Powertech Technology Inc. and Subsidiaries

Transcription

1 Powertech Technology Inc. and Subsidiaries Consolidated Financial Statements for the Six Months Ended and and Independent Auditors Review Report - 1 -

2 INDEPENDENT AUDITORS REVIEW REPORT The Board of Directors and Shareholders Powertech Technology Inc. We have reviewed the accompanying consolidated balance sheets of Powertech Technology Inc. (the Corporation ) and its subsidiaries (collectively referred to as the Group ) as of and, and the related consolidated statements of comprehensive income for the three months ended and, six months ended and, and statements of changes in equity and cash flows for the six months then ended and. These consolidated financial statements are the responsibility of the Corporation s management. Our responsibility is to issue a report on these consolidated financial statements based on our reviews. Except as stated in the following paragraph, we conducted our reviews in accordance with Statement of Auditing Standards No. 36 Engagements to Review Financial Statements issued by the Auditing Standards Committee of the Accounting Research and Development Foundation of the Republic of China. A review consists principally of applying analytical procedures to financial data and of making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with auditing standards generally accepted in the Republic of China, the objective of which is the expression of an opinion regarding the consolidated financial statements taken as a whole. Accordingly, we do not express such an opinion. As stated in Note 14, 16 and 37 to the consolidated financial statements and related information disclosed, we did not review the financial statements of non-current assets held for sale and equity-method investees as of and for the six months ended and. The carrying value of the related investments as of and were $819,296 thousand and $2,309,298 thousand, and the share of comprehensive income of associates were $32,156 thousand, $29,922 thousand, $65,022 thousand and $102,161 thousand for the three months ended and, and six months ended and

3 Based on our reviews, except for the consolidated financial statements of investees as well as related information disclosed referred to in preceding paragraph, were based on unreviewed financial statements of the investees for the same reporting periods as those of the Corporation, if those consolidated financial statements had been reviewed and any adjustments were determined to be necessary, we are not aware of any material modifications that should be made to the consolidated financial statements referred to in the first paragraph for them to be in conformity with the Guidelines Governing the Preparation of Financial Reports by Securities Issuers and the International Accounting Standard 34 Interim Financial Reporting endorsed by the Financial Supervisory Commission of the Republic of China. August 7, Notice to Readers The accompanying consolidated financial statements are intended only to present the consolidated financial position, results of operations and cash flows in accordance with International Financial Reporting Standard and not those of any other jurisdictions. The standards, procedures and practices to review such consolidated financial statements are those generally accepted and applied in the Republic of China. For the convenience of readers, the independent auditors review 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 review report and consolidated financial statements shall prevail

4 POWERTECH TECHNOLOGY INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (In Thousands of New Taiwan Dollars) (Reviewed) (Audited) (Reviewed) (Reviewed) (Audited) (Reviewed) ASSETS Amount % Amount % Amount % LIABILITIES AND EQUITY Amount % Amount % Amount % CURRENT ASSETS CURRENT LIABILITIES Cash and cash equivalents (Note 6) $ 19,361, $ 17,560, $ 18,807, Short-term bank loans (Note 20) $ 2,327,623 3 $ 1,139,241 2 $ 296,633 - Financial assets at fair value through profit or loss - Financial liabilities at fair value through profit or current (Note 7) 167, , ,203 - loss - current (Note 7) 1,799-8, Held-to-maturity financial assets - current (Note 8) , ,088 - Notes and accounts payable 2,817, ,949, ,218,566 5 Notes and accounts receivable (Note 12) 4,746, ,201, ,904,352 7 Accounts payable - related parties (Note 33) Receivables from related parties (Notes 12 and 33) 3,825, ,409, ,618,573 5 Bonus to employees and remuneration to directors and Other receivables 112, , ,724 - supervisors (Note 27) 928, , ,115 1 Other receivables from related parties (Note 33) 7, Payables to equipment suppliers 1,511, ,988, ,568,195 4 Inventories (Note 13) 2,519, ,582, ,562,737 4 Dividend payable (Note 25) 3,227, ,177,856 3 Prepaid expenses 94, ,580-98,979 - Other payables - related parties (Note 33) 11,673-57,687-13,937 - Non-current assets held for sale (Notes 4 and 14) ,581,331 2 Current income tax liabilities (Note 28) 317, , ,252 - Other current assets (Notes 19 and 34) 253, , ,285 1 Provisions - current (Note 23) 23,824-24,599-14,925 - Accrued expenses and other current liabilities (Notes 22 Total current assets 31,087, ,592, ,391, and 35) 3,511, ,523, ,333,337 7 Finance lease payables - current (Note 21) 8,887-9, NON-CURRENT ASSETS Current portion of long-term debts (Notes 20 and 34) ,750 1 Available-for-sale financial assets - noncurrent (Note 9) 449, , ,762 1 Held-to-maturity financial assets - noncurrent (Note 8) 603, , ,985 - Total current liabilities 14,688, ,632, ,823, Financial assets carried at cost - noncurrent (Note 10) 8,846-8,846-8,846 - Bond investments with no active market - noncurrent NON-CURRENT LIABILITIES (Notes 11 and 34) 536, ,000-69,000 - Long-term debt (Notes 20 and 34) 15,540, ,685, ,862, Investments accounted for by the equity method (Note 16) 819, , ,967 1 Deferred income tax liabilities (Note 28) 281-5,133-7,427 - Property, plant and equipment (Notes 5, 17, 33, 34 and 35) 36,096, ,660, ,123, Other long-term payable (Notes 22 and 35) 1,825, ,368, ,617,563 4 Intangible assets (Note 18) 1,276, ,330, ,355,497 2 Finance lease payables - nuncurrent (Note 21) 9,426-13, Deferred income tax assets (Notes 4 and 28) 101,051-27,525-53,013 - Net defined benefit liability - noncurrent (Notes 4 and Other noncurrent assets (Note 19) 124, , ,424-24) 176, , ,057 - Other noncurrent liabilities (Note 22) 24,568-22,568-22,568 - Total non-current assets 40,016, ,860, ,159, Total non-current liabilities 17,576, ,279, ,684, Total liabilities 32,265, ,911, ,508, EQUITY ATTRIBUTABLE TO SHAREHOLDERS OF THE COMPANY (Note 25) Capital stock Common stock 7,791, ,791, ,791, Capital surplus 1,445, ,423, ,408,076 2 Retained earnings Legal reserve 4,952, ,628, ,628,537 6 Unappropriated earnings 17,195, ,140, ,409, Total retained earnings 22,148, ,768, ,038, Other equity 113,207-76,662-60,044 - Treasury stock (Note 25) (292,644) - (542,921) (1) (691,501) (1) Total equity attributable to owners of the Company 31,206, ,517, ,606, NON-CONTROLLING INTERESTS (Note 25) 7,632, ,024, ,435, Total stockholders' equity 38,838, ,541, ,042, TOTAL $ 71,104, $ 69,453, $ 71,550, TOTAL $ 71,104, $ 69,453, $ 71,550, The accompanying notes are an integral part of the consolidated financial statements. (With Deloitte & Touche review report dated August 7, ) - 4 -

5 POWERTECH TECHNOLOGY INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (In Thousands of New Taiwan Dollars, Except Earnings Per Share) (Reviewed, Not Audited) For the Three Months Ended For the Six Months Ended Amount % Amount % Amount % Amount % NET SALES (Notes 26 and 33) $ 10,243, $ 10,580, $ 19,674, $ 19,806, OPERATING COSTS (Notes 13, 27 and 33) 8,327, ,666, ,084, ,551, GROSS PROFIT 1,915, ,914, ,589, ,255, OPERATING EXPENSES (Notes 27 and 33) Marketing 68, , , ,566 1 General and administrative 230, , , ,368 2 Research and development 267, , , ,238 3 Total operating expenses 565, , ,081, ,168,172 6 OPERATING INCOME 1,349, ,310, ,507, ,087, NONOPERATING INCOME AND EXPENSES Share of profits of associates (Note 16) 32,156-29,922-65,022-97,528 1 Miscellaneous income (Notes 27 and 33) 24,106-28,205-42,739-48,865 - Other gains and losses (Notes 27 and 33) (8,681) - 13,339-12,917-69,510 - Foreign exchange gain (loss), net (Note 27) (34,068) - (21,982) - (71,198) - 43,162 - Financial costs (Note 27) (48,188) - (49,483) - (95,272) - (100,053) - Total nonoperating income and expenses (34,675) (45,792) - 159,012 1 INCOME BEFORE INCOME TAX 1,315, ,310, ,461, ,246, INCOME TAX EXPENSE (Notes 4 and 28) 128, , , ,573 1 NET INCOME 1,186, ,224, ,215, ,091, OTHER COMPREHENSIVE INCOME (Note 25) Items that may be reclassified subsequently to profit or loss Exchange differences on translating foreign operations (22,353) - (26,935) - (34,982) - (39,117) - Unrealized gain (loss) on available-for-sale financial assets 71,112 - (1,244) - 71,527-79,929 - Share of the other comprehensive income of associates ,633 - Total other comprehensive income 48,759 - (28,179) - 36,545-45,445 - TOTAL COMPREHENSIVE INCOME $ 1,235, $ 1,196, $ 2,252, $ 2,136, (Continued) - 5 -

6 POWERTECH TECHNOLOGY INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (In Thousands of New Taiwan Dollars, Except Earnings Per Share) (Reviewed, Not Audited) For the Three Months Ended For the Six Months Ended Amount % Amount % Amount % Amount % NET INCOME ATTRIBUTABLE TO Shareholders of the parent $ 926,638 9 $ 898,516 9 $ 1,697,997 8 $ 1,495,954 8 Non-controlling interests 259, , , ,493 3 $ 1,186, $ 1,224, $ 2,215, $ 2,091, TOTAL COMPREHENSIVE INCOME ATTRIBUTABLE TO Shareholders of the parent $ 975,397 9 $ 870,337 8 $ 1,734,542 9 $ 1,541,399 8 Non-controlling interests 259, , , ,493 3 $ 1,235, $ 1,196, $ 2,252, $ 2,136, EARNINGS PER SHARE (Note 29) Basic $ 1.20 $ 1.18 $ 2.21 $ 1.96 Diluted $ 1.19 $ 1.17 $ 2.19 $ 1.95 The accompanying notes are an integral part of the consolidated financial statements. (With Deloitte & Touche review report dated August 7, ) (Concluded) - 6 -

7 POWERTECH TECHNOLOGY INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY (In Thousands of New Taiwan Dollars) (Reviewed, Not Audited) Equity Attributable to Shareholder of the Company Other Equity Exchange Share Capital Issued and Differences on Unrealized Outstanding Retained Earnings Translating Gain (Loss) on Total Share Special Unappropriated Foreign Available-for-sale Noncontrolling Shareholders (Thousands) Amount Capital Surplus Legal Reserve Reserve Earnings Operations Financial Assets Treasury Stock Total Interest Equity BALANCE, JANUARY 1, 779,147 $ 7,791,466 $ 2,914,524 $ 4,628,537 $ 162,741 $ 14,751,086 $ 42,270 $ (27,671 ) $ (691,501 ) $ 29,571,452 $ 7,489,824 $ 37,061,276 APPROPRIATION OF 2013 EARNINGS Special reserve (162,741) 162, Cash dividends distributed by subsidiaries (649,563) (649,563) Compensation cost of employee share options , ,845-21,845 Issue of cash dividends from capital surplus - - (1,528,293 ) (1,528,293 ) - (1,528,293 ) Net income for the six months ended ,495, ,495, ,493 2,091,447 Other comprehensive income for the six months ended (39,117 ) 84,562-45,445-45,445 Total comprehensive income for the six months ended ,495,954 (39,117 ) 84,562-1,541, ,493 2,136,892 BALANCE, JUNE 30, 779,147 $ 7,791,466 $ 1,408,076 $ 4,628,537 $ - $ 16,409,781 $ 3,153 $ 56,891 $ (691,501 ) $ 29,606,403 $ 7,435,754 $ 37,042,157 BALANCE, JANUARY 1, 779,147 $ 7,791,466 $ 1,423,925 $ 4,628,537 $ - $ 18,140,233 $ 89,835 $ (13,173 ) $ (542,921 ) $ 31,517,902 $ 8,024,064 $ 39,541,966 APPROPRIATION OF EARNINGS Legal reserve ,952 - (323,952) Cash dividends distributed by the Corporation (2,318,396) (2,318,396) - (2,318,396) Cash dividends distributed by subsidiaries (909,388) (909,388) Compensation cost of employee share options , ,953-21,953 Net income for the six months ended ,697, ,697, ,860 2,215,857 Other comprehensive income for the six months ended (34,982 ) 71,527-36,545-36,545 Total comprehensive income for the six months ended ,697,997 (34,982 ) 71,527-1,734, ,860 2,252,402 Reissue of treasury stock , , ,277 BALANCE, JUNE 30, 779,147 $ 7,791,466 $ 1,445,878 $ 4,952,489 $ - $ 17,195,882 $ 54,853 $ 58,354 $ (292,644 ) $ 31,206,278 $ 7,632,536 $ 38,838,814 The accompanying notes are an integral part of the consolidated financial statements. (With Deloitte & Touche review report dated August 7, ) - 7 -

8 POWERTECH TECHNOLOGY INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (In Thousands of New Taiwan Dollars) (Reviewed, Not Audited) Six Months Ended CASH FLOWS FROM OPERATING ACTIVITIES Current income before income tax $ 2,461,870 $ 2,246,020 Adjustments to reconcile income before income tax to net cash provided by operating activities: Depreciation 4,251,359 4,406,900 Amortization 56,195 52,668 Provision of allowance for doubtful accounts - 19,261 Net gain on fair value change of financial assets designated as at fair value through profit or loss (7,796) (27,372) Financial costs 95, ,053 Premium amortization of held-to-maturity financial assets 1,180 1,349 Interest revenue (39,601) (46,720) Compensation cost of employee share options 21,953 21,845 Share of profits of associates (65,022) (97,528) Net gain on disposal of property, plant and equipment (59,942) (64,835) Net gain of foreign currency exchange (20,227) (82,696) Changes in operating assets and liabilities: Increase in financial assets held for trading (37,700) (41,000) Increase in notes and accounts receivable (316,355) (313,833) Increase in accounts receivable from related parties (218,561) (537,750) Decrease (increase) in other receivables 66,257 (108,595) Decrease (increase) in other receivables from related parties (6,485) 47,702 Decrease (increase) in inventories 62,716 (104,804) Decrease (increase) in prepayments 8,778 (11,608) Decrease (increase) in other current assets 20,607 (48,749) Increase (decrease) in accounts payable (222,380) 98,034 Decrease in accounts payable to related parties (303) (127,062) Increase in bonus to employees, directors and supervisors 299, ,412 Decrease in other payables to related parties (46,014) (652) Increase (decrease) in accrued expenses and other current liabilities (29,730) 518,963 Decrease in provisions (775) (1,364) Decrease in net defined benefit liability (7,518) (11,575) Decrease in other accounts payable (741,858) (1,861,867) Net cash provided by operating activities 5,525,418 4,333,197 Interest received 39,166 51,240 Interest paid (129,059) (135,753) Income tax paid (308,994) (215,369) Net cash provided by operating activities 5,126,531 4,033,315 (Continued) - 8 -

9 POWERTECH TECHNOLOGY INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (In Thousands of New Taiwan Dollars) (Reviewed, Not Audited) Six Months Ended CASH FLOWS FROM INVESTING ACTIVITIES Proceeds from (acquisition of) the disposal of debt investments with no active market $ (467,901) $ 6,224 Purchase of held-to-maturity financial assets (200,918) (202,255) Proceeds on sale of held-to-maturity financial assets 200, ,000 Acquisition of property, plant and equipment (3,226,717) (4,603,960) Disposal of property, plant and equipment 86, ,610 Decrease in refundable deposits 41,780 84,203 Increase in intangible assets (440) (6,700) Decrease (increase) in prepayments for equipment 14, ,688 Decrease in other prepayments 2,884 2,812 Net cash used in investing activities (3,550,435) (4,262,378) CASH FLOWS FROM FINANCING ACTIVITIES Increase (decrease) in short-term bank loans 1,196,990 (770,574) Increase in long-term debts 6,773,333 5,800,000 Decrease in long-term debts (7,918,072) (6,542,760) Increase (decrease) in guarantee deposits 2,000 (4,378) Decrease in finance lease payables (4,740) - Proceeds from reissue of treasury shares 250,277 - Net cash used in financing activities 299,788 (1,517,712) EFFECTS OF EXCHANGE RATE CHANGES ON THE BALANCE OF CASH HELD IN FOREIGN CURRENCIES (74,420) (20,202) NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 1,801,464 (1,766,977) CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 17,560,164 20,574,782 CASH AND CASH EQUIVALENTS, END OF PERIOD $ 19,361,628 $ 18,807,805 The accompanying notes are an integral part of the consolidated financial statements. (With Deloitte & Touche review report dated August 7, ) (Concluded) - 9 -

10 POWERTECH TECHNOLOGY INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE SIX MONTHS ENDED JUNE 30, AND (In Thousands of New Taiwan Dollars, Unless Stated Otherwise) (Reviewed, Not Audited) 1. GENERAL INFORMATION Powertech Technology Corporation (the Corporation ) was incorporated in the Republic of China ( ROC ) in May 15, 1997 and commenced business in September 3, The Corporation mainly manufactures, packages, tests and sells various integrated circuit products. The Corporation mainly researches and develops, designs, assembles, tests and manufactures various integrated circuits. The Corporation also provides semiconductor testing and assembly services on a turnkey basis, in which the Corporation buys fabricated wafers and sells, tested and assembled semiconductors. The address of its registered office and principal place of business is Hsin-chu Industrial Park, Hukou, Hsin-chu. The Corporation s shares have been listed on the Taiwan Stock Exchange ( TSE ) on November 8, 2004 after they were traded on the Taiwan GreTai Securities Market starting on April 3, The Corporation also issued Global Depositary Shares (GDS), which are listed on the Luxembourg Stock Exchange and traded on the Euro MTF Market. The GDS was accepted for quotation on the International Order Book of the London Stock Exchange Limited. The consolidated financial statements are presented in the Corporation s functional currency, New Taiwan dollars. The functional currency of the Corporation is New Taiwan dollars. For greater comparability and consistency of financial reporting, the consolidated financial statements are presented in New Taiwan dollars since the Corporation s stocks are listed on the Taiwan Stock Exchange. 2. APPROVAL OF FINANCIAL STATEMENTS The consolidated financial statements were reported to the Board of Directors and issued on August 7,. 3. APPLICATION OF NEW, AMENDED AND REVISED STANDARDS AND INTERPRETATIONS a. Initial application of the amendments to the Regulations Governing the Preparation of Financial Reports by Securities Issuers and the 2013 version of the International Financial Reporting Standards (IFRS), International Accounting Standards (IAS), Interpretations of IFRS (IFRIC), and Interpretations of IAS (SIC) endorsed by the FSC Rule No and Rule No issued by the FSC on April 3,, stipulated that the Group should apply the 2013 version of IFRS, IAS, IFRIC and SIC (collectively, the IFRSs ) endorsed by the FSC and the related amendments to the Regulations Governing the Preparation of Financial Reports by Securities Issuers starting January 1,

11 Except for the following, whenever applied, the initial application of the amendments to the Regulations Governing the Preparation of Financial Reports by Securities Issuers and the 2013 IFRSs version would not have any material impact on the Corporation and subsidiaries s (the Group ) accounting policies: 1) IFRS 10 Consolidated Financial Statements IFRS 10 replaces IAS 27 Consolidated and Separate Financial Statements and SIC 12 Consolidation - Special Purpose Entities. The Group considers whether it has control over other entities for consolidation. The Group has control over an investee if and only if it has i) power over the investee; ii) exposure, or rights, to variable returns from its involvement with the investee and iii) the ability to use its power over the investee to affect the amount of its returns. Additional guidance has been included in IFRS 10 to explain when an investor has control over an investee. 2) IFRS 12 Disclosure of Interests in Other Entities IFRS 12 is a new disclosure standard and is applicable to entities that have interests in subsidiaries, joint arrangements, associates and/or unconsolidated structured entities. In general, the disclosure requirements in IFRS 12 are more extensive than in the current standards. 3) IFRS 13 Fair Value Measurement IFRS 13 establishes a single source of guidance for fair value measurements. It defines fair value, establishes a framework for measuring fair value, and requires disclosures about fair value measurements. The disclosure requirements in IFRS 13 are more extensive than those required by the current standards. For example, quantitative and qualitative disclosures based on the three-level fair value hierarchy currently required for financial instruments only will be extended by IFRS 13 to cover all assets and liabilities within its scope. The fair value measurements under IFRS 13 will be applied prospectively from January 1,. Refer to Note 32 for related disclosures. 4) Amendments to IAS 1 Presentation of Items of Other Comprehensive Income The amendments to IAS 1 requires items of other comprehensive income to be grouped into those items that (1) will not be reclassified subsequently to profit or loss; and (2) may be reclassified subsequently to profit or loss. Income taxes on related items of other comprehensive income are grouped on the same basis. Under current IAS 1, there were no such requirements. The Group retrospectively applied the above amendments starting in. Items not expected to be reclassified to profit or loss are actuarial gains or losses from defined benefit plans and the share of actuarial gains or losses from defined benefit plans of associates. Items expected to be reclassified to profit or loss are the exchange differences on translating foreign operations, unrealized gain (loss) on available-for-sale financial assets and share of the other comprehensive income (except the share of the remeasurements of the defined benefit plans) of associates accounted for using the equity method. However, the application of the above amendments will not have any impact on the net profit for the period, other comprehensive income for the period (net of income tax), and total comprehensive income for the period

12 5) Revision to IAS 19 Employee Benefits The interest cost and expected return on plan assets used in current IAS 19 are replaced with a net interest amount, which is calculated by applying the discount rate to the net defined benefit liability or asset. In addition, the revised IAS 19 introduces certain changes in the presentation of the defined benefit cost, and also includes more extensive disclosures. In addition, revised IAS 19 changes the definition of short-term employee benefits. The revised definition is employee benefits (other than termination benefits) that are expected to be settled wholly before twelve months after the end of the annual reporting period in which the employees render the related service. The Group s unused annual leave, which can be carried forward within 24 months after the end of the annual period in which the employee renders service and which is currently classified as short-term employee benefits, is classified as other long-term employee benefits under revised IAS 19. Related defined benefit obligation of such other long-term benefit is calculated using the Projected Unit Credit Method. However, this change does not affect unused annual leave to be presented as a current liability in the consolidated balance sheet. On initial application of the revised IAS 19, the changes in cumulative employee benefit costs as of 2013 resulting from the retrospective application are not adjusted. In addition, in preparing the consolidated financial statements for the year ended, the Group elects not to present comparative information about the sensitivity of the defined benefit obligation. 6) Amendments to IFRS 7 Disclosure - Offsetting Financial Assets and Financial Liabilities The amendments to IFRS 7 require disclosure of information about rights of offset and related arrangements (such as collateral posting requirements) for financial instruments under enforceable master netting arrangements and similar arrangements. 7) Amendments to IAS 32 Offsetting Financial Assets and Financial Liabilities The amendments to IAS 32 clarify the requirements relating to the offset of financial assets and financial liabilities. Specifically, the amendments clarify the meaning of currently has a legally enforceable right of set-off and simultaneous realization and settlement. 8) Annual Improvements to IFRSs: Cycle Several standards including IAS 16 Property, Plant and Equipment were amended in this annual improvement. The amendments to IAS 16 clarify that spare parts, stand-by equipment and servicing equipment should be recognized in accordance with IAS 16 when they meet the definition of property, plant and equipment and otherwise as inventory. The initial application of the amendments to the Regulations Governing the Preparation of Financial Reports by Securities Issuers and the 2013 IFRSs version in has no material effect on the consolidated balance sheet as of January 1,

13 b. New IFRSs in issue but not yet endorsed by the FSC The Group has not applied the following New IFRSs issued by the IASB but not yet endorsed by the FSC. As of the date the consolidated financial statements were authorized for issue, the FSC has not announced their effective dates. New IFRSs Effective Date Announced by IASB (Note 1) Annual Improvements to IFRSs Cycle July 1, (Note 2) Annual Improvements to IFRSs Cycle July 1, Annual Improvements to IFRSs Cycle January 1, 2016 (Note 4) IFRS 9 Financial Instruments January 1, 2018 Amendments to IFRS 9 and IFRS 7 Mandatory Effective Date of January 1, 2018 IFRS 9 and Transition Disclosures Amendments to IFRS 10 and IAS 28 Sale or Contribution of Assets January 1, 2016 (Note 3) between an Investor and its Associate or Joint Venture Amendments to IFRS 10 and IAS 28 'Investment Entities: Applying January 1, 2016 the Consolidation Exception Amendment to IFRS 11 Accounting for Acquisitions of Interests in January 1, 2016 Joint Operations IFRS 14 Regulatory Deferral Accounts January 1, 2016 IFRS 15 Revenue from Contracts with Customers January 1, 2017 Amendment to IAS 1 Disclosure Initiative January 1, 2016 Amendments to IAS 16 and IAS 38 Clarification of Acceptable January 1, 2016 Methods of Depreciation and Amortization Amendments to IAS 16 and IAS 41 Agriculture: Bearer Plants January 1, 2016 Amendment to IAS 19 Defined Benefit Plans: Employee July 1, Contributions Amendment to IAS 36 Impairment of Assets: Recoverable Amount January 1, Disclosures for Non-financial Assets Amendment to IAS 39 Novation of Derivatives and Continuation of January 1, Hedge Accounting IFRIC 21 Levies January 1, Note 1: Unless stated otherwise, the above New IFRSs are effective for annual periods beginning on or after their respective effective dates. Note 2: The amendment to IFRS 2 applies to share-based payment transactions with grant date on or after July 1, ; the amendment to IFRS 3 applies to business combinations with acquisition date on or after July 1, ; the amendment to IFRS 13 is effective immediately; the remaining amendments are effective for annual periods beginning on or after July 1,. Note 3: Prospectively applicable to transactions occurring in annual periods beginning on or after January 1, Note 4: The amendment to IFRS 5 is applied prospectively to changes in a method of disposal that occur in annual periods beginning on or after January 1, 2016; the remaining amendments are effective for annual periods beginning on or after January 1,

14 The initial application of the above New IFRSs, whenever applied, would not have any material impact on the Group s accounting policies, except for the following: 1) IFRS 9 Financial Instruments Recognition and measurement of financial assets With regards to financial assets, all recognized financial assets that are within the scope of IAS 39 Financial Instruments: Recognition and Measurement are subsequently measured at amortized cost or fair value. Under IFRS 9, the requirement for the classification of financial assets is stated below. For the Group s debt instruments that have contractual cash flows that are solely payments of principal and interest on the principal amount outstanding, their classification and measurement are as follows: a) For debt instruments, if they are held within a business model whose objective is to collect the contractual cash flows, the financial assets are measured at amortized cost and are assessed for impairment continuously with impairment loss recognized in profit or loss, if any. Interest revenue is recognized in profit or loss by using the effective interest method; b) For debt instruments, if they are held within a business model whose objective is achieved by both the collecting of contractual cash flows and the selling of financial assets, the financial assets are measured at fair value through other comprehensive income (FVTOCI) and are assessed for impairment. Interest revenue is recognized in profit or loss by using the effective interest method, and other gain or loss shall be recognized in other comprehensive income, except for impairment gains or losses and foreign exchange gains and losses. When the debt instruments are derecognized or reclassified, the cumulative gain or loss previously recognized in other comprehensive income is reclassified from equity to profit or loss. Except for above, all other financial assets are measured at fair value through profit or loss. However, the Group may make an irrevocable election to present subsequent changes in the fair value of an equity investment (that is not held for trading) in other comprehensive income, with only dividend income generally recognized in profit or loss. No subsequent impairment assessment is required, and the cumulative gain or loss previously recognized in other comprehensive income cannot be reclassified from equity to profit or loss. The impairment of financial assets IFRS 9 requires that impairment loss on financial assets is recognized by using the Expected Credit Losses Model. The credit loss allowance is required for financial assets measured at amortized cost, financial assets mandatorily measured at FVTOCI, lease receivables, contract assets arising from IFRS 15 Revenue from Contracts with Customers, certain written loan commitments and financial guarantee contracts. A loss allowance for the 12-month expected credit losses is required for a financial asset if its credit risk has not increased significantly since initial recognition. A loss allowance for full lifetime expected credit losses is required for a financial asset if its credit risk has increased significantly since initial recognition and is not low. However, a loss allowance for full lifetime expected credit losses is required for trade receivables that do not constitute a financing transaction. For purchased or originated credit-impaired financial assets, the Group takes into account the expected credit losses on initial recognition in calculating the credit-adjusted effective interest rate. Subsequently, any changes in expected losses are recognized as a loss allowance with a corresponding gain or loss recognized in profit or loss

15 2) Amendment to IAS 36 Recoverable Amount Disclosures for Non-financial Assets In issuing IFRS 13 Fair Value Measurement, the IASB made consequential amendment to the disclosure requirements in IAS 36 Impairment of Assets, introducing a requirement to disclose in every reporting period the recoverable amount of an asset or each cash-generating unit. The amendment clarifies that such disclosure of recoverable amounts is required only when an impairment loss has been recognized or reversed during the period. Furthermore, the Group is required to disclose the discount rate used in measurements of the recoverable amount based on fair value less costs of disposal measured using a present value technique. 3) Annual Improvements to IFRSs: Cycle Several standards including IFRS 2 Share-based Payment, IFRS 3 Business Combinations and IFRS 8 Operating Segments were amended in this annual improvement. The amended IFRS 2 changes the definitions of vesting condition and market condition and adds definitions for performance condition and service condition. The amendment clarifies that a performance target can be based on the operations (i.e. a non-market condition) of the Group or another entity in the same group or the market price of the equity instruments of the Group or another entity in the same group (i.e. a market condition); that a performance target can relate either to the performance of the Group as a whole or to some part of it (e.g. a division); and that the period for achieving a performance condition must not extend beyond the end of the related service period. In addition, a share market index target is not a performance condition because it not only reflects the performance of the Group, but also of other entities outside the Group. IFRS 3 was amended to clarify that contingent consideration should be measured at fair value, irrespective of whether the contingent consideration is a financial instrument within the scope of IFRS 9 or IAS 39. Changes in fair value should be recognized in profit or loss. The amended IFRS 8 requires an entity to disclose the judgments made by management in applying the aggregation criteria to operating segments, including a description of the operating segments aggregated and the economic indicators assessed in determining whether the operating segments have similar economic characteristics. The amendment also clarifies that a reconciliation of the total of the reportable segments assets to the entity s assets should only be provided if the segments assets are regularly provided to the chief operating decision-maker. IFRS 13 was amended to clarify that the issuance of IFRS 13 did not remove the ability to measure short-term receivables and payables with no stated interest rate at their invoice amounts without discounting, if the effect of not discounting is immaterial. IAS 24 was amended to clarify that a management entity providing key management personnel services to the Group is a related party of the Group. Consequently, the Group is required to disclose as related party transactions the amounts incurred for the service paid or payable to the management entity for the provision of key management personnel services. However, disclosure of the components of such compensation is not required. 4) Annual Improvements to IFRSs: Cycle Several standards, including IFRS 3 and IFRS 13 were amended in this annual improvement. IFRS 3 was amended to clarify that IFRS 3 does not apply to the accounting for the formation of all types of joint arrangements in the financial statements of the joint arrangement itself

16 The scope in IFRS 13 of the portfolio exception for measuring the fair value of a group of financial assets and financial liabilities on a net basis was amended to clarify that it includes all contracts that are within the scope of, and accounted for in accordance with, IAS 39 or IFRS 9, even if those contracts do not meet the definitions of financial assets or financial liabilities within IAS 32. 5) Amendments to IAS 16 and IAS 38 Clarification of Acceptable Methods of Depreciation and Amortization The entity should use appropriate depreciation and amortization method to reflect the pattern in which the future economic benefits of the property, plant and equipment and intangible asset are expected to be consumed by the entity. The amended IAS 16 Property, Plant and Equipment requires that a depreciation method that is based on revenue that is generated by an activity that includes the use of an asset is not appropriate. The amended standard does not provide any exception from this requirement. The amended IAS 38 Intangible Assets requires that there is a rebuttable presumption that an amortization method that is based on revenue that is generated by an activity that includes the use of an intangible asset is not appropriate. This presumption can be overcome only in the following limited circumstances: a) In which the intangible asset is expressed as a measure of revenue (for example, the contract that specifies the entity s use of the intangible asset will expire upon achievement of a revenue threshold); or b) When it can be demonstrated that revenue and the consumption of the economic benefits of the intangible asset are highly correlated. An entity should apply the aforementioned amendments prospectively for annual periods beginning on or after the effective date. 6) Amendments to IFRS 10 and IAS 28 Sale or Contribution of Assets between an Investor and its Associate or Joint Venture The amendments stipulated that, when an entity sells or contributes assets that constitute a business (as defined in IFRS 3) to an associate or joint venture, the gain or loss resulting from the transaction is recognized in full. Also, when an entity loses control of a subsidiary that contains a business but retains significant influence or joint control, the gain or loss resulting from the transaction is recognized in full. Conversely, when an entity sells or contributes assets that do not constitute a business to an associate or joint venture, the gain or loss resulting from the transaction is recognized only to the extent of the unrelated investors interest in the associate or joint venture, i.e. the entity s share of the gain or loss is eliminated. Also, when an entity loses control of a subsidiary that does not contain a business but retains significant influence or joint control in an associate or a joint venture, the gain or loss resulting from the transaction is recognized only to the extent of the unrelated investors interest in the associate or joint venture, i.e. the entity s share of the gain or loss is eliminated. 7) Annual Improvements to IFRSs: Cycle Several standards including IFRS 5 Non-current assets held for sale and discontinued operations and IFRS 7 were amended in this annual improvement

17 IFRS 5 was amended to clarify that reclassification between non-current assets (or disposal group) held for sale and non-current assets held for distribution to owners does not constitute a change to a plan of sale or distribution. Therefore, previous accounting treatment is not reversed. The amendment also explains that assets that no longer meet the criteria for held for distribution to owners and do not meet the criteria for held for sale should be treated in the same way as assets that cease to be classified as held for sale. The amendments to IFRS 7 provide additional guidance to clarify whether a servicing contract is continuing involvement in a transferred asset. In addition, the amendments clarify that the offsetting disclosures are not explicitly required for all interim periods; however, the disclosures may need to be included in condensed interim financial statements to comply with IAS 34 under specific conditions. 8) Amendment to IAS 1 Disclosure Initiative The amendment clarifies that the consolidated financial statements should be prepared for the purpose of disclosing material information. To improve the understandability of its consolidated financial statements, the Group should disaggregate the disclosure of material items into their different natures or functions, and disaggregate material information from immaterial information. The amendment further clarifies that the Group should consider the understandability and comparability of its consolidated financial statements to determine a systematic order in presenting its footnotes. Except for the above impact, as of the date the consolidated financial statements were authorized for issue, the Group is continuously assessing the possible impact that the application of other standards and interpretations will have on the Group s financial position and financial performance, and will disclose the relevant impact when the assessment is completed. 4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICY Except for the following, the accounting policies followed in these consolidated financial statements was the same as those applied in the preparation of the Group s consolidated financial statements for the year ended. a. Statement of compliance The consolidated financial statements have been prepared in accordance with the Regulations Governing the Preparation of Financial Reports by Securities Issuers, or other regulations (please specify) and IAS 34 Interim Financial Reporting as endorsed by the FSC. Disclosure information included in the consolidated financial statements is less than those required in a complete set of annual financial statements. b. Basis of consolidation Please refer to Note 15 for detailed information about subsidiary included in consolidated financial statements, percentage of ownership and main business. c. Basis of preparation The consolidated financial statements have been prepared on the historical cost basis except for financial instruments that are measured at fair value

18 The following table provides an analysis of financial instruments that are measured subsequent to initial recognition at fair value, grouped into Levels 1 to 3 based on the degree to which the fair value is observable: 1) Level 1 fair value measurements are those derived from quoted prices (unadjusted) in active markets for identical assets or liabilities; 2) Level 2 fair value measurements are those derived from 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); and 3) Level 3 fair value measurements are those derived from valuation techniques that include inputs for the asset or liability that are not based on observable market data (unobservable inputs). d. Retirement benefit Defined benefit costs (including service cost, net interest and remeasurement) under the defined benefit retirement benefit plans are determined using the projected unit credit method. Service cost and net interest on the net defined benefit liability (asset) are recognized as employee benefits expense in the period they occur. Remeasurement, comprising actuarial gains and losses and the return on plan assets (excluding interest), is recognized in other comprehensive income in the period in which they occur. Remeasurement recognized in other comprehensive income is reflected immediately in retained earnings and will not be reclassified to profit or loss. Net defined benefit liability (asset) represents the actual deficit (surplus) in the Group s defined benefit plan. Any surplus resulting from this calculation is limited to the present value of any refunds from the plans or reductions in future contributions to the plans. Pension cost for an interim period is calculated on a year-to-date basis by using the actuarially determined pension cost rate at the end of the prior financial year, adjusted for significant market fluctuations since that time and for significant plan amendments, settlements, or other significant one-off events. e. Taxation Income tax expense is the sum of the tax currently payable and deferred tax. Interim period income taxes are assessed on an annual basis and calculated by multiplying pre-tax income for the interim reporting period by the tax rate that would be applicable to expected total annual earnings. f. Non-current assets held for sale Non-current assets are classified as held for sale if their carrying amount will be recovered principally through a sale transaction rather than through continuing use. This condition is regarded as met only when the sale is highly probable and the non-current asset is available for immediate sale in its present condition. To meet the criteria for the sale being highly probable, the appropriate level of management must be committed to the sale, which should be expected to qualify for recognition as a completed sale within one year from the date of classification. Non-current assets classified as held for sale are measured at the lower of their previous carrying amount and fair value less costs to sell

19 5. CRITICAL ACCOUNTING JUDGMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY Except for the following, the critical accounting judgments and key sources of estimation uncertainty followed in these consolidated financial statements were the same as those applied in the preparation of the consolidated financial statements for the year ended. a. Useful lives of property, plant and equipment The Corporation reviews the estimated useful lives of property, plant and equipment at each balance sheet date. According to evalution report by China Property Appraising Co., Ltd., through process of industry meta-analysis, functional analysis and economic analysis, the actual useful lives of the Corporation s equipment have had exceed the original useful lives. The Corporation determined that the useful lives of certain items of machinery and equipment should be extended from 4 or 6 years to 8 years from January 1,. The financial effect of this reassessment, assuming the assets are held until the end of their estimated useful lives, is to decrease the consolidated depreciation expense for and for the next three years, by the following amounts: Amount $ (560,670) (295,092) , ,429 b. Impairment of assets of property, plant and equipment The Corporation s equipment have had impaired $207,884 thousand, by comparing its carrying amount with its recoverable amount. c. Fair value measurements and valuation processes If some of the Group s assets and liabilities measured at fair value have no quoted prices in active markets, the Group to determine whether to engage third party qualified valuers and to determine the appropriate valuation techniques for fair value measurements. Information about the valuation techniques and inputs used in determining the fair value of various assets and liabilities is disclosed in note CASH AND CASH EQUIVALENTS Checking accounts and demand deposits $ 17,867,233 $ 16,282,040 $ 17,445,003 Cash on hand Cash equivalent Repurchase agreements collateralized by bonds 1,494,362 1,278,038 1,362,722 $ 19,361,628 $ 17,560,164 $ 18,807,

20 The market rate intervals of cash in bank and cash equivalent at the end of the reporting period were as follows: Bank balance 0%-1.30% 0%-3.80% 0%-4.00% Repurchase agreement collateralized by bonds 0.52%-1.13% 0.52%-0.60% 0.52%-0.60% 7. FINANCIAL INSTRUMENTS AT FAIR VALUE THROUGH PROFIT OR LOSS Financial assets at FVTPL - current Financial assets held for trading - current Derivative financial assets (not under hedge accounting) Foreign exchange forward contracts $ 1,087 $ 702 $ 3,427 Non-derivative financial assets Mutual funds 165, , ,776 Financial liabilities at FVTPL - current $ 167,043 $ 128,589 $ 150,203 Financial liabilities held for trading - current Derivative financial liabilities (not under hedge accounting) Foreign exchange forward contracts $ 1,799 $ 8,841 $ 2 At the end of the reporting period, outstanding foreign exchange forward contracts not under hedge accounting were as follows: Currency Maturity Date Contract Amounts (In Thousands) Sell forward exchange contracts USD to NTD USD 18,200 USD to RMB USD 1,000 Sell forward exchange contracts USD to NTD USD 15,800 USD to RMB USD 2,000 Sell forward exchange contracts USD to NTD USD 12,000 USD to RMB USD 3,

21 The Group entered into foreign exchange forward contracts to manage exposures due to exchange rate fluctuations of foreign currency denominated assets and liabilities. However, those contracts did not meet the criteria of hedge effectiveness and therefore were not accounted for by using hedge accounting. 8. HELD-TO-MATURITY FINANCIAL ASSETS Current Domestic investments Corporate bonds - 99 Taiwan Power Company 1B Bond $ - $ 200,409 $ 201,088 Noncurrent Domestic investments Corporate bonds - 02 Taiwan Power Company 4 Bond $ 201,104 $ 201,541 $ 201,985 Corporate bonds - 01 TSMC 2A Bond 201, ,321 - Corporate bonds - 01 Taiwan Power Company 1A Bond 200, $ 603,009 $ 402,862 $ 201,985 On June 7, 2013, the Group bought corporate bonds issued by Taiwan Power Company with an effective interest rate of 0.7% at premium value $403,697 thousand (par value $400,000 thousand), and a maturity date of April 21, and, at par value of $200,000 thousand, respectively. On March 10,, the Group bought corporate bonds issued by Taiwan Power Company with an effective interest rate of 0.9% at premium value $202,255 thousand (par value $200,000 thousand), and a maturity date of September 26, 2016, at par value of $200,000 thousand. On August 7,, the Group bought corporate bonds issued by TSMC with an effective interest rate of 1.02% at premium value $201,523 thousand (par value $200,000 thousand), and a maturity date of August 2, 2017, at par value of $200,000 thousand. On March 19,, the Group bought corporate bonds issued by Taiwan Power Company with an effective interest rate of 1.13% at premium value $200,918 thousand (par value $200,000 thousand), and a maturity date of May 6, 2018, at par value of $200,000 thousand