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

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 and for the six months ended and, as well as the consolidated statements of changes in equity and cash flows for the six months 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 to the consolidated financial statements, we did not review the financial statements of some immaterial subsidiaries, which included in the consolidated financial statements, as of and for the six months ended, which represented total assets of 4.85% $3,623,796 thousand of the consolidated assets; and total liabilities of 4.67% $1,574,255 thousand of the consolidated liabilities. These statements also reflected these subsidiaries comprehensive loss of (6.11)% $(86,389) thousand and (7.02)% $(176,588) thousand of the consolidated comprehensive income for the three months ended, six months ended, respectively. Also, as stated in Note 15 to the consolidated financial statements, we did not review the financial statements of equity-method investees as of and for the six months ended June 30, and. The carrying value of the related investments as of and were $938,102 thousand and $819,296 thousand, and the share of comprehensive income of associates were $51,221 thousand, $32,156 thousand, $82,042 thousand and $65,022 thousand for the three months ended and, and six months ended and, respectively. These investment amounts, as well as related information disclosed in Note 36 to the consolidated financial statements, were based on unreviewed financial statements of the investees for the same reporting periods as those of the Corporation and subsidiaries

3 Based on our reviews, except for the consolidated financial statements of subsidiaries and 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 and subsidiaries, 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 as of and for the six months ended and as 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 Financial Reporting Standard No. 34 Interim Financial Reporting, which were approved by the Financial Supervisory Commission. August 5, 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 review such consolidated financial statements are those generally 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) $ 18,947, $ 19,729, $ 19,361, Short-term bank loans (Note 19) $ 1,597,569 2 $ 330,660 - $ 2,327,623 3 Financial assets at fair value through profit or loss - Financial liabilities at fair value through profit or loss current (Note 7) 67,462-26, , current (Note 7) 81-4,417-1,799 - Held-to-maturity financial assets - current (Note 8) 200, , Notes and accounts payable 3,152, ,327, ,817,646 4 Notes and accounts receivable (Note 12) 5,589, ,922, ,746,035 7 Bonus to employees and remuneration to directors and Receivables from related parties (Notes 12 and 32) 3,520, ,303, ,825,773 6 supervisors (Note 26) 985, , ,506 1 Other receivables 213, , ,414 - Payables to equipment suppliers 3,471, ,777, ,511,883 2 Other receivables from related parties (Note 32) 1,868-13,131-7,473 - Dividend payable (Note 24) 3,506, ,227,784 5 Inventories (Note 13) 3,000, ,736, ,519,386 4 Other payables - related parties (Note 32) 6,422-15,718-11,673 - Prepaid expenses 164, ,796-94,802 - Current income tax liabilities (Notes 4 and 27) 630, , ,376 - Other current assets (Notes 18 and 33) 309, , ,398 - Provisions - current (Note 22) 38,720-54,403-23,824 - Accrued expenses and other current liabilities (Notes 21 Total current assets 32,015, ,538, ,087, and 34) 3,714, ,327, ,511,315 5 Finance lease payables - current (Note 20) 7,331-8,145-8,887 - NON-CURRENT ASSETS Available-for-sale financial assets - noncurrent (Note 9) 275, , ,991 - Total current liabilities 17,110, ,291, ,688, Held-to-maturity financial assets - noncurrent (Note 8) 702, , ,009 1 Financial assets carried at cost - noncurrent (Note 10) - - 8,846-8,846 - NON-CURRENT LIABILITIES Debt investments with no active market - noncurrent (Notes Long-term debt (Notes 19 and 33) 15,236, ,665, ,540, and 33) 564, , ,901 1 Deferred income tax liabilities (Notes 4 and 27) 158-1, Investments accounted for by the equity method (Note 15) 938, , ,296 1 Other long-term payable (Notes 21 and 34) 1,089, ,529, ,825,363 3 Property, plant and equipment (Notes 16 and 33) 38,718, ,168, ,096, Finance lease payables - nuncurrent (Note 20) 2,498-5,678-9,426 - Intangible assets (Note 17) 1,174, ,225, ,276,356 2 Net defined benefit liability - noncurrent (Notes 4 and 23) 221, , ,823 - Deferred income tax assets (Notes 4 and 27) 118,501-72, ,051 - Other noncurrent liabilities (Note 21) 24,568-24,568-24,568 - Other noncurrent assets (Note 18) 143, , ,038 - Total non-current liabilities 16,575, ,455, ,576, Total non-current assets 42,634, ,164, ,016, Total liabilities 33,686, ,746, ,265, EQUITY ATTRIBUTABLE TO OWNERS OF THE COMPANY (Notes 14 and 24) Capital stock Common stock 7,791, ,791, ,791, Capital surplus 678, ,457, ,445,878 2 Retained earnings Legal reserve 5,354, ,952, ,952,489 7 Unappropriated earnings 19,187, ,467, ,195, Total retained earnings 24,541, ,419, ,148, Other equity 52, , ,207 - Treasury stock (292,644) - Total equity attributable to owners of the Company 33,063, ,830, ,206, NON-CONTROLLING INTERESTS (Notes 14 and 24) 7,900, ,125, ,632, Total stockholders' equity 40,963, ,956, ,838, TOTAL $ 74,649, $ 71,702, $ 71,104, TOTAL $ 74,649, $ 71,702, $ 71,104, The accompanying notes are an integral part of the consolidated financial statements. (With Deloitte & Touche review report dated August 5, ) - 3 -

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 Amount % Amount % Amount % Amount % NET SALES (Notes 25 and 32) $ 11,318, $ 10,243, $ 21,936, $ 19,674, OPERATING COSTS (Notes 13, 26 and 32) 8,883, ,327, ,442, ,084, GROSS PROFIT 2,434, ,915, ,493, ,589, OPERATING EXPENSES (Notes 26 and 32) Marketing 73, , , ,588 1 General and administrative 262, , , ,060 2 Research and development 308, , , ,124 3 Total operating expenses 644, , ,245, ,081,772 6 OPERATING INCOME 1,789, ,349, ,247, ,507, NONOPERATING INCOME AND EXPENSES Share of profits of associates (Note 15) 51,221-32,156-82,042-65,022 - Miscellaneous income (Notes 26 and 32) 17,004-24,106-38,791-42,739 - Other gains and losses (Notes 26 and 32) (60,931) (1) (8,681) - (23,221) - 12,917 - Financial costs (Note 26) (28,950) - (48,188) - (70,240) - (95,272) - Foreign exchange loss, net (Note 26) (24,180) - (34,068) - (132,239) (1) (71,198) - Total nonoperating income and expenses (45,836) (1) (34,675) - (104,867) (1) (45,792) - INCOME BEFORE INCOME TAX 1,743, ,315, ,143, ,461, INCOME TAX EXPENSE (Notes 4 and 27) 337, , , ,013 1 NET INCOME 1,406, ,186, ,623, ,215, OTHER COMPREHENSIVE INCOME (Note 24) Items that may be reclassified subsequently to profit or loss Exchange differences on translating foreign operations (30,610) - (22,353) - (107,802) (1) (34,982) - Net valuation gain (loss) on available-for-sale financial assets 38,117-71,112 - (1,561) - 71,527 - Total other comprehensive income (loss) 7,507-48,759 - (109,363) (1) 36,545 - TOTAL COMPREHENSIVE INCOME $ 1,413, $ 1,235, $ 2,514, $ 2,252, (Continued) - 4 -

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 Amount % Amount % Amount % Amount % NET INCOME ATTRIBUTABLE TO Shareholders of the parent $ 1,128, $ 926,638 9 $ 2,068,959 9 $ 1,697,997 8 Non-controlling interests 277, , , ,860 3 $ 1,406, $ 1,186, $ 2,623, $ 2,215, TOTAL COMPREHENSIVE INCOME ATTRIBUTABLE TO Shareholders of the parent $ 1,136, $ 975,397 9 $ 1,959,596 9 $ 1,734,542 9 Non-controlling interests 277, , , ,860 2 $ 1,413, $ 1,235, $ 2,514, $ 2,252, EARNINGS PER SHARE (Note 28) Basic $ 1.45 $ 1.20 $ 2.66 $ 2.21 Diluted $ 1.45 $ 1.19 $ 2.64 $ 2.19 The accompanying notes are an integral part of the consolidated financial statements. (With Deloitte & Touche review report dated August 5, ) (Concluded) - 5 -

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 Unrealized Share Capital Issued and Differences on Gain (Loss) on Outstanding Retained Earnings Translating Available-for Total Share Capital Unappropriated Foreign -sale Financial Noncontrolling Shareholders (Thousands) Amount Surplus Legal Reserve Earnings Operations Assets Treasury Stock Total Interest Equity 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 2014 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 BALANCE, JANUARY 1, 779,147 $ 7,791,466 $ 1,457,194 $ 4,952,489 $ 19,467,504 $ 167,050 $ (4,919) $ - $ 33,830,784 $ 8,125,270 $ 41,956,054 APPROPRIATION OF EARNINGS Legal reserve ,581 (401,581) Cash dividends distributed by the Corporation (1,947,866) (1,947,866) - (1,947,866) Cash dividends distributed by subsidiaries (779,476) (779,476) Issue of cash dividends from capital surplus - - (779,147) (779,147) - (779,147) Net income for the six months ended ,068, ,068, ,582 2,623,541 Other comprehensive income for the six months ended (107,802) (1,561) - (109,363) - (109,363) Total comprehensive income for the six months ended ,068,959 (107,802) (1,561) - 1,959, ,582 2,514,178 BALANCE, JUNE 30, 779,147 $ 7,791,466 $ 678,047 $ 5,354,070 $ 19,187,016 $ 59,248 $ (6,480) $ - $ 33,063,367 $ 7,900,376 $ 40,963,743 The accompanying notes are an integral part of the consolidated financial statements. (With Deloitte & Touche review report dated August 5, ) - 6 -

8 POWERTECH TECHNOLOGY INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (In Thousands of New Taiwan Dollars) (Reviewed, Not Audited) CASH FLOWS FROM OPERATING ACTIVITIES Current income before income tax $ 3,143,056 $ 2,461,870 Adjustments to reconcile income before income tax to net cash provided by operating activities: Depreciation 4,129,321 4,251,359 Amortization 55,789 56,195 Net gain on fair value change of financial assets designated as at fair value through profit or loss (6,027) (7,796) Financial costs 70,240 95,272 Premium amortization of held-to-maturity financial assets 1,104 1,180 Interest revenue (37,982) (39,601) Compensation cost of employee share options - 21,953 Share of profits of associates (82,042) (65,022) Net gain on disposal of property, plant and equipment (128,428) (59,942) Loss on disposal of intangible assets 59 - Net gain on disposal of available-for-sale financial assets (1,093) - Impairment loss on financial assets 121,866 - Loss (gain) of foreign currency exchange, net 119,907 (20,227) Changes in operating assets and liabilities: Increase in financial assets held for trading (35,200) (37,700) Increase in notes and accounts receivable (669,223) (316,355) Decrease (increase) in accounts receivable from related parties 771,045 (218,561) (Increase) decrease in other receivables (62,704) 66,257 Decrease (increase) in other receivables from related parties 11,263 (6,485) (Increase) decrease in inventories (263,840) 62,716 (Increase) decrease in prepayments (30,279) 8,778 Decrease in other current assets 36,947 20,607 Decrease in financial liability held for trading (4,336) - Decrease in accounts payable (173,772) (222,380) Decrease in accounts payable to related parties - (303) Increase in bonus to employees, directors and supervisors 339, ,498 Decrease in other payables to related parties (9,296) (46,014) Decrease in accrued expenses and other current liabilities (574,143) (29,730) Decrease in provisions (15,683) (775) Decrease in net defined benefit liabilities (7,575) (7,518) Decrease in other accounts payable (531,838) (741,858) Net cash provided by operating activities 6,166,820 5,525,418 Interest received 39,868 39,166 Interest paid (98,926) (129,059) Income tax paid (737,324) (308,994) Net cash provided by operating activities 5,370,438 5,126,531 (Continued) - 7 -

9 POWERTECH TECHNOLOGY INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (In Thousands of New Taiwan Dollars) (Reviewed, Not Audited) CASH FLOWS FROM INVESTING ACTIVITIES Proceeds on sale of available-for-sale financial assets $ 4,819 $ - Proceeds from the disposal of (acquisition of) debt investments with no active market 5,210 (467,901) Purchase of held-to-maturity financial assets - (200,918) Proceeds on sale of held-to-maturity financial assets - 200,000 Acquisition of property, plant and equipment (6,157,408) (3,226,717) Disposal of property, plant and equipment 207,990 86,462 Decrease in refundable deposits 4,402 41,780 Increase in intangible assets (4,326) (440) (Increase) decrease in prepayments for equipment (12,579) 14,415 Decrease in other prepayments 5,105 2,884 Net cash used in investing activities (5,946,787) (3,550,435) CASH FLOWS FROM FINANCING ACTIVITIES Increase in short-term bank loans 1,277,229 1,196,990 Increase in long-term debts 5,120,889 6,773,333 Decrease in long-term debts (6,549,327) (7,918,072) Increase in guarantee deposits - 2,000 Decrease in finance lease payables (3,994) (4,740) Proceeds from reissue of treasury shares - 250,277 Net cash (used in) provided by financing activities (155,203) 299,788 EFFECTS OF EXCHANGE RATE CHANGES ON THE BALANCE OF CASH HELD IN FOREIGN CURRENCIES (50,119) (74,420) NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS (781,671) 1,801,464 CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 19,729,637 17,560,164 CASH AND CASH EQUIVALENTS, END OF PERIOD $ 18,947,966 $ 19,361,628 The accompanying notes are an integral part of the consolidated financial statements. (With Deloitte & Touche review report dated August 5, ) (Concluded) - 8 -

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 ) on May 15, 1997 and commenced business in September, 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 Hsinchu Industrial Park, Hukou, Hsinchu. The Corporation s shares have been listed on the Taiwan Stock Exchange (TSE) on November 8, 2004 after they were traded on the Taipei Exchange 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, the New Taiwan dollar. For greater comparability and consistency of financial reporting, the consolidated financial statements are presented in New Taiwan dollars since the Corporation s stock is 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 5,. 3. APPLICATION OF NEW, AMENDED AND REVISED STANDARDS AND INTERPRETATIONS a. International Financial Reporting Standards (IFRS), International Accounting Standards (IAS), Interpretations of IFRS (IFRIC), and Interpretations of IAS (SIC) endorsed by the FSC for application starting from Rule No issued by the FSC endorsed the following IFRS, IAS, IFRIC and SIC (collectively, the IFRSs ) for application starting January 1, New, Amended or Revised Standards and Interpretations (the New IFRSs ) Effective Date Announced by IASB (Note 1) Annual Improvements to IFRSs Cycle July 1, 2014 (Note 2) Annual Improvements to IFRSs Cycle July 1, 2014 Annual Improvements to IFRSs Cycle January 1, (Note 3) Amendments to IFRS 10, IFRS 12 and IAS 28 'Investment Entities: January 1, Applying the Consolidation Exception (Continued) - 9 -

11 New, Amended or Revised Standards and Interpretations (the New IFRSs ) Effective Date Announced by IASB (Note 1) Amendment to IFRS 11 Accounting for Acquisitions of Interests in January 1, Joint Operations IFRS 14 Regulatory Deferral Accounts January 1, Amendment to IAS 1 Disclosure Initiative January 1, Amendments to IAS 16 and IAS 38 Clarification of Acceptable January 1, Methods of Depreciation and Amortization Amendments to IAS 16 and IAS 41 Agriculture: Bearer Plants January 1, Amendment to IAS 19 Defined Benefit Plans: Employee July 1, 2014 Contributions Amendment to IAS 36 Impairment of Assets: Recoverable Amount January 1, 2014 Disclosures for Non-financial Assets Amendment to IAS 39 Novation of Derivatives and Continuation of January 1, 2014 Hedge Accounting IFRIC 21 Levies January 1, 2014 (Concluded) Note 1: Unless stated otherwise, the above New or amended 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, 2014; the amendment to IFRS 3 applies to business combinations with acquisition date on or after July 1, 2014; the amendment to IFRS 13 is effective immediately; the remaining amendments are effective for annual periods beginning on or after July 1, Note 3: 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, ; the remaining amendments are effective for annual periods beginning on or after January 1,. Except for the following, the initial application of the above New or amended IFRSs in 2017 would not have any material impact on the Group s accounting policies: 1) Amendment to IAS 36 Recoverable Amount Disclosures for Non-financial Assets The amendment clarifies that the recoverable amount of an asset or a cash-generating unit is disclosed only when an impairment loss on the asset has been recognized or reversed during the period. Furthermore, if the recoverable amount of an item of property, plant and equipment for which impairment loss has been recognized or reversed is fair value less costs of disposal, the Group is required to disclose the fair value hierarchy. If the fair value measurements are categorized within Level 2 and Level 3, the valuation technique and key assumptions used to measure the fair value are disclosed. The discount rate used is disclosed if such fair value less costs of disposal is measured by using present value technique. The amendment will be applied retrospectively. 2) 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

12 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. The share-based payment arrangements with market conditions, non-market conditions or non-vesting conditions will be accounted for differently, and the aforementioned amendment will be applied prospectively to those share-based payments granted on or after January 1, 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 amendment will be applied prospectively to business combination with acquisition date on or after January 1, 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. The judgements made in applying aggregation criteria should be disclosed retrospectively upon initial application of the amendment in When the amended IFRS 13 becomes effective in 2017, the short-term receivables and payables with no stated interest rate will be measured 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. 3) 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. The amendment will be applied prospectively starting from January 1, 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 those contracts do not meet the definitions of financial assets or financial liabilities within IAS 32. 4) 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

13 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. 5) Annual Improvements to IFRSs: Cycle Several standards including IFRS 5 Non-current assets held for sale and discontinued operations, IFRS 7, IAS 19 and IAS 34 were amended in this annual improvement. 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 amendment will be applied prospectively to transactions that occur on or after January 1, Except for the above impacts, as of the date the consolidated financial statements were authorized for issue, the Group continues assessing other possible impacts that application of the aforementioned amendments will have on the Group s financial position and financial performance, and will disclose these other impacts when the assessment is completed. b. New IFRSs in issue but not yet endorsed by the FSC The Group has not applied the following IFRSs issued by the IASB but not yet endorsed by the FSC. The FSC announced that the Group should apply IFRS 15 starting January 1, As of the date the consolidated financial statements were authorized for issue, the FSC has not announced the effective dates of other new IFRSs. New IFRSs Effective Date Announced by IASB (Note) Amendment to IFRS 2 Classification and Measurement of January 1, 2018 Share-based Payment Transactions IFRS 9 Financial Instruments January 1, 2018(Note 2) 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 To be determined by IASB between an Investor and its Associate or Joint Venture IFRS 15 Revenue from Contracts with Customers January 1, 2018 Amendment to IFRS 15 Clarifications to IFRS 15 January 1, 2018 (Continued)

14 New IFRSs Effective Date Announced by IASB (Note) IFRS 16 Leases January 1, 2019 Amendment to IAS 7 Disclosure Initiative January 1, 2017 Amendments to IAS 12 Recognition of Deferred Tax Assets for January 1, 2017 Unrealized Losses (Concluded) Note: Unless stated otherwise, the above New IFRSs are effective for annual periods beginning on or after their respective effective dates. 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 the 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. 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 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

15 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. 2) 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. 3) IFRS 16 Leases IFRS 16 sets out the accounting standards for leases that will supersede IAS 17 and a number of related interpretations. Under IFRS 16, if the Group is a lessee, it shall recognize right-of-use assets and lease liabilities for all leases on the consolidated balance sheets except for low-value and short-term leases. The Group may elect to apply the accounting method similar to the accounting for operating lease under IAS 17 to the low-value and short-term leases. On the consolidated statements of comprehensive income, the Group should present the depreciation expense charged on the right-of-use asset separately from interest expense accrued on the lease liability; interest is computed by using effective interest method. On the consolidated statements of cash flows, cash payments for the principal portion of the lease liability are classified within financing activities; cash payments for interest portion are classified within operating activities. The application of IFRS 16 is not expected to have a material impact on the accounting of the Group as lessor. When IFRS 16 becomes effective, the Group may elect to apply this Standard either retrospectively to each prior reporting period presented or retrospectively with the cumulative effect of the initial application of this Standard recognized at the date of initial application. 4) Amendments to IAS 12 Recognition of Deferred Tax Assets for Unrealized Losses The amendment clarifies that the difference between the carrying amount of the debt instrument measured at fair value and its tax base gives rise to a temporary difference, even though there are unrealized losses on that asset, irrespective of whether the Group expects to recover the carrying amount of the debt instrument by sale or by holding it and collecting contractual cash flows

16 In addition, in determining whether to recognize a deferred tax asset, the Group should assess a deductible temporary difference in combination with all of its other deductible temporary differences, unless the tax law restricts the utilization of losses to deduction against income of a specific type, in which case, a deductible temporary difference is assessed in combination only with other deductible temporary differences of the appropriate type. The amendment also stipulates that, when determining whether to recognize a deferred tax asset, the estimate of probable future taxable profit may include some of the Group s assets for more than their carrying amount if there is sufficient evidence that it is probable that the Group will achieve this, and that the estimate for future taxable profit should exclude tax deductions resulting from the reversal of deductible temporary differences. 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 a. Statement of compliance These interim consolidated financial statements have been prepared in accordance with the Regulations Governing the Preparation of Financial Reports by Securities Issuers, 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 14 for detailed information about subsidiary included in consolidated financial statements, percentage of ownership and main business. c. Other significant accounting policies Except for the following, the accounting policies applied in these consolidated financial statements are consistent with those applied in the consolidated financial statements for the year ended. For the summary of other significant accounting policies, please refer to the consolidated financial statements for the year ended. 1) Retirement benefits 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. 2) Taxation Income tax expense represents the sum of the tax currently payable and deferred tax. Interim period income taxes are assessed on an annual basis and calculated by applying to an interim period's pre-tax income the tax rate that would be applicable to expected total annual earnings

17 5. CRITICAL ACCOUNTING JUDGMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY 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. 6. CASH AND CASH EQUIVALENTS Checking accounts and demand deposits $ 17,512,407 $ 18,170,263 $ 17,867,233 Cash on hand Cash equivalent Repurchase agreements collateralized by bonds 1,435,365 1,164,893 1,494,362 Commercial papers - 394,400 - $ 18,947,966 $ 19,729,637 $ 19,361,628 The market rate intervals of cash in bank and cash equivalent at the end of the reporting period were as follows: Bank balance 0%-1.16% 0%-1.16% 0%-1.30% Repurchase agreement collateralized by bonds 0.34%-.40% 0.37%-0.48% 0.52%-1.13% Commercial papers %-0.45% - 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 $ 8,506 $ 2,527 $ 1,087 Non-derivative financial assets Mutual funds 58,956 23, ,956 Financial liabilities at FVTPL - current $ 67,462 $ 26,235 $ 167,043 Financial liabilities held for trading - current Derivative financial liabilities (not under hedge accounting) Foreign exchange forward contracts $ 81 $ 4,417 $ 1,

18 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 20,000 USD to NTD USD 7,200 USD to JPY USD 5,000 Sell forward exchange contracts USD to NTD USD 19,400 USD to JPY USD 3,000 Sell forward exchange contracts USD to NTD USD 18,200 USD to RMB USD 1,000 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 - 02 Taiwan Power Company 4 Bond $ 200,215 $ 200,657 $ - Noncurrent Domestic investments Corporate bonds - 01 TSMC 2A Bond $ 200,561 $ 200,814 $ 201,070 Corporate bonds - 02 Taiwan Power Company 1A Bond 200, , ,835 Corporate bonds - 01 TSMC 1B Bond 101, ,634 - Corporate bonds - P04 Hon Hai 4C Bond 100, ,001 - Corporate bonds - P04 FENC 4 Bond 100, ,000 - Corporate bonds - 02 Taiwan Power Company 4 Bond ,104 $ 702,476 $ 703,138 $ 603,009 On March 10, 2014, 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,, at par value of $200,000 thousand

19 On August 7, 2014, 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 $200,917 thousand (par value $200,000 thousand), and a maturity date of May 6, 2018, at par value of $200,000 thousand. On October 20,, the Group bought corporate bonds issued by TSMC, which have an effective interest rate of 0.91%; a premium value of $101,740 thousand (par value $100,000 thousand); and maturity on January 11, On October 23,, the Group bought corporate bonds issued by HON HAI PRECISION IND. CO., LTD., which have an effective interest rate of 1.15%; a premium value of $100,001 thousand (par value $100,000 thousand); and maturity on September 29, On November 16,, the Group bought corporate bonds issued by Far Eastern New Century Corporation, which have an effective interest rate of 1.25%; a premium value of $100,001 thousand (par value $100,000 thousand); and maturity date on November 16, AVAILABLE-FOR-SALE FINANCIAL ASSETS Noncurrent Domestic investments Listed share $ 38,846 $ 44,133 $ 71,875 Foreign investments Listed share 236, , ,116 $ 275,555 $ 393,862 $ 449, FINANCIAL ASSETS MEASURED AT COST Noncurrent Domestic unlisted common shares $ - $ 8,846 $ 8,846 Classified according to financial asset measurement categories Available-for-sale financial assets $ - $ 8,846 $ 8,846 Management believed that the above unlisted equity investments held by the Group, whose fair value cannot be reliably measured due to the range of reasonable fair value estimates was so significant; therefore they were measured at cost less impairment at the end of reporting period. The Corporation assessed the impairment of investees for the six months ended, and recognized impairment loss amounting to $8,846 thousand

20 11. DEBT INVESTMENTS WITH NO ACTIVE MARKET Noncurrent Pledged time deposits $ 564,250 $ 569,460 $ 536,901 a. Refer to Note 33 for information relating to debt investments with no active market pledged as security. 12. NOTES AND ACCOUNTS RECEIVABLE, NET Notes receivable - third parties $ 84,169 $ 92,423 $ 93,618 Accounts receivable - third parties 5,528,076 4,853,633 4,671,165 Less: Allowance for impairment loss (23,111) (23,160) (18,748) 5,589,134 4,922,896 4,746,035 Accounts receivable - related parties 3,520,888 4,303,817 3,825,773 $ 9,110,022 $ 9,226,713 $ 8,571,808 The average credit period on sales of goods was 30 to 90 days. In determining the recoverability of a trade receivable, the Group considered any change in the credit quality of the trade receivable since the date credit was initially granted to the end of the reporting period. Allowance for impairment loss were recognized reference to past default experience of the counterparties and an analysis of their current financial position. For the trade receivables balances that were past due at the end of the reporting period, the Group did not recognize an allowance for impairment loss. There had not been a significant change in credit quality and the amounts were still considered recoverable. The Group did not hold any collateral or other credit enhancements over these balances nor did it have a legal right to offset against any amounts owed by the Group to the counterparty. Age of receivables was as follow: Less than 60 days $ 4,815,834 $ 4,227,073 $ 3,907, days 685, , , days 26,472 34,844 - The above analyses were based on the invoice date. $ 5,528,076 $ 4,853,633 $ 4,671,

21 Age of receivables that are past due but not impaired was as follow: Less than 60 days $ 10,297 $ 57,605 $ 118, days 253 1,177 26, days 1 9,079 3,986 More than 120 days - 25, Above analysis was based on the past due date. $ 10,551 $ 93,336 $ 149,347 Movement in the allowance for impairment loss recognized on notes receivable and accounts receivables were as follow: Individually Assessed for Impairment Collectively Assessed for Impairment Total Balance at January 1, $ 2,920 $ 15,868 $ 18,788 Add: Effect of changes rate changes (40) - (40) Balance at $ 2,880 $ 15,868 $ 18,748 Balance at January 1, $ 7,292 $ 15,868 $ 23,160 Add: Effect of changes rate changes (49) - (49) Balance at $ 7,243 $ 15,868 $ 23,111 Included in the allowance for impairment loss were individually impaired trade receivables amounting to $7,243 thousand, $7,292 thousand, and $2,880 thousand as of,, and June 30,, respectively. These amounts relate to customers that had been in significant financial difficulty. The impairment recognized represents the carrying amount of these accounts receivables. The Group did not hold any collateral over these balances. 13. INVENTORIES Finished goods $ 333,017 $ 422,142 $ 255,645 Work in progress 639, , ,417 Raw materials 1,755,912 1,457,811 1,576,767 Supplies 272, , ,557 $ 3,000,340 $ 2,736,500 $ 2,519,

22 The costs of inventories recognized as cost of goods sold were as follows: For the Three Months Ended Provision (reversal) of inventory valuation and obsolescence losses $ 20,101 $ (1,163) $ 31,733 $ 10,545 Unallocated overheads $ 647,474 $ 69,084 $ 1,171,493 $ 597,444 Sales of scrapes $ 30,597 $ 11,800 $ 53,706 $ 45, SUBSIDIARY a. Subsidiary included in consolidated financial statements % of Ownership December 31 Investor Investee Main Business Remark Powertech Technology Inc. Powertech Holding (BVI) Inc. PTI Technology (Singapore) Pte. Ltd. Powertech Technology (Singapore) Pte. Ltd. Powertech Holding (BVI) Inc. Greatek Electronics Inc. ( GEI ) Powertech Technology (Singapore) Pte. Ltd. PTI Technology (Singapore) Pte. Ltd. Powertech Technology (Suzhou) Ltd. Powertech Technology (Xian) Ltd. Investment business 100% 100% 100% - Semiconductor assembly and testing service 43% 43% 43% Notes 1 and 3 Integrated circuit testing and 100% 100% 100% Note 2 assembly service Investment business 100% 100% 100% - Semiconductor testing design, manufacturing, sales business and assembly services Semiconductor testing design, manufacturing, sales business and assembly services 100% 100% 100% - 100% 100% 100% Note 4 Note 1: On the reelection of the directors and supervisors of Greatek Electronics Inc., the Corporation got a majority of the directors seats and become subsidiary even the Corporation only have 43% ownership of Greatek Electronics Inc.. Note 2: Powertech Technology (Singapore) Pte. Ltd. is a non-significant subsidiary, its financial statements have not been reviewed. Note 3: Subsidiaries that have material non-controlling interests. Note 4: The immaterial subsidiary was established in June and recognized on the basis of unreviewed financial statements. b. Details of subsidiaries that have material non-controlling interests Investee Greatek Electronics Inc. Location Zhunan Township, Miaoli County Proportion of Ownership and Voting Rights Held by Non-controlling Interests 57% 57% 57% Profit Allocated to Non-controlling Interests For the Three Months Ended Accumulated Non-controlling Interests Investee Greatek Electronics Inc. $ 277,367 $ 259,920 $ 554,582 $ 517,860 $ 7,900,376 $ 8,125,270 $ 7,632,