YFY Inc. and Subsidiaries

Transcription

1 YFY Inc. and Subsidiaries Consolidated Financial Statements for the Three Months Ended 2018 and and Independent Auditors Review Report

2 INDEPENDENT AUDITORS REVIEW REPORT The Board of Directors and Shareholders YFY Inc. Introduction We have reviewed the accompanying consolidated balance sheets of YFY Inc. and its subsidiaries (the Group ) as of 2018 and and the related consolidated statements of comprehensive income, changes in equity and cash flows for the three-month periods then ended and related notes, including a summary of significant accounting policies (collectively referred to as the consolidated financial statements ). Management is responsible for the preparation and fair presentation of the consolidated financial statements in accordance with the Regulations Governing the Preparation of Financial Reports by Securities Issuers and International Accounting Standard 34 Interim Financial Reporting. Our responsibility is to express a conclusion on the consolidated financial statements based on our reviews. Scope of Review Except as explained in the following paragraph, we conducted our reviews in accordance with Statement of Auditing Standards No. 65 Review of Financial Information Performed by the Independent Auditor of the Entity. A review of consolidated financial statements consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion. Basis for Qualified Conclusion As disclosed in Notes 16 and 17 to the consolidated financial statements, the financial statements of some non-significant subsidiaries and equity-method investments included in the consolidated financial statements referred to in the first paragraph were not reviewed. As of 2018 and, the combined total assets of these non-significant subsidiaries were NT$19,012,866 and NT$26,689,113, respectively, representing 16% and 25%, respectively, of the consolidated total assets, and the combined total liabilities of these non-significant subsidiaries were NT$7,012,831 NT$8,899,164, respectively, representing 10% and 13%, respectively, of the consolidated total liabilities; for the three-month periods ended 2018 and, the amounts of combined comprehensive income of these non-significant subsidiaries were NT$391,107 and NT$68,621, respectively, representing 39% and 4%, respectively, of the consolidated total comprehensive income. As of 2018 and, the carrying amounts of the above mentioned equity-method investees were NT$1,717,266 and NT$2,169,368, respectively. Included in the Group s total comprehensive income and loss for the three-month periods ended 2018 and were a gain of NT$88,896 and a loss of NT$31,343, respectively, of the equity-method investees net profit or loss

3 Qualified Conclusion Based on our reviews, except for the adjustments, if any, as might have been determined to be necessary had the financial statements of the non-significant subsidiaries and equity-method investments as described in the preceding paragraph been reviewed, nothing has come to our attention that has caused us to believe that the accompanying consolidated financial statements do not give a true and fair view of the consolidated financial position of the Group as of 2018 and and its consolidated financial performance and its consolidated cash flows for the three-month periods then ended in accordance with the Regulations Governing the Preparation of Financial Reports by Securities Issuers and International Accounting Standard 34 Interim Financial Reporting. The engagement partners on the reviews resulting in this independent auditors review report are Chih-Ming Shao and Cheng-Hung Kuo. Deloitte & Touche Taipei, Taiwan Republic of China May 11, 2018 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 YFY INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (In Thousands of New Taiwan Dollars) 2018 (Reviewed) December 31, (Audited) (Reviewed) ASSETS Amount % Amount % Amount % CURRENT ASSETS Cash and cash equivalents (Notes 4 and 6) $ 5,000,179 4 $ 4,144,894 4 $ 2,207,603 2 Financial assets at fair value through profit or loss (FVTPL) (Notes 4 and 7) 776, , ,278 1 Financial assets at fair value through other comprehensive income (FVTOCI) (Notes 4 and 8) 4,957, Available-for-sale financial assets (Notes 4 and 10) - - 4,532, ,911,156 3 Financial assets at amortized cost (Notes 4 and 9) 2,439, Debt investments with no active market (Notes 4 and 6) - - 2,357, ,991,862 2 Notes receivable (Notes 4 and 13) 3,403, ,775, ,783,647 3 Accounts receivable (Notes 4, 13 and 29) 10,612, ,974, ,312,809 9 Inventories (Notes 4 and 14) 9,190, ,191, ,689,405 8 Biological assets (Notes 4 and 15) 3,357, ,280, ,103,051 3 Prepayments 1,337, ,007, ,487 1 Other financial assets (Notes 4 and 30) 318, , ,117 - Other current assets (Notes 4, 11 and 29) 668, ,067, ,024,224 1 Total current assets 42,060, ,062, ,067, NON-CURRENT ASSETS Financial assets at fair value through profit or loss (FVTPL) (Notes 4 and 7) 406, Financial assets at fair value through other comprehensive income (FVTOCI) (Notes 4 and 8) 12,143, Available-for-sale financial assets (Notes 4 and 10) - - 8,712, ,814,329 8 Financial assets carried at cost (Notes 4 and 12) - - 1,495, ,609,951 2 Debt investments with no active market (Notes 4 and 29) , ,000 - Investments accounted for using the equity method (Notes 4 and 17) 6,468, ,307, ,806,271 6 Property, plant and equipment (Notes 4, 18 and 24) 48,655, ,994, ,145, Investment properties (Notes 4 and 19) 2,708, ,711, ,747,456 3 Goodwill (Note 4) 448, , ,476 - Deferred tax assets (Note 4) 431, , ,027 1 Long-term prepayments for leases 1,326, ,314, ,016,442 1 Prepayments for equipment (Note 18) 796, ,026, ,485,258 2 Other non-current assets (Note 30) 715, , ,588 1 Total non-current assets 74,101, ,523, ,753, TOTAL $ 116,162, $ 112,585, $ 107,820, LIABILITIES AND EQUITY CURRENT LIABILITIES Short-term borrowings (Note 20) $ 13,783, $ 11,384, $ 12,187, Short-term bills payable (Note 20) 8,746, ,021, ,340, Financial liabilities at fair value through profit or loss (FVTPL) (Notes 4 and 7) 364, ,060-51,768 - Notes and accounts payable (Note 29) 7,854, ,748, ,659,410 7 Other payables (Note 18) 2,932, ,984, ,686,818 3 Current tax liabilities (Note 4) 238, , ,747 - Current portion of long-term borrowings (Note 20) 160, , ,107 - Other current liabilities (Notes 4, 7, 11 and 23) 1,488, ,534, ,401,603 1 Total current liabilities 35,568, ,336, ,784, NON-CURRENT LIABILITIES Long-term borrowings, net of current portion (Note 20) 29,459, ,964, ,864, Deferred tax liabilities (Note 4) 3,423, ,386, ,376,577 3 Net defined benefit liabilities (Notes 4 and 21) 1,055, ,134, ,433,035 1 Other non-current liabilities (Notes 4 and 7) 256, , ,613 - Total non-current liabilities 34,195, ,722, ,894, Total liabilities 69,764, ,059, ,679, EQUITY ATTRIBUTABLE TO OWNERS OF THE COMPANY (Notes 4 and 22) Share capital 16,603, ,603, ,603, Capital surplus 1,050, ,046, ,546 1 Retained earnings 14,146, ,894, ,175, Other equity 4,008, ,686, ,789 1 Total equity attributable to owners of the Company 35,809, ,231, ,574, NON-CONTROLLING INTERESTS 10,588, ,295, ,566,909 9 Total equity 46,398, ,526, ,141, TOTAL $ 116,162, $ 112,585, $ 107,820, The accompanying notes are an integral part of the consolidated financial statements. (With Deloitte & Touche review report dated May 11, 2018) - 3 -

5 YFY 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 March Amount % Amount % OPERATING REVENUE (Notes 4, 23 and 29) Net sales $ 15,828, $ 13,753, Other operating revenue 1,990, ,755, Total operating revenue 17,819, ,509, OPERATING COSTS (Notes 14, 24 and 29) Cost of goods sold 13,996, ,496, Other operating costs 1,362, ,259,603 8 Total operating costs 15,358, ,756, LOSS ON CHANGES IN FAIR VALUE LESS COSTS TO SELL BIOLOGICAL ASSETS (Notes 4 and 15) (4,249) - (1,498) - GROSS PROFIT 2,456, ,751, OPERATING EXPENSES (Notes 24 and 29) Selling and marketing 1,217, ,172,387 8 General and administrative 927, ,411 6 Research and development 55, ,786 - Total operating expenses 2,200, ,153, PROFIT FROM OPERATIONS 256, ,959 4 NON-OPERATING INCOME AND EXPENSES Finance costs (Notes 4 and 24) (247,846) (1) (217,638) (1) Share of profit of associates (Notes 4 and 16) 68,502-19,830 - Interest income 52,154-49,594 - Rental income (Notes 19 and 29) 23,014-12,418 - Other income 76, ,408 1 Gain on disposal of investments ,721 - Other losses (4,856) - (8,009) - Foreign exchange gain (loss) (Note 32) 354,903 2 (100,371) (1) Loss on financial instruments at FVTPL (Notes 4 and 28) (228,945) (1) (319,886) (2) Total non-operating income and expenses 93,135 1 (425,933) (3) PROFIT BEFORE INCOME TAX 349, ,026 1 (Continued) - 4 -

6 YFY 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 March Amount % Amount % INCOME TAX EXPENSE (Notes 4 and 25) $ (174,067) (1) $ (110,406) (1) NET PROFIT FOR THE YEAR 175, ,620 - OTHER COMPREHENSIVE INCOME (LOSS) (Notes 4 and 25) Items that will not be reclassified subsequently to profit or loss: Remeasurement of defined benefit plans 17, Unrealized gain on investments in equity instruments at FVTOCI 613, Share of the other comprehensive income of associates 51, Items that may be reclassified subsequently to profit or loss: Exchange differences on translating foreign operations 148,447 1 (1,728,199) (11) Unrealized gain on available-for-sale financial assets ,358 1 Cash flow hedges - - (12,405) - Gain on hedging instruments 7, Share of the other comprehensive loss of associates (14,576) - (139,828) (1) Other comprehensive income (loss) for the period, net of income tax 823,940 5 (1,680,074) (11) TOTAL COMPREHENSIVE INCOME (LOSS) FOR THE PERIOD $ 999,418 6 $ (1,618,454) (11) NET PROFIT (LOSS) ATTRIBUTABLE TO: Owners of the Company $ 110,258 1 $ (44,795) - Non-controlling interests 65, ,415 - $ 175,478 1 $ 61,620 - TOTAL COMPREHENSIVE INCOME (LOSS) ATTRIBUTABLE TO: Owners of the Company $ 866,323 5 $ (1,585,363) (11) Non-controlling interests 133,095 1 (33,091) - $ 999,418 6 $ (1,618,454) (11) (Continued) - 5 -

7 YFY 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 March Amount % Amount % EARNINGS PER SHARE (Note 26) Basic $ 0.07 $ (0.03) Diluted $ 0.07 $ (0.03) The accompanying notes are an integral part of the consolidated financial statements. (With Deloitte & Touche review report dated May 11, 2018) (Concluded) - 6 -

8 YFY INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (In Thousands of New Taiwan Dollars) (Reviewed, Not Audited) Equity Attributable to Owners of the Company Other Equity Exchange Differences on Unrealized Gain (Loss) on Unrealized Gain Share Capital Capital Surplus Retained Earnings Translating Available-for- on Financial Gain (Loss) on Shares Consolidation Unappropriated Foreign sale Financial Assets at Cash Flow Hedging (Thousands) Amount Treasury Shares Excess Others Total Legal Reserve Special Reserve Earnings Total Operations Assets FVTOCI Hedges Instruments Total Non-controlling Interests Total Equity BALANCE AT JANUARY 1, 1,660,372 $ 16,603,715 $ 14,947 $ 293,124 $ 515,722 $ 823,793 $ 3,242,110 $ 4,031,432 $ 4,948,452 $ 12,221,994 $ 798,656 $ 1,744,884 $ - $ (11,183 ) $ - $ 32,181,859 $ 9,460,270 $ 41,642,129 Adjustments for the changes in equity in associates ,954 13, (35 ) (35 ) , ,858 Partial disposal of interests in subsidiaries (37,419 ) (37,419 ) (37,419 ) 136,764 99,345 Adjustments for the changes in equity in subsidiaries ,218 3, (1,858 ) (1,858 ) ,360 2,027 3,387 Net loss for the three months ended (44,795 ) (44,795 ) (44,795 ) 106,415 61,620 Other comprehensive income (loss) for the three months ended, net of income tax (1,700,741) 171,320 - (11,147) - (1,540,568) (139,506) (1,680,074) Total comprehensive income (loss) for the three months ended (44,795) (44,795) (1,700,741) 171,320 - (11,147) - (1,585,363) (33,091) (1,618,454) BALANCE AT MARCH 31, 1,660,372 $ 16,603,715 $ 14,947 $ 293,124 $ 495,475 $ 803,546 $ 3,242,110 $ 4,031,432 $ 4,901,764 $ 12,175,306 $ (902,085 ) $ 1,916,204 $ - $ (22,330 ) $ - $ 30,574,356 $ 9,566,909 $ 40,141,265 BALANCE AT JANUARY 1, ,660,372 $ 16,603,715 $ 14,947 $ 293,124 $ 738,729 $ 1,046,800 $ 3,254,722 $ 4,030,039 $ 6,609,773 $ 13,894,534 $ (263,411 ) $ 1,964,407 $ - $ (14,871 ) $ - $ 33,231,174 $ 10,295,146 $ 43,526,320 Adjustments on initial application , ,573 - (1,964,407 ) 3,545,472 14,871 (14,871 ) 1,705,638 43,400 1,749,038 BALANCE AT JANUARY 1, 2018 AS RESTATED 1,660,372 16,603,715 14, , ,729 1,046,800 3,254,722 4,030,039 6,734,346 14,019,107 (263,411 ) - 3,545,472 - (14,871 ) 34,936,812 10,338,546 45,275,358 Reversal of special reserve (1,455 ) 1, Cash dividends distributed by subsidiaries (4,564 ) (4,564 ) Adjustments for the changes in equity of associates ,316 2, , ,598 Adjustment for the changes in other capital surplus (14 ) (14 ) (14 ) - (14 ) Partial acquisition of interests in subsidiaries , ,823 Adjustments for the changes in equity of subsidiaries ,834 2, ,834 3,006 5,840 Net income for the three months ended , , ,258 65, ,478 Other comprehensive income (loss) for the three months ended 2018, net of income tax ,602 14, , ,556-7, ,065 67, ,940 Total comprehensive income (loss) for the three months ended , , , ,556-7, , , ,418 BALANCE AT MARCH 31, ,660,372 $ 16,603,715 $ 14,947 $ 293,124 $ 742,799 $ 1,050,870 $ 3,254,722 $ 4,028,584 $ 6,862,977 $ 14,146,283 $ (146,344 ) $ - $ 4,162,028 $ - $ (7,031 ) $ 35,809,521 $ 10,588,938 $ 46,398,459 The accompanying notes are an integral part of the consolidated financial statements. (With Deloitte & Touche review report dated May 11, 2018) - 7 -

9 YFY INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (In Thousands of New Taiwan Dollars) (Reviewed, Not Audited) For the Three Months Ended March CASH FLOWS FROM OPERATING ACTIVITIES Income before income tax $ 349,545 $ 172,026 Adjustments for: Depreciation and amortization expenses 966, ,651 Expected credit losses recognized on accounts receivable 8,358 - Impairment loss recognized on accounts receivable - 44,013 Net loss on fair value changes of financial instruments at FVTPL 228, ,886 Finance costs 247, ,638 Interest income (52,154) (49,594) Share of profit of associates (68,502) (19,830) Gain on disposal of property, plant and equipment (3,067) (18) Gain on disposal of investments - (35,721) Net unrealized loss (gain) on foreign currency exchange (359,545) 18,023 Write-down of inventories (reversed) (2,865) 2,589 Loss on changes in fair value less costs to sell biological assets 4,249 1,498 Changes in operating assets and liabilities Financial assets held for trading - 97,337 Financial assets mandatorily classified as at FVTPL (501,574) - Notes receivable 287,646 (1,026,594) Accounts receivable 478, ,741 Inventories (122,217) (685,942) Biological assets (26,985) (7,375) Prepayments (344,905) 165,399 Other current assets 354,660 (348,977) Notes and accounts payable 230, ,577 Other payables (201,092) (394,364) Other current liabilities (42,925) 543,542 Net defined benefit liabilities (60,757) (112,363) Cash generated from operations 1,370, ,142 Interest received 34,646 16,870 Dividends received Interest paid (220,945) (199,193) Income tax paid (126,073) (56,718) Net cash generated from operating activities 1,058, ,101 CASH FLOWS FROM INVESTING ACTIVITIES Proceeds from sale of financial assets at FVTOCI Proceeds from the return of capital upon investees' capital reduction of financial assets at FVTOCI 7,097 - Proceeds from sale of financial assets carried at cost (332,164) - Purchase of available-for-sale financial assets - (154,988) (Continued) - 8 -

10 YFY INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (In Thousands of New Taiwan Dollars) (Reviewed, Not Audited) For the Three Months Ended March Proceeds from sale of available-for-sale financial assets $ - $ 162,890 Purchase of debt investments with no active market - (341,764) Purchase of financial assets carried at cost - (77,737) Proceeds from sale of financial assets carried at cost - 5,806 Purchase of financial assets held for hedging - (4,988) Proceeds on sale of financial assets held for hedging 8,905 - Proceeds from sale of investments accounted for using the equity method - 5,531 Payments for property, plant and equipment (960,096) (1,195,695) Proceeds from disposal of property, plant and equipment 71,026 2,356 Proceeds from the disposal of investment properties 6,132 - Decrease in other financial assets 75,711 27,247 Increase in other non-current assets (74,835) (185,577) Net cash used in investing activities (1,198,001) (1,756,919) CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from short-term borrowings 2,465,787 3,154,379 Proceeds from short-term bills payable 730,245 12,444,239 Repayments of long-term borrowings (2,391,597) (15,752,338) Increase in other non-current liabilities 62, ,802 Increase in non-controlling interests 114, ,659 Overdue dividends paid (14) - Net cash generated from activities 981,630 64,741 EFFECTS OF EXCHANGE RATE CHANGES ON THE BALANCE OF CASH HELD IN FOREIGN CURRENCIES 13,084 (109,189) NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 855,285 (1,503,266) CASH AND CASH EQUIVALENTS AT THE BEGINNING OF THE PERIOD 4,144,894 3,710,869 CASH AND CASH EQUIVALENTS AT THE END OF THE PERIOD $ 5,000,179 $ 2,207,603 The accompanying notes are an integral part of the consolidated financial statements. (With Deloitte & Touche review report dated May 11, 2018) (Concluded) - 9 -

11 YFY INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE THREE MONTHS ENDED MARCH 31, 2018 AND (In Thousands of New Taiwan Dollars, Unless Stated Otherwise) (Reviewed, Not Audited) 1. GENERAL INFORMATION YFY Inc. (the Company) was incorporated in Kaohsiung in February The Company s shares have been listed on the Taiwan Stock Exchange (TWSE) since February The Company originally manufactured, packaged, tested and sold various integrated circuit products. To increase its competitiveness and sales through organization restructuring and specialization, the Company spun off the assets, liabilities, and operations of its consumer products and packaging segments to its subsidiaries, YFY Consumer Products, in October 2007 and, YFY Packaging Inc., in September In addition, the Company spun off the assets, liabilities and operations of its paper and cardboard business segment to Chung Hwa Pulp (CHPC) and acquired the shares issued by CHPC on October 1, After this transaction, CHPC became a subsidiary of the Company, and the Company became an investment holding company, with investment and holding as its main business. The consolidated financial statements of the Company and its subsidiaries, hereto forth collectively referred to as the Group, are presented in the Company s functional currency, the New Taiwan dollar. 2. APPROVAL OF FINANCIAL STATEMENTS The consolidated financial statements were approved by the Company s board of directors on May 11, 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 International Financial Reporting Standards (IFRS), International Accounting Standards (IAS), Interpretations of IFRS (IFRIC), and Interpretations of IAS (SIC) (collectively, the IFRSs ) endorsed and issued into effect by the FSC 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 IFRSs endorsed and issued into effect by the FSC would not have any material impact on the Group s accounting policies: 1) IFRS 9 Financial Instruments and related amendment IFRS 9 supersedes IAS 39 Financial Instruments: Recognition and Measurement, with consequential amendments to IFRS 7 Financial Instruments: Disclosures and other standards. IFRS 9 sets out the requirements for classification, measurement and impairment of financial assets and hedge accounting. Refer to Note 4 for information relating to the relevant accounting policies

12 Classification, measurement and impairment of financial assets On the basis of the facts and circumstances that existed as at January 1, 2018, the Group has performed an assessment of the classification of recognized financial assets and has elected not to restate prior reporting periods. The following table shows the original measurement categories and carrying amount under IAS 39 and the new measurement categories and carrying amount under IFRS 9 for each class of the Group s financial assets and financial liabilities as at January 1, Financial assets Measurement Category Carrying Amount IAS 39 IFRS 9 IAS 39 IFRS 9 Remark Derivatives Held for trading Mandatorily at fair value $ 4,351 $ 4,351 through profit or loss (i.e. Mandatorily at FVTPL) Hedging instruments Hedging instruments 2 2 Structured deposits Loans and receivables Mandatorily at FVTPL 783, ,256 Equity securities Held for trading Fair value through other 104, ,523 comprehensive income (i.e. FVTOCI - equity instruments) Available for sale (accounted for as financial assets carried at cost) FVTOCI - equity instruments 1,495,143 3,171,938 a) Available for sale FVTOCI - equity 13,244,667 13,244,667 a) instruments Mutual funds Held for trading Mandatorily at FVTPL 216, ,452 Subordinated bank debentures Time deposits with original maturities of more than 3 months Financial liabilities Loans and receivables Mandatorily at FVTPL 402, ,418 Loans and receivables Amortized cost 2,120,878 2,120,878 Derivatives Held for trading Mandatorily at fair value 278, ,060 through profit or loss Hedging instruments Hedging instruments Financial Assets IAS 39 Carrying Amount as of January 1, 2018 Reclassifications Remeasurements IFRS 9 Carrying Amount as of January 1, 2018 Retained Earnings Effect on January 1, 2018 Other Equity Effect on January 1, 2018 FVTPL $ 325,326 $ - $ - $ 325,326 $ - $ - Add: Reclassification from loans and receivables - 1,185,674-1,185, Less: Reclassification to FVTOCI - equity instruments - (104,523) - (104,523) ,326 1,081,151-1,406, FVTOCI - equity instruments Add: Reclassification from FVTPL - 104, , Add: Reclassification from available-for-sale - 14,739,810 1,676,795 16,416,605 45,037 1,591,674 a) - 14,844,333 1,676,795 16,521,128 45,037 1,591,674 $ 325,326 $ 15,925,484 $ 1,676,795 $ 17,927,605 $ 45,037 $ 1,591,674 Remark IAS 39 Carrying Amount as of January 1, 2018 Adjustments Arising from Initial Application IFRS 9 Carrying Amount as of January 1, 2018 Retained Earnings Effect on January 1, 2018 Other Equity Effect on January 1, 2018 Remark Investments accounted for using the equity method $ 6,307,712 $ 12,021 $ 6,319,733 $ 22,070 $ (10,609 ) b)

13 a) The Group elected to classify all of its investments in equity securities previously classified as available-for-sale under IAS 39 as at FVTOCI under IFRS 9. The related other equity - unrealized gain (loss) on available-for-sale financial assets of $1,964,407 was reclassified to other equity - unrealized gain (loss) on financial assets at FVTOCI. Investments in unlisted shares previously carried at cost under IAS 39 have been designated as at FVTOCI under IFRS 9 and remeasured at fair value. Consequently, there was an increase of $1,676,795 in FVTOCI, an increase of $1,636,711 in other equity - unrealized gain (loss) on financial assets at FVTOCI and an increase in non-controlling interests of $40,084 on January 1, The Group recognized, under IAS 39, impairment loss on certain investments in equity securities previously carried at cost, and the loss was accumulated in retained earnings. Since those investments were designated as at FVTOCI under IFRS 9 and no impairment assessment is required, an adjustment was made that resulted in a decrease of $45,037 in other equity - unrealized gain (loss) on financial assets at FVTOCI and an increase of $45,037 in retained earnings on January 1, b) As a result of the retrospective application of IFRS 9 by associates, there was an increase in investments accounted for using the equity method of $12,021, a decrease in other equity - unrealized gain (loss) on financial assets at FVTOCI of $10,609, an increase in retained earnings of $22,070 and an increase in non-controlling interests of $560 on January 1, Hedge accounting When the Group applies IFRS 9 for the first time for hedge accounting, it will be subject to deferral. Furthermore, due to the amendments to the Regulations Governing the Preparation of Financial Reports by Securities Issuers, all derivative and non-derivative financial assets and financial liabilities which are designated as hedging instruments are presented as financial assets and financial liabilities held for hedging starting from January 1, 2018 retrospectively. 2) IFRS 15 Revenue from Contracts with Customers and related amendments IFRS 15 establishes principles for recognizing revenue that apply to all contracts with customers and supersedes IAS 18 Revenue, IAS 11 Construction Contracts and a number of revenue-related interpretations. Refer to Note 4 for the related accounting policies. Under IFRS 15, the net effect of revenue recognized and consideration received and receivable is recognized as a contract asset or a contract liability. Prior to the application of IFRS 15, receivables and deferred revenue were recognized when revenue was recognized for the contract under IAS 18. As a result of the retrospective application of IFRS 15 by associates, there was an increase of $60,222 in investments accounted for using the equity method, an increase of $57,466 in retained earnings and an increase of $2,756 in non-controlling interests on January 1, Except for the above impact, as of the date the consolidated financial statements were authorized for issue, the Group has assessed that the application of other standards and interpretations will have no effect on the Group s consolidated financial position and financial performance

14 b. New IFRSs in issue but not yet endorsed and issued into effect by the FSC New IFRSs Effective Date Announced by IASB (Note 1) Annual Improvements to IFRSs Cycle January 1, 2019 Amendments to IFRS 9 Prepayment Features with Negative January 1, 2019 (Note 2) Compensation 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 16 Leases January 1, 2019 (Note 3) IFRS 17 Insurance Contracts January 1, 2021 Amendments to IAS 19 Plan Amendment, Curtailment or January 1, 2019 (Note 4) Settlement Amendments to IAS 28 Long-term Interests in Associates and Joint January 1, 2019 Ventures IFRIC 23 Uncertainty Over Income Tax Treatments January 1, 2019 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 FSC permits the election for early adoption of the amendments starting from Note 3: On December 19,, the FSC announced that IFRS 16 will take effect starting from January 1, Note 4: The Group shall apply these amendments to plan amendments, curtailments or settlements occurring on or after January 1, 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 leases under IAS 17 to low-value and short-term leases. On the consolidated statements of comprehensive income, the Group should present the depreciation expense charged on right-of-use assets separately from the interest expense accrued on lease liabilities; interest is computed using the effective interest method. On the consolidated statements of cash flows, cash payments for the principal portion of lease liabilities and cash payments for the interest 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. 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

15 4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES 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 and issued into effect by the FSC. Disclosure information included in these interim consolidated financial statements is less than the disclosure information required in a complete set of annual consolidated financial statements. b. Basis of preparation The consolidated financial statements have been prepared on the historical cost basis except for financial instruments which are measured at fair value, biological assets (excluding bearer plants) which are measured at fair value less costs to sell and net defined benefit liabilities which are measured at the present value of the defined benefit obligation less the fair value of plan assets. The fair value measurements are grouped into Levels 1 to 3 on the basis of the degree to which the fair value measurement inputs are observable and the significance of the inputs to the fair value measurement in its entirety, are described as follows: 1) Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities. 2) Level 2 inputs are inputs other than quoted prices included within Level 1 that are observable for an asset or liability, either directly (i.e., as prices) or indirectly (i.e., derived from prices); and 3) Level 3 inputs are unobservable inputs on an asset or liability. c. Basis of consolidation The consolidated financial statements incorporate the financial statements of the Company and the entities controlled by the Company (i.e. its subsidiaries). Income and expenses of subsidiaries acquired or disposed of during the period are included in the consolidated statements of profit or loss and other comprehensive income from the effective date of acquisition or up to the effective date of disposal, as appropriate. When necessary, adjustments are made to the financial statements of subsidiaries to bring their accounting policies into line with those used by the Company. All intra-group transactions, balances, income and expenses are eliminated in full upon consolidation. Total comprehensive income of subsidiaries is attributed to the owners of the Company and to the non-controlling interests even if this attribution results in the non-controlling interests having a deficit balance. Changes in the Group s ownership interests in subsidiaries that do not result in the Group losing control over the subsidiaries are accounted for as equity transactions. The carrying amounts of the Group s interests and the non-controlling interests are adjusted to reflect the changes in their relative interests in the subsidiaries. Any difference between the amount by which the non-controlling interests are adjusted and the fair value of the consideration paid or received is recognized directly in equity and attributed to the owners of the Company. Refer to Note 16 and Tables 8 and 9 for more information on subsidiaries (including the percentages of ownership and main businesses)

16 d. 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 December 31,. For the summary of other significant accounting policies, refer to the consolidated financial statements for the year ended December 31,. 1) Financial instruments Financial assets and financial liabilities are recognized when a group entity becomes a party to the contractual provisions of the instruments. Financial assets and financial liabilities are initially measured at fair value. Transaction costs that are directly attributable to the acquisition or issue of financial assets and financial liabilities (other than financial assets and financial liabilities at FVTPL) are added to or deducted from the fair value of the financial assets or financial liabilities, as appropriate, on initial recognition. Transaction costs directly attributable to the acquisition of financial assets or financial liabilities at FVTPL are recognized immediately in profit or loss. a) Financial assets All regular way purchases or sales of financial assets are recognized and derecognized on a trade date basis. i. Measurement category 2018 Financial assets are classified into the following categories: Financial assets at FVTPL, financial assets at amortized cost and investments in equity instruments at FVTOCI. i) Financial assets at FVTPL Financial assets are classified as at FVTPL when such a financial asset is mandatorily classified or designated as at FVTPL. Financial assets mandatorily classified as at FVTPL include investments in equity instruments which are not designated as at FVTOCI or the amortized cost criteria. A financial asset may be designated as at FVTPL upon initial recognition if such designation eliminates or significantly reduces a measurement or recognition inconsistency that would otherwise arise. Financial assets at FVTPL are subsequently measured at fair value, with any gains or losses arising on remeasurement recognized in profit or loss. The net gain or loss recognized in profit or loss does not incorporate any dividends or interest earned on such a financial asset. Fair value is determined in the manner described in Note 28. ii) Financial assets at amortized cost Financial assets that meet the following conditions are subsequently measured at amortized cost: The financial asset is held within a business model whose objective is to hold financial assets in order to collect contractual cash flows; and

17 The contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding. Subsequent to initial recognition, financial assets at amortized cost, not including cash and cash equivalents and trade receivables at amortized cost, are measured at amortized cost, which equals the gross carrying amount determined using the effective interest method less any impairment loss. Exchange differences are recognized in profit or loss. Interest income is calculated by applying the effective interest rate to the gross carrying amount of a financial asset, except for: Purchased or originated credit-impaired financial assets, for which interest income is calculated by applying the credit-adjusted effective interest rate to the amortized cost of such financial assets; and Financial assets that have subsequently become credit-impaired, for which interest income is calculated by applying the effective interest rate to the amortized cost of such financial assets. Cash equivalents include time deposits and repurchase agreements collateralized by bonds with original maturities within 3 months from the date of acquisition, which are highly liquid, readily convertible to a known amount of cash and are subject to an insignificant risk of changes in value. These cash equivalents are held for the purpose of meeting short-term cash commitments. iii) Investments in equity instruments at FVTOCI On initial recognition, the Group may make an irrevocable election to designate investments in equity instruments as at FVTOCI. Designation at FVTOCI is not permitted if the equity investment is held for trading or if it is contingent consideration recognized by an acquirer in a business combination. Investments in equity instruments at FVTOCI are subsequently measured at fair value with gains and losses arising from changes in fair value recognized in other comprehensive income and accumulated in other equity. The cumulative gain or loss will not be reclassified to profit or loss on disposal of the equity investments; instead, they will be transferred to retained earnings. Dividends on these investments in equity instruments are recognized in profit or loss when the Group s right to receive the dividends is established, unless the dividends clearly represent a recovery of part of the cost of the investments. Financial assets are classified into the following categories: Financial assets at fair value through profit or loss, available-for-sale financial assets and loans and receivables. i) Financial assets at fair value through profit or loss Financial assets at fair value through profit or loss are stated at fair value, with any gains or losses arising on remeasurement recognized in profit or loss. The net gain or loss recognized in profit or loss does not incorporate any dividends on the financial asset. Fair value is determined in the manner described in Note

18 Investments in equity instruments under financial assets at fair value through profit or loss that do not have a quoted market price in an active market and whose fair value cannot be reliably measured and derivatives that are linked to and must be settled by delivery of such unquoted equity instruments are subsequently carried at cost less any identified impairment loss at the end of each reporting period and presented in a separate line item as financial assets carried at cost. If, in a subsequent period, the fair value of the financial assets can be reliably measured, the financial assets are remeasured at fair value. The difference between the carrying amount and the fair value is recognized in profit or loss. ii) Available-for-sale financial assets Available-for-sale financial assets are non-derivatives that are either designated as available-for-sale or are not classified as loans and receivables or financial assets at fair value through profit or loss. Available-for-sale financial assets are measured at fair value. Dividends on available-for- sale equity investments are recognized in profit or loss. Other changes in the carrying amount of available-for-sale financial assets are recognized in other comprehensive income and will be reclassified to profit or loss when the investment is disposed of or is determined to be impaired. Dividends on available-for-sale equity instruments are recognized in profit or loss when the Group s right to receive the dividends is established. Available-for-sale equity investments that do not have a quoted market price in an active market and whose fair value cannot be reliably measured and derivatives that are linked to and must be settled by delivery of such unquoted equity investments are carried at cost less any identified impairment loss at the end of each reporting period and are presented in a separate line item as financial assets carried at cost. If, in a subsequent period, the fair value of the financial assets can be reliably measured, the financial assets are remeasured at fair value. The difference between the carrying amount and the fair value is recognized in other comprehensive income on financial assets. Any impairment losses are recognized in profit and loss. iii) Loans and receivables Loans and receivables (including notes receivables, accounts receivable, cash and cash equivalents and debt investments with no active market) are measured using the effective interest method at amortized cost less any impairment, except for short-term receivables when the effect of discounting is immaterial. Cash equivalents include time deposits and repurchase agreements collateralized by bonds with original maturities within three months from the date of acquisition, which are highly liquid, readily convertible to a known amount of cash and are subject to an insignificant risk of changes in value. These cash equivalents are held for the purpose of meeting short-term cash commitments. ii. Impairment of financial assets 2018 The Group recognizes a loss allowance for expected credit losses on financial assets at amortized cost (including trade receivables), investments in debt instruments that are measured at FVTOCI, lease receivables, as well as contract assets

19 For financial instruments and contract assets, the Group recognizes lifetime expected credit losses (i.e. ECLs) when there has been a significant increase in credit risk since initial recognition. If, on the other hand, the credit risk on a financial instrument has not increased significantly since initial recognition, the Group measures the loss allowance for that financial instrument at an amount equal to 12-month ECLs. Expected credit losses reflect the weighted average of credit losses with the respective risks of a default occurring as the weights. Lifetime ECLs represent the expected credit losses that will result from all possible default events over the expected life of a financial instrument. In contrast, 12-month ECLs represent the portion of lifetime ECLs that is expected to result from default events on a financial instrument that are possible within 12 months after the reporting date. The Group recognizes an impairment gain or loss in profit or loss for all financial instruments with a corresponding adjustment to their carrying amount through a loss allowance account, except for investments in debt instruments that are measured at FVTOCI, for which the loss allowance is recognized in other comprehensive income and does not reduce the carrying amount of the financial assets. Financial assets, other than those at fair value through profit or loss, are assessed for indicators of impairment at the end of each reporting period. Financial assets are considered to be impaired when there is objective evidence, as a result of one or more events that occurred after the initial recognition of the financial assets, that the estimated future cash flows of the investment have been affected. For financial assets at amortized cost, such as notes receivable and accounts receivable, such assets are assessed for impairment on a collective basis even if they were assessed not to be impaired individually. Objective evidence of impairment for a portfolio of receivables could include the Group s past experience with collecting payments, as well as observable changes in national or local economic conditions that correlate with defaults on receivables. For a financial asset at amortized cost, the amount of the impairment loss recognized is the difference between such an asset s carrying amount and the present value of its estimated future cash flows, discounted at the financial asset s original effective interest rate. For financial assets at amortized cost, if, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognized, the previously recognized impairment loss is reversed through profit or loss to the extent that the carrying amount of the investment (at the date the impairment is reversed) does not exceed what the amortized cost would have been had the impairment not been recognized. For available-for-sale equity investments, a significant or prolonged decline in the fair value of a security below its cost is considered to be objective evidence of impairment. For all other financial assets, objective evidence of impairment could include significant financial difficulty of the issuer or counterparty, breach of contract such as a default or delinquency in interest or principal payments, it becoming probable that the borrower will enter bankruptcy or financial re-organization, or the disappearance of an active market for those financial assets because of financial difficulties

20 When an available-for-sale financial asset is considered to be impaired, cumulative gains or losses previously recognized in other comprehensive income are reclassified to profit or loss in the period. In respect of available-for-sale equity securities, impairment loss previously recognized in profit or loss is not reversed through profit or loss. Any increase in fair value subsequent to an impairment loss is recognized in other comprehensive income. In respect of available-for-sale debt securities, impairment loss is subsequently reversed through profit or loss if an increase in the fair value of the investment can be objectively related to an event occurring after the recognition of the impairment loss. For financial assets carried at cost, the amount of the impairment loss is measured as the difference between such an asset s carrying amount and the present value of the its estimated future cash flows discounted at the current market rate of return for a similar financial asset. Such impairment loss will not be reversed in subsequent periods. The carrying amount of a financial asset is reduced by the impairment loss directly for all financial assets, with the exception of notes receivable and accounts receivable, where the carrying amount is reduced through the use of an allowance account. When notes receivable and accounts receivable are considered uncollectible, they are written off against the allowance account. Subsequent recoveries of amounts previously written off are credited against the allowance account. Changes in the carrying amount of the allowance account are recognized in profit or loss except for uncollectible notes receivable and accounts receivable that are written off against the allowance account. iii. Derecognition of financial assets The Group derecognizes a financial asset only when the contractual rights to the cash flows from the asset expire or when it transfers the financial asset and substantially all the risks and rewards of ownership of the asset to another party. Before 2018, on derecognition of a financial asset in its entirety, the difference between the asset s carrying amount and the sum of the consideration received and receivable and the cumulative gain or loss that had been recognized in other comprehensive income is recognized in profit or loss. Starting from 2018, on derecognition of a financial asset at amortized cost in its entirety, the difference between the asset s carrying amount and the sum of the consideration received and receivable is recognized in profit or loss. On derecognition of an investment in a debt instrument at FVTOCI, the difference between the asset s carrying amount and the sum of the consideration received and receivable and the cumulative gain or loss that had been recognized in other comprehensive income is recognized in profit or loss. However, on derecognition of an investment in an equity instrument at FVTOCI, the difference between the asset s carrying amount and the sum of the consideration received and receivable is recognized in profit or loss, and the cumulative gain or loss that had been recognized in other comprehensive income is transferred directly to retained earnings, without recycling through profit or loss. b) Financial liabilities i. Subsequent measurement Except for financial liabilities at fair value through profit or loss, all the financial liabilities are measured at amortized cost using the effective interest method. Financial liabilities are classified as at fair value through profit or loss when such a financial liability is either held for trading or it is designated as at fair value through profit or loss