DELTA ELECTRONICS, INC. AND SUBSIDIARIES

Transcription

1 DELTA ELECTRONICS, INC. AND SUBSIDIARIES CONSOLIDATED FINANCIAL STATEMENTS AND REVIEW REPORT OF INDEPENDENT ACCOUNTANTS SEPTEMBER 30, 2014 AND For the convenience of readers and for information purpose only, the auditors report and the accompanying financial statements have been translated into English from the original Chinese version prepared and used in the Republic of China. In the event of any discrepancy between the English version and the original Chinese version or any differences in the interpretation of the two versions, the Chinese-language auditors report and financial statements shall prevail.

2 REVIEW REPORT OF INDEPENDENT ACCOUNTANTS TRANSLATED FROM CHINESE PWCR To Electronics, Inc. We have reviewed the accompanying consolidated balance sheets of Electronics, Inc. and subsidiaries as of September 30, 2014 and 2013, and the related consolidated statements of comprehensive income for the three-month and nine-month periods then ended, of changes in equity and of cash flows for the nine-month periods then ended. These financial statements are the responsibility of the Company s management. Our responsibility is to express a conclusion on these financial statements based on our reviews. We did not review the financial statements of certain investments accounted for under the equity method, which statements reflect total assets of $6,270,765 thousand, constituting 3.04% of the consolidated total assets as of September 30, 2014, and total comprehensive income (including share of profit and other comprehensive income of associates and joint ventures accounted for under equity method) of $297,801 thousand and $861,748 thousand, constituting 3.94% and 5.13% of the consolidated comprehensive income for the three-month and nine-month periods then ended, respectively. Those financial statements were reviewed by other independent accountants whose reports thereon have been furnished to us, and our conclusion expressed herein, is based solely on the review reports of the other independent accountants. Except as explained in the following paragraph, our reviews were made in accordance with the Generally Accepted Auditing Standards No. 36, Review of Financial Statements in the Republic of China. A review consists principally of inquiries of company personnel and analytical procedures applied to financial data. It is substantially less in scope than an audit in accordance with generally accepted auditing standards in the Republic of China, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion. As explained in Notes 4(3)B and 6(8), we did not review the financial statements of certain insignificant consolidated subsidiaries and investments accounted for under equity method, which statements reflect total assets (including investments accounted for under equity method) of $19,433,730 thousand and $18,237,335 thousand, constituting 9.41% and 9.76% of the consolidated total assets, and total liabilities of $1,462,462 thousand and $2,669,252 thousand, constituting 1.49% and 3.04% of the consolidated total liabilities as of September 30, 2014 and 2013, respectively, and total comprehensive income (including ~1~

3 share of profit and other comprehensive income of associates and joint ventures accounted for under equity method) of ($48,265) thousand and $168,885 thousand, constituting (0.64%) and 3.64% of the consolidated total comprehensive income for the three-month periods ended September 30, 2014 and 2013, respectively, and $174,712 thousand and $827,529 thousand, constituting 1.04% and 5.01% of the consolidated total comprehensive income for the nine-month periods then ended, respectively. These amounts and the information disclosed in Note 13 were based solely on the unreviewed financial statements of these companies as of September 30, 2014 and Based on our reviews and the review reports of other independent accountants, except for the effect of such adjustments if any, as might have been determined to be necessary had the financial statements of certain consolidated subsidiaries, investments accounted for under equity method and the information disclosed in Note 13 been reviewed by independent accountants, we are not aware of any material modifications that should be made to the consolidated financial statements referred to above for them to be in conformity with the Rules Governing the Preparation of Financial Statements by Securities Issuers and IAS 34, Interim Financial Reporting as endorsed by the Financial Supervisory Commission (FSC). The consolidated financial statements of Electronics, Inc. and subsidiaries as of and for the nine-month period ended September 30, 2014 expressed in US dollars are presented solely for the convenience of the reader and were translated from the financial statements expressed in New Taiwan dollars using the exchange rate of $30.42 to US$1.00 at September 30, This basis of translation is not in accordance with International Financial Reporting Standards, International Accounting Standards, and relevant interpretations and interpretative bulletins that are ratified by the FSC. PricewaterhouseCoopers, Taiwan October 28, The accompanying consolidated financial statements are not intended to present the financial position and results of operations and cash flows in accordance with accounting principles generally accepted in countries and jurisdictions other than the Republic of China. The standards, procedures and practices in the Republic of China governing the audit of such financial statements may differ from those generally accepted in countries and jurisdictions other than the Republic of China. Accordingly, the accompanying consolidated financial statements and report of independent accountants are not intended for use by those who are not informed about the accounting principles or auditing standards generally accepted in the Republic of China, and their applications in practice. As the financial statements are the responsibility of the management, PricewaterhouseCoopers cannot accept any liability for the use of, or reliance on, the English translation or for any errors or misunderstandings that may derive from the translation. ~2~

4 Current assets DELTA ELECTRONICS, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS SEPTEMBER 30, 2014, DECEMBER 31, 2013 AND SEPTEMBER 30, 2013 (EXPRESSED IN THOUSANDS OF DOLLARS) (THE SEPTEMBER 30, 2014 AND 2013 AMOUNTS ARE UNAUDITED) US Dollars New Taiwan Dollars Assets Notes September 30, 2014 September 30, 2014 December 31, 2013 September 30, Cash and cash equivalents 6(1) $ 2,064,978 $ 62,816,642 $ 59,023,870 $ 54,971, Financial assets at fair value through profit or loss - current 1125 Available-for-sale financial assets - current 1135 Derivative financial assets for hedging - current 6(2) 6(3) 6(5) 2,933 89,211 82, ,885 20, , , , ,340 25, Notes receivable, net 64,948 1,975,728 1,535,567 1,535, Accounts receivable, net 6(6) 1,417,068 43,107,221 41,121,837 38,513, Accounts receivable - related parties 7 48,748 1,482,911 1,083,328 1,078, Other receivables 18, , , , Other receivables - related parties , ,570 65, Current income tax assets 13, ,551 5, , X Inventories 6(7) 674,245 20,510,542 18,041,829 16,871, Prepayments 127,545 3,879,916 3,993,820 3,746, Other current assets 22, , , ,221 11XX Total current assets 4,475, ,139, ,503, ,367,757 Non-current assets 1510 Financial assets at fair value through profit or loss - non-current 1523 Available-for-sale financial assets non-current 6(2) 6(3) 1543 Financial assets carried at cost - 6(4) non-current 1550 Investments accounted for under equity method 6(8) 6, , , , ,147 6,362,249 7,677,790 5,649,149 13, , , , ,728 6,897,055 6,696,275 6,523, Property, plant and equipment 6(9) 1,190,296 36,208,791 37,194,762 36,900, Investment property, net 6(10) 71,087 2,162,479 1,960,453 1,978, Intangible assets 6(11) 382,198 11,626,451 10,857,876 10,826, Deferred income tax assets 128,187 3,899,463 3,288,189 3,246, Other non-current assets 6(13) 85,574 2,603,163 2,639,953 1,941,284 15XX Total non-current assets 2,312,518 70,346,788 70,825,713 67,572,229 1XXX Total assets $ 6,787,848 $ 206,486,324 $ 197,328,814 $ 186,939,986 (Continued) ~3~

5 DELTA ELECTRONICS, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (CONTINUED) SEPTEMBER 30, 2014, DECEMBER 31, 2013 AND SEPTEMBER 30, 2013 (EXPRESSED IN THOUSANDS OF DOLLARS) (THE SEPTEMBER 30, 2014 AND 2013 AMOUNTS ARE UNAUDITED) US Dollars New Taiwan Dollars Liabilities and Equity Notes September 30, 2014 September 30, 2014 December 31, 2013 September 30, 2013 Current liabilities 2100 Short-term borrowings 6(14) $ 235,092 $ 7,151,499 $ 4,561,722 $ 4,867, Financial liabilities at fair value through profit or loss - current 2125 Derivative financial liabilities for hedging - current 6(15) 6(5) ,199 16,883 6, ,915 2,644 5, Notes payable Accounts payable 1,105,927 33,642,308 32,628,527 30,594, Accounts payable - related parties 7 7, , , , Other payables 602,886 18,339,797 17,533,426 16,226, Current income tax liabilities 56,865 1,729,817 1,390,013 1,125, Other current liabilities 6(16) 134,996 4,106,567 3,046,701 3,167,979 21XX Total current liabilities 2,143,555 65,206,928 59,367,812 56,267,836 Non-current liabilities 2540 Long-term borrowings 6(16) 678,089 20,627,477 18,827,664 20,312, Deferred income tax liabilities 287,126 8,734,359 7,431,813 7,344, Other non-current liabilities 6(17) 126,892 3,860,054 3,815,895 3,750,082 25XX Total non-current liabilities 1,092,107 33,221,890 30,075,372 31,407,382 2XXX Total liabilities 3,235,662 98,428,818 89,443,184 87,675,218 Equity Share capital 3110 Share capital - common stock 6(19) 801,296 24,375,433 24,375,433 24,303,894 Capital surplus 3200 Capital surplus 6(20) 849,411 25,839,068 25,790,922 25,387,502 Retained earnings 6(21) 3310 Legal reserve 511,251 15,552,256 13,774,636 13,774, Special reserve 17, ,556 4,074,505 4,074, Unappropriated retained earnings 937,324 28,513,405 25,212,328 20,481,135 Other equity interest 3400 Other equity interest 14, , ,768 ( 2,499,478) 31XX Equity attributable to owners of the parent 3,131,567 95,262,261 93,647,592 85,522,194 36XX Non-controlling interest 420,619 12,795,245 14,238,038 13,742,574 3XXX Total equity 6(22) 3,552, ,057, ,885,630 99,264,768 Significant contingent liabilities and unrecorded contract commitments Subsequent Events 11 9 Total liabilities and equity $ 6,787,848 $ 206,486,324 $ 197,328,814 $ 186,939,986 The accompanying notes are an integral part of these consolidated financial statements. See review report of independent accountants dated October 28, ~4~

6 DELTA ELECTRONICS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (EXPRESSED IN THOUSANDS OF DOLLARS, EXCEPT EARNINGS PER SHARE DATA) (UNAUDITED) US Dollars New Taiwan Dollars For the nine-month period ended For the three-month periods ended September 30, For the nine-month periods ended September 30, Items Notes September 30, Sales revenue 6(23) and 7 $ 4,638,618 $ 50,454,895 $ 46,140,469 $ 141,106,779 $ 128,415, Operating costs 6(24) and 7 ( 3,380,696) ( 36,689,139) ( 34,677,145) ( 102,840,779) ( 96,058,736) 5950 Gross profit 1,257,922 13,765,756 11,463,324 38,266,000 32,356,430 Operating expenses 6(28)(29) 6100 Selling expenses ( 230,244) ( 2,521,620) ( 2,149,272) ( 7,004,034) ( 6,079,874) 6200 General and administrative expenses ( 163,127) ( 1,829,740) ( 1,496,546) ( 4,962,325) ( 4,302,560) 6300 Research and development expenses ( 294,429) ( 3,158,879) ( 2,897,542) ( 8,956,539) ( 8,192,567) 6000 Total operating expenses ( 687,800) ( 7,510,239) ( 6,543,360) ( 20,922,898) ( 18,575,001) 6900 Operating profit 570,122 6,255,517 4,919,964 17,343,102 13,781,429 Non-operating income and expenses 7010 Other income 6(25)(32) 80, , ,914 2,463,936 2,137, Other gains and losses 6(26) ( 8,282) ( 60,779) ( 166,867) ( 251,930) ( 450,603) 7050 Finance costs 6(27) ( 3,528) ( 45,341) ( 87,242) ( 107,330) ( 133,961) 7060 Share of profit of associates and joint ventures accounted for under equity method 6(8) 25, , , , , Total non-operating income and expenses 95,040 1,092, ,565 2,891,126 2,272, Profit before income tax 665,162 7,348,303 5,856,529 20,234,228 16,054, Income tax expense 6(30) ( 109,302) ( 1,120,141) ( 982,519) ( 3,324,973) ( 2,392,803) 8000 Profit for the period from continuing operations 555,860 6,228,162 4,874,010 16,909,255 13,661, Profit for the period from discontinued operations 6(12) , Profit for the period $ 555,860 $ 6,228,162 $ 4,874,010 $ 16,909,255 $ 13,780,825 (Continued) ~5~

7 DELTA ELECTRONICS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (CONTINUED) (EXPRESSED IN THOUSANDS OF DOLLARS, EXCEPT EARNINGS PER SHARE DATA) (UNAUDITED) US Dollars New Taiwan Dollars For the nine-month period ended For the three-month periods ended September 30, For the nine-month periods ended September 30, Items Notes September 30, Other comprehensive (loss) income 8310 Financial statements translation differences of foreign operations $ 36,732 $ 2,160,877 ($ 1,076,659) $ 1,117,377 $ 2,360, Unrealized gain (loss) on valuation of available-for-sale financial assets ( 34,750 ) ( 559,337 ) 748,416 ( 1,057,085) 604, Cash flow hedges ( 488 ) 8,817 2,352 ( 14,833) ( 6,023) 8370 Share of other comprehensive income of associates and joint ventures accounted for under equity method 68 ( 29,306 ) ( 33,186) 2,071 ( 1,150) 8399 Income tax relating to the components of other comprehensive income 6(30) ( 4,921 ) ( 252,418 ) 122,028 ( 149,695) ( 207,415) 8300 Other comprehensive (loss) income for the period ( $ 3,359 ) $ 1,328,633 ($ 237,049) ($ 102,165) $ 2,750, Total comprehensive income for the period $ 552,501 $ 7,556,795 $ 4,636,961 $ 16,807,090 $ 16,531,017 Profit attributable to: 8610 Owners of the parent $ 515,105 $ 5,836,641 $ 4,527,614 $ 15,669,487 $ 13,045, Non-controlling interest $ 40,755 $ 391,521 $ 346,396 $ 1,239,768 $ 735,816 Comprehensive income attributable to: 8710 Owners of the parent $ 516,248 $ 6,961,585 $ 4,309,104 $ 15,704,271 $ 15,353, Non-controlling interest $ 36,253 $ 595,210 $ 327,857 $ 1,102,819 $ 1,177,170 Basic earnings per share (in dollars) 6(31) 9710 Profit from continuing operations $ $ 2.40 $ 1.86 $ 6.43 $ Profit from discontinued operations Total basic earnings per share $ $ 2.40 $ 1.86 $ 6.43 $ 5.38 Diluted earnings per share (in dollars) 6(31) 9810 Profit from continuing operations $ $ 2.38 $ 1.85 $ 6.38 $ Profit from discontinued operations Total diluted earnings per share $ $ 2.38 $ 1.85 $ 6.38 $ 5.32 The accompanying notes are an integral part of these consolidated financial statements. See review report of independent accountants dated October 28, ~6~

8 DELTA ELECTRONICS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY SEPTEMBER 30, 2014 AND 2013 (EXPRESSED IN THOUSANDS OF DOLLARS) (UNAUDITIED) Notes Share capital - common stock Capital surplus Legal reserve Equity attributable to owners of the parent Retained earnings Financial statements Unrealized translation gain or loss on Unappropriated differences of available-forsale Special retained foreign financial reserve earnings operations assets Other equity interest Hedging instrument gain (loss) on effective hedge of cash flow hedges Equity directly related to non-current assets held for sale Total Non-controlling interest Total equity 2013 New Taiwan Dollars Balance at January 1, 2013 $24,211,780 $24,774,551 $12,163,682 $ 2,156,092 $23,808,695 ( $ 4,259,517) ($ 492,915 ) $ 26,229 ($ 26,975 ) $82,361,622 $15,966,356 $ 98,327,978 Share-based payments 6(18) 92, , , ,357 Distribution of 2012 earnings Legal reserve 6(21) - - 1,610,954 - ( 1,610,954 ) Special reserve 6(21) ,918,413 ( 1,918,413 ) Cash dividends 6(21) ( 12,843,222 ) ( 12,843,222 ) - ( 12,843,202 ) Change in equity of associates and joint ventures accounted for under equity method - 46, ,496-46,496 Difference between consideration and carrying amount of subsidiaries acquired or disposed - 34, ( 55,138 ) ( 20,926 ) - ( 20,926 ) Changes in non-controlling interests ( 3,400,952 ) ( 3,400,952 ) Other comprehensive income for the period ,625, ,597 ( 3,791 ) 82,113 2,308, ,354 2,750,192 Profit for the period ,045, ,045, ,816 13,780,825 Balance at Septermber 30, 2013 $24,303,894 $25,387,502 $13,774,636 $ 4,074,505 $20,481,135 ( $ 2,633,598) $ 111,682 $ 22,438 $ - $85,522,194 $13,742,574 $ 99,264, New Taiwan Dollars Balance at January 1, 2014 $24,375,433 $25,790,922 $13,774,636 $ 4,074,505 $25,212,328 ( $ 1,703,490) $ 2,104,380 $ 18,878 $ - $93,647,592 $14,238,038 $ 107,885,630 Distribution of 2013 earnings Legal reserve 6(21) - - 1,777,620 - ( 1,777,620 ) Reversal of special reserve 6(21) ( 3,546,949 ) 3,546, Cash dividends 6(21) ( 14,137,739 ) ( 14,137,739 ) - ( 14,137,739 ) Change in equity of associates and joint ventures accounted for under equity method - 48, ,224-48,224 From share of changes in equities of subsidiaries Proceeds from investments accounted for under the equity method - ( 340 ) ( 9) ( 349 ) - ( 349 ) Changes in non-controlling interests ( 2,545,612 ) ( 2,545,612 ) Other comprehensive loss for the period ,106,793 ( 1,057,156 ) ( 14,853 ) - 34,784 ( 136,949 ) ( 102,165 ) Profit for the period ,669, ,669,487 1,239,768 16,909,255 Balance at Septermber 30, 2014 $24,375,433 $25,839,068 $15,552,256 $ 527,556 $28,513,405 ( $ 596,706) $1,047,224 $ 4,025 $ - $95,262,261 $12,795,245 $ 108,057,506 (Continued) ~7~

9 DELTA ELECTRONICS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (CONTINUED) SEPTEMBER 30, 2014 AND 2013 (EXPRESSED IN THOUSANDS OF DOLLARS) (UNAUDITIED) Notes Share capital - common stock Capital surplus Legal reserve Equity attributable to owners of the parent Retained earnings Financial statements Unrealized translation gain or loss on Unappropriated differences of available-forsale Special retained foreign financial reserve earnings operations assets Other equity interest Hedging instrument gain (loss) on effective hedge of cash flow hedges Equity directly related to non-current assets held for sale Total Non-controlling interest Total equity 2014 US Dollars Balance at January 1, 2014 $ 801,296 $ 847,828 $ 452,815 $ 133,942 $ 828,808 ($ 55,999) $ 69,178 $ 621 $ - $ 3,078,489 $ 468,049 $ 3,546,538 Distribution of 2014 earnings Legal reserve 6(21) ,436 - ( 58,436 ) Reversal of special reserve 6(21) ( 116,599 ) 116, Cash dividends 6(21) ( 464,752 ) ( 464,752 ) - ( 464,752 ) Change in equity of associates and joint ventures accounted for under equity method - 1, ,585-1,585 From share of changes in equities of subsidiaries Proceeds from investments accounted for under the equity method - ( 11 ) ( 1) ( 12 ) - ( 12 ) Changes in non-controlling interests ( 83,683 ) ( 83,683 ) Other comprehensive loss for the period ,384 ( 34,752 ) ( 489 ) - 1,143 ( 4,502 ) ( 3,359 ) Profit for the period , ,105 40, ,860 Balance at Septermber 30, 2014 $ 801,296 $ 849,411 $ 511,251 $ 17,343 $ 937,324 ($ 19,616) $ 34,426 $ 132 $ - $ 3,131,567 $ 420,619 $ 3,552,186 The accompanying notes are an integral part of these consolidated financial statements. See review report of independent accountants dated October 28, ~8~

10 DELTA ELECTRONICS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE NINE-MONTH PERIODS ENDED SEPTEMBER 30, 2014 AND 2013 (EXPRESSED IN THOUSANDS OF DOLLARS) (UNAUDITED) US Dollars New Taiwan Dollars Notes CASH FLOWS FROM OPERATING ACTIVITIES Profit before tax for the period from continuing operations $ 665,162 $ 20,234,228 $ 16,054,000 Profit before tax for the period from discontinued operations 6(12) ,798 Profit before tax 665,162 20,234,228 16,186,798 Adjustments to reconcile net income to net cash generated from operating activities Income and expenses having no effect on cash flows Depreciation 6(9)(10) 162,363 4,939,094 5,547,490 Amortization 6(11)(28) 28, , ,040 Provision for bad debts 6(6) 8, , ,309 Interest expense 6(27) 3, , ,209 Interest income 6(25) ( 24,258 ) ( 737,921 ) ( 513,146 ) Net gain on financial assets or liabilities at fair value through profit or 6(26) loss ( 87 ) ( 2,648 ) ( 38,603 ) Share of profit of associates accounted for under the equity method 6(8) ( 25,853 ) ( 786,450 ) ( 720,059 ) Loss (gain) on disposal of property, plant and equipment 6(26) 238 7,224 ( 31,816 ) Gain on disposal of non-current assets classified as held for sale 6(12) (shown as profit (loss) from discontinued operations) - - ( 25,989 ) (Gain) loss on disposal of investments 6(26) ( 5,131 ) ( 156,094 ) 217,083 Reversal of impairment loss on non-financial assets (shown as profit 6(12) (loss) from discontinued operations) - - ( 809,194 ) Impairment loss on financial assets ,564 35,762 Changes in assets/liabilities relating to operating activities Net changes in assets relating to operating activities Financial assets at fair value through profit or loss ( 2,302 ) ( 70,022 ) ( 24,435 ) Notes receivable ( 14,469 ) ( 440,161 ) ( 214,553 ) Accounts receivable ( 92,516 ) ( 2,814,350 ) ( 3,909,978 ) Accounts receivable - related parties 5, , ,048 Other receivables ( 4,637 ) ( 141,050 ) ( 108,990 ) Other receivables - related parties 4, , ,920 Inventories ( 81,154 ) ( 2,468,713 ) ( 1,600,887 ) Prepayments 3, ,971 ( 1,235,835 ) Other current assets ( 7,799 ) ( 237,243 ) ( 86,685 ) Other non-current assets 1,432 43,565 ( 347,642 ) Net changes in liabilities relating to operating activities Notes payable ( 27 ) ( 808 ) - Accounts payable 33,285 1,012,517 4,259,325 Accounts payable - related parties ,656 38,317 Other payables ( 29,436 ) ( 895,449 ) 913,909 Other current liabilities 35,356 1,075,535 4,424 Other non-current liabilities 1,452 44,159 ( 39,861 ) Cash generated from operations 667,381 20,301,722 19,225,961 Interest received 24, , ,146 Dividend received 21, , ,299 Interest paid ( 3,587 ) ( 109,110 ) ( 220,445 ) Income taxes paid ( 76,372 ) ( 2,323,222 ) ( 3,222,859 ) Net cash provided by operating activities 633,291 19,264,710 16,931,102 (Continued) ~9~

11 DELTA ELECTRONICS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED) FOR THE NINE-MONTH PERIODS ENDED SEPTEMBER 30, 2014 AND 2013 (EXPRESSED IN THOUSANDS OF DOLLARS) (UNAUDITED) US Dollars New Taiwan Dollars Notes CASH FLOWS FROM INVESTING ACTIVITIES Acquisition of financial assets at fair value through profit or loss, designated upon initial recognition ( $ 948 ) ( $ 28,844 ) ($ 96,700 ) Proceeds from disposal of financial assets at fair value through profit or loss, designated upon initial recognition ,000 Acquisition of available-for-sale financial assets ( 10,552 ) ( 320,994 ) ( 214,517 ) Proceeds from disposal of available-for-sale financial assets 25, , ,083 Proceeds from capital reduction of available-for-sale financial assets ,112 - Proceeds from capital reduction of financial assets carried at cost Proceeds from disposal of investments accounted for under the equity method ,261 - Increase in other financial assets ( 3,464 ) ( 105,383 ) ( 6,443 ) Acquisition of property, plant and equipment 6(9) ( 135,624 ) ( 4,125,695 ) ( 7,374,596 ) Proceeds from disposal of property, plant and equipment 4, , ,913 Acquisition of intangible assets 6(11) ( 5,908 ) ( 179,713 ) ( 237,486 ) (Increase) decrease in other non-current assets ( 274 ) ( 8,335 ) 646,423 Net cash flow from acquisition of subsidiaries (net of cash acquired) 6(32) ( 86,989 ) ( 2,646,215 ) ( 455,843 ) Disposal of subsidiaries 6(12) - - ( 644,798 ) Net cash used in investing activities ( 213,071 ) ( 6,481,626 ) ( 6,737,964 ) CASH FLOWS FROM FINANCING ACTIVITIES Increase (decrease) in short-term borrowings 85,132 2,589,727 ( 270,364 ) Proceeds from long-term debt 676,022 20,564,600 20,173,000 Repayment of long-term debt ( 617,445 ) ( 18,782,687 ) ( 16,754,495 ) Exercise of employee share options 6(18) ,357 Change in non-controlling interests 6(22) ( 45,679 ) ( 1,389,553 ) 3,750 Cash dividends paid ( 464,751 ) ( 14,137,739 ) ( 12,843,202 ) Net cash used in financing activities ( 366,721 ) ( 11,155,652 ) ( 9,066,954 ) Effects due to changes in exchange rate 71,181 2,165,340 2,749,232 Increase in cash and cash equivalents 124,680 3,792,772 3,875,416 Cash and cash equivalents at beginning of period 1,940,298 59,023,870 51,096,128 Cash and cash equivalents at end of period $ 2,064,978 $ 62,816,642 $ 54,971,544 The accompanying notes are an integral part of these consolidated financial statements. See review report of independent accountants dated October 28, ~10~

12 DELTA ELECTRONICS, INC. AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS SEPTEMBER 30, 2014 AND 2013 (Expressed in thousands of New Taiwan dollars, except as otherwise indicated) (Unaudited) 1. HISTORY AND ORGANIZATION Electronics, Inc. (the Company) was incorporated as a company limited by shares under the provisions of the Company Law of the Republic of China (R.O.C.). The Company and its subsidiaries (collectively referred herein as the Group) are the global leader in power and thermal management solutions and are primarily engaged in the research and development, design, manufacturing and sale of electronic control systems, industrial automation products, digital display products, communication products, consumer electronics products, energy-saving lighting application and energy technology services, etc. The Group s mission statement, to provide innovative, clean and energy-efficient solutions for a better tomorrow, focuses on the role in addressing key environmental issues such as global climate change. With the concern for the environment, the Group continues to develop innovative energy-efficient products and solutions. In recent years, the Group has transformed from a product provider towards a solution provider and the Group s business is segregated into power electronics business, energy management business, and smart green life business. 2. THE DATE OF AUTHORIZATION FOR ISSUANCE OF THE CONSOLIDATED FINANCIAL STATEMENTS AND PROCEDURES FOR AUTHORIZATION These consolidated financial statements were authorised for issuance by the Board of Directors on October 28, APPLICATION OF NEW STANDARDS, AMENDMENTS AND INTERPRETATIONS (1) Effect of the adoption of new issuances of or amendments to International Financial Reporting Standards ( IFRS ) as endorsed by the Financial Supervisory Commission ( FSC ) None. (2) Effect of new issuances of or amendments to IFRSs as endorsed by the FSC but not yet adopted by the Group According to Financial-Supervisory-Securities-Auditing No issued on April 3, 2014, commencing 2015, companies with shares listed on the TWSE or traded on the Taiwan GreTai Securities Market or Emerging Stock Market shall adopt the 2013 version of IFRS (not including IFRS 9, Financial instruments but including the Regulations Governing the Preparation of Financial Reports by Securities Issuers effective January 1, 2005) as endorsed by the FSC in preparing the consolidated financial statements. The related new standards, interpretations and amendments are listed below: 11

13 New Standards, Interpretations and Amendments Based on the Group s assessment, the adoption of the 2013 version of IFRS has no significant impact on the consolidated financial statements of the Group, except the following: A. IAS 19 (revised), Employee benefits The standard requires additional disclosures to present how defined benefit plans may affect the amount, timing and uncertainty of the entity s future cash flows. B. IAS 1, Presentation of financial statements Effective Date by International Accounting Standards Board Limited exemption from comparative IFRS 7 disclosures for first-time July 1, 2010 adopters (amendment to IFRS 1) Severe hyperinflation and removal of fixed dates for first-time adopters July 1, 2011 (amendment to IFRS 1) Government loans (amendment to IFRS 1) January 1, 2013 Disclosures-Transfers of financial assets (amendment to IFRS 7) July 1, 2011 Disclosures-Offsetting financial assets and financial liabilities January 1, 2013 (amendment to IFRS 7) IFRS 10, Consolidated financial statements January 1, 2013 (Investment entities: January 1, 2014) IFRS 11, Joint arrangements January 1, 2013 IFRS 12, Disclosure of interests in other entities January 1, 2013 IFRS 13, Fair value measurement January 1, 2013 Presentation of items of other comprehensive income (amendment to July 1, 2012 IAS 1) Deferred tax: recovery of underlying assets (amendment to IAS 12) January 1, 2012 IAS 19 (revised), Employee benefits January 1, 2013 IAS 27, Separate financial statements (as amended in 2011) January 1, 2013 IAS 28, Investments in associates and joint ventures (as amended in January 1, ) Offsetting financial assets and financial liabilities (amendment to IAS 32) January 1, 2014 IFRIC 20, Stripping costs in the production phase of a surface mine January 1, 2013 Improvements to IFRSs 2010 January 1, 2011 Improvements to IFRSs January 1, 2013 The amendment requires entities to separate items presented in OCI classified by nature into two groups on the basis of whether they are potentially reclassifiable to profit or loss subsequently when specific conditions are met. If the items are presented before tax then the tax related to each of the two groups of OCI items (those that might be reclassified and those that will not be reclassified) must be shown separately. Accordingly, the Group will adjust its presentation of the statement of comprehensive income. 12

14 C. IFRS 12, Disclosure of interests in other entities The standard integrates the disclosure requirements for subsidiaries, joint arrangements, associates and unconsolidated structured entities. The Group will disclose additional information about its interests in consolidated entities and unconsolidated entities accordingly. D. IFRS 13, Fair value measurement The standard defines fair value, sets out a framework for measuring fair value, and requires disclosures about fair value measurements. Based on the Group s assessment, the adoption of the standard has no significant impact on its consolidated financial statements, and the Group will disclose additional information about fair value measurements accordingly. (3) IFRSs issued by IASB but not yet endorsed by the FSC New standards, interpretations and amendments issued by IASB but not yet included in the 2013 version of IFRS as endorsed by the FSC: New Standards, Interpretations and Amendments International Accounting Standards Board IFRS 9, Financial instruments' January 1, 2018 Sale or contribution of assets between an investor and its associate or joint venture (amendments to IFRS 10 and IAS 28) January 1, 2016 Accounting for acquisition of interests in joint operations (amendments to IFRS 11) IFRS 14, 'Regulatory deferral accounts' January 1, 2016 January 1, 2016 IFRS 15, Revenue from contracts with customers' January 1, 2017 Clarification of acceptable methods of depreciation and amortisation (amendments to IAS 16 and IAS 38) January 1, 2016 Agriculture: bearer plants (amendments to IAS 16 and IAS 41) January 1, 2016 Defined benefit plans: employee contributions (amendments to IAS 19R) July 1, 2014 Equity method in separate financial statements (amendments to IAS 27) January 1, 2016 Recoverable amount disclosures for non-financial assets (amendments to IAS 36) Novation of derivatives and continuation of hedge accounting (amendments to IAS 39) IFRIC 21, Levies January 1, 2014 January 1, 2014 January 1, 2014 Improvements to IFRSs July 1, 2014 Improvements to IFRSs July 1, 2014 Improvements to IFRSs January 1, 2016 The Group is assessing the potential impact of the new standards, interpretations and amendments above and has not yet been able to reliably estimate their impact on the consolidated financial statements. 13

15 4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The principal accounting policies applied in the preparation of these consolidated financial statements are set out below. These policies have been consistently applied to all the periods presented, unless otherwise stated. (1) Compliance statement The consolidated financial statements of the Group have been prepared in accordance with the Rules Governing the Preparation of Financial Statements by Securities Issuers and IAS 34, Interim Financial Reporting as endorsed by the FSC. (2) Basis of preparation A. Except for the following items, the consolidated financial statements have been prepared under the historical cost convention: (a) Financial assets and financial liabilities (including derivative instruments) at fair value through profit or loss. (b) Available-for-sale financial assets measured at fair value. (c) Liabilities on cash-settled share-based payment arrangements measured at fair value. (d) Defined benefit liabilities recognised based on the net amount of pension fund assets plus unrecognised past service cost and unrecognised actuarial losses, and less unrecognised actuarial gains and present value of defined benefit obligation. B. The preparation of financial statements in conformity with International Financial Reporting Standards, International Accounting Standards, IFRIC Interpretations, and SIC Interpretations as endorsed by the FSC (collectively referred herein as the IFRSs ) requires the use of certain critical accounting estimates. It also requires management to exercise its judgment in the process of applying the Group s accounting policies. The areas involving a higher degree of judgment or complexity, or areas where assumptions and estimates are significant to the consolidated financial statements are disclosed in Note 5. (3) Basis of consolidation A. Basis for preparation of consolidated financial statements: (a) All subsidiaries are included in the Group s consolidated financial statements. Subsidiaries are all entities (including special purpose entities) over which the Group has the power to govern the financial and operating policies. In general, control is presumed to exist when the parent owns, directly or indirectly through subsidiaries, more than half of the voting power of an entity. The existence and effect of potential voting rights that are currently exercisable or convertible have been considered when assessing whether the Group controls another entity. Subsidiaries are fully consolidated from the date on which control is transferred to the Group. They are de-consolidated from the date that control ceases. (b) Inter-company transactions, balances and unrealised gains or losses on transactions between companies within the Group are eliminated. Accounting policies of subsidiaries have been adjusted where necessary to ensure consistency with the policies adopted by the Group. (c) Profit or loss and each component of other comprehensive income are attributed to the owners of the parent and to the non-controlling interests. Total comprehensive income is attributed to the owners of the parent and to the non-controlling interests even if this results in the non-controlling interests having a deficit balance. 14

16 (d) Changes in a parent s ownership interest in a subsidiary that do not result in the parent losing control of the subsidiary (transactions with non-controlling interests) are accounted for as equity transactions, i.e. transactions with owners in their capacity as owners. Any difference between the amount by which the non-controlling interests are adjusted and the fair value of the consideration paid or received is recognised directly in equity. (e) When the Group loses control of a subsidiary, the Group remeasures any investment retained in the former subsidiary at its fair value. Any difference between fair value and carrying amount is recognised in profit or loss. All amounts previously recognised in other comprehensive income in relation to the subsidiary are reclassified to profit or loss, on the same basis as would be required if the related assets or liabilities were disposed of. That is, when the Group loses control of a subsidiary, all gains or losses previously recognised in other comprehensive income in relation to the subsidiary should be reclassified from equity to profit or loss, if such gains or losses would be reclassified to profit or loss when the related assets or liabilities are disposed of. B. Subsidiaries included in the consolidated financial statements: Ownership (%) Name of Name of Main Business September 30, December 31, September 30, Investor Subsidiary Activities Description Electronics, Inc. Electronics, Inc. Electronics, Inc. International Holding Ltd. (DIH) Networks Holding Ltd. (DNH) Deltronics (Netherlands) B.V. (DEN) Equity investments Equity investments Trading of equipment, components and materials of telecom and computer systems Note A Note B Electronics, Inc. PreOptix (Hong Kong) Co., Ltd. (PHK) Equity investments Note A Note B Electronics, Inc. NeoEnergy Microelectronics, Inc. (NEM) Designing and experimenting on integrated circuit and information software services Note A Note B Electronics, Inc. Cyntec Co., Ltd. (Cyntec) Research, development, manufacturing and sales of film opticelectronics devices Electronics, Inc. DelBio Inc. (DelBio) Manufacturing, wholesale and retail of medical equipment Note A Note B Electronics, Inc. Electronics Capital Company ( Capital) Equity investments Note A Note B 15

17 Ownership (%) Name of Name of Main Business September 30, December 31, September 30, Investor Subsidiary Activities Description Electronics, Inc. Electronics Int l (Singapore) Pte. Ltd. (DEIL-SG) Sales of electronic products Electronics, Inc. Smart Green Life Co., Ltd. (DSGL) Research and development, energy technology, meeting, exhibition, and leasing services, etc Note A Note B Electronics, Inc. Allied Material Technology Corp. (AMT) Manufacturing and sales of color filter and lease services, etc Note A Note B Electronics, Inc. Robot Automatic Co., Ltd. ( Robot) Research, designing, development, manufacturing and sales of intelligent robot systems and automation engineering, etc Note B Note C Electronics, Inc. SYN-TEK Research, designing, Automation Co., Ltd. development, (STA) manufacturing and sales of industrial automation equipment, etc Note B Note E Electronics, Inc. Vivitek Corporation (Vivitek-TW) Providing installment construction of lighting equipment Note A Note D International Holding Ltd. (DIH) Electronics (H.K.) Ltd. (DHK) Equity investments, operations management and engineering services International Holding Ltd. (DIH) Electronics International Ltd. (DEIL-Labuan) Sales of electronic products International Holding Ltd. (DIH) Power Sharp Ltd. (DPS) Operations and engineering services Note A Note B International Holding Ltd. (DIH) DEI Logistics (USA) Corp. (ALI) Warehousing and logistics services Note A 16

18 Ownership (%) Name of Name of Main Business September 30, December 31, September 30, Investor Subsidiary Activities Description International Holding Ltd. (DIH) Electronics (Japan), Inc. (DEJ) Sales of power products, display solution products, electronic components, industrial automation products and their materials Note B International Holding Ltd. (DIH) International Holding Ltd. (DIH) International Holding Ltd. (DIH) DAC Holding (Cayman) Ltd. (DAC) Ace Pillar Holding Co., Ltd. (Ace) PreOptix (Hong Kong) Co., Ltd. (PHK) Equity investments Note A Note B Equity investments Note F Equity investments Note A Note B International Holding Ltd. (DIH) Drake Overseas Financial Investment Ltd. (Drake) Equity investments Note F International Holding Ltd. (DIH) Greentech (China) Co., Ltd. (DGC) Manufacturing and sales of uninterruptible power systems Note F International Holding Ltd. (DIH) Vivitek Corporation (Vivitek) Sales of projector products and their materials Note A Note B Note E International Holding Ltd. (DIH) Greentech SGP Pte. Ltd. (DGSG) Equity investments Note G International Holding Ltd.(DIH) Electronics Europe Ltd. (DEU) Repair centre and providing of support services Note A Note D International Holding Ltd.(DIH) Boom Treasure Ltd. (Boom) Equity investments Note D 17

19 Ownership (%) Name of Name of Main Business September 30, December 31, September 30, Investor Subsidiary Activities Description Electronics (H.K.) Ltd. (DHK) Electronics (Dongguan) Co., Ltd. (DDG) Manufacturing and sales of transformer and power supplies Electronics (H.K.) Ltd. (DHK) Electronics Power (Dongguan) Co., Ltd. (DEP) Manufacturing and sales of transformer and power supplies Electronics (H.K.) Ltd. (DHK) Electronics (H.K.) Ltd. (DHK) Electronics (Shanghai) Co., Ltd. (DPEC) Electronics (Jiangsu) Ltd. (DWJ) Product design and management consulting service, etc. Manufacturing and sales of power supplies and transformers Electronics (H.K.) Ltd. (DHK) Electronics Components (Wujiang) Ltd. (DWC) Manufacturing and sales of transformers Electronics (H.K.) Ltd. (DHK) Electro-Optics (Wujiang) Ltd. (DWO) Manufacturing and sales of peripherals and electronic control equipment Electronics (H.K.) Ltd. (DHK) Video Display System (Wujiang) Ltd. (DWV) Manufacturing and sales of various projectors Electronics (H.K.) Ltd. (DHK) Electronics (Wuhu) Co., Ltd. (DWH) Manufacturing and sales of power supplies and transformers Electronics (H.K.) Ltd. (DHK) Electronics (H.K.) Ltd. (DHK) Electronics (Chenzhou) Co., Ltd. (DCZ) Electronics International Mexico S.A. DE C.V. (DEIL-MX) Manufacturing and sales of power supplies and transformers Sales of power management of industrial automation product and telecommunications equipment Note A Note B 18

20 Ownership (%) Name of Name of Main Business September 30, December 31, September 30, Investor Subsidiary Activities Description Electronics (H.K.) Ltd. (DHK) Electronics (Wujiang) Trading Co., Ltd. (DWT) Installation, consulting and trading of electronic products Note A Note B Electronics (H.K.) Ltd. (DHK) Green (Tianjin) Industries Co., Ltd. (DGT) Manufacturing and sales of transformers and bluetooth module Note A Note B PreOptix (Hong Kong) Co., Ltd. (PHK) PreOptix (Jiang Su) Co., Ltd. (PJS) Manufacturing and sales of lenses and optical engines for projectors Note A Note B Electronics (Japan), Inc. (DEJ) Addtron Technology (Japan), Inc. (AT Japan) Trading of networking system and peripherals Note B Electronics (Japan), Inc. (DEJ) Electronics (Korea), Inc. ( Korea) Sales of power products, display solution products electronic components, industrial automation products and their materials Note B DAC Holding (Cayman) Ltd. (DAC) DAC Holding (Cayman) Ltd. (DAC) Electronics Mexico S.A. DE C.V. (DEM) Viedeo Technology Ltd. (DVT) Manufacturing and sales of electronic products Sales of electronic products Note A Note B Note A Note B Drake Overseas Financial Investment Ltd. (Drake) Drake Investment (HK) Ltd. (Drake- HK) Equity investments Note F Ace Pillar Holding Co., Ltd. (Ace) Greentech (China) Co., Ltd. (DGC) Manufacturing and sales of uninterruptible power systems Note F Drake Investment (HK) Ltd. (Drake-HK) Greentech (China) Co., Ltd. (DGC) Manufacturing and sales of uninterruptible power systems Note F 19

21 Ownership (%) Name of Name of Main Business September 30, December 31, September 30, Investor Subsidiary Activities Description Greentech SGP Pte. Ltd. (DGSG) Greentech (China) Co., Ltd. (DGC) Manufacturing and sales of power supplies and transformers Note F Boom Treasure Ltd. (Boom) Greentech (China) Co., Ltd. (DGC) Manufacturing and sales of power supplies and transformers Note H Electronics (Wuhu) Co., Ltd. (DWH) Electronics (Wuhu) Co., Ltd. (DWH) Electronics (Chenzhou) Co., Ltd. (DCZ) Electronics (Chenzhou) Co., Ltd. (DCZ) Wuhu Technology Co., Ltd. (WDT) Energy Technology (Wuhu) Co., Ltd. (DET-WH) Chenzhou Technology Co., Ltd. (CDT) Manufacturing and sales of power supplies and transformers Research and development of energysaving technology, energy-saving equipment, energy management system and technology consulting service, etc. Manufacturing and sales of power supplies and transformers Energy Research and Technology development of energysaving technology, (Chenzhou) Co., Ltd. (DET-CZ) energy-saving equipment, energy management system and technology consulting service, etc Note A Note B Note A Note B Electronics (Dongguan) Co., Ltd. (DDG) Energy Technology (Dongguan) Co., Ltd., (DET-DG) Research and development of energysaving technology, energy-saving equipment, energy management system and technology consulting service, etc Note A Note B 20

22 Ownership (%) Name of Name of Main Business September 30, December 31, September 30, Investor Subsidiary Activities Description Electro- Optics (Wujiang) Ltd. (DWO) Energy Technology (Wujiang) Co., Ltd. (DET-WJ) Research and development of energysaving technology, energy-saving equipment, energy management system and technology consulting service, etc Note A Note B Electronics (Shanghai) Co., Ltd. (DPEC) Electronics (Shanghai) Co., Ltd. (DPEC) Energy Technology (Wuhu) Co., Ltd. (DET-WH) Research and development of energysaving technology, energy-saving equipment, energy management system and technology consulting service, etc. Energy Research and Technology development of energysaving technology, (Chenzhou) Co., Ltd. (DET-CZ) energy-saving equipment, energy management system and technology consulting service, etc Note A Note B Note A Note B Electronics (Shanghai) Co., Ltd. (DPEC) Energy Technology (Dongguan) Co., Ltd. (DET-DG) Research and development of energysaving technology, energy-saving equipment, energy management system and technology consulting service, etc Note A Note B Electronics (Shanghai) Co., Ltd. (DPEC) Energy Technology (Wujiang) Co., Ltd. (DET-WJ) Research and development of energysaving technology, energy-saving equipment, energy management system and technology consulting service, etc Note A Note B 21

23 Ownership (%) Name of Name of Main Business September 30, December 31, September 30, Investor Subsidiary Activities Description Electronics (Shanghai) Co., Ltd. (DPEC) Energy Technology (Shanghai) Co., Ltd. (DET-SH) Research and development of energysaving technology, energy-saving equipment, energy management system and technology consulting service, etc Greentech (China) Co., Ltd. (DGC) Energy Technology (Shanghai) Co., Ltd. (DET-SH) Research and development of energysaving technology, energy-saving equipment, energy management system and technology consulting service, etc Networks Holding Ltd. (DNH) Networks, Inc. (DNI Cayman) Equity investments Networks, Inc. (DNI Cayman) Networks, Inc. (Taiwan) (DNIT) Manufacturing and sales of networking system and peripherals Networks, Inc. (DNI Cayman) DNI Logistics (USA) Corp. (ALN) Trading of networking system and peripherals Note A Networks, Inc. (DNI Cayman) Networks International Ltd. (DNIL-Labuan) Trading of networking system and peripherals Networks, Inc. (DNI Cayman) Networks (H.K.) Ltd. (DNHK) Equity investments