Gintech Energy Corporation and Subsidiaries

Transcription

1 Gintech Energy Corporation and Subsidiaries Consolidated Financial Statements for the Three Months Ended and 2016 and Independent Auditors Review Report

2 INDEPENDENT AUDITORS REVIEW REPORT The Board of Directors and Shareholders Gintech Energy Corporation We have reviewed the accompanying consolidated balance sheets of Gintech Energy Corporation (the Corporation ) and its subsidiaries (collectively referred to as the Group ) as of, 2017 and 2016, and the consolidated statements of comprehensive income, changes in equity and cash flows for the three months then ended. These consolidated financial statements are the responsibility of the Corporation s management. Our responsibility is to issue a report on these consolidated financial statements based on our reviews. Except as stated in the following paragraph, we conducted our reviews in accordance with Statement of Auditing Standards No. 36 Review of Financial Statements issued by the Auditing Standards Committee of the Accounting Research and Development Foundation of the Republic of China. A review consists principally of applying analytical procedures to financial data and of making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with auditing standards generally accepted in the Republic of China, the objective of which is the expression of an opinion regarding the consolidated financial statements taken as a whole. Accordingly, we do not express such an opinion. The carrying amount of NT$618,461 thousand and NT$679,207 thousand of the Group s investments accounted for using equity method as of and 2016, respectively, and the related investment income (loss) of NT$(61,540) thousand and NT$50,459 thousand, respectively; the related other comprehensive loss of NT$10,580 thousand and NT$7,756 thousand, respectively, recognized for the three months then ended, were determined on the basis of the unreviewed financial statements of the investees

3 Based on our reviews, except for the effects of such adjustments, if any, as might have been required had we been able to obtain the reviewed financial statements of the investees as of and for the three months ended and 2016, as explained in the preceding paragraph, we are not aware of any material modifications that should be made to the consolidated financial statements of Gintech Energy Corporation and its subsidiaries referred to above for them to be in conformity with the Regulations Governing the Preparation of Financial Reports by Securities Issuers and International Accounting Standards No. 34 Interim Financial Reporting endorsed and issued into effect by the Financial Supervisory Commission of the Republic of China. Deloitte & Touche Taipei, Taiwan Republic of China May 10, 2017 Notice to Readers The accompanying consolidated 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 consolidated financial statements are those generally applied in the Republic of China. For the convenience of readers, the independent auditors review report and the accompanying consolidated financial statements have been translated into English from the original Chinese version prepared and used in the Republic of China. If there is any conflict between the English version and the original Chinese version or any difference in the interpretation of the two versions, the Chinese-language independent auditors review report and consolidated financial statements shall prevail

4 GINTECH ENERGY CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (In Thousands of New Taiwan Dollars) (Reviewed) 2016 (Audited), 2016 (Reviewed) ASSETS Amount % Amount % Amount % CURRENT ASSETS Cash and cash equivalents (Notes 6, 31 and 35) $ 3,991, $ 4,071, $ 3,295, Available-for-sale financial assets (Notes 4, 8 and 31) 159, , ,004 1 Accounts receivable, net (Notes 4, 9, 31 and 35) 2,803, ,184, ,941, Other receivables (Notes 4 and 9) 217, , ,517 2 Other receivables from related parties (Notes 4, 9, 32 and 35) 29,044-30,271-42,042 - Current income tax assets (Notes 4 and 25) 1,640-1,590-1,277 - Inventories (Notes 4 and 10) 835, ,023, ,773,453 9 Prepayments (Notes 5 and 34) 762, , ,898,431 9 Other current assets (Notes 11, 31 and 33) 356, , ,504 - Total current assets 9,158, ,276, ,519, NON-CURRENT ASSETS Financial assets measured at cost (Notes 4 and 12) 31,800-31,800-31,800 - Investments accounted for using equity method (Notes 4 and 14) 618, , ,207 4 Property, plant and equipment (Notes 4, 15, 28 and 33) 7,354, ,788, ,744, Intangible assets (Notes 4 and 16) 8,965-10,270-5,575 - Deferred income tax assets (Notes 4, 5 and 25) 657, , ,356 3 Other non-current assets (Notes 17, 28, 29 and 34) 109, , ,611 4 Total non-current assets 8,780, ,277, ,936, TOTAL $ 17,938, $ 17,554, $ 20,456, LIABILITIES AND EQUITY CURRENT LIABILITIES Short-term borrowings (Notes 18, 31 and 35) $ 648,571 4 $ 689,117 4 $ 1,042,846 5 Financial liabilities at fair value through profit or loss (Notes 4, 7 and 35) ,296 - Accounts payable (Notes 31 and 35) 1,848, ,800, ,926, Accounts payable to related parties (Notes 31, 32 and 35) 63, , ,146 - Other payables (Notes 20, 31 and 35) 550, , ,332 2 Other payables to related parties (Notes 31, 32 and 35) Current income tax liabilities 2,984-3, Receipts in advance 31,980-39,479-12,150 - Long-term debts - current portion (Notes 18, 31 and 35) 556, , ,190,800 6 Other current liabilities 10,494-10,852-14,581 - Total current liabilities 3,713, ,756, ,645, NON-CURRENT LIABILITIES Long-term debts, net of current portion (Notes 18, 31 and 35) 2,701, ,683, ,960,750 9 Provisions (Notes 4 and 21) 1,825-1,825-1,825 - Deferred income tax liabilities (Notes 4, 5 and 25) 12,401-12, Guarantee deposits received 11,212-10,914-11,629 - Total non-current liabilities 2,726, ,708, ,974,348 9 Total liabilities 6,440, ,465, ,619, EQUITY ATTRIBUTABLE TO OWNERS OF THE CORPORATION (Notes 19 and 23) Ordinary shares 5,196, ,496, ,495, Advance receipts for share capital ,313 - Capital surplus 9,458, ,951, ,949, Unappropriated earnings (accumulated deficits) (3,133,322) (18) (2,353,546) (14) 422,304 2 Other equity (22,840) - (5,600) - (34,369) - Total equity 11,498, ,088, ,836, TOTAL $ 17,938, $ 17,554, $ 20,456, The accompanying notes are an integral part of the consolidated financial statements. (With Deloitte & Touche review report dated May 10, 2017) - 3 -

5 GINTECH ENERGY CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (In Thousands of New Taiwan Dollars, Except Earnings (Loss) Per Share) (Reviewed, Not Audited) Amount % Amount % OPERATING REVENUE Sales (Notes 4 and 32) $ 3,420, $ 4,885, Sales returns (2,123) - (1,834) - Sales allowance (569) - (432) - Total operating revenue 3,417, ,882, OPERATING COSTS (Notes 10, 22, 24, 27 and 32) 3,944, ,218, GROSS PROFIT (LOSS) (527,240) (16) 664, OPERATING EXPENSES (Notes 22, 24, 27 and 32) Selling 57, ,581 1 General and administrative 61, ,869 2 Research and development 18,411-58,228 1 Total operating expenses 137, ,678 4 OTHER OPERATING INCOME AND EXPENSES (Note 24) (103) - (4,400) - PROFIT (LOSS) FROM OPERATIONS (664,519) (20) 491, NON-OPERATING INCOME AND EXPENSES Other income (Notes 24 and 32) 4,707-8,644 - Other gains and losses (Note 24) (35,649) (1) 37,068 1 Financial costs (Notes 19 and 24) (22,775) - (22,927) - Share of profit (loss) of associates and a joint venture (Notes 4 and 14) (61,540) (2) 50,459 1 Total non-operating income and expenses (115,257) (3) 73,244 2 NET PROFIT (LOSS) BEFORE INCOME TAX (779,776) (23) 564, INCOME TAX EXPENSE (Notes 4 and 25) ,444 1 NET PROFIT (LOSS) (Note 26) (779,776) (23) 521, (Continued) - 4 -

6 GINTECH ENERGY CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (In Thousands of New Taiwan Dollars, Except Earnings (Loss) Per Share) (Reviewed, Not Audited) Amount % Amount % OTHER COMPREHENSIVE INCOME (LOSS) Items that may be reclassified subsequently to profit or loss: Exchange differences on translating foreign operations (Notes 4 and 23) $ (25,166) (1) $ (45,242) (1) Unrealized gain on available-for-sale financial assets (Note 23) 18, ,243 - Share of the other comprehensive loss of associates and a joint venture (Notes 4, 14 and 23) (10,580) - (7,756) - Total other comprehensive loss (17,240) - (33,755) (1) TOTAL COMPREHENSIVE INCOME (LOSS) $ (797,016) (23) $ 488, NET PROFIT (LOSS) ATTRIBUTABLE TO: Owners of the Corporation $ (779,776) (23) $ 521, Non-controlling interests $ (779,776) (23) $ 521, TOTAL COMPREHENSIVE INCOME (LOSS) ATTRIBUTABLE TO: Owners of the Corporation $ (797,016) (23) $ 488, Non-controlling interests $ (797,016) (23) $ 488, EARNINGS (LOSS) PER SHARE (NEW TAIWAN DOLLARS; Note 26) Basic $ (1.62) $ 1.16 Diluted $ 1.16 The accompanying notes are an integral part of the consolidated financial statements. (With Deloitte & Touche review report dated May 10, 2017) (Concluded) - 5 -

7 GINTECH ENERGY CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (In Thousands of New Taiwan Dollars) (Reviewed, Not Audited) Ordinary Shares (Note 23) Advance Receipts for Share Capital (Note 23) Capital Surplus (Note 23) Unappropriated Earnings (Accumulated Deficits) (Note 23) Other Equity (Note 23) Exchange Unrealized Differences on Gain (Loss) on Translating Available-for- Foreign sale Financial Operations Assets Other Total Equity BALANCE AT JANUARY 1, 2016 $ 4,495,168 $ - $ 8,947,563 $ (99,497) $ 15,465 $ (12,789) $ (4,524) $ 13,341,386 Share-based payments (Notes 23 and 27) ,234 1,234 Net profit for the three months ended, , ,801 Other comprehensive income (loss) for the three months ended, (49,073) 15,318 - (33,755) Total comprehensive income (loss) for the three months ended, ,801 (49,073) 15, ,046 Exercise of employee share options - 3, ,241 Conversion of bonds into ordinary shares - 1,072 1, ,614 BALANCE AT MARCH 31, 2016 $ 4,495,168 $ 4,313 $ 8,949,105 $ 422,304 $ (33,608) $ 2,529 $ (3,290) $ 13,836,521 BALANCE AT JANUARY 1, 2017 $ 4,496,677 $ - $ 8,951,405 $ (2,353,546) $ (25,534) $ 19,934 $ - $ 11,088,936 Share-based payments (Notes 23 and 27) - - (171) (171) Issuance of ordinary shares for cash 700, , ,206,829 Net loss for the three months ended (779,776) (779,776) Other comprehensive income (loss) for the three months ended (34,750) 17,510 - (17,240) Total comprehensive income (loss) for the three months ended (779,776) (34,750) 17,510 - (797,016) Retirement of restricted employee shares (171) BALANCE AT MARCH 31, 2017 $ 5,196,506 $ - $ 9,458,234 $ (3,133,322) $ (60,284) $ 37,444 $ - $ 11,498,578 The accompanying notes are an integral part of the consolidated financial statements. (With Deloitte & Touche review report dated May 10, 2017) - 6 -

8 GINTECH ENERGY CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (In Thousands of New Taiwan Dollars) (Reviewed, Not Audited) CASH FLOWS FROM OPERATING ACTIVITIES Net profit (loss) before income tax $ (779,776) $ 564,245 Adjustments for: Depreciation 439, ,548 Amortization 1,168 1,331 Net loss on fair value change of financial assets and liabilities at fair value through profit or loss - 8,143 Interest expense 20,766 20,120 Interest income (599) (4,473) Compensation costs of share-based payments (171) 1,234 Share of loss (profit) of associates and a joint venture 61,540 (50,459) Net loss on disposal of available-for-sale financial assets 3,316 - Unrealized net loss on foreign currency exchange 26,724 25,694 Gain on buy-back of convertible bonds - (13) Changes in operating assets and liabilities Accounts receivable (663,715) (581,320) Other receivables (131,059) (320,453) Other receivables from related parties 1,227 (11,581) Inventories 187,580 (79,060) Prepayments (22,087) 12,542 Other current assets (312,962) 275,027 Accounts payable 77,167 (476,191) Accounts payable to related parties (6,167) 7,765 Other payables (117,095) (172,837) Other payables to related parties 521 (11,726) Receipts in advance (7,499) 1,512 Other current liabilities (358) 4,310 Cash used in operations (1,221,935) (371,642) Interest received 562 4,405 Interest paid (21,437) (18,585) Income tax paid (51) (36) Net cash used in operating activities (1,242,861) (385,858) CASH FLOWS FROM INVESTING ACTIVITIES Proceeds from sale of available-for-sale financial assets 6,184 - Acquisition of investments accounted for using equity method (89,474) - Acquisition of property, plant and equipment (109,964) (84,174) Decrease in refundable deposits 2,029 63,189 Increase in prepayments for equipment (6,101) (223,411) Net cash used in investing activities (197,326) (244,396) (Continued) - 7 -

9 GINTECH ENERGY CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (In Thousands of New Taiwan Dollars) (Reviewed, Not Audited) CASH FLOWS FROM FINANCING ACTIVITIES Increase (decrease) in short-term borrowings $ (31,043) $ 469,912 Buy-back of convertible bonds - (200) Proceeds from long-term debts 240,000 1,223,842 Repayments of long-term debts (41,250) (2,300,792) Increase (decrease) in guarantee deposits received 298 (310) Insurance of ordinary shares for cash 1,206,829 - Exercise of employee share options - 3,241 Net cash generated from (used in) financing activities 1,374,834 (604,307) EFFECT OF EXCHANGE RATE CHANGES (13,981) (82,829) NET DECREASE IN CASH AND CASH EQUIVALENTS (79,334) (1,317,390) CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 4,071,204 4,612,593 CASH AND CASH EQUIVALENTS, END OF PERIOD $ 3,991,870 $ 3,295,203 The accompanying notes are an integral part of the consolidated financial statements. (With Deloitte & Touche review report dated May 10, 2017) (Concluded) - 8 -

10 GINTECH ENERGY CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE THREE MONTHS ENDED MARCH 31, 2017 AND 2016 (In Thousands of New Taiwan Dollars, Unless Stated Otherwise) (Reviewed, Not Audited) 1. GENERAL INFORMATION Gintech Energy Corporation (the Corporation ) was incorporated on August 10, The Corporation was in the development stage from August 10, 2005 to July 31, On August 1, 2006, the Corporation started operations, and mainly researches, develops, manufactures and sells solar cells and related materials. The Corporation s shares have been listed on the Taiwan Stock Exchange (TSE) since November 2, The consolidated financial statements as of and for the three months ended and 2016 incorporated the financial statements of the Corporation, Ultimate Energy Solution Limited ( UES, the subsidiary of the Corporation), Renewable Energy Solution Limited ( RES, the subsidiary of UES), and Gintech (Thailand) Limited ( Gintech (Thailand), the subsidiary of RES). UES commenced preparation for incorporation in Samoa in January 2015 with its main business on investment activities. As of and 2016, UES s paid-in capital was both US$42,130 thousand; the Corporation s equity interest in UES was both 100%. RES commenced preparation for incorporation in Samoa in January 2015 with its main business on investment activities. As of and 2016, RES s paid-in capital was both US$42,130 thousand; UES s equity interest in RES was both 100%. Gintech (Thailand) was incorporated in Thailand in April 2015 with its main business on research, development, manufacture and sale of solar cells and related materials. As of and 2016, the paid-in capital of Gintech (Thailand) was both THB1,434,850 thousand; RES s equity interest in Gintech (Thailand) was both 100%. The Corporation and its subsidiaries are collectively referred to as the Group. The consolidated financial statements are presented in the Corporation s functional currency, the New Taiwan dollars. In February 2017, the Corporation injected additional capital through issue of ordinary shares for cash with total proceeds of $1,206,829 thousand. In addition, on March 22, 2017, the Corporation s board of directors proposed the appropriations of earnings of 2016 and resolved to use capital surplus to make up for accumulated deficit. As of, the accumulated deficit of the Group amounted to $3,133,322 thousand that exceeded one-half of the paid-in capital. Please refer to Note 23 for detailed information. 2. APPROVAL OF FINANCIAL STATEMENTS The consolidated financial statements were reported to the Corporation s board of directors on May 10,

11 3. APPLICATION OF NEW, AMENDED AND REVISED STANDARDS AND INTERPRETATIONS a. Initial application of the amendments to the Regulations Governing the Preparation of Financial Reports by Securities Issuers and International Financial Reporting Standards (IFRS), International Accounting Standards (IAS), Interpretations of IFRS (IFRIC), and Interpretations of IAS (SIC) (collectively, the IFRSs ) endorsed and issued into effect by the Financial Supervisory Commission (FSC) Except for the following, the application of the amendments to the Regulations Governing the Preparation of Financial Reports by Securities Issuers and the IFRSs endorsed and issued into effect by the FSC did not have any material impact on the Group s accounting policies: Amendments to the Regulations Governing the Preparation of Financial Reports by Securities Issuers The amendments include additions of several accounting items and requirements for disclosures of impairment of non-financial assets as a consequence of the IFRSs endorsed and issued into effect by the FSC. In addition, as a result of the post implementation review of the IFRSs in the Republic of China (the ROC ), the amendments also include emphasis on certain recognition and measurement considerations and add requirements for disclosures of related party transactions and goodwill. The amendments stipulate that other companies or institutions of which the chairman of the board of directors or president serves as the chairman of the board of directors or the president, or is the spouse or second immediate family of the chairman of the board of directors or president of the Group are deemed to have a substantive related party relationship, unless it can be demonstrated that no control, joint control, or significant influence exists. Furthermore, the amendments require the disclosure of the names of the related parties and the relationship with whom the Group has significant transaction. If the transaction or balance with a specific related party is 10% or more of the Group s respective total transaction or balance, such transaction should be separately disclosed by the name of each related party. When the amendments were applied retrospectively from January 1, 2017, the disclosures of related party transactions were enhanced. Refer to Note 32 for related disclosures. b. The New IFRSs in issue but not yet endorsed and issued into effect by the FSC The Group has not applied the following New IFRSs issued by International Accounting Standards Board (IASB) but not yet endorsed and issued into effect by the FSC. The FSC announced that the Group should apply IFRS 9 and IFRS 15 starting January 1, As of the date the consolidated financial statements were authorized for issue, the FSC has not announced the effective dates of other New IFRSs. The New IFRSs Effective Date Announced by IASB Annual Improvements to IFRSs Cycle Note Amendment to IFRS 2 Classification and Measurement of January 1, 2018 Share-based Payment Transactions IFRS 9 Financial Instruments January 1, 2018 Amendments to IFRS 9 and IFRS 7 Mandatory Effective Date of January 1, 2018 IFRS 9 and Transition Disclosures Amendments to IFRS 10 and IAS 28 Sale or Contribution of Assets To be determined by IASB between an Investor and its Associate or Joint Venture IFRS 15 Revenue from Contracts with Customers January 1, 2018 Amendment to IFRS 15 Clarifications to IFRS 15 Revenue from January 1, 2018 Contracts with Customers (Continued)

12 The New IFRSs Effective Date Announced by IASB IFRS 16 Leases January 1, 2019 Amendment to IAS 7 Disclosure Initiative January 1, 2017 Amendment to IAS 12 Recognition of Deferred Tax Assets for January 1, 2017 Unrealized Losses Amendment to IAS 40 Transfers of Investment Property January 1, 2018 IFRIC 22 Foreign Currency Transactions and Advance January 1, 2018 Consideration (Concluded) Note: The amendment to IFRS 12 is retrospectively applied for annual periods beginning on or after January 1, 2017; the amendment to IAS 28 is retrospectively applied for annual periods beginning on or after January 1, The initial application of the above New IFRSs, whenever applied, would not have any material impact on the Group s accounting policies, except for the following: 1) IFRS 9 Financial Instruments Recognition and measurement of financial assets With regards to financial assets, all recognized financial assets that are within the scope of IAS 39 Financial Instruments: Recognition and Measurement are subsequently measured at amortized cost or fair value. Under IFRS 9, the requirement for the classification of financial assets is stated below. For the Group s debt instruments that have contractual cash flows that are solely payments of principal and interest on the principal amount outstanding, their classification and measurement are as follows: a) For debt instruments, if they are held within a business model whose objective is to collect the contractual cash flows, the financial assets are measured at amortized cost and are assessed for impairment continuously with impairment loss recognized in profit or loss, if any. Interest income 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 income is recognized in profit or loss by using the effective interest method, and other gain or loss shall be recognized in other comprehensive income (loss), 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 (loss) is reclassified from equity to profit or loss. Except for the above, all other financial assets are measured at fair value through profit or loss. However, the Group may make an irrevocable election to present subsequent changes in the fair value of an equity investment (that is not held for trading) in other comprehensive income (loss), 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 (loss) cannot be reclassified from equity to profit or loss

13 Impairment of financial assets IFRS 9 requires impairment loss on financial assets to be recognized by using the Expected Credit Losses Model. The credit loss allowance is required for financial assets measured at amortized cost, financial assets mandatorily measured at FVTOCI, lease receivables, contract assets arising from IFRS 15 Revenue from Contracts with Customers, certain written loan commitments and financial guarantee contracts. A loss allowance for the 12-month expected credit losses is required for a financial asset if its credit risk has not increased significantly since initial recognition. A loss allowance for full lifetime expected credit losses is required for a financial asset if its credit risk has increased significantly since initial recognition and is not low credit risk. However, a loss allowance for full lifetime expected credit losses is required for trade receivables that do not constitute a financing transaction. For purchased or originated credit-impaired financial assets, the Group takes into account the expected credit losses on initial recognition in calculating the credit-adjusted effective interest rate. Subsequently, any changes in expected losses are recognized as a loss allowance with a corresponding gain or loss recognized in profit or loss. Transition Financial instruments that have been derecognized prior to the effective date of IFRS 9 cannot be reversed to apply IFRS 9 when it becomes effective. Under IFRS 9, the requirements for classification, measurement and impairment of financial assets are applied retrospectively with the difference between the previous carrying amount and the carrying amount at the date of initial application recognized in the current period and restatement of prior periods is not required. The requirements for general hedge accounting shall be applied prospectively and the accounting for hedging options shall be applied retrospectively. 2) IFRS 16 Leases IFRS 16 sets out the accounting standards for leases that will supersede IAS 17 and related interpretations. Under IFRS 16, if the Group is a lessee, it shall recognize right-of-use assets and lease liabilities for all leases on the consolidated balance sheets except for low-value and short-term leases. The Group may elect to apply the accounting method similar to the accounting for operating lease under IAS 17 to the low-value and short-term leases. On the consolidated statements of comprehensive income, the Group should present the depreciation expense charged on the right-of-use asset separately from interest expense accrued on the lease liability; interest is computed by using effective interest method. On the consolidated statements of cash flows, cash payments for the principal portion of the lease liability are classified within financing activities; cash payments for interest portion are classified within operating activities. The application of IFRS 16 is not expected to have a material impact on the accounting of the Group as lessor. When IFRS 16 becomes effective, the Group may elect to apply this Standard either retrospectively to each prior reporting period presented or retrospectively with the cumulative effect of the initial application of this Standard recognized at the date of initial application. Except for the above potential impact, as of the date the consolidated financial statements were authorized for issue, the Group is continuously assessing the possible impact that the application of other standards and interpretations will have on the Group s financial position and financial performance and will disclose the relevant impact when the assessment is completed

14 4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Statement of Compliance The consolidated financial statements have been prepared in accordance with the Regulations Governing the Preparation of Financial Reports by Securities Issuers and IAS 34 Interim Financial Reporting as endorsed and issued into effect by the FSC. Disclosure information included in the consolidated financial statements is less than the disclosure information required in a complete set of annual consolidated financial statements. For the convenience of readers, the consolidated financial statements have been translated into English from the original Chinese version prepared and used in the ROC. 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 consolidated financial statements shall prevail. Basis of Preparation The consolidated financial statements have been prepared on the historical cost basis except for certain properties and financial instruments that are measured at revalued amount of fair value. The fair value measurements are grouped into Levels 1 to 3 based on the degree to which the fair value measurement inputs are observable and the significance of the inputs to the fair value measurement in its entirety, which are described as follows: a. Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities; b. Level 2 inputs are inputs other than quoted prices included within Level 1 that are observable for the assets or liabilities, either directly (i.e. as prices) or indirectly (i.e. derived from prices); and c. Level 3 inputs are unobservable inputs for the assets or liabilities. Basis of Consolidation The consolidated financial statements incorporate the financial statements of the Corporation and its subsidiaries. When necessary, adjustments are made to the financial statements of subsidiaries to bring their accounting policies into line with those used by the Corporation. All intra-group transactions, balances, income and expenses are eliminated in full upon consolidation. For more detailed information of the subsidiaries, including the percentage of ownership and main business, please refer to Note 13 and Table 7. Other Significant Accounting Policies The same accounting policies of these consolidated financial statements have been followed as were applied in the preparation of the Corporation s consolidated financial statements for the year ended 2016, except as described below: Income taxes Income tax expense represents the sum of current income tax and deferred income 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

15 5. CRITICAL ACCOUNTING JUDGMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY The same critical accounting judgments and key sources of estimation uncertainty have been followed in these consolidated financial statements as were applied in the preparation of the consolidated financial statements for the year ended CASH AND CASH EQUIVALENTS Cash on hand $ 350 $ 350 $ 350 Checking deposits and demand deposits 3,891,520 4,054,729 3,288,315 Cash equivalents Time deposits with original maturities less than three months 100,000 16,125 6,538 $ 3,991,870 $ 4,071,204 $ 3,295,203 As of, time deposits with original maturities over three months was $300,000 thousand, which was classified as other financial assets under other current assets, as shown in Note 11. There were no time deposits with original maturities over three months as of 2016 and, FINANCIAL INSTRUMENTS AT FAIR VALUE THROUGH PROFIT OR LOSS Financial liabilities held for trading - current Derivative financial liabilities (not under hedge accounting) Foreign exchange forward contracts $ - $ - $ 7,296 The Corporation entered into foreign exchange forward contracts to manage exposures to exchange rate fluctuations of foreign currency-denominated assets and liabilities. The financial risk management objective of the Corporation was to minimize market risks. There were no outstanding foreign exchange forward contracts as of and At the end of the reporting period, outstanding foreign exchange forward contracts not under hedge accounting were as follows: Currency Contract Period Contract Amount (In Thousands), 2016 Sell EUR/USD EUR7,000/USD7,803 Sell EUR/USD EUR8,000/USD8,

16 8. AVAILABLE-FOR-SALE FINANCIAL ASSETS Domestic investments Quoted shares $ 159,159 $ 150,153 $ 129,004 As of, 2016 and, 2016, the unrealized gains on financial instruments were $49,729 thousand, $31,223 thousand and $10,074 thousand, respectively. 9. ACCOUNTS RECEIVABLE AND OTHER RECEIVABLES, NET Accounts receivable Accounts receivable - operating $ 2,839,268 $ 2,220,289 $ 2,977,508 Less: Allowance for impairment loss 35,673 35,673 35,673 Other receivables $ 2,803,595 $ 2,184,616 $ 2,941,835 Business tax refund receivable $ 140,027 $ 86,019 $ 312,438 Retentions receivable from banks 75, Others 2,307 2,249 17,079 Less: Allowance for impairment loss Other receivables from related parties $ 217,945 $ 88,268 $ 329,517 Other receivables from related parties $ 29,044 $ 30,271 $ 42,042 Less: Allowance for impairment loss Accounts Receivable $ 29,044 $ 30,271 $ 42,042 Accounts receivable are assessed for impairment on a collective basis even if they were assessed without objective evidence of impairment individually. The average credit period on sales of goods was 30 to 90 days. When determining the collectability of accounts receivable, the Group considered any change in the credit quality of accounts receivable since the date credit was initially granted to the end of the reporting period. The Group may adjust the credit period due to operating strategy consideration. In general, with historical experience, it was unlikely for accounts receivable that are past due beyond 180 days to be recoverable; the Group recognized an allowance for impairment loss of 100% against all accounts receivable over 180 days. For accounts receivable that are past due within 180 days, the allowance for impairment loss was recognized based on estimated irrecoverable amounts determined by reference to historical experience. Before accepting any new customer, the Group assesses the potential customer s credit quality and defines credit limits by customer. Limits and scoring attributed to customers are reviewed periodically

17 As of, 2016 and, 2016, the accounts receivable that were past due but not impaired amounted to $623,130 thousand, $575,431 thousand and $538,007 thousand, respectively (see the aging analysis below). The Group did not recognize an allowance for impairment loss because there was not a significant change in credit quality and the amounts were still considered recoverable. The aging of accounts receivable based on the date the account became past due was as follows: Not past due $ 2,180,465 $ 1,609,185 $ 2,403,828 1 to 60 days 266, , , days to 180 days More than 180 days 392, , ,348 $ 2,839,268 $ 2,220,289 $ 2,977,508 The aging of accounts receivable that were past due but not impaired based on the date the account became past due was as follows: Up to 60 days $ 266,280 $ 195,991 $ 159, days to 180 days More than 180 days 356, , ,675 $ 623,130 $ 575,431 $ 538,007 As of, 2016 and, 2016, certain accounts receivable from a customer that had been outstanding for more than 180 days had an amount that was the same as the amount of accounts payable to the customer. Under an agreement with the customer, the Corporation would settle the accounts payable after the accounts receivable are collected. Thus, management of the Corporation believed that these accounts receivable were not impaired. Movements in the allowance for impairment loss of accounts receivable were as follows: Individually Assessed for Impairment Collectively Assessed for Impairment Total Balance at January 1, 2017 $ 35,628 $ 45 $ 35,673 Balance at $ 35,628 $ 45 $ 35,673 Balance at January 1, 2016 $ 35,628 $ 45 $ 35,673 Balance at, 2016 $ 35,628 $ 45 $ 35,673 As of, 2016 and, 2016, the amount of allowance for impairment loss related to impaired accounts receivable from customers that were in liquidation or in severe financial difficulties were all $35,628 thousand. Refer to Note 31 for details of the factoring agreements for trade receivables

18 Other Receivables Other receivables are individually assessed for impairment if there is objective evidence of impairment. Other receivables without objective evidence of impairment are classified by similar credit risk group and each collectively assessed for impairment. At the end of the reporting period, there were no other receivables that were past due but not impaired. 10. INVENTORIES Raw materials and supplies $ 367,646 $ 394,072 $ 775,994 Work-in process 225, , ,405 Finished goods 241, , ,054 $ 835,516 $ 1,023,096 $ 1,773,453 The cost of inventories recognized as cost of goods sold for the three months ended and 2016 was $3,944,828 thousand and $4,218,884 thousand, respectively. The cost of inventories recognized as cost of goods sold for the three months ended, 2016 included inventory write-down of $40,200 thousand. 11. OTHER CURRENT ASSETS Other financial assets $ 300,000 $ - $ - Restricted assets 29,162 37,162 29,511 Refundable deposits ,984 Others 27,451 6,489 23,009 $ 356,613 $ 43,651 $ 108,504 Other financial assets were time deposits with original maturities over three months. The market interest rate of time deposits as of was 0.09%-0.66%. Restricted assets represented collaterals or bonded collaterals for financial and government institutions, as shown in Note FINANCIAL ASSETS MEASURED AT COST Overseas unlisted ordinary shares $ 31,800 $ 31,800 $ 31,

19 The unlisted equity investment was classified as available-for-sale financial assets according to financial measurement categories. Management of the Group believed the fair value of the investment cannot be reliably measured as the range of reasonable fair value estimates was significant and the probabilities of the various estimates cannot be reasonably assessed; therefore, it was measured at cost less impairment at the end of the reporting period. 13. SUBSIDIARIES Subsidiaries Included in the Consolidated Financial Statements The detailed information of the subsidiaries at the end of the reporting periods was as follows: Investor Investee Main Business, 2017 Percentage of Ownership 2016, 2016 The Corporation UES Investment activities 100% 100% 100% UES RES Investment activities 100% 100% 100% RES Gintech (Thailand) Research, development, manufacture and sale of solar cells and related materials 100% 100% 100% Refer to Table 7 for the principal place of business and country of incorporation of the subsidiaries. 14. INVESTMENTS ACCOUNTED FOR USING EQUITY METHOD Investments in associates $ 318,607 $ 379,015 $ 468,406 Investment in a joint venture 299, , ,801 a. Investments in associates $ 618,461 $ 601,107 $ 679,207 Material associate Utech Solar Corporation $ 267,718 $ 326,985 $ 401,577 Associate that is not individually material Gintung Energy Corporation 50,889 52,030 66,829 1) Material associate $ 318,607 $ 379,015 $ 468,406 Name of Associate Main Business Principal Place of Business Percentage of Ownership and Voting Rights,, Utech Solar Corporation Manufacture and sale of various electronic materials Miaoli 45% 45% 45%

20 The summarized financial information below represents amounts shown in the associate s financial statements prepared in accordance with IFRSs adjusted by the Group for equity accounting purposes. Utech Solar Corporation Current assets $ 901,525 $ 982,406 $ 1,223,207 Non-current assets 2,876,423 2,939,882 3,067,055 Current liabilities (601,792) (494,171) (3,389,185) Non-current liabilities (2,575,438) (2,694,413) - Equity $ 600,718 $ 733,704 $ 901,077 Percentage of the Group s ownership 45% 45% 45% Equity attributable to the Group $ 267,718 $ 326,985 $ 401, Operating revenue $ 826,103 $ 1,114,909 Profit (loss) from continuing operations $ (130,750) $ 134,789 Net profit (loss) $ (130,750) $ 134,789 Other comprehensive loss (2,236) (8,808) Total comprehensive income (loss) $ (132,986) $ 125,981 In September 2016, the accumulated deficits of Utech Solar Corporation were offset by capital reduction. 44,121 thousand ordinary shares of the Corporation s investment in Utech Solar Corporation were cancelled at a rate proportionate to the percentage of the Corporation s equity interest in the investee. The percentage of the Corporation s equity interest in Utech Solar Corporation remained 45%. 2) Aggregate information of an associate that is not individually material The Group s share of: Loss from continuing operations $ (1,141) $ (10,201) Other comprehensive income (loss) - - Total comprehensive loss $ (1,141) $ (10,201)

21 b. Investment in a joint venture Joint venture that is not individually material GD Development Corporation $ 299,854 $ 222,092 $ 210, The Group s share of: Profit (loss) from continuing operations $ (2,128) $ 589 Other comprehensive loss (9,584) (3,831) Total comprehensive loss $ (11,712) $ (3,242) In September 2016, GD Development Corporation distributed stock dividends. The shares of the Corporation s investment in GD Development Corporation increased by 1,053 thousand shares at a rate proportionate to the percentage of the Corporation s equity interest in the investee. The percentage of the Corporation s equity interest in GD Development Corporation remained 50%. In February 2017, GD Development Corporation issued new shares in the amount of $178,948 thousand. The Corporation participated, at a rate proportionate to the percentage of the Corporation s equity interest in the investee, in this capital raising and subscribed for 7,158 thousand new shares in the amount of $89,474 thousand. The percentage of the Corporation s equity interest in GD Development Corporation remained 50%. 15. PROPERTY, PLANT AND EQUIPMENT Land $ 266,904 $ 267,513 $ 267,449 Buildings 2,200,009 2,241,165 2,316,490 Machinery and equipment 4,649,234 5,021,605 4,791,598 Transportation equipment ,160 Office equipment 18,213 19,871 11,611 Leasehold improvements ,644 Leased equipment ,260 Other equipment 219, , ,197 $ 7,354,168 $ 7,788,660 $ 7,744,409 Except for depreciation recognized, there were no significant addition, disposal and impairment on property, plant and equipment for the three months ended and The lease contract with respect to the leased Guanyin plant had been terminated in December In June 2016, the lease contract under which the Corporation rented out part of its equipment located in Guanyin plant to Gintung Energy Corporation was terminated. Related property, plant and equipment had been reclassified from leased equipment to machinery and equipment, transportation equipment and other equipment, unless those that were disposed of

22 The above items of property, plant and equipment are depreciated on a straight-line basis over the estimated useful lives as follows: Buildings Machinery and equipment Transportation equipment Office equipment Leasehold improvements Leased equipment Other equipment 3-50 years 3-11 years 3-5 years 3-5 years 2-20 years 4-8 years 2-10 years Part of property, plant and equipment provided as collaterals for bank loans was shown in Note INTANGIBLE ASSETS Computer software $ 8,965 $ 10,220 $ 5,083 Licenses and franchises $ 8,965 $ 10,270 $ 5,575 Except for amortization recognized, there were no significant addition, disposal, and impairment on intangible assets for the three months ended and The above items of intangible assets are amortized on a straight-line basis over the estimated useful lives as follows: Computer software Licenses and franchises 3-5 years 3 years 17. OTHER NON-CURRENT ASSETS Prepayments for equipment $ 94,523 $ 114,465 $ 418,537 Refundable deposits (Note 29) 15,353 17,382 18,188 Prepayments to suppliers - 56, ,886 $ 109,876 $ 188,265 $ 846, BORROWINGS Short-term Borrowings Credit loans $ 648,571 $ 689,117 $ 1,042,

23 The interest rates on short-term borrowings at the end of the reporting periods were as follows: Credit loans % % Long-term Debts % % % % Secured loans $4.2 billion syndicated loan $ 2,100,000 $ 2,100,000 $ - $0.55 billion syndicated loan 467, , ,000 $4.0 billion syndicated loan - - 2,351,550 $0.25 billion revolving loan 240, ,000 Unsecured loans $0.5 billion syndicated loan 450, ,000-3,257,500 3,058,750 3,151,550 Less: Current portion (556,250) (375,000) (1,190,800) Long-term debts $ 2,701,250 $ 2,683,750 $ 1,960,750 The interest rate intervals % % % % % % Under the $0.55 billion syndicated loan agreement, the Corporation should show the compliance with all of the following financial covenants in its annual and semiannual consolidated financial statements for periods starting second quarter in 2014: a. The current ratio (ratio of current assets to current liabilities) should not be less than 100%; b. The leverage ratio (ratio of total liabilities to tangible net worth) should not exceed 120%; c. The interest coverage ratio should not be less than 200% in 2014 and should not be less than 400% starting from 2015; and d. Tangible net worth should be at least $11 billion in 2014 and should be at least $12 billion starting from Under the $4.2 billion and $0.5 billion syndicated loan agreements, the Corporation should show the compliance with all of the following financial covenants in its annual and semiannual consolidated financial statements for periods starting from 2016: a. The current ratio (ratio of current assets to current liabilities) should not be less than 100%; b. The leverage ratio (ratio of total liabilities to tangible net worth) should not exceed 120%;

24 c. The interest coverage ratio should not be less than 400%; and d. Tangible net worth should be at least $12 billion. The Corporation was not in compliance with the above loan requirements with respect to the interest coverage ratio and tangible net worth as shown in its 2016 consolidated financial statements. However, during the grace period from the date the 2016 consolidated financial statements were authorized for issue to the date the consolidated financial statements as of and for the six months ending June 30, 2017 are authorized for issue, such situation will not constitute a breach of the agreements, but the Corporation shall pay additional interest based on the loan balances according to the loan agreements. The Corporation had injected capital in February 2017 to improve its financial structure. Please refer to Note 23 for detailed information. Part of property, plant and equipment provided as collaterals for the long-term syndicated loans and revolving loan was shown in Note 33. In February 2017, the Group entered into a three-year syndicated loan agreement with three banks for US$11 million and THB0.3 billion. As of, the Group has not made any drawdown from the credit facility. 19. BONDS PAYABLE The Corporation issued 5-year domestic unsecured, zero-coupon convertible bonds, with an aggregate face value of $620,000 thousand and $500,000 thousand on September 25, 2012 and September 18, 2013, respectively. For the three months ended, 2016, the interest expense for bond discounts amortized was $11 thousand and was classified as financial costs under non-operating income and expenses. As of, 2016, all of the above convertible bonds had been converted into ordinary shares or bought back by the Corporation. 20. OTHER PAYABLES Payable for acquisition of equipment $ 215,190 $ 142,374 $ 75,704 Payable for import/export duties 65,847 59,897 39,164 Payable for salaries and bonus 37, ,712 38,545 Payable for employees compensation and remuneration to directors and supervisors ,460 Others 232, , ,459 $ 550,716 $ 768,135 $ 402, PROVISIONS Warranties - non-current $ 1,825 $ 1,825 $ 1,825 The provision for warranties claims represented the estimate of obligation for warranties in sale agreements. The estimate had been made on the basis of historical warranty trends

25 22. RETIREMENT BENEFIT PLAN The Corporation s pension plan under the Labor Pension Act (the LPA ) is deemed a defined contribution retirement benefit plan. Based on the LPA, the Corporation makes monthly contributions to employees individual pension accounts at 6% of monthly salaries and wages. Such pension costs of $9,697 thousand and $9,686 thousand were recognized in the consolidated statement of comprehensive income for the three months ended and 2016, respectively. 23. EQUITY a. Share capital and advance receipts for share capital Ordinary shares Number of shares authorized (in thousands) 750, , ,000 Share capital authorized $ 7,500,000 $ 7,500,000 $ 7,500,000 Number of shares issued (in thousands) 519, , ,517 Share capital issued $ 5,196,506 $ 4,496,677 $ 4,495,168 The issued ordinary shares with par value of $10 are entitled to the right to vote and to receive dividends. A total of 10,000 thousand shares of the Corporation s authorized shares were reserved for the issuance of employee share options. On February 20, 2017, the Corporation completed the issuance of 70,000 thousand ordinary shares, with a par value of $10, for consideration of $17.2 per share issued at a premium. A reconciliation of the number of shares outstanding was as follows: Number of Shares (In Thousands) Share Capital Advance Receipts for Share Capital Balance at January 1, ,668 $ 4,496,677 $ - Issuance of ordinary shares for cash 70, ,000 - Retirement of restricted employee shares (17) (171) - Balance at 519,651 $ 5,196,506 $ - Balance at January 1, ,517 $ 4,495,168 $ - Exercise of employee share options 109-3,241 Conversion of bonds into ordinary shares 107-1,072 Balance at, ,733 $ 4,495,168 $ 4,313 As of, 2016, the registration procedure for the change in share capital for both the exercise of employee share options and the conversion of bonds into ordinary shares had not been completed; therefore, related share capital was classified under advance receipts for share capital