Greatek Electronics Inc. Financial Statements for the Six Months Ended June 30, 2016 and 2015 and Independent Auditors Review Report

Transcription

1 Greatek Electronics Inc. Financial Statements for the Six Months Ended and and Independent Auditors Review Report

2 INDEPENDENT AUDITORS REVIEW REPORT The Board of Directors and Shareholders Greatek Electronics Inc. We have reviewed the accompanying balance sheets of Greatek Electronics Inc. (the Corporation ) as of and, and the related statements of comprehensive income for the three months ended and and for the six months ended and, as well as the statements of changes in equity and cash flows for the six months ended and. These financial statements are the responsibility of the Corporation s management. Our responsibility is to issue a report on these financial statements based on our reviews. Except as stated in the following paragraph, we conducted our reviews in accordance with Statement of Auditing Standards No. 36 Engagements to Review Financial Statements issued by the Auditing Standards Committee of the Accounting Research and Development Foundation of the Republic of China. A review consists principally of applying analytical procedures to financial data and of making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with auditing standards generally accepted in the Republic of China, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion. Based on our reviews, we are not aware of any material modifications that should be made to the financial statements referred to above for them to be in conformity with the Guidelines Governing the Preparation of Financial Reports by Securities Issuers and the International Financial Reporting Standard No. 34 Interim Financial Reporting, which were approved by the Financial Supervisory Commission. August 4, Notice to Readers The accompanying financial statements are intended only to present the financial position, financial performance and cash flows in accordance with accounting principles and practices generally accepted in the Republic of China and not those of any other jurisdictions. The standards, procedures and practices to review such financial statements are those generally applied in the Republic of China. For the convenience of readers, the independent auditors review report and the accompanying financial statements have been translated into English from the original Chinese version prepared and used in the Republic of China. If there is any conflict between the English version and the original Chinese version or any difference in the interpretation of the two versions, the Chinese-language independent auditors review report and financial statements shall prevail

3 GREATEK ELECTRONICS INC. BALANCE SHEETS (In Thousands of New Taiwan Dollars) (Reviewed) (Audited) (Reviewed) (Reviewed) (Audited) (Reviewed) ASSETS Amount % Amount % Amount % LIABILITIES AND EQUITY Amount % Amount % Amount % CURRENT ASSETS CURRENT LIABILITIES Cash and cash equivalents (Note 6) $ 5,539, $ 4,583, $ 5,131, Financial liabilities at fair value through profit or loss Financial assets at fair value through profit or loss - - current (Note 7) $ 81 - $ 3,795 - $ 1,293 - current (Note 7) 59,910-23, ,313 1 Notes payable 5,427-5,019-8,520 - Held-to-maturity financial assets - current (Note 8) 200, , Accounts payable (Note 25) 565, , ,947 3 Notes receivable (Note 10) 84,169-92,423-93,618 1 Payables to equipment suppliers 359, , ,636 2 Accounts receivable (Note 10) 1,822, ,002, ,975, Dividend payable (Note 18) - - 1,592, Receivables from related parties (Note 25) 303, , ,037 1 Accrued bonus to employees and remuneration to directors and 1,365,230 8 Inventories (Note 11) 737, , ,112 4 supervisors (Note 20) 492, , ,321 3 Prepaid expenses and other current assets (Notes 14 and 25) 144, , ,979 1 Current income tax liabilities 144, , ,076 1 Provisions - current (Note 16) 38,720-54,403-23,824 - Total current assets 8,892, ,978, ,368, Accrued expenses and other current liabilities (Notes 15 and 25) 435, , ,558 2 NON-CURRENT ASSETS Held-to-maturity financial assets - noncurrent (Note 8) 702, , ,009 4 Total current liabilities 3,407, ,877, ,447, Financial assets carried at cost - noncurrent (Note 9) - - 8,846-8,846 - Property, plant and equipment (Notes 12 and 27) 7,329, ,014, ,325, NON-CURRENT LIABILITIES Intangible assets (Note 13) 17,331-15,486-12,890 - Deferred income tax liabilities 158-1, Deferred income tax assets 20,301-19,305-13,358 - Guarantee deposits 2,090-2,090-2,090 - Other noncurrent assets (Notes 14 and 26) 76, , ,021 - Net defined benefit liability - noncurrent (Note 4) 178, , ,294 1 Total non-current assets 8,145, ,835, ,038, Total non-current liabilities 180, , ,665 1 Total liabilities 3,588, ,061, ,608, EQUITY (Notes 18 and 23) Capital stock Common stock 5,688, ,688, ,688, Capital surplus 1, , ,153 2 Retained earnings Legal reserve 2,359, ,162, ,162, Unappropriated earnings 5,399, ,507, ,554, Total equity 13,449, ,752, ,799, TOTAL $ 17,038, $ 15,814, $ 16,407, TOTAL $ 17,038, $ 15,814, $ 16,407, The accompanying notes are an integral part of the financial statements

4 GREATEK ELECTRONICS INC. STATEMENTS OF COMPREHENSIVE INCOME (In Thousands of New Taiwan Dollars, Except Earnings Per Share) (Reviewed, Not Audited) For the Three Months Ended For the Six Months Ended Amount % Amount % Amount % Amount % NET SALES (Notes 19 and 25) $ 2,495, $ 2,393, $ 4,969, $ 4,724, OPERATING COSTS (Notes 11, 17, 20 and 25) 1,797, ,721, ,553, ,399, GROSS PROFIT 698, , ,415, ,325, OPERATING EXPENSES (Notes 17 and 20) Selling and marketing expenses 13,847-13,756-23,512-24,069 - General and administrative 40, , , ,248 2 Research and development 51, , , ,447 2 Total operating expenses 106, , , ,764 4 OPERATING INCOME 591, , ,200, ,124, NONOPERATING INCOME AND EXPENSES (Note 20) Other income 10,260-10,888-22,309-20,580 - Other gains and losses (6,402) - (7,190) - (18,636) - (13,583) - Total nonoperating income and expenses 3,858-3,698-3,673-6,997 - INCOME BEFORE INCOME TAX 595, , ,204, ,131, INCOME TAX EXPENSE (Notes 4 and 21) 64, , , ,345 3 NET INCOME 531, , ,062, , OTHER COMPREHENSIVE INCOME TOTAL COMPREHENSIVE INCOME $ 531, $ 500, $ 1,062, $ 98, EARNINGS PER SHARE (Note 22) Basic $ 0.93 $ 0.88 $ 1.87 $ 1.75 Diluted $ 0.93 $ 0.87 $ 1.85 $ 1.72 The accompanying notes are an integral part of the financial statements

5 GREATEK ELECTRONICS INC. STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY (In Thousands of New Taiwan Dollars) (Reviewed, Not Audited) Share Capital Issued and Outstanding Retained Earnings Share Unappropriated (Thousands) Amount Capital Surplus Legal Reserve Special Reserve Earnings Total Equity BALANCE, JANUARY 1, 568,846 $ 5,688,459 $ 394,153 $ 1,936,222 $ 1,560 $ 5,373,200 $ 13,393,594 APPROPRIATION OF 2014 EARNINGS Legal reserve ,128 - (226,128) - Reversal of special reverse (1,560) 1,560 - Cash dividends to shareholders - NT$2.8 per share (1,592,768) (1,592,768) Net income for the six months ended , ,231 BALANCE, JUNE 30, 568,846 $ 5,688,459 $ 394,153 $ 2,162,350 $ - $ 4,554,095 $ 12,799,057 BALANCE, JANUARY 1, 568,846 $ 5,688,459 $ 394,153 $ 2,162,350 $ - $ 5,507,884 $ 13,752,846 APPROPRIATION OF EARNINGS Legal reserve ,584 - (197,584) - Cash dividends to shareholders - NT$1.71 per share (972,724) (972,724) Issue of cash dividends from capital surplus - NT$0.69 per share - - (392,506) (392,506) Net income for the six months ended ,062,330 1,062,330 BALANCE, JUNE 30, 568,846 $ 5,688,459 $ 1,647 $ 2,359,934 $ - $ 5,399,906 $ 13,449,946 The accompanying notes are an integral part of the financial statements

6 GREATEK ELECTRONICS INC. STATEMENTS OF CASH FLOWS (In Thousands of New Taiwan Dollars) (Reviewed, Not Audited) For the Six Months Ended CASH FLOWS FROM OPERATING ACTIVITIES Current income before income tax $ 1,204,533 $ 1,131,576 Adjustments to reconcile income before income tax to net cash provided by operating activities: Depreciation 902, ,623 Amortization 2,414 1,796 Net gain on fair value change of financial instruments designated as at fair value through profit or loss (4,716) (5,918) Premium amortization of held-to-maturity financial assets 1,104 1,180 Interest revenue (16,843) (18,858) Net loss on disposal of property, plant and equipment 13,042 - Impairment loss recognized on financial assets 8,846 - Net loss on foreign currency exchange 17,669 33,654 Changes in operating assets and liabilities: Increase in financial assets held for trading (35,200) (37,700) Decrease in notes receivable 8,254 2,184 Decrease (increase) in accounts receivable 162,635 (186,324) (Increase) decrease in accounts receivable from related parties (36,671) 90,879 (Increase) decrease in inventories (29,004) 79,454 (Increase) decrease in prepaid expenses and other current assets (41,749) 4,483 Increase in notes payable 408 5,818 Increase (decrease) in accounts payable 1,685 (119,853) Increase in accrued bonus to employees and remuneration to directors and supervisors 172, ,714 Decrease in provisions (15,683) (775) Decrease in accrued expenses and other accounts payable (139,114) (127,209) Decrease in net defined benefit liability (2,066) (1,777) Net cash provided by operating activities 2,173,901 1,949,947 Income tax paid (278,235) (306,451) Net cash provided by operating activities 1,895,666 1,643,496 CASH FLOWS FROM INVESTING ACTIVITIES Purchase of held-to-maturity financial assets - (200,918) Proceeds of the sale of held-to-maturity of financial assets - 200,000 Acquisition of property, plant and equipment (945,846) (886,716) Increase in refundable deposits (1,056) (40) Increase in intangible assets (4,259) (354) Interest received 14,619 17,619 Net cash used in investing activities (936,542) (870,409) (Continued) - 5 -

7 GREATEK ELECTRONICS INC. STATEMENTS OF CASH FLOWS (In Thousands of New Taiwan Dollars) (Reviewed, Not Audited) For the Six Months Ended CASH FLOWS FROM FINANCING ACTIVITIES Increase in guarantee deposits $ - $ 2,000 Net cash provided in financing activities - 2,000 EFFECTS OF EXCHANGE RATE CHANGES ON THE BALANCE OF CASH HELD IN FOREIGN CURRENCIES (2,984) (2,145) NET INCREASE IN CASH AND CASH EQUIVALENTS 956, ,942 CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 4,583,834 4,359,057 CASH AND CASH EQUIVALENTS, END OF PERIOD $ 5,539,974 $ 5,131,999 The accompanying notes are an integral part of the financial statements. (Concluded) - 6 -

8 GREATEK ELECTRONICS INC. NOTES TO FINANCIAL STATEMENTS FOR THE SIX MONTHS ENDED JUNE 30, AND (In Thousands of New Taiwan Dollars, Unless Stated Otherwise) (Reviewed, Not Audited) 1. GENERAL INFORMATION Greatek Electronics Inc. (the Corporation or Greatek ) was incorporated in the Republic of China ( ROC ) on March 7, The Corporation mainly provides semiconductor assembly and testing services on a turnkey basis. The Corporation s shares have been listed on the Taiwan Stock Exchange (TSE) on October 26, Powertech Technology Inc. (PTI) acquired Greatek s 44.09% ownership, pursuant to Greatek s board approval on December 21, On the reelection of the directors and supervisors of Greatek, PTI holds a majority of the directors seats and become parent. PTI has 42.91% ownership of Greatek as of and. 2. APPROVAL OF FINANCIAL STATEMENTS The financial statements were reported to the Board of Directors and issued on August 4,. 3. APPLICATION OF NEW, AMENDED AND REVISED STANDARDS AND INTERPRETATIONS a. International Financial Reporting Standards (IFRS), International Accounting Standards (IAS), Interpretations of IFRS (IFRIC), and Interpretations of IAS (SIC) endorsed by the FSC for application starting from Rule No issued by the FSC endorsed the following IFRS, IAS, IFRIC and SIC (collectively, the IFRSs ) for application starting January 1, New, Amended or Revised Standards and Interpretations (the New IFRSs ) Effective Date Announced by IASB (Note 1) Annual Improvements to IFRSs Cycle July 1, 2014 (Note 2) Annual Improvements to IFRSs Cycle July 1, 2014 Annual Improvements to IFRSs Cycle January 1, (Note 3) Amendments to IFRS 10, IFRS 12 and IAS 28 'Investment Entities: January 1, Applying the Consolidation Exception Amendment to IFRS 11 Accounting for Acquisitions of Interests in January 1, Joint Operations IFRS 14 Regulatory Deferral Accounts January 1, Amendment to IAS 1 Disclosure Initiative January 1, Amendments to IAS 16 and IAS 38 Clarification of Acceptable January 1, Methods of Depreciation and Amortization Amendment to IAS 19 Defined Benefit Plans: Employee July 1, 2014 Contributions (Continued) - 7 -

9 New, Amended or Revised Standards and Interpretations (the New IFRSs ) Effective Date Announced by IASB (Note 1) Amendment to IAS 27 Equity Method in Separate Financial January 1, Statements Amendment to IAS 36 Impairment of Assets: Recoverable Amount January 1, 2014 Disclosures for Non-financial Assets Amendment to IAS 39 Novation of Derivatives and Continuation of January 1, 2014 Hedge Accounting IFRIC 21 Levies January 1, 2014 (Concluded) Note 1: Unless stated otherwise, the above New or amended IFRSs are effective for annual periods beginning on or after their respective effective dates. Note 2: The amendment to IFRS 2 applies to share-based payment transactions with grant date on or after July 1, 2014; the amendment to IFRS 3 applies to business combinations with acquisition date on or after July 1, 2014; the amendment to IFRS 13 is effective immediately; the remaining amendments are effective for annual periods beginning on or after July 1, Note 3: The amendment to IFRS 5 is applied prospectively to changes in a method of disposal that occur in annual periods beginning on or after January 1, ; the remaining amendments are effective for annual periods beginning on or after January 1,. Except for the following, the initial application of the above New or amended IFRSs in 2017 would not have any material impact on the Corporation s accounting policies: 1) Amendment to IAS 36 Recoverable Amount Disclosures for Non-financial Assets The amendment clarifies that the recoverable amount of an asset or a cash-generating unit is disclosed only when an impairment loss on the asset has been recognized or reversed during the period. Furthermore, if the recoverable amount of an item of property, plant and equipment for which impairment loss has been recognized or reversed is fair value less costs of disposal, the Corporation is required to disclose the fair value hierarchy. If the fair value measurements are categorized within Level 2 and Level 3, the valuation technique and key assumptions used to measure the fair value are disclosed. The discount rate used is disclosed if such fair value less costs of disposal is measured by using present value technique. The amendment will be applied retrospectively. 2) Annual Improvements to IFRSs: Cycle Several standards including IFRS 2 Share-based Payment and IFRS 8 Operating Segments were amended in this annual improvement. The amended IFRS 2 changes the definitions of vesting condition and market condition and adds definitions for performance condition and service condition. The amendment clarifies that a performance target can be based on the operations (i.e. a non-market condition) of the Corporation or another entity in the same Corporation or the market price of the equity instruments of the Corporation or another entity in the same Corporation (i.e. a market condition); that a performance target can relate either to the performance of the Corporation as a whole or to some part of it (e.g. a division); and that the period for achieving a performance condition must not extend beyond the end of the related service period. In addition, a share market index target is not a performance condition because it not only reflects the performance of the Corporation, but also of other entities outside the Corporation. The share-based payment arrangements with market conditions, non-market conditions or non-vesting conditions will be accounted for differently, and - 8 -

10 the aforementioned amendment will be applied prospectively to those share-based payments granted on or after January 1, The amended IFRS 8 requires an entity to disclose the judgments made by management in applying the aggregation criteria to operating segments, including a description of the operating segments aggregated and the economic indicators assessed in determining whether the operating segments have similar economic characteristics. The amendment also clarifies that a reconciliation of the total of the reportable segments assets to the entity s assets should only be provided if the segments assets are regularly provided to the chief operating decision-maker. The judgements made in applying aggregation criteria should be disclosed retrospectively upon initial application of the amendment in When the amended IFRS 13 becomes effective in 2017, the short-term receivables and payables with no stated interest rate will be measured at their invoice amounts without discounting, if the effect of not discounting is immaterial. IAS 24 was amended to clarify that a management entity providing key management personnel services to the Corporation is a related party of the Corporation. Consequently, the Corporation is required to disclose as related party transactions the amounts incurred for the service paid or payable to the management entity for the provision of key management personnel services. However, disclosure of the components of such compensation is not required. 3) Annual Improvements to IFRSs: Cycle Several standards including IFRS 7, IAS 19 and IAS 34 were amended in this annual improvement. IAS 19 was amended to clarify that the depth of the market for high quality corporate bonds used to estimate discount rate for post-employment benefits should be assessed by the market of the corporate bonds denominated in the same currency as the benefits to be paid, i.e. assessed at currency level (instead of country or regional level). Except for the above impacts, as of the date the financial statements were authorized for issue, the Corporation continues assessing other possible impacts that application of the aforementioned amendments will have on the Corporation s financial position and financial performance, and will disclose these other impacts when the assessment is completed. b. New IFRSs in issue but not yet endorsed by the FSC The Corporation has not applied the following IFRSs issued by the IASB but not yet endorsed by the FSC. The FSC announced that the Corporation should apply IFRS 15 starting January 1, As of the date the financial statements were authorized for issue, the FSC has not announced the effective dates of other new IFRSs. New IFRSs Effective Date Announced by IASB (Note 1) Amendment to IFRS 2 Classification and Measurement of January 1, 2018 Share-based Payment Transactions IFRS 9 Financial Instruments January 1, 2018(Note 2) Amendments to IFRS 9 and IFRS 7 Mandatory Effective Date of January 1, 2018 IFRS 9 and Transition Disclosures Amendments to IFRS 10 and IAS 28 Sale or Contribution of Assets To be determined by IASB between an Investor and its Associate or Joint Venture (Continued) - 9 -

11 New IFRSs Effective Date Announced by IASB (Note) IFRS 15 Revenue from Contracts with Customers January 1, 2018 Amendment to IFRS 15 Clarifications to IFRS 15 January 1, 2018 IFRS 16 Leases January 1, 2019 Amendment to IAS 7 Disclosure Initiative January 1, 2017 Amendments to IAS 12 Recognition of Deferred Tax Assets for January 1, 2017 Unrealized Losses (Concluded) Note 1: Unless stated otherwise, the above New IFRSs are effective for annual periods beginning on or after their respective effective dates. 1) IFRS 9 Financial Instruments Recognition and measurement of financial assets With regards to financial assets, all recognized financial assets that are within the scope of IAS 39 Financial Instruments: Recognition and Measurement are subsequently measured at amortized cost or fair value. Under IFRS 9, the requirement for the classification of financial assets is stated below. For the Corporation s debt instruments that have contractual cash flows that are solely payments of principal and interest on the principal amount outstanding, their classification and measurement are as follows: a) For debt instruments, if they are held within a business model whose objective is to collect the contractual cash flows, the financial assets are measured at amortized cost and are assessed for impairment continuously with impairment loss recognized in profit or loss, if any. Interest revenue is recognized in profit or loss by using the effective interest method; b) For debt instruments, if they are held within a business model whose objective is achieved by both the collecting of contractual cash flows and the selling of financial assets, the financial assets are measured at fair value through other comprehensive income (FVTOCI) and are assessed for impairment. Interest revenue is recognized in profit or loss by using the effective interest method, and other gain or loss shall be recognized in other comprehensive income, except for impairment gains or losses and foreign exchange gains and losses. When the debt instruments are derecognized or reclassified, the cumulative gain or loss previously recognized in other comprehensive income is reclassified from equity to profit or loss. Except for the above, all other financial assets are measured at fair value through profit or loss. However, the Corporation may make an irrevocable election to present subsequent changes in the fair value of an equity investment (that is not held for trading) in other comprehensive income, with only dividend income generally recognized in profit or loss. No subsequent impairment assessment is required, and the cumulative gain or loss previously recognized in other comprehensive income cannot be reclassified from equity to profit or loss. Impairment of financial assets IFRS 9 requires that impairment loss on financial assets is recognized by using the Expected Credit Losses Model. The credit loss allowance is required for financial assets measured at amortized cost certain written loan commitments and financial guarantee contracts. A loss allowance for the 12-month expected credit losses is required for a financial asset if its credit risk has not increased significantly since initial recognition. A loss allowance for full lifetime expected credit losses is

12 required for a financial asset if its credit risk has increased significantly since initial recognition and is not low. However, a loss allowance for full lifetime expected credit losses is required for trade receivables that do not constitute a financing transaction. 2) Amendments to IAS 12 Recognition of Deferred Tax Assets for Unrealized Losses The amendment clarifies that the difference between the carrying amount of the debt instrument measured at fair value and its tax base gives rise to a temporary difference, even though there are unrealized losses on that asset, irrespective of whether the Corporation expects to recover the carrying amount of the debt instrument by sale or by holding it and collecting contractual cash flows. In addition, in determining whether to recognize a deferred tax asset, the Corporation should assess a deductible temporary difference in combination with all of its other deductible temporary differences, unless the tax law restricts the utilization of losses to deduction against income of a specific type, in which case, a deductible temporary difference is assessed in combination only with other deductible temporary differences of the appropriate type. The amendment also stipulates that, when determining whether to recognize a deferred tax asset, the estimate of probable future taxable profit may include some of the Corporation s assets for more than their carrying amount if there is sufficient evidence that it is probable that the Corporation will achieve this, and that the estimate for future taxable profit should exclude tax deductions resulting from the reversal of deductible temporary differences. Except for the above impact, as of the date the financial statements were authorized for issue, the Corporation is continuously assessing the possible impact that the application of other standards and interpretations will have on the Corporation s financial position and financial performance, and will disclose the relevant impact when the assessment is completed. 4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICY a. Statement of compliance These interim financial statements have been prepared in accordance with the Regulations Governing the Preparation of Financial Reports by Securities Issuers, and IAS 34 Interim Financial Reporting as endorsed by the FSC. Disclosure information included in the financial statements is less than those required in a complete set of annual financial statements. b. Other significant accounting policies Except for the following, the accounting policies applied in these financial statements are consistent with those applied in the financial statements for the year ended. For the summary of other significant accounting policies, please refer to the financial statements for the year ended. 1) Retirement benefits Pension cost for an interim period is calculated on a year-to-date basis by using the actuarially determined pension cost rate at the end of the prior financial year, adjusted for significant market fluctuations since that time and for significant plan amendments, settlements, or other significant one-off events

13 2) Taxation Income tax expense represents the sum of the tax currently payable and deferred tax. Interim period income taxes are assessed on an annual basis and calculated by applying to an interim period s pre-tax income the tax rate that would be applicable to expected total annual earnings. 5. CRITICAL ACCOUNTING JUDGMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY The critical accounting judgments and key sources of estimation uncertainty followed in these financial statements were the same as those applied in the preparation of the financial statements for the year ended. 6. CASH AND CASH EQUIVALENTS Bank deposits $ 4,104,608 $ 3,418,941 $ 3,637,637 Repurchase agreements collateralized by bonds 1,435,366 1,164,893 1,494,362 $ 5,539,974 $ 4,583,834 $ 5,131,999 The market rate intervals of cash in bank and cash equivalent at the end of the reporting period were as follows: Bank deposits 0.13%-1.16% 0.20%-1.16% 0.29%-1.30% Repurchase agreement collateralized by bonds 0.34%-0.40% 0.37%-0.48% 0.52%-1.13% 7. FINANCIAL INSTRUMENTS AT FAIR VALUE THROUGH PROFIT OR LOSS Financial assets at FVTPL - current Financial assets held for trading - current Non-derivative financial assets Mutual funds $ 58,956 $ 23,708 $ 165,956 Derivative financial assets (not under hedge accounting) Foreign exchange forward contracts Financial liabilities at FVTPL - current $ 59,910 $ 23,708 $ 166,313 Financial liabilities held for trading - current Derivative financial liabilities (not under hedge accounting) Foreign exchange forward contracts $ 81 $ 3,795 $ 1,

14 At the end of the reporting period, outstanding foreign exchange forward contracts not under hedge accounting were as follows: Currency Maturity Date Contract Amounts (In Thousands) Sell forward exchange contracts USD to NTD USD7,200 / NTD233,098 Sell forward exchange contracts USD to NTD USD9,400 / NTD306,600 Sell forward exchange contracts USD to NTD USD8,200 / NTD251,977 The Corporation entered into foreign exchange forward contracts to manage exposures due to exchange rate fluctuations of foreign currency denominated assets and liabilities. However, those contracts did not meet the criteria of hedge effectiveness and therefore were not accounted for by using hedge accounting. 8. HELD-TO-MATURITY FINANCIAL ASSETS Current Domestic investments Corporate bonds - 02 Taiwan Power Company 4 Bond $ 200,215 $ 200,657 $ - Noncurrent Domestic investments Corporate bonds - 01 TSMC 2A Bond $ 200,561 $ 200,814 $ 201,070 Corporate bonds - 02 Taiwan Power Company 1A Bond 200, , ,835 Corporate bonds - 01 TSMC 1B Bond 101, ,634 - Corporate bonds - P04 Hon Hai 4C Bond 100, ,001 - Corporate bonds - P04 FENC 4 Bond 100, ,000 - Corporate bonds - 02 Taiwan Power Company 4 Bond ,104 $ 702,476 $ 703,138 $ 603,009 On March 10, 2014, the Corporation bought corporate bonds issued by Taiwan Power Company with an effective interest rate of 0.9% at premium value $202,255 thousand (par value $200,000 thousand), and a maturity date of September 26,, at par value of $200,000 thousand. On August 7, 2014, the Corporation bought corporate bonds issued by TSMC with an effective interest rate of 1.02% at premium value $201,523 thousand (par value $200,000 thousand), and a maturity date of August 2, 2017, at par value of $200,000 thousand

15 On March 19,, the Corporation bought corporate bonds issued by Taiwan Power Company with an effective interest rate of 1.13% at premium value $200,917 thousand (par value $200,000 thousand), and a maturity date of May 6, 2018, at par value of $200,000 thousand. On October 20,, the Corporation bought corporate bonds issued by TSMC, which have an effective interest rate of 0.91%; a premium value of $101,740 thousand (par value $100,000 thousand); and maturity on January 11, On October 23,, the Corporation bought corporate bonds issued by HON HAI PRECISION IND. CO., LTD., which have an effective interest rate of 1.15%; a premium value of $100,001 thousand (par value $100,000 thousand); and maturity on September 29, On November 16,, the Corporation bought corporate bonds issued by Far Eastern New Century Corporation, which have an effective interest rate of 1.25%; a premium value of $100,001 thousand (par value $100,000 thousand); and maturity date on November 16, FINANCIAL ASSETS MEASURED AT COST Noncurrent Domestic unlisted common shares $ - $ 8,846 $ 8,846 Management believed that the above unlisted equity investments held by the Corporation, whose fair value cannot be reliably measured due to the range of reasonable fair value estimates was so significant; therefore they were measured at cost less impairment at the end of reporting period. The Corporation assessed the impairment of investees for the six months ended, and recognized impairment loss amounting to $8,846 thousand. 10. NOTES AND ACCOUNTS RECEIVABLE, NET Notes receivable - operating $ 84,169 $ 92,423 $ 93,618 Accounts receivable $ 1,838,609 $ 2,017,957 $ 1,991,721 Less: Allowance for impairment loss (15,868) (15,868) (15,868) $ 1,822,741 $ 2,002,089 $ 1,975,853 The average credit period on sales of goods was 60 days. In determining the recoverability of a trade receivable, the Corporation considered any change in the credit quality of the trade receivable since the date credit was initially granted to the end of the reporting period. Allowance for impairment loss were recognized reference to past default experience of the counterparties and an analysis of their current financial position. For the trade receivables balances that were past due at the end of the reporting period, the Corporation did not recognize an allowance for impairment loss. There had not been a significant change in credit quality and the amounts were still considered recoverable. The Corporation did not hold any collateral or other

16 credit enhancements over these balances nor did it have a legal right to offset against any amounts owed by the Corporation to the counterparty. Age of receivables was as follow: Less than 60 days $ 1,357,460 $ 1,429,469 $ 1,288, days 338, , , days 124, , ,677 More than 120 days 17,455 65,022 67,210 The above analyses were based on the invoice date. Age of receivables that are past due but not impaired was as follow: $ 1,838,609 $ 2,017,957 $ 1,991,721 Less than 60 days $ 9,704 $ 48,682 $ 118, days 166 1,177 26, days 1 9,079 3,668 More than 120 days - 25, Above analysis was based on the past due date. $ 9,871 $ 84,413 $ 149,029 Movement in the allowance for impairment loss recognized on notes receivable and accounts receivables were as follow: Individually Assessed for Impairment Collectively Assessed for Impairment Total Balance at January 1, $ - $ 15,868 $ 15,868 Add: Impairment losses recognized on receivables Balance at $ - $ 15,868 $ 15,868 Balance at January 1, $ - $ 15,868 $ 15,868 Add: Impairment losses recognized on receivables Balance at $ - $ 15,868 $ 15,868 Included in the allowance for impairment loss was individually impaired trade receivables amounting to $0 as of, and, respectively

17 11. INVENTORIES Finished goods $ 198,315 $ 188,649 $ 137,348 Work in progress 97, ,628 81,146 Raw materials 397, , ,407 Supplies 43,887 37,550 30,211 The costs of inventories recognized as cost of goods sold were as follows: $ 737,130 $ 708,126 $ 677,112 For the Three Months Ended For the Six Months Ended Provision (reversal) of inventory valuation and obsolescence losses $ 3,322 $ (1,124) $ 2,949 $ (4,851) Unallocated overheads $ 42,734 $ 69,084 $ 84,951 $ 142,384 Sales of scrapes $ (11,400) $ (11,800) $ (22,999) $ (26,141) Operating Costs $ 1,797,884 $ 1,721,949 $ 3,553,081 $ 3,399, PROPERTY, PLANT AND EQUIPMENT Cost Land Building Machinery and Equipment Transportation Equipment For the Six Months Ended Office Equipment Other Equipment Equipment under Installation Construction in Progress Spare Parts Total Balance, beginning of period $ 1,157,720 $ 1,822,230 $ 9,065,728 $ 11,007 $ 33,844 $ 219,131 $ 305,126 $ 72,024 $ 82,992 $ 12,769,802 Additions - 76, ,274-1,876 7, , , , ,392 Disposals - (7,220 ) (59,732 ) - (60 ) (1,358 ) - - (128,425 ) (196,795 ) Reclassified ,715-1,745 - (226,881 ) - - (1,421 ) Balance, end of period 1,157,720 1,891,507 9,511,985 11,007 37, , , ,938 80,546 13,564,978 Accumulated deprecation Balance, beginning of period - 782,843 4,570,219 8,418 12, , ,500,520 Depreciation expense - 64, , ,919 15, , ,623 Disposals - (7,220 ) (59,732 ) - (60 ) (1,358 ) - - (128,425 ) (196,795 ) Balance, end of period - 839,876 5,234,891 8,795 15, , ,239,348 Net book value, end of period $ 1,157,720 $ 1,051,631 $ 4,277,094 $ 2,212 $ 21,939 $ 84,813 $ 273,737 $ 375,938 $ 80,546 $ 7,325,630 Cost Land Building Machinery and Equipment Transportation Equipment For the Six Months Ended Office Equipment Other Equipment Equipment under Installation Construction in Progress Spare Parts Total Balance, beginning of period $ 1,157,720 $ 1,895,802 $ 9,814,236 $ 9,512 $ 38,876 $ 243,280 $ 167,930 $ 580,495 $ 88,546 $ 13,996,397 Additions - 5, , , , , ,889 1,230,876 Disposals - - (302,819 ) - (3,618 ) (3,792 ) - - (134,502 ) (444,731 ) Reclassified - 6, , ,830 (136,597 ) (6,812 ) - (- ) Balance, end of period 1,157,720 1,908,430 9,892,937 9,512 35, , , ,866 91,933 14,782,542 Accumulated deprecation Balance, beginning of period - 908,137 5,903,158 7,492 17, , ,982,375 Depreciation expense - 65, , ,961 17, , ,259 Disposals - - (289,777 ) - (3,618 ) (3,792 ) - - (134,502 ) (431,689 ) Balance, end of period - 973,760 6,294,868 7,838 16, , ,452,945 Net book value, beginning of period $ 1,157,720 $ 987,665 $ 3,911,078 $ 2,020 $ 21,673 $ 96,895 $ 167,930 $ 580,495 $ 88,546 $ 7,014,022 Net book value, end of period $ 1,157,720 $ 934,670 $ 3,598,069 $ 1,674 $ 19,446 $ 91,115 $ 522,104 $ 912,866 $ 91,933 $ 7,329,

18 The above items of property, plant and equipment were depreciated on a straight-line basis at the following rates per annum: Buildings Main plants Mechanical and electrical power equipment Others Machinery and equipment Transportation equipment Office equipment Other equipment Spare parts 26 years 6-11 years 6-51 years 2-10 years 6 years 3-7 years 2-16 years 0.5 years 13. INTANGIBLE ASSETS For the Six Months Ended Computer Software Cost Balance, beginning of period $ 16,480 Additions 354 Reclassified 1,421 Balance, end of period 18,255 Accumulated amortization Balance, beginning of period 3,569 Additions 1,796 Balance, end of period 5,365 Net book value, end of period $ 12,890 Cost For the Six Months Ended Computer Software Balance, beginning of period $ 22,779 Additions 4,259 Balance, end of period 27,038 (Continued)

19 For the Six Months Ended Computer Software Accumulated amortization Balance, beginning of period $ 7,293 Additions 2,414 Balance, end of period 9,707 Net book value, beginning of period $ 15,486 Net book value, end of period $ 17,331 (Concluded) Computer software was amortized on a straight-line basis at 5 years. 14. OTHER ASSETS Current Tax overpaid $ 75,845 $ 40,526 $ 25,833 Tax refund receivables 24,876 22,084 15,926 Inventory of supplies 20,530 15,990 16,603 Interest receivable 8,914 6,690 6,472 Advance payments 7,230 6,099 12,226 Other receivables 3,148 6,301 3,455 Others (a) 4,306 3,186 3,464 Non-current $ 144,849 $ 100,876 $ 83,979 Pledged deposits (b) $ 69,000 $ 69,000 $ 69,000 Refundable deposits 7,144 6,088 6,021 $ 76,144 $ 75,088 $ 75,021 a. Other current assets include prepaid insurances, prepaid rents, temporary debits and payment on behalf of others. b. Pledge deposits are guarantee deposits for imports

20 15. OTHER LIABILITIES Current Accrued expenses Bonus $ 204,900 $ 337,868 $ 169,262 Labor and health insurance 27,221 32,146 25,071 Utilities 25,370 23,320 28,220 Others (a) 134, , , , , ,591 Other current liabilities Unearned receipts 28,681 22,568 24,483 Behalf of the collection 13,112 11,826 17,539 Temporary receipts 2,577 2,995 1,945 44,370 37,389 43,967 $ 435,886 $ 575,000 $ 377,558 a. Other accrued expenses include spare parts, services and utilization of the foreign employment security. 16. PROVISIONS Current Indemnification payable $ 38,720 $ 54,403 $ 23,824 Movements in the provisions were as follow: For the Six Months Ended Balance at January 1 $ 54,403 $ 24,599 Reversal of amounts reversed during the period (15,566) - Amounts written off during the period as uncollectible (117) (775) Balance at $ 38,720 $ 23,824 Indemnification payable are measured at the best estimate of the consideration required to settle the present obligation at the end of the reporting period, taking into account the risks and uncertainties surrounding the obligation

21 17. RETIREMENT BENEFIT PLANS a. Defined contribution plans The Corporation adopted a pension plan under the Labor Pension Act (the LPA ), which is a state-managed defined contribution plan. Under the LPA, an entity makes monthly contributions to employees individual pension accounts at 6% of monthly salaries and wages. Employee benefit expenses in respect of the Corporation s defined contribution retirement plans were $19,134 thousand, $16,480 thousand, $36,895 thousand and $33,795 thousand for the three months and six months ended and, respectively. b. Defined benefit plans The defined benefit plan adopted by the Corporation in accordance with the Labor Standards Law is operated by the government. Pension benefits are calculated on the basis of the length of service and average monthly salaries of the six months before retirement. The Corporation contribute amounts equal to 2% of total monthly salaries and wages to a pension fund administered by the pension fund monitoring committee. Pension contributions are deposited in the Bank of Taiwan in the committee s name. Before the end of each year, the Corporation assesses the balance in the pension fund. If the amount of the balance in the pension fund is inadequate to pay retirement benefits for employees who conform to retirement requirements in the next year, the Corporation is required to fund the difference in one appropriation that should be made before the end of March of the next year. The pension fund is managed by the Bureau of Labor Funds, Ministry of Labor ( the Bureau ); the Corporation has no right to influence the investment policy and strategy. Employee benefit expenses in respect of the Corporation s defined benefit retirement plans were $1,082 thousand, $1,168 thousand, $2,164 thousand and $2,336 thousand for the three months and six months ended and, respectively, and were calculated using the actuarially determined pension cost discount rate as of and EQUITY a. Ordinary shares Numbers of shares authorized (in thousands) 600, , ,000 Shares authorized $ 6,000,000 $ 6,000,000 $ 6,000,000 Number of shares issued and fully paid (in thousands) 568, , ,846 Shares issued $ 5,688,459 $ 5,688,459 $ 5,688,459 Fully paid ordinary shares, which have a par value of $10, carry one vote per share and carry a right to dividends. There are 20,000 thousand shares reserved for employee stock options

22 b. Capital surplus May be used to offset a deficit, distributed as cash dividends or transferred to share capital Share premium $ 1,647 $ 215,085 $ 215,085 Premium from convertible bonds - 179, ,068 $ 1,647 $ 394,153 $ 394,153 Share Premium Premium from Convertible Bonds Total Balance at January 1 and $ 215,085 $ 179,068 $ 394,153 Balance at January 1, $ 215,085 $ 179,068 $ 394,153 Cash dividends (213,438) (179,068) (392,506) Balance at $ 1,647 $ - $ 1,647 The premium from shares issued in excess of par may be used to offset a deficit; in addition, when the Corporation has no deficit, such capital surplus may be distributed as cash dividends or transferred to capital (limited to a certain percentage of the Corporation s capital surplus and once a year). The capital surplus from employee share options and share warrants may not be used for any purpose. c. Retained earnings and dividend policy In accordance with the amendments to the Company Act in May, the recipients of dividends and bonuses are limited to shareholders and do not include employees. The shareholders held their regular meeting on June 7, and, in that meeting, had resolved amendments to the Corporation s Articles of Incorporation (the Articles ), particularly the amendment to the policy on dividend distribution and the addition of the policy on distribution of employees compensation. Under the dividend policy as set forth in the amended Articles, the Corporation should make appropriations from its net income in the following order: 1) Deducted for accumulated deficits. (include current year s adjusted undistributed earnings) 2) Appropriate the 10% as the legal reserve. However when the legal reserve amounts to the authorized capital, this shall not apply. 3) Appropriate or reverse the special reserve in accordance with relevant laws or regulations or as requested by the authorities in charge. 4) The board of directors will draft a resolution declaring a dividend equaling the sum of previous years surpluses and current year s adjusted undistributed earnings, less previous expense balances. The shareholders will ultimately decide whether the amount should be distributed as dividends or retained within the Corporation

23 For information on the accrued employees compensation and remuneration to directors and supervisors and the actual appropriations, please refer to the employee benefit expense shown in Note 20 (d). Dividends are distributed in the form of cash, common shares or a combination of cash and common shares. In consideration of the Corporation s being in a capital-intensive industry as well as the long-term development, overall environment, industrial growth characteristics, capital demand, capital budget, shareholders interests, balanced dividend considerations and long-term financial plans, the Corporation s Articles of Incorporation provide that the total of cash dividends paid in any given year should be at least 30% of total dividends distributed. Appropriation of earnings to legal reserve shall be made until the legal reserve equals the Corporation s capital surplus. Legal reserve may be used to offset deficit. If the Corporation has no deficit and the legal reserve has exceeded 25% of the Corporation s capital surplus, the excess may be transferred to capital or distributed in cash. Except for non-roc resident shareholders, all shareholders receiving the dividends are allowed a tax credit equal to their proportionate share of the income tax paid by the Corporation. The appropriations of earnings for and 2014 had been approved in the shareholders meetings on June 7, and June 10,, respectively. The appropriations and dividends per share were as follows: Appropriation Appropriation of Earnings of Earnings Dividends Per Share ($) For Year For Year 2014 For Year For Year 2014 Legal reserve $ 197,584 $ 226,128 $ - $ - Cash dividends 972,724 1,592, $ 1,170,308 $ 1,818,896 The Corporation s shareholders meeting held on June 7, also approved to issue of cash dividends from capital surplus of $392,506 thousand (about $0.69 dollar per share). d. Special reserve For the Six Months Ended Balance at January 1 $ - $ 1,560 Reversal: Reversal of the debt to other equity items - (1,560) Balance at $ - $ - The Corporation had a decrease in retained earnings that resulted from all IFRSs adjustments; therefore, no special reserve was appropriated

24 19. REVENUE Revenue of the Corporation were analyzed as follow: For the Three Months Ended For the Six Months Ended Subcontract revenue $ 2,495,984 $ 2,393,203 $ 4,969,010 $ 4,724, NET PROFIT FROM CONTINUING OPERATIONS a. Other income For the Three Months Ended For the Six Months Ended Rental income Operating lease rental income $ 105 $ 105 $ 211 $ 211 Interest income Bank deposits 4,575 6,229 9,324 11,819 Held-to-maturity financial assets 2,355 1,612 4,689 2,997 Repurchase agreements collateralized by bonds 1,473 2,082 2,828 4,040 Refundable deposits Others 1, ,255 1,511 b. Other gains and losses $ 10,260 $ 10,888 $ 22,309 $ 20,580 For the Three Months Ended For the Six Months Ended Net gain (loss) on foreign currency exchange $ 3,844 $ (11,425) $ (15,404) $ (20,113) Net (loss) gain arising on financial instruments classified as held for trading (1,398) 3,711 5,622 6,028 Impairment loss recognized on financial assets (8,846) - (8,846) - Others (2) 524 (8) 502 $ (6,402) $ (7,190) $ (18,636) $ (13,583)

25 c. Depreciation and amortization For the Three Months Ended For the Six Months Ended Property, plant and equipment $ 440,784 $ 471,588 $ 902,259 $ 935,623 Intangible assets 1, ,414 1,796 $ 442,032 $ 472,501 $ 904,673 $ 937,419 An analysis of depreciation by function Operating costs $ 427,480 $ 459,600 $ 875,728 $ 912,393 Operating expense 13,304 11,988 26,531 23,230 $ 440,784 $ 471,588 $ 902,259 $ 935,623 An analysis of amortization by function Operating costs $ 231 $ 54 $ 388 $ 108 Selling and marketing expenses General and administrative ,687 1,365 Research and development d. Employee benefits expense $ 1,248 $ 913 $ 2,414 $ 1,796 For the Three Months Ended For the Six Months Ended Post-employment benefits Defined contribution plans $ 19,134 $ 16,480 $ 36,895 $ 33,795 Defined benefit plans (see Note 17) 1,082 1,168 2,164 2,336 20,216 17,648 39,059 36,131 Other employee benefits 592, ,358 1,173,793 1,066,901 Total employee benefits expense $ 612,897 $ 553,006 $ 1,212,852 $ 1,103,032 An analysis of employee benefits expense by function Operating costs $ 539,958 $ 483,664 $ 1,063,713 $ 963,767 Operating expenses 72,939 69, , ,265 $ 612,897 $ 553,006 $ 1,212,852 $ 1,103,032 To be in compliance with the Company Act as amended in May, the proposed amended Articles of Incorporation of the Corporation stipulate to distribute employees compensation and remuneration to directors and supervisors at the rates between 9% to 15% and no higher than 3%, respectively, of net profit before income tax, employees compensation and remuneration to directors and supervisors. For the three months and six months ended, the employees compensation and the

26 remuneration to directors and supervisors were representing 10% and 2%, respectively, of the base net profit. According to the Articles of Incorporation of the Corporation before amendments, the Corporation stipulate to distribute bonus to employees and remuneration to directors and supervisors at the rates 15% and 3%, respectively, of net income (net of bonus to employees and remuneration to directors and supervisors, legal reserve and special reserve) for the three months and six months ended. For the Three Months Ended For the Six Months Ended Employees compensation $ 71,726 $ 67,629 $ 143,415 $ 134,761 Remuneration to directors and supervisors $ 14,345 $ 13,526 $ 28,683 $ 26,953 If there is a change in the proposed amounts after the annual financial statements were authorized for issue, the differences are recorded as a change in accounting estimate. The appropriations of employees compensation and remuneration to directors and supervisors for having been resolved by the board of directors on March 7,, and the appropriations of employees compensation and remuneration to directors and supervisors for 2014 having been approved in the shareholders meetings on June 10,, respectively, were stated as below. Cash Dividends For the Year Ended December Share Cash Dividends Dividends Share Dividends Employees compensation /bonus to employees $ 266,738 $ - $ 305,506 $ - Remuneration of directors and supervisors 53,347-61,101 - There was no difference between the amounts of the employees compensation, bonus to employees and the remuneration to directors and supervisors proposed by the board of directors and approved in the shareholders meetings on March 7, and June 10, and the amounts recognized in the annual financial statements for the years ended and 2014, respectively. Information on the employees compensation and remuneration to directors and supervisors for resolved by the Company s board of directors in and bonus to employees, directors and supervisors for 2014 resolved by the shareholders' meeting in are available on the Market Observation Post System website of the Taiwan Stock Exchange. f. Gain or loss on foreign currency exchange For the Three Months Ended For the Six Months Ended Foreign exchange gains $ 5,666 $ 11,753 $ 28,966 $ 15,387 Foreign exchange losses (1,822) (23,178) (44,370) (35,500) $ 3,844 $ (11,425) $ (15,404) $ (20,113)