,000 thousand) 153,525 (USD5,000 thousand)	$ 19,958 (USD650 thousand) 184,230 (USD6,000 thousand) 122,820 (USD4,000 thousand) - (USD- thousand) 173,483 (USD5,650 thousand) 153,525 (USD5,000 thousand)	1.5% 1.5% 1.5% 1.5% 4.5% 4.5%	Short term financing Short term financing Short term financing Short term financing Short term financing Short term financing	$ - - - - - -	Operating capital Operating capital Operating capital Operating capital Operating capital Operating capital	$ - - - - - -	－ － － － － －	$ - - - - - -	$ 522,202 522,202 285,587 285,587 442,812 442,812	$ 1,044,404 1,044,404 285,587 285,587 885,624 885,624

Note 1: The description of the number column is as follows:

• (1) Enter 0 for the issuer.

• (2) The invested companies are sequentially numbered by company, starting from the Arabic numeral 1.

Note 2: The Company follows the procedures for lending funds to others. For companies or banks that need short-term financing, the loan limit for each borrower shall not exceed 20% of the Company's most recent net worth of financial reports that have been audited or reviewed by CPA, the total amount of

funds loaned to others shall not exceed 40%; FFL funds are loaned to the parent company or a company in which the parent company, directly and indirectly, holds 100% of the voting shares. The limit and total amount of each borrower shall not exceed 100% of the net value of FFL's most recent

financial report audited or reviewed by CPAs; Zhuhai Khgears has companies or banks that need short-term financing, and the loan limit of each borrower shall not exceed 20% of the net value of the latest financial report of Zhuhai Khgears that has been audited or reviewed by CPAs. The total amount of funds loaned to others shall not exceed the net value of Zhuhai Khgears Limited’s most recent financial report that has been audited or reviewed by CPAs. The net value of the financial report is limited to 40%. The aforementioned net value was calculated based on the net value of each company on Dec. 31, 2023.

Note 3: It was translated based on the exchange rate on Dec. 31, 2023.

• 54 -

KHGEARS INTERNATIONAL LIMITED AND ITS SUBSIDIARIES

PROVIDING ENDORSEMENTS OR GUARANTEES FOR OTHERS

FOR THE YEARS ENDED DEC. 31, 2023

Table 2

Unit: Unless otherwise noted, the currency is in thousands of New Taiwan Dollars

No.	Endorsement/ Guarantee Provider	Endorsee/Guarantee	Endorsee/Guarantee	Limit on Endorsement/ Guarantee Given on Benefit of Each Party (Note 2)	Maximum Amount Endorsed/ Guaranteed During the Period (Note 3)	Outstanding Endorsement/ Guarantee at the End of the Period (Note 3)	Amount Actually Drawn (Note 3)	Amount of Endorsement/ Guarantee Collateralized by Properties	Ratio of Accumulated Endorsement/ Guarantee to Net Equity per Latest Financial Statements (%)	Maximum Endorsement/ Guarantee Amount Allowable (Note 2)	Guarantee Provided by Parent Company	Guarantee Provided by Subsidiary	Guarantee Provided to Subsidiaries in Mainland China	Remark
		Company Name	Relationship
0 0 1	The Company The Company FFL	FFL Khgears Taiwan The Company	Subsidiary of the Company Subsidiary of the Company The Company	$ 2,611,011 2,611,011 571,174	$ 583,395 (USD19,000 thousand) 15,000 368,460 (USD12,000 thousand)	$ 583,395 (USD19,000 thousand) - 368,460 (USD12,000 thousand)	$ 583,395 (USD19,000 thousand) - 368,460 (USD12,000 thousand)	$ - - -	22.34% - 129.02%	$ 2,611,011 2,611,011 571,174	Y Y N	N N Y	N N N

Note 1: Calculated using net worth as of Dec. 31, 2023.

Note 2: The Company's endorsement guarantee for a single subsidiary that directly and indirectly holds 100% of the voting shares shall not exceed 100% of the Company's current net worth. FFL's endorsement guarantee for the Company is limited to no more than 200% of FFL's current net worth. The maximum limit of this endorsement guarantee was calculated based on the net value on Dec. 31, 2023.

Note 3: Amounts were translated based on the exchange rate on Dec. 31, 2023.

• 55 -

KHGEARS INTERNATIONAL LIMITED AND ITS SUBSIDIARIES

THE PURCHASE AND SALE OF GOODS WITH RELATED PARTIES REACHING NT$100 MILLION OR 20% OF PAID-IN CAPITAL OR MORE FOR THE YEARS ENDED DEC. 31, 2023

Table 3

Unit: Unless otherwise noted, the currency is in thousands of New Taiwan Dollars

Company Name	Counterparty	Relationship		Transaction Details	Transaction Details		Abnormal	Transaction	Notes/ Accounts Payable or Receivable	Notes/ Accounts Payable or Receivable	Remark
			Purchases/ Sales	Amount	% to Total	Payment Terms	Unit Price	Payment Terms	Ending Balance	% to Total
Zhuhai Khgears FFL Khgears Vietnam FFL	FFL Zhuhai Khgears FFL Khgears Vietnam	The same ultimate parent company The same ultimate parent company The same ultimate parent company The same ultimate parent company	Sales Purchase Sales Purchase	$ 1,091,000 ( 1,091,000 ) 274,407 ( 274,407 )	57.18% ( 79.90% ) 77.80% ( 20.10% )	150 days 150 days 150 days 150 days	No significant difference No significant difference No significant difference No significant difference	No significant difference No significant difference No significant difference No significant difference	$ 281,549 ( 281,549 ) 68,486 ( 68,486 )	55.38% ( 78.90% ) 62.57% ( 19.16% )	(Note) (Note) (Note) (Note)

Note: It has been fully written off when preparing the consolidated financial statements.

• 56 -

KHGEARS INTERNATIONAL LIMITED AND ITS SUBSIDIARIES

ACCOUNTS RECEIVABLE FROM RELATED PARTIES REACHING NT$100 MILLION OR 20% OF PAID-IN CAPITAL OR MORE

FOR THE YEARS ENDED DEC. 31, 2023

Table 4

Unit: Unless otherwise noted, the currency is in thousands of New Taiwan Dollars

Company Name	Counterparty	Relationship	Ending Balance (Note 1)	Turnover Rate	Overdue	Overdue	Amounts Received in Subsequent Period	Allowance for Bad Debts
					Amount	Action Taken
Zhuhai Khgears Zhuhai Khgears Zhuhai Khgears The Company FFL	FFL The Company Khgears Vietnam Khgears Vietnam Khgears Vietnam	Subsidiary of the Parent Company Parent Company Subsidiary of the Parent Company Subsidiary of the Parent Company Subsidiary of the Parent Company	$ 281,549 178,131 (Recognized as other receivables) 168,681 (Recognized as other receivables) 186,070 (Recognized as other receivables) 143,530 (Recognized as other receivables)	3.59 - - - -	$ - - - - -	－ － － － －	$ 151,642 - - - -	$ - - - - -

Note 1: After evaluation, no provision for losses is allocated.

Note 2: It has been fully written off when preparing the consolidated financial statements.

• 57 -

KHGEARS INTERNATIONAL LIMITED AND ITS SUBSIDIARIES

THE RELATIONSHIP AND CIRCUMSTANCES AND AMOUNTS OF IMPORTANT TRANSACTIONS BETWEEN THE PARENT AND SUBSIDIARY COMPANIES AND BETWEEN EACH SUBSIDIARY

FOR THE YEARS ENDED DEC. 31, 2023

Table 5

Unit: Unless otherwise noted, the currency is in thousands of New Taiwan Dollars

No. (Note 1)	Counterparty	Transaction Counterparty	Relationship to the Counterparty		Transaction Details	Transaction Details
				Account	Amount	Transaction Terms	% of Total Sales or Assets (Note 2)
0 0 0 0 1 1 1 1 1 1 1 1 1 2 2 2 2	The Company The Company The Company The Company Zhuhai Khgears Zhuhai Khgears Zhuhai Khgears Zhuhai Khgears Zhuhai Khgears Zhuhai Khgears Zhuhai Khgears Zhuhai Khgears Zhuhai Khgears FFL FFL FFL FFL	Khgears Vietnam Khgears Vietnam Khgears Taiwan Kwok Hing (China) The Company FFL FFL FFL Khgears Vietnam Khgears Vietnam Khgears Vietnam Khgears Vietnam Khgears Vietnam Khgears Vietnam Khgears Vietnam Khgears Vietnam Khgears Vietnam	Parent company to subsidiary Parent company to subsidiary Parent company to subsidiary Parent company to subsidiary Subsidiary to parent company Subsidiary to subsidiary Subsidiary to subsidiary Subsidiary to subsidiary Subsidiary to subsidiary Subsidiary to subsidiary Subsidiary to subsidiary Subsidiary to subsidiary Subsidiary to subsidiary Subsidiary to subsidiary Subsidiary to subsidiary Subsidiary to subsidiary Subsidiary to subsidiary	Interest income Other receivables Other receivables Other receivables Other receivables Other receivables Sales Revenue Accounts receivable Sales Revenue Purchase Accounts receivable Other receivables Accounts payable Purchase Interest income Other receivables Accounts payable	$ 3,815 186,070 19,920 47,910 178,131 62,028 1,091,000 281,549 41,716 28,065 23,197 168,681 11,571 274,407 4,338 143,530 68,486	No significant difference No significant difference No significant difference No significant difference No significant difference No significant difference No significant difference No significant difference No significant difference No significant difference No significant difference No significant difference No significant difference No significant difference No significant difference No significant difference No significant difference	- 5% 1% 1% 5% 2% 46% 8% 2% 1% 1% 5% - 12% - 4% 2%

Note 1: Information on business transactions between the parent company and its subsidiaries should be indicated in the number column respectively. The method of filling in the number is as follows:

1. Enter 0 for the parent company.

2. Subsidiaries are sequentially numbered by company, starting from the Arabic numeral 1.

Note 2: The ratio of the transaction amount to the consolidated total revenue or total assets is calculated by the ending balance for the consolidated total assets if it is an asset-liability account; or calculated by the accumulated amount for the consolidated total revenue if it is a profit and loss account.

Note 3: The relevant transactions have been fully written off when preparing the consolidated financial statements.

• 58 -

KHGEARS INTERNATIONAL LIMITED AND ITS SUBSIDIARIES

INFORMATION, LOCATION... AND OTHER RELATED INFORMATION OF SUBSIDIARIES

FOR THE YEARS ENDED DEC. 31, 2023

Table 6

Unit: Unless otherwise noted, the currency is in thousands of New Taiwan Dollars

Investor	Investee Company	Location	Business Scope	Original Investment Amount	Original Investment Amount	Holding of	Investment a	t the End of the Period	Net Income (Losses) of the Investee	Share of Profits (Losses) of Investee (Notes 2 and 3)	Remark
				Dec. 31, 2023	Dec. 31, 2022	Quantity (in thousands)	Proportion	Carrying Amount (Notes 1 and 3)
The Company The Company The Company The Company	Kwok Hing (China) FFL Khgears Taiwan Khgears Vietnam	Hong Kong Samoa Taiwan Vietnam	Investment holding Sale of gears Manufacture and sale of gears Manufacture and sale of gears	$ 325,080 32,250 25,000 295,836	$ 325,080 32,250 25,000 295,836	280 2,000 25,000 -	100% 100% 100% 100%	$ 2,114,542 (RMB488,686 thousand) 267,482 (RMB61,817 thousand) 4,404 215,850 (RMB49,884 thousand)	$ 243,316 (HKD61,142 thousand) 146,587 (RMB33,349 thousand) ( 20,642) ( 16,224) (VND(12,640,304) thousand)	$ 243,316 (RMB55,354 thousand) 138,235 (RMB31,449 thousand) ( 20,642) ( 21,283) (RMB(4,842) thousand)	- - - Note 4

Note 1: It was translated based on the exchange rate on Dec. 31, 2023.

Note 2: It was translated based on the average exchange rate from Jan. 1 to Dec. 31, 2023.

Note 3: It has been written off when preparing the consolidated financial statements.

Note 4: It is a limited company and does not divide shares.

• 59 -

KHGEARS INTERNATIONAL LIMITED AND ITS SUBSIDIARIES

INFORMATION OF INVESTMENT IN MAINLAND CHINA

FOR THE YEARS ENDED DEC. 31, 2023

Table 7

Unit: Unless otherwise noted, the currency is in thousands of New Taiwan Dollars

Investee Company in Mainland China	Business Scope	Paid-in shares Capital (Note 2)	Investment Method	Investment Method	Accumulated Outflow of Investment from Taiwan as of Jan. 1, 2023	Investment Flows	Investment Flows	Accumulated Outflow of Investment from Taiwan as of Dec. 31, 2023	Accumulated Outflow of Investment from Taiwan as of Dec. 31, 2023	Net Income (Losses) of the Investee	The Company’s Direct or Indirect Holding Percentage	Share of Profits (Losses) of Investee (Notes 1 and 3)	Carrying Amount of Investments at the End of the Period (Notes 2 and 3)	Accumulated Inward Remittance of Earnings as of Dec. 31, 2023 (Note 3)	Remark
						Outflow	Inflow
Zhuhai Khgears Limited	Manufacture and sale of gears	$ 770,642 (RMB178,101 thousand)	Reinvestment in Mainland China through companies registered in a third region.		$ -	$ -	$ -	$	-	$ 282,713 (RMB 64,317 thousand)	100%	$ 282,713 (HKD 71,042 thousand)	$ 2,214,060 (HKD 564,636 thousand)	$ 176,320 (RMB 40,000 thousand)	-
Accumulated Investment in Mainland China as of Dec. 31, 2023					Investment Amounts Authorized by Investment Commission, MOEA					Upper Limit on Investment
Note4					Note4					Note4

Note 1: It was translated based on the average exchange rate from Jan. 1 to Dec. 31, 2023.

Note 2: It was translated based on the exchange rate on Dec. 31, 2023.

Note 3: It has been fully written off when preparing the consolidated financial statements.

Note 4: The Company is not a company established in the Republic of China, so it is not applicable.

• 60 -

KHGEARS INTERNATIONAL LIMITED INFORMATION OF MAJOR SHAREHOLDERS

Dec. 31, 2023

Table 8

Name of Major Shareholders	Shareholding	Shareholding
	Number of Shares	Ratio of Shareholding
1. Kwok Hing Global Limited 2. Henry & Helen Company Limited 3. Long Luck Holdings Limited 4. Jibulu Company Limited 5. YH International Limited	6,637,963 3,972,002 3,670,829 3,343,817 3,101,161	12.49% 7.47% 6.91% 6.29% 5.83%

• Note 1: In this chart, major shareholders are defined as shareholders with more than 5% collective holding interest in common and preferred shares that have been delivered via book entry (including treasury stocks), as shown in the records of Taiwan Depository & Clearing Corporation on the final business day of the current quarter. Share capital, as shown in the financial statements, may differ from the number of shares that have been delivered via book entry due to differences in the preparation basis.

• 61 -