DELTA ELECTRONICS, INC. AND SUBSIDIARIES

Transcription

1 DELTA ELECTRONICS, INC. AND SUBSIDIARIES CONSOLIDATED FINANCIAL STATEMENTS AND REVIEW REPORT OF INDEPENDENT ACCOUNTANTS MARCH 31, 2013 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 March 31, 2013, March 31, 2012, December 31, 2012 and January 1, 2012, and the related consolidated statements of comprehensive income, of changes in equity and of cash flows for the three-month periods ended March 31, 2013 and These financial statements are the responsibility of the Company s management. Our responsibility is to express an opinion on these financial statements based on our reviews. As explained in Notes 4(3)2 and 6(8), we did not review the financial statements of certain consolidated subsidiaries and investments accounted for under equity method, which statements reflect total assets (including investments accounted for under equity method) of $5,662,006,000 and $6,579,004,000, constituting 3.10% and 3.36% of the consolidated total assets, and total liabilities of $0 and $77,668,000, constituting 0% and 0.08% of the consolidated total liabilities as of December 31, 2012 and January 1, 2012, respectively. Those statements were reviewed by other auditors whose reports thereon have been furnished to us and our opinion expressed herein is based solely on the review reports of the other auditors. 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. We did not review the financial statements of certain consolidated subsidiaries and investments accounted for under equity method, which statements reflect total assets (including investments accounted for under equity method) of $27,308,390,000 and $19,114,274,000, constituting 14.51% and 10.03% of the consolidated total assets, and total liabilities of $2,767,682,000 and $2,533,628,000, constituting 3.36% and 2.63% of the consolidated total liabilities as of March 31, 2013 and 2012, respectively, and total comprehensive income (including share of profit (loss) and other comprehensive income of associates and joint ventures accounted for under equity method) of $530,563,000 and ~1~

3 $148,396,000, constituting 7.99% and 10.47% of the consolidated total comprehensive income for the three-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 March 31, 2013 and Based on our reviews and the review reports of the other auditors, 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 audited or 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, IAS 34, Interim Financial Reporting, and IFRS 1, First-time Adoption of International Financial Reporting Standards, as endorsed by the Financial Supervisory Commission (FSC). The consolidated financial statements of Electronics, Inc. and subsidiaries as of and for the three-month period ended March 31, 2013 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 $ to US$1.00 at March 31, 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 April 29, 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 DELTA ELECTRONICS, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (EXPRESSED IN THOUSANDS OF DOLLARS) (UNAUDITED) US Dollars New Taiwan Dollars Assets Notes March 31, 2013 March 31, 2013 December 31, 2012 March 31, 2012 January 1, 2012 Current assets 1100 Cash and cash equivalents 6(1) $ 1,854,020 $ 55,296,148 $ 51,096,128 $ 62,364,431 $ 67,695, Financial assets at fair value through profit or loss - current 6(2) 25, , ,015 2,663 2, Available-for-sale financial assets - current 6(3) 21, , , , , Derivative financial assets for hedging - current 6(5) ,295 39, , , Notes receivable, net 6(5) 46,910 1,399,099 1,319,593 1,278,069 1,330, Accounts receivable, net 6(6) 1,113,876 33,221,348 34,978,476 34,265,836 34,708, Accounts receivable - related parties 7 37,220 1,110,093 1,231, , , Other receivables 15, , ,096 1,667,850 1,934, Other receivables - related parties 7 24, , , , , X Inventories 6(7) 528,123 15,751,272 15,461,032 16,938,578 19,126, Prepayments 111,842 3,335,684 2,782,463 2,294,794 2,384, Non-current assets held for sale, net 6(12) 369,160 11,010,203 11,265, Other current assets 14, , , , ,779 11XX Total Current Assets 4,163, ,172, ,484, ,250, ,427,419 Non-current assets 1510 Financial assets at fair value through profit or loss - non-current 6(2) 11, , , ,055 2,803, Available-for-sale financial assets - non-current 6(3) 122,813 3,662,888 3,546,918 6,428,591 3,835, Financial assets carried at cost - non-current 6(4) 13, , , , , Investments accounted for under equity method 6(8) 201,568 6,011,773 6,352,742 5,723,371 5,911, Property, plant and equipment 6(9) 1,228,171 36,630,192 35,278,446 38,709,806 34,628, Investment property, net 6(10) 40,716 1,214,351 1,232, Intangible assets 6(11) 361,772 10,789,863 10,937,813 10,847,170 11,064, Deferred income tax assets 101,957 3,040,862 2,436,921 2,870,415 2,507, Other non-current assets 6(13) 64,277 1,917,057 1,926,757 3,429,161 5,466,313 15XX Total Non-current assets 2,145,995 64,004,288 62,357,534 69,392,155 66,620,605 1XXX Total Assets $ 6,309,352 $ 188,176,424 $ 182,842,436 $ 190,642,606 $ 196,048,024 Liabilities and Equity Current liabilities 2100 Short-term borrowings 6(14) $ 315,142 $ 9,399,117 $ 5,037,267 $ 18,147,503 $ 17,599, Financial liabilities at fair value through profit or loss - current 6(15) 189 5,644 26,286 10,187 4, Derivative financial liabilities for hedging - current 6(5) 238 7,089 14,750 43,227 46, Accounts payable 859,402 25,631,674 26,864,029 28,218,815 30,271, Accounts payable - related parties 7 6, , , , , Other payables 510,056 15,212,423 14,587,340 13,229,977 14,590, Current income tax liabilities 69,464 2,071,768 2,156,441 2,081,013 2,010, Liabilities directly related to non-current assets held for sale 6(12) 216,653 6,461,677 6,849, Other current liabilities 6(16) 109,081 3,253,338 3,238,723 4,582,889 4,367,943 21XX Total Current Liabilities 2,086,559 62,231,636 58,956,799 66,449,551 69,009,705 (Continued) ~3~

5 DELTA ELECTRONICS, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (CONTINUED) (EXPRESSED IN THOUSANDS OF DOLLARS) (UNAUDITED) US Dollars New Taiwan Dollars Liabilities and Equity Notes March 31, 2013 March 31, 2013 December 31, 2012 March 31, 2012 January 1, 2012 Non-current liabilities 2540 Long-term borrowings 6(16) 335,380 10,002,689 16,491,517 20,316,067 24,862, Deferred income tax liabilities 218,929 6,529,561 5,391,475 5,663,691 5,280, Other non-current liabilities 6(17) 123,919 3,695,876 3,674,667 3,729,415 3,798,067 25XX Total Non-current liabilities 678,228 20,228,126 25,557,659 29,709,173 33,940,491 2XXX Total Liabilities 2,764,787 82,459,762 84,514,458 96,158, ,950,196 Equity attributable to owners of parent Share capital 3110 Share capital - common stock 6(19) 813,417 24,260,162 24,211,780 24,061,363 24,033,974 Capital surplus 3210 Capital surplus, additional paid-in capital 6(20) 836,028 24,934,536 24,638,107 23,690,269 23,495, Capital surplus, others 5, , , , ,879 Retained earnings 6(21) 3310 Legal reserve 407,835 12,163,682 12,163,682 11,064,579 11,064, Special reserve 72,292 2,156,092 2,156,092 5,323,562 5,323, Unappropriated retained earnings 938,724 27,997,446 23,808,695 18,566,493 15,827,730 Other equity interest 3410 Financial statements translation differences of foreign operations ( 79,803) ( 2,380,123) ( 4,259,517) ( 3,295,371) ( 1,687,326 ) 3425 Unrealized gain or loss on available-for-sale financial assets ( 9,090) ( 271,096) ( 492,915) ( 79,477) 268,272 ) 3430 Hedging instrument gain on effective hedge of cash flow hedges ,553 26, ,544 64, Equity directly related to non-current assets held for sale 6(12) ( 20) ( 594) ( 26,975) XX Equity attributable to owners of the parent 2,985,514 89,042,956 82,361,622 79,752,398 78,183,552 36XX Non-controlling interest 559,051 16,673,706 15,966,356 14,731,484 14,914,276 3XXX Total equity 3,544, ,716,662 98,327,978 94,483,882 93,097,828 Significant contingent liabilities and unrecorded contract commitments 9 Significant events after the balance sheet date 11 Total liabilities and equity $ 6,309,352 $ 188,176,424 $ 182,842,436 $ 190,642, ,048,024 The accompanying notes are an integral part of these financial statements. See review report of independent accountants dated April 29, ~4~

6 DELTA ELECTRONICS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME FOR THE THREE-MONTH PERIODS ENDED MARCH 31, (EXPRESSED IN THOUSANDS OF DOLLARS, EXCEPT EARNINGS PER SHARE DATA) (UNAUDITED) US Dollars New Taiwan Dollars Items Notes Operating revenue 6(22) and 7 $ 1,301,948 $ 38,830,600 $ 38,447, Operating costs 6(23) and 7 ( 968,534) ( 28,886,523) ( 29,910,649 ) 5950 Gross profit 333,414 9,944,077 8,536,556 Operating expenses 6(27)(28) 6100 Selling expenses ( 62,047) ( 1,850,552) ( 1,928,363 ) 6200 General & administrative expenses ( 44,757) ( 1,334,879) ( 1,224,660 ) 6300 Research and development expenses ( 84,447) ( 2,518,623) ( 2,517,164 ) 6000 Total operating expenses ( 191,251) ( 5,704,054) ( 5,670,187 ) 6900 Operating income 142,163 4,240,023 2,866,369 Non-operating income and expenses 7010 Other income 6(24)(31) 20, , , Other gains and losses 6(2)(25) ( 3,101) 92,496) 740, Finance costs 6(26) ( 719) ( 21,447) ( 87,656 ) 7060 Share of profit/(loss) of 6(8) associates and joint ventures accounted for under equity method 7, , , Total non-operating income and expenses 24, ,301 1,423, Profit before tax 166,314 4,960,324 4,290, Income tax expense 6(29) ( 28,176) ( 840,348) ( 926,992 ) 8000 Profit from continuing operations 138,138 4,119,976 3,363, Profit (loss) from discontinued 6(12) operations 1,810 53,980 ( 484,050 ) 8200 Profit $ 139,948 $ 4,173,956 $ 2,879,315 (Continued) ~5~

7 DELTA ELECTRONICS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (CONTINUED) FOR THE THREE-MONTH PERIODS ENDED MARCH 31, (EXPRESSED IN THOUSANDS OF DOLLARS, EXCEPT EARNINGS PER SHARE DATA) (UNAUDITED) US Dollars New Taiwan Dollars Items Notes Other comprehensive income 8310 Financial statements translation differences of foreign operations $ 78,881 $ 2,352,632 ( $ 1,934,393 ) 8325 Unrealized gain on valuation of available-for-sale financial assets 7, , , Cash flow hedges ( 491)( 14,665) 84, Equity related to non-current assets classified as held for sale 4, , Share of other comprehensive income of associates and joint ventures accounted for under equity method 259 7,737 9, Income tax relating to the components of other 6(29) comprehensive income ( 7,761)( 231,489) 214, Total comprehensive income $ 222,738 $ 6,643,149 $ 1,416,833 Profit (loss), attributable to: 8610 Owners of parent $ 140,444 $ 4,188,751 $ 2,738, Non-controlling interests ($ 496)($ 14,795) $ 140,552 Comprehensive income attributable to: 8710 Owners of parent $ 212,532 $ 6,338,766 $ 1,394, Non-controlling interests $ 10,206 $ 304,383 $ 22,297 Basic earnings per share 6(30) (in dollars) 9710 Profit from continuing operations $ $ 1.60 $ Profit (loss) from discontinued operations ( 0.12) 9750 Total basic earnings per share $ $ 1.73 $ 1.14 Diluted earnings per share (in dollars) 9810 Profit from continuing operations $ $ 1.58 $ Profit (loss) from discontinued operations ( 0.11) 9850 Total diluted earnings per share $ $ 1.71 ( $ 1.13) The accompanying notes are an integral part of these consolidated financial statements. See review report of independent accountants dated April 29, ~6~

8 DELTA ELECTRONICS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (CONTINUED) FOR THE THREE-MONTH PERIODS ENDED MARCH 31, (EXPRESSED IN THOUSANDS OF DOLLARS) (UNAUDITED) Share capital - common stock Capital surplus Legal reserve Special reserve Equity attributable to owners of the parent Retained earnings Unappropriated retained earnings Financial statements translation differences of foreign operations Other equity interest Unrealized gain or loss on available-for -sale financial assets Hedging instrument gain (loss) on effective hedge of cash flow hedges Equity directly related to non-current assets held for sale Non-controlling interest Total 2012 New Taiwan Dollars Balance at January 1, 2012 $ 24,033,974 $ 23,824,784 $ 11,064,579 $ 5,323,562 $ 15,827,730 ($ 1,687,326 ) ($ 268,272 ) $ 64,521 $ - $ 14,914,276 $ 93,097,828 Share-based payments 27, , ,997 Difference between consideration and carrying amount of subsidiaries acquired or disposed - 3, ,313 Changes in non-controlling interests ( 205,089 ) ( 205,089 ) Other comprehensive income for the period ( 1,608,045 ) 188,795 75,023 - ( 118,255 ) ( 1,462,482 ) Profit for the period ,738, ,552 2,879,315 Balance at March 31, 2012 $ 24,061,363 $ 23,971,705 $ 11,064,579 $ 5,323,562 $ 18,566,493 ($ 3,295,371 ) ($ 79,477 ) $ 139,544 $ - $ 14,731,484 $ 94,483, 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 ) $ 15,966,356 $ 98,327,978 Share-based payments 48, , ,333 Changes in equity of associates and joint ventures accounted for under equity method - 9, ,639 Difference between consideration and carrying amount of subsidiaries acquired or disposed - 30, ( 30,097 ) Changes in non-controlling interests , ,967 Other comprehensive income for the period ,879, ,819 ( 7,676 ) 56, ,178 2,469,193 Profit (loss) for the period ,188, ( 14,795 ) 4,173,956 Balance at March 31, 2013 $ 24,260,162 $ 25,098,834 $ 12,163,682 $ 2,156,092 $ 27,997,446 ($ 2,380,123 ) ($ 271,096 ) $ 18,553 ($ 594 ) $ 16,673,706 $105,716,662 (Continued) ~7~

9 DELTA ELECTRONICS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (CONTINUED) FOR THE THREE-MONTH PERIODS ENDED MARCH 31, (EXPRESSED IN THOUSANDS OF DOLLARS) (UNAUDITED) Share capital - common stock Capital surplus Legal reserve Special reserve Equity attributable to owners of the parent Retained earnings Unappropriated retained earnings Financial statements translation differences of foreign operations Other equity interest Unrealized gain or loss on available-for -sale financial assets Hedging instrument gain (loss) on effective hedge of cash flow hedges Equity directly related to non-current assets held for sale Non-controlling interest Total 2013 US Dollars Balance at January 1, 2013 $ 811,795 $ 830,664 $ 407,835 $ 72,292 $ 798,280 ($ 142,817 ) ($ 16,527 ) $ 879 ($ 904 ) $ 535,335 $ 3,296,832 Share-based payments 1,622 9, ,143 Changes in equity of associates and joint ventures accounted for under equity method Difference between consideration and carrying amount of subsidiaries acquired or disposed - 1, ( 1,010 ) - 19 Changes in non-controlling interests ,510 13,510 Other comprehensive income for the period ,014 7,437 ( 257 ) 1,894 10,702 82,790 Profit (loss) for the period , ( 496 ) 139,948 Balance at March 31, 2013 $ 813,417 $ 841,537 $ 407,835 $ 72,292 $ 938,724 ($ 79,803 ) ($ 9,090 ) $ 622 ($ 20 ) $ 559,051 $ 3,544,565 The accompanying notes are an integral part of these consolidated financial statements. See review report of independent accountants dated April 29, ~8~

10 DELTA ELECTRONICS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE THREE-MONTH PERIODS ENDED MARCH 31 (EXPRESSED IN THOUSANDS OF DOLLARS) (UNAUDITED) US Dollars New Taiwan Dollars CASH FLOWS FROM OPERATING ACTIVITIES Profit before tax from continuing operations $ 166,314 $ 4,960,324 $ 4,290,357 Profit (loss) before tax from discontinued operations 2,186 65,179 ( 545,701 ) Profit before tax 168,500 5,025,503 3,744,656 Adjustments to reconcile net income to net cash generated from operating activites Income and expenses having no effect on cash flows Depreciation 61,883 1,845,664 1,681,765 Amortization 8, , ,400 Provision for bad debts expense 2,708 80,775 76,306 Interest expense 1,983 59, ,158 Interest income ( 4,337 ) ( 129,364 )( 250,040 ) Net gain on financial assets or liabilities at fair value through profit or loss ( 405 ) ( 12,076 )( 4,774 ) Share of profit of associates accounted for under equity method ( 7,956 ) ( 237,290 )( 116,130 ) Gain on disposal of property, plant and equipment ( 338 ) ( 10,071 )( 8,727 ) Loss (gain) on disposal of investments ,935 ( 721,714 ) Reversal of impairment loss on non-financial assets (shown as profit (loss) from discontinued operations) ( 17,214 ) ( 513,411 ) - Total adjustments from income and expenses having no effect on cash flows 45,088 1,344,749 1,010,244 Changes in assets/liabilities relating to operating activities Net changes in assets relating to operating activities Financial assets held for trading ( 870 ) ( 25,945 ) - Notes receivable ( 2,659 ) ( 79,312 ) 52,151 Accounts receivable 52,461 1,564, ,544 Accounts receivable - related parties 6, ,632 ( 48,151 ) Other receivables ( 679 ) ( 20,246 ) 242,942 Other receivables - related parties 4, ,746 ( 21,100 ) Inventories ( 15,425 ) ( 460,054 ) 2,187,535 Prepayments ( 20,937 ) ( 624,436 ) 89,410 Other current assets ( 3,687 ) ( 109,953 ) 34,548 Other non-current assets 1,439 42,908 69,145 Total changes in operating assets 21, ,985 2,973,024 Net changes in liabilities relating to operating activities Accounts payable ( 26,910 ) ( 802,597 )( 2,052,923 ) Accounts payable - related parties ( 1,583 ) ( 47,227 ) 17,566 Other payables 15, ,715 ( 1,360,450 ) Other current liabilities 220 6,564 ( 70,903 ) Other non-current liabilities ( 2,649 ) ( 79,007 )( 68,651 ) Total changes in operating liabilities ( 15,408 ) ( 459,552 ) ( 3,535,361 ) Total changes in operating assets and liabilities 5, ,433 ( 562,337 ) Total adjustments 50,769 1,514, ,907 Cash generated from operations 219,269 6,539,685 4,192,563 Interest received 4, , ,040 Interest paid ( 2,473 ) ( 73,755 )( 105,324 ) Income taxes paid ( 22,513 ) ( 671,453 )( 627,562 ) Net cash generated from operating activities 198,620 5,923,837 3,709,717 (Continued) ~9~

11 DELTA ELECTRONICS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED) FOR THE THREE-MONTH PERIODS ENDED MARCH 31, (EXPRESSED IN THOUSANDS OF DOLLARS) (UNAUDITED) US Dollars New Taiwan Dollars CASH FLOWS FROM INVESTING ACTIVITIES Acquisition of financial assets at fair value through profit or loss, designated upon initial recognition ($ 2,984 ) ($ 88,992 ) $ - Acquisition of available-for-sale financial assets - - ( 171,138 ) Proceeds from disposal of available-for-sale financial assets 2,747 81, ,208 Net cash flow from acquisition of subsidiaries (net of cash acquired) ( 300 ) ( 8,962 ) - Proceeds from disposal of investments accounted for under equity method Acquisition of property, plant and equipment ( 73,337 ) ( 2,187,270 )( 6,302,614 ) Proceeds from disposal of property, plant and equipment 6, ,156 79,662 Decrease in other non-current assets 1,665 49,669 1,968,009 Decrease in other financial assets 77 2,311 80,965 Acquisition of intangible assets ( 1,334 ) ( 39,786 )( 80,538 ) Net cash used in investing activities ( 66,587 ) ( 1,985,955 )( 3,993,587 ) CASH FLOWS FROM FINANCING ACTIVITIES Increase in short-term borrowings 138,267 4,123, ,011 Repayment of long-term debt ( 231,687 ) ( 6,910,071 )( 4,260,331 ) Exercise of employee share options 11, , ,997 Cash dividend declared to minority shareholders - - ( 5,840 ) Net cash used in financing activities ( 82,277 ) ( 2,453,903 )( 3,547,163 ) Effect of exchange rate changes on cash and cash equivalents 115,124 3,433,571 ( 1,500,442 ) Decrease in cash and cash equivalents of non-current disposal group held for sale ( 24,058 ) ( 717,530 ) - Increase (decrease) in cash and cash equivalents 140,822 4,200,020 ( 5,331,475 ) Cash and cash equivalents at beginning of period 1,713,198 51,096,128 67,695,906 Cash and cash equivalents at end of period $ 1,854,020 $ 55,296,148 $ 62,364,431 The accompanying notes are an integral part of these consolidated financial statements. See review report of independent accountants dated April 29, ~10~

12 DELTA ELECTRONICS, INC. AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (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 primarily engaged in the installation of electronic control systems and manufacturing of communication products and components, computer information system and power supply. 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 April 29, 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 ) Not applicable as it is the first-time adoption of IFRSs by the Group this year. (2) Effect of new issuances of or amendments to IFRSs as endorsed by the FSC but not yet adopted by the Group IFRS 9, Financial Instruments : Classification and measurement of financial assets A. The International Accounting Standards Board ( IASB ) published IFRS 9, Financial Instruments, in November, 2009, which will take effect on January 1, 2015 with early application permitted. Although the FSC has endorsed IFRS 9, FSC does not permit early application of IFRS 9 when IFRSs are adopted in R.O.C. in Instead, enterprises should apply International Accounting Standard No. 39 ( IAS 39 ), Financial Instruments: Recognition and Measurement reissued in B. IFRS 9 was issued as the first step to replace IAS 39. IFRS 9 outlines the new classification and measurement requirements for financial instruments, which might affect the accounting treatments for financial instruments of the Group. C. The Group has not evaluated the overall effect of the IFRS 9 adoption. However, based on preliminary evaluation, it was noted that the IFRS 9 adoption might have an impact on those instruments classified as available-for-sale financial assets held by the Group, as IFRS 9 specifies that the fair value changes in the equity instruments that meet certain ~11~

13 criteria may be reported in other comprehensive income, and such amount that has been recognised in other comprehensive income should not be reclassified to profit or loss when such assets are derecognised. The Group recognised gain (or loss) on debt instruments and on equity instruments amounting to $0 and $221,868, respectively, in other comprehensive income for the three-month period ended March 31, (3) IFRSs issued by IASB but not yet endorsed by the FSC A. The following are the new standards and amendments issued by IASB that are effective but not yet endorsed by the FSC and have not been adopted by the Group: New Standards or Amendments IFRS 1 Limited exemption from comparative IFRS 7 disclosures for first-time adopters Effective Date July 1, improvements to IFRSs January 1, 2011 IFRS 7 Disclosures - transfers of financial assets July 1, 2011 IFRS 1 Severe hyperinflation and removal of fixed dates for first-time adopters July 1, 2011 IAS 12 Deferred tax: recovery of underlying assets January 1, 2012 IFRS 10 Consolidated financial statements January 1, 2013 IFRS 11 Joint arrangements January 1, 2013 IFRS 12 Disclosure of interests in other entities January 1, 2013 IAS 27 Separate financial statements January 1, 2013 IAS 28 Investments in associates and joint ventures January 1, 2013 IFRS 13 Fair value measurements January 1, 2013 IAS 19 Employee benefits January 1, 2013 IAS 1 Presentation of items of other comprehensive income July 1, 2012 IFRIC 20 IFRS 7 Stripping costs in the production phase of a surface mine Disclosures - offsetting financial assets and financial liabilities January 1, 2013 January 1, 2013 IFRS 1 Government loans January 1, improvements to IFRSs January 1, 2013 IFRS 10, IFRS 11 and IFRS 12 Consolidated financial statements, joint arrangements and disclosure of interests in other entities: transition guidance January 1, 2013 B. The following are the new standards and amendments issued by IASB that are not yet effective and not yet endorsed by the FSC and have not been adopted by the Group: ~12~

14 IFRS 9 C. The Group is assessing the potential impact of the new standards and amendments above and has not yet been able to reliably estimate their impact on the consolidated financial statements. New Standards or Amendments Financial instruments: Classification and measurement of financial liabilities 4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Effective Date January 1, 2015 IAS 32 Offsetting financial assets and financial liabilities January 1, 2014 IFRS 7 and IFRS 9 Mandatory effective date and transition January 1, 2015 disclosures IFRS 10, IFRS 12 and IAS 27 Investment entities January 1, 2014 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 A. These consolidated financial statements are the first interim consolidated financial statements prepared by the Group in accordance with the Rules Governing the Preparation of Financial Statements by Securities Issuers, IAS 34, Interim Financial Reporting, and IFRS 1, First-time Adoption of International Financial Reporting Standards, as endorsed by the FSC. B. In the preparation of the balance sheet of January 1, 2012, the Group has adjusted the amounts that were reported in the consolidated financial statements in accordance with previous R.O.C. GAAP. Please refer to Note 15 for the impact of transitioning from R.O.C. GAAP to the International Financial Reporting Standards, International Accounting Standards, and Interpretations/bulletins as endorsed by the FSC (collectively referred herein as the IFRSs ) on the Group s financial position, operating results and cash flows. (2) Basis of preparation A. Except for the following items, these 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 ~13~

15 plus unrecognised prior period s service cost and unrecognised actuarial losses, and less unrecognised actuarial gains and present value of defined benefit obligation. B. The significant accounting policies as stated below have been consistently applied to all the periods presented in these consolidated financial statements, including the opening IFRS balance sheet on January 1, 2012 (the Group s date of transition to IFRSs) that are prepared in transition to IFRSs. C. The preparation of financial statements in conformity with 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) 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. d) 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 ~14~

16 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. Conversely, all gains or losses previously recognised in other comprehensive income in relation to the subsidiary should be transferred directly to retained earnings, if such gains or losses would be transferred directly to retained earnings when the related assets or liabilities are disposed of. B. Subsidiaries included in the consolidated financial statements: Ownership (%) Name of Name of Main Business March 31, December 31, Investor Subsidiary Activities Description Electronics, Inc. Electronics, Inc. Electronics, Inc. Electronics, Inc. International Holding Ltd. (DIH) Networks Holding Ltd. (DNH) Deltronics (Netherlands) B.V. (DEN) DelSolar Co., Ltd. (DelSolar) Equity investments Equity investments Trading of equipment, components and materials of telecom and computer systems Manufacturing of solar batteries and related systems Note A Electronics, Inc. Electronics, Inc. PreOptix (Hong Kong) Co., Ltd. (PHK) Equity investments NeoEnergy Designing and Microelectronics, experimenting on Inc. (NEM) integrated circuit and information software services ~15~

17 Name of Name of Main Business March 31, December 31, Investor Subsidiary Activities Description Electronics, Inc. Electronics, Inc. Electronics, Inc. Cyntec Co., Ltd. (Cyntec) DelBio Inc. (DelBio) Research, development, manufacturing and sales of film opticelectronics devices Manufacturing, wholesale and retail of medical equipment Ownership (%) Electronics Equity investments Capital Company ( Capital) Electronics, Inc. Electronics, Inc. Electronics, Inc. Electronics, Inc. International Holding Ltd. (DIH) Electronics Int'l (Singapore) Pte. Ltd. (DEIL- SG) Smart Green Life Co., Ltd. (DSGL) Allied Material Technology Corp. (AMT) Robot Automatic Co., Ltd. ( Robot) Electronics (H.K.) Ltd. (DHK) Sales of electronic products Research and development, energy technology, meeting, exhibition, and leasing services, etc. Manufacturing and sales of color filter and lease services, etc. Research, designing, development, manufacturing and sales of intelligent robot systems and automation engineering, etc. Equity investments, operations management and engineering services Note B Note C Note B ~16~

18 Name of Name of Main Business March 31, December 31, Investor Subsidiary Activities Description International Holding Ltd. (DIH) Electronics International Ltd. (DEIL-Labuan) Sales of electronic products Ownership (%) International Holding Ltd. (DIH) Power Sharp Ltd. (DPS) Operations and engineering services International Holding Ltd. (DIH) DEI Logistics (USA) Corp. (ALI) Warehousing and logistics services International Holding Ltd. (DIH) International Holding Ltd. (DIH) International Holding Ltd. (DIH) International Holding Ltd. (DIH) International Holding Ltd. (DIH) Electronics (Japan), Inc. (DEJ) DAC Holding (Cayman) Ltd. (DAC) Ace Pillar Holding Co., Ltd. (Ace) PreOptix (Hong Kong) Co., Ltd. (PHK) Drake Overseas Financial Investment Ltd. (Drake) Sales of power products, display solution products electronic components, industrial automation products and their materials Equity investments Equity investments Note D Equity investments Equity investments Note D ~17~

19 Name of Name of Main Business March 31, December 31, Investor Subsidiary Activities Description International Holding Ltd. (DIH) International Holding Ltd. (DIH) Electronics (H.K.) Ltd. (DHK) Greentech (China) Co., Ltd. (DGC) Vivitek Corporation (Vivitek) Electronics (Dongguan) Co., Ltd. (DDG) Manufacturing and sales of uninterruptible power systems Sales of projector products and their materials Manufacturing and sales of transformer and power supplies Ownership (%) Note D Note E 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 (H.K.) Ltd. (DHK) Electronics (H.K.) Ltd. (DHK) Electronics (Shanghai) Co., Ltd. (DPEC) Electronics (Jiangsu) Ltd. (DWJ) Electronics Components (Wujiang) Ltd. (DWC) Electro- Optics (Wujiang) Ltd. (DWO) Product design and management consulting service, etc. Manufacturing and sales of power supplies and transformers Manufacturing and sales of transformers Manufacturing and sales of peripherals and electronic control equipments ~18~

20 Name of Name of Main Business March 31, December 31, Investor Subsidiary Activities Description Electronics (H.K.) Ltd. (DHK) Video Display System (Wujiang) Ltd. (DWV) Manufacturing and sales of various projectors Ownership (%) Electronics (H.K.) Ltd. (DHK) Electronics (H.K.) Ltd. (DHK) Electronics (H.K.) Ltd. (DHK) Electronics (H.K.) Ltd. (DHK) Electronics (Wuhu) Co., Ltd. (DWH) Electronics (Chenzhou) Co., Ltd. (DCZ) Electronics International Mexico S.A. DE C.V. (DEIL-MX) Electronics (Wujiang) Trading Co., Ltd. (DWT) Manufacturing and sales of power supplies and transformers Manufacturing and sales of power supplies and transformers Sales of power management of industrial automation product and telecommunications equipment Installation, consulting and trading of electronic products Electronics (H.K.) Ltd. (DHK) Green (Tianjin) Industries Co., Ltd. (DGT) Manufacturing and sales of transformers and bluetooth module PreOptix (Hong Kong) Co., Ltd. (PHK) Electronics (Japan), Inc. (DEJ) PreOptix (Jiang Su) Co., Ltd. (PJS) Addtron Technology (Japan), Inc. (AT Japan) Manufacturing and sales of lenses and optical engines for projectors Trading of networking system and peripherals ~19~

21 Name of Name of Main Business March 31, December 31, Investor Subsidiary Activities Description Electronics (Japan), Inc. (DEJ) DAC Holding (Cayman) Ltd. (DAC) Electronics (Korea), Inc. ( Korea) Electronics Mexico S.A. DE C.V. (DEM) Sales of power products, display solution products electronic components, industrial automation products and their materials Manufacturing and sales of electronic products Ownership (%) DAC Holding (Cayman) Ltd. (DAC) Video Technology Ltd. (DVT) Sales of electronic products Drake Overseas Financial Investment Ltd. (Drake) Ace Pillar Holding Co., Ltd. (Ace) Drake Investment (HK) Ltd. (Drake-HK) Greentech (China) Co., Ltd. (DGC) Equity investments Note D Manufacturing and sales of uninterruptible power systems Note D Drake Investment (HK) Ltd. (Drake-HK) Greentech (China) Co., Ltd. (DGC) Manufacturing and sales of uninterruptible power systems Note D Electronics (Wuhu) Co., Ltd. (DWH) Electronics (Wuhu) Co., Ltd. (DWH) Wuhu Technology Co., Ltd. (WDT) Energy Technology (Wuhu) Co., Ltd. (DET-WH) 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 Note B ~20~

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

23 Name of Name of Main Business March 31, December 31, Investor Subsidiary Activities Description Electronics (Shanghai) Co., Ltd. (DPEC) Energy Technology (Chenzhou) Co., Ltd. (DET-CZ) Research and development of energysaving technology, energy-saving equipment, energy management system and technology consulting service, etc. Ownership (%) 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 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 B 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 Note B Greentech Energy (China) Co., Ltd. Technology (DGC) (Shanghai) Co., Ltd. (DET-SH) Research and development of energysaving technology, energy-saving equipment, energy management system and technology consulting service, etc Note B ~22~

24 Name of Name of Main Business March 31, December 31, Investor Subsidiary Activities Description Networks Holding Ltd. (DNH) Networks, Inc. (DNI Cayman) Ownership (%) 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 Networks, Inc. (DNI Cayman) Networks International Ltd. (DNIL-Labuan) Trading of networking system and peripherals Networks, Inc. (DNI Cayman) Networks (H.K.) Ltd. (DNHK) Networks (H.K.) Ltd. (DNHK) Networks (H.K.) Ltd. (DNHK) Networks (Dongguan) Ltd. (DII) Networks (Shanghai) Ltd. (DNS) Equity investments Manufacturing and sales of other radio transmission apparatus, incorporating reception apparatus and other radio-broadcast receivers, combined with sound recording or reproducing apparatus Design of computer software ~23~

25 Name of Name of Main Business March 31, December 31, Investor Subsidiary Activities Description Networks (H.K.) Ltd. (DNHK) Networks (Xiamen) Ltd. (DNX) Operation of radio transmission apparatus, and automatic data processing, reception, conversion and transmission or regeneration of voice, images or other data of the machine, including switches and routers, with a special program to control a computer or word processor with memory business Ownership (%) Networks, Inc. (Taiwan) (DNIT) DelSolar Co., Ltd. (DelSolar) DelSolar Co., Ltd. (DelSolar) DelSolar Holding (Cayman) Ltd. (DSH) DelSolar Holding (Cayman) Ltd. (DSH) Ayecom Technology Co., Ltd. (Ayecom) DelSolar Holding (Cayman) Ltd. (DSH) DelSolar Holding Singapore Pte. Ltd. (DSH-SG) DelSolar (H.K.) Ltd. (DSHK) DelSolar US Holdings (Delaware) Corporation (DSUS) Manufacturing and sales of wire and wireless telecommunications equipment, electronic parts and controlled telecommunications radio frequency devices Equity investments Equity investments Equity investments Equity investments ~24~

26 Name of Name of Main Business March 31, December 31, Investor Subsidiary Activities Description DelSolar Holding Singapore Pte. Ltd. (DSH-SG) DelSolar (H.K.) Ltd. (DSHK) DelSolar India EPC Company Private Ltd. (DS India) DelSolar (Wujiang) Ltd. (DSWJ) Contractor of solar systems project Manufacturing and sales of solar batteries and related systems Ownership (%) DelSolar US Holdings (Delaware) Corporation (DSUS) DelSolar Development (Delaware) LLC (DS Delaware) DelSolar Development (Delaware) LLC (DS Delaware) DelSolar Development (Delaware) LLC (DS Delaware) DSS-RAL LLC (DSS) DSS-USF-PHX LLC (DSSU) Design and sale of solar system Contractor of solar system Contractor of solar system Cyntec Co., Ltd. (Cyntec) Fairview Assets Ltd. (Fairview) Grandview Holding Ltd. (Grandview) Fairview Assets Ltd. (Fairview) Grandview Holding Ltd. (Grandview) Cyntec Holding (H.K.) Ltd. (CHK) Equity investments Equity investments Equity investments Grandview Holding Ltd. (Grandview) Cyntec International Ltd. (CIL-Labuan) Trading ~25~

27 Name of Name of Main Business March 31, December 31, Investor Subsidiary Activities Description Cyntec Holding (H.K.) Ltd. (CHK) Cyntec Holding (H.K.) Ltd. (CHK) DelBio Inc. (DelBio) Cyntec (Suzhou) Co., Ltd. (CSC) Cyntec Electronics (Suzhou) Co., Ltd. (CES) DelBio Inc (Wujiang)., Ltd.(DelBio-WJ) Research, development, manufacturing and sales of new-type electronic components and wholesale, import and export of similar products Research, development, manufacturing and sales of new-type electronic components (chip components, sensing elements, hybrid integrated circuits) and wholesale, import and export of similar products Manufacturing, wholesale and retail of medical equipment Ownership (%) Note F ~26~

28 Name of Name of Main Business March 31, January 1, Investor Subsidiary Activities Description Electronics, Inc. Electronics, Inc. International Holding Ltd. (DIH) Networks Holding Ltd. (DNH) Ownership (%) Equity investments Equity investments Electronics, Inc. Deltronics (Netherlands) B.V. (DEN) Trading of equipment, components and materials of telecom and computer systems Electronics, Inc. DelSolar Co., Ltd. (DelSolar) Manufacturing of solar batteries and related systems Electronics, Inc. PreOptix (Hong Kong) Co., Ltd. (PHK) Equity investments Electronics, Inc. NeoEnergy Microelectronics, Inc. (NEM) Designing and experimenting on integrated circuit and information software services Electronics, Inc. Cyntec Co., Ltd. (Cyntec) Research, development, manufacturing and sales of film opticelectronics devices Electronics, Inc. Electronics, Inc. DelBio Inc. (DelBio) Electronics Capital Company ( Capital) Manufacturing, wholesale and retail of medical equipment Equity investments ~27~

29 Ownership (%) Name of Name of Main Business March 31, January 1, 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 B 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 International Holding Ltd. (DIH) DEI Logistics (USA) Corp. (ALI) Warehousing and logistics services International Holding Ltd. (DIH) Electronics (Japan), Inc. (DEJ) Sales of power products, display solution products electronic components, industrial automation products and their materials ~28~