· table of contents letter to shareholders
TRANSCRIPT
Table of Contents Letter to Shareholders ..................................................................................................................................................... 1 Company Overview 1. Company profile .............................................................................................................................................................. 3 2. Corporate governance report ............................................................................................................................................ 4 3. Capital and Shareholding.................................................................................................................................................20 4. Issuance of corporate bonds ............................................................................................................................................22 5. Issuance of preferred stocks ............................................................................................................................................22 6. Issuance of global depositary receipts (GDR) .................................................................................................................22 7. Exercise of employee stock option plan (ESOP) .............................................................................................................24 8. Issuance of new shares for merger or acquisition of other companies ............................................................................25
9. Implementation of capital allocation plan .......................................................................................................................25 Business Overview 1. Business activities ...........................................................................................................................................................26 2. Market, production and sales ...........................................................................................................................................30 3. Employees .....................................................................................................................................................................34 4. Spending on environmental protections ..........................................................................................................................34 5. Employees-employer relations ......................................................................................................................................35 6. Important contracts ........................................................................................................................................................38
7. Financial difficulties and corporate events encountered by the Company and affiliates in the past year and up to the date of report that have material impact on the financial status of the Company…………………………………….. 38
Financial Overview
1. Condensed balance sheets, statements of income, names of auditors, and audit opinions (2009-2013) .........................39 2. Financial analysis (2009 - 2013) ....................................................................................................................................41 3. 2013 Consolidated Financial Statements .........................................................................................................................44 4. 2013 Financial Statements .............................................................................................................................................103
Financial Status, Financial Performance and Risk Analysis
1. Financial status ..............................................................................................................................................................155 2. Financial performance ...................................................................................................................................................155 3. Cash flow analysis .........................................................................................................................................................156 4. Effect of major capital spending on financial position and business operation .............................................................156 5. Industry-specific key performance indicator ...............................................................................................................156 6. Investment policy in the past year, return on investment analysis, improvement plan, and investment plan for the
coming year .................................................................................................................................................................156 7. Risk management and evaluation ................................................................................................................................156 8. Other important events ..................................................................................................................................................160
Important Notice
1. Profile on affiliates and subsidiaries ..............................................................................................................................161
Letter to Shareholders Dear Shareholders,
The global economy saw gradual recovery in 2013 as the Eurozone emerged from the sovereign debt crisis and the U.S. gradually recovered from the economic doldrums, while Japan carried on with its stimulus policy and China maintained stable economic growth. For the industry as a whole, the business cycle of information and communication technology (ICT) has become more compressed. Cloud data and Internet of Things (IoT) are expected to replace the PC-centered devices in the information age, and new electronic products geared toward smart living will be introduced at a faster pace. These changes in the application of technology in everyday life bring more innovation opportunities and consumer demand, which however pose constant challenges to the enterprise agility and its flexibility to respond to market moves. In the midst of a tentative turnaround in the economy and a rapidly changing industry, Winbond continues to serve its tier one customers worldwide with specialty memory solutions and stays abreast of market momentum. Financial Performance
Our consolidated revenue, including that of Nuvoton Technology Corp. and other subsidiaries, amounted to NT$33,135 million in 2013, up 0.5% from the year before. We recorded net earnings of NT$287 million or NT$0.06 per share in 2013. Operating Results
Winbond engages in the R&D, manufacturing and sale of Specialty DRAM and NOR Flash. Our operating results for 2013 are summarized as follows:
Winbond is currently the fifth largest DRAM supplier in the world after industry consolidation. We are a major Specialty DRAM and Mobile DRAM supplier of global tier one customers. In the competitive NOR Flash market, we have been able to hold onto the No. 4 position in the world with new applications and better product and client mix. In the Serial Flash market, we remain the No. 1 supplier worldwide.
As the growth momentum shifting from PC to mobile devices, we have also strategically adjusted product mix. In comparison with the previous year, sales of communication products as a percentage of revenue rose from 34% to 37% , that of computer and peripheral products was reduced from 35% to 30%, while consumer products stayed even at 28% of total revenue. Automotive and industrial electronics products passed qualification by leading international manufacturers last year, their sales now make up 5% of total revenue, up from 2% in the previous year and indicating that we have gradually gained ground in the market. Corporate Development
In process technology and R&D, we have embarked on the development of 38 nm DRAM process and focused on low-power DDR2 and DDR3. We have completed the 46nm Flash process development, focusing primarily on Code Storage Flash and targeting high- density, high-performance and low-power products.
Our capital expenditure in 2014 is mainly for the expansion of advanced process technology with the plan to increase the monthly output of 12-inch wafers from 33,000 to 40,000. We will also continue to shorten the design-in time for new product qualification and rapidly respond to customer and market demand with the competitive edge of "innovative products, customer service, and flexible manufacturing." Future Outlook
Cost control through mass production used to be the core competency of memory IC manufacturers. Today, high-performance and high-quality customized products are the most important competitive edge. Winbond will continue to expand its client base in the low to medium density specialty memory market, strengthen R&D capability and focus on product planning as we endeavor to become an indispensable partner to our clients and generate stable growth and profits for the company and our shareholders.
1
On behalf of the management team of Winbond, I would like to thank our shareholders for their support and encouragement. May you have a prosperous year and good health.
Chairman and CEO
2
Company Overview 1. Company profile 1.1 Company history
Winbond Electronics Corp. is a Specialty Memory IC Company engaged in design, manufacturing and sales services. From product design, research and development, wafer fabrication to marketing of brand name product, Winbond endeavors to provide its global clientele top quality of low to medium density memory solutions.
The Company was established in September 1987 and listed on Taiwan Stock Exchange in 1995 with headquarters in the Central Taiwan Science Park, Taichung, Taiwan.
Winbond has three core business groups - DRAM Product, Flash Memory IC, and Memory IC Manufacturing. It continuously seeks product and technological innovation to gain a competitive edge. Winbond’s major product lines include Code Storage Flash Memory, Specialty DRAM and Mobile DRAM. Our advantage of technological autonomy and prudent capacity strategy enables us to build a highly flexible production system to produce the synergy of product mix, and meet customer demands while building the brand image.
In the area of Code Storage Flash Memory products, we focus on the "low to medium density" market by offering a full range of products of Serial and Parallel Flash. Our small-size flash memory packages offer the features of low pin count, small size and low cost. With considerable market share in computer peripheral markets, we also develop mobile device and consumer electronic related fields.
Winbond specializes in the design of high-performance, low-power memory, and riding on the strength of having a 12-inch fab, offers a whole series of Mobile DRAM and Specialty DRAM products that target top-tier clientele and quality-oriented applications. Winbond’s products are used extensively in handheld devices, consumer electronics and computer peripherals. We also focus on high entry barrier, high-quality applications, such as KGD, automobile and industrial electronics.
To provide clientele around the world with prompt services, Winbond has set up bases in the USA, Japan, China, Hong Kong and Israel and built up distributor networks in different countries to expand our sales network. In the aspect of quality, Winbond implements rigorous process control and quality control, strengthens yield analysis and supply chain to achieve customer satisfaction. The long-standing efforts in quality assurance have earned the Company a good reputation and resulted in the accreditation of ISO 9001, TS 16949, QC 080000, ISO 1 4001 and OHSAS 18001.
In the future, Winbond will continue to provide customer-oriented services and concentrate our resources in markets in which the Company has a competitive edge. At the same time, riding on the strength of our advanced semiconductor design and manufacturing knowhow, observing the core values of “accountability, innovation and synergy” and incorporating the corporate spirit of “execution, innovation and passion” in all operational activities, Winbond will strive towards the goal of becoming a world-class solution provider.
1.2 Investment in affiliates in the past year and up to the date of report 1. In order to take advantage of outstanding R&D manpower in Israel to further enhance the competitiveness of our
products, the Company established Winbond Technology Ltd in Israel in September, 2013, to engage in the design, sales and services of semiconductor components. As of December 31, 2013, the Company had invested 2.5 million shekels in Winbond Technology LTD, holding 100% of its shares.
2. For other equity investments, please see page 206 of this report.
3
2. C
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gov
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4
2.1.2 Major business units Unit Functions
Auditing Department 1. Planning and execution of internal audit operations. 2. Planning and execution of internal control self-assessment operations. 3. Review of company codes and rules.
Quality & ESH Center
1. Planning and execution of company quality policy. 2. Drafting and implementing quality indicators and maintaining quality system. 3. Elevating the quality and professional knowhow of employees and continuously improving the quality of
products through continuous improvement of quality management system and employee training. 4. In charge of internal quality management and external quality assurance, reliability assurance and handling of
quality complaints. 5. Management of outsourcing quality. 6. Supervising the implementation of effective ESH plans and risk management measures, establishing a work
environment in compliance with environmental regulations and international standards, and reducing the company's operational risks.
Sales Center
1. In charge of for worldwide sales (except for foundry). 2. New client development and new product promotion. 3. Responsible for the attainment of annual sales targets. 4. Management of dealers and distributors. 5. Collection of accounts receivable.
Finance Center
1. Planning and execution of accounting system and tax matters. 2. Planning and evaluation of budget and costs. 3. Planning and maneuvering of company funds and investment management. 4. Planning and execution of investors relations and shareholder services.
DRAM Product Business Group
DRAM Product Marketing Center
1. Planning and marketing of new products. 2. Optimization of DRAM product mix. 3. Promotion of DRAM products. 4. Development and management of DRAM products. 5. Trend analysis of DRAM market. 6. Troubleshooting of customer application problems and error analysis.
DRAM Product Development Center
1. Research and development of DRAM products. 2. Improving the DRAM product design platform. 3. Improving the quality of DRAM products and enhancing competitiveness. 4. Confirmation of product specifications and mapping market blueprint. 5. Analysis of customer-reported failure. 6. Resources planning and use for IC design and layout. 7. Central planning of R&D manpower allocation and OEM project support. 8. Planning and management of subsidiaries' R&D personnel.
Memory IC Manufacturing Business Group
300mm Memory Product Manufacturing Center
1. Planning of fab establishment, density and display. 2. Analysis of fab budget/cost structure. 3. Establishment of fab process system and SOP documents. 4. Introduction of new products and new technologies and volume production. 5. Establishment and execution of foundry system. 6. Establishment of fab quality system. 7. Planning and implementation of fab EHS system. 8. Scope and guidelines for fab's risk management. 9. Fab's automated operations.
Memory Product Process Integration Center
1. Improvement of process/ product yield, quality and reliability. 2. Analysis and improvement of production and engineering problem analysis. 3. Transfer, implementation and volume production of new process/product. 4. Technology development and management of generative process and custom-made products. 5. Process cost improvement and process streamlining. 6. Optimization and tolerance adjustment of process conditions.
Facility & Testing Center
1. Planning and execution of memory product trial production. 2. Planning and execution of memory product yield improvement. 3. Planning and execution of construction, expansion and improvement of plants and facilities. 4. Improvement and maintenance of clean rooms and production related facilities. 5. Maintenance and management of industrial environment, health and safety facilities.
Flash Memory IC Business Group
Flash Memory IC Product Center
1. Design, testing and validation of flash memory products. 2. Introducing volume production of new products and improving product yield, quality, costs and process to meet
customer demands.
Flash Product Marketing Center
1. Planning of new flash products. 2. Development management of flash products. 3. Promotion of flash products. 4. Optimization of flash product mix. 5. Trend analysis of flash market.
Administration Service Group
1.Providing a safe and comfortable working environment in a most cost effective manner and assisting other business units to achieve the overall business goals of the company.
2.Establishing and maintaining the supplier system to assist the attainment of profit targets for business groups and the company as a whole.
3.In charge of production control and outsourcing operations. 4.Setup and execution of knowledge and information management structure to strengthen the operations of functional
units and enhance operational performance.
5
Unit Functions
Technology R&D Group
1. Planning and execution of technology development matters. 2. Building advanced process technology to enhance product competitiveness. 3. Evaluation and development of new generation memory technology. 4. Building advanced OPC and DFM capabilities. 5. Supporting continuous process improvement by fabs. 6. Supporting resolution of process related problems by business units.
6
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epre
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22
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2011
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22
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ter i
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ysic
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igh-
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arva
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.V.,
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outh
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ia
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inbo
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ice
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uvot
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echn
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o.
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mbe
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e 13
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one.
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ng-Y
i C
han
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22
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2009
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aste
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agem
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cien
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Pres
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Dire
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ong-
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2011
.06.
22
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ars
2011
.06.
22
- -
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M.S
., St
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ote
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ter i
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ate
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ity
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irman
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annS
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olor
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hairm
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nsTo
uch
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mbe
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e 16
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irman
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ctor
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hief
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cer
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ur
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g C
hin
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her
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her a
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r in-
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Supe
rviso
r
Wan
g-Ts
ai
Lin
2011
.06.
22
3 ye
ars
Not
e 5
- -
- -
- -
- -
Adv
isor
to C
hairm
an's
Off
ice
of W
alsi
n Li
hwa
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p. (i
ncum
bent
)
N
ote
17
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e.
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e.
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e.
Supe
rviso
r
Hui
-Min
g C
heng
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11.0
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year
s 20
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0 0.
01%
-
- -
-
Mas
ter i
n B
usin
ess A
dmin
istra
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Kel
ley
Scho
ol o
f Bus
ines
s at I
ndia
na U
nive
rsity
. M
aste
r in
Scie
nce
in
Che
mic
al E
ngin
eerin
g, U
nive
rsity
of
Cal
iforn
ia, L
os A
ngel
es
CFO
at W
inbo
nd E
lect
roni
cs C
orp.
C
hief
Fin
anci
al O
ffice
r of T
aiw
an M
obile
C
FO a
t Fub
on F
inan
cial
Hol
ding
s Co.
, Li
mite
d.
CFO
at H
TC C
orpo
ratio
n D
irect
or, P
resi
dent
and
Com
pens
atio
n C
omm
ittee
mem
ber o
f Wal
sin
Lihw
a C
orp.
(in
cum
bent
)
Not
e 18
N
one.
N
one.
N
one.
Not
e 1:
"Pe
rcen
tage
" und
er "
Shar
ed h
eld
whe
n el
ecte
d" w
as b
ased
on
then
issu
ed a
nd o
utst
andi
ng s
hare
s com
mon
sha
res o
f 3,6
72,5
39,1
93 s
hare
s.
Not
e 2:
"Pe
rcen
tage
" un
der "
Shar
es c
urre
ntly
hel
d" w
as b
ased
on
then
issu
ed a
nd o
utst
andi
ng c
omm
on s
hare
s of
3,6
94,4
66,1
93 s
hare
s as
of M
arch
31,
201
4, in
clud
ing
443,
000
shar
es e
xerc
ised
by e
mpl
oyee
s un
der t
he e
mpl
oyee
sto
ck o
ptio
n pl
an b
etw
een
Janu
ary
1 an
d M
arch
31,
201
4 th
at a
re n
ot y
et re
gist
ered
for c
hang
e of
cap
ital s
tock
.
Not
e 3:
Mr.
Mat
thew
Fen
g-C
hian
g M
iau
has b
een
a di
rect
or o
f Win
bond
sinc
e M
ay 6
, 200
3. H
e al
so se
rved
as a
dire
ctor
from
Mar
ch 2
5, 1
993
to F
eb. 2
1, 1
994
and
from
Mar
. 30,
199
4 to
Jan.
29,
200
3.
Not
e 4:
Sup
ervi
sor M
r. Y
u-C
hi C
hiao
has
bee
n a
supe
rviso
r of W
inbo
nd fr
om A
pril
9, 1
996
to F
ebru
ary
28, 2
000,
and
from
Apr
il 30
, 200
8 un
til n
ow.
Not
e 5:
Mr.
Wan
g-Ts
ai L
in h
as b
een
a Su
perv
isor
of W
inbo
nd fr
om S
epte
mbe
r 4, 1
987
to M
arch
25,
199
3, a
nd fr
om J
une
10, 2
005
until
now
. N
ote
6: M
r. A
rthur
Yu-
Che
ng C
hiao
serv
es c
oncu
rren
tly a
s the
CEO
of W
inbo
nd, C
hairm
an a
nd C
ompe
nsat
ion
Com
mitt
ee m
embe
r of C
apel
la M
icro
syst
ems,
Cha
irman
of N
uvot
on T
echn
olog
y C
o. a
nd C
hin
Xin
Inve
stm
ent C
orp.
, Ltd
., V
ice
Cha
irman
of W
alsi
n Li
hwa
Co.
; Dire
ctor
of W
alsi
n Te
chno
logy
Cor
pora
tion,
Uni
ted
Bio
med
ical
, Inc
., A
sia, K
olin
Con
s. &
Dev
elop
men
t Co.
, Ltd
., W
alsi
n Li
hwa
Hol
ding
s C
o., W
alsi
n Sp
ecia
lty S
teel
Cor
pora
tion,
Lan
dmar
k G
roup
H
oldi
ngs
Ltd.
, Win
bond
Int’l
Cor
p., W
inbo
nd E
lect
roni
cs C
orpo
ratio
n A
mer
ica,
New
foun
d A
sian
Cor
p., P
eace
ful R
iver
Cor
p., B
ayst
ar H
oldi
ngs
Ltd.
, Nuv
oton
Inve
stm
ent H
oldi
ng L
td.,
Mar
ketp
lace
Man
agem
ent L
imite
d, a
nd P
igeo
n C
reek
Hol
ding
Co.
, Ltd
. man
agem
ent o
f Gol
dbon
d LL
C; a
nd S
uper
viso
r of M
iTac
Inte
rnat
iona
l Cor
p.; I
ndep
ende
nt D
irect
or a
nd C
ompe
nsat
ion
Com
mitt
ee c
onve
nor o
f Tai
wan
Cem
ent a
nd I
ndep
ende
nt D
irect
or a
nd C
ompe
nsat
ion
Com
mitt
ee m
embe
r of S
ynne
x Te
chno
logy
Inte
rnat
iona
l. N
ote
7: M
r. C
hing
-Chu
Cha
ng se
rves
con
curr
ently
as t
he su
perv
isor
of F
ine
Art
Tech
nolo
gy C
o., L
td.,a
nd th
e su
perv
isor o
f Z-C
om, I
nc.
N
ote
8: M
r. M
atth
ew F
eng-
Chi
ang
Mia
u se
rves
con
curr
ently
as C
hairm
an o
f Lie
nhw
a In
dust
rial C
orpo
ratio
n, M
iTac
Hol
ding
s Cor
pora
tion,
Syn
nex
Tech
nolo
gy In
tern
atio
nal C
orpo
ratio
n, M
iTA
C In
form
atio
n Te
chno
logy
Cor
p., U
nion
Ven
ture
C
apita
l Cor
p. a
nd U
nion
Tec
hnol
ogy
Cor
p.; a
nd D
irect
or o
f Get
ac T
echn
olog
y C
orp.
and
Lie
nhw
a In
dust
rial G
ases
Cor
p.
Not
e 9:
Ms.
Yun
g C
hin
serv
es c
oncu
rren
tly a
s th
e C
hief
Adm
inis
trativ
e O
ffic
er o
f W
inbo
nd;
Cha
irman
of
Win
bond
(H
.K.)
and
Win
bond
Ele
ctro
nics
(H
K)
Ltd.
; an
d D
irect
or o
f N
uvot
on T
echn
olog
y C
o., W
inbo
nd E
lect
roni
cs C
orp.
A
mer
ica,
New
foun
d A
sian
Cor
p.,
Peac
eful
Riv
er C
orp.
, an
d N
uvot
on E
lect
roni
cs T
echn
olog
y (H
.K.)
Lim
ited,
and
Qin
g A
n In
vest
men
t; an
d Su
perv
isor
of Q
ing
An
Inve
stm
ent
Lim
ited,
Yau
Che
ung
Inve
stm
ent
Lim
ited,
W
inbo
nd E
lect
roni
cs C
orpo
ratio
n Ja
pan,
Nuv
oton
Tec
hnol
ogy
(Sha
ngha
i) C
orp.
and
Win
bond
(Suz
hou)
Inte
grat
ed C
ircui
t.
8
Not
e 10
: W
alsi
n Li
hwa
Cor
pora
tion
serv
es c
oncu
rren
tly a
s D
irect
or o
f Chi
n X
in In
vest
men
t Cor
p., L
td.,
Min
Maw
Pre
cisi
on In
dust
ry C
orp.
, Kol
in C
ons.
& D
evel
opm
ent C
o., L
td.,
Wal
sin
Info
-Ele
ctric
Co.
, Con
cord
Ven
ture
Cap
ital G
roup
, W
alsi
n Te
chno
logy
Cor
pora
tion
, Wal
ton
Adv
ance
d En
gine
erin
g, In
c., H
annS
tar B
oard
Cor
pora
tion,
Han
nSta
r Disp
lay
Cor
pora
tion,
Han
nSta
r Col
or C
o., L
td.,
Glo
bal I
nves
tmen
t Hol
ding
s, K
uang
Tai
Met
al In
dust
rial C
o. ,
I-C
hi U
nite
d Tr
adin
g C
orp.
, and
Zho
ng T
ai T
echn
olog
y D
evel
opm
ent E
ngin
eerin
g C
o.; a
nd S
uper
viso
r of M
in M
aw P
reci
sion
Indu
stry
Cor
p. a
nd T
aiw
an H
igh
Spee
d R
ail C
orp.
N
ote
11:
Mr.
You
-Yi Z
hu se
rves
con
curr
ently
as t
he C
ompe
nsat
ion
Com
mitt
ee m
embe
r of t
he C
ompa
ny (t
erm
of o
ffic
e ex
pire
s on
Mar
ch 1
9, 2
014)
; Dire
ctor
of W
alsi
n Te
chno
logy
Cor
pora
tion
and
Han
nSta
r Boa
rd C
orpo
ratio
n; a
nd S
uper
viso
r of
Wal
sin
Lihw
a C
orp.
N
ote
12:
Mr.
Lu-P
ao H
su se
rves
con
curr
ently
as D
irect
or o
f Dio
des I
ncor
pora
ted,
Sup
ervi
sor o
f Nuv
oton
Tec
hnol
ogy
Co.
; and
Com
pens
atio
n C
omm
ittee
con
veno
r of W
alsi
n Li
hwa
Cor
p.
Not
e 13
: M
r. R
ober
t Hsu
ser
ves
conc
urre
ntly
as
Cha
irman
of N
uvot
on E
lect
roni
cs T
echn
olog
y (H
.K.)
Lim
ited,
Nuv
oton
Tec
hnol
ogy
(Sha
ngha
i) C
orp.
; Dire
ctor
of W
inbo
nd In
t’l C
orp.
, Lan
dmar
k G
roup
Hol
ding
s Lt
d., W
inbo
nd E
lect
roni
cs
Cor
pora
tion
Japa
n, B
ayst
ar H
oldi
ngs
Ltd.
, Nuv
oton
Ele
ctro
nics
Tec
hnol
ogy
(She
nzhe
n) L
imite
d, W
inbo
nd T
echn
olog
y (N
anjin
g) C
o., N
uvot
on T
echn
olog
y C
orp.
Am
eric
a, N
uvot
on T
echn
olog
y Is
rael
Ltd
., N
uvot
on I
nves
tmen
t H
oldi
ng L
td.,
Mar
ketp
lace
Man
agem
ent L
imite
d, a
nd P
igeo
n C
reek
Hol
ding
Co.
, Ltd
. N
ote
14:
Mr.
Tong
-Yi C
han
serv
es c
oncu
rren
tly a
s Cha
irman
of W
inbo
nd (S
uzho
u) In
tegr
ated
Circ
uit a
nd W
inbo
nd T
echn
olog
y Lt
d.; D
irect
or a
nd C
ompe
nsat
ion
Com
mitt
ee m
embe
r of W
alto
n A
dvan
ced
Engi
neer
ing;
Dire
ctor
of L
andm
ark
Gro
up H
oldi
ngs
Ltd.
, Win
bond
Int
’l C
orp.
, Mob
ile M
agic
Des
ign
Cor
p., W
inbo
nd E
lect
roni
cs C
orpo
ratio
n A
mer
ica,
Win
bond
Ele
ctro
nics
Cor
pora
tion
Japa
n, N
ewfo
und
Asi
an C
orp.
, Pea
cefu
l Riv
er C
orp.
, Bay
star
Hol
ding
s Lt
d.,
Mar
ketp
lace
Man
agem
ent L
imite
d, P
igeo
n C
reek
Hol
ding
Co.
, Ltd
. and
Win
bond
(H.K
.); a
nd C
EO o
f Mob
ile M
agic
Des
ign
Cor
p.
Not
e 15
: M
r. H
ong-
Chi
Yu
serv
es c
oncu
rren
tly a
s Cha
irman
and
Pre
side
nt o
f Wal
ton
Adv
ance
d En
gine
erin
g, In
c.;In
depe
nden
t Dire
ctor
of A
dvan
ced
Mic
roel
ectro
nic
Prod
ucts
Inc.
; Mr.
Chi
ng-C
hu C
hang
serv
es c
oncu
rren
tly a
s the
supe
rviso
r of
Glo
bal B
rand
s Man
ufac
ture
Ltd
.; Su
perv
isor o
f Wal
sin
Tech
nolo
gy C
o., L
td.,
and
Han
nSta
r Col
or C
o. L
td.
Not
e 16
: M
r. Y
u-C
hi C
hiao
serv
es co
ncur
rent
ly as
Cha
irman
of H
anns
pree
, Inc
., O
rient
al C
onso
rtium
Inve
stm
ent,
Han
nsta
r Disp
lay
(Nan
jing)
, and
Han
nspr
ee D
ispl
ay T
echn
olog
y (N
anjin
g); D
irect
or a
nd C
EO o
f Han
nSta
r Dis
play
Cor
pora
tion;
D
irect
or o
f Br
adfo
rd L
td.,
Han
nSpi
rit (
BVI)
Hol
ding
Ltd
., B
right
star
Res
ourc
es L
td.,
Gua
ng B
o R
esou
rces
Co.
, Han
nspr
ee C
hina
Hol
ding
s Lt
d., H
anns
pree
Int
erna
tiona
l Hol
ding
s Lt
d.,
Han
nspr
ee N
orth
Am
eric
a H
oldi
ngs
Ltd.
, H
anns
pree
Nor
th A
mer
ica
Inc.
, and
Han
nSta
r Boa
rd C
orpo
ratio
n.
Not
e 17
: M
r. W
ang-
Tsai
Lin
ser
ves
conc
urre
ntly
as
Cha
irman
of M
in M
aw P
reci
sion
Ind
ustry
Cor
p., V
ice
Cha
irman
of W
alsi
n In
fo-E
lect
ric C
o.; D
irect
or o
f Wal
sin
Lihw
a C
orp.
, Chi
n X
in I
nves
tmen
t Cor
p., L
td.,
Pow
erte
k En
ergy
Co.
; Su
perv
isor o
f Wal
sin
Tech
nolo
gy C
o., L
td.,
and
Kol
in C
ons.
& D
evel
opm
ent C
o., L
td.;
and
Rec
eive
r of C
onco
rd V
entu
re C
apita
l Gro
up.
Not
e 18
: M
r. H
ui-M
ing
Che
ng se
rves
con
curr
ently
as D
irect
or o
f AC
ME
Elec
troni
cs C
orpo
ratio
n;
Not
e 19
: D
irect
ors w
ho a
re re
pres
enta
tive
of in
stitu
tiona
l sha
reho
lder
and
the
maj
or s
hare
hold
ers o
f ins
titut
iona
l sha
reho
lder
s M
arch
31,
201
4
Nam
e of
inst
itutio
nal s
hare
hold
er
Maj
or sh
areh
olde
rs o
f ins
titut
iona
l sha
reho
lder
Wal
sin
Lihw
a C
orpo
ratio
n
Deu
tsch
e Ba
nk (4
.49%
), C
hin
Xin
Inve
stm
ent C
orp.
, Ltd
. (2.
86%
), Sa
udi A
rabi
a C
entra
l Ban
k In
vest
men
t Fun
d un
der t
he c
usto
dy o
f JPM
orga
n C
hase
Ban
k N
.A. T
aipe
i Bra
nch
(2.5
5%),
Van
guar
d Em
ergi
ng M
arke
ts S
tock
Inde
x Fu
nd u
nder
the
trust
of S
tand
ard
Cha
rter (
1.88
%),
Yu-
Hen
g C
hiao
(1.6
5%),
Dim
ensi
on E
mer
ging
Mar
ket E
valu
atio
n Fu
nd u
nder
the
trust
of
Citi
bank
(Tai
wan
) (1.
56%
), Y
u-H
ui C
hiao
(1.4
7%),
Yu-
Chi
Chi
ao (1
.46%
), Pa
i-Yun
g H
ong
(1.3
6%),
Wal
sin
Lihw
a Em
ploy
ee W
elfa
re C
omm
ittee
(1.3
4%).
Not
e 20
: Maj
or sh
areh
olde
rs in
Not
e 19
who
are
inst
itutio
nal i
nves
tor a
nd th
eir m
ajor
shar
ehol
ders
M
arch
31,
201
4
Nam
e of
inst
itutio
nal s
hare
hold
er
Maj
or sh
areh
olde
rs o
f ins
titut
iona
l sha
reho
lder
Chi
n X
in In
vest
men
t Cor
p., L
td.
Win
bond
Ele
ctro
nics
(37.
70%
), W
alsi
n Li
hwa
(37.
00%
), O
rient
al C
onso
rtium
Inve
stm
ent L
imite
d (4
.43%
), A
rthur
Yu-
Che
ng C
hiao
(3.1
4%),
Yu-
Lon
Chi
ao (3
.14%
), Y
u-H
eng
Chi
ao
(3.1
4%),
Yu-
Chi
Chi
ao (3
.14%
), Y
au C
heun
g In
vest
men
t (2.
81%
), W
alsi
n Te
chno
logy
Co.
(1.8
6%),
Han
nSta
r Boa
rd C
orpo
ratio
n (1
.34%
).
Dire
ctor
s and
supe
rvis
ors (
2)
Mar
ch 3
1, 2
014
Crit
eria
Nam
e
Has
at l
east
5 y
ears
of w
ork
expe
rienc
e an
d m
eet o
ne o
f the
follo
win
g pr
ofes
sion
al
qual
ifica
tions
M
eet t
he in
depe
nden
ce c
riter
ia (N
ote
1)
Num
ber
of
othe
r
publ
ic c
ompa
nies
in
whi
ch
the
dire
ctor
also
se
rves
as
an
inde
pend
ent d
irect
or
An
inst
ruct
or
or
high
er
posit
ion
in t
he d
epar
tmen
t
of c
omm
erce
, law
, fin
ance
,
acco
untin
g or
ot
her
depa
rtmen
t re
late
d to
the
busi
ness
ne
eds
of
the
Com
pany
in
a pu
blic
or
priv
ate
juni
or
colle
ge
or
univ
ersi
ty
A ju
dge,
pub
lic p
rose
cuto
r,
atto
rney
, ac
coun
tant
, or
othe
r pr
ofes
sion
al
or
tech
nica
l sp
ecia
list
rela
ted
to
the
need
s of
th
e
Com
pany
who
has
pas
sed
a
natio
nal
exam
inat
ion
and
rece
ived
a
certi
ficat
e
ther
efor
e
Has
wor
k ex
perie
nce
in
com
mer
ce, l
aw, f
inan
ce, o
r
acco
untin
g or
a p
rofe
ssio
n
nece
ssar
y fo
r the
bus
ines
s of
the
Com
pany
1 2
3 4
5 6
7 8
9 10
Arth
ur Y
u-C
heng
Chi
ao
V
V
V
V
2
Chi
ng-C
hu C
hang
V
V
V
V
V
V
V
V
-
9
Crite
ria
Nam
e
Has
at l
east
5 y
ears
of w
ork
expe
rienc
e an
d m
eet o
ne o
f the
follo
win
g pr
ofes
siona
l
qual
ifica
tions
M
eet t
he in
depe
nden
ce c
riter
ia (N
ote
1)
Num
ber
of
othe
r
publ
ic c
ompa
nies
in
whi
ch
the
dire
ctor
also
se
rves
as
an
inde
pend
ent d
irect
or
An
inst
ruct
or
or
high
er
posit
ion
in t
he d
epar
tmen
t
of c
omm
erce
, law
, fin
ance
,
acco
untin
g or
ot
her
depa
rtmen
t re
late
d to
the
busin
ess
need
s of
th
e
Com
pany
in
a p
ublic
or
priv
ate
juni
or
colle
ge
or
univ
ersi
ty
A ju
dge,
pub
lic p
rose
cuto
r,
atto
rney
, ac
coun
tant
, or
othe
r pr
ofes
siona
l or
tech
nica
l sp
ecia
list
rela
ted
to
the
need
s of
th
e
Com
pany
who
has
pas
sed
a
natio
nal
exam
inat
ion
and
rece
ived
a
certi
ficat
e
ther
efor
e
Has
wor
k ex
perie
nce
in
com
mer
ce, l
aw, f
inan
ce, o
r
acco
untin
g or
a p
rofe
ssio
n
nece
ssar
y fo
r the
bus
ines
s of
the
Com
pany
1 2
3 4
5 6
7 8
9 10
Mat
thew
Fen
g-C
hian
g M
iau
V
V
V
V
V
V
V
V
V
V
-
Yun
g Ch
in
V
V
V
V
V
-
Wal
sin
Lihw
a C
orpo
ratio
n
(Rep
rese
ntat
ive:
Pet
er C
hu)
V
V
V
V
V
V
V
-
Lu-P
ao H
su
V
V
V
V
V
V
V
V
V
V
1
Robe
rt H
su
V
V
V
V
V
V
V
V
V
-
Tong
-Yi C
han
V
V
V
V
V
V
V
V
V
-
Hon
g-C
hi Y
u
V
V
V
V
V
V
V
V
V
V
1
Yu-
Chi
Chi
ao
V
V
V
V
V
-
Wan
g-Ts
ai L
in
V
V
V
V
V
V
V
V
-
Hui
-Min
g Ch
eng
V
V
V
V
V
V
V
V
-
Not
e 1:
If th
e di
rect
or o
r sup
ervi
sor m
eets
any
of t
he fo
llow
ing
crite
ria in
the
two
year
s bef
ore
bein
g el
ecte
d or
dur
ing
the
term
of o
ffic
e, p
leas
e ch
eck
"V"
the
corr
espo
ndin
g bo
xes:
(1) N
ot a
n em
ploy
ee o
f the
Com
pany
or a
ny o
f its
aff
iliat
es;
(2) N
ot a
dire
ctor
or s
uper
viso
r of t
he C
ompa
ny o
r any
of i
ts a
ffili
ates
(the
sam
e do
es n
ot a
pply
if th
e pe
rson
is a
n in
depe
nden
t dire
ctor
of t
he C
ompa
ny o
r its
par
ent c
ompa
ny, o
r any
sub
sidi
ary
in w
hich
the
Com
pany
hol
ds,
dire
ctly
and
indi
rect
ly, m
ore
than
50%
of t
he v
otin
g sh
ares
). (3
) Not
a n
atur
al-p
erso
n sh
areh
olde
r who
se s
hare
hold
ing,
toge
ther
with
thos
e of
his/
her s
pous
e, m
inor
chi
ldre
n, a
nd s
hare
s he
ld u
nder
oth
ers’
nam
es, e
xcee
d 1%
of t
he to
tal n
umbe
r of o
utst
andi
ng s
hare
s of
the
Com
pany
, or
rank
s the
per
son
in th
e to
p te
n sh
areh
olde
rs o
f the
Com
pany
. (4
) Not
a sp
ouse
, rel
ativ
e w
ithin
seco
nd d
egre
e of
kin
ship
, or l
inea
l rel
ativ
e w
ithin
third
deg
ree
of k
insh
ip.
(5) N
ot a
dire
ctor
, sup
ervi
sor o
r em
ploy
ee o
f an
inst
itutio
nal s
hare
hold
er th
at h
olds
dire
ctly
5%
or m
ore
of th
e to
tal n
umbe
r of o
utst
andi
ng sh
ares
of t
he C
ompa
ny o
r ran
ks in
the
top
five
shar
ehol
ders
. (6
) Not
a d
irect
or, s
uper
viso
r, m
anag
er o
r sha
reho
lder
hol
ding
5%
or m
ore
of th
e sh
ares
of a
spec
ified
com
pany
or i
nstit
utio
n th
at h
as a
fina
ncia
l or b
usin
ess r
elat
ions
hip
with
the
Com
pany
. (7
) Not
a p
rofe
ssio
nal o
r an
owne
r, pa
rtner
, dire
ctor
, sup
ervi
sor,
man
ager
or a
spo
use
of th
e ab
ovem
entio
ned
who
pro
vide
s co
mm
erci
al, l
egal
, fin
anci
al, a
ccou
ntin
g se
rvic
es o
r con
sulta
tion
to th
e Co
mpa
ny o
r an
affil
iate
of t
he
Com
pany
, exc
ludi
ng m
embe
rs o
f co
mpe
nsat
ion
com
mitt
ee w
ho e
xerc
ise p
ower
in a
ccor
danc
e w
ith A
rticl
e 7
of th
e Re
gula
tions
Gov
erni
ng th
e A
ppoi
ntm
ent a
nd E
xerc
ise o
f Po
wer
s by
the
Com
pens
atio
n co
mm
ittee
of
a Co
mpa
ny W
hose
Sto
ck is
Lis
ted
on th
e St
ock
Exch
ange
or T
rade
d O
ver t
he C
ount
er.
(8) N
ot h
avin
g a
mar
ital r
elat
ions
hip
or a
rela
tive
with
in th
e se
cond
deg
ree
of k
insh
ip to
any
oth
er d
irect
or o
f the
Com
pany
. (9
) Not
hav
ing
any
of th
e si
tuat
ions
set f
orth
in A
rticl
e 30
of t
he C
ompa
ny A
ct o
f the
R.O
.C.
(10)
Not
a g
over
nmen
t age
ncy,
juris
tic p
erso
n, o
r its
repr
esen
tativ
e se
t for
th in
Arti
cle
27 o
f the
Com
pany
Act
of t
he R
.O.C
.
10
2.2.
2 Pr
ofile
of P
resi
dent
, Vic
e Pr
esid
ents
, Ass
ista
nt V
ice
Pres
iden
ts, a
nd D
epar
tmen
t Dire
ctor
s
Mar
ch 3
1, 2
014
Title
N
ame
Dat
e ap
poin
ted
Shar
es h
eld
Sh
ares
hel
d by
spou
se a
nd
min
or c
hild
ren
Shar
es h
eld
Shar
es h
eld
in th
e na
me
of o
ther
s Sh
ares
hel
d
Educ
atio
n/w
ork
expe
rienc
e M
anag
er w
ho is
the
spou
se o
r a re
lativ
e w
ithin
the
seco
nd d
egre
e
Man
ager
who
is th
e sp
ouse
or
a re
lativ
e w
ithin
Ti
tle N
ame
Dat
e ap
poin
ted
the
seco
nd d
egre
e
Shar
es
Shar
es %
(N
ote2
) Sh
ares
Sh
ares
%
(Not
e2)
Shar
es
Shar
es %
(N
ote2
)Ti
tleN
ame
Rela
tions
hip
CEO
A
rthur
Yu-
Che
ng
Chia
o 20
05.0
8.01
58
,264
,955
1.58
%16
,020
,978
0.43
%-
-M
aste
r in
Elec
trica
l Eng
inee
ring
and
Rese
arch
er
of M
anag
emen
t Col
lege
of W
ashi
ngto
n U
niv.
Ch
airm
an o
f Wal
sin
Lihw
a Co
rp.
Not
e 3
Non
e. N
one.
N
one.
Pres
iden
t
Tong
-Yi C
han
2009
.02.
09
500,
000
0.01
%-
--
-
PhD
. in
Elec
trica
l Eng
inee
ring,
U.C
. Ber
kele
y M
aste
r in
Man
agem
ent S
cien
ce, S
tanf
ord
Uni
vers
ity
BC
D S
emic
ondu
ctor
CEO
Pr
esid
ent o
f Win
bond
Ele
ctro
nics
Cor
p.
(incu
mbe
nt)
Not
e 4
Non
e. N
one.
N
one.
Exec
utiv
e V
ice
Pres
iden
t
Wils
on W
en
2008
.05.
02
400,
609
0.01
%-
--
-B
S in
Ele
ctro
nic
Phys
ics,
Nat
iona
l Chi
ao T
ung
Uni
v.
CEO
of H
annS
tar D
ispl
ay C
orpo
ratio
n Ch
airm
an o
f Mob
ile M
agic
Des
ign
Corp
. N
one.
Non
e.
Non
e.
Vic
e Pr
esid
ent
and
Chie
f Fin
anci
al
Off
icer
Jam
es W
en
2004
.03.
16
320,
000
0.01
%-
--
-
MBA
, Wha
rton
Scho
ol in
Uni
vers
ity o
f Pe
nnsy
lvan
ia
Pres
iden
t of C
atha
y Se
curit
ies I
nves
tmen
t Tru
st
Co.,
Ltd.
Not
e 5
Non
e. N
one.
N
one.
Vic
e Pr
esid
ent
Yua
n-M
ow S
u
2005
.02.
01
1,69
9,85
9 0.
05%
--
--
MSE
E, U
nive
rsity
of S
outh
ern
Calif
orni
a
Pres
iden
t of M
obile
Mag
ic D
esig
n C
orp.
Ch
airm
an o
f Win
bond
Ele
ctro
nics
Co
rpor
atio
n A
mer
ica
Dire
ctor
of W
inbo
nd In
tegr
ated
Circ
uit
(Suz
hou)
Non
e. N
one.
N
one.
Vic
e Pr
esid
ent
Che
n-H
si L
in
2005
.02.
01
341,
000
0.01
%-
--
-
Ph.D
. App
lied
Phys
ics,
Har
vard
Uni
vers
ity,
USA
D
eput
y D
ivis
iona
l Dire
ctor
of C
orpo
rate
M
arke
ting
and
Cent
ral R
&D
, UM
C
Non
e.
Non
e. N
one.
N
one.
Vic
e Pr
esid
ent
Pei
-Min
g Ch
en
2005
.10.
01
361
0.00
%-
--
-M
S of
E.E
., U
nive
rsity
of D
etro
it, U
SA
Mar
ketin
g Ex
ecut
ive
of M
obile
Mag
ic
Des
ign
Corp
. Pr
esid
ent o
f Win
bond
(Suz
hou)
Inte
grat
ed
Circ
uit C
ompa
ny
Dire
ctor
and
pre
siden
t of
Win
bond
Ele
ctro
nics
(HK
) Ltd
. D
irect
or o
f Win
bond
Ele
ctro
nics
Co
rpor
atio
n A
mer
ica
Non
e. N
one.
N
one.
Vic
e Pr
esid
ent
Che
ng- K
ung
Lin
2006
.11.
01
1,31
5,28
10.
04%
161,
539
0.00
%-
-
MS
in E
ngin
eerin
g Te
chno
logy
of N
atio
nal
Taiw
an U
nive
rsity
of S
cien
ce a
nd T
echn
olog
y D
epar
tmen
t Hea
d an
d A
ssist
ant V
ice
Pres
iden
t of
Win
bond
Ele
ctro
nics
Dire
ctor
of W
inbo
nd (H
.K.)
Dire
ctor
of W
inbo
nd In
tegr
ated
Circ
uit
(Suz
hou)
N
one.
Non
e.
Non
e.
Vic
e Pr
esid
ent
Chi
n-Fe
n Ts
ai
2011
.11.
01
--
--
--
Ph.D
. in
Mat
eria
l Sci
ence
and
Eng
inee
ring
of
Uni
vers
ity o
f Uta
h V
ice
Pres
iden
t in
tech
nolo
gy a
nd C
TO o
f Sun
ny
Opt
roni
cs C
orp.
V
ice
Pres
iden
t of E
vers
ol C
orp.
D
eput
y D
ivis
iona
l Dire
ctor
of Q
RA
, UM
C
Non
e.
Non
e. N
one.
N
one.
11
Title
N
ame
Dat
e ap
poin
ted
Shar
es h
eld
Sh
ares
hel
d by
spou
se a
nd
min
or c
hild
ren
Shar
es h
eld
Shar
es h
eld
in th
e na
me
of o
ther
s Sh
ares
hel
d
Educ
atio
n/w
ork
expe
rienc
e M
anag
er w
ho is
the
spou
se o
r a re
lativ
e w
ithin
the
seco
nd d
egre
e
Man
ager
who
is th
e sp
ouse
or
a re
lativ
e w
ithin
Ti
tle N
ame
Dat
e ap
poin
ted
the
seco
nd d
egre
e
Shar
es
Shar
es %
(N
ote2
) Sh
ares
Sh
ares
%
(Not
e2)
Shar
es
Shar
es %
(N
ote2
)Ti
tleN
ame
Rela
tions
hip
Chie
f Bus
ines
s O
ffic
er
Eung
joon
Par
k 20
08.0
8.04
25
0,00
00.
01%
--
--
Mas
ter i
n El
ectri
cal E
ngin
eerin
g, U
.C. B
erke
ley
Win
bond
Ele
ctro
nics
Cor
p. E
xecu
tive
Vic
e Pr
esid
ent
Exec
utiv
e V
ice
Pres
iden
t of N
exFl
ash
Tech
nolo
gies
Inc.
V
ice
Pres
iden
t of A
zale
a M
icro
elec
troni
cs C
orp.
D
ivis
ion
Dire
ctor
of I
SSI/N
exFl
ash
Div
isio
n D
irect
or o
f ICT
Inc.
Se
nior
eng
inee
r, A
MD
Pres
iden
t of W
inbo
nd E
lect
roni
cs
Corp
orat
ion
Am
eric
a N
one.
Non
e.
Non
e.
Ass
istan
t Vic
e Pr
esid
ent
Shi-Y
uan
Wan
g 20
05.0
8.01
75
5,65
6 0.
02%
186,
059
0.01
%-
-
MS
in E
lect
ric E
ngin
eerin
g, N
atio
nal T
sing
Hua
U
nive
rsity
Ju
nior
Eng
inee
r, In
dust
rial T
echn
olog
y an
d Re
sear
ch In
stitu
te
R&D
Dep
uty
Exec
utiv
e of
Mob
ile M
agic
D
esig
n Co
rp.
N
one.
Non
e.
Non
e.
Ass
istan
t Vic
e Pr
esid
ent
Chiu
-Yi H
uang
20
06.0
7.12
47
3,94
9 0.
01%
--
--
MBA
, Ind
iana
Uni
vers
ity
Chie
f Aud
itor o
f Win
bond
Ele
ctro
nics
Cor
p.
Vic
e Pr
esid
ent,
Citi
bank
N
ote
6 N
one.
Non
e.
Non
e.
Ass
istan
t Vic
e Pr
esid
ent
Yi-D
ar C
hang
20
07.1
0.01
1,
630,
074
0.04
%13
,978
0.00
%-
-EM
BA
, Nat
iona
l Tsi
ng H
ua U
nive
rsity
Eq
uipm
ent E
ngin
eerin
g, IT
RI-E
RSO
N
one.
N
one.
Non
e.
Non
e.
Ass
istan
t Vic
e Pr
esid
ent
Chi-L
ung
Cho
u 20
08.0
7.01
24
0,04
0 0.
01%
--
--
Bach
elor
, Con
trol E
ngin
eerin
g, N
atio
nal C
hiao
Tu
ng U
nive
rsity
D
irect
or o
f Mem
ory
Test
ing
Div
isio
n,
Win
bond
Ele
ctro
nics
D
irect
or o
f Fla
sh M
emor
y an
d Te
stin
g En
gine
erin
g D
ivis
ion,
W
inbo
nd E
lect
roni
cs
Ass
istan
t Man
ager
of U
nite
d M
icro
elec
troni
cs
Man
ager
of M
osel
Vite
lic In
c.
Non
e.
Non
e. N
one.
N
one.
Ass
istan
t Vic
e Pr
esid
ent
Wen
-Hua
Lu
2011
.07.
01
451
0.00
%73
80.
00%
--
MS
in M
ater
ial S
cien
ce a
nd E
ngin
eerin
g, N
atio
nal
Taiw
an U
nive
rsity
A
ssist
ant R
esea
rche
r of M
ater
ial a
nd C
hem
ical
Re
sear
ch L
abor
ator
ies,
ITRI
Non
e.
Non
e. N
one.
N
one.
Ass
istan
t Vic
e Pr
esid
ent
Wen
-Cha
ng H
ong
2012
.01.
16
35,0
000.
00%
6,00
00.
00%
--
M.S
. in
Indu
stria
l Eng
inee
ring
and
Syst
em
Man
agem
ent,
Chun
g H
ua U
nive
rsity
N
one.
N
one.
Non
e.
Non
e.
Ass
istan
t Vic
e Pr
esid
ent
Mao
-Hsi
ang
Yen
2012
.07.
01
131,
321
0.00
%15
,975
0.00
%-
-M
S in
Ele
ctric
Eng
inee
ring,
Nat
iona
l Che
ng K
ung
Uni
vers
ity
Non
e.
Non
e. N
one.
N
one.
Dep
uty
Dep
artm
ent
Hea
d an
d A
ccou
ntin
g Ch
ief
Wen
-Yin
g Li
ang
2008
.08.
18
85,0
00
0.00
%-
--
-M
aste
r in
Man
agem
ent R
esea
rch
Inst
itute
, Fu
Jen
Cath
olic
Uni
vers
ity
Non
e.
Non
e. N
one.
N
one.
Not
e 1:
Man
agem
ent i
s def
ined
the
sam
e as
the
inte
rpre
tatio
n pr
ovid
ed in
the
Min
istry
of F
inan
ce le
tter T
ai-C
ai-Z
heng
-San
-Zi-
0920
0013
01, i
nclu
ding
pre
siden
t, vi
ce p
resi
dent
, ass
istan
t vic
e pr
esid
ent,
chie
f fin
anci
al o
ffic
er a
nd c
hief
acc
ount
ing
offic
er.
N
ote
2: “
Perc
enta
ge”
unde
r “S
hare
s cu
rren
tly h
eld”
was
bas
ed o
n th
en is
sued
and
out
stan
ding
com
mon
sha
res
of 3
,694
, 466
,193
sha
res
as o
f M
arch
31,
201
4, in
clud
ing
443,
000
shar
es e
xerc
ised
by e
mpl
oyee
s un
der
the
empl
oyee
sto
ck o
ptio
n pl
an
betw
een
Janu
ary
1 an
d M
arch
31,
201
4 th
at a
re n
ot y
et re
gist
ered
for c
hang
e of
cap
ital s
tock
. N
ote
3: R
efer
to N
ote
6 un
der P
rofil
e of
Dire
ctor
s and
Sup
ervi
sors
(1).
Not
e 4:
Ref
er to
Not
e 14
und
er P
rofil
e of
Dire
ctor
s and
Sup
ervi
sors
(1).
12
Not
e 5:
VP
Jam
es W
en se
rves
con
curr
ently
as P
resid
ent o
f Win
bond
(H.K
.);W
inbo
nd E
lect
roni
cs C
orpo
ratio
n Ja
pan,
Win
bond
Ele
ctro
nics
Cor
pora
tion
Am
eric
a, W
inbo
nd E
lect
roni
cs (H
K),
Mob
ile M
agic
Des
ign
Cor
p., W
inbo
nd (S
uzho
u) In
tegr
ated
C
ircui
t, W
inbo
nd T
echn
olog
y (N
anjin
g), N
uvot
on I
nves
tmen
t Hol
ding
Ltd
., W
alto
n C
ultu
ral a
nd E
duca
tiona
l Fou
ndat
ion,
Glo
bal I
nves
tmen
t Hol
ding
s; a
nd in
depe
nden
t dire
ctor
of T
a-H
o M
ariti
me
Cor
pora
tion.
Mr.
Ting
-Pia
o C
hiao
ser
ves
conc
urre
ntly
as C
hairm
an o
f Chi
n X
in In
vest
men
t Cor
p., L
td.;
Not
e 6:
Ass
istan
t VP
Chi
u-Y
i Hua
ng s
erve
s co
ncur
rent
ly a
s D
irect
or o
f Win
bond
Ele
ctro
nics
(HK
), W
inbo
nd E
lect
roni
cs C
orpo
ratio
n Ja
pan
and
Win
bond
Tec
hnol
ogy
LTD
; Sup
ervi
sor o
f Sea
rch
Mar
ketin
g C
o., H
arbi
nger
Ven
ture
III C
apita
l Cor
p.
and
Mob
ile M
agic
Des
ign
Cor
p.; a
nd m
anag
emen
t of G
oldb
ond
LLC
;
13
2.2.
3. R
emun
erat
ions
to d
irect
ors,
supe
rvis
ors,
pres
iden
t, an
d vi
ce p
resi
dent
s in
rece
nt y
ears
2.
2.3.
1 R
emun
erat
ion
to d
irect
ors
Dec
embe
r 31,
201
3; U
nit:
NT$
1,00
0; 1
,000
shar
es
Title
N
ame
Dire
ctor
's re
mun
erat
ion
Rat
io o
f tot
al
(A),
(B),
(C),
and
(D) t
o af
ter-
tax
inco
me
(%)
(Not
e 10
)
Pay
rece
ived
as a
n em
ploy
ee
Rat
io o
f tot
al
(A),
(B),
(C),
(D),
(E),
(F)
and
(G) t
o af
ter-
tax
inco
me
(%)
(N
ote
10)
Rem
uner
atio
n re
ceiv
ed fr
om
Inve
stee
s oth
er th
an
subs
idia
ries
(Not
e 11
)
Rem
uner
atio
n (A
) (N
ote
1)
Pens
ion
(B)
(Not
e 2)
Pr
ofit
shar
ing
(C) (
Not
e 3)
Bus
ines
s ex
pens
e (D
) (N
ote
4)
Sala
ry, b
onus
and
sp
ecia
l allo
wan
ce
(E) (
Not
e 5)
Pens
ion
(F)
(Not
e 2)
Pr
ofit
shar
ing
& b
onus
(G) (
Not
e 6)
Shar
es
subs
crib
able
un
der
empl
oyee
st
ock
optio
ns
(H) (
Not
e 7)
Shar
es
obta
ined
th
roug
h re
stric
ted
stoc
k aw
ard
(I) (N
ote
8)
Winbond
All companies in consolidated statements (Note 9)
Winbond
All companies in consolidated statements (Note 9)
Winbond
All companies in consolidated statements (Note 9)
Winbond
All companies in consolidated statements (Note 9)
Winbond
All companies in consolidated statements (Note 9)
Winbond
All companies in consolidated statements (Note 9
Winbond
All companies in consolidated statements (Note 9
Winbond
All companies in consolidated
statements (Note 9)
Winbond
All companies in consolidated statements (Note 9
Winbond
All companies in consolidated statements (Note 9
Winbond
All companies in consolidated statements (Note 9
Cash bonus
Stock bonus
Cash bonus
Stock bonus
Cha
irman
A
rthur
Y
u-C
heng
C
hiao
300
300
- -
- 63
9 3,
240
3,61
5 1.
71
1.58
22
,910
29
,556
91
28
9 -
- 50
8 -
- -
- -
12.8
5 16
.90
Yes
7,15
4
Dire
ctor
C
hing
-Chu
Cha
ng
Non
e.
Dire
ctor
M
atth
ew
Feng
-C
hian
g M
iau
Non
e.
Dire
ctor
Y
ung
Chi
n Y
es
Cor
pora
te
Dire
ctor
W
alsi
n Li
hwa
Cor
pora
tion
N
one.
Cor
pora
te
Dire
ctor
re
pres
enta
tive
Wal
sin
Lihw
a C
orp.
; re
pres
enta
tive:
Pe
ter C
hu
Yes
Dire
ctor
Lu
-Pao
Hsu
Y
es
Dire
ctor
R
ober
t Hsu
N
one.
Dire
ctor
To
ng-Y
i Cha
n Y
es
Dire
ctor
H
ong-
Chi
Yu
Yes
Not
e 1:
Rem
uner
atio
n to
the
dire
ctor
in th
e pa
st y
ear (
incl
udin
g sa
lary
, add
ition
al p
ay, s
ever
ance
pay
, bon
uses
and
rew
ards
). N
ote
2: P
ensi
on in
clud
es:
a. A
mou
nt e
qual
to 6
% o
f the
mon
thly
sala
ry p
aid
into
an
acco
unt a
t the
Bur
eau
of L
abor
Insu
ranc
e pu
rsua
nt to
the
new
pen
sion
syst
em u
nder
the
Labo
r Pen
sion
Act
. b.
Am
ount
equ
al to
2%
of t
he m
onth
ly s
alar
y de
posi
ted
into
an
acco
unt a
t Ban
k of
Tai
wan
und
er th
e na
me
of th
e C
ompa
ny’s
retir
emen
t res
erve
fun
d su
perv
isor
y co
mm
ittee
pur
suan
t to
the
old
pens
ion
syst
em u
nder
the
Labo
r St
anda
rds
Act
. c.
Am
ount
act
ually
pai
d to
the
dire
ctor
in th
e ye
ar o
f ret
irem
ent.
Not
e 3:
The
am
ount
is th
e pr
opos
ed re
mun
erat
ion
to d
irect
ors a
ccor
ding
to th
e m
ost r
ecen
t ear
ning
s dist
ribut
ion
plan
that
has
bee
n ap
prov
ed b
y th
e Bo
ard
of D
irect
ors b
ut h
as n
ot b
een
subm
itted
to th
e sh
areh
olde
rs' m
eetin
g.
Not
e 4:
Thi
s is b
usin
ess e
xpen
se o
f dire
ctor
s in
the
past
yea
r (in
clud
ing
trans
porta
tion
allo
wan
ce, s
peci
al a
llow
ance
, stip
ends
, dor
mito
ry, a
nd c
ar).
Not
e 5: A
ll pa
ys to
the d
irect
or w
ho is
also
an
empl
oyee
of t
he C
ompa
ny (i
nclu
ding
the
posi
tion
of p
resi
dent
, vic
e pre
side
nt, o
ther
man
ager
ial o
ffic
er a
nd st
aff)
, inc
ludi
ng sa
lary
, add
ition
al p
ay, s
ever
ance
pay
, bon
uses
, rew
ards
, tra
nspo
rtatio
n al
low
ance
, spe
cial
allo
wan
ce, s
tipen
ds, d
orm
itory
, and
car
. N
ote
6: F
or d
irect
ors a
lso w
orki
ng a
s an
empl
oyee
(inc
ludi
ng th
e pos
ition
of p
resi
dent
, vic
e pr
esid
ent,
othe
r man
ager
ial o
ffic
er a
nd st
aff),
the
amou
nt o
f the
pro
pose
d pr
ofit
shar
ing
and
bonu
s acc
ordi
ng to
the
mos
t rec
ent e
arni
ngs d
istrib
utio
n pl
an th
at h
as b
een
appr
oved
by
the
Boa
rd o
f Dire
ctor
s bu
t has
not
bee
n su
bmitt
ed to
the
shar
ehol
ders
' mee
ting.
14
Not
e 7:
Sha
res
subs
crib
able
und
er e
mpl
oyee
sto
ck o
ptio
n pl
an b
y th
e di
rect
or a
lso w
orki
ng a
s an
em
ploy
ee (i
nclu
ding
the
posi
tion
of p
resi
dent
, vic
e pr
esid
ent,
othe
r man
ager
ial o
ffic
er a
nd s
taff
) as
of th
e da
te o
f rep
ort (
Mar
ch 3
1, 2
014)
(e
xclu
ding
sha
res a
lread
y ex
erci
sed)
. N
ote
8: S
hare
s obt
aine
d th
roug
h re
stric
ted
stoc
k aw
ard
by th
e di
rect
or a
lso w
orki
ng a
s an
em
ploy
ee (i
nclu
ding
the
posi
tion
of p
resid
ent,
vice
pre
side
nt, o
ther
man
ager
ial o
ffic
er a
nd st
aff)
as o
f the
dat
e of
repo
rt (M
arch
31,
201
4).
Not
e 9:
The
tota
l pay
to th
e di
rect
or fr
om a
ll co
mpa
nies
in th
e co
nsol
idat
ed st
atem
ents
(inc
ludi
ng th
e C
ompa
ny).
Not
e 10
: Com
pute
d ba
sed
on 2
013
net i
ncom
e of
NT$
206,
564,
000
of th
e C
ompa
ny.
Not
e 11
: a. T
his
field
sho
ws t
he a
mou
nt o
f rem
uner
atio
n a
dire
ctor
of t
he C
ompa
ny re
ceiv
es fr
om in
vest
ees o
ther
than
subs
idia
ries o
f the
Com
pany
. b.
The
rem
uner
atio
n m
eans
pay
, rem
uner
atio
n, e
mpl
oyee
bon
us a
nd b
usin
ess e
xpen
se re
ceiv
ed b
y th
e di
rect
or se
rvin
g as
a d
irect
or, s
uper
viso
r or m
anag
er o
f an
inve
stee
of t
he C
ompa
ny o
ther
than
subs
idia
ries.
Ran
ge o
f rem
uner
atio
n pa
id to
eac
h di
rect
or
Nam
e of
dire
ctor
Tota
l of (
A+B
+C+D
) To
tal o
f (A
+B+C
+D+E
+F+G
)
Win
bond
A
ll co
mpa
nies
in c
onso
lidat
ed st
atem
ents
W
inbo
nd
All
inve
stee
s (N
ote)
<NT$
2,00
0,00
0
Arth
ur Y
u-C
heng
Chi
ao, C
hing
-Chu
C
hang
, Mat
thew
Fen
g-C
hian
g M
iau,
Yun
g C
hin,
Rep
rese
ntat
ive
of W
alsi
n Li
hwa:
Pe
ter C
hu, L
u-Pa
o H
su, R
ober
t Hsu
, Ton
g-Y
i Cha
n, H
ong-
Chi
Yu
Arth
ur Y
u-C
heng
Chi
ao, C
hing
-Chu
C
hang
, Mat
thew
Fen
g-C
hian
g M
iau,
Yun
g C
hin,
Rep
rese
ntat
ive
of W
alsi
n Li
hwa:
Pe
ter C
hu, L
u-Pa
o H
su, R
ober
t Hsu
, Ton
g-Y
i Cha
n, H
ong-
Chi
Yu
Chi
ng-C
hu C
hang
, M
atth
ew F
eng-
Chi
ang
Mia
u,
Wal
sin
Lihw
a re
pres
enta
tive:
Pe
ter C
hu, L
u-Pa
o H
su, R
ober
t H
su, H
ong-
Chi
Yu
Chi
ng-C
hu C
hang
, Mat
thew
Fen
g-C
hian
g M
iau,
Wal
sin
Lihw
a re
pres
enta
tive:
Pet
er C
hu, L
u-Pa
o H
su
NT$
2,00
0,00
0 (in
clus
ive)
NT$
5,00
0,00
0 (e
xclu
sive
)
Hon
g-C
hi Y
u
NT$
5,00
0,00
0 (in
clus
ive)
NT$
10,0
00,0
00
(exc
lusi
ve)
Arth
ur Y
u-C
heng
Chi
ao, Y
ung
Chi
n, T
ong-
Yi C
han
Yun
g C
hin,
Rob
ert H
su, T
ong-
Yi
Cha
n N
T$10
,000
,000
(inc
lusi
ve)
NT$
15,0
00,0
00
(exc
lusi
ve)
A
rthur
Yu-
Che
ng C
hiao
NT$
15,0
00,0
00 (i
nclu
sive
)N
T$30
,000
,000
(e
xclu
sive
)
NT$
30,0
00,0
00 (i
nclu
sive
)N
T$50
,000
,000
(e
xclu
sive
)
NT$
50,0
00,0
00 (i
nclu
sive
)N
T$10
0,00
0,00
0 (e
xclu
sive
)
> N
T$10
0,00
0,00
0
Tota
l 9
peop
le
9 pe
ople
9
peop
le
9 pe
ople
N
ote:
Whe
n ca
lcul
atin
g th
e ra
nge
of re
mun
erat
ion,
rem
uner
atio
n re
ceiv
ed b
y ea
ch d
irect
or fr
om in
vest
ees o
ther
than
subs
idia
ries
was
als
o in
clud
ed.
15
2.
2.3.
2 R
emun
erat
ion
to su
perv
isor
s
Dec
embe
r 31,
201
3; U
nit:
NT$
1,00
0
Title
N
ame
Supe
rviso
r's R
emun
erat
ion
Rat
io o
f tot
al (A
), (B
), an
d (C
) to
afte
r-ta
x in
com
e (%
) (N
ote
5)
Rem
uner
atio
n re
ceiv
ed fr
om In
vest
ees
othe
r tha
n su
bsid
iarie
s (D
) (N
ote
6)
Rem
uner
atio
n (A
) (N
ote
1)
Prof
it sh
arin
g (B
) (N
ote
2)
Bus
ines
s exp
ense
(C) (
Not
e 3)
Win
bond
A
ll co
mpa
nies
in
cons
olid
ated
st
atem
ents
(Not
e 4)
W
inbo
nd
All
com
pani
es in
co
nsol
idat
ed
stat
emen
ts (N
ote
4)
Win
bond
A
ll co
mpa
nies
in
cons
olid
ated
st
atem
ents
(Not
e 4)
W
inbo
nd
All
com
pani
es in
co
nsol
idat
ed
stat
emen
ts (N
ote
4)
Supe
rviso
r
Yu-
Chi
Chi
ao
- -
- -
1,08
0 1,
080
0.52
0.
52
Yes
38,7
16
Supe
rviso
r
Wan
g-Ts
ai L
in
Yes
Supe
rviso
r
Hui
-Min
g C
heng
Y
es
Not
e 1:
Rem
uner
atio
n to
sup
ervi
sors
in th
e pa
st y
ear (
incl
udin
g sa
lary
, add
ition
al p
ay, s
ever
ance
pay
, bon
uses
and
rew
ards
).
Not
e 2:
The
am
ount
is th
e pr
opos
ed re
mun
erat
ion
to su
perv
isor
s acc
ordi
ng to
the
mos
t rec
ent e
arni
ngs d
istrib
utio
n pl
an a
ppro
ved
by th
e Bo
ard
of D
irect
ors b
ut h
as n
ot b
een
subm
itted
to th
e sh
areh
olde
rs' m
eetin
g.
Not
e 3:
Thi
s is b
usin
ess e
xpen
se o
f sup
ervi
sors
in th
e pa
st y
ear (
incl
udin
g tra
nspo
rtatio
n al
low
ance
, spe
cial
allo
wan
ce, s
tipen
ds, d
orm
itory
, and
car
).
Not
e 4:
The
tota
l pay
to su
perv
isors
from
all
com
pani
es in
the
cons
olid
ated
stat
emen
ts (i
nclu
ding
the
Com
pany
).
Not
e 5:
Com
pute
d ba
sed
on 2
013
net i
ncom
e of
NT$
206,
564,
000
of th
e C
ompa
ny.
Not
e 6:
a. T
his
field
sho
ws t
he a
mou
nt o
f rem
uner
atio
n a
supe
rviso
r of t
he C
ompa
ny re
ceiv
es fr
om in
vest
ees o
ther
than
sub
sidi
arie
s of t
he C
ompa
ny.
b. T
he re
mun
erat
ion
mea
ns p
ay, r
emun
erat
ion,
em
ploy
ee b
onus
and
bus
ines
s exp
ense
rece
ived
by
the
supe
rviso
r ser
ving
as a
dire
ctor
, sup
ervi
sor o
r man
ager
of a
n in
vest
ee o
f the
Com
pany
oth
er th
an su
bsid
iarie
s.
Ran
ge o
f rem
uner
atio
n pa
id to
eac
h su
perv
isor
Nam
es o
f sup
ervi
sors
Tota
l of (
A+B
+C)
Win
bond
A
ll in
vest
ees (
Not
e)
<NT$
2,00
0,00
0
Yu-
Chi
Chi
ao ,
Wan
g-Ts
ai L
in, H
ui-M
ing
Che
ng
Wan
g-Ts
ai L
in
NT$
2,00
0,00
0 (in
clus
ive)
NT$
5,00
0,00
0 (e
xclu
sive
)
N
T$5,
000,
000
(incl
usiv
e)N
T$10
,000
,000
(exc
lusi
ve)
NT$
10,0
00,0
00 (i
nclu
sive
)N
T$15
,000
,000
(exc
lusi
ve)
NT$
15,0
00,0
00 (i
nclu
sive
)N
T$30
,000
,000
(exc
lusi
ve)
Y
u-C
hi C
hiao
, H
ui-M
ing
Che
ng
NT$
30,0
00,0
00 (i
nclu
sive
)N
T$50
,000
,000
(exc
lusi
ve)
NT$
50,0
00,0
00 (i
nclu
sive
)N
T$10
0,00
0,00
0 (e
xclu
sive
)
>
NT$
100,
000,
000
Tota
l 3
peop
le
3 pe
ople
Not
e: W
hen
calc
ulat
ing
the
rang
e of
rem
uner
atio
n, re
mun
erat
ion
rece
ived
by
each
supe
rvis
or fr
om in
vest
ees o
ther
than
subs
idia
ries w
as a
lso in
clud
ed.
16
2.2.
3.3
Rem
uner
atio
n to
pre
side
nt a
nd v
ice
pres
iden
t D
ecem
ber 3
1, 2
013;
Uni
t: N
T$1,
000;
1,0
00 sh
ares
Title
N
ame
Sala
ry (A
) (N
ote
1)
Pens
ion
(B)
(N
ote
2)
Bonu
s and
spec
ial
allo
wan
ce (C
) (N
ote
3)
Empl
oyee
bon
us (D
)
(Not
e 4)
Rat
io o
f tot
al (A
), (B
), (C
), an
d (D
) to
afte
r-ta
x in
com
e (%
) (N
ote
8)
Shar
es su
bscr
ibab
le
unde
r em
ploy
ee st
ock
optio
ns (N
ote
5))
Shar
es o
btai
ned
thro
ugh
rest
ricte
d st
ock
awar
d (N
ote
6)
Rem
uner
atio
n re
ceiv
ed fr
om
Inve
stee
s oth
er
than
sub
sidi
arie
s (N
ote
9)
Win
bond
All
com
pani
es
in
cons
olid
ated
stat
emen
ts
(Not
e 7)
Win
bond
All
com
pani
es
in
cons
olid
ated
stat
emen
ts
(Not
e 7)
Win
bond
All
com
pani
es in
cons
olid
ated
stat
emen
ts
(Not
e 7)
Win
bond
All
com
pani
es in
cons
olid
ated
stat
emen
ts (N
ote
7)
Win
bond
All
com
pani
es in
cons
olid
ated
stat
emen
ts
(Not
e 7)
Win
bond
All
com
pani
es in
cons
olid
ated
stat
emen
ts
(Not
e 7)
Win
bond
All
com
pani
es in
cons
olid
ated
stat
emen
ts
(Not
e 7)
Cas
h bo
nus
Stoc
k bo
nus
Cas
h bo
nus
Stoc
k bo
nus
CEO
A
rthur
Yu-
Che
ng C
hiao
38,7
67
46,1
06
216
471
17,5
34
17,5
34
- -
- -
27.3
6 31
.04
- -
- -
Yes
2,19
6
Pres
iden
t
Tong
-Yi C
han
Yes
Ex
ecut
ive
Vic
e Pr
esid
ent
W
ilson
Wen
N
one.
Vic
e Pr
esid
ent
Ja
mes
Wen
N
one.
V
ice
Pres
iden
t
Yua
n-M
ow S
u
Non
e.
Vic
e Pr
esid
ent
C
hen-
Hsi
Lin
N
one.
V
ice
Pres
iden
t
Pei-M
ing
Che
n
Non
e.
Vic
e Pr
esid
ent
C
heng
- Kun
g Li
n
Non
e.
Vic
e Pr
esid
ent
C
hin-
Fen
Tsai
N
one.
Not
e 1:
Sal
ary,
add
ition
al p
ay, a
nd se
vera
nce
pay
rece
ived
by
the
pres
iden
t or v
ice
pres
iden
t in
the
past
yea
r.
Not
e 2:
Pen
sion
incl
udes
:
a. A
mou
nt e
qual
to 6
% o
f the
mon
thly
sala
ry p
aid
into
an
acco
unt a
t the
Bur
eau
of L
abor
Insu
ranc
e pu
rsua
nt to
the
new
pen
sion
syst
em u
nder
the
Labo
r Pen
sion
Act
.
b. A
mou
nt e
qual
to 2
% o
f the
mon
thly
sal
ary
depo
site
d in
to a
n ac
coun
t at B
ank
of T
aiw
an u
nder
the
nam
e of
the
Com
pany
’s re
tirem
ent r
eser
ve f
und
supe
rviso
ry c
omm
ittee
pur
suan
t to
the
old
pens
ion
syst
em
unde
r the
Lab
or S
tand
ards
Act
.
c. A
mou
nt a
ctua
lly p
aid
to th
e pr
esid
ent o
r vic
e pr
esid
ent i
n th
e ye
ar o
f ret
irem
ent.
Not
e 3:
Bon
us, r
ewar
d, tr
ansp
orta
tion
allo
wan
ce, s
peci
al a
llow
ance
, stip
ends
, dor
mito
ry, c
ar a
nd o
ther
pay
s rec
eive
d by
the
pres
iden
t or v
ice
pres
iden
t in
the
past
yea
r.
Not
e 4:
The
am
ount
is th
e em
ploy
ee b
onus
(inc
ludi
ng s
tock
bon
us a
nd c
ash
bonu
s) to
the
pres
iden
t and
vic
e pr
esid
ents
acc
ordi
ng to
the
mos
t rec
ent e
arni
ngs
dist
ribut
ion
plan
that
has
bee
n ap
prov
ed b
y th
e Bo
ard
of
Dire
ctor
s but
has
not
bee
n su
bmitt
ed to
the
shar
ehol
ders
' mee
ting.
Not
e 5:
Sha
res s
ubsc
ribab
le u
nder
em
ploy
ee st
ock
optio
n pl
an b
y th
e pr
esid
ent a
nd v
ice
pres
iden
ts a
s of t
he d
ate
of re
port
(Mar
ch 3
1, 2
014)
(exc
ludi
ng s
hare
s alre
ady
exer
cise
d).
Not
e 6:
Sha
res o
btai
ned
thro
ugh
rest
ricte
d st
ock
awar
d by
the
pres
iden
t and
vic
e pr
esid
ents
as o
f the
dat
e of
repo
rt (M
arch
31,
201
4).
Not
e 7:
The
tota
l pay
to th
e pr
esid
ent o
r vic
e pr
esid
ent f
rom
all
com
pani
es in
the
cons
olid
ated
stat
emen
ts (i
nclu
ding
the
Com
pany
). N
ote
8: C
ompu
ted
base
d on
201
3 ne
t inc
ome
of N
T$20
6,56
4,00
0 of
the
Com
pany
.
Not
e 9:
a. T
his
field
sho
ws t
he a
mou
nt o
f rem
uner
atio
n th
e pr
esid
ent o
r vic
e pr
esid
ent o
f the
Com
pany
rece
ives
from
inve
stee
s oth
er th
an s
ubsi
diar
ies o
f the
Com
pany
.
b. T
he re
mun
erat
ion
mea
ns p
ay, r
emun
erat
ion,
em
ploy
ee b
onus
and
bus
ines
s ex
pens
e re
ceiv
ed b
y th
e pr
esid
ent o
r vic
e pr
esid
ent s
ervi
ng a
s a
dire
ctor
, sup
ervi
sor o
r man
ager
of a
n in
vest
ee o
f the
Com
pany
oth
er
than
sub
sidi
arie
s.
Ran
ge o
f rem
uner
atio
n pa
id to
pre
side
nts a
nd v
ice
pres
iden
ts
Nam
es o
f pre
side
nts a
nd v
ice
pres
iden
ts
Win
bond
A
ll in
vest
ees (
Not
e)
<NT$
2,00
0,00
0
NT$
2,00
0,00
0 (in
clus
ive)
NT$
5,00
0,00
0 (e
xclu
sive
) Y
uan-
Mow
Su,
Pei
-Min
g C
hen,
Chi
n-Fe
n Ts
ai
Chi
n-Fe
n Ts
ai
NT$
5,00
0,00
0 (in
clus
ive)
NT$
10,0
00,0
00 (e
xclu
sive
) A
rthur
Yu-
Che
ng C
hiao
, Ton
g-Y
i Cha
n, W
ilson
Wen
, Jam
es W
en, C
hen-
Hsi
Lin
, Che
ng-
Kun
g Li
n To
ng-Y
i Cha
n, W
ilson
Wen
, Jam
es W
en, Y
uan-
Mow
Su,
Che
n-H
si L
in, P
ei-M
ing
Che
n,
Che
ng- K
ung
Lin
17
NT$
10,0
00,0
00 (i
nclu
sive
)N
T$15
,000
,000
(exc
lusi
ve)
A
rthur
Yu-
Che
ng C
hiao
NT$
15,0
00,0
00 (i
nclu
sive
)N
T$30
,000
,000
(exc
lusi
ve)
NT$
30,0
00,0
00 (i
nclu
sive
)N
T$50
,000
,000
(exc
lusi
ve)
NT$
50,0
00,0
00 (i
nclu
sive
)N
T$10
0,00
0,00
0 (e
xclu
sive
)
> N
T$10
0,00
0,00
0
Tota
l 9
peop
le
9 pe
ople
Not
e: W
hen
calc
ulat
ing
the
rang
e of
rem
uner
atio
n, re
mun
erat
ion
rece
ived
by
pres
iden
t and
vic
e pr
esid
ents
from
inve
stee
s oth
er th
an s
ubsi
diar
ies w
as a
lso in
clud
ed.
18
2.2.3.4 Analysis of remuneration to directors, supervisors, president and vice presidents as a percentage of earnings in the last two years and description of the policy, standards and packages of remunerations, procedure for making such decision and relation to business performance:
(1) Analysis of remuneration to directors, supervisors, president and vice presidents as a percentage of the Company's earnings in the last two years
Title
Total remuneration as a percentage of earnings (%) 2013 2012
Winbond All companies in
consolidated statements Winbond
All companies in consolidated statements
Director 12.85% 16.90% -1.36% -1.73% Supervisor 0.52% 0.52% -0.06% -0.06% President and Vice President
27.36% 31.04% -2.73% -3.10%
(2) Starting December 2011, the remuneration of directors and supervisors will be decided according to the resolution passed by the Compensation Committee and the Board of Directors pursuant to the internal Rules for Remuneration and Performance Evaluation of Directors and Supervisors.
(3) Starting December 2011, the remuneration of managerial officers (CEO, President and Vice Presidents) will be decided according to the resolution passed by the Compensation Committee and the Board of Directors pursuant to the internal Rules for Remuneration and Performance Evaluation of Managerial Officers.
19
3. Capital and shareholding 3.1 Sources of capital
March 31, 2014; Unit: Shares; NTD
Year/month
Issue price
Authorized capital Paid-in capital Remark
Shares Amount Shares Amount Source of capital (Note 1)
Subscriptions paid with property other than cash
Approval date and number
2013.03
10 6,700,000,000 67,000,000,000 3,685,601,193
36,856,011,930
Exercise of employee stock options: $5,290,000
None. Zhong-Shang-Zi-#1020006222 dated 3/18/2013
2013.05 10 6,700,000,000 67,000,000,000 3,686,826,193 36,868,261,930 Exercise of employee stock options: $12,250,000
None. Zhong-Shang-Zi-#1020011230 dated 5/16/2013
2013.09 10 6,700,000,000 67,000,000,000 3,688,832,193 36,888,321,930 Exercise of employee stock options: $20,060,000
None. Zhong-Shang-Zi-#1020022395 dated 9/14/2013
2013.11 10 6,700,000,000 67,000,000,000 3,691,967,193 36,919,671,930 Exercise of employee stock options: $31,350,000
None. Zhong-Shang-Zi-#1020027795 dated 11/18/2013
2014.02 10 6,700,000,000 67,000,000,000 3,694,023,193 36,940,231,930 Exercise of employee stock options: $20,560,000
None. Zhong-Shang-Zi-#1030003799 dated 2/19/2014
Note 1: The 5th issue of 50,000,000 units of employee stock options took effect on September 5, 2008 pursuant to Jin-Guan-Zhen (1) - 0970045576 dated September 8, 2008. The recipients may subscribe 1 common share for each unit and new shares were issued for the exercise of employee stock options. For details on actual issue and exercise, please refer to page 31.
Note 2: As of March 31, 2014, 443,000 shares issued for employee stock options exercised have not completed registration, and Company's paid-in capital was NT$36,944,661,930 with 3,694,466,193 shares issued.
March 31, 2014; Unit: Shares
Type of stock Authorized capital
Remark Shares issued and outstanding (Note 1)
Unissued shares Total
Common shares
3,694,466,193 3,005,533,807 6,700,000,000 Listed stock
Note 1: Shares issued and outstanding include 443,000 shares issued for employee stock options exercised between January 1 and March 31, 2014 that have not completed registration of change of capital.
Note 2: Of the total capital amount, up to NT$5 billion may be used for issues of employee stock options, preferred stocks or corporate bonds with warrant for a total of 500 million shares with par value of NT$10 per share in tranches. Those shares may be issued in installments. The respective amount for the issue of employee stock options, preferred stocks or corporate bonds with warrant may be adjusted by resolution of the Board of Directors in view of the capital market situation and business needs.
Note 3: Information on shelf registration: None.
3.2 Shareholder structure March 31, 2014
Quantity\ shareholder structure
Government agencies
Financial institutions
Other juristic persons
Individual investors
Foreign institutions and
foreigners
Chinese investors (Note 1) Total
Number 2 76 172 210,476 259 3 210,988 Shares held (note 2) 26,858,699 25,000,423 970,743,676 2,168,840,730 503,022,290 375 3,694,466,193
Shareholding 0.73% 0.68% 26.27% 58.71% 13.61% 0.00% 100.00% Note 1: Chinese investors refer to Mainland Area individuals, juristic persons, groups, other institutions or companies based in a third area as provided
in Article 3 of the Regulations Governing Investment by People in Mainland Area in Taiwan. Note 2: Shares held include 443,000 shares issued for employee stock options exercised between January 1 and March 31, 2014 that have not
completed registration of change of capital. 3.3 Dispersion of equity ownership 1. Common stocks:
March 31, 2014; par value of NT$10 per share Shares Number of shareholders Shares held Percentage (%)
1 ~ 999 58,956 20,522,516 0.56 1,000 ~ 5,000 96,846 233,086,026 6.31 5,001 ~ 10,000 25,956 213,174,428 5.77
20
10,001 ~ 15,000 7,883 100,904,080 2.73 15,001 ~ 20,000 6,624 125,567,960 3.40 20,001 ~ 30,000 5,088 133,046,778 3.60 30,001 ~ 50,000 4,189 172,952,390 4.68 50,001 ~ 100,000 3,037 224,642,927 6.08 100,001 ~ 200,000 1,294 186,133,460 5.04 200,001 ~ 400,000 578 165,428,106 4.48 400,001 ~ 600,000 199 98,338,804 2.66 600,001 ~ 800,000 68 48,440,551 1.31 800,001 ~ 1,000,000 53 48,215,292 1.30 >1,000,001 217 1,924,012,875 52.08 Total (Note) 210,988 3,694,466,193 100.00
Note: Shares held include 443,000 shares issued for employee stock options exercised between January 1 and March 31, 2014 that have not completed registration of change of capital.
2. Preferred stocks: N/A. 3.4 List of major shareholders
1. Names, shares and percentage of shareholding of shareholders with more than 5% of equity: March 31, 2014
Name\shareholding of major shareholder Shares held Shareholding
Walsin Lihwa Corporation 858,091,531 shares 23.23%
2. For names, shares and percentage of shareholding of top ten shareholders, please refer to page 26-27.
3.5 Stock price, net worth, earnings, dividends and related information for the previous two years Unit: NT$
Item\Year 2012 2013 up to March 31, 2014 Stock price (Note 1)
High 6.96 10.10 8.78 Low 3.83 4.91 7.35 Average 5.26 7.73 8.15
Net worth per share (Note 2)
Basic 8.97 9.44 -
Diluted (Note 6) (Note 6) -
Earnings per share
Weighted average shares (1,000 shares)
3,676,698 3,682,410 -
Earnings per share (0.51) 0.06 -
Dividends per share
Cash dividend (Note 6) (Note 6) - Stock dividend
Earnings (Note 6) (Note 6) - Capital surplus (Note 6) (Note 6) -
Accumulated unpaid dividend (Note 6) (Note 6) -
Return analysis
Price-earnings ratio (Note 3) N/A. 128.83 - Price-dividend ratio (Note 4) (Note 6) (Note 6) - Cash dividend yield (Note 5) (Note 6) (Note 6) -
Note 1: The year's high and low market prices of common stock are provided, and the average price for the year is computed based on the year's transaction amount and volume.
Note 2: Net worth per share is computed based on the number of shares issued and outstanding at the end of the year. Note 3: Price-earnings ratio Year's average per share closing price / earnings per share. Note 4: Price-dividend ratio Year's average per share closing price / cash dividend per share. Note 5: Cash dividend yield Cash dividend per share / year's average per share closing price. Note 6: The Company posted losses in 2012 and 2013, so there was no earnings distribution for those years.
3.6 Dividend policy and implementation status
1. Dividend policy
Our dividend policy is set up in accordance with the Company Act and the Articles of Incorporation of Winbond Electronics Corp. in consideration of factors including capital, financial structure, operating status, earnings, industry characteristics and cycle, etc. The dividends shall be distributed in a prudent manner where appropriate retained earnings, stock dividend or cash dividend, or both are taken into consideration so as to ensure sustained
21
development of the Company. The Company requires intensive capital, technologies, and manpower, and is currently in growth and expansion stage. Hence the distribution of earnings will factor in the future plans for capital expenditures and working capital. Thus any dividend distribution plan will give priority to cash dividend, whereas stock dividend can also be considered. Nevertheless, stock dividend to be distributed shall not be more than 50% of total dividends in principle. The current dividend policy for retained earnings and dividends with respect to their conditions, timing, amount and type would be adjusted from time to time in accordance with economic and industrial fluctuations, and in particular, in view of the Company’s future development needs and profitability.
2. Dividend distribution to be proposed to the shareholders’ meeting: The Company does not plan to distribute dividends for fiscal year 2013.
3.7 Effect of the proposed stock dividends (to be adopted by the Shareholders’ Meeting) on the
operating performance and earnings per share: Not applicable for the Company does not plan to distribute earnings for fiscal year 2013.
3.8 Employee bonus and remuneration to directors and supervisors
1.Information on employee bonus and remuneration to directors and supervisors provided in Company’s Articles of Incorporation
Under the ROC Company Act and Winbond's Articles of Incorporation, the Company shall, after covering prior years' losses and paying all taxes and dues, set aside 10% of its earnings as legal reserve until such reserve equals the paid-in capital. Of the remainder plus undistributed earnings in prior years or of distributable earnings resulting from this year's loss plus undistributed earnings in prior years, special reserve shall be set aside or reversed according to laws or the competent authority. The remainder surplus may be retained for business needs or otherwise distributed by the following principle:
(1) 1% ~ 2% as remuneration to directors and supervisors;
(2) 10 ~ 15% as bonus to employees; and
(3) the remainder thereafter as dividends to stockholders where not less than 10% of the total dividends distributed shall be in the form of cash.
2. Basis for estimating the amount of employee bonuses and remuneration to directors/supervisors, basis for calculating the number of shares to be distributed as stock bonuses, and the accounting treatment of the discrepancy, if any, between the actual distributed amount and the estimated amount, for the current period: The Company posted loss in 2013 and does not plan to distribute earnings for the year. Hence employee bonus and remuneration to directors/supervisors were not estimated.
3. Information on planned employee bonus as approved by the Board of Directors Not applicable for the Company posts loss in 2013 and does not plan to distribute earnings for the year.
4. Information on actual distribution of employee bonus and remuneration to directors and supervisors in the previous year Not applicable for the Company posts loss in 2012 and does not plan to distribute earnings for the year.
3.9 Stock buyback:
The Company did not buy back stocks in the past year and up to the date of report.
4. Issuance of corporate bonds: None.
5. Issuance of preferred stocks: None.
6. Issuance of global depositary receipts (GDR) March 31, 2014
Date of issue February 5, 1999 Place of issue and trading Luxemburg Total amount US$333,502,000
22
Offer price per unit February 5, 1999 - initial issue US$11.45 November 18, 1999 - additional issue US$16.70
Total units issued
30,336,980 February 5, 1999 - initial issue 14,600,000 November 18, 1999 - additional issue 9,960,000 July 7, 2000 - additional issue for the distribution of free stock dividends
2,108,252
June 1, 2001 additional issue for the distribution of free stock dividends
3,668,728
Source of underlying security Issuance of new shares for cash capital increase Underlying security 10 common shares of Winbond
Rights and obligations of GDR holder
Dividends, interest distribution and relevant taxes of the underlying shares represented by the GDRs shall be governed by the laws of the Republic of China, the Depository Agreement and the Custodial Agreement.
Trustee None. Depository bank Bank of New York Mellon Corp. Custodial bank Bank International Commercial Bank Balance outstanding (units) 13,354 Fees incurred in issuance and the outstanding period of the GDRs
Borne by Winbond Electronics Corp.
Covenants of depository agreement and custodial agreement
The deposit, redemption and delivery of the underlying shares represented by the GDRs and the re-issuance of the GDRs shall be governed by the laws of the Republic of China, Depository Agreement and the Custodial Agreement.
Unit price (US$)
2013
High 3.28 Low 1.69
Average 2.46
up to March 31, 2014
High 2.86 Low 2.44
Average 2.66
23
7. Exercise of employee stock option plan (ESOP) (1) Employee stock options outstanding and impact on the stockholders’ equity
March 31, 2014
Tranche of ESOP First issue of Tranche 5
Second issue of Tranche 5
Third issue of Tranche 5
Fourth issue of Tranche 5
Date of approval by competent authorities September 5, 2008 September 5, 2008 September 5, 2008 September 5, 2008
Date of issue October 29, 2008 February 9, 2009 April 29, 2009 August 5, 2009
Units granted 45,764,000 614,000 77,000 894,000
Units granted to total shares issued and outstanding (%) (Note 1)
1.24% 0.02% 0.00% 0.02%
Duration October 28, 2013 February 8, 2014 April 28, 2014 August 4, 2014
Exercise Issue new shares Issue new shares Issue new shares Issue new shares
Vesting schedule and quota (%)
October 29, 2010:50% October 29, 2011:100%
February 9, 2011:50% February 9, 2012:100%
April 29, 2011:50% April 29, 2012:100%
August 5, 2011:50% August 5, 2012:100%
Units exercised (shares) 37,179,000 607,000 20,000 163,000
Amount exercised (NT$) $112,280,580 $1,936,330 $111,400 $1,052,980
Units unexercised (shares) (Note 2)
0 0 12,000 504,000
Exercise price for unexercised units (NTD)
$3.02 $3.19 $5.57 $6.46
Units unexercised to total outstanding shares (%)
0.00% 0.00% 0.00% 0. 01%
Impact on shareholders
Give employees the incentive to stay on and build employee loyalty to work towards the best interest of the Company and shareholders.
Note 1: "Total shares issued and outstanding" are based on 3,694,466,193 common shares of the Company issued as of March 31, 2014.
Note 2: “Units unexercised” exclude expired employee stock options.
24
(2) N
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25
Business Overview A. Business Activities
a. Business Scope 1. Major business activities
The Company's main business consists of the research and development, production and sale of various integrated circuit products.
2. Revenue breakdown by product
The Company's core products include DRAM and Code Storage Flash Memory. Logic ICs are the principal products of Nuvoton Technology Corporation ("Nuvoton Technology"), a major subsidiary of the Company. 2013 revenue breakdown by product (as percentages of consolidated sales revenue):
Unit: NT$1,000 Product Sales revenue %
DRAM product income 15,644,586 47.21
Flash memory product income 10,712,265 32.33
Logic IC revenue 6,776,926 20.45
Other 1,671 0.01
Sales revenue - Consolidated financial statements 33,135,448 100.00
3. Description of product lines
3.1 DRAM products
The Company's DRAM products consist of:
Specialty DRAM
Mobile DRAM
The Company's Specialty DRAM is chiefly used in the 3C, auto electronics, industrial electronics, and medical electronics fields. Specifications include 16Mb-2Gb Specialty DRAM and KGD (Known Good Die).
Mobile DRAM products include 32Mb-256Mb pseudo SRAM and 128Mb-2Gb Low-Power DRAM. They are chiefly used in cell phones, mobile devices, wearable devices, consumer electronics products, and network communications products.
3.2 Code Storage Flash Memory products
The Company's Code Storage Flash Memory is widely used in PCs and peripherals (including hard disc drives, optical disc drives, printers and monitors), mobile handheld devices and their peripheral modules, network communications products (wireless networks, modems) and consumer electronics (set-top boxes, TVs, DVD players, and monitors, etc.), industrial electronics, automotive electronics, medical electronics, and household appliance modules, etc., and specifications range from 512Kb-1Gb. Our product quality has improved steadily over many years, and our products have received the approval of top-notch customers in many application areas. Winbond is currently the world's largest serial flash vendor.
26
4. New products and services under development
Product lines New products under development
DRAM
With respect to Specialty DRAM, we continue to develop mid and low density Specialty DRAM products deployed mainly in consumer electronics, PC peripherals, networking products, automotive electronics, industrial electronics and medical electronic devices. In the area of mobile DRAM, we also continue to develop medium- and low-density as well as low power consumption mobile DRAM products used principally in cell phones, e-book readers, 3G/4G portable data cards, tablets, MP3/PMP, portable industrial electronic products, and portable medical electronic equipment.
Flash memory products
For flash memory products, we employ advanced process technologies to produce high-density, high-performance and low power consumption products, providing a complete range of Code Storage Flash product line to meet the requirements of the following applications: networking, wearable devices, mobile devices and peripheral modules, computer and peripheral modules, consumer electronics, automotive electronics and industrial control products.
b. Industry overview 1. Industry current trends and outlook
1.1 Current trends and outlook for the DRAM industry
(1) Specialty DRAM
Demand perspective:
In 2014, DRAM growth will be driven mainly by smart devices, including smartphones, tablets, smart TVs, wearable devices and smart automobiles. In particular, it is possible that smartphones and tablets will achieve annual growth of 20%. The penetration rate of smart TVs will continue to rise. As smart TV devices equipped with Android and iOS operating systems begin to enter the market and 4K2K panels become more popular, the DRAM content of smart TVs will increase substantially to 512Mb or more. Following the launch of iWatch, the wearable device will have the opportunity to undergo significant growth. The new generation of consoles, PS4 and Xbox One, now carry 8GB of DRAM content. Thus, launch of new model game consoles will have a multiplier effect of sales volume and DRAM content. Smart applications will also be introduced to automobiles in the future so DRAM content per vehicle is also expected to increase. The medical electronic device market will continue to benefit from an aging population, with rising demand. In the area of industrial electronics, there will be significant increase in demand for industrial robots, 3D copy machines and high-resolution electronic billboards. All these applications will contribute to a substantial increase in demand for DRAM in the industrial sector.
Supply perspective:
In 2014, continuing on from 2013's boom, the DRAM industry will experience another good year. After the fire in SK Hynix's Wuxi factory in September 2013, the supply side was tight. Commodity DRAM prices rose resulted in Specialty DRAM price to increase accordingly. With DRAM prices stayed at returning to reasonable levels, it is expected that 2014 will remain a profitable year for DRAM makers.
(2) Mobile DRAM
Demand perspective:
Global smartphone penetration (in terms of sales volume) will increase from 57% in 2013 to 68% in 2014. With the market penetration rate rising and the number of cell phone users increasing globally, smartphone sales volume will possibly grow to 1.4 billion, an annual growth rate of 20% (brand + white-box + OEM). In 2014, global sales of tablet devices (brand + white-box) could grow 20% to 290 million units. The launch of Office Mobile and the ModAP (AP+LTE Modem) trend as well as OS upgrades (iOS/Android), the differentiation and competitive specifications of mobile phone features will result in even higher mobile DRAM content in smartphones and tablets. The multiplier effect of increased sales volume and memory content will push demand for mobile DRAM. In 2014, mobile DRAM is expected to exceed PC DRAM (commodity + server) as a percentage of overall DRAM for the first time, and the trend will reduce commodity DRAM for PCs.
27
Supply perspective:
Due to the rapid growth of demand for mobile DRAM and decline of the PC DRAM sector, in 2014 the top three DRAM makers will divert PC DRAM production capacity to the manufacturing of mobile DRAM in order to meet demand from cell phone and tablet segments. As mobile DRAM is closer to ASIC in design, DRAM makers normally manufacture mobile DRAM against orders (forecasts), which keeps balanced supply and demand in long-term. Consequently, mobile DRAM prices fluctuate less than those of commodity DRAM.
1.2 Current trends and outlook of the Flash Memory industry
Flash Memory produced by the Company consists of Serial Flash, which is used in PCs and their peripherals, network communications, consumer electronics, mobile devices and peripheral modules, industrial electronics, auto electronics, and medical electronics, etc. NOR Flash shipments exceeded 1.7 billion in 2012, made it the leading serial flash IC’s worldwide. Winbond's Serial Flash achieved 33% market share worldwide in 2013. Looking into to 2014, growth momentum will come from increased functionalities of end products and the introduction of new platforms, as well as the rapid growth of automotive electronics. Apart from increasing demand for flash memory content and the widespread deployment of 1.8V Serial Flash in mobile devices and peripheral modules, the introduction of 3V/1.8V1Gb high-density products in 2014 will be an important driver of growth in terms of both revenue and profitability.
2. Relationships of the industry's supply chain
Looking at the industry's supply chain, the upstream consists mainly raw material suppliers, including silicon wafers. Wafers are subject to a series of manufacturing processes, including front end processes such as lithography, hi-temperature processing, chemical vapor deposition, ion implantation, etching, chemical machinery polishing and grinding, and process control and monitoring, and back end processes such as packaging and testing. Because the types of applications are diverse, types of down-stream customers are likewise varied consisting of suppliers of PCs and peripherals, printers, hard disks, displays, cell phones, network communications equipment, and set-top boxes.
3. Product trends and competition
3.1 DRAM
In the area of Specialty DRAM, we began mass production of 4xnm products in 2013, and will keep the Fab-Lite strategy in 2014 by outsourcing when short of capacity. We use advanced process technology at DRAM fabs to develop medium and low density products, which enables us to have stable operating performance.
In mobile DRAM, we developed new 4xnm 256Mb-2Gb LP DDR2 and 1Gb LP DDR products in 2013.
3.2 Flash Memory
We target the full range of serial flash, and continue to expand Code Storage Flash products, giving us complete product line. We currently offer comprehensive product lines for the Serial Flash series (512Kb to 512Mb), including both high-speed and low-voltage products, as well as medium and low density Parallel Flash (32Mb-256Mb) products. In 2012, we completed migration to advanced 58nm processing and successfully accepted by customers. In 2012, Winbond became the world's largest serial flash supplier, and in 2013 the Company's global market share reached 33%. Winbond will continue to expand its market share in consumer electronics, including LCD TVs and set-top boxes, as well as in mobile devices, peripheral modules and network communications. In 2013, new Code Storage Flash, which offers additional features, higher speed, high density and low voltage requirements. In 2014, we will continue to develop and introduce value-added serial flash products. These new products are manifestations of our continued pursuit of product competitiveness, expanding new market shares and development of new customers.
28
c. Overview of Technology and R&D 1. R&D expenses (including those of the subsidiary Nuvoton Technology) in the previous year and in the current year up to the annual report publication date:
Unit: NT$1,000 Item 2013 up to March 31, 2014 R&D Expenses 4,190,576 1,214,538
2. Successfully developed technologies and products
2.1 Product development
R&D Achievements Future R&D Plan DRAM Low to medium density 4xnm Mobile RAM
Low to medium density 4xnm Specialty DRAM Outsourced medium and high density 3xnm Mobile
DRAM Outsourced medium and high density 3xnm Specialty
DRAM Development of 3xnm process technology
Flash memory products
Optimized volume production for 90nm process for 3V/1.8V Serial Flash,
58nm 3V 256Mb Parallel Flash, 3V PRMC and 1.8V 128Mb Serial Flash More value-added functions; high speed, and low
voltage products 46nm 1Gb code storage flash memory
We are using more advanced process technologies for better cost competitiveness; providing lower voltage and greater customization for diversified applications; and developing various specialty hi-speed flash products. 1Gb-2Gb 46nm process new products Serial flash with optimized 58nm process, higher
performance and lower power consumption Development of code storage flash with 3xnm process
2.2 Development of manufacturing processes
In 2014, the Company's Specialty DRAM and Mobile DRAM will employ advanced 3xnm process technology at outsourced fab to develop new products. We will also develop our own 3xnm process technology to meet customers Specialty DRAM requirements. In 2013, apart from some low-density products which will continue to be made using 12" 90nm process technology, mass production of our medium-density Flash Memory products will shift to 58nm process technology. We will continue to be the world's leading Serial Flash producer, while developing more advanced 46nm Flash process technology, and new high-performance Code Storage Flash products.
d. Business plan - long-term and short-term
As the world's leading vendor of niche memory, Winbond focuses on the medium- and low-density niche memory IC’s. Winbond offers outstanding product quality, highly competitive, innovative products, good customer service, and sells to global tier-1 customers. The following is a summary of our long- and short-term sales plans:
Our DRAM product lines will focus on high-performance and low-power-consumption, we will supply 16Mb to 4Gb Specialty DRAM, 128Mb to 2Gb Low-Power DRAM, and 32Mb to 256Mb Pseudo SRAM. We will consolidate our presence in niche markets such as KGD (Known Good Die), auto electronics, industrial products, and MCP and SiP via comprehensive product solutions and long-term service. At the same time, we keep Fab-Lite strategy, take advantage of advanced process technology of DRAM to provide comprehensive product solutions.
As far as our Code Storage Flash Memory product line is concerned, we are already the world's leading supplier of Serial Flash. Serial Flash is mainly used in PCs and peripherals, consumer electronics, mobile devices, and peripheral module products, and we expand into industrial electronics, auto electronics, and medical electronics. We have received certification from leading international manufacturers, and will be looking to provide even higher density solutions in the future.
The Company's long-term development goals include continuing to expand into the high-margin applications fields, cultivating global leading brand customers, and pursuing stable profits.
29
B. Market, production and sales a. Market analysis 1. Consolidated sales revenue including Winbond’s subsidiaries by region for 2013:
Unit: NT$1,000 Region Sales Percentage
Asia 31,265,988 94.36%
America 1,143,967 3.45%
Europe 607,162 1.83%
Other 118,331 0.36%
Total 33,135,448 100.00%
2. Market share and outlook
2.1 DRAM
In 2014, we plan to outsource 3xnm products and enter into mobile device, wearable device, automotive electronics, industrial electronics and medical electronics markets.
In the area of Specialty DRAM, apart from outsourcing of 3xnm process products, we plan to further optimize our product applications, and achieve a stable gross profit margin.
In Mobile DRAM, we will to expand into medium- and high-density Mobile DRAM applications market in 2014, boost our shipment volume and market share.
2.2 Flash Memory
Flash products are move toward high-density, the Mb of each system continue to increase. Thanks also to the low pin count and cost effectiveness advantages of Serial Flash, applications will continue to grow, and the market will expand steadily.
After years of market expansion efforts, Winbond has become the leading supplier of serial flash memory, Winbond shipped close to 1 billion units, achieving a 35% global market share in 2010 and became the world's leading producer of serial flash memory in the fourth quarter of 2010. Development of the 58nm process was completed in fourth quarter of 2011, with mass production migrating to the 58nm process in 2012. In 2013, Winbond maintained its position as the world's No. 1 producer of Serial Flash memory.
The Company has positioned as a leading Code Storage Flash memory supplier with comprehensive high performance and low power consumption product lines. In addition to our existing flash products, Winbond has introduced higher density (1Gb-4Gb), higher speed (Double Transfer Rate) and advanced process technologies in order to satisfy the rapidly growing wearable device, mobile device, peripheral module, Internet of Things (IoE), automotive electronics and industrial control markets.
3. Competitive edge, outlook of long-term growth
3.1 DRAM
(1) Competitive edges
In 2014, we outsourced 3xnm product production, developed highly-competitive DRAM products, and further optimized product applications, while continuing to enhance our core competency.
(2) Impacts may affect our development
Positive impact: The fire of SK Hynix's Wuxi factory resulted in DRAM prices hike. The smart device will increase the content of DRAM and the demand. In 2014 Mobile DRAM will exceed commodity DRAM in terms of overall DRAM demand. The "non-commodity DRAM" trend is expected to reduce DRAM price volatility.
Industry consolidation will result in a rational market.
30
Economic recovery in Europe and the U.S. will help to improve demand for end products.
Negative impact: Given improved cash flow from operating activities, DRAM manufacturers may increase capital spending and supply.
The withdrawal of QE in the U.S. may cause capital outflows in emerging markets, demand for and products may therefore be affected.
In 2014, China's local government debt will enter a peak .It may cause a liquidity risk as well as economy is slowdown. China is the world's largest market for smartphones, PCs and TVs, and therefore risks associated with demand for end products exist.
(3) Response measures
We will actively enter the mobile device, auto electronics, industrial electronics, and medical electronics equipment markets, and further optimize our applications fields.
Continued migration into advanced process technologies. Strengthen cash management in response to various possible risks
3.2 Flash Memory
(1) Competitive edges
The Company focuses on the medium/low density Flash Memory market, and offers a complete Serial Flash product range (512Kb-512Mb). We have achieved mass production with the 58nm process since 2011. We also develop high-density Code Storage Flash products. In 2014 the Company introduced 46nm process to produce 1Gb flash. Winbond provides more comprehensive Code Storage Flash memory products. Winbond has cultivated the Flash Memory market for many years, and has a 33% share of the global Serial Flash market (IHS March 2014 report). Our shares of the 2G/2.5G cell phone market, mobile device and peripheral module, consumer electronics and network communications markets continue to increase, and we move into the auto electronics and medical electronics markets, while pass qualifications from leading manufacturers.
(2) Impacts may affect our development
Positive impact: Winbond moved NOR Flash product line to 12" fab in 2010. Serial Flash shipments approached 1.9 billion units in 2013 with quality and competitive cost.
We offer a comprehensive Flash product line, and continue mass production of 3V high speed Quad I/O Serial Flash, 2.5V/1.8V low-voltage Serial Flash and MCP products, 3V high-performance high-density Parallel Flash, and 58nm process products. We have also introduced the even faster QPI and Double Transfer Rate serial flash products.
In 2014 we employ 46nm process to manufacture high-density products and continue to introduce Code Storage flash products based on both parallel and serial interfaces, which will make our product portfolio even more comprehensive.
Our Flash products have a market share of over 40% in PCs and peripherals. Our market shares in consumer electronics, network communications, mobile devices and peripheral module products also increased, and we have successfully entered into the industrial, auto, and medical electronics applications markets.
We are working together with the world's leading chip vendors to determine specifications for the next generation of Serial Flash.
Our 12" wafer plant enables us to respond swiftly to changes in market demand. We offer both Flash and DRAM product lines, providing customers with the convenience of one-stop shopping.
Negative impact: The excess production capacity needs to be gradually digested.
(3) Response measures
We have introduced the 58nm process products with value-adding functions, and produce high-density, high-speed, low-voltage products meeting customers' various needs. We are continuing to develop advanced process technology, and our high-density Code Storage Flash will continue to boost our competitive advantage.
31
We will adjust our product lineup in order to develop the high profit margin, high density Code Storage Flash market.
We will continue to increase our share at cell phone, mobile device and peripheral module, network communications, TV, set-top box, and auto electronics markets.
b. Major applications of products and production processes 1. Major applications of core products
Products DescriptionDRAM 1. Low to medium density SDR/DDR
Specialty DRAM; medium to high density DDR2/DDR3 Specialty DRAM
2. Pseudo SRAM, Low-Power DRAM 3. High-density GDDR3 Graphic DRAM
1. Used in computer peripherals and consumer electronic products (2) Used in handheld mobile devices and consumer electronic products (3) Used in electronic products with graphics and image processing functions.
Flash memory products
Medium and low density flash memory and high-density Code Storage Flash products.
Used in PCs and peripherals, consumer electronics and mobile handheld devices and peripheral module products
2 . Production processes
The integrated circuit manufacturing process consists of five processes: IC design, mask production, wafer manufacturing, packaging, and testing. See the flowchart below:
c. Supply of major raw materials Winbond's major raw materials and parts include silicon wafers, chemicals used in processes, photoresist chemicals, special gases, etc. The suppliers of these materials are located in the US, Japan, Germany, Korea, Malaysia, and Taiwan. All items have approved alternative suppliers, ensuring stable source, price, supply, and quality. Outsourced items include testing and packaging; we have various approved suppliers for each item, which ensures us considerable lead time, service quality.
d. Names of suppliers who accounted for more than 10% of the procurement of the Company
in the last two years, and the ratio to total purchases
Define Spec
IC design & layout design
System design & software design
Mask Making
Wafer Fabrication
Wafer C.P. test
IC Packaging
Final Testing
32
In 2012 and 2013 no single supplier accounted for more than 10% of the Company's total procurement as reported in the consolidated financial statements.
e. Names of customers who accounted for more than 10% of the sales in the last two years,
and sales as a percentage of total sales In 2012 and 2013 no single customer accounted for more than 10% of the Company's total sales as reported in the consolidated financial statements.
f. Output volume and value during the most recent two years 1. Consolidated production volume and value of the Company and its subsidiary Nuvoton Technology:
Unit: NT$1,000 Year 2013 2012
Core products/Production
capacity/Output
Production capacity (Note 1)
Production volume (Note 2) Value
Production capacity (Note 1)
Production volume (Note 2) Value
Wafer Die Wafer Die DRAM 300mm
wafers382
- 809,659 12,608,576 300mm wafers
431
6 794,735 13,876,201
Flash 1 1,960,777 8,436,944
1 1,753,408 8,545,359
Logic ICs 150mm wafers
480292 614,313 3,855,099
150mm wafers
480288 657,710 4,149,899
Total 293 3,384,749 24,900,619 295 3,205,853 26,571,459N o te 1 : p r od uc t ion c a pa c i ty i s mea su r e d in 1 ,0 0 0 p ie c e s . No te 2 : W a fe r p r od uc t ion v o lu me i s measu r ed in 1 ,0 00 p i eces ; D ie p r od u c t ion vo lu me i s measu r ed on 1 ,0 0 0 u n i t s .
g. Sales volume and value as reported in the Consolidated Financial Statements including its
subsidiary Nuvoton Technology for the most recent two years Unit: NT$1,000
Year 2013 2012
Core Product/
Sales volume
and value
Domestic sales Exports Domestic sales Exports
Sales volume (note) Sales Sales volume (note) Sales Sales volume (note) Sales Sales volume (note) Sales
Wafer Die Wafer Die Wafer Die Wafer Die
DRAM 300mm
wafers
- 210,996 3,865,849 - 600,182 11,778,737 - 195,693 2,910,087 6 613,198 11,894,199
Flash
Products - 343,611 2,031,205 1 1,580,957 8,681,060 - 435,432 2,646,562 - 1,313,888 8,164,606
Logic
ICs
150mm
wafers 209 219,963 2,520,702 83 393,226 4,256,224 214 228,461 2,922,743 70 417,595 4,425,448
Other - - - - - 1,671 - - 60 - - 1,578
Total 209 774,570 8,417,756 84 2,574,365 24,717,692 214 859,586 8,479,452 76 2,344,681 24,485,831
Note: Wafer sa l es volu me are measured in 1 ,000 p iec es ; D ie ou t pu t v o lu me is mea su r ed on 1 ,00 0 un i ts .
33
C. Employees The following is information related to the employees of the Company and its subsidiaries:
Year 2012 2013 up to March 31, 2014
Number of employees
Technical personnel (engineers)
2,146 2,191 2,220
Administration and sales staff
780 791 792
Assistant to technicians
699 713 723
Total 3,625 3,695 3,735Average age 37.26 38.03 38.19 Average years of service 8.27 8.83 8.91
Education background (%)
Ph.D. 0.98 0.99 1.05Master's 33.49 33.63 33.46University/College 49.23 48.83 48.9High school 15.68 15.88 15.83Below high school 0.62 0.67 0.76
D. Spending on environmental protections
a. Losses due to environmental pollution (including compensation) and total fines during the most recent year and up to the annual report publication date: None.
b. Preventive measures taken to ensure a safe working environment and maintain employees' personal safety
The Company upholds the spirit of the ISO 14001 environmental management system, and pledges to provide and maintain a working environment better than that required by law and industry practice. We also strive to comply with international environmental protection standards, and seek to eliminate possible environmental risks through continuous improvement. As a member of the global village, in line with the principle of environmentally-friendly design, we strive to develop green products and energy-saving, low-pollution products that will fulfill our vision of sustainable corporate development. Throughout production operations, we rely on process optimization to reduce consumption of water and power, use of raw materials and parts, and pollution emissions for each output unit. In accordance with law, we have obtained all required environmental protection permits and licenses, and have established appropriate dedicated management positions. Adequate recycling systems for process waste water, exhaust gases, and solid wastes were incorporated during an early stage of the plant design process, enabling us to reduce resource losses and pollutant discharges. Thanks to our dedication to environmental protection, we have received honors such as the Green Business Award, National Outstanding Industrial Waste Reduction Factory and Contributing Group Award, and Industry Outstanding Voluntary Greenhouse Gas Emission Reduction Factory Award from agencies including the EPA and MOEA. Furthermore, we have also undertaken the health, safety, and risk management tasks prescribed in OHSAS 18001 and TOSHMS, and integrated an environmental, health and safety management system in order to enhance our overall environmental management performance. We have received many honors over the years, including the Council of Labor Affairs' Friendly Workplace Award and the Central Taiwan Science Park Administration's Superior Labor Health, Safety Enterprise Award and Health Promotion Administration's Outstanding Healthy Workplace Award. Looking to the future, we will continue to strengthen our spirit of corporate sustainability, while responding to increasing environmental consciousness by engaging in appropriate environmental protection expenditure when needed, employing innovative technologies to improve the efficiency of pollution control equipment, and striving to minimize the environmental impact of production activities.
34
E. Employer-employee relations a. Employee welfare, training and education, retirement system, and implementation
1. Employee welfare
The Company has established an "Employee Welfare Committee," "retirement reserve fund supervisory committee," and "environmental, health, safety, and risk management committee," and employees can rely on channels such as employer-employee conferences and improvement suggestion measures to communicate with management.
2. Employee training and education
The Company has established a complete, diversified learning environment in accordance with the Education and Training Management Procedures, and has trained several dozen in-house lecturers in line with the ideal of "respect for the individual and cultivation of professionalism." A total of 807 training classes were held in 2013, and were attended for a total of 44,960 person-hours. Employees took part in training a total of 21,761 person-times, training expenditure totaled NT$14 million, and the average training cost per employee was NT$6,835. The Company's main learning channels included the following: (1) Classroom classes: In accordance with demand, we formulate professional, QC, work safety, management, and
general education and training classes on an annual basis, and hold classes in accordance with plans; employees may sign up to participate in these classes. The following is a summary of the various types of classes: A. We offer management development training activities in accordance with our management
functions blueprint; these activities include high-level, mid-level, and basic-level new manager training and other elective classes.
B. We offer common, QC, and work safety training in accordance with the Company's quality policy, government laws, and overall demand. Examples of these training classes include working methods, statistical analysis methods, and emergency response safety training classes.
C. Professional training is offered when our units have need of specific professional functions. Examples include R&D design classes, process testing classes, and international seminar sharing sessions.
D. New employee training classes are geared to getting newcomers quickly up to speed, and include the employment system, corporate culture, and work adaptation classes.
E. We conduct basic training assessments for direct personnel, including new employees, as well as continuing advanced professional skills assessments.
(2) Online classes: The Company’s training website provides information on various online classes. To ensure that learning is not limited to certain times or places, employees can access lecture notes from various types of classes online at any time. We offer the following types of online classes: Classes on the Company environment and management system; classes on laws, regulations, and codes of conduct, and basic process training; language classes and other elective classes.
(3) Lifelong learning: To encourage employers' continuing development and personal growth, in accordance with the In-service Continuing Education Regulations, we recommend that employees study for master's or Ph.D. degrees at Ministry of Education-accredited domestic universities or approved foreign universities, and the Company will subsidize relevant costs. We also provide employees with subsidies for enhancement and work-related skills training provided by an external or foreign organization.
3. Retirement system
The Company has drafted retirement regulations in line with the requirements of the Labor Standards Law and Labor Pension Act, has established a "retirement reserve fund supervisory committee," regularly monitors disbursements from the retirement reserve fund, and bears responsibility for the review of retirement applications.
b. Licenses held by personnel involved in transparency of financial information:
International certified internal auditor (CIA): 2 persons.
35
International certification in control self-assessor (CCSA): 1 person. International certified information systems auditor (CISA): 1 person.
c. Employer-employee harmony and employee rights protection
1. The Company has drafted "employer-employee conference implementation regulations," and regularly holds employer-employee conferences to discuss and negotiate issues of importance. Items in conference resolutions must be dealt with fully by relevant units within a limited time.
2. The Company has drafted "internal appeal regulations" intended to maintain employees' lawful rights and interests and help eliminate illegal and unreasonable treatment of employees, ensuring that employees enjoy a legally-compliant, reasonable, and fair working environment.
d. Losses due to employer-employee disputes during the most recent year and up to the annual
report publication date: None
e. Estimated losses due to current and possible future employer-employee disputes and response measures The Company holds regular employer-employee conferences to promote the exchange of views between employer-employee. Both sides have consistently maintained a state of consensus since the founding of the Company, and no disputes have occurred.
f. Employee Conduct Code The Company has drafted comprehensive rules of conduct to provide employees with standards for work ethics and conduct, protection of intellectual property rights/business secrets, and work order. These rules, which are described below, can be viewed by employees via the document management system, announcements on relevant internal websites, or bulletin board messages:
1. Work ethics and conduct (1) Work rules: The Company's regulations contain dedicated service rules and general principles for prevention
of sexual harassment. (2) Workplace sexual harassment prevention regulations: In accordance with relevant government laws and
regulations, the Company has explicitly drafted workplace sexual harassment prevention regulations and established a dedicated awareness website, and has adopted appropriate prevention, correction, and punishment measures.
(3) Employment contracts: Specify the requirement that employees faithfully perform their duties. (4) Human resource management conduct guidelines: In accordance with relevant government laws and
regulations and company regulations, we have drafted "human resource management conduct guidelines" classes on such subjects as eliminating discrimination, fair treatment, and prohibition of involuntary labor. To ensure that everyone can work under fair and lawful conditions, all Company employees receive extensive awareness of these guidelines.
2. Rules for protection of intellectual property rights and maintenance of business secrets (1) Work rules: The Company's regulations contain general principles for maintenance of the confidentiality of
business secrets. (2) Employment contracts: Employment contracts specify requirements concerning confidentiality duties, document ownership, secret information, ownership of intellectual or industrial property, and non-compete terms.
3. Work orders (1) Division of responsibilities: The "guidelines for responsibility stratification" specify the division of
responsibilities, and serve to guide the performance of on-the-job duties. (2) Duties of individual units: The mission of each unit is clearly defined. (3) Restrictions on the hiring of relatives: The "restrictions on the hiring of relatives" specify that relatives should
not be hired to fill certain positions. This is intended to ensure that the effectiveness and efficiency of the Company's internal management is not compromised unnecessarily by family relationships between employees.
(4) Attendance management A. "Request for leave regulations": These regulations explicitly state the Company's leave request principles
and regulations.
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B. "Domestic travel regulations" and "foreign travel regulations": To facilitate personnel management and activate substitute mechanisms, the Company has established operating procedures for travel applications; To ensure that personnel taking business trips accomplish their missions, such personnel shall be given appropriate travel subsidies.
C. "Overtime regulations": These regulations explicitly specify this Company's overtime principles and standards.
D. "Regulations concerning work stoppages due to natural disasters and major accidents": These regulations explicitly state standards for work stoppages in the event of natural disasters and major accidents.
(5) Performance management A. "Performance management and evaluation regulations": These regulations seek to provide an understanding
of employees' strengths and weaknesses, and help them to develop their personal abilities, by assessing the degree to which employees have achieved their personal goals; Employees' contributions to the organization are determined on the basis of mutual comparisons between peers.
B. "Performance guidance operating regulations": Performance guidance work seeks to enhance the productivity of the Company as a whole.
(6) Reward and penalty regulations The "Reward and penalty handling regulations" prescribe appropriate rewards or punishments for those employees who display superior performance or violate regulations, and have the intent of encouraging and maintaining on-the-job morale and order.
(7) Manpower development A. "In-service continuing education regulations": These regulations establish channels for continuing
education, and have a goal of accumulating the human resources needed for the Company's long-term operations.
B. "Regulations concerning applications to participate in academic groups and organizations": Participation in academic groups and organizations can promote the diffusion of knowledge and experience, and help employees to find out the latest information in their professional fields.
C. "Conference participation and management regulations": Participation in international conferences enables employees to acquire the newest information in their professional fields.
(8) Communication channels A. "Employer-employee conference implementation regulations": These regulations enshrine the consensus
and shared welfare of employer and employees, promote teamwork for the sake of corporate development and employee welfare, establish an effective two-way communication system between employer and employees, put an end to employer-employee disputes, and ensure maximal productivity.
B. "Corporate internal appeal regulations": These regulations provide employees with channels to express their views and make appeals directly to the Company, maintain employees' rights and interests, and encourage communication of views.
C. "Employee suggestion regulations": Employee's ideas and creative thinking can help the Company to continue to improve. These regulations provide for rewards for employees who submit proposals concerning the Company's operations, and are intended to encourage employees to contribute their intelligence and experience.
37
F. Important contracts
Nature of contract Contracting parties
Year and month of contract start and end
Content Restriction clauses
Technical cooperation Qimonda AG of Germany 2007.06-2014.12 Licensing of 75nm and 58nm DRAM technology and
reserving specific capacity (Note 1) None.
Technical cooperation Qimonda AG of Germany 2008.04-2015.12 Licensing of 65nm DRAM technology and reserving
specific capacity (Note 1) None.
Syndicated loan
11 banks in the consortium, including CTBC Bank 2008.06-2013.06 NT$7.7 billion syndicated loan for the 12-inch fab None.
Technical cooperation Qimonda AG of Germany 2009.08-permanent
(Note 2)
Licensing of graphics DRAM process technology and equipment purchase, expanded licensing for 90-65nm process technology, and settlement of insolvency procedure
None.
Technical cooperation Qimonda AG of Germany 2010.04-permanent
(Note 2)Licensing of 45 nm and 46 nm Buried Wordline DRAM processes and equipment purchase None.
Syndicated loan
16 banks in the consortium, including Bank of Taiwan. 2010.05-2015.05 NT$7 billion syndicated loan for working capital and
12-inch fab None.
Syndicated loan
17 banks in the consortium, including Bank of Taiwan. 2011.09-2016.09 NT$7 billion syndicated loan for the 12-inch fab None.
Syndicated loan
10 banks in the consortium, including CTBC Bank 2012.11-2015.11 NT$5 billion syndicated loan for operating funds and
payment of existing financial liabilities None.
Purchase of machinery
Powerchip Semiconductor Corp. 2012.12- permanent Acquisition of machinery and equipment needed for
operations. None.
Equipment leasing
Powerchip Semiconductor Corp.
December 2013 -
December 2016
The Company acquired foundry service production capacity (both parties entered into separate service agreements.)
None.
Note 1: Winbond and Qimonda AG entered into an agreement in August 2009 to terminate the prior agreement on reserving specific capacity.
Note 2: The licensing of 90-45nm process technologies from Qimonda AG becomes permanent after Winbond pays off royalties as agreed.
G. Financial difficulties and corporate events encountered by the Company and affiliates in the
past year and up to the date of report that have material impact on the financial status of the Company: None
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Financial Overview 1. Condensed balance sheets, statements of comprehensive income, names of auditors, and audit opinions (2009-2013)
1.1 Condensed consolidated balance sheet and statements of comprehensive income including its subsidiaries
1.1.1 Condensed consolidated balance sheet (2009 - 2013) Unit: NT$1,000
Item\Year Based on Financial Accounting Standards in Taiwan Based on International Financial Accounting Standards (IFRSs)
(Note 1) 2009 2010 2011 2012 2012 2013
Current assets 16,752,150 19,951,177 19,214,023 20,287,621 20,065,265 22,408,255
Funds andlong-term investments
Financial assets available for sale 44,375 218,251 353,997 64,530 64,530 281,070
Held-to-maturity investment - - - - - 97,770
Financial assets carried atcost 1,443,653 1,364,104 1,245,403 604,185 678,588 656,676
Investment accounted for using equity method 60,873 86,346 65,092 1,727,128 1,726,533 2,407,094
Property, plant and equipment (fixed assets) 43,048,732 39,417,222 35,149,539 29,021,114 29,021,114 24,804,025 Intangible assets 1,626,395 1,128,628 639,191 183,310 183,310 193,947 Other assets Other non-current assets 4,460,894 4,409,922 4,257,404 4,331,249 4,536,698 4,829,841 Total Assets 67,437,072 66,575,650 60,924,649 56,219,137 56,276,038 55,678,678
Current liabilities Basic 17,469,388 17,396,527 15,970,810 14,373,014 14,443,119 12,501,610 Diluted 17,469,388 17,396,527 15,970,810 14,373,014 14,443,119 12,501,610
Non-current liabilitLong-term liabilities 15,116,660 10,124,990 7,966,663 6,550,000 6,550,000 6,076,193 Other liabilities 435,368 487,459 562,093 638,157 1,167,384 1,212,773
Total liabilities Basic 33,021,416 28,008,976 24,499,566 21,561,171 22,160,503 19,790,576 Diluted 33,021,416 28,008,976 24,499,566 21,561,171 22,160,503 19,790,576
Equity attributable to owners of parent 33,854,037 37,441,137 35,355,500 33,472,439 33,006,052 34,813,920 Paid-in capital 36,564,972 36,693,502 36,802,302 36,856,012 36,856,012 36,940,232 Capital surplus 13,181,004 2,303,944 2,232,519 2,199,126 2,177,342 2,148,359 Accumulated loss
Basic (15,977,842) (1,640,149) (2,483,440) (4,335,976) (4,430,750) (4,187,772) Diluted (15,977,842) (1,640,149) (2,483,440) (4,335,976) (4,430,750) (4,187,772)
Other interests
Unrealized gain (loss) onfinancial instruments (254,377) (51,936) (1,449,394) (1,408,417) (1,408,417) 79,055
Exchange differences arising on translation of foreign currency financial statements (cumulative translation adjustment)
446,667 242,163 359,900 268,081 (81,748) (59,567)
Treasury stock (106,387) (106,387) (106,387) (106,387) (106,387) (106,387) Non-controlling interests (minority interests) 561,619 1,125,537 1,069,583 1,185,527 1,109,483 1,074,182 Total equity (total stockholders' equity)
Basic 34,415,656 38,566,674 36,425,083 34,657,966 34,115,535 35,888,102
Diluted 34,415,656 38,566,674 36,425,083 34,657,966 34,115,535 35,888,102
Note 1: The Company adopts the FSC-recognized IFRSs in preparing consolidated financial statements starting 2013. Note 2: The financial information for FY 2009 to FY 2013 has been audited and certified by accountants. The 2013 financial report has been approved by the
Board of Directors, but have not yet been submitted to the shareholders’ meeting.
1.1.2 Condensed consolidated statements of income (2009 - 2013) Unit: NT$1,000
Item\Year Based on Financial Accounting Standards in Taiwan Based on International Financial Accounting Standards (IFRSs)
(Note 1) 2009 2010 2011 2012 2012 2013
Sales revenue 26,695,369 39,934,358 34,696,850 32,965,283 32,965,283 33,135,448 Gross profit (loss) (3,779) 9,788,666 6,056,701 5,160,284 5,162,985 6,908,932 Operating income (loss) (5,986,260) 3,707,282 (173,335) (1,279,475) (1,281,362) 765,198 Non-operating income and expense (2,540,059) 192,893 (353,270) (160,596) (168,158) (206,544) Net income (loss) before tax (8,526,319) 3,900,175 (526,605) (1,440,071) (1,449,520) 558,654 Less: income tax expense 60,732 123,509 152,363 175,037 175,037 271,288 Net income (loss) (8,587,051) 3,776,666 (678,968) (1,615,108) (1,624,557) 287,366
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Other comprehensive income (227,705) 1,567,420 Total comprehensive income (1,852,262) 1,854,786 Earnings (loss) per share (NT$) (2.36) 0.97 (0.23) (0.50) (0.51) 0.06 Net income (loss) attributable to owners of parent company
(1,862,883) 206,564 Non-controlling interests 238,326 80,802
Net income (loss) (1,624,557) 287,366 Total comprehensive income attributable to:
Owners of parent company (2,040,687) 1,752,631 Non-controlling interests 188,425 102,155
Total comprehensive income (1,852,262) 1,854,786 Note 1: The Company adopts the FSC-recognized IFRSs in preparing consolidated financial statements starting 2013. Note 2: The financial information for FY 2009 to FY 2013 has been audited and certified by accountants. The 2013 financial report has been approved by the
Board of Directors, but have not yet been submitted to the shareholders’ meeting.
1.2 Condensed standalone balance sheet and statements of comprehensive income 1.2.1 Condensed standalone balance sheet (2009 - 2013)
Unit: NT$1,000
Item\Year Based on Financial Accounting Standards in Taiwan Based on International Financial Accounting Standards (IFRSs)
(Note 1) 2009 2010 2011 2012 2012 2013
Current assets 12,833,810 15,092,984 14,750,125 15,811,873 15,664,873 17,675,258
Funds and long-investments
Financial assets availablesale - - 64,800 64,530 64,530 281,070
Held-to-maturity investm - - - - - 97,770 Financial assets carriedcost 71,887 71,887 61,855 56,481 56,481 40,161
Investment accounted using equity method 4,860,439 5,116,679 4,825,200 5,387,887 5,285,053 6,224,488
Property, plant and equipment (fixed assets) 42,048,999 38,633,321 34,395,036 28,396,274 28,396,274 24,132,155 Intangible assets 1,530,973 1,059,078 548,754 38,430 38,430 52,000
Other assets Other non-current assets 3,816,552 3,815,609 3,725,602 3,803,504 3,933,597 4,352,813
Total Assets 65,162,660 63,789,558 58,371,372 53,558,979 53,439,238 52,855,715
Current liabilities Basic 15,854,667 15,885,703 14,668,433 13,009,438 13,055,594 11,125,426 Diluted 15,854,667 15,885,703 14,668,433 13,009,438 13,055,594 11,125,426
Non-current liabilitLong-term liabilities 15,116,660 10,124,990 7,966,663 6,550,000 6,550,000 6,076,193 Other liabilities 337,296 337,728 380,776 527,102 827,592 840,176
Total liabilities Basic 31,308,623 26,348,421 23,015,872 20,086,540 20,433,186 18,041,795 Diluted 31,308,623 26,348,421 23,015,872 20,086,540 20,433,186 18,041,795
Paid-in capital 36,564,972 36,693,502 36,802,302 36,856,012 36,856,012 36,940,232 Capital surplus 13,181,004 2,303,944 2,232,519 2,199,126 2,177,342 2,148,359
Accumulated loss Basic (15,977,842) (1,640,149) (2,483,440) (4,335,976) (4,430,750) (4,187,772) Diluted (15,977,842) (1,640,149) (2,483,440) (4,335,976) (4,430,750) (4,187,772)
Other interests
Unrealized gain (loss)financial instruments (254,377) (51,936) (1,449,394) (1,408,417) (1,408,417) 79,055
Exchange differences arising on translation of foreign currency financial statements (cumulative translation adjustment)
446,667 242,163 359,900 268,081 (81,748) (59,567)
Treasury stock (106,387) (106,387) (106,387) (106,387) (106,387) (106,387) Total equity (total stockholders' equity)
Basic 33,854,037 37,441,137 35,355,500 33,472,439 33,006,052 34,813,920
Diluted 33,854,037 37,441,137 35,355,500 33,472,439 33,006,052 34,813,920
Note 1: The Company adopts the FSC-recognized IFRSs in preparing financial statements starting 2013. Note 2: The financial information for FY 2009 to FY 2013 has been audited and certified by accountants. The 2013 financial report has been approved by the
Board of Directors, but have not yet been submitted to the shareholders’ meeting.
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1.2.2 Condensed statements of comprehensive income (2009 - 2013)
Unit: NT$1,000
Item\Year Based on Financial Accounting Standards in Taiwan Based on International Financial Accounting Standards (IFRSs)
(Note 1) 2009 2010 2011 2012 2012 2013
Sales revenue 19,532,712 31,855,462 27,214,454 25,418,819 25,418,819 26,165,961 Gross profit (loss) (2,947,940) 6,262,200 3,064,955 1,943,103 1,945,491 3,939,796 Operating income (loss) (5,994,677) 3,158,724 (625,146) (2,027,742) (2,023,662) 344,684 Non-operating income and expense (2,618,262) 392,272 (218,145) 175,206 160,779 (138,120) Net income (loss) before tax (8,612,939) 3,550,996 (843,291) (1,852,536) (1,862,883) 206,564 Less: income tax expense - - - - - - Net income (loss) (8,612,939) 3,550,996 (843,291) (1,852,536) (1,862,883) 206,564 Other comprehensive income (177,804) 1,546,067 Total comprehensive income (2,040,687) 1,752,631 Earnings (loss) per share (NT$) (2.36) 0.97 (0.23) (0.50) (0.51) 0.06
Note 1: The Company adopts the FSC-recognized IFRSs in preparing financial statements starting 2013. Note 2: The financial information for FY 2009 to FY 2013 has been audited and certified by accountants. The 2013 financial report has been approved by the
Board of Directors, but have not yet been submitted to the shareholders’ meeting.
1.3 Names of auditors and audit opinions (2009 – 2013) Year CPA Audit opinion 2009 C. C. Lu and M. Y. Chiu Modified unqualified opinion (Note 1 and Note 2) 2010 C. C. Lu and M. Y. Chiu Modified unqualified opinion (Note 2) 2011 K. T. Hong and K. C. Wu Modified unqualified opinion (Note 2) 2012 K. T. Hong and K. C. Wu Unqualified opinion 2013 K. T. Hong and K. C. Wu Unqualified opinion
Note 1: The CPA issued a modified unqualified opinion in their audit report for the Company's financial statements because the Company adopts the newly revised Statements of Financial Accounting Standard No. 10 - Inventories starting January 1, 2009.
Note 2: The CPA issued a modified unqualified opinion in their 2009-2011 audit reports because the financial statements of some investee companies accounted for using equity method were audited by other CPA.
2. Financial analysis (2009 - 2013)
2.1 Financial analysis of consolidated financial statements including its subsidiaries (2009-2013)
Item\Year Based on Financial Accounting Standards in Taiwan
Based on International Financial Accounting
Standards (IFRSs) (Note 1)
2009 2010 2011 2012 2012 2013
Financial structure
Debt-to-assets ratio (%) 48.96 42.07 40.21 38.35 39.37 35.54 Long-term fund to property, plant and equipment
(fixed assets) ratio (%) 115.06 123.52 126.29 141.99 144.14 174.07
Solvency Current ratio (%) 95.89 114.68 120.30 141.15 138.92 179.24 Quick ratio (%) 62.40 75.22 72.16 81.57 79.66 118.07 Times interest earned - 7.54 - - - 3.15
Operating
ability
Receivables turnover ratio (times) 8.74 9.97 8.05 7.47 7.47 6.86 Average days of collection 41 36 45 48 49 53 Inventory turnover ratio (times) 5.43 5.27 4.21 3.61 3.61 3.47 Payables turnover ratio (times) 7.57 7.25 7.43 6.70 6.70 6.54 Average days of sales 67 69 86 101 101 105 Property, plant and equipment (fixed assets)
turnover ratio (times) 0.57 0.96 0.93 1.02 1.02 1.23
Total assets turnover ratio (times) 0.37 0.59 0.54 0.56 0.56 0.59
Profitability
Return on assets (%) (11.31) 6.37 (0.50) (2.24) (2.25) 0.89 Return on equity (shareholder's equity) (%) (23.63) 10.34 (1.81) (4.54) (4.63) 0.82 Paid-in capital to operating income (%) (16.37) 10.10 (0.47) (3.47) (3.47) 2.07 Paid-in capital to income before tax (%) (23.31) 10.62 (1.43) (3.90) (3.93) 1.51 Net profit margin (%) (32.16) 9.45 (1.95) (4.89) (4.92) 0.86 Earnings per share (NT$) (2.36) 0.97 (0.23) (0.50) (0.51) 0.06
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Cash flows Cash flow ratio (%) 30.04 66.75 59.98 44.21 44.03 58.05Cash flow adequacy ratio (%) 45.18 60.60 86.36 89.06 91.14 149.23Cash reinvestment ratio (%) 5.43 10.99 8.48 5.41 5.41 5.83
Leverage Operating leverage (1.14) 5.19 (87.65) (9.80) (9.78) 15.35Financial leverage 0.90 1.19 0.28 0.77 0.77 1.51
Reasons for changes in financial ratios exceeding 20%: 1. Increases in current ratio and quick ratio were due to rise in profit that led to increase in current assets, such as cash and cash equivalent, and
decrease in short-term borrowing that led to decrease in current liabilities. 2. Increases in long-term fund to property, plant and equipment, and property, plant and equipment turnover ratio were due to amortization of
property, plant and equipment that resulted in decrease in their book values. 3. Increases in return on assets, return on equity, income before tax to paid-in capital, net profit margin and earnings per share were due to increase in
sales and improvement in gross profit that led to increase in operating income. 4. Increases in cash flow ratio and cash flow adequacy ratio were mainly due to increase in cash inflow from operating activities in 2013. 5. Increases in operating leverage and financial leverage were mainly due to rise in operating income in 2013.
Note 1: The Company adopts the FSC-recognized IFRSs in preparing consolidated financial statements starting 2013. Note 2: The financial ratios were computed based on CPA-audited financial information. The computation formulas used in financial analysis:
1. Financial structure (1) Debt-to-asset ratio = total liabilities / total assets. (2) Long-term fund to property, plant and equipment (fixed assets) ratio (total equity + non-current liabilities) / net property, plant and
equipment. 2. Solvency
(1) Current ratio = current assets / current liabilities. (2) Quick ratio = (current assets – inventory – prepaid expense) / current liabilities. (3) Times interest earned = net income before income tax and interest expense / current interest expense.
3. Operating ability (1) Receivable (including accounts receivable and business-related notes receivable) turnover ratio = net operating revenue / average balance of
receivable of the period (including accounts receivable and business-related notes receivable). (2) Average days of collection 365 / receivables turnover ratio. (3) Inventory turnover ratio cost of goods sold / average amount of inventory. (4) Payable (including accounts payable and business-related notes payable) turnover ratio = cost of goods sold / average balance of payable of
the period (including accounts payable and business-related notes payable). (5) Average days of sales 365 / inventory turnover ratio. (6) Property, plant and equipment (fixed assets) turnover ratio net sales / net average property, plant and equipment. (7) Total assets turnover ratio net sales / total average assets.
4. Profitability (1) Return on assets [net income + interests expense (1– tax rate)] / average total assets. (2) Return on equity (shareholder’s equity) after-tax profit /total average equity. (3) Net profit margin net income / net sales. (4) Earnings per share (income attributable to owners of parent – dividend to preferred stock) / weighted average of shares issued.
5. Cash flows (1) Cash flow ratio = new cash flows from operating activities / current liabilities. (2) Cash flow adequacy ratio = net cash flows from operating activities in the past five years / (capital expenditure + increase in inventory +
cash dividend) in the past five years. (3) Cash reinvestment ratio = (net cash flows from operating activities –cash dividend) / (gross margin of property, plant and equipment +
long-term investment + other non-current assets + working capital). 6. Leverage:
(1) Operating leverage (net operating income – variable operating cost and expenses) / operating income. (2) Financial leverage operating income / (operating income – interest expense)
2.2 Financial analysis of standalone financial statements (2009-2013)
Item\Year Based on Financial Accounting Standards in Taiwan
Based on International Financial Accounting
Standards (IFRSs) (Note 1)
2009 2010 2011 2012 2012 2013
Financial structure
Debt-to-assets ratio (%) 48.04 41.30 39.43 37.50 38.23 34.13Long-term fund to property, plant and equipment
(fixed assets) ratio (%) 116.46 123.12 125.95 140.94 142.21 172.92
Solvency Current ratio (%) 80.94 95.00 100.37 121.48 119.98 158.87Quick ratio (%) 48.78 58.41 54.34 64.00 62.70 98.50Times interest earned - 6.90 - - - 1.79
Operating
ability
Receivables turnover ratio (times) 8.58 10.45 8.22 7.54 7.54 6.88Average days of collection 43 35 44 48 48 53Inventory turnover ratio (times) 5.37 5.18 4.07 3.46 3.46 3.36Payables turnover ratio (times) 7.60 7.22 7.29 6.61 6.61 6.50Average days of sales 68 70 89 105 105 109Property, plant and equipment (fixed assets)
turnover ratio (times) 0.43 0.78 0.74 0.80 0.80 0.99
Total assets turnover ratio (times) 0.28 0.49 0.44 0.45 0.45 0.49
42
Profitability
Return on assets (%) (11.72) 6.28 (0.80) (2.77) (2.79) 0.79 Return on equity (shareholder's equity) (%) (23.88) 9.96 (2.31) (5.38) (5.47) 0.60 Paid-in capital to operating income (%) (16.39) 8.60 (1.69) (5.46) (5.49) 0.93 Paid-in capital to income before tax (%) (23.55) 9.67 (2.29) (5.02) (5.05) 0.55 Net profit margin (%) (44.09) 11.14 (3.09) (7.28) (7.32) 0.78 Earnings per share (NT$) (2.36) 0.97 (0.23) (0.50) (0.51) 0.06
Cash flows Cash flow ratio (%) 29.09 71.32 64.81 43.92 44.24 58.19 Cash flow adequacy ratio (%) 48.93 64.22 89.78 89.30 91.60 149.53 Cash reinvestment ratio (%) 5.73 12.83 10.16 5.81 5.88 6.14
Leverage Operating leverage (0.96) 5.07 (19.90) (4.71) (4.68) 26.17 Financial leverage 0.90 1.23 0.59 0.84 0.84 4.02
Reasons for changes in financial ratios exceeding 20%: 1. Increases in current ratio and quick ratio were due to rise in profit; increase in cash and cash equivalent that led to increase in current assets; and
repayment of short-term borrowing that led to decrease in current liabilities. 2. Increases in long-term fund to property, plant and equipment and property, plant and equipment turnover ratio were mainly due to
AMORTIZATION that resulted in decrease in their book values of property, plant and equipment. 3. Increases in return on assets, return on equity, income before tax to paid-in capital, net profit margin and earnings per share were due to increase in
sales and improvement in gross profit margin in 2013 that led to increase in operating income. 4. Increases in cash flow ratio and cash flow adequacy ratio were mainly due to increase in cash inflow from operating activities. 5. Increases in operating leverage and financial leverage were mainly due to rise in operating income in 2013.
Note 1: The Company adopts the FSC-recognized IFRSs in preparing financial statements starting 2013. Note 2: The financial ratios were computed based on CPA-audited financial information. The computation formulas used in financial analysis:
1. Financial structure (1) Debt-to-asset ratio = total liabilities / total assets. (2) Long-term fund to property, plant and equipment (fixed assets) ratio (total equity + non-current liabilities) / net property, plant and
equipment. 2. Solvency
(1) Current ratio = current assets / current liabilities. (2) Quick ratio = (current assets – inventory – prepaid expense) / current liabilities. (3) Times interest earned = net income before income tax and interest expense / current interest expense.
3. Operating ability (1) Receivable (including accounts receivable and business-related notes receivable) turnover ratio = net operating revenue / average balance of
receivable of the period (including accounts receivable and business-related notes receivable). (2) Average days of collection 365 / receivables turnover ratio. (3) Inventory turnover ratio cost of goods sold / average amount of inventory. (4) Payable (including accounts payable and business-related notes payable) turnover ratio = cost of goods sold / average balance of payable of
the period (including accounts payable and business-related notes payable). (5) Average days of sales 365 / inventory turnover ratio. (6) Property, plant and equipment (fixed assets) turnover ratio net sales / net average property, plant and equipment. (7) Total assets turnover ratio net sales / total average assets.
4. Profitability (1) Return on assets [net income + interests expense (1– tax rate)] / average total assets. (2) Return on equity (shareholder’s equity) after-tax profit /total average equity. (3) Net profit margin net income / net sales. (4) Earnings per share (income attributable to owners of parent – dividend to preferred stock) / weighted average of shares issued.
5. Cash flows (1) Cash flow ratio = new cash flows from operating activities / current liabilities. (2) Cash flow adequacy ratio = net cash flows from operating activities in the past five years / (capital expenditure + increase in inventory +
cash dividend) in the past five years. (3) Cash reinvestment ratio = (net cash flows from operating activities –cash dividend) / (gross margin of property, plant and equipment +
long-term investment + other non-current assets + working capital). 6. Leverage:
(1) Operating leverage (net operating income – variable operating cost and expenses) / operating income. (2) Financial leverage operating income / (operating income – interest expense)
43
Winbond Electronics Corporation and Subsidiaries Consolidated Financial Statements for the Years Ended December 31, 2013 and 2012 and Independent Auditors’ Report
INDEPENDENT AUDITORS’ REPORT The Board of Directors and Stockholders Winbond Electronics Corporation We have audited the accompanying consolidated balance sheets of Winbond Electronics Corporation (the “Company”) and its subsidiaries (collectively referred as the “Group”) as of December 31, 2013, December 31, 2012 and January 1, 2012, and the related consolidated statements of comprehensive income, changes in equity, and cash flows for the years ended December 31, 2013 and 2012. These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We conducted our audits in accordance with the Rules Governing the Audit of Financial Statements by Certified Public Accountants and auditing standards generally accepted in the Republic of China. Those rules and standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall consolidated financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of the Group as of December 31, 2013, December 31, 2012 and January 1, 2012, and their consolidated financial performance and their consolidated cash flows for the years ended December 31, 2013 and 2012, in conformity with the Regulations Governing the Preparation of Financial Reports by Securities Issuers and International Financial Reporting Standards (IFRS), International Accounting Standards (IAS), IFRIC Interpretations (IFRIC), and SIC Interpretations (SIC) endorsed by the Financial Supervisory Commission of the Republic of China. We have also audited the parent company only financial statements of Winbond Electronics Corporation as of and for the years ended December 31, 2013 and 2012 on which we have issued an unqualified report. March 28, 2014
Notice to Readers The accompanying consolidated financial statements are intended only to present the consolidated financial position, financial performance and cash flows in accordance with accounting principles and practices generally accepted in the Republic of China and not those of any other jurisdictions. The standards, procedures and practices to audit such consolidated financial statements are those generally applied in the Republic of China. For the convenience of readers, the independent auditors’ 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’ report and consolidated financial statements shall prevail.
3.2013 Consolidated Financial Statements
44
WINBOND ELECTRONICS CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (In Thousands of New Taiwan Dollars) December 31, 2013 December 31, 2012 January 1, 2012 ASSETS Amount % Amount % Amount % CURRENT ASSETS
Cash and cash equivalents (Note 6) $ 7,670,379 14 $ 5,710,913 10 $ 5,895,681 10 Financial assets at fair value through profit or loss, current (Note 7) - - 28,721 - 3,676 - Available-for-sale financial assets, current (Note 8) 1,790,113 3 704,091 1 902,713 1 Notes and accounts receivable, net (Note 9) 4,906,167 9 4,609,247 8 4,114,428 7 Accounts receivable due from related parties, net (Note 28) 89,754 - 46,073 - 50,639 - Other receivables (Note 10) 300,116 1 325,331 1 272,051 - Inventories (Note 11) 6,973,887 12 8,108,677 15 7,272,562 12 Other current assets 677,839 1 532,212 1 420,635 1
Total current assets 22,408,255 40 20,065,265 36 18,932,385 31
NON-CURRENT ASSETS
Available-for-sale financial assets, non-current (Note 8) 281,070 1 64,530 - 353,997 1 Held-to-maturity financial assets, non-current (Note 12) 97,770 - - - - - Financial assets measured at cost, non-current (Note 13) 656,676 1 678,588 1 1,301,667 2 Investments accounted for using equity method (Note 14) 2,407,094 4 1,726,533 3 65,092 - Property, plant and equipment (Note 15) 24,804,025 45 29,021,114 52 35,149,539 58 Investment properties (Note 16) 80,401 - 80,747 - - - Intangible assets (Note 17) 193,947 1 183,310 - 639,191 1 Deferred income tax assets (Note 22) 4,088,406 7 4,219,354 8 4,274,277 7 Other non-current assets (Notes 6 and 10) 661,034 1 236,597 - 264,765 -
Total non-current assets 33,270,423 60 36,210,773 64 42,048,528 69
TOTAL $ 55,678,678 100 $ 56,276,038 100 $ 60,980,913 100 LIABILITIES AND EQUITY CURRENT LIABILITIES
Short-term borrowings (Note 18) $ 2,072,708 4 $ 2,716,474 5 $ 1,681,092 3 Short-term bills payable (Note 18) - - 499,376 1 199,763 - Financial liabilities at fair value through profit or loss, current (Note 7) 16,545 - - - - - Notes payable 517,550 1 812,253 1 849,713 1 Accounts payable 3,267,045 6 3,421,866 6 3,211,805 5 Payable on equipment 472,496 1 173,632 - 650,233 1 Other payables 2,213,020 4 2,258,359 4 2,211,613 4 Current portion of long-term borrowings (Note 18) 3,863,097 7 4,483,330 8 7,158,327 12 Other current liabilities 79,149 - 77,829 - 68,865 -
Total current liabilities 12,501,610 23 14,443,119 25 16,031,411 26
NON-CURRENT LIABILITIES
Long-term borrowings (Note 18) 6,076,193 11 6,550,000 12 7,966,663 13 Accrued pension liabilities (Note 19) 929,453 2 942,757 2 730,752 1 Other non-current liabilities 283,320 - 224,627 - 193,417 1
Total non-current liabilities 7,288,966 13 7,717,384 14 8,890,832 15
Total liabilities 19,790,576 36 22,160,503 39 24,922,243 41
EQUITY ATTRIBUTABLE TO OWNERS OF THE PARENT
Common stock (Note 20) 36,940,232 66 36,856,012 65 36,802,302 60 Capital surplus 2,148,359 4 2,177,342 4 2,211,059 4 Accumulated deficits (4,187,772) (8) (4,430,750) (8) (2,418,258) (4) Exchange differences on translation of foreign financial statements (59,567) - (81,748) - - - Unrealized gains (losses) on available-for-sale financial assets 79,055 - (1,408,417) (2) (1,461,970) (3) Treasury stock (106,387) - (106,387) - (106,387) -
Total equity attributable to owners of the parent 34,813,920 62 33,006,052 59 35,026,746 57
NON-CONTROLLING INTERESTS 1,074,182 2 1,109,483 2 1,031,924 2
Total equity 35,888,102 64 34,115,535 61 36,058,670 59 TOTAL $ 55,678,678 100 $ 56,276,038 100 $ 60,980,913 100 The accompanying notes are an integral part of the consolidated financial statements.
45
WINBOND ELECTRONICS CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME (In Thousands of New Taiwan Dollars, Except Earnings (Loss) Per Share) For the Year Ended December 31 2013 2012 Amount % Amount % OPERATING REVENUE $ 33,135,448 100 $ 32,965,283 100 OPERATING COST (Note 11) 26,226,516 79 27,802,298 84 GROSS PROFIT 6,908,932 21 5,162,985 16 OPERATING EXPENSES
Selling expenses 972,433 3 1,013,571 3 General and administrative expenses 980,725 3 1,126,336 4 Research and development expenses 4,190,576 13 4,304,440 13
Total operating expenses 6,143,734 19 6,444,347 20
PROFIT (LOSS) FROM OPERATIONS 765,198 2 (1,281,362) (4) NON-OPERATING INCOME AND LOSSES
Interest income 53,033 - 43,825 - Dividend income 29,715 - 47,133 - Gain on doubtful debt recoveries 6,330 - 79,951 - Other income 33,742 - 36,793 - Gains (losses) on disposal of property, plant and
equipment (3,807) - 17,555 - Foreign exchange gains (losses) 161,934 1 (51,631) - Gains (losses) on financial instruments at fair value
through profit or loss (89,923) - 103,648 1 Interest expense (259,402) (1) (364,983) (1) Other expense (37,652) - (27,674) - Loss on disposal of investments (7,674) - (42,203) - Impairment loss on financial assets (Note 13) (783) - (25,030) - Share of profit or loss of associates accounted for
using equity method (Note 14) (92,057) - 14,458 -
Total non-operating income and losses (206,544) - (168,158) - PROFIT (LOSS) BEFORE INCOME TAX 558,654 2 (1,449,520) (4) INCOME TAX EXPENSE (Note 22) 271,288 1 175,037 1 NET PROFIT (LOSS) 287,366 1 (1,624,557) (5)
(Continued)
46
WINBOND ELECTRONICS CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME (In Thousands of New Taiwan Dollars, Except Earnings (Loss) Per Share) For the Year Ended December 31 2013 2012 Amount % Amount % OTHER COMPREHENSIVE INCOME
Exchange difference on translation of foreign financial statements $ 43,138 - $ (93,274) -
Unrealized gains on available-for-sale financial assets 1,487,472 5 53,553 -
Actuarial gains and losses on defined benefit plans 36,810 - (187,984) (1)
Other comprehensive income 1,567,420 5 (227,705) (1) TOTAL COMPREHENSIVE INCOME $ 1,854,786 6 $ (1,852,262) (6) NET PROFIT (LOSS) ATTRIBUTABLE TO:
Owner of the parent $ 206,564 1 $ (1,862,883) (6) Non-controlling interests 80,802 - 238,326 1
$ 287,366 1 $ (1,624,557) (5)
TOTAL COMPREHENSIVE INCOME
ATTRIBUTABLE TO: Owner of the parent $ 1,752,631 5 $ (2,040,687) (6) Non-controlling interests 102,155 1 188,425 -
$ 1,854,786 6 $ (1,852,262) (6)
EARNINGS (LOSS) PER SHARE (Note 23)
Basic $ 0.06 $ (0.51) Diluted $ 0.06 $ -
The accompanying notes are an integral part of the consolidated financial statements. (Concluded)
47
WIN
BO
ND
EL
EC
TR
ON
ICS
CO
RPO
RA
TIO
N A
ND
SU
BSI
DIA
RIE
S C
ON
SOL
IDA
TE
D S
TAT
EM
EN
T O
F C
HA
NG
ES
IN E
QU
ITY
(I
n T
hous
ands
of N
ew T
aiw
an D
olla
rs)
Equ
ity A
ttrib
utab
le to
Ow
ners
of t
he P
aren
t
O
ther
Equ
ity
Exc
hang
e
D
iffer
ence
s on
U
nrea
lized
T
rans
latio
n of
Gai
ns (L
osse
s)
Fore
ign
on A
vaila
ble-
A
ccum
ulat
ed
Fi
nanc
ial
fo
r-sa
le
Non
-con
trol
ling
Com
mon
Sto
ck
Cap
ital S
urpl
us
Def
icits
Stat
emen
ts
Fin
anci
al A
sset
s T
reas
ury
Stoc
k
Tot
al
In
tere
sts
T
otal
Equ
ity
BA
LAN
CE,
JAN
UA
RY
1, 2
012
$
36
,802
,302
$
2,21
1,05
9
$
(2,4
18,2
58)
$
-
$
(1
,461
,970
)
$
(106
,387
)
$
35,0
26,7
46
$
1,
031,
924
$
36
,058
,670
C
hang
e in
equ
ity o
f ass
ocia
tes a
ccou
nted
for u
sing
equ
ity m
etho
d
-
3,63
1
-
-
-
-
3,
631
(248
)
3,
383
Net
loss
for 2
012
-
-
(1,8
62,8
83)
-
-
-
(1
,862
,883
)
23
8,32
6
(1
,624
,557
)
O
ther
com
preh
ensi
ve in
com
e fo
r 201
2
-
-
(1
49,6
09)
(81,
748)
53,5
53
-
(1
77,8
04)
(49,
901)
(227
,705
)
To
tal c
ompr
ehen
sive
inco
me
for 2
012
-
-
(2,0
12,4
92)
(81,
748)
53,5
53
-
(2
,040
,687
)
18
8,42
5
(1
,852
,262
)
Is
sue
of o
rdin
ary
shar
es u
nder
em
ploy
ee st
ock
optio
ns
53,7
10
(37,
489)
-
-
-
-
16,2
21
-
16
,221
C
ompe
nsat
ion
cost
of e
mpl
oyee
stoc
k op
tions
-
141
-
-
-
-
141
-
14
1
D
ecre
ase
in n
on-c
ontro
lling
inte
rest
s
-
-
-
-
-
-
-
(110
,618
)
(1
10,6
18)
BA
LAN
CE,
DEC
EMB
ER 3
1, 2
012
36,8
56,0
12
2,17
7,34
2
(4
,430
,750
)
(8
1,74
8)
(1
,408
,417
)
(1
06,3
87)
33,0
06,0
52
1,10
9,48
3
34
,115
,535
C
hang
e in
equ
ity o
f ass
ocia
tes a
ccou
nted
for u
sing
equ
ity m
etho
d
-
29,3
47
-
-
-
-
29,3
47
133
29,4
80
Net
inco
me
for 2
013
-
-
206,
564
-
-
-
20
6,56
4
80
,802
28
7,36
6
O
ther
com
preh
ensi
ve in
com
e 20
13
-
-
36,4
14
22,1
81
1,48
7,47
2
-
1,54
6,06
7
21
,353
1,
567,
420
Tota
l com
preh
ensi
ve in
com
e fo
r 201
3
-
-
24
2,97
8
22
,181
1,
487,
472
-
1,
752,
631
102,
155
1,85
4,78
6
Is
sue
of o
rdin
ary
shar
es u
nder
em
ploy
ee st
ock
optio
ns
84,2
20
(58,
330)
-
-
-
-
25,8
90
-
25
,890
D
ecre
ase
in n
on-c
ontro
lling
inte
rest
s
-
-
-
-
-
-
-
(137
,589
)
(1
37,5
89)
BA
LAN
CE,
DEC
EMB
ER 3
1, 2
013
$
36
,940
,232
$
2,14
8,35
9
$
(4,1
87,7
72)
$
(5
9,56
7)
$
79,0
55
$
(1
06,3
87)
$
34
,813
,920
$
1,07
4,18
2
$
35,8
88,1
02
The
acco
mpa
nyin
g no
tes a
re a
n in
tegr
al p
art o
f the
con
solid
ated
fina
ncia
l sta
tem
ents
.
48
WINBOND ELECTRONICS CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENT OF CASH FLOWS (In Thousands of New Taiwan Dollars) For the Year Ended December 31 2013 2012 CASH FLOWS FROM OPERATING ACTIVITIES
Profit (loss) before income tax $ 558,654 $ (1,449,520) Adjustments for:
Depreciation expenses 6,277,692 8,651,002 Amortization expenses 169,142 618,621 Provision for (reversal of) allowance for doubtful accounts 5,138 (67,586) Provision for (reversal of) decline in market value and obsolescence
and abandonment of inventories (177,945) 158 Loss (gain) on financial assets and liabilities at fair value through
profit or loss 39,904 (25,045) Interest expense 259,402 364,983 Interest income (53,033) (43,825) Dividend income (29,715) (47,133) Share of loss (profit) of associates accounted for using equity
method 92,057 (14,458) Impairment loss recognized on financial assets 783 25,030 Compensation cost of employee stock options - 198 Loss (gain) on disposal of property, plant and equipment 3,807 (17,555) Loss on disposal of investments 7,674 42,203 Unrealized profit (loss) on the transactions with associates (137) 256 Changes in operating assets and liabilities
Decrease in financial assets at fair value through profit or loss 5,529 - Increase in notes and accounts receivable (308,018) (513,419) (Increase) decrease in accounts receivable due from related parties (43,681) 4,566 Decrease (increase) in other receivables 62,983 (65,869) Decrease (increase) in inventories 1,312,735 (836,274) Increase in other current assets (150,998) (113,395) (Increase) decrease in other non-current assets (5,567) 5,331 Decrease in notes payable (294,703) (37,460) (Decrease) increase in accounts payable (154,821) 210,061 (Decrease) increase in other payables (60,474) 34,733 Increase in other current liabilities 1,320 8,965 Increase in other non-current liabilities 81,803 44,309
Cash inflow generated from operations 7,599,531 6,778,877 Interest received 44,203 37,454 Dividend received 34,530 53,698 Interest paid (298,559) (422,819) Income tax paid (122,104) (87,652)
Net cash flows generated from operating activities 7,257,601 6,359,558
CASH FLOWS USED IN INVESTING ACTIVITIES
Acquisition of available-for-sale financial assets (631,036) (86,915) Proceeds from disposal of available-for-sale financial assets 206,111 315,037 Acquisition of held-to-maturity financial assets (94,584) -
(Continued)
49
WINBOND ELECTRONICS CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENT OF CASH FLOWS (In Thousands of New Taiwan Dollars) For the Year Ended December 31 2013 2012
Acquisition of financial assets measured at cost $ (16,000) $ - Proceeds from disposal of financial assets measured at cost 2,467 16,552 Proceeds from capital reduction of financial assets measured at cost 32,603 8,617 Acquisition of investments accounted for using equity method (151,236) (403,856) Net cash outflow on disposal of subsidiaries - (258,088) Acquisitions of property, plant and equipment (2,245,724) (3,077,707) Proceeds from disposal of property, plant and equipment 5,076 48,145 Decrease in financial lease receivables 64,246 - Acquisition of intangible assets (155,663) (142,735)
Net cash used in investing activities (2,983,740) (3,580,950)
CASH FLOWS USED IN FINANCING ACTIVITIES
(Decrease) increase in short-term borrowings (643,766) 1,035,383 (Decrease) increase in short-term bills payable (500,000) 300,000 Increase in long-term borrowings 3,510,000 3,200,000 Repayments of long-term borrowings (4,604,040) (7,291,660) Dividend paid to non-controlling interests (137,588) (133,318) Proceeds from exercise of employee stock options 25,890 16,221 Increase (decrease) in non-controlling interests 21,352 (33,094)
Net cash used in financing activities (2,328,152) (2,906,468)
EFFECTS OF EXCHANGE RATE CHANGES ON THE BALANCE
OF CASH HELD IN FOREIGN CURRENCIES 13,757 (56,908) NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS 1,959,466 (184,768) CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR 5,710,913 5,895,681 CASH AND CASH EQUIVALENTS, END OF YEAR $ 7,670,379 $ 5,710,913 As of December 31, 2012, fair values of assets and liabilities of Win Investment Corporation, a subsidiary merged by Chin Xin Investment Co., Ltd. are summarized as follows: Amount Cash and cash equivalents $ 258,088 Available-for-sale financial assets, current and non-current 433,932 Financial assets measured at cost, non-current 620,154 Other current and non-current assets 50,697 Other current liabilities (33) Net assets of Win Investment Corporation on merger date $ 1,362,838 Net cash outflow on disposal of subsidiary Win Investment Corporation $ 258,088 The accompanying notes are an integral part of the consolidated financial statements. (Concluded)
50
WINBOND ELECTRONICS CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 2013 AND 2012 (In Thousands of New Taiwan Dollars, Unless Stated Otherwise) 1. GENERAL INFORMATION
Winbond Electronics Corporation (the “Company”) was incorporated in the Republic of China (“ROC”) on September 29, 1987 and is engaged in the design, development, manufacture and marketing of Very Large Scale Integration (“VLSI”) integrated circuits (“ICs”) used in a variety of microelectronic applications. The Company’s shares have been listed on the Taiwan Stock Exchange since October 18, 1995. Walsin Lihwa is a major stockholder of the Company and held approximately 23% ownership interest in the Company as of December 31, 2013 and 2012.
2. APPROVAL OF FINANCIAL STATEMENTS
The consolidated financial statements were approved by the board of directors and authorized for issue on March 28, 2014.
3. APPLICATION OF NEW AND REVISED STANDARDS, AMENDMENTS AND INTERPRETATIONS
a. New, amended and revised standards and interpretations (the “New IFRSs”) in issue but not yet
effective.
The Company and entities controlled by the Company (the “Group”) have not applied the following International Financial Reporting Standards (IFRS), International Accounting Standards (IAS), Interpretations of IFRS (IFRIC), and Interpretations of IAS (SIC) issued by the IASB. On January 28, 2014, the Financial Supervisory Commission (FSC) announced the framework for the adoption of updated IFRSs version in the ROC. Under this framework, starting January 1, 2015, the previous version of IFRSs endorsed by the FSC (the 2010 IFRSs version) currently applied by companies with shares listed on the Taiwan Stock Exchange or traded on the Taiwan GreTai Securities Market or Emerging Stock Market will be replaced by the updated IFRSs without IFRS 9 (the 2013 IFRSs version). However, as of the date that the financial statements were authorized for issue, the FSC has not endorsed the following new, amended and revised standards and interpretations issued by the IASB (the “New IFRSs”) included in the 2013 IFRSs version. Furthermore, the FSC has not announced the effective date for the following New IFRSs that are not included in the 2013 IFRSs version.
The New IFRSs Included in the 2013 IFRSs Version Not Yet Endorsed by the FSC
Effective Date Announced by IASB (Note 1)
Improvements to IFRSs (2009) - amendment to IAS 39 January 1, 2009 and January 1,
2010, as appropriate Improvements to IFRSs (2010) July 1, 2010 and January 1,
2011, as appropriate Annual Improvements to IFRSs 2009-2011 Cycle January 1, 2013 Amendment to IFRS 1 “Limited Exemption from Comparative IFRS 7
Disclosures for First-time Adopters” July 1, 2010
(Continued)
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The New IFRSs Included in the
2013 IFRSs Version Not Yet Endorsed by the FSC Effective Date
Announced by IASB (Note 1) Amendment to IFRS 1 “Severe Hyperinflation and Removal of Fixed
Dates for First-time Adopters” July 1, 2011
Amendment to IFRS 1 “Government Loans” January 1, 2013 Amendment to IFRS 7 “Disclosure - Offsetting Financial Assets and
Financial Liabilities” January 1, 2013
Amendment to IFRS 7 “Disclosure - Transfer of Financial Assets” July 1, 2011 IFRS 10 “Consolidated Financial Statements” January 1, 2013 IFRS 11 “Joint Arrangements” January 1, 2013 IFRS 12 “Disclosure of Interests in Other Entities” January 1, 2013 Amendments to IFRS 10, IFRS 11 and IFRS 12 “Consolidated
Financial Statements, Joint Arrangements and Disclosure of Interests in Other Entities: Transition Guidance”
January 1, 2013
Amendments to IFRS 10 and IFRS 12 and IAS 27 “Investment Entities”
January 1, 2014
IFRS 13 “Fair Value Measurement” January 1, 2013 Amendment to IAS 1 “Presentation of Other Comprehensive Income” July 1, 2012 Amendment to IAS 12 “Deferred Tax: Recovery of Underlying
Assets” January 1, 2012
Revise of IAS 19 “Employee Benefits” January 1, 2013 Revise of IAS 27 “Separate Financial Statements” January 1, 2013 Revise of IAS 28 “Investments in Associates and Joint Ventures” January 1, 2013 Amendment to IAS 32 “Offsetting Financial Assets and Financial
Liabilities” January 1, 2014
Amendment to IAS 39 “Embedded Derivatives” Effective for annual periods ending on or after June 30, 2009
IFRIC 20 “Stripping Costs in Production Phase of a Surface Mine” January 1, 2013 (Concluded)
The New IFRSs Not Included in the 2013 IFRSs Version Effective Date
Announced by IASB (Note 1) Annual Improvements to IFRSs 2010-2012 Cycle July 1, 2014 (Note 2) Annual Improvements to IFRSs 2011-2013 Cycle July 1, 2014 IFRS 9 “Financial Instruments” Effective date not determined Amendments to IFRS 9 and IFRS 7 “Mandatory Effective Date and
Transition Disclosures” Effective date not determined
IFRS 14 “Regulatory Deferral Accounts” January 1, 2016 Amendment to IAS 19 “Defined Benefit Plans: Employee
Contributions” July 1, 2014
Amendment to IAS 36 “Recoverable Amount Disclosures for Non-financial Assets”
January 1, 2014
Amendment to IAS 39 “Novation of Derivatives and Continuation of Hedge Accounting”
January 1, 2014
IFRIC 21 “Levies” January 1, 2014 Note 1: Unless stated otherwise, the above New IFRSs are effective for annual periods beginning on
or after the respective effective dates.
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Note 2: The amendment to IFRS 2 applies to share-based payment transactions for which the grant date is on or after July 1, 2014; the amendment to IFRS 3 applies to business combinations for which the acquisition date is 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, 2014.
b. Significant impending changes in accounting policy result from New IFRSs in issue but not yet
effective. Except for the following, the impending initial application of the above New IFRSs, whenever applied, would not have any material impact on the Group’s accounting policies: 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. Specifically, financial assets that are held within a business model whose objective is to collect contractual cash flows, and have contractual cash flows that are solely payments of principal and interest on the principal outstanding are generally measured at amortized cost at the end of subsequent accounting periods. All other financial assets are measured at their fair values at the end of reporting period. However, the Group may make an irrevocable election to present subsequent changes in the fair value of an equity investment in other comprehensive income, with only dividend income generally recognized in profit or loss. Effective date The mandatory effective date of IFRS 9, which was previously set at January 1, 2015, was removed and will be reconsidered once the standard is complete with a new impairment model and any limited amendments to classification and measurement have been finalized in both consolidated and nonconsolidated financial statements.
2) New and revised standards on consolidation, joint arrangement, and associates and disclosure a) IFRS 10 “Consolidated Financial Statements”
IFRS 10 replaces IAS 27 “Consolidated and Separate Financial Statements” and SIC 12 “Consolidation - Special Purpose Entities”. The Group considers whether it has control over other entities for consolidation. The Group has control over an investee if and only if it has i) power over the investee; ii) exposure, or rights, to variable returns from its involvement with the investee and iii) the ability to use its power over the investee to affect the amount of its returns. Additional guidance has been included in IFRS 10 to explain when an investor has control over an investee.
b) IFRS 12 “Disclosure of Interests in Other Entities” IFRS 12 is a new disclosure standard and is applicable to entities that have interests in subsidiaries, joint arrangements, associates and/or unconsolidated structured entities. In general, the disclosure requirements in IFRS 12 are more extensive than in the current standards.
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3) IFRS 13 “Fair Value Measurement” IFRS 13 establishes a single source of guidance for fair value measurements. It defines fair value, establishes a framework for measuring fair value, and requires disclosures about fair value measurements. The disclosure requirements in IFRS 13 are more extensive than those required in the current standards. For example, quantitative and qualitative disclosures based on the three-level fair value hierarchy currently required for financial instruments only will be extended by IFRS 13 to cover all assets and liabilities within its scope.
4) Amendment to IAS 1 “Presentation of Items of Other Comprehensive Income” The amendment to IAS 1 requires items of other comprehensive income to be grouped into those that (1) will not be reclassified subsequently to profit or loss; and (2) will be reclassified subsequently to profit or loss when specific conditions are met. Income taxes on related items of other comprehensive income are grouped on the same basis. Under current IAS 1, there were no such requirements.
5) Amendment to IAS 36 “Recoverable Amount Disclosures for Non-financial Assets” In issuing IFRS 13 “Fair Value Measurement”, the IASB made consequential amendment to the disclosure requirements in IAS 36 “Impairment of Assets”, introducing a requirement to disclose in every reporting period the recoverable amount of an asset or each cash-generating unit. The amendment clarifies that such disclosure of recoverable amounts is required only when an impairment loss has been recognized or reversed during the period. Furthermore, the Group is required to disclose the discount rate used in measurements of the recoverable amount based on fair value less costs of disposal measured using a present value technique.
6) Annual Improvements to IFRSs: 2010-2012 Cycle Several standards including IFRS 2 “Share-Based Payment”, IFRS 3 “Business Combinations” and IFRS 8 “Operating Segments” were amended in this annual improvement. 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. IFRS 13 was amended to clarify that the issuance of IFRS 13 did not remove the ability to measure short-term receivables and payables with no stated interest rate 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 Group is a related party of the Group. Consequently, the Group is required to disclose as related party transactions the amounts incurred for the service and 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.
7) Annual Improvements to IFRSs: 2011-2013 Cycle Several standards including IFRS 3, IFRS 13 and IAS 40 “Investment Property” were amended in this annual improvement.
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The scope in IFRS 13 of the portfolio exception for measuring the fair value of a group of financial assets and financial liabilities on a net basis was amended to clarify that it includes all contracts that are within the scope of, and accounted for in accordance with, IAS 39 or IFRS 9, even if those contracts do not meet the definitions of financial assets or financial liabilities within IAS 32. IAS 40 was amended to clarify that IAS 40 and IFRS 3 are not mutually exclusive and application of both standards may be required to determine whether the investment property acquired is acquisition of an asset or a business combination.
As of the date the consolidated financial statements were authorized for issue, the Group is continuing to assess the possible impact of the application of other standards, interpretations and amendments to Regulations Governing the Preparation of Financial Reports by Securities Issuers on the Group's financial position and operating result, and will disclose the relevant impact when the assessment is complete.
4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
On May 14, 2009, the FSC announced the “Framework for the Adoption of IFRSs by the Companies in the ROC.” In this framework, starting 2013, companies with shares listed on the Taiwan Stock Exchange or traded on the Taiwan GreTai Securities Market or Emerging Stock Market should prepare their consolidated financial statements in accordance with the Regulations Governing the Preparation of Financial Reports by Securities Issuers and the IFRS, IAS, IFRIC and SIC (the “IFRSs”) endorsed by the FSC. The Group’s consolidated financial statements for the year ended December 31, 2013 are its first IFRS consolidated financial statements. The date of transition to IFRSs was January 1, 2012. Refer to Note 35 for the impact of IFRS conversion on the Group’s consolidated financial statements. 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 IFRSs as endorsed by the FSC. Basis of Preparation The consolidated financial statements have been prepared on the historical cost basis except for financial instruments that are measured at fair values. Historical cost is generally based on the fair value of the consideration given in exchange for assets. The opening consolidated balance sheets as of the date of transition to IFRSs were prepared in accordance with IFRS 1 “First-time Adoption of International Financial Reporting Standards”. The applicable IFRSs have been applied retrospectively by the Group except for some aspects where IFRS 1 prohibits retrospective application or grants optional exemptions to this general principle. For the exemptions that the Group elected, refer to Note 35. Basis of Consolidation a. Principles for preparing consolidated financial statements
The consolidated financial statements incorporate the financial statements of the Company and the entities controlled by the Company. When necessary, adjustments are made to the financial statements of subsidiaries to bring their accounting policies into line with those used by the Company. All intra-group transactions, balances, income and expenses are eliminated in full upon consolidation.
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Attribution of total comprehensive income to non-controlling interests Total comprehensive income of subsidiaries is attributed to the owners of the Company and to the non-controlling interests even if this results in the non-controlling interests having a deficit balance. Changes in the Group’s ownership interests in existing subsidiaries Changes in the Group’s ownership interests in subsidiaries that do not result in the Group losing control over the subsidiaries are accounted for as equity transactions. The carrying amounts of the Group’s interests and the non-controlling interests are adjusted to reflect the changes in their relative interests in the subsidiaries. Any difference between the amount by which the non-controlling interests are adjusted and the fair value of the consideration paid or received is recognized directly in equity and attributed to the owners of the Company.
b. Subsidiary included in consolidated financial statements
% of Ownership
Investor Investee Main Business December 31,
2013 December 31,
2012 January 1,
2012 The Company Winbond Int’l Corporation
(“WIC”) Investment holding
100.00 100.00 100.00
WIC Winbond Electronics Corp. America (“WECA”)
Design, sales and after-sales service of semiconductor
100.00 100.00 100.00
The Company Landmark Group Holdings Ltd. (“Landmark”)
Investment holding 100.00 100.00 100.00
Landmark Winbond Electronics Corp. Japan (“WECJ”)
Design, sales and after-sales service of semiconductor
100.00 100.00 100.00
Landmark Peaceful River Corp. (“PRC”)
Investment holding 100.00 100.00 (Note 1)
100.00 (Note 1)
The Company Winbond Electronics (HK) Limited (“WEHK”)
Sale of semiconductor 100.00 100.00 100.00
The Company Pine Capital Investment Limited (“PCI”)
Investment holding
100.00 100.00 100.00
PCI Winbond Electronics (Suzhou) Limited (“WECN”)
Design development and marketing of VLSI integrated ICs
100.00 100.00 100.00
The Company Mobile Magic Design Corporation (“MMDC”)
Design development and marketing of Pseudo SRAM
100.00 100.00 100.00
The Company Nuvoton Technology Corporation (“NTC”)
Research, development, design, manufacture and marketing of Logic IC, 6 inch wafer product, test, and OEM
61.00 61.00 61.00
The Company Winbond Technology LTD. (Israel) (“WECI”) (Note 2)
Design, sales and after-sales service of semiconductor
100.00 - -
NTC Marketplace Management Ltd. (“MML”)
Investment holding 100.00 100.00 100.00
MML Goldbond LLC (“GLLC”) Investment holding 100.00 100.00 100.00 GLLC Nuvoton Electronics
Technology (Shanghai) Limited (“NTSH”)
Provide project of sale in China and repair, test and consult of software
100.00 100.00 100.00
GLLC Winbond Electronics (Nanjing) Ltd. (“WENJ”)
Computer software service (except I.C. design)
100.00 100.00 100.00
NTC Pigeon Creek Holding Co., Ltd. (“PCH”)
Investment holding 100.00 100.00 100.00
PCH Nuvoton Technology Corp. America (“NTCA”)
Design, sales and after-sales service of semiconductor
100.00 100.00 100.00
NTC Nuvoton Investment Holding Ltd. (“NIH”)
Investment holding 100.00 100.00 100.00
NIH Nuvoton Technology Israel Ltd. (“NTIL”)
Design, sales and after-sales service of semiconductor
100.00 100.00 100.00
NTC Nuvoton Electronics Technology (H.K.) Limited (“NTHK”)
Sales of semiconductor 100.00 100.00 100.00
NTHK Nuvoton Electronics Technology (“Shenzhen”) Limited (“NTSZ”)
Computer software service (except I.C. design), wholesale business for computer, supplement and software
100.00 100.00 100.00
(Continued)
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% of Ownership
Investor Investee Main Business December 31,
2013 December 31,
2012 January 1,
2012
The Company Win Investment Corporation (“WIN”) (Note 3)
Investment holding - - 100.00
WIN (Note 3)
NTC Research, development, design, manufacture and marketing of Logic IC, 6 inch wafer product, test, and OEM
- - 1.00
The Company Newfound Asian Corp. (“NAC”)
Investment holding 100.00 100.00 100.00
NAC Baystar Holdings Ltd. (“BHL”)
Investment holding 100.00 100.00 100.00
(Concluded) Note 1: In September 2012, Landmark acquired 100% ownership interest of PRC from WIN. Note 2: WECI was incorporated in September 2013. Note 3: WIN was merged by Chin Xin Investment Co., Ltd. on December 31, 2012.
Classification of Current and Non-current Assets and Liabilities Current assets include cash and cash equivalents and those assets held primarily for trading purposes or to be realized, sold or consumed within twelve months after the reporting period, unless the asset is restricted from being exchanged or used to settle a liability for at least twelve months after the reporting period. Current liabilities are obligations incurred for trading purposes or to be settled within twelve months after the reporting period and liabilities that the Group does not have an unconditional right to defer settlement for at least twelve months after the reporting period. Except as otherwise mentioned, assets and liabilities that are not classified as current are classified as non-current. Foreign Currencies The consolidated financial statements are presented in the Company’s functional currency, New Taiwan dollars. In preparing the financial statements of each individual group entity, transactions in currencies other than the entity’s foreign currencies are recognized at the rates of exchange prevailing at the dates of the transactions. At the end of each reporting period, monetary items denominated in foreign currencies are retranslated at the rates prevailing at that date. Exchange differences on monetary items arising from settlement are recognized in profit or loss in the period they arise. Exchange differences arising on the retranslation of non-monetary items measured at fair value are included in profit or loss for the period at the rates prevailing at the end of reporting period except for exchange differences arising from the retranslation of non-monetary items in respect of which gains and losses are recognized directly in other comprehensive income, in which case, the exchange differences are also recognized directly in other comprehensive income. Non-monetary items that are measured in terms of historical cost in a foreign currency are not retranslated. For the purposes of presenting consolidated financial statements, the assets and liabilities of the Group’s foreign operations are translated into New Taiwan dollars using exchange rates prevailing at the end of each reporting period. Income and expense items are translated at the average exchange rates for the period, and exchange differences arising are recognized in other comprehensive income (attributed to the owners of the Company and non-controlling interests as appropriate).
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Financial Instruments a. Financial assets
All regular way purchases or sales of financial assets are recognized and derecognized on a trade date basis, except derivative financial assets which are recognized and derecognized on settlement date basis. The categories of financial assets held by the Group are financial assets at fair value through profit or loss, available-for-sale financial assets, held-to-maturity financial assets, and loans and receivables. 1) Financial assets at fair value through profit or loss
Financial assets are classified as at fair value through profit or loss when the financial assets are either held for trading or designated as at fair value through profit or loss. Financial assets at fair value through profit or loss are stated at fair value, with any gains or losses arising on remeasurement recognized in profit or loss.
2) Available-for-sale financial assets Listed shares held by the Group that are traded in an active market are classified as available-for-sale financial assets and are stated at fair value at the end of each reporting period. Changes in the fair value of available-for-sale financial assets are recognized in other comprehensive income and will be reclassified to profit or loss when the investment is disposed of or is determined to be impaired. Dividends on available-for-sale equity instruments are recognized in profit or loss when the Group’s right to receive the dividends is established. Available-for-sale equity investments that do not have a quoted market price in an active market and whose fair value cannot be reliably measured and derivatives that are linked to and must be settled by delivery of such unquoted equity investments are measured at cost less any identified impairment loss at the end of each reporting period and are presented in a separate line item as financial assets carried at cost. If, in a subsequent period, the fair value of the financial assets can be reliably measured, the financial assets are remeasured at fair value. The difference between carrying amount and fair value is recognized in profit or loss or other comprehensive income on financial assets. Any impairment losses are recognized in profit and loss.
3) Held-to-maturity financial assets Bonds which have a specific credit rating and the Group has positive intent and ability to hold to maturity are classified as held-to-maturity financial assets. Subsequent to initial recognition, held-to-maturity financial assets are measured at amortized cost using the effective interest method less any impairment.
4) Loans and receivables Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. Loans and receivables including cash and cash equivalent, notes and accounts receivable, account receivable due from related parties, other receivables and refundable deposits are measured at amortized cost using the effective interest method, less any impairment, except for short-term receivable when the effect of discounting is immaterial.
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Cash equivalents include time deposits with original maturities within one year from the date of acquisition, highly liquid, readily convertible to a known amount of cash and subject to an insignificant risk of changes in value. These cash equivalents are held for the purpose of meeting short-term cash commitments.
b. Impairment of financial assets Financial assets, other than those at fair value through profit or loss, are assessed for indicators of impairment at the end of each reporting period. Financial assets are considered to be impaired when there is objective evidence that, as a result of one or more events that occurred after the initial recognition of the financial asset, the estimated future cash flows of the investment have been affected. Financial assets carried at amortized cost, such as accounts receivable and held-to-maturity financial assets are assessed for impairment. Objective evidence of impairment for a portfolio of receivables could include the Group’s past experience of collecting payments, an increase in the number of delayed payments in the portfolio past the average credit period, as well as observable changes in national or local economic conditions that correlate with default on receivables. The amount of the impairment loss recognized is the difference between the asset’s carrying amount and the present value of estimated future cash flows, discounted at the financial asset’s original effective interest rate. If, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognized, the previously recognized impairment loss is reversed through profit or loss to the extent that the carrying amount of the investment at the date the impairment is reversed does not exceed what the amortized cost would have been had the impairment not been recognized. For available-for-sale equity investments, a significant or prolonged decline in the fair value of the security below its cost is considered to be objective evidence of impairment. When an available-for-sale financial asset is considered to be impaired, cumulative gains or losses previously recognized in other comprehensive income are reclassified to profit or loss in the period. In respect of available-for-sale equity securities, impairment loss previously recognized in profit or loss are not reversed through profit or loss. Any increase in fair value subsequent to an impairment loss is recognized in other comprehensive income and accumulated under the heading of investments revaluation reserve. In respect of available-for-sale debt securities, impairment loss are subsequently reversed through profit or loss if an increase in the fair value of the investment can be objectively related to an event occurring after the recognition of the impairment loss. For financial assets that are carried at cost, the amount of the impairment loss is measured as the difference between the asset’s carrying amount and the present value of the estimated future cash flows discounted at the current market rate of return for a similar financial asset. Such impairment loss will not be reversed in subsequent periods. The carrying amount of the financial asset is reduced by the impairment loss directly for all financial assets with the exception of trade receivables where the carrying amount is reduced through the use of an allowance account. When accounts receivable are considered uncollectible, the amount is written off against the allowance account. Subsequent recoveries of amounts previously written off are credited against the allowance account. Changes in the carrying amount of the allowance account are recognized in profit or loss.
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c. Derecognition of financial assets The Group derecognizes a financial asset only when the contractual rights to the cash flows from the asset expire, or when it transfers the financial asset and substantially all the risks and rewards of ownership of the asset to another party. On derecognition of a financial asset in its entirety, the difference between the asset’s carrying amount and the sum of the consideration received and receivable and the cumulative gain or loss that had been recognized in other comprehensive income and accumulated in equity is recognized in profit or loss.
d. Financial liabilities Financial liabilities are classified as at fair value through profit or loss when the financial liability is either held for trading or it is designated as at fair value through profit or loss. Financial liabilities at fair value through profit or loss are stated at fair value, with any gains or losses arising on remeasurement recognized in profit or loss. Financial liabilities are measured at cost amortized using the effective interest method, except financial liabilities at fair value through profit or loss.
e. Derecognition of financial liabilities The difference between the carrying amount of the financial liability derecognized and the consideration paid and payable is recognized in profit or loss.
f. Derivative financial instruments
The group enters into a variety of derivative financial instruments to manage its exposure to foreign exchange rate risks, including foreign exchange forward contracts and cross currency swaps. Derivatives are initially recognized at fair value at the date the derivative contracts are entered into and are subsequently remeasured to their fair value at the end of each reporting period. The resulting gain or loss is recognized in profit or loss immediately unless the derivative is designated and effective as a hedging instrument, in which event the timing of the recognition in profit or loss depends on the nature of the hedge relationship. When the fair value of derivative financial instruments is positive, the derivative is recognized as a financial asset; when the fair value of derivative financial instruments is negative, the derivative is recognized as a financial liability.
g. Information about fair value of financial instruments
The Group determined the fair value of financial assets and liabilities as follow: 1) The fair values of financial assets and liabilities which have standard terms and conditions and
traded in active market are determined by reference to quoted market price. If there is no quoted market price in active market, valuation techniques are applied.
2) The fair value of foreign-currency derivative financial instrument could be determined by reference
to the price and discount rate of currency swap quoted by financial institutions. Foreign exchange forward contracts use individual maturity rate to calculate the fair value of each contract.
3) The fair values of other financial assets and financial liabilities are determined by discounted cash
flow analysis in accordance with generally accepted pricing models.
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Inventories Inventories consist of raw materials, supplies, finished goods and work-in-process and are stated at the lower of cost or net realizable value. Inventory write-downs are made by item, except where it may be appropriate to group similar or related items. Net realizable value is the estimated selling price of inventories less all estimated costs of completion and costs necessary to make the sale. Inventories are recorded at weighted-average cost on the balance sheet date. Investments Accounted for Using Equity Method An associate is an entity over which the Group has significant influence and that is neither a subsidiary nor an interest in a joint venture. Significant influence is the power to participate in the financial and operating policy decisions of the investee without having control or joint control over those policies. The results and assets and liabilities of associates are incorporated in these consolidated financial statements using the equity method of accounting. Under the equity method, an investment in an associate is initially recognized at cost and adjusted thereafter to recognize the Group’s share of the profit or loss and other comprehensive income of the associate. The Group also recognizes the changes in the Group’s share of equity of associates. When the Group subscribes for additional new shares of the associate at a percentage different from its existing ownership percentage, the resulting carrying amount of the investment differs from the amount of the Group’s proportionate interest in the associate. The Group records such a difference as an adjustment to investments with the corresponding amount charged or credited to capital surplus. If the Group’s ownership interest is reduced due to the additional subscription of the new shares of associate, the proportionate amount of the gains or losses previously recognized in other comprehensive income in relation to that associate is reclassified to profit or loss on the same basis as would be required if the investee had directly disposed of the related assets or liabilities. When the adjustment should be debited to capital surplus, but the capital surplus recognized from investments accounted for by the equity method is insufficient, the shortage is debited to retained earnings. When the Group’s share of losses of an associate equals or exceeds its interest in that associate (which includes any carrying amount of the investment accounted for by the equity method and long-term interests that, in substance, form part of the Group’s net investment in the associate), the Group discontinues recognizing its share of further losses. Additional losses and liabilities are recognized only to the extent that the Group has incurred legal obligations, or constructive obligations, or made payments on behalf of that associate. Any excess of the cost of acquisition over the Group's share of the net fair value of the identifiable assets and liabilities of an associate recognized at the date of acquisition is recognized as goodwill, which is included within the carrying amount of the investment and is not amortized. Any excess of the Group's share of the net fair value of the identifiable assets and liabilities over the cost of acquisition, after reassessment, is recognized immediately in profit or loss. The entire carrying amount of the investment (including goodwill) is tested for impairment as a single asset by comparing its recoverable amount with its carrying amount. Any impairment loss recognized forms part of the carrying amount of the investment. Any reversal of that impairment loss is recognized to the extent that the recoverable amount of the investment subsequently increases. When a group entity transacts with its associate, profits and losses resulting from the transactions with the associate are recognized in the Group' consolidated financial statements only to the extent of interests in the associate that are not related to the Group.
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Property, Plant and Equipment Property, plant and equipment are stated at cost, less subsequent accumulated depreciation and subsequent accumulated impairment loss. Depreciation is recognized using the straight-line method. The estimated useful lives, residual values and depreciation method are reviewed at the end of each reporting period, with the effect of any changes in estimate accounted for on a prospective basis. Any gain or loss arising on the disposal or retirement of an item of property, plant and equipment is determined as the difference between the sales proceeds and the carrying amount of the asset and is recognized in profit or loss. The Group’s property, plant and equipment were depreciated straight-line basis over the estimated useful life of the asset: Buildings 9-21 years Machinery and equipment 4-6 years Other equipment 6 years Furthermore, on April 29, 2013, the board of directors determined to change the accounting-basis of estimated useful life of assets and reported the change in the stockholders’ meeting on June 19, 2013. Since July 1, 2013, the useful life of facilities (recorded as “buildings”) is from 11 years to 15 years, and useful life of machinery and equipment is from 6 years to 8 years. Investment Properties Investment properties are properties held to earn rentals and/or for capital appreciation. Investment properties are measured initially at cost. Subsequent to initial recognition, investment properties are measured at cost less accumulated depreciation and accumulated impairment loss, and depreciated over 20 years useful lives after considered residual values, using the straight-line method. Any gain or loss arising on derecognition of the property is calculated as the difference between the net disposal proceeds and the carrying amount of the asset and is included in profit or loss in the period in which the property is derecognized. Intangible Assets Intangible assets with finite useful lives that are acquired separately are initially measured at cost and subsequently measured at cost less accumulated amortization and accumulated impairment loss. Amortization is recognized on a straight-line basis over their estimated useful lives. The estimated useful life, residual value, and amortization method are reviewed at the end of each reporting period with the effect of any changes in estimate accounted for on a prospective basis. Impairment of Tangible and Intangible Assets At the end of each reporting period, the Company reviews the carrying amounts of its tangible and intangible assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss. Recoverable amount is the higher of fair value less costs to sell and value in use. If the recoverable amount of an asset or cash-generating unit is estimated to be less than its carrying amount, the carrying amount of the asset or cash-generating unit is reduced to its recoverable amount.
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When an impairment loss subsequently is reversed, the carrying amount of the asset or cash-generating unit is increased to the revised estimate of its recoverable amount, but only to the extent of the carrying amount that would have been determined had no impairment loss been recognized for the asset or cash-generating unit in prior years. A reversal of an impairment loss is recognized immediately in profit or loss. Provisions Provisions are recognized when the Group has a present obligation as a result of a past event and 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. For potential product risk, the Group accrues reserve for products guarantee based on commitment to specific customers. Revenue Recognition Revenue is measured at the fair value of the consideration received or receivable. Revenue is reduced for estimated customer returns, rebates and other similar allowances. Sales returns are recognized at the time of sale provided the seller can reliably estimate future returns; a liability is recognized for returns based on previous experience and other relevant factors. Sales of goods are recognized when the goods are delivered and title is passed to the buyer. Leasing Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards of ownership to the lessee. All other leases are classified as operating lease. Under finance lease, the Group as lessor recognizes amounts due from lessees as receivables at the amount of the Group’s net investment in the lease. Finance lease income is allocated to accounting periods so as to reflect a constant periodic rate of return on the Group’s net investment outstanding in respect of the leases. Under operating lease, the Group as lessor recognizes rental income from operating lease on a straight-line basis over the term of the relevant lease. Contingent rents receivable arising under operating leases are recognized as income in the period in which they are earned. As lessee, operating lease payments are recognized as an expense on a straight-line basis over the lease term. Contingent rents payable arising under operating leases are recognized as an expense in the period in which they are incurred. Borrowing Costs Borrowing costs directly attributable to the acquisition of qualifying assets are added to the cost of those assets, until such time that the assets are substantially ready for their intended use or sale. Other than state above, all other borrowing costs are recognized in profit or loss in the period in which they are incurred other than state above. Retirement Benefit Costs Payments to defined contribution retirement benefit plans are recognized as an expense when employees have rendered service entitling them to the contributions. For defined benefit retirement plans, the cost of providing benefits is determined using the Projected Unit Credit Method. Actuarial gains and losses on the defined benefit obligation are recognized immediately in other comprehensive income. Past service cost is recognized immediately to the extent that the benefits are already vested, and otherwise is amortized on a straight-line basis over the average period until the benefits become vested.
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The retirement benefit obligation recognized in the consolidated balance sheets represents the present value of the defined benefit obligation as adjusted for unrecognized past service cost, and as reduced by the fair value of plan assets. Any asset resulting from this calculation is limited to the unrecognized past service cost and actuarial losses, plus the present value of available refunds and reductions in future contributions to the plan. Curtailment or settlement gains or losses on the defined benefit plan are recognized when the curtailment or settlement occurs. Employee Stock Options The value of the stock options granted, which is equal to the best available estimate of the number of stock options expected to vest multiplied by the grant-date fair value, is expensed on a straight-line basis over the vesting period, with a corresponding adjustment to capital surplus. The fair value determined at the grant date of the employee stock options is recognized as an expense in full at the grant date when the stock options granted vest immediately. At the end of each reporting period, the Group revises its estimate of the number of employee stock options expected to vest. The impact of the revision of the original estimates is recognized in profit or loss such that the cumulative expense reflects the revised estimate, with a corresponding adjustment to the capital surplus. Taxation Income tax expense represents the sum of the tax currently payable and deferred tax. a. Current tax
According to the Income Tax Law, an additional tax at 10% of unappropriated earnings is provided for as income tax in the year the shareholders approve to retain the earnings. Adjustments of prior years’ tax liabilities are added to or deducted from the current year’s tax provision.
b. Deferred tax Deferred tax is recognized on temporary differences between the carrying amounts of assets and liabilities in the consolidated financial statements and the corresponding tax bases used in the computation of taxable profit. Deferred tax liabilities are generally recognized for all taxable temporary differences. Deferred tax liabilities and assets are measured at the tax rates that are expected to apply in the period in which the liability is settled or the asset realized, based on tax rates (and tax laws) that have been enacted or substantively enacted by the end of the reporting period. The measurement of deferred tax liabilities and assets reflects the tax consequences that would follow from the manner in which the Group expects, at the end of the reporting period, to recover or settle the carrying amount of its assets and liabilities.
5. CRITICAL ACCOUNTING JUDGMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY In the application of the Group’s accounting policies, management is required to make judgments, estimates and assumptions about the carrying amounts of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered relevant. Actual results may differ from these estimates.
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The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period in which the estimate is revised if the revision affects only that period or in the period of the revision and future periods if the revision affects both current and future periods. a. Deferred tax
The realizability of the deferred tax asset mainly depends on whether sufficient future profits or taxable temporary differences will be available. In cases where the actual future profits generated are less than expected, a material reversal of deferred tax assets may arise, which would be recognized in profit or loss for the period in which such a reversal takes place.
b. Valuation of inventory Net realizable value of inventory is the estimated selling price in the ordinary course of business less the estimated costs of completion and the estimated costs necessary to make the sale. The estimation of net realizable value is based on current market conditions and the historical experience from selling products of a similar nature. Changes in market conditions may have a material impact on the estimation of net realizable value.
c. Useful lives and impairment of plant, property and equipment As described in Note 4, the Group reviews the estimated useful lives and recoverable amount of property, plant and equipment at the end of each reporting period. During the current period, the Group reassessed the useful lives of plant, property, and equipment in view of expected economic benefits. Since July 1, 2013, the useful life of facilities ranged from 11 years to 15 years and machinery and equipment from 6 years to 8 years. The financial effect of this reassessment is to decrease depreciation expense by $987,784 thousand from July 1 to December 31, 2013.
d. Recognition and measurement of defined benefit retirement plans Accrued pension liabilities and the resulting pension expense under defined retirement plans are calculated using the Projected Unit Credit Method. Actuarial assumptions comprise the discount rate, rate of employee turnover, and long-term average future salary increase. Changes in economic circumstances and market conditions will affect these assumptions and may have a material impact on the amount of the expense and the liability.
e. Impairment of accounts receivable
Objective evidence of impairment used in evaluating impairment loss includes estimated future cash flows. The amount of impairment loss recognized is the difference between the asset’s carrying amount and the present value of estimated future cash flows, discounted at the financial asset’s original effective interest rate. If the future cash flows are lower than expected, significant impairment loss may be recognized.
6. CASH AND CASH EQUIVALENTS
December 31,
2013 December 31,
2012 January 1,
2012 Cash on hand $ 751 $ 713 $ 640 Checking accounts and demand deposits 6,831,028 3,965,800 5,144,028 Repurchase agreements collateralized by bonds 838,600 1,744,400 751,013 $ 7,670,379 $ 5,710,913 $ 5,895,681
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a. The Group has time deposits pledged to secure land lease at a science park, customs tariff obligation, purchase orders of materials and sales deposits which are reclassified as “other non-current assets”:
December 31,
2013 December 31,
2012 January 1,
2012 Time deposits $ 131,547 $ 132,160 $ 139,964
b. The Group has partial time deposits which were not held for the purpose of meeting short-term cash
commitments and are reclassified to “other receivables”:
December 31,
2013 December 31,
2012 January 1,
2012 Time deposits $ 1,041 $ 104,015 $ 106,916
7. FINANCIAL INSTRUMENTS AT FAIR VALUE THROUGH PROFIT OR LOSS
December 31,
2013 December 31,
2012 January 1,
2012 Financial assets at FVTPL - current Derivative financial assets (not under hedge
accounting) Forward exchange contracts $ - $ 25,188 $ 215
Non-derivative financial assets Listed shares and emerging market shares - 3,533 3,461
$ - $ 28,721 $ 3,676 Financial liabilities at FVTPL - current Derivative financial liabilities (not under hedge
accounting) Forward exchange contracts $ 16,545 $ - $ -
At the end of the reporting period, outstanding forward expense contracts not under hedge accounting were follows:
Currencies Maturity Date Contract Amount
(In Thousands) December 31, 2013 Sell forward exchange contracts USD to NTD 2014.01.02-2014.03.28 USD77,800/NTD2,299,753 December 31, 2012 Sell forward exchange contracts USD to NTD 2013.01.03-2013.03.14 USD137,000/NTD3,989,235 Buy forward exchange contracts NTD to USD 2013.02.07 NTD289,220/USD10,000 January 1, 2012 Sell forward exchange contracts USD to NTD 2012.01.03-2012.03.02 USD62,000/NTD1,875,747 Sell forward exchange contracts USD to JPY 2012.01.05 USD925/JPY72,000
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The Group entered into derivative financial instruments to manage exposures to exchange rate fluctuations of foreign currency denominated assets and liabilities.
8. AVAILABLE-FOR-SALE FINANCIAL ASSETS
December 31,
2013 December 31,
2012 January 1,
2012 Listed stocks
Hannstar Display Corporation $ 696,747 $ 192,061 $ 168,612 Walton Advanced Engineering Inc. 535,670 420,526 480,601 Walsin Lihwa Corporation 401,520 - 143,880 Walsin Technology Corporation 102,958 91,504 103,859 Telit Communications PLC 53,218 - - Capella Microsystems Inc. - - 69,563 Chaintech Corp. - - 5,760 Japan Material Co., Ltd. - - 14,097 Emerging Memory & Logic Solution Inc. - - 140,738
Private-placement shares of listed company Hannstar Display Corporation 281,070 64,530 129,600
$ 2,071,183 $ 768,621 $ 1,256,710 Current $ 1,790,113 $ 704,091 $ 902,713 Non-current 281,070 64,530 353,997 $ 2,071,183 $ 768,621 $ 1,256,710 In January 2011, the Group acquired 108,000,000 private-placement shares of Hannstar Display Corporation, dividend per shares NT$5 dollars. According to Securities and Exchange Act, the private-placement shares of Hannstar Display Corporation could be resold freely in an active market only after 3 years from the delivery date and permitted by the controlling authorities. In September 2012, Hannstar Display Corporation carried out a capital reduction to offset a deficit, and the proportion of capital reduction is 50%. The Group deducted 54,000,000 private-placement shares of Hannstar Display Corporation. There were 27,000,000 of Hannstar Display Corporation’s private-placement shares held by the Group which are decreased due to WIN (dissolved company) was merged by Chin Xin Investment Co., Ltd on December 31, 2012. As of December 31, 2013, the Group held 27,000,000 of Hannstar Display Corporation’s private-placement shares.
9. NOTES AND ACCOUNTS RECEIVABLE
December 31,
2013 December 31,
2012 January 1,
2012 Notes receivable $ 814 $ 327 $ 534 Accounts receivable 5,028,740 4,721,523 4,426,386 Less: Allowance for doubtful accounts (123,387) (112,603) (312,492) $ 4,906,167 $ 4,609,247 $ 4,114,428 The average credit period for sales of goods was 30-60 days. Allowance for doubtful accounts is based on estimated irrecoverable amounts determined by reference to aging of receivables, past default experience of the counterparties and an analysis of their financial position.
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The aging of accounts receivable were as follows:
December 31,
2013 December 31,
2012 January 1,
2012 Not overdue $ 4,618,613 $ 4,406,427 $ 4,036,086 Overdue under 30 days 364,054 295,019 164,405 Overdue 31-60 days 31,878 9,796 2,888 Overdue 61 days and longer 14,195 10,281 223,007 $ 5,028,740 $ 4,721,523 $ 4,426,386 Movements in the allowance for doubtful accounts recognized on accounts receivable were as follows: For the Year Ended December 31 2013 2012 Balance at January 1 $ 112,603 $ 312,492 Less: Amounts written off - (212,254) Add: Impairment losses recognized on accounts receivable 11,468 12,365 Effect of exchange rate changes (684) - Balance at December 31 $ 123,387 $ 112,603 The Group’s receivables were aged on a collective basis and not on individual account basis.
10. FINANCE LEASE RECEIVABLES
December 31,
2013 December 31,
2012 January 1,
2012 Gross investment in leases Not later than one year $ 148,734 $ - $ - Later than one year and not later than five years 672,610 - - 821,344 - - Less: Unearned finance income (348,261) - - Present value of minimum lease payments $ 473,083 $ - $ - Finance lease receivables Not later than one year (recorded as “other
receivables”) $ 32,647 $ - $ - Later than one year and not later than five years
(recorded as “other non-current assets”) 440,436 - - Financial lease receivables $ 473,083 $ - $ - The Group entered into finance lease arrangements for certain machinery. All leases were denominated in New Taiwan dollars. The term of finance leases entered into was 3 years. The interest rate inherent in the leases was fixed at contract date for the entire lease term. As of December 31, 2013, the interest rate inherent in the finance lease was 1.7% per annum. Financial lease receivables are secured by the leased machinery. The Group is not permitted to sell or repledge the collateral in the absence of default by the lessee.
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During 2013, the carrying value of $527,656 thousand of the machinery which was reclassified to financial lease receivables was pledged to secure long-term borrowings. The finance lease receivables as of December 31, 2013 were neither past due nor impaired.
11. INVENTORIES
December 31,
2013 December 31,
2012 January 1,
2012 Finished goods $ 1,528,832 $ 1,643,222 $ 1,720,658 Work-in-process 5,086,226 6,091,663 5,123,038 Raw materials and supplies 329,429 357,001 398,506 Inventories in transit 29,400 16,791 30,360 $ 6,973,887 $ 8,108,677 $ 7,272,562 a. Gain on recovery of loss of inventory of $177,945 thousand and loss on write-down of inventories of
$158 thousand were recognized in cost of sales for the years ended December 31, 2013 and 2012, respectively. Gain on recovery of decline in market value amounted to $268,631 thousand and $85,930 thousand in the years ended December 31, 2013 and 2012, due to net realizable value improvement.
b. Unallocated fixed manufacturing costs recognized as cost of sales in the years ended December 31,
2013 and 2012 amounted to $553,302 thousand and $513,589 thousand, respectively.
12. HELD-TO-MATURITY FINANCIAL ASSETS
December 31,
2013 December 31,
2012 January 1,
2012 Chinatrust Commercial Bank 1st Unsecured
Financial Debentures in 2013 $ 97,770 $ - $ - On March 12, 2013, the Company bought 3-year financial bonds issued by Chinatrust Commercial Bank with a coupon rate and an effective interest rate of 2.9%, at par value of RMB20,000 thousand.
13. FINANCIAL ASSETS MEASURED AT COST, NON-CURRENT
December 31,
2013 December 31,
2012 January 1,
2012 LTIP Trust Fund $ 466,144 $ 466,144 $ 466,144 United Industrial Gases Co., Ltd. 81,081 81,081 154,867 Yu-Ji Venture Capital Co., Ltd. 40,000 24,000 24,000 Harbinger III Venture Capital Corp. 23,488 39,808 39,678 Strategic Value II Liquidating Trust 2,051 2,051 15,752 Ta Cherng Investing Co. - - 199,870 Walsin Color Corporation - - 121,197 YH Bio Explore & Application Co., Ltd. - - 83,011
(Continued)
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December 31,
2013 December 31,
2012 January 1,
2012 Vita Genomic, Inc. $ - $ - $ 30,693 Others 43,912 65,504 166,455 $ 656,676 $ 678,588 $ 1,301,667
(Concluded) a. Management believed that the above unlisted equity investments held by the Group have fair value that
cannot be reliably measured because the range of reasonable fair value estimates was so significant; therefore they were measured at cost less impairment at the end of reporting period.
b. The Group recognized an impairment loss of $783 thousand and $25,030 thousand for the years ended
December 31, 2013 and 2012, respectively. 14. INVESTMENTS ACCOUNTED FOR USING EQUITY METHOD
December 31, 2013 December 31, 2012 January 1, 2012
Name of Associate Carrying Value Ownership Percentage Carrying Value
Ownership Percentage Carrying Value
Ownership Percentage
Unlisted companies
Chin Xin Investment Co., Ltd. $ 2,323,058 38 $ 1,654,103 35 $ - - Nyquest Technology Co., Ltd. 84,036 27 72,430 29 65,092 30 $ 2,407,094 $ 1,726,533 $ 65,092
The summarized financial information in respect of the Group’s associates is set out below:
December 31,
2013 December 31,
2012 January 1,
2012 Total assets $ 6,675,580 $ 6,083,027 $ 310,788 Total liabilities $ 140,224 $ 107,276 $ 113,858 For the Year Ended December 31 2013 2012 Revenue $ 727,387 $ 545,923 Net (loss) income $ (894,912) $ 42,050 Other comprehensive income $ 1,476,726 $ 9 Group’s share of profits (loss) of associates for the year $ (92,057) $ 14,458 In November 2012, the Company bought 40,000 thousand shares of Chin Xin Investment Co., Ltd. from related-party Walsin Lihwa Corporation. On December 31, 2012, WIN a subsidiary of the Company was merged into Chin Xin Investment Co., Ltd., and accordingly WIN was dissolved. The Company acquired 130,713 thousand shares of Chin Xin Investment Co., Ltd. after such merger. In fourth quarter of 2013, the Company acquired 12,128 thousand shares of Chin Xin Investment Co., Ltd. from related-party Walsin Lihwa Corporation. As of December 31, 2013, the Company had 182,841 thousand shares of Chin Xin Investment Co., Ltd. with a 38% ownership interest. The investments accounted for by the equity method and the share of profit or loss and other comprehensive income of those investments for the years ended December 31, 2013 and 2012 were based on the associates’ financial statements audited by independent auditors for the same years.
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15. PROPERTY, PLANT AND EQUIPMENT
December 31,
2013 December 31,
2012 January 1,
2012 Land $ 872,339 $ 870,460 $ 873,493 Buildings 8,567,718 9,560,270 10,703,659 Machinery and equipment 14,029,546 18,106,622 22,922,777 Other equipment 341,995 386,415 523,001 Construction in progress and prepayments for
purchase of equipment 992,427 97,347 126,609 $ 24,804,025 $ 29,021,114 $ 35,149,539
Land Building Machinery and
Equipment Other
Equipment
Construction in Progress and Prepayments
for Purchase of Equipment Total
Cost Balance at January 1, 2013 $ 870,460 $ 20,067,447 $ 78,216,631 $ 2,888,473 $ 97,347 $ 102,140,358 Additions - 55,686 1,481,372 95,051 951,598 2,583,707 Disposals - (47,654 ) (394,560 ) (26,153 ) - (468,367 ) Reclassified - 51,475 (599,060 ) 4,103 (56,518 ) (600,000 ) Effect of foreign currency
exchange differences 1,879 6,492 4,323 14,798 - 27,492 Balance at December 31, 2013 $ 872,339 $ 20,133,446 $ 78,708,706 $ 2,976,272 $ 992,427 $ 103,683,190 Accumulated depreciation and impairment Balance at January 1, 2013 $ - $ 10,507,177 $ 60,110,009 $ 2,502,058 $ - $ 73,119,244 Depreciation expenses - 1,099,972 5,028,125 144,660 - 6,272,757 Disposals - (44,774 ) (389,778 ) (24,932 ) - (459,484 ) Reclassified - - (72,344 ) - - (72,344 ) Effect of foreign currency
exchange differences - 3,353 3,148 12,491 - 18,992 Balance at December 31, 2013 $ - $ 11,565,728 $ 64,679,160 $ 2,634,277 $ - $ 78,879,165 Cost Balance at January 1, 2012 $ 873,493 $ 19,963,440 $ 76,529,259 $ 2,822,391 $ 126,609 $ 100,315,192 Additions - 171,123 2,332,996 70,205 75,928 2,650,252 Disposals - (17,282 ) (655,367 ) (15,737 ) - (688,386 ) Reclassified - (35,159 ) 12,832 19,204 (105,190 ) (108,313 ) Effect of foreign currency
exchange differences (3,033 ) (14,675 ) (3,089 ) (7,590 ) - (28,387 ) Balance at December 31, 2012 $ 870,460 $ 20,067,447 $ 78,216,631 $ 2,888,473 $ 97,347 $ 102,140,358 Accumulated depreciation and impairment Balance at January 1, 2012 $ - $ 9,259,781 $ 53,606,482 $ 2,299,390 $ - $ 65,165,653 Depreciation expenses - 1,285,502 7,140,379 223,530 - 8,649,411 Disposals - (8,671 ) (634,305 ) (14,820 ) - (657,796 ) Reclassified - (23,390 ) - - - (23,390 ) Effect of foreign currency
exchange differences - (6,045 ) (2,547 ) (6,042 ) - (14,634 ) Balance at December 31, 2012 $ - $ 10,507,177 $ 60,110,009 $ 2,502,058 $ - $ 73,119,244
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a. As of December 31, 2013, December 31, 2012 and January 1, 2012, the carrying values of $13,458,619 thousand, $20,557,599 thousand and $20,906,790 thousand of land and 12-inch Fab manufacturing facilities were pledged to secure long-term borrowings. The Group was not permitted to sell or pledge all of these pledged assets.
b. Information about capitalized interest
For the Year Ended December 31 2013 2012 Capitalized interest amounts $ 39,120 $ 49,146 Capitalized interest rate 2.40%-2.65% 2.62%-2.70%
16. INVESTMENT PROPERTIES
December 31,
2013 December 31,
2012 January 1,
2012 Investment properties, net $ 80,401 $ 80,747 $ - Management was unable to reliably measure the fair value of investment property located at Shen-Zhen, China. The market for comparable properties is inactive and alternative reliable measurements of fair value are not available; therefore, the Group determined that the fair value of the investment property is not reliably measurable.
Investment Properties
Cost Balance at January 1, 2013 $ 105,724 Effect of foreign currency exchange differences 6,138 Balance at December 31, 2013 $ 111,862 Accumulated depreciation and impairment Balance at January 1, 2013 $ 24,977 Depreciation expenses 4,935 Effect of foreign currency exchange differences 1,549 Balance at December 31, 2013 $ 31,461 Cost Balance at January 1, 2012 $ - Reclassified 105,718 Effect of foreign currency exchange differences 6 Balance at December 31, 2012 $ 105,724
(Continued)
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Investment Properties
Accumulated depreciation and impairment Balance at January 1, 2012 $ - Reclassified 23,390 Depreciation expenses 1,591 Effect of foreign currency exchange differences (4) Balance at December 31, 2012 $ 24,977
(Concluded)
17. INTANGIBLE ASSET
December 31,
2013 December 31,
2012 January 1,
2012 Deferred technical assets, net $ 192,588 $ 179,372 $ 638,357 Other intangible assets, net 1,359 3,938 834 $ 193,947 $ 183,310 $ 639,191
Deferred Technical
Assets
Other Intangible
Assets Total Cost Balance at January 1, 2013 $ 18,271,946 $ 26,948 $ 18,298,894 Addition 155,279 384 155,663 Disposals - (2,740) (2,740) Effect of foreign currency exchange differences 6,401 (3,183) 3,218 Balance at December 31, 2013 $ 18,433,626 $ 21,409 $ 18,455,035 Accumulated amortization and impairment Balance at January 1, 2013 $ 18,092,574 $ 23,010 $ 18,115,584 Amortization expenses 142,942 3,001 145,943 Disposals - (2,740) (2,740) Effect of foreign currency exchange differences 5,522 (3,221) 2,301 Balance at December 31, 2013 $ 18,241,038 $ 20,050 $ 18,261,088 Cost Balance at January 1, 2012 $ 18,133,430 $ 26,902 $ 18,160,332 Addition 141,771 964 142,735 Reclassified - 2,596 2,596 Effect of foreign currency exchange differences (3,255) (3,514) (6,769) Balance at December 31, 2012 $ 18,271,946 $ 26,948 $ 18,298,894
(Continued)
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Deferred Technical
Assets
Other Intangible
Assets Total Accumulated amortization and impairment Balance at January 1, 2012 $ 17,495,073 $ 26,068 $ 17,521,141 Amortization expenses 599,104 420 599,524 Effect of foreign currency exchange differences (1,603) (3,478) (5,081) Balance at December 31, 2012 $ 18,092,574 $ 23,010 $ 18,115,584
(Concluded) The amounts of deferred technical assets were the technical transfer fee in connection with certain technical transfer agreements. The above technical assets pertained to different products or process technology. The assets were depreciated on a straight-line basis from the commencement of production, and over the estimated useful life of the assets: Deferred technical assets - economic benefits or terms of the contracts and other intangible assets - 3-5 years.
18. BORROWINGS
December 31,
2013 December 31,
2012 January 1,
2012 Short-term borrowings $ 2,072,708 $ 2,716,474 $ 1,681,092 Short-term bills payable $ - $ 499,376 $ 199,763 Long-term borrowings $ 9,939,290 $ 11,033,330 $ 15,124,990
a. Short-term borrowings
December 31, 2013 December 31, 2012 January 1, 2012 Interest Rate Amount Interest Rate Amount Interest Rate Amount Bank lines of credit 1.08%-2.36% $ 2,026,570 1.33%-1.87% $ 2,562,100 1.89%-2.58% $ 141,500 Materials procurement loans 1.06% 46,138 1.11%-1.70% 154,374 1.09%-2.73% 1,539,592 $ 2,072,708 $ 2,716,474 $ 1,681,092
b. Short-term bills payable
December 31,
2013 December 31,
2012 January 1,
2012 Commercial paper payable $ - $ 500,000 $ 200,000 Less: Unamortized discount on commercial
paper payables - (624) (237) $ - $ 499,376 $ 199,763
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Outstanding short-term bills payable were as follows: December 31, 2012
Bills Financial Corporation Nominal Amount
Discount Amount
Carrying Value Interest Rate
China bills $ 200,000 $ 142 $ 199,858 0.85% MEGA bills 300,000 482 299,518 1.15% $ 500,000 $ 624 $ 499,376 January 1, 2012
Bills Financial Corporation Nominal Amount
Discount Amount
Carrying Value Interest Rate
China bills $ 200,000 $ 237 $ 199,763 0.92%
c. Long-term borrowings
December 31, 2013 December 31,
2012 January 1,
2012 Period Interest Rate Amount Amount Amount
Chinatrust Commercial Bank syndication
agreement (II) 2008.06.27-2013.06.27 - $ - $ 1,283,330 $ 3,849,990
Bank of Taiwan syndication agreement (I)
2009.07.27-2012.07.27 - - - 2,775,000
Bank of Taiwan syndication agreement (II)
2010.06.18-2015.06.18 2.81%-3.11% 1,650,000 4,850,000 6,000,000
Bank of Taiwan syndication agreement (III)
2011.12.23-2016.12.23 2.33%-2.64% 3,289,290 2,900,000 2,500,000
Chinatrust Commercial Bank syndication agreement (III)
2012.12.27-2015.12.27 2.24%-2.65% 5,000,000
2,000,000
-
9,939,290 11,033,330 15,124,990 Less: Current portion (3,863,097 ) (4,483,330 ) (7,158,327 ) $ 6,076,193 $ 6,550,000 $ 7,966,663 1) Chinatrust Commercial Bank Syndication Agreement (II)
a) On June 4, 2008, the Company entered into a syndication agreement, amounting to $7.7 billion,
with a group of financial institutions to procure equipment for 12-inch Fab. b) The principal will be repaid every six months from December 27, 2010 until maturity. c) Please refer to Note 15 for collateral on bank borrowing. d) The agreement was fully redeemed on January 25, 2013.
2) Bank of Taiwan Syndication Agreement (I) a) On July 15, 2009, the Company entered into a syndication agreement, amounting to $3.7 billion,
with a group of financial institutions to fund the long-term loan payments and finance the working capital.
b) The principal will be repaid every three months from October 27, 2011 until maturity. c) Please refer to Note 15 for collateral on bank borrowing and the chairman of the Company is a
joint guarantor.
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d) The agreement was fully redeemed on July 27, 2012.
3) Bank of Taiwan Syndication Agreement (II)
a) On May 31, 2010, the Company entered into a syndication agreement, with a group of financial institutions to procure equipment for 12-inch Fab and fund the long-term loan payments, credit line was divided into parts a and b, which amounted to $3.3 billion and $3.5 billion, respectively; the total line of credit $6.8 billion.
b) Part A will be repaid every six months from December 18, 2012 until maturity; part B will be
repaid from June 18, 2012 at 20%, 20% and 60% of the principal, respectively. c) Please refer to Note 15 for collateral on bank borrowing and Note 28 for the joint guarantor.
4) Bank of Taiwan Syndication Agreement (III) a) On September 19, 2011, the Company entered into a syndication agreement, the original amount
of $7 billion was deducted $0.25 billion because prepayment, finally amounting to $6.75 billion, with a group of financial institutions to procure equipment for 12-inch Fab.
b) The Company changed the terms and repayment schedule of the agreement on December 18,
2013. The loan utilized before December 22, 2013 will be repaid every six months from June 23, 2014 and the loan utilized after December 22, 2013 will be repaid every six months at 30%, 30% and 40% from December 23, 2015, respectively.
c) Please refer to Note 15 for collateral on bank borrowing.
5) Chinatrust Commercial Bank Syndication Agreement (III) a) On November 19, 2012, the Company entered into a syndication agreement, amounting to $5
billion, with a group of financial institutions to fund the long-term loan payments and finance the working capital.
b) The principal will be repaid every six months from December 27, 2014 until maturity. c) Please refer to Note 15 for collateral on bank borrowing.
The Company is required to maintain certain financial covenants, including current ratio, debt ratio and tangible net equity, on June 30 and December 31 during the tenors of the loans. Additionally, the principal and interest coverage should be also maintained on December 31 during the tenors of the loans except for the interest coverage ratio of Bank of Taiwan Syndication Agreement (II), (III) and Chinatrust Commercial Bank Syndication Agreement (III) which should be maintained on June 30 and December 31. The computations of financial ratios mentioned above are done based on the audited consolidated financial statements.
19. RETIREMENT BENEFIT PLANS
a. Defined contribution plan
The Company, MMDC and NTC 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.
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The employees of the Group’s subsidiaries in the United States, Japan, Hong Kong, Israel, and China are members of a state-managed retirement benefit plan operated by the government of each country. The subsidiaries are required to contribute a specified percentage of payroll costs to the retirement benefit scheme to fund the benefits. The only obligation of the Group with respect to the retirement benefit plan is to make the specified contributions.
b. Defined benefit plan The Company, MMDC and NTC of the Group adopted the defined benefit plan under the Labor Standards Law, under which pension benefits are calculated on the basis of the length of service and average monthly salaries of the six months before retirement. The Company, MMDC and NTC 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. The actuarial valuations of plan assets and the present value of the defined benefit obligation were carried out by qualified actuaries. The principal assumptions used for the purposes of the actuarial valuations were as follows:
December 31,
2013 December 31,
2012 January 1,
2012 Discount rate 2.25% 1.75% 2% Expected return on plan assets 1.25% 2% 2% Expected rate of salary increase 1%-3% 1%-3% 1%-3% Amounts recognized in profit or loss in respect of these defined benefit plans were as follows:
For the Year Ended December 31 2013 2012 Current service cost $ 37,032 $ 36,800 Interest cost 33,086 33,519 Expected return on plan assets (19,236) (19,177) $ 50,882 $ 51,142 Analysis by function
Manufacturing expense $ 22,332 $ 21,717 Selling expenses 2,647 2,839 General and administrative expenses 4,418 4,361 Research and development expenses 21,485 22,225
$ 50,882 $ 51,142 Actuarial gains and losses recognized in other comprehensive income for the years ended December 31, 2013 and 2012 were gain of $36,810 thousand and loss of $187,984 thousand, respectively. The cumulative amount of actuarial losses recognized in other comprehensive income as of December 31, 2013 and 2012 were loss of $151,174 thousand and $187,984 thousand, respectively.
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The amount included in the consolidated balance sheet in respect of the Group’s obligation on its defined benefit plan was as follows:
December 31,
2013 December 31,
2012 January 1,
2012 Present value of funded defined benefit
obligation $ 1,895,781 $ 1,915,135 $ 1,694,184 Fair value of plan assets (966,328) (972,378) (963,432) Accrued pension liabilities $ 929,453 $ 942,757 $ 730,752 Movements in present value of funded defined benefit obligation were as follows:
For the Year Ended December 31 2013 2012 Opening defined benefit obligation $ 1,915,135 $ 1,694,184 Current service cost 37,032 36,800 Interest cost 33,086 33,519 Actuarial (gain) loss (43,714) 178,186 Benefit paid of plan assets (45,758) (27,554) Closing defined benefit obligation $ 1,895,781 $ 1,915,135 Movements in fair value of plan assets were as follows:
For the Year Ended December 31 2013 2012 Opening fair value of plan assets $ 972,378 $ 963,432 Actual return on plan assets 12,232 9,380 Contributions of plan assets 27,476 27,120 Benefit paid of plan assets (45,758) (27,554) Closing fair value of plan assets $ 966,328 $ 972,378 The major categories of plan assets at the end of reporting period were disclosed based on the information announced by Labor Pension Fund Supervisory Committee. The overall expected rate of return was based on historical return trends and analysts’ predictions of the market for the asset over the life of the related obligation, with reference to the use of the Labor Pension Fund by Labor Pension Fund Supervision Committee, taking into consideration the effect of possible differences between the guaranteed minimum income and the return on local banks’ two-year time deposits. The Group expects to make a contribution of $66,479 thousand to the defined benefit plan during the annual period beginning after 2014.
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20. EQUITY a. Common stock
December 31,
2013 December 31,
2012 January 1,
2012 Number of shares authorized (in thousands) 6,700,000 6,700,000 6,700,000 Share authorized $ 67,000,000 $ 67,000,000 $ 67,000,000 Number of shares issued and fully paid (in
thousands) 3,694,023 3,685,601 3,680,230 Share issued $ 36,940,232 $ 36,856,012 $ 36,802,302 Reconciliation of the Company outstanding share:
Shares
(In Thousands) Capital January 1, 2013 3,685,601 $ 36,856,012 Employee executed the stock options 8,422 84,220 December 31, 2013 3,694,023 $ 36,940,232 January 1, 2012 3,680,230 $ 36,802,302 Employee executed the stock options 5,371 53,710 December 31, 2012 3,685,601 $ 36,856,012 As of December 31, 2012, the balance of the Company’s capital account amounted to $36,856,012 thousand, divided into 3,685,601 thousand shares at par $10.00 per share. Employees executed the stock options at $3.02 to $6.46 per share totaling 8,422 thousand shares during the year of 2013. As of December 31, 2013, the balance of the Company’s capital account amount to $36,940,232 thousand, divided into 3,694,023 thousand shares at par $10.00 per share.
b. Retained earnings and dividend policy According to the Company Law of the ROC and the Company’s Articles of Incorporation, if the Company has surplus earnings at the end of a fiscal year, after covering all losses incurred in prior years and paying all taxes, the Company shall set aside 10% of said earnings as legal reserve. However, legal reserve need not be made when the accumulated legal reserve equals the paid-in capital of the Company. After setting aside or reversing special reserve pursuant to applicable laws and regulations and orders of competent authorities from (1) the remaining amount plus undistributed retained earnings; or (2) the differences between the undistributed retained earnings and the losses suffered by the Company at the end of a fiscal year if the losses can be fully covered by the undistributed retained earnings, the Company shall distribute the remaining amount (if not otherwise set aside as special reserve and reserved based on business needs) in the following order: a. 1% to 2% as remuneration to directors and supervisors; b. 10% to 15% as bonus to employees; c. The remaining amount as bonus to shareholders. Not less than 10% of the total shareholders
bonus shall be distributed in form of cash.
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“Employees” referred to in item b of the preceding paragraph, when distributing the stock bonus, include the employees of subsidiaries of the Company meeting certain criteria. The board of directors is authorized to determine the above “certain criteria” or the board of directors may authorize the Chairman to ratify the above “certain criteria”. The Company’s results were loss for the years ended December 31, 2012 and 2011, so the stockholders’ meetings on June 19, 2013 and June 15, 2012 did not include appropriations of earnings. The Company’s results were loss for the year ended December 31, 2013; the Company’s board of directors determined not to make appropriation of earnings on March 28, 2014. The relevant information about the Company is available on MOPS. The Company had operating loss in the years 2013, 2012 and 2011; thus it did not estimate bonus to employees, directors and supervisors. Under Rule No. 1010012865 issued by the FSC on April 6, 2012 and the directive titled “Questions and Answers for Special Reserves Appropriated Following Adoption of IFRSs”, on the first-time adoption of IFRSs, a company should appropriate a special reserve of an amount the same as that of unrealized revaluation increment and cumulative translation differences (gains) transferred to retained earnings as a result of the Company’s use of exemptions under IFRS 1. At the transition date for the first-time adoption of IFRS, the Company had negative retained earnings; thus, the rule was not applicable to the Company.
c. Capital surplus Movements in the capital surplus for the years ended December 31, 2013 and 2012 were as follows:
Employee
Stock Option Treasury Stock
Change in Equity of Associates
Accounted for Using Equity
Method Others Total January 1, 2012 $ 13,960 $ 1,971,862 $ 2,453 $ 222,784 $ 2,211,059 Change in equity of associates
accounted for using equity method - - (255) - (255)
Write-off of equity due to merger of subsidiary - - 3,886 - 3,886
Issuance of ordinary shares under employee stock options (4,816) - - (32,673) (37,489)
Compensation cost of employee stock options 141 - - - 141
December 31, 2012 9,285 1,971,862 6,084 190,111 2,177,342 Issuance of ordinary shares
under employee stock options (7,588) - - (50,742) (58,330) Change in equity of associates
accounted for using equity method - - 29,347 - 29,347
December 31, 2013 $ 1,697 $ 1,971,862 $ 35,431 $ 139,369 $ 2,148,359 The capital surplus arising from treasury stock transactions, and the excess of the consideration received over the carrying amount of the subsidiaries’ net assets during disposal or acquisition may be distributed as cash dividends or transferred to share capital, provided the Company has no deficit, and transfer is limited to a certain percentage of the Company’s capital surplus and made once a year. The capital surplus from investments accounted for using equity method and employee stock options may not be used for any purpose.
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d. Other equity items
Exchange differences on translation of foreign financial statements are the exchange differences on net assets of foreign operations translated into the Company’s functional currency (New Taiwan dollar), which are recognized directly in other comprehensive income. For the years ended December 31, 2013 and 2012, the Company recognized gain of $22,181 thousand and loss of $81,748 thousand in other comprehensive income, respectively. Unrealized gain (loss) on available-for-sale financial assets For the Year Ended December 31 2013 2012 Balance, beginning of year $ (1,408,417) $ (1,461,970) Unrealized gains (losses) arising on revaluation of
available-for-sale financial assets 876,993 13,648 Share of unrealized gain on revaluation of available-for-sale
financial assets of associates accounted for using the equity method 610,479 39,905
Balance, end of year $ 79,055 $ (1,408,417)
e. Non-controlling interests
For the Year Ended December 31 2013 2012 Balance, beginning of year $ 1,109,483 $ 1,031,924 Attributable to non-controlling interests
Share of profit for the year 80,802 238,326 Exchange difference on translation of foreign financial
statements 20,958 (11,527) Actuarial gains and loss arising from defined benefit plans 395 (38,374) Change in capital surplus from investments in associates
accounted for using equity method 133 (248) Others (137,589) (110,618) Balance, end of year $ 1,074,182 $ 1,109,483
f. Treasury stock
1) Treasury stock transactions for the year of 2013 were summarized as follows:
Purpose of Buyback
Treasury Stock Held as of January 1,
2013
Increase During the
Year
Decrease During the
Year
Treasury Stock Held as
of December 31,
2013 Common shares held by
subsidiaries 7,518,364 - - 7,518,364
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2) Treasury stock transactions for the year of 2012 were summarized as follows:
Purpose of Buyback
Treasury Stock Held as of January 1,
2012
Increase During the
Year
Decrease During the
Year
Treasury Stock Held as
of December 31,
2012 Common shares held by
subsidiaries 7,518,364 - - 7,518,364 The Company’s shares held by its subsidiaries at the end of the reporting periods were as follows:
Name of Subsidiary Number of
Shares Held Carrying Value Market Value December 31, 2013 Baystar Holdings Ltd. 7,518,364 $ 106,387 $ 60,147 December 31, 2012 Baystar Holdings Ltd. 7,518,364 $ 106,387 $ 37,968 January 1, 2012 Baystar Holdings Ltd. 7,518,364 $ 106,387 $ 31,571 The purpose of holding the shares is to maintain stockholders’ equity. The Company’s shares held by subsidiaries were treated as treasury stock, and the holders are entitled to the rights of stockholders, except for the right to participate in the Company’s share issuance for cash and vote in stockholders’ meeting when the subsidiary held more than 50%. Other rights are the same as common stock.
21. EMPLOYEE BENEFITS EXPENSE, DEPRECIATION, AND AMORTIZATION
Year Ended December 31, 2013
Classified as Operating
Costs
Classified as Operating Expenses
Classified as Non-operating
Income and Losses Total
Short-term employee benefits $ 2,057,003 $ 2,800,153 $ - $ 4,857,156 Post-employment benefits $ 106,015 $ 134,375 $ - $ 240,390 Other long-term employment
benefits $ - $ 44,633 $ - $ 44,633 Depreciation $ 6,078,748 $ 191,396 $ 7,548 $ 6,277,692 Amortization $ 47,290 $ 99,041 $ 22,811 $ 169,142
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Year Ended December 31, 2012
Classified as Operating
Costs
Classified as Operating Expenses
Classified as Non-operating
Income and Losses Total
Short-term employee benefits $ 2,024,940 $ 2,680,061 $ - $ 4,705,001 Post-employment benefits $ 102,630 $ 125,184 $ - $ 227,814 Other long-term employment
benefits $ - $ 39,222 $ - $ 39,222 Depreciation $ 8,483,615 $ 163,193 $ 4,194 $ 8,651,002 Amortization $ 44,756 $ 555,148 $ 18,717 $ 618,621
22. INCOME TAXES RELATING TO CONTINUING OPERATIONS
a. Income tax recognized in profit or loss
The major components of income tax expense were as follows:
For the Year Ended December 31 2013 2012 Current income tax $ 177,731 $ (198,922) In respect of prior years 40,688 11,197 Deferred tax 52,869 362,762 Income tax expense recognized in profit or loss $ 271,288 $ 175,037 Reconciliation of accounting profit and income tax expense is as follows:
For the Year Ended December 31 2013 2012 Profit (loss) before tax from continuing operations $ 157,662 $ (149,348) Adjustments
Permanent differences (3,187) (62,125) Others 5,256 6,551
Additional income tax on unappropriated earnings 18,000 6,000 Current income tax 177,731 (198,922) Deferred income tax 52,869 362,762 Adjustment for prior years’ tax 40,688 11,197 Income tax expense recognized in profit or loss $ 271,288 $ 175,037 The applicable tax rate used above is the corporate tax rate of 17% payable by the Group in ROC, while the applicable tax rate used by subsidiaries in China is 25%. Tax rates used by other group entities operating in other jurisdictions are based on the tax laws in those jurisdictions.
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b. Current tax liabilities
December 31,
2013 December 31,
2012 January 1,
2012 Income tax payables (recorded as “other
payables”) $ 122,350 $ 106,552 $ 86,204 c. As of December 31, 2013, December 31, 2012 and January 1, 2012, deferred income tax assets of
$4,088,406 thousand, $4,219,354 thousand and $4,274,277 thousand, respectively were mainly net operating loss carryforwards and investment tax credit.
d. Information about the Group’s investment tax credit, operating loss carryforwards as of December 31, 2013, the Company’s investment tax credit was as follows:
Law Tax Credit Item Credit Expiry Year Statute for Upgrading Industries Machinery equipment $ 239,000 2014 As of December 31, 2013, WECA’s operating loss carryforward was US$15,642 thousand, and will expire in 2025. As of December 31, 2013, the Company’s operating loss carryforwards comprised of: Operating Loss Carryforwards
Expiry Year
$ 3,700,000 2015-2019 559,000 2022 $ 4,259,000 As of December 31, 2013, NTC’s profits attributable to the following expansion projects were exempted from income tax for a five-year period:
Expansion of Construction Project Tax-exemption
Period Advanced integrated circuit design 2014-2018
e. The information on the Company’s integrated income tax was as follows:
December 31,
2013 December 31,
2012 January 1,
2012 Balance of imputation credit account $ 297,186 $ 252,935 $ 217,239 Undistributed earnings for the years of 1997
and before $ - $ - $ - Undistributed deficits for the years of 1998
and thereafter $ (4,187,772) $ (4,430,750) $ (2,418,258) f. The Company’s tax returns through 2010 have been assessed by the tax authorities. NTC’s (a
subsidiary of the Company) tax returns through 2011, except 2010, have been assessed by the tax authorities. NTC disagreed with the tax authorities’ assessment of its 2010 tax return and applied for a re-examination. Nevertheless, to be conservative, the Group provided for the income tax assessed by the tax authorities.
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23. EARNINGS (LOSS) PER SHARE
Year Ended December 31, 2013 Earnings Per Share (NT$)
Amounts (Numerator) After Tax
and
After Tax and Attributable to Owners of
Shares (Denominator)
Attributable to Owners
of the Before Tax the Parent (In Thousands) Before Tax Parent Basic earnings per share
Net income attributed to common shareholders $ 558,654 $ 206,564 3,682,410 $ 0.15 $ 0.06
Effect of potentially dilutive ordinary shares Employee stock option - - 287
Diluted earnings per share Net income attributed to common
shareholders $ 558,654 $ 206,564 3,682,697 $ 0.15 $ 0.06
Year Ended December 31, 2012 Loss Per Share (NT$)
Amounts (Numerator) After Tax
and
After Tax and Attributable to Owners of
Shares (Denominator)
Attributable to Owners
of the Before Tax the Parent (In Thousands) Before Tax Parent Basic loss per share
Net loss attributed to common shareholders $ (1,449,520) $ (1,862,883) 3,676,698 $ (0.39) $ (0.51)
24. SHARE-BASED PAYMENT ARRANGEMENT
Employee Stock Option In 2008 and 2009, the Company granted employee stock options in the quantity of 45,764 thousand and 1,585 thousand units, respectively. Each individual employee stock option is granted the right to purchase the Company’s new issued one common share. The stock options were granted to qualified employees of the Company and its subsidiaries. The stock options granted are valid for 5 years and exercisable at certain percentages after the second anniversary year from the grant date. The stock options were granted at an exercise price equal to the closing price of the Company’s common shares listed on the Taiwan Stock Exchange on the grant date. For any subsequent changes in the Company’s capital surplus, the exercise price and the number of options are adjusted accordingly.
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As of December 31, 2013 and 2012, employee stock options were summarized as follows:
Year Ended December 31 2013 2012
Employee Stock Options
Number of Options (In Thousands)
Weighted Average Exercise
Price (NT$)
Number of Options (In Thousands)
Weighted Average Exercise
Price (NT$)
Outstanding balance, beginning of year 9,774 $ 3.28 15,516 $ 3.20 Options exercised (8,422) 3.07 (5,371) 3.02 Options expired (393) 3.32 (371) 3.49 Outstanding balance, end of year 959 5.08 9,774 3.28 Options exercisable, end of year 959 5.08 9,751 3.28 Information about outstanding options was as follows:
December 31 2013 2012
Range of Exercise Price (NT$)
Weighted Average Remaining
Contractual Life (Years)
Range of Exercise Price (NT$)
Weighted Average Remaining
Contractual Life (Years)
$3.19-$6.46 0.39 $3.02-$6.46 0.90
The Company used the fair value method to evaluate the option using Black-Scholes model, the assumptions and proforma result were as follows: Grant-date share price (NT$) $3.02-$6.46 Exercise price (NT$) $3.02-$6.46 Expected volatility 52.03%-74.48% Expected duration (years) 3.75 Expected dividend yield 0% Risk-free interest rate 0.94%-1.95% Compensation costs recognized under the fair value method were zero and $198 thousand for the years ended December 31, 2013 and 2012, respectively.
25. NON-CASH TRANSACTIONS
2013 2012 Non-cash investing and financing activities
Current portion of long-term borrowings $ 3,863,097 $ 4,483,330 Exchange differences on translation of foreign financial statements $ 22,181 $ (81,748) Unrealized gain on available-for-sale financial assets $ 1,487,472 $ 53,553 Change in equity of associates accounted for using equity method $ 29,347 $ 3,631 Acquisitions of available-for-sale financial assets by offset with
accounts receivable
$ 6,330 $ 86,501 (Continued)
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2013 2012
Property, plant and equipment was reclassified to investment properties
$ - $ 82,328
Property, plants and equipment was reclassified to finance lease receivable
$ 527,656 $ -
(Concluded) 26. OPERATING LEASE ARRANGEMENTS
The Group as Lessee
a. Lease arrangements The Group leased land from Science Park Administration until 2023 and the lease term can extended after the expiration of the lease periods. The Group leased some of the offices in the United States, China, Japan, Israel, and part in Taiwan, and the lease terms will expire between 2013 and 2016 which can be extended after the expiration of the lease periods. As of December 31, 2013, December 31, 2012 and January 1, 2012, deposits paid under operating leases amounted to $19,152 thousand, $15,786 thousand and $16,637 thousand, respectively (recorded as “other non-current assets”).
b. Lease expense 2013 2012 Lease expenditure $ 89,451 $ 88,047
27. CAPITAL MANAGEMENT The Group’s capital management objective is to ensure it has the necessary financial resources and operational plan so that it can cope with the next twelve months working capital requirements, capital expenditures, debt repayments and dividends payments.
28. RELATED PARTY TRANSACTIONS
a. The names and relationships of related parties are as follows:
Related Party Relationship with the Group Walsin Lihwa Corporation Investor that exercises significant influence over
the Group Nyquest Technology Co., Ltd. Associate Global Brands Manufacture Ltd. Related party in substance Walton Advanced Engineering Inc. Related party in substance Global Brands Manufacture (Dongguan) Ltd. Related party in substance Walton Advanced Engineering (Suzhou) Inc. Related party in substance Capella Microsystems Inc. Related party in substance
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b. Operating activities
For the Year Ended December 31 2013 2012 1) Operating revenue
Associate $ 245,740 $ 212,401 Related party in substance 254,448 154,053
$ 500,188 $ 366,454 2) Purchase
Associate $ 2,349 $ 4,179
3) Manufacturing expenses
Related party in substance $ 2,329,857 $ 2,142,353 4) General and administrative expenses
Investor that exercises significant influence over the Group $ 8,651 $ 7,891 5) Research and development expenses
Associate $ - $ 174 6) Other revenue
Associate $ 398 $ -
December 31,
2013 December 31,
2012 January 1,
2012 7) Accounts receivable due from related
parties Associate $ 35,405 $ 31,109 $ 36,506 Related party in substance 54,349 14,964 14,133 $ 89,754 $ 46,073 $ 50,639
8) Accounts payable from related parties
Related party in substance $ 518,745 $ 531,278 $ 713,278 Investor that exercises significant
influence over the Group 2,609 2,654 2,113 Associate 264 407 526 $ 521,618 $ 534,339 $ 715,917
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December 31,
2013 December 31,
2012 January 1,
2012 9) Other receivables and other current assets
Investor that exercises significant
influence over the Group $ - $ 20 $ 1,438 10) Other payables
Related party in substance $ 7,178 $ 6,487 $ 9,359 Investor that exercises significant
influence over the Group 1,048 1,076 2,496 Associate 13 203 - $ 8,239 $ 7,766 $ 11,855
11) Refundable deposits (recorded as “other
non-current assets”)
Investor that exercises significant influence over the Group $ 203 $ 203 $ 203
The related party transactions were conducted under normal terms.
c. Investment properties acquired For the year ended December 31, 2013
Related Parties Types Securities Name Shares
(Thousand) Acquired Price Investor that exercises
significant influence over the Group
Chin Xin Investment Co., Ltd. 12,128 $ 151,236
For the year ended December 31, 2012
Related Parties Types Securities Name Shares
(Thousand) Acquired Price Investor that exercises
significant influence over the Group
Chin Xin Investment Co., Ltd. 40,000 $ 403,856
d. Guarantee
As of December 31, 2013, the chairman of the Company is a joint guarantor of the long-term borrowings - Bank of Taiwan Syndication Agreement (II). Please refer to Note 18.
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e. Compensation key management personnel For the Year Ended December 31 2013 2012 Short-term employment benefits $ 201,987 $ 181,376 Post-employment benefits 4,595 3,582 Share - based payments 7,815 1,019 Other long-term employment benefits 183 129 $ 214,580 $ 186,106 The remuneration of directors and key management personnel was determined by the remuneration committee having regard to the performance of individuals and market trends.
29. PLEDGED AND COLLATERALIZED ASSETS Please refer to Note 6, Note 10, Note 15 and Note 18.
30. SIGNIFICANT CONTINGENT LIABILITIES AND UNRECOGNIZED COMMITMENTS Amounts available under unused letters of credit as of December 31, 2013 were approximately US$8,485 thousand and JPY58,451 thousand.
31. FINANCIAL INSTRUMENT
a. Categories of financial instruments
1) Fair values of financial instruments were summarized as follows:
December 31, 2013 December 31, 2012 January 1, 2012
Carrying Amount Fair Value
Carrying Amount Fair Value
Carrying Amount Fair Value
Financial assets Loans and receivables
Cash and cash equivalents $ 7,670,379 $ 7,670,379 $ 5,710,913 $ 5,710,913 $ 5,895,681 $ 5,895,681 Notes and accounts receivable
(included related parties)
4,995,921 4,995,921 4,655,320 4,655,320 4,165,067 4,165,067 Other receivables 300,116 300,116 325,331 325,331 272,051 272,051 Refundable deposits (recorded in
other non-current assets)
153,570 153,570 148,981 148,981 160,149 160,149 Finance lease receivable
(recorded in other non-current assets) 440,436 440,436 - - - -
Financial assets at FVTPL - - 28,721 28,721 3,676 3,676 Available-for-sale financial assets
(current and non-current)
2,071,183 2,071,183 768,621 768,621 1,256,710 1,256,710 Held-to-maturity financial assets 97,770 96,792 - - - - Financial assets measured at cost 656,676 656,676 678,588 678,588 1,301,667 1,301,667 $ 16,386,051 $ 16,385,073 $ 12,316,475 $ 12,316,475 $ 13,055,001 $ 13,055,001 Financial liabilities Measured at amortized cost
Short-term borrowings $ 2,072,708 $ 2,072,708 $ 2,716,474 $ 2,716,474 $ 1,681,092 $ 1,681,092 Short-term bills payable - - 499,376 499,376 199,763 199,763 Notes and accounts payable 3,784,595 3,784,595 4,234,119 4,234,119 4,061,518 4,061,518 Payable on equipment and other
payables
2,685,516 2,685,516 2,431,991 2,431,991 2,861,846 2,861,846 Long-term borrowings 9,939,290 9,939,290 11,033,330 11,033,330 15,124,990 15,124,990
Financial liabilities at FVTPL 16,545 16,545 - - - - $ 18,498,654 $ 18,498,654 $ 20,915,290 $ 20,915,290 $ 23,929,209 $ 23,929,209
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2) Fair value measurements recognized in the balance sheets
The following table provides an analysis of financial instruments that are measured subsequent to initial recognition at fair value, grouped into Levels 1 to 2 based on the degree to which the fair value is observable: a) Level 1 fair value measurements are those derived from quoted prices in active markets for
identical assets or liabilities.
December 31,
2013 December 31,
2012 January 1,
2012 Financial assets at FVTPL $ - $ 3,533 $ 3,461 Available-for-sale financial assets 1,790,113 704,091 1,127,110 Held-to-maturity financial assets 96,792 - - $ 1,886,905 $ 707,624 $ 1,130,571
b) Level 2 fair value measurements are those derived from inputs other than quoted prices included
within Level 1 that are observable for the asset or liability, either directly or indirectly.
December 31,
2013 December 31,
2012 January 1,
2012 Financial assets at FVTPL $ - $ 25,188 $ 215 Available-for-sale financial assets 281,070 64,530 129,600 $ 281,070 $ 89,718 $ 129,815 Financial liabilities at FVTPL $ 16,545 $ - $ - The fair values of other financial assets and financial liabilities (excluding those described above) were determined in accordance with generally accepted pricing models based on discounted cash flow analysis.
b. Financial risk management objectives and policies
The Group’s major financial instruments included equity and debt investments, borrowings accounts receivable and accounts payable. The Group’s Corporate Treasury function provides services to the business, coordinates access to domestic and international financial markets, monitors and manages the financial risks relating to the operations of the Group through internal risk reports which analyze exposures by degree and magnitude of risks. These risks include market risk, credit risk and liquidity risk. The Group sought to minimize the effects of these risks by using derivative financial instruments to hedge risk exposures. The use of financial derivatives was governed by the Group’s policies approved by the board of directors, which provide written principles on foreign exchange risk, and use of financial derivatives. Compliance with policies and exposure limits was reviewed by the internal auditors on a continuous basis. 1) Market risk
The Group’s activities expose it primarily to the financial risks of changes in foreign currency exchange rates and interest rates. The Group uses forward foreign exchange contracts and to hedge the foreign currency risk on export.
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There had been no change to the Group’s exposure to market risks or the manner in which these risks were managed and measured. a) Foreign currency risk
The Group uses forward foreign exchange contracts to hedge the exchange rate risk within approved policy parameters utilizing forward foreign exchange contracts. The carrying amounts of the Group’s foreign currency denominated monetary assets and monetary liabilities at the end of the reporting period are set out in Note 32. The sensitivity analysis included only outstanding foreign currency denominated monetary items at the end of the reporting period and an increase in net income and equity if New Taiwan dollars strengthen by 1% against U.S. dollars. For a 1% weakening of New Taiwan dollars against US dollars, there would be impact on net income in the amounts of $19,298 thousand and $33,707 thousand for the years ended December 31, 2013 and 2012, respectively.
b) Interest rate risk
The Group’s interest rate risk arises primarily from floating rate deposits and borrowings. The carrying amount of the Group’s financial assets and financial liabilities with exposure to interest rates at the end of the reporting period were as follows:
December 31,
2013 December 31,
2012 January 1,
2012 Cash flow interest rate risk
Financial assets $ 5,678 $ 15,920 $ 280,648 Financial liabilities 9,939,290 11,200,934 15,463,475
The sensitivity analyses below were determined based on the Group’s exposure to interest rates for fair value of variable-rate derivatives instruments at the end of the reporting period. If interest rates had been higher by one percentage point, the Group’s cash flows for the years ended December 31, 2013 and 2012 would have increased by $99,336 thousand and $111,850 thousand, respectively.
2) Credit risk
Credit risk refers to the risk that counterparty will default on its contractual obligations resulting in financial loss to the Group. The Group adopted a policy of only dealing with creditworthy counterparties and obtaining sufficient collateral, where appropriate, as a means of mitigating the risk of financial loss from defaults. In order to minimize credit risk, the management of the Group has delegated a team responsible for determination of credit limits, credit approvals and other monitoring procedures to ensure that follow-up action is taken to recover overdue receivables. In addition, the Group reviews the recoverable amount of each individual accounts receivables at the end of the reporting period to ensure that adequate impairment losses are recognized for irrecoverable amounts. In this regard, the directors of the Group consider that the Group’s credit risk was significantly reduced.
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3) Liquidity risk The Group has enough operating capital to comply with loan covenants; liquidity risk is low. � The Group’s non-derivative financial liabilities and their agreed repayment period were as
follows:
December 31, 2013 Within 1 Year 1-2 Years Over 2 Years Total
Non-derivative financial liabilities Non-interest bearing $ 6,470,111 $ - $ - $ 6,470,111 Variable interest rate liabilities 3,863,097 4,979,763 1,096,430 9,939,290 Fixed interest rate liabilities 2,072,708 - - 2,072,708 $ 12,405,916 $ 4,979,763 $ 1,096,430 $ 18,482,109
December 31, 2012 Within 1 Year 1-2 Years Over 2 Years Total
Non-derivative financial liabilities Non-interest bearing $ 6,666,110 $ - $ - $ 6,666,110 Variable interest rate liabilities 4,650,934 2,733,333 3,816,667 11,200,934 Fixed interest rate liabilities 3,048,246 - - 3,048,246 $ 14,365,290 $ 2,733,333 $ 3,816,667 $ 20,915,290
January 1, 2012 Within 1 Year 1-2 Years Over 2 Years Total
Non-derivative financial liabilities Non-interest bearing $ 6,923,364 $ - $ - $ 6,923,364 Variable interest rate liabilities 7,496,812 4,216,663 3,750,000 15,463,475 Fixed interest rate liabilities 1,542,370 - - 1,542,370 $ 15,962,546 $ 4,216,663 $ 3,750,000 $ 23,929,209
32. EXCHANGE RATE OF FINANCIAL ASSETS AND LIABILITIES DENOMINATED IN FOREIGN CURRENCIES The significant financial assets and liabilities denominated in foreign currencies were as follows: December 31, 2013 December 31, 2012 January 1, 2012
Foreign Currencies (Thousand)
Exchange Rate
New Taiwan Dollars
(Thousand)
Foreign Currencies (Thousand)
Exchange Rate
New Taiwan Dollars
(Thousand)
Foreign Currencies (Thousand)
Exchange Rate
New Taiwan Dollars
(Thousand) Financial assets Monetary items
USD $ 238,331 29.805 $ 7,103,462 $ 238,052 29.04 $ 6,913,019 $ 198,558 30.275 $ 6,011,352 EUR 1,451 41.09 59,626 951 38.49 36,586 2,075 39.18 81,307 JPY 892,614 0.2839 253,413 646,039 0.3364 217,328 2,617,609 0.3906 1,022,438 RMB 123,469 4.8885 603,579 99,603 4.6202 460,188 38,935 4.8049 187,081 ILS 40,764 8.5851 349,967 35,355 7.7845 275,217 28,287 7.925 224,175 AUD - - - - - - 2,706 30.735 83,169
Non-monetary items USD 16,439 29.805 489,978 15,281 29.04 443,766 16,140 30.275 488,647 KRW - - - - - - 5,351,246 0.0263 140,738
Financial liabilities Monetary items
USD 122,410 29.805 3,648,423 80,871 29.04 2,348,480 114,872 30.275 3,477,755 EUR 24,551 41.09 1,008,797 1,270 38.49 48,866 2,197 39.18 86,063 JPY 749,693 0.2839 212,838 795,851 0.3364 267,633 2,398,822 0.3906 936,980 ILS 3,975 8.5851 34,123 5,136 7.7845 39,978 3,082 7.925 24,425 RMB 41,836 4.8885 204,513 4,441 4.6202 20,518 2,103 4.8049 10,106
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33. SEGMENT INFORMATION
a. Basic information about operating segment
1) Classification of operating segments
The Group’s reportable segments under IFRS 8 “Operating Segments” were as follows:
a) Segment of DRAM IC product The DRAM IC product segment engages mainly in the manufacturing, selling, researching, designing and after-sales service of Mobile RAM, Specialty DRAM, Graphic DRAM and Commodity DRAM.
b) Segment of Flash Memory product The Flash Memory product segment engages mainly in the manufacturing, selling, researching, designing and after-sales service of Flash Memory product.
c) Segment of Logic IC product The Logic IC product segment engages mainly in the manufacturing, selling, researching, designing and after-sales service of Logic IC product.
2) Principles of measuring reportable segments, profit, assets and liabilities: The significant accounting principles of each operating segment are the same as those stated in Note 4 to the consolidated financial statements. The Group’s operating segment profit or loss represents the profit or loss earned by each segment. The profit or loss is controllable by segment managers and is the basis for assessment of segment performance. Individual segment assets are disclosed as zero since those measures are not reviewed by the chief operating decision maker. Major liabilities are arranged based on the capital cost and deployment of the whole company, which are not controlled by individual segment managers.
b. Segment revenues and operating results
The following was an analysis of the Group’s revenue from continuing operations by reportable segments. Segment Revenue Segment Profit and Loss Years Ended December 31 Years Ended December 31 2013 2012 2013 2012 DRAM IC product $ 15,644,586 $ 14,804,286 $ 926,082 $ (1,278,844) Flash Memory product 10,712,265 10,811,168 991,350 902,832 Logic IC product 6,776,926 7,348,191 1,092,023 1,481,441 Total of segment revenue 33,133,777 32,963,645 3,009,455 1,105,429 Other revenue 1,671 1,638 1,671 1,638 Operating revenue $ 33,135,448 $ 32,965,283 Unallocated expenditure
Administrative and supporting expense (980,725) (1,126,336)
Sales and other common expenses (1,265,203) (1,262,093)
Total operating profit (loss) $ 765,198 $ (1,281,362)
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c. Geographical information
The Group’s revenue from continuing operations from external customers by location of operations and information about its non-current assets (non-current assets exclude financial instruments, deferred income tax assets and post-employment benefit assets) by location of assets are detailed below.
Revenue from
External Customers Non-current Assets Year Ended December 31 December 31, December 31, January 1, 2013 2012 2013 2012 2012
Asia $ 31,265,988 $ 30,672,773 $ 24,924,544 $ 29,138,811 $ 35,613,954 United States 1,143,967 1,501,960 218,766 233,976 279,391 Europe 607,162 660,024 - - - Others 118,331 130,526 - - - $ 33,135,448 $ 32,965,283 $ 25,143,310 $ 29,372,787 $ 35,893,345
d. Major customer information
No individual customer exceeded 10% of the Group’s net sales for the years ended December 31, 2013 and 2012.
34. FIRST-TIME ADOPTION OF IFRSs
a. Basis of the preparation for financial information under IFRSs
The Group’s consolidated financial statements for the year ended December 31, 2012 were the first IFRS financial statements. The Group not only follows the significant accounting policies stated in Note 4 but also applies the requirements under IFRS 1 “First-time Adoption of IFRS” as the basis for the preparation.
b. Impact of the transition to IFRSs
After transition to IFRSs, the impact on the Group’s consolidated balance sheets and consolidated statement of comprehensive income is stated as follows: 1) Reconciliation of consolidated balance sheet as of January 1, 2012
Impact of Transition to IFRSs
Recognition
and ROC GAAP Measurement Presentation IFRSs
Item Amount Difference Difference Amount Item Note Assets Current assets Current assets
Cash and cash equivalents $ 6,002,597 $ - $ (106,916 ) $ 5,895,681 Cash and cash equivalents Note 1 Financial assets at fair
value through profit or loss, current
3,676 - - 3,676 Financial assets at fair value through profit or loss, current
Available-for-sale financial assets, current
902,713 - - 902,713 Available-for-sale financial assets, current
Notes and accounts receivable, net
4,114,428 - - 4,114,428 Notes and accounts receivable, net
Accounts receivable due from related parties, net
50,639 - - 50,639 Accounts receivable due from related parties, net
Other financial assets, current
165,135 - 106,916 272,051 Other receivables Note 1
Inventories 7,272,562 - - 7,272,562 Inventories
(Continued)
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Impact of Transition to IFRSs
Recognition
and ROC GAAP Measurement Presentation IFRSs
Item Amount Difference Difference Amount Item Note
Deferred income tax assets, current
$ 281,638 $ - $ (281,638 ) $ - - Note 2
Other current assets 420,635 - - 420,635 Other current assets Total current assets 19,214,023 - (281,638 ) 18,932,385 Total current assets
Fund and investments Non-current assets Available-for-sale
financial assets, non-current
353,997 - - 353,997 Available-for-sale financial assets, non-current
Financial assets carried at cost, non-current
1,245,403 56,264 - 1,301,667 Financial assets measured at cost, non-current
Note 3
Long-term equity investments at equity method
65,092
-
-
65,092
Investment accounted for using equity method
Total fund and investments
1,664,492
56,264
-
1,720,756
Property, plant and equipment
35,149,539
-
-
35,149,539
Property, plant and equipment
Intangible assets 639,191 - - 639,191 Intangible assets Other assets
Deferred income tax assets, non-current
3,992,639 - 281,638 4,274,277 Deferred income tax assets
Note 2
Others 264,765 - - 264,765 Others non-current assets Total other assets 4,257,404 - 281,638 4,539,042 Total non-current assets
Total $ 60,924,649 $ 56,264 $ - $ 60,980,913 Total Liabilities and stockholder’s equity
Current liabilities Current liabilities
Short-term loans $ 1,681,092 $ - $ - $ 1,681,092 Short-term borrowings Short-term bills payable 199,763 - - 199,763 Short-term bills payable Notes payable 849,713 - - 849,713 Notes payable Accounts payable 3,211,805 - - 3,211,805 Accounts payable Payable on equipment 650,233 - - 650,233 Payable on equipment Accrued expenses and
other payables 2,151,012 60,601 - 2,211,613 Other payables Note 4
Current portion of long-term liabilities
7,158,327 - - 7,158,327 Current portion of long-term borrowings
Other current liabilities 68,865 - - 68,865 Other current liabilities Total current liabilities 15,970,810 60,601 - 16,031,411 Total current liabilities
Long-term liabilities Non-current liabilities Long-term debt 7,966,663 - - 7,966,663 Long-term borrowings
Other liabilities Accrued pension liabilities 368,676 362,076 - 730,752 Accrued pension liabilities Note 5 Others 193,417
-
-
193,417
Others non-current
liabilities
Total other liabilities 562,093
362,076
-
924,169
Total non-current liabilities
Total liabilities 24,499,566 422,677 - 24,922,243 Total liabilities Equity attributable to
stockholders of the parent Equity attributable to owners
of the parent
Common stock 36,802,302 - - 36,802,302 Common stock Capital surplus 2,232,519 (21,460 ) - 2,211,059 Capital surplus Note 6 Accumulated deficits (2,483,440 ) 65,182 - (2,418,258 ) Accumulated deficits Cumulative translation
adjustments 359,900 (359,900 ) - - Exchange difference on
translation of foreign financial statements
Note 7
Unrealized loss on financial instruments
(1,449,394 ) (12,576 ) - (1,461,970 ) Unrealized gain (loss) on available-for-sale financial assets
Note 8
Treasury stock (106,387 ) - - (106,387 ) Treasury stock Equity attributable to
stockholders of the parent
35,355,500 (328,754 ) - 35,026,746 Total equity attributable to owners of the parent
Minority interest 1,069,583 (37,659 ) - 1,031,924 Non-controlling interests Note 9 Total stockholders’ equity 36,425,083 (366,413 ) - 36,058,670 Total equity Total $ 60,924,649 $ 56,264 $ - $ 60,980,913 Total
(Concluded) Note 1: The Group’s long-term time deposits, in accordance with the IFRSs are classified as other
receivables. Please see Note e) 4). Note 2: Deferred income tax assets, current, in accordance with IFRSs are classified as
non-current items. Please see Note e) 1).
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Note 3: The translation of functional currency of subsidiaries to retroactively adjust financial
assets measured at cost, non-current. Please see Note e) 7). Note 4: Under IAS No. 19, the Group recognized as expense when employees provide service to
increase their paid vacation. Please see Note e) 2). Note 5: Under IAS No. 19, “Employee Benefits,” the Group elects to recognize actuarial gains and
losses immediately in full in the period in which they occur, as other comprehensive income. The subsequent reclassification to earnings is not permitted. Please see Note e) 3).
Note 6: The changes of investment percentage arise when the investment company did not
subscribe for new shares issued by the investee; the increase or decrease in the investment company’s equity is adjusted in the capital surplus. In accordance with IFRSs, the above-mentioned capital surplus should be restrospectively adjusted to accumulated deficits. Please see Note e) 5).
Note 7: In accordance with IFRS 1, the Group elected to set to zero its cumulative translation
adjustment in stockholders’ equity by reclassifying the amount to retained earnings at the date of transition to IFRS. Please see Note d).
Note 8: The translation of functional currency of subsidiaries restrospectively adjusted unrealized
loss on financial instruments. Please see Note e) 7). Note 9: The equity of subsidiaries was decreased on January 1, 2012; thus, so non-controlling
interest was adjusted retroactively.
2) Reconciliation of consolidated balance sheet as of December 31, 2012
Impact of Transition to IFRSs
Recognition
and ROC GAAP Measurement Presentation IFRSs
Item Amount Difference Difference Amount Item Note Assets Current assets Current assets
Cash and cash equivalents $ 5,814,928 $ - $ (104,015 ) $ 5,710,913 Cash and cash equivalents Note 1 Financial assets at fair
value through profit or loss, current
28,721 - - 28,721 Financial assets at fair value through profit or loss, current
Available-for-sale financial assets, current
704,091 - - 704,091 Available-for-sale financial assets, current
Notes and accounts receivable, net
4,609,247 - - 4,609,247 Notes and accounts receivable, net
Accounts receivable due from related parties, net
46,073 - - 46,073 Accounts receivable due from related parties, net
Other financial assets, current
221,316 - 104,015 325,331 Other receivables Note 1
Inventories 8,108,677 - - 8,108,677 Inventories Deferred income tax
assets, current 222,356 - (222,356 ) - - Note 2
Other current assets 532,212 - - 532,212 Other current assets Total current assets 20,287,621 - (222,356 ) 20,065,265 Total current assets
Fund and investments Non-current assets Available-for-sale
financial assets, non-current
64,530 - - 64,530 Available-for-sale financial assets, non-current
Financial assets carried at cost, non-current
604,185 74,403 - 678,588 Financial assets measured at cost, non-current
Note 3
Long-term equity investments at equity method
1,727,128
(595 )
-
1,726,533
Investments accounted for using equity method
Note 4
Total fund and investments
2,395,843
73,808
-
2,469,651
(Continued)
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Impact of Transition to IFRSs
Recognition
and R.O.C. GAAP Measurement Presentation IFRSs
Item Amount Difference Difference Amount Item Note Property, plant and
equipment $ 29,021,114
$ -
$ -
$ 29,021,114
Property, plant and
equipment
- - - 80,747 80,747 Investment properties Note 5 Intangible assets 183,310 - - 183,310 Intangible assets Other assets
Deferred income tax assets, non-current
3,996,998 - 222,356 4,219,354 Deferred income tax assets
Note 2
Others 334,251 (16,907 ) (80,747 ) 236,597 Other non-current assets Note 5 Total other assets 4,331,249 (16,907 ) 141,609 4,455,951 Total non-current assets
Total $ 56,219,137 $ 56,901 $ - $ 56,276,038 Total Liabilities and stockholder’s equity
Current liabilities Current liabilities
Short-term loans $ 2,716,474 $ - $ - $ 2,716,474 Short-term borrowings Short-term bills payable 499,376 - - 499,376 Short-term bills payable Notes payable 812,253 - - 812,253 Notes payable Accounts payable 3,421,866 - - 3,421,866 Accounts payable Payable for equipment 173,632 - - 173,632 Payable on equipment Accrued expenses and
other payables 2,187,998 70,361 - 2,258,359 Other payables Note 6
Current portion of long-term liabilities
4,483,330 - - 4,483,330 Current portion of long-term borrowings
Other current liabilities 78,085 (256 ) - 77,829 Other current liabilities Note 4 Total current liabilities 14,373,014 70,105 - 14,443,119 Total current liabilities
Long-term liabilities Non-current liabilities Long-term debt 6,550,000 - - 6,550,000 Long-term borrowings
Other liabilities Accrued pension liabilities 417,477 525,280 - 942,757 Accrued pension liabilities Note 7 Others 220,680
3,947
-
224,627
Other non-current
liabilities
Total other liabilities 638,157
529,227
-
1,167,384
Total non-current liabilities
Total liabilities 21,561,171 599,332 - 22,160,503 Total liabilities Equity attributable to
stockholders of the parent Equity attributable to owners
of the parent
Common stock 36,856,012 - - 36,856,012 Common stock Capital surplus 2,199,126 (21,784 ) - 2,177,342 Capital surplus Note 8 Accumulated deficits (4,335,976 ) (94,774 ) - (4,430,750 ) Accumulated deficits Cumulative translation
adjustments 268,081 (349,829 ) - (81,748 ) Exchange difference on
translation of foreign financial statements
Note 9
Unrealized loss on financial instruments
(1,408,417 ) - - (1,408,417 ) Unrealized gain (loss) on available-for-sale financial assets
Treasury stock (106,387 ) - - (106,387 ) Treasury stock Equity attributable to
stockholders of the parent
33,472,439 (466,387 ) - 33,006,052 Total equity attributable to owners of the parent
Minority interest 1,185,527 (76,044 ) - 1,109,483 Non-controlling interest Note 10 Total stockholders’ equity 34,657,966 (542,431 ) - 34,115,535 Total equity Total $ 56,219,137 $ 56,901 $ - $ 56,276,038 Total
(Concluded) Note 1: The Group’s long-term time deposits, in accordance with the IFRSs are classified as other
receivable. Please see Note e) 4). Note 2: Deferred income tax assets, current, in accordance with IFRSs are classified as
non-current items. Please see Note e) 1). Note 3: The translation of functional currency of subsidiaries retroactively adjusted financial asset
measured at cost, non-current. Please see Note e) 7). Note 4: Unrealized profit from downstream transactions with an equity-method investee would be
converted from other current liabilities to investments accounted for using equity method. Please see Note e) 6).
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Note 5: A property held under an operating lease was reclassified from other assets to investment properties. Please see Note e) 8).
Note 6: Under IAS No. 19, the Group recognized as expense when employees provide service to
increase their paid vocation. Please see Note e) 2). Note 7: Under IAS No. 19, “Employee Benefits,” the Group elects to recognize actuarial gains and
losses immediately in full in the period in which they occur, as other comprehensive income. The subsequent reclassification to earnings is not permitted. According IAS No. 19, the Company reclassified unrecognized actuarial loss into accumulated loss, which increased by $362,076 thousand accrued pension liabilities. Furthermore, under IAS No. 19, the Group reclassified net pension cost and difference in actuarial loss into other comprehensive income, which increased non-current assets by $163,204 thousand. As a result, accrual pension liabilities increased by $525,280 thousand. Please see Note e) 3).
Note 8: The changes of investment percentage arise when the investment company increased
investment but did not subscribe for new shares issued by the investee; the increase or decrease in the investment company’s equity is adjusted in the capital surplus. In accordance with the IFRSs, the above-mentioned capital surplus should be restrospectively adjusted to accumulated losses. The capital surplus had decreased by $21,784 thousand. Please see Note e) 5).
Note 9: In accordance with IFRS 1, the Group elected to set to zero its cumulative translation
adjustment in stockholders’ equity by reclassifying the amount to retained earnings at the date of translation to IFRS. The cumulative translation adjustment decreased by $359,900 thousand. The translation of functional currency increased cumulative translation adjustments by $10,071 thousand. Please see Note e) 5).
Note 10: The equity of subsidiaries was decreased on December 31, 2012, so non-controlling
interest was adjusted retroactively.
c. Reconciliation of statement of comprehensive income for the year ended December 31, 2012
ROC GAAP
Impact of Transition to
IFRSs IFRSs Item Amount Amount Amount Item Note
Operating revenue $ 32,965,283 $ - $ 32,965,283 Operating revenue Operating cost 27,804,925 (2,627 ) 27,802,298 Operating cost Note 1 Less: Unrealized gain on inter-affiliate (74 ) 74 - - Gross profit 5,160,284 2,701 5,162,985 Gross profit Operating expense 6,439,759 4,588 6,444,347 Total operating expenses Note 1 Loss from operations (1,279,475 ) (1,887 ) (1,281,362 ) Loss from operations Non-operation income and expense (160,596 ) (7,562 ) (168,158 ) Non-operating income and losses Notes 2 and 3 Loss before income tax (1,440,071 ) (9,449 ) (1,449,520 ) Loss before income tax Income tax expense (175,037 ) - (175,037 ) Income tax expense Net loss $ (1,615,108 ) $ (9,449 ) (1,624,557 ) Net loss (93,274 ) Exchange differences on translation of
foreign financial statements
53,553 Unrealized gain on available-for-sale financial assets
(187,984 )
Actuarial gain and losses arising from defined benefit plans
(227,705 ) Other comprehensive income $ (1,852,262 ) Total comprehensive income
Note 1: Under IAS No. 19, the Group increased “salary expenses”. Pension cost and other
comprehensive income were also adjusted for the year ended December 31, 2012. Please see Note 5) b) and c).
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Note 2: Investments accounted for using equity method caused equity changes. Under ROC GAAP, the change is recognized as capital surplus, but under IFRSs it is recognized as investment gain, so investment gain increased by $190 thousand. Please see Note e) 5).
Note 3: Change of functional currency of subsidiaries is retroactively adjusted; as a result, it increased
the available-for-sale financial assets. The Group disposed of financial assets and increased investment loss by $12,576 thousand. Otherwise, the Group recognized foreign exchange gain of $3,908 thousand, which is due to subsidiary’s capital reduction.
d. Exemptions from IFRS 1
IFRS 1 establishes the procedures for the Group’s first consolidated financial statements prepared in accordance with IFRSs. According to IFRS 1, the Group is required to determine the accounting policies under IFRSs and retrospectively apply those accounting policies in its opening balance sheet at the date of transition to IFRSs, January 1, 2012; except for optional exemptions and mandatory exceptions to such retrospective application provided under IFRS 1. The major optional exemptions the Group adopted are summarized as follows: 1) Share-based payment
The Group elected to adjust retrospectively the shared-based payment transactions granted and vested before the date of transition to IFRSs.
2) Employee benefits
The Group elected to recognize all cumulative actuarial gains and losses in accumulated deficits at the date of transition to IFRSs.
3) Exchange differences on translation of foreign financial statements
The Group elected to set to zero its cumulative translation adjustment in stockholders’ equity by reclassifying the amount to accumulated deficits at the date of transition to IFRSs.
4) Compound financial instruments
As the liability component was no longer outstanding at the date of transition to IFRSs, the Group elected not to split the compound financial instruments issued before the date of transition to IFRSs into separate two portions of equity.
5) Borrowing costs
The Group elected to capitalize borrowing costs that meet the elements for capitalization of borrowing costs. Capitalization starts on the date of transition to IFRSs. The effect of the above-mentioned optional exemptions elected by the Group was stated in the following Note e. Explanations of significant reconciling items in the transition to IFRSs.
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e. Explanations of significant reconciling items in the transition to IFRSs
Material differences between the accounting policies under ROC GAAP and the accounting policies adopted under IFRSs were as follows: 1) Deferred income tax asset/liability
Under ROC GAAP, valuation allowance is provided to the extent, if any, that it is more likely than not that deferred income tax assets will not be realized. In accordance with IFRSs, deferred income tax assets are only recognized to the extent that it is probable that there will be sufficient taxable profits and the valuation allowance account is no longer used. In addition, under ROC GAAP, a deferred tax asset or liability is classified as current or non-current in accordance with the classification of its related asset or liability. However, if a deferred income tax asset or liability does not relate to an asset or liability in the financial statements, it is classified as either current or non-current based on the expected length of time before it is realized or settled. Under IFRSs, a deferred tax asset or liability is classified as non-current asset or liability.
2) Short-term employee benefits Short-term employee benefits under ROC GAAP are not expressly stipulated and usually recorded when paid. After the date of transition to IFRS, it is recognized the accumulating compensated absences as an expense when employees provided services to increase their vacation.
3) Employee benefits - gain or loss on actuarial valuation of defined benefit plan According to SFAS No. 18, the unrecognized transition obligation due to first adoption of SFAS No. 18, “Accounting for Pension,” should be amortized over the expected remaining working lives of employees. On the date of transition to IFRSs, the retained earnings should be adjusted for unrecognized transition obligation. Under ROC GAAP, when using the corridor approach, actuarial gains and losses should be amortized over the expected average remaining working lives of the participating employees. Under IAS No. 19, “Employee Benefits,” the Group elects to recognize actuarial gains and losses immediately in full in the period in which they occur, as other comprehensive income. The subsequent reclassification to earnings is not permitted.
4) Reclassification of long-term time deposit
Under ROC GAAP, time deposit is classified as cash if it is readily convertible to a known amount of cash and subject only to an insignificant risk of changes in value. Under IFRSs, time deposits held for the purpose of meeting short-term cash commitments are classified as cash and cash equivalents and others are classified as other financial assets.
5) Long-term equity investments when associates/subsidiaries issue new shares and the shareholder is not subscribing in accordance with its percentage of shares of the investee/parent company According to ROC GAAP, the changes of investment percentage that arise when the investment company does not subscribe for new shares issued by the investee in accordance with its percentage of ownership before the new subscription is adjusted in the “capital surplus and “long-term equity investment.”
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Under IFRSs, such transaction is deemed a disposal and the aforementioned difference is recognized in the same accounts accordingly. In addition, according to “Q&A for adopting IFRSs” issued by the TSE, accounts that do not conform to IFRSs or not covered under the Company Law as well as capital surplus items required by the Ministry of Economic Affairs should be adjusted at the date of transition to IFRSs.
6) Downstream transactions with an equity-method investee Under ROC GAAP, profit from downstream transactions with an investee under equity-method is eliminated in proportion to the Group’s percentage of ownership in the investee. Under IFRSs, unrealized profit is reclassified to sales, cost of sales and investment income recognized under equity-method.
7) Translation of functional currency of foreign operations Under ROC GAAP, various indicators are comprehensively evaluated to identify functional currency. Under IFRSs, IAS No. 21 “The Effects of Changes in Foreign Exchange Rates” rules that the primary indicators should be considered first and then the secondary indicators in the determination of functional currency. According to the rules, the overseas associates and subsidiaries changed their functional currency from U.S. dollars to N.T. dollars and adjusted retroactively the balances of assets and liabilities in N.T. dollars at the date of transition to IFRSs.
8) Investment properties Under ROC GAAP, a property held under an operating lease may be classified as other assets; under IFRSs, property held to earn rentals or capital appreciation or both should be reclassified to investment properties.
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Winbond Electronics Corporation Financial Statements for the Years Ended December 31, 2013 and 2012 and Independent Auditors’ Report
INDEPENDENT AUDITORS’ REPORT The Board of Directors and Stockholders Winbond Electronics Corporation We have audited the accompanying balance sheets of Winbond Electronics Corporation (the “Company”) as of December 31, 2013, December 31, 2012 and January 1, 2012, and the related statements of comprehensive income, changes in equity and cash flows for the years ended December 31, 2013 and 2012. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with the Rules Governing the Audit of Financial Statements by Certified Public Accountants and auditing standards generally accepted in the Republic of China. Those rules and standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2013, December 31, 2012 and January 1, 2012, and its financial performance and its cash flows for the years ended December 31, 2013 and 2012, in conformity with the Regulations Governing the Preparation of Financial Reports by Securities Issuers. March 28, 2014
Notice to Readers The accompanying financial statements are intended only to present the financial position, results of operations 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 audit such financial statements are those generally accepted and applied in the Republic of China. For the convenience of readers, the auditors’ report and the accompanying financial statements have been translated into English from the original Chinese version prepared and used in the Republic of China. 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 auditors’ report and financial statements shall prevail.
4.2013 Financial Statements
103
WINBOND ELECTRONICS CORPORATION BALANCE SHEETS (In Thousands of New Taiwan Dollars) December 31, 2013 December 31, 2012 January 1, 2012 ASSETS Amount % Amount % Amount % CURRENT ASSETS
Cash and cash equivalents (Note 6) $ 4,957,922 9 $ 3,707,404 7 $ 3,812,987 7 Financial assets at fair value through profit or loss, current (Note 7) - - 23,551 - 1,703 - Available-for-sale financial assets, current (Note 8) 1,736,895 3 704,091 1 707,542 1 Notes and accounts receivable, net (Note 9) 3,152,950 6 3,004,861 6 2,448,280 4 Accounts receivable due from related parties, net (Note 27) 868,460 2 578,568 1 701,771 1 Other receivables (Note 10) 242,054 - 168,037 - 111,595 - Inventories (Note 11) 6,111,134 12 7,107,687 13 6,427,420 11 Other current assets 605,843 1 370,674 1 328,827 1
Total current assets 17,675,258 33 15,664,873 29 14,540,125 25
NON-CURRENT ASSETS
Available-for-sale financial assets, non-current (Note 8) 281,070 1 64,530 - 64,800 - Held-to-maturity financial assets, non-current (Note 12) 97,770 - - - - - Financial assets measured at cost, non-current (Note 13) 40,161 - 56,481 - 61,855 - Investments accounted for using equity method (Note 14) 6,224,488 12 5,285,053 10 4,770,395 8 Property, plant and equipment (Note 15) 24,132,155 46 28,396,274 53 34,395,036 59 Intangible assets (Note 16) 52,000 - 38,430 - 548,754 1 Deferred income tax assets (Note 21) 3,742,000 7 3,742,000 7 3,742,000 7 Other non-current assets (Notes 6 and 10) 610,813 1 191,597 1 193,602 -
Total non-current assets 35,180,457 67 37,774,365 71 43,776,442 75
TOTAL $ 52,855,715 100 $ 53,439,238 100 $ 58,316,567 100 LIABILITIES AND EQUITY CURRENT LIABILITIES
Short-term borrowings (Note 17) $ 1,893,878 4 $ 2,716,474 5 $ 1,539,592 3 Short-term bills payable (Note 17) - - 499,376 1 199,763 - Financial liabilities at fair value through profit or loss, current (Note 7) 15,841 - - - - - Notes payable 517,550 1 812,253 2 849,714 1 Accounts payable 2,708,454 5 2,798,923 5 2,640,929 5 Payable on equipment 427,371 1 125,116 - 632,910 1 Other payables 1,664,721 3 1,597,160 3 1,663,850 3 Current portion of long-term borrowings (Note 17) 3,863,097 7 4,483,330 8 7,158,327 12 Other current liabilities 34,514 - 22,962 - 23,503 -
Total current liabilities 11,125,426 21 13,055,594 24 14,708,588 25
NON-CURRENT LIABILITIES
Long-term borrowings (Note 17) 6,076,193 11 6,550,000 12 7,966,663 14 Accrued pension liabilities (Note 18) 460,911 1 489,363 1 388,147 1 Other non-current liabilities 379,265 1 338,229 1 226,423 -
Total non-current liabilities 6,916,369 13 7,377,592 14 8,581,233 15
Total liabilities 18,041,795 34 20,433,186 38 23,289,821 40
EQUITY
Common stock (Note 19) 36,940,232 70 36,856,012 69 36,802,302 63 Capital surplus 2,148,359 4 2,177,342 4 2,211,059 4 Accumulated deficits (4,187,772) (8) (4,430,750) (8) (2,418,258) (4) Exchange differences on translation of foreign financial statements (59,567) - (81,748) - - - Unrealized gains (losses) on available-for-sale financial assets 79,055 - (1,408,417) (3) (1,461,970) (3) Treasury stock (106,387) - (106,387) - (106,387) -
Total equity 34,813,920 66 33,006,052 62 35,026,746 60
TOTAL $ 52,855,715 100 $ 53,439,238 100 $ 58,316,567 100 The accompanying notes are an integral part of the financial statements.
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WINBOND ELECTRONICS CORPORATION STATEMENT OF COMPREHENSIVE INCOME (In Thousands of New Taiwan Dollars, Except Earnings (Loss) Per Share) For the Year Ended December 31 2013 2012 Amount % Amount % OPERATING REVENUE $ 26,165,961 100 $ 25,418,819 100 OPERATING COSTS (Note 10) 22,226,165 85 23,473,328 92 GROSS PROFIT 3,939,796 15 1,945,491 8 OPERATING EXPENSES
Selling expenses 629,159 3 686,821 3 General and administrative expenses 531,366 2 682,647 3 Research and development expenses 2,434,587 9 2,599,685 10
Total operating expenses 3,595,112 14 3,969,153 16
PROFIT (LOSS) FROM OPERATIONS 344,684 1 (2,023,662) (8) NON-OPERATING INCOME AND LOSSES
Interest income 33,656 - 18,901 - Dividend income 816 - - - Gain on doubtful debt recoveries 6,330 - 79,951 - Other income 20,889 - 17,313 - Gains (losses) on disposal of property, plant and
equipment (659) - 4,456 - Loss on disposal of investments (467) - (16,940) - Foreign exchange gains (losses) 122,733 1 (56,097) - Gains (losses) on financial instruments at fair value
through profit or loss (80,353) - 93,806 - Share of profit of subsidiaries and associates
accounted for using equity method (Note 13) 44,211 - 407,806 2 Interest expense (259,105) (1) (362,797) (1) Other expense (26,171) - (22,698) - Impairment loss on financial assets (Note 13) - - (2,922) -
Total non-operating income and losses (138,120) - 160,779 1
PROFIT (LOSS) BEFORE INCOME TAX 206,564 1 (1,862,883) (7) INCOME TAX EXPENSE (Note 21) - - - - NET PROFIT (LOSS) 206,564 1 (1,862,883) (7)
(Continued)
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WINBOND ELECTRONICS CORPORATION STATEMENT OF COMPREHENSIVE INCOME (In Thousands of New Taiwan Dollars, Except Earnings (Loss) Per Share) For the Year Ended December 31 2013 2012 Amount % Amount % OTHER COMPREHENSIVE INCOME
Exchange difference on translation of foreign financial statements $ 22,181 - $ (81,748) -
Unrealized gains on available-for-sale financial assets 1,487,472 6 53,553 -
Actuarial gains and losses on defined benefit plans 36,414 - (149,609) (1)
Other comprehensive income 1,546,067 6 (177,804) (1) TOTAL COMPREHENSIVE INCOME $ 1,752,631 7 $ (2,040,687) (8) EARNINGS (LOSS) PER SHARE (Note 22)
Basic $ 0.06 $ (0.51) Diluted $ 0.06 $ -
The accompanying notes are an integral part of the financial statements. (Concluded)
106
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107
WINBOND ELECTRONICS CORPORATION STATEMENT OF CASH FLOWS (In Thousands of New Taiwan Dollars) For the Year Ended December 31 2013 2012 CASH FLOWS FROM OPERATING ACTIVITIES
Profit (loss) before income tax $ 206,564 $ (1,862,883) Adjustments for:
Depreciation expenses 6,124,453 8,489,074 Amortization expenses 61,241 529,041 Reversal of allowance for doubtful accounts (2,330) (68,209) Gain on reversal of decline in market value and obsolescence and
abandonment of inventories (193,725) (69,515) Net loss (gain) on financial assets and liabilities at fair value through
profit or loss 39,392 (21,849) Interest expense 259,105 362,797 Interest income (33,656) (18,901) Dividend income (816) - Share of profit of subsidiaries and associates accounted for using
equity method (44,211) (407,806) Impairment loss on financial assets - 2,922 Compensation cost of employee stock options - 141 Loss (gain) on disposal of property, plant and equipment 659 (4,456) Loss on disposal of investments 467 16,940 Gain on foreign currency exchange of held-to-maturity financial
assets (3,186) - Changes in operating assets and liabilities
Increase in notes and accounts receivable (152,088) (574,873) (Increase) decrease in accounts receivable due from related parties (295,683) 122,828 Increase in other receivables (38,714) (74,689) Decrease (increase) in inventories 1,190,278 (610,753) Increase in other current assets (235,169) (41,846) Increase in other non-current assets (23) (16,711) Decrease in notes payable (294,703) (37,460) (Decrease) increase in accounts payable (90,468) 157,993 Increase (decrease) in other payables 16,363 (58,802) Increase (decrease) in other current liabilities 11,552 (541) Increase in other non-current liabilities 11,524 19,708
Cash inflow generated from operations 6,536,826 5,832,150 Interest received 20,184 18,297 Dividend received 216,071 215,254 Interest paid (298,402) (420,219) Income tax (paid) refund (427) 18,850
Net cash flows generated from operating activities 6,474,252 5,664,332
(Continued)
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WINBOND ELECTRONICS CORPORATION STATEMENT OF CASH FLOWS (In Thousands of New Taiwan Dollars) For the Year Ended December 31 2013 2012 CASH FLOWS USED IN INVESTING ACTIVITIES
Acquisition of available-for-sale financial assets $ (402,085) $ (86,915) Proceeds from disposal of available-for-sale financial assets 5,863 71,285 Acquisition of held-to-maturity financial assets (94,584) - Acquisition of financial assets measured at cost - (58,950) Proceeds from disposal of financial assets measured at cost - 62,708 Proceeds from capital reduction of financial assets measured at cost 16,320 - Acquisition of investments accounted for using equity method (400,425) (403,856) Proceeds from capital reduction of investments accounted for using
equity method 24,951 188,874 Acquisitions of property, plant and equipment (2,050,634) (2,969,088) Proceeds from disposal of property, plant and equipment 3,360 24,584 Decrease in finance lease receivables 64,246 -
Net cash used in investing activities (2,832,988) (3,171,358)
CASH FLOWS USED IN FINANCING ACTIVITIES
(Decrease) increase in short-term borrowings (822,596) 1,176,882 (Decrease) increase in short-term bills payable (500,000) 300,000 Increase in long-term borrowings 3,510,000 3,200,000 Repayments of long-term borrowings (4,604,040) (7,291,660) Proceeds from exercise of employee stock options 25,890 16,221
Net cash used in financing activities (2,390,746) (2,598,557)
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS 1,250,518 (105,583) CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR 3,707,404 3,812,987 CASH AND CASH EQUIVALENTS, END OF YEAR $ 4,957,922 $ 3,707,404 The accompanying notes are an integral part of the financial statements. (Concluded)
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WINBOND ELECTRONICS CORPORATION NOTES TO FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 2013 AND 2012 (In Thousands of New Taiwan Dollars, Unless Stated Otherwise) 1. GENERAL INFORMATION
Winbond Electronics Corporation (the “Company”) was incorporated in the Republic of China (“ROC”) on September 29, 1987 and is engaged in the design, development, manufacture and marketing of Very Large Scale Integration (“VLSI”) integrated circuits (“ICs”) used in a variety of microelectronic applications. The Company’s shares have been listed on the Taiwan Stock Exchange since October 18, 1995. Walsin Lihwa is a major stockholder of the Company and held approximately 23% ownership interest in the Company as of December 31, 2013 and 2012. These financial statements are presented in the Company’s functional currency, New Taiwan dollars.
2. APPROVAL OF FINANCIAL STATEMENTS
The financial statements were approved by the board of directors and authorized for issue on March 28, 2014.
3. APPLICATION OF NEW AND REVISED STANDARDS, AMENDMENTS AND INTERPRETATIONS a. New, amended and revised standards and interpretations (the “New IFRSs”) in issue but not yet
effective The Company has not applied the following International Financial Reporting Standards (IFRS), International Accounting Standards (IAS), Interpretations of IFRS (IFRIC), and Interpretations of IAS (SIC) issued by the IASB. On January 28, 2014, the Financial Supervisory Commission (FSC) announced the framework for the adoption of updated IFRSs version in the ROC. Under this framework, starting January 1, 2015, the previous version of IFRSs endorsed by the FSC (the 2010 IFRSs version) currently applied by companies with shares listed on the Taiwan Stock Exchange or traded on the Taiwan GreTai Securities Market or Emerging Stock Market will be replaced by the updated IFRSs without IFRS 9 (the 2013 IFRSs version). However, as of the date that the financial statements were authorized for issue, the FSC has not endorsed the following new, amended and revised standards and interpretations issued by the IASB (the “New IFRSs”) included in the 2013 IFRSs version. Furthermore, the FSC has not announced the effective date for the following New IFRSs that are not included in the 2013 IFRSs version.
The New IFRSs Included in the 2013 IFRSs Version Not Yet Endorsed by the FSC
Effective Date Announced by IASB (Note 1)
Improvements to IFRSs (2009) - amendment to IAS 39 January 1, 2009 and January 1,
2010, as appropriate Improvements to IFRSs (2010) July 1, 2010 and January 1,
2011, as appropriate Annual Improvements to IFRSs 2009-2011 Cycle January 1, 2013
(Continued)
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The New IFRSs Included in the
2013 IFRSs Version Not Yet Endorsed by the FSC Effective Date
Announced by IASB (Note 1) Amendment to IFRS 1 “Limited Exemption from Comparative IFRS 7
Disclosures for First-time Adopters” July 1, 2010
Amendment to IFRS 1 “Severe Hyperinflation and Removal of Fixed Dates for First-time Adopters”
July 1, 2011
Amendment to IFRS 1 “Government Loans” January 1, 2013 Amendment to IFRS 7 “Disclosure - Offsetting Financial Assets and
Financial Liabilities” January 1, 2013
Amendment to IFRS 7 “Disclosure - Transfer of Financial Assets” July 1, 2011 IFRS 10 “Consolidated Financial Statements” January 1, 2013 IFRS 11 “Joint Arrangements” January 1, 2013 IFRS 12 “Disclosure of Interests in Other Entities” January 1, 2013 Amendments to IFRS 10, IFRS 11 and IFRS 12 “Consolidated
Financial Statements, Joint Arrangements and Disclosure of Interests in Other Entities: Transition Guidance”
January 1, 2013
Amendments to IFRS 10 and IFRS 12 and IAS 27 “Investment Entities”
January 1, 2014
IFRS 13 “Fair Value Measurement” January 1, 2013 Amendment to IAS 1 “Presentation of Other Comprehensive Income” July 1, 2012 Amendment to IAS 12 “Deferred Tax: Recovery of Underlying
Assets” January 1, 2012
Revise of IAS 19 “Employee Benefits” January 1, 2013 Revise of IAS 27 “Separate Financial Statements” January 1, 2013 Revise of IAS 28 “Investments in Associates and Joint Ventures” January 1, 2013 Amendment to IAS 32 “Offsetting Financial Assets and Financial
Liabilities” January 1, 2014
Amendment to IAS 39 “Embedded Derivatives” Effective for annual periods ending on or after June 30, 2009
IFRIC 20 “Stripping Costs in Production Phase of a Surface Mine” January 1, 2013 (Concluded)
The New IFRSs Not Included in the 2013 IFRSs Version Effective Date
Announced by IASB (Note 1) Annual Improvements to IFRSs 2010-2012 Cycle July 1, 2014 (Note 2) Annual Improvements to IFRSs 2011-2013 Cycle July 1, 2014 IFRS 9 “Financial Instruments” Effective date not determined Amendments to IFRS 9 and IFRS 7 “Mandatory Effective Date and
Transition Disclosures” Effective date not determined
IFRS14 “Interim Standard on regulatory deferral accounts” January 1, 2016 Amendment to IAS 19 “Defined Benefit Plans: Employee
Contributions” July 1, 2014
Amendment to IAS 36 “Recoverable Amount Disclosures for Non-financial Assets”
January 1, 2014
Amendment to IAS 39 “Novation of Derivatives and Continuation of Hedge Accounting”
January 1, 2014
IFRIC 21 “Levies” January 1, 2014 Note 1: Unless stated otherwise, the above New IFRSs are effective for annual periods beginning on
or after the respective effective dates.
111
Note 2: The amendment to IFRS 2 applies to share-based payment transactions for which the grant date is on or after July 1, 2014; the amendment to IFRS 3 applies to business combinations for which the acquisition date is 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, 2014.
b. Significant impending changes in accounting policy that would result from the adoption of New IFRSs
in issue but not yet effective Except for the following, the impending application of the above New IFRSs, whenever applied, would not have not any material impact on the Company’s accounting policies: 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. Specifically, financial assets that are held within a business model whose objective is to collect contractual cash flows, and have contractual cash flows that are solely payments of principal and interest on the principal outstanding are generally measured at amortized cost at the end of subsequent accounting periods. All other financial assets are measured at their fair values at the end of reporting period. However, the Company 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. Effective date The mandatory effective date of IFRS 9, which was previously set at January 1, 2015, was removed and will be reconsidered once the standard is complete with a new impairment model and any limited amendments to classification and measurement have been finalized.
2) IFRS 13, “Fair Value Measurement” IFRS 13 establishes a single source of guidance for fair value measurements. It defines fair value, establishes a framework for measuring fair value, and requires disclosures about fair value measurements. The disclosure requirements in IFRS 13 are more extensive than those required in the current standards. For example, quantitative and qualitative disclosures based on the three-level fair value hierarchy currently required for financial instruments only will be extended by IFRS 13 to cover all assets and liabilities within its scope.
3) Amendments to IAS 1, “Presentation of Items of Other Comprehensive Income”
The amendments to IAS 1 require items of other comprehensive income to be grouped into those that (1) will not be reclassified subsequently to profit or loss; and (2) will be reclassified subsequently to profit or loss when specific conditions are met. Income taxes on related items of other comprehensive income are grouped on the same basis. Under current IAS, there were no such requirements.
112
4) Amendments to IAS 36, “Recoverable Amount Disclosures for Non-financial Assets” In issuing IFRS 13 “Fair Value Measurement”, the IASB made consequential amendment to the disclosure requirements in IAS 36 “Impairment of Assets”, introducing a requirement to disclose in every reporting period the recoverable amount of an asset or each cash-generating unit. The amendment clarifies that such disclosure of recoverable amounts is required only when an impairment loss has been recognized or reversed during the period. Furthermore, the Company is required to disclose the discount rate used in measurements of the recoverable amount based on fair value less costs of disposal measured using a present value technique.
5) Annual Improvements to IFRSs: 2010-2012 Cycle
Several standards including IFRS 2 “Share-based Payment”, IFRS 3 “Business Combinations” and IFRS 8 “Operating Segments” were amended in this annual improvement. IFRS 13 was amended to clarify that the issuance of IFRS 13 did not remove the ability to measure short-term receivables and payables with no stated interest rate 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 Company is a related party of the Company. Consequently, the Company is required to disclose as related party transactions the amounts incurred for the service and 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.
6) Annual Improvements to IFRSs: 2011-2013 Cycle Several standards including IFRS 3, IFRS 13 and IAS 40 “Investment Property” were amended in this annual improvement. The scope in IFRS 13 of the portfolio exception for measuring the fair value of a group of financial assets and financial liabilities on a net basis was amended to clarify that it includes all contracts that are within the scope of, and accounted for in accordance with, IAS 39 or IFRS 9, even if those contracts do not meet the definitions of financial assets or financial liabilities within IAS 32.
As of the date the financial statements were authorized for issue, the Company is continuing to assess the possible impact of the application of other standards, interpretations and amendments to Regulations Governing the Preparation of Financial Reports by Securities Issuers on the Company’s financial position and operating result, and will disclose the relevant impact when the assessment is complete.
4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
This Company’s financial statements for the year ended December 31, 2013 are its first IFRS financial statements prepared in accordance with the Regulation Governing the Preparation of Financial Reports by Securities Issuers (“the Regulation”). Statement of Compliance The parent company only financial statements have been prepared in accordance with the Regulations Governing the Preparation of Financial Reports by Securities Issuers.
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Basis of Preparation The financial statements have been prepared on the historical cost basis except for financial instruments that are measured at fair values. Historical cost is generally based on the fair value of the consideration given in exchange for assets. When preparing its parent company only financial statements, the Company used equity method to account for its investment in subsidiaries and associates. The amounts of the net profit for the year, other comprehensive income for the year and total equity in the parent company only financial statements are the same with the amounts attributable to the owner of the Company in its consolidated financial statements since there is no difference in accounting treatment between parent company only basis and consolidated basis. Classification of Current and Non-current Assets and Liabilities Current assets include cash and cash equivalents and those assets held primarily for trading purposes or to be realized, sold or consumed within twelve months after the reporting period, unless the asset is restricted from being exchanged or used to settle a liability for at least twelve months after the reporting period. Current liabilities are obligations incurred for trading purposes or to be settled within twelve months after the reporting period and liabilities that the Company does not have an unconditional right to defer settlement for at least twelve months after the reporting period. Except as otherwise mentioned, assets and liabilities that are not classified as current are classified as non-current. Foreign Currencies In preparing the financial statements, transactions in currencies other than the entity’s functional currency are recognized at the rates of exchange prevailing at the dates of the transactions. At the end of each reporting period, monetary items denominated in foreign currencies are retranslated at the rates prevailing at that date. Exchange differences on monetary items arising from settlement are recognized in profit or loss in the period they arise. Exchange differences arising on the retranslation of non-monetary items measured at fair value are included in profit or loss for the period at the rates prevailing at the end of reporting period except for exchange differences arising from the retranslation of non-monetary items in respect of which gains and losses are recognized directly in other comprehensive income, in which case, the exchange differences are also recognized directly in other comprehensive income. Non-monetary items that are measured in terms of historical cost in a foreign currency are not retranslated. For the purposes of presenting financial statements, the assets and liabilities of the Company’s foreign operations are translated into New Taiwan dollars using exchange rate prevailing at the end of each reporting period. Income and expense items are translated at the average exchange rates for the period, and exchange difference arising are recognized in other comprehensive income. Financial Instruments a. Financial assets
All regular way purchases or sales of financial assets are recognized and derecognized on a trade date basis, except derivative financial assets which are recognized and derecognized on settlement date basis. The categories of financial assets held by Company are financial assets at fair value through profit or loss, available-for-sale financial assets, held-to-maturity financial assets, and loans and receivables.
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1) Financial assets at fair value through profit or loss Financial assets are classified as at fair value through profit or loss when the financial assets are either held for trading or designated as at fair value through profit or loss. Financial assets at fair value through profit or loss are stated at fair value, with any gains or losses arising on remeasurement recognized in profit or loss.
2) Available-for-sale financial assets Listed shares held by the Company that are traded in an active market are classified as available-for-sale financial assets and are stated at fair value at the end of each reporting period. Changes in the fair value of available-for-sale financial assets are recognized in other comprehensive income and will be reclassified to profit or loss when the investment is disposed of or is determined to be impaired. Dividends on available-for-sale equity instruments are recognized in profit or loss when the Company’s right to receive the dividends is established. Available-for-sale equity investments that do not have a quoted market price in an active market and whose fair value cannot be reliably measured and derivatives that are linked to and must be settled by delivery of such unquoted equity investments are measured at cost less any identified impairment loss at the end of each reporting period and are presented in a separate line item as financial assets carried at cost. If, in a subsequent period, the fair value of the financial assets can be reliably measured, the financial assets are remeasured at fair value. The difference between carrying amount and fair value is recognized in profit or loss or other comprehensive income on financial assets. Any impairment losses are recognized in profit and loss.
3) Held-to-maturity financial assets
Bonds which have a specific credit rating and the Company has positive intent and ability to hold to maturity are classified as held-to-maturity financial assets. Subsequent to initial recognition, held-to-maturity financial assets are measured at amortized cost using the effective interest method less any impairment.
4) Loans and receivables Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. Loans and receivables including cash and cash equivalent, notes and accounts receivable, account receivable due from related parties, other receivables and refundable deposits are measured at amortized cost using the effective interest method, less any impairment, except for short-term receivable when the effect of discounting is immaterial. Cash equivalents include time deposits with original maturities within one year from the date of acquisition, highly liquid, readily convertible to a known amount of cash and subject to an insignificant risk of changes in value. These cash equivalents are held for the purpose of meeting short-term cash commitments.
b. Impairment of financial assets Financial assets, other than those at fair value through profit or loss, are assessed for indicators of impairment at the end of each reporting period. Financial assets are considered to be impaired when there is objective evidence that, as a result of one or more events that occurred after the initial recognition of the financial asset, the estimated future cash flows of the investment have been affected.
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Financial assets carried at amortized cost, such as accounts receivable and held-to-maturity financial assets are assessed for impairment. Objective evidence of impairment for a portfolio of receivables could include the Company’s past experience of collecting payments, an increase in the number of delayed payments in the portfolio past the average credit period, as well as observable changes in national or local economic conditions that correlate with default on receivables. The amount of the impairment loss recognized is the difference between the asset’s carrying amount and the present value of estimated future cash flows, discounted at the financial asset’s original effective interest rate. If, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognized, the previously recognized impairment loss is reversed through profit or loss to the extent that the carrying amount of the investment at the date the impairment is reversed does not exceed what the amortized cost would have been had the impairment not been recognized. For available-for-sale equity investments, a significant or prolonged decline in the fair value of the security below its cost is considered to be objective evidence of impairment. When an available-for-sale financial asset is considered to be impaired, cumulative gains or losses previously recognized in other comprehensive income are reclassified to profit or loss in the period. In respect of available-for-sale equity securities, impairment loss previously recognized in profit or loss are not reversed through profit or loss. Any increase in fair value subsequent to an impairment loss is recognized in other comprehensive income and accumulated under the heading of investments revaluation reserve. In respect of available-for-sale debt securities, impairment loss are subsequently reversed through profit or loss if an increase in the fair value of the investment can be objectively related to an event occurring after the recognition of the impairment loss. For financial assets that are carried at cost, the amount of the impairment loss is measured as the difference between the asset’s carrying amount and the present value of the estimated future cash flows discounted at the current market rate of return for a similar financial asset. Such impairment loss will not be reversed in subsequent periods. The carrying amount of the financial asset is reduced by the impairment loss directly for all financial assets with the exception of trade receivables where the carrying amount is reduced through the use of an allowance account. When accounts receivable are considered uncollectible, the amount is written off against the allowance account. Subsequent recoveries of amounts previously written off are credited against the allowance account. Changes in the carrying amount of the allowance account are recognized in profit or loss.
c. Derecognition of financial assets The Company derecognizes a financial asset only when the contractual rights to the cash flows from the asset expire, or when it transfers the financial asset and substantially all the risks and rewards of ownership of the asset to another party. On derecognition of a financial asset in its entirety, the difference between the asset’s carrying amount and the sum of the consideration received and receivable and the cumulative gain or loss that had been recognized in other comprehensive income and accumulated in equity is recognized in profit or loss.
d. Financial liabilities Financial liabilities are classified as at fair value through profit or loss when the financial liability is either held for trading or it is designated as at fair value through profit or loss. Financial liabilities at fair value through profit or loss are stated at fair value, with any gains or losses arising on remeasurement recognized in profit or loss. Financial liabilities are measured at amortized cost using the effective interest method, except financial liabilities at fair value through profit or loss.
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e. Derecognition of financial liabilities The difference between the carrying amount of the financial liability derecognized and the consideration paid and payable is recognized in profit or loss.
f. Derivative financial instruments
The Company enters into a variety of derivative financial instruments to manage its exposure to foreign exchange rate risks, including foreign exchange forward contracts and cross currency swaps. Derivatives are initially recognized at fair value at the date the derivative contracts are entered into and are subsequently remeasured to their fair value at the end of each reporting period. The resulting gain or loss is recognized in profit or loss immediately unless the derivative is designated and effective as a hedging instrument, in which event the timing of the recognition in profit or loss depends on the nature of the hedge relationship. When the fair value of derivative financial instruments is positive, the derivative is recognized as a financial asset; when the fair value of derivative financial instruments is negative, the derivative is recognized as a financial liability.
g. Information about fair value of financial instruments
The Company determined the fair value of financial assets and liabilities as follow: 1) The fair values of financial assets and liabilities which have standard terms and conditions and
traded in active liquid market are determined by reference to quoted market price. If there is no quoted market price in active market, valuation techniques are applied.
2) The fair value of foreign-currency derivative financial instrument could be determined by reference
to the price and discount rate of currency swap quoted by financial institutions. Foreign exchange forward contracts use individual maturity rate to calculate the fair value of each contract.
3) The fair values of other financial assets and financial liabilities are determined by discounted cash
flow analysis in accordance with of generally accepted pricing models. Inventories Inventories consist of raw materials, supplies, finished goods and work-in-process and are stated at the lower of cost or net realizable value. Inventory write-downs are made by item, except where it may be appropriate to group similar or related items. Net realizable value is the estimated selling price of inventories less all estimated costs of completion and costs necessary to make the sale. Inventories are recorded at weighted-average cost on the balance sheet date. Investments Accounted for using Equity Method a. Investment in subsidiaries
Subsidiaries are the entities controlled by the Company. Under the equity method, the investment is initially recognized at cost and the carrying amount is increased or decreased to recognize the Company's share of the profit or loss and other comprehensive income of the subsidiary after the date of acquisition. Besides, the Company also recognizes the Company’s share of the change in other equity of the subsidiary.
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Changes in the Company’s ownership interests in subsidiaries that do not result in the Company’s loss of control over the subsidiaries are accounted for as equity transactions. Any difference between the carrying amount of the investment and the fair value of the consideration paid or received is recognized directly in equity. When the Company’s share of losses of a subsidiary equals or exceeds its interest in that subsidiary (which includes any carrying amount of the investment in subsidiary accounted for by the equity method and long-term interests that, in substance, form part of the Company’s net investment in the subsidiary), the Company continues recognizing its share of further losses. Profits and losses from downstream transactions with a subsidiary are eliminated in full. Profits and losses from upstream transactions with a subsidiary and sidestream transactions between subsidiaries are recognized in the Company’s financial statements only to the extent of interests in the subsidiary that are not related to the Company.
b. Investment in associates An associate is an entity over which the Company has significant influence and that is neither a subsidiary nor an interest in a joint venture. The Company uses equity method to recognize investments in associates. Under the equity method, an investment in an associate is initially recognized at cost and adjusted thereafter to recognize the Company’s share of the profit or loss and other comprehensive income of the associate. The Company also recognizes the changes in the Company’s share of equity of associates. When the Company subscribes for additional new shares of the associate, at a percentage different from its existing ownership percentage, the resulting carrying amount of the investment differs from the amount of the Company’s proportionate interest in the associate. The Company records such a difference as an adjustment to investments with the corresponding amount charged or credited to capital surplus. If the Company’s ownership interest is reduced due to the additional subscription of the new shares of associate, the proportionate amount of the gains or losses previously recognized in other comprehensive income in relation to that associate is reclassified to profit or loss on the same basis as would be required if the investee had directly disposed of the related assets or liabilities. When the adjustment should be debited to capital surplus, but the capital surplus recognized from investments accounted for by the equity method is insufficient, the shortage is debited to retained earnings. When the Company’s share of losses of an associate equals or exceeds its interest in that associate (which includes any carrying amount of the investment accounted for by the equity method and long-term interests that in substances, from part of the Company’s net investment in the associate), the Company discontinues recognizing its share of further losses. Additional losses and liabilities are recognized only to the extent that the Company has incurred legal obligations, or constructive obligations, or made payments on behalf of that associate. Any excess of the cost of acquisition over the Company’s share of the net fair value of the identifiable assets and liabilities of an associate recognized at the date of acquisition is recognized as goodwill, which is included within the carrying amount of the investment and is not amortized. Any excess of the Company’s share of the net fair value of the identifiable assets and liabilities over the cost of acquisition, after reassessment, is recognized immediately in profit or loss. The entire carrying amount of the investment (including goodwill) is tested for impairment as a single asset by comparing its recoverable amount with its carrying amount. Any impairment loss recognized forms part of the carrying amount of the investment. Any reversal of that impairment loss is recognized to the extent that the recoverable amount of the investment subsequently increases.
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When the Company transacts with its associate, profits and losses resulting from the transactions with the associate are recognized in the Company’s financial statements only to the extent of interests in the associate that are not related to the Company.
Property, Plant and Equipment Property, plant and equipment are stated at cost less subsequent accumulated depreciation and subsequent accumulated impairment loss. Depreciation is recognized using the straight-line method. The estimated useful lives, residual values and depreciation method are reviewed at the end of each reporting period, with the effect of any changes in estimate accounted for on a prospective basis. Any gain or loss arising on the disposal or retirement of an item of property, plant and equipment is determined as the difference between the sales proceeds and the carrying amount of the asset and is recognized in profit or loss. The Company’s property, plant and equipment were depreciated on a straight-line basis over the estimated useful life of the asset: Buildings 9-21 years Machinery and equipment 4-6 years Other equipment 6 years Furthermore, on April 29, 2013, the board of directors determined to change the accounting-basis of estimated useful life of assets and reported the change in the stockholders’ meeting on June 19, 2013. Since July 1, 2013, the useful life of facilities (recorded as “buildings”) is from 11 years to 15 years, and useful life of machinery and equipment is from 6 years to 8 years. Intangible Assets Intangible assets with finite useful lives that are acquired separately are initially measured at cost and subsequently measured at cost less accumulated amortization and accumulated impairment loss. Amortization is recognized on a straight-line basis over their estimated useful lives. The estimated useful life, residual value, and amortization method are reviewed at the end of each reporting period with the effect of any changes in estimate accounted for on a prospective basis. Impairment of Tangible and Intangible Assets At the end of each reporting period, the Company reviews the carrying amounts of its tangible and intangible assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss. Recoverable amount is the higher of fair value less costs to sell and value in use. If the recoverable amount of an asset or cash-generating unit is estimated to be less than its carrying amount, the carrying amount of the asset or cash-generating unit is reduced to its recoverable amount. When an impairment loss subsequently is reversed, the carrying amount of the asset or cash-generating unit is increased to the revised estimate of its recoverable amount, but only to the extent of the carrying amount that would have been determined had no impairment loss been recognized for the asset or cash-generating unit in prior years. A reversal of an impairment loss is recognized immediately in profit or loss.
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Provisions Provisions are recognized when the Company has a present obligation as a result of a past event and 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. For potential product risk, the Company accrues reserve for product guarantee based on commitment to specific customers. Revenue Recognition Revenue is measured at the fair value of the consideration received or receivable. Revenue is reduced for estimated customer returns, rebates and other similar allowances. Sales returns are recognized at the time of sale provided the seller can reliably estimate future returns; a liability is recognized a liability for returns based on previous experience and other relevant factors. Sales of goods are recognized when the goods are delivered and title is passed to the buyer. Leasing Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards of ownership to the lessee. All other leases are classified as operating lease. Under finance lease, the Company as lessor recognizes amounts due from lessees as receivables at the amount of the Company’s net investment in the lease. Finance lease income is allocated to accounting periods so as to reflect a constant periodic rate of return on the Company’s net investment outstanding in respect of the leases. Under operating lease, the Company as lessor recognizes rental income from operating leases on a straight-line basis over the term of the relevant lease. Contingent rents receivable arising under operating leases are recognized as income in the period in which they are earned. As lessee, operating lease payments are recognized as an expense on a straight-line basis over the lease term. Contingent rents payable arising under operating leases are recognized as an expense in the period in which they are incurred. Borrowing Costs Borrowing costs directly attributable to the acquisition of qualifying assets are added to the cost of those assets, until such time that the assets are substantially ready for their intended use. Other than stated above, all other borrowing costs are recognized in profit or loss in the period in which they are incurred. Retirement Benefit Costs Payments to defined contribution retirement benefit plans are recognized as an expense when employees have rendered service entitling them to the contributions. For defined benefit retirement plans, the cost of providing benefits is determined using the Projected Unit Credit Method. Actuarial gains and losses on the defined benefit obligation are recognized immediately in other comprehensive income. Past service cost is recognized immediately to the extent that the benefits are already vested, and otherwise is amortized on a straight-line basis over the average period until the benefits become vested. The retirement benefit obligation recognized in the balance sheets represents the present value of the defined benefit obligation as adjusted for unrecognized past service cost, and as reduced by the fair value of plan assets. Any asset resulting from this calculation is limited to the unrecognized past service cost, plus the present value of available refunds and reductions in future contributions to the plan.
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Curtailment or settlement gains or losses on the defined benefit plan are recognized when the curtailment or settlement occurs. Employee Stock Options The value of the stock options granted, which is equal to the best available estimate of the number of stock options expected to vest multiplied by the grant-date fair value, is expensed on a straight-line basis over the vesting period, with a corresponding adjustment to capital surplus. The fair value determined at the grant date of the employee stock options is recognized as an expense in full at the grant date when the stock options granted vest immediately. At the end of each reporting period, the Company revises its estimate of the number of employee stock options expected to vest. The impact of the revision of the original estimates is recognized in profit or loss such that the cumulative expense reflects the revised estimate, with a corresponding adjustment to the capital surplus. Taxation Income tax expense represents the sum of the tax currently payable and deferred tax. a. Current tax
According to the Income Tax Law, an additional tax at 10% of unappropriated earnings is provided for as income tax in the year the shareholders approve to retain the earnings. Adjustments of prior years’ tax liabilities are added to or deducted from the current year’s tax provision.
b. Deferred tax
Deferred tax is recognized on temporary differences between the carrying amounts of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit. The carrying amount of deferred tax assets is reviewed at the end of each reporting period and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered. Deferred tax liabilities and assets are measured at the tax rates that are expected to apply in the period in which the liability is settled or the asset realized, based on tax rates and tax laws that have been enacted or substantively enacted by the end of the reporting period. The measurement of deferred tax liabilities and assets reflects the tax consequences that would follow from the manner in which the Company expects, at the end of the reporting period, to recover or settle the carrying amount of its assets and liabilities.
5. CRITICAL ACCOUNTING JUDGMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY In the application of the Company’s accounting policies, management is required to make judgments, estimates and assumptions about the carrying amounts of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered relevant. Actual results may differ from these estimates. The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period in which the estimate is revised if the revision affects only that period or in the period of the revision and future periods if the revision affects both current and future periods.
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a. Deferred tax The realizability of the deferred tax asset mainly depends on whether sufficient future profits or taxable temporary differences will be available. In cases where the actual future profits generated are less than expected, a material reversal of deferred tax assets may arise, which would be recognized in profit or loss for the period in which such a reversal takes place.
b. Valuation of inventory Net realizable value of inventory is the estimated selling price in the ordinary course of business less the estimated costs of completion and the estimated costs necessary to make the sale. The estimation of net realizable value is based on current market conditions and the historical experience from selling products of a similar nature. Changes in market conditions may have a material impact on the estimation of net realizable value.
c. Useful lives and impairment of plant, property and equipment As described in Note 4, the Company reviews the estimated useful lives and recoverable amount of property, plant and equipment at the end of each reporting period. During the current period, the Company reassessed the useful lives of plant, property, and equipment in view of expected economic benefits. Since July 1, 2013, the useful life of facilities ranged from 11 years to 15 years and of machinery and equipment from 6 years to 8 years. The financial effect of this reassessment is to decrease depreciation expense by $987,784 thousand from July 1 to December 31, 2013.
d. Recognition and measurement of defined benefit retirement plans Accrued pension liabilities and the resulting pension expense under defined benefit retirement plans are calculated using the Projected Unit Credit Method. Actuarial assumptions comprise the discount rate, rate of employee turnover, and long-term average future salary increase. Changes in economic circumstances and market conditions will affect these assumptions and may have a material impact on the amount of the expense and the liability.
e. Impairment of accounts receivable
Objective evidence of impairment used in evaluating impairment loss includes estimated future cash flows. The amount of impairment loss recognized is the difference between the asset’s carrying amount and the present value of estimated future cash flows, discounted at the financial asset’s original effective interest rate. If the future cash flows are lower than expected, significant impairment loss may be recognized.
6. CASH AND CASH EQUIVALENTS
December 31,
2013 December 31,
2012 January 1,
2012 Cash on hand $ 230 $ 230 $ 230 Checking accounts and demand deposits 4,148,092 1,978,774 3,175,744 Repurchase agreements collateralized by bonds 809,600 1,728,400 637,013 $ 4,957,922 $ 3,707,404 $ 3,812,987
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The Company has time deposits pledged to secure land lease at a science park, customs tariff obligation, purchase orders of materials and sales deposits which are reclassified as “other non-current assets”.
December 31,
2013 December 31,
2012 January 1,
2012 Time deposits $ 70,781 $ 70,733 $ 77,836
7. FINANCIAL INSTRUMENTS AT FAIR VALUE THROUGH PROFIT OR LOSS
December 31,
2013 December 31,
2012 January 1,
2012 Financial assets at FVTPL - current Derivative financial assets (not under hedge
accounting) Forward exchange contracts $ - $ 23,551 $ 1,703
Financial liabilities at FVTPL - current Derivative financial liabilities (not under hedge
accounting) Forward exchange contracts $ 15,841 $ - $ -
At the end of the reporting period, outstanding forward exchange contracts not under hedge accounting were as follows:
Currencies Maturity Date Contract Amount
(In Thousands) December 31, 2013 Sell forward exchange contracts USD to NTD 2014.01.02-2014.03.28 USD65,300/NTD1,929,443 December 31, 2012 Sell forward exchange contracts USD to NTD 2013.01.03-2013.03.14 USD116,000/NTD3,378,206 Buy forward exchange contracts NTD to USD 2013.02.07 NTD289,220/USD10,000 January 1, 2012 Sell forward exchange contracts USD to NTD 2012.01.05-2012.02.02 USD41,000/NTD1,241,738 Sell forward exchange contracts USD to JPY 2012.01.05 USD925/JPY72,000 The Company entered into derivative financial instruments to manage exposures to exchange rate fluctuations of foreign currency denominated assets and liabilities.
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8. AVAILABLE-FOR-SALE FINANCIAL ASSETS
December 31,
2013 December 31,
2012 January 1,
2012 Listed stocks
Hannstar Display Corporation $ 696,747 $ 192,061 $ 123,082 Walton Advanced Engineering Inc. 535,670 420,526 480,601 Walsin Technology Corporation 102,958 91,504 103,859 Walsin Lihwa Corporation 401,520 - -
Private-placement shares of listed company Hannstar Display Corporation 281,070 64,530 64,800
$ 2,017,965 $ 768,621 $ 772,342 Current $ 1,736,895 $ 704,091 $ 707,542 Non-current 281,070 64,530 64,800 $ 2,017,965 $ 768,621 $ 772,342 In January 2011, the Company acquired 54,000,000 private-placement shares of Hannstar Display Corporation, dividend per share NT$5 dollars. According to Securities and Exchange Act, the private-placement shares of Hannstar Display Corporation could be resold freely in an active market only after 3 years from the delivery date and permitted by the controlling authorities. In September 2012, Hannstar Display Corporation carried out a capital reduction to offset a deficit, and the proportion of capital reduction is 50%. The Company deducted 27,000,000 private-placement shares of Hannstar Display Corporation. As of December 31, 2013, the Company held 27,000,000 of Hannstar Display Corporation’s private-placement shares.
9. NOTES AND ACCOUNTS RECEIVABLE
December 31,
2013 December 31,
2012 January 1,
2012 Notes receivable $ 365 $ 286 $ 382 Accounts receivable 3,235,073 3,083,063 2,726,898 Less: Allowance for doubtful accounts (82,488) (78,488) (279,000) $ 3,152,950 $ 3,004,861 $ 2,448,280 The average credit period for sales of goods was 30-60 days. Allowance for doubtful accounts is based on estimated irrecoverable amounts determined by reference to aging of receivables, past default experience of the counterparties and an analysis of their financial position. The aging of accounts receivable were as follows:
December 31,
2013 December 31,
2012 January 1,
2012 Not overdue $ 2,969,298 $ 2,859,790 $ 2,404,558 Overdue under 30 days 249,901 208,114 96,663 Overdue 31-60 days 4,379 5,032 2,670 Overdue 61 days and longer 11,495 10,127 223,007 $ 3,235,073 $ 3,083,063 $ 2,726,898
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Movements in the allowance for doubtful accounts recognized on accounts receivable were as follows: For the Year Ended December 31 2013 2012 Balance at January 1 $ 78,488 $ 279,000 Less: Amounts written off - (212,254) Add: Impairment losses recognized on accounts receivable 4,000 11,742 Balance at December 31 $ 82,488 $ 78,488 The Company’s receivables were aged on a collective basis and not on individual account basis.
10. FINANCE LEASE RECEIVABLES
December 31,
2013 December 31,
2012 January 1,
2012 Gross investment in leases Not later than one year $ 148,734 $ - $ - Later than one year and not later than five years 672,610 - - 821,344 - - Less: Unearned finance income (348,261) - - Present value of minimum lease payments $ 473,083 $ - $ - Finance lease receivables Not later than one year (recorded as “other
receivables”) $ 32,647
$ -
$ - Later than one year and not later than five years
(recorded as “other non-current assets”) 440,436
-
- Financial lease receivables $ 473,083 $ - $ - The Company entered into finance lease arrangements for certain machinery. All leases were denominated in New Taiwan dollars. The term of finance leases entered into was 3 years. The interest rate inherent in the leases was fixed at contract date for the entire lease term. As of December 31, 2013, the interest rate inherent in the finance lease was 1.7% per annum. Finance lease receivables are secured by the leased machinery. The Company is not permitted to sell or pledge the collateral in the absence of default by the lessee. During 2013, the carrying value of $527,656 thousand of the machinery which was reclassified to financial lease receivables was pledged to secure long-term borrowings. The finance lease receivables as of December 31, 2013 were neither past due nor impaired.
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11. INVENTORIES
December 31,
2013 December 31,
2012 January 1,
2012 Finished goods $ 1,359,542 $ 1,505,625 $ 1,606,347 Work-in-process 4,487,058 5,321,377 4,517,692 Raw materials and supplies 247,412 263,894 289,609 Inventories in transit 17,122 16,791 13,772 $ 6,111,134 $ 7,107,687 $ 6,427,420 a. Gain on recovery of loss of inventory of $193,725 thousand and $69,515 thousand were recognized in
cost of sales for the years ended December 31, 2013 and 2012, respectively. Gain on recovery of decline in market value amounted to $260,374 thousand and $109,608 thousand in the years ended December 31, 2013 and 2012, due to net realizable value improvement.
b. Unallocated fixed manufacturing costs recognized as cost of sales in the years ended December 31,
2013 and 2012 amounted to $553,302 thousand and $513,589 thousand, respectively.
12. HELD-TO-MATURITY FINANCIAL ASSETS
December 31,
2013 December 31,
2012 January 1,
2012 Chinatrust Commercial Bank 1st Unsecured
Financial Debentures in 2013 $ 97,770 $ - $ - On March 12, 2013, the Company bought 3-year financial bonds issued by Chinatrust Commercial Bank with a coupon rate and an effective interest rate of 2.9%, at par value of RMB20,000 thousand.
13. FINANCIAL ASSETS MEASURED AT COST, NON-CURRENT
December 31,
2013 December 31,
2012 January 1,
2012 Harbinger III Venture Capital Corp. $ 26,908 $ 43,228 $ - YH Bio Explore & Application Co., Ltd. - - 35,520 Vita Genomic, Inc. - - 13,082 Others 13,253 13,253 13,253 $ 40,161 $ 56,481 $ 61,855 a. Management believed that the above unlisted equity investments held by the Company have fair value
that cannot be reliably measured because the range of reasonable fair value estimates was so significant; therefore they were measured at cost less impairment at the end of reporting period.
b. The board of directors of Harbinger III Venture Capital Corp. resolved capital reduction in the amount
of $16,320 thousand in June 2013. c. The Company assessed the recoverable amount of the above financial assets; as a result, the Company
recognized an impairment loss of $2,922 thousand, recorded as “impairment loss on financial assets” for the year ended December 31, 2012.
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14. INVESTMENTS ACCOUNTED FOR USING EQUITY METHOD
December 31,
2013 December 31,
2012 January 1,
2012 Investments in subsidiaries $ 3,901,430 $ 3,630,950 $ 4,770,395 Investments in associates 2,323,058 1,654,103 - $ 6,224,488 $ 5,285,053 $ 4,770,395 a. Investments in subsidiaries
December 31, 2013 December 31, 2012 January 1, 2012
Carrying
Value Ownership Percentage
Carrying Value
Ownership Percentage
Carrying Value
Ownership Percentage
Listed companies Nuvoton Technology Corporation $ 1,712,259 61 $ 1,735,764 61 $ 1,645,164 61
Unlisted companies Winbond Int’l Corporation 1,688,192 100 1,617,587 100 1,651,184 100 Pine Capital Investment Limited 266,236 100 37,684 100 42,805 100 Landmark Group Holding Ltd. 212,026 100 239,915 100 372,332 100 Winbond Technology LTD 22,717 100 - - - - Win Investment Corporation - - - - 1,058,307 - Mobile Magic Design Corporation - 100 - 100 603 100 Newfound Asian Corp. - 100 - 100 - 100 Winbond Electronics (H.K.) Limited - 100 - 100 - 100 $ 3,901,430 $ 3,630,950 $ 4,770,395
1) Fair value of investment in subsidiaries for which there are published price quotations are
summarized as follows, based on closing price of those investments at the balance sheet date:
Name of Subsidiary December 31,
2013 December 31,
2012 January 1,
2012 Nuvoton Technology Corporation $ 3,266,798 $ 4,026,519 $ 2,665,353
2) In December 2013, the Company subscribed shares Pine Capital Investment Limited for cash of
$227,052 thousand. 3) In May 2013 and September 2012, the board of directors of Landmark Group Holding Ltd. resolved
capital reduction in the amounts of $24,951 thousand and $188,874 thousand, respectively. 4) Winbond Technology LTD (“WECI”) was incorporated in September 2013. WECI’s principal
activity is in the design, development and marketing of VLSI ICs used in a variety of microelectronic applications. As of December 31, 2013, the balance of WECI’s capital account amounted to ILS2,500 thousand and the Company held a 100% ownership interest directly.
5) In 2013 and 2012, the Company recognized share of profit of subsidiaries under equity method in
the amounts of $152,362 thousand and $407,806 thousand, respectively.
b. Investments in associates
December 31, 2013 December 31, 2012 January 1, 2012
Name of Associate Carrying
Value Ownership Percentage
Carrying Value
Ownership Percentage
Carrying Value
Ownership Percentage
Unlisted companies:
Chin Xin Investment Co., Ltd. $ 2,323,058 38 $ 1,654,103 35 $ - -
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The summarized financial information in respect of the Company’s associates is set out below:
December 31,
2013 December 31,
2012 January 1,
2012 Total assets $ 6,270,285 $ 5,749,226 $ - Total liabilities $ 16,090 $ 549 $ - For the Year Ended December 31 2013 2012 Revenue $ 46,890 $ - Net loss $ (955,413) $ - Other comprehensive income $ 1,476,715 $ - Company’s share of profits of associates for the year $ (108,151) $ - In November 2012, the Company bought 40,000 thousand shares of Chin Xin Investment Co., Ltd. from related-party Walsin Lihwa Corporation. On December 31, 2012, Win Investment Corporation, a subsidiary of the Company was merged into Chin Xin Investment Co., Ltd. and accordingly Win Investment Corporation was dissolved. The Company acquired 130,713 thousand shares of Chin Xin Investment Co., Ltd. after such merger. In fourth quarter of 2013, the Company acquired 12,128 thousand shares of Chin Xin Investment Co., Ltd. from related-party Walsin Lihwa Corporation. As of December 31, 2013, the Company had 182,841 thousand shares of Chin Xin Investment Co., Ltd. with a 38% ownership interest. The investments accounted for by the equity method and the share of profit or loss and other comprehensive income of those investments for the years ended December 31, 2013 and 2012 were based on the subsidiaries’ and associates’ financial statements audited by independent auditors for the same years.
15. PROPERTY, PLANT AND EQUIPMENT
December 31,
2013 December 31,
2012 January 1,
2012 Land $ 799,147 $ 799,147 $ 799,147 Building 8,361,611 9,358,233 10,403,121 Machinery and equipment 13,728,569 17,819,762 22,593,191 Other equipment 250,582 326,187 473,906 Construction in progress and prepayments on
purchase of equipment 992,246 92,945 125,671 $ 24,132,155 $ 28,396,274 $ 34,395,036
Land Building Machinery and
Equipment Other
Equipment
Construction in Progress and Prepayments
on Purchase of Equipment Total
Cost Balance at January 1, 2013 $ 799,147 $ 16,357,176 $ 66,351,722 $ 2,560,421 $ 92,945 $ 86,161,411 Additions - 27,873 1,366,325 46,395 951,416 2,392,009 Disposals - - (177,848 ) (7,155 ) - (185,003 ) Reclassified - 51,475 (599,360 ) - (52,115 ) (600,000 ) Balance at December 31, 2013 $ 799,147 $ 16,436,524 $ 66,940,839 $ 2,599,661 $ 992,246 $ 87,768,417
(Continued)
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Land Building Machinery and
Equipment Other
Equipment
Construction in Progress and Prepayments
on Purchase of Equipment Total
Accumulated depreciation and impairment Balance at January 1, 2013 $ - $ 6,998,943 $ 48,531,960 $ 2,234,234 $ - $ 57,765,137 Depreciation expense - 1,075,970 4,926,507 121,976 - 6,124,453 Disposals - - (173,853 ) (7,131 ) - (180,984 ) Reclassified - - (72,344 ) - - (72,344 ) Balance at December 31, 2013 $ - $ 8,074,913 $ 53,212,270 $ 2,349,079 $ - $ 63,636,262
(Concluded)
Land Building Machinery and
Equipment Other
Equipment
Construction in Progress and Prepayments
on Purchase of Equipment Total
Cost Balance at January 1, 2012 $ 799,147 $ 16,148,157 $ 64,599,851 $ 2,504,366 $ 125,671 $ 84,177,192 Additions - 138,460 2,262,451 37,065 72,464 2,510,440 Disposals - - (523,412 ) (2,809 ) - (526,221 ) Reclassified - 70,559 12,832 21,799 (105,190 ) - Balance at December 31, 2012 $ 799,147 $ 16,357,176 $ 66,351,722 $ 2,560,421 $ 92,945 $ 86,161,411 Accumulated depreciation and impairment Balance at January 1, 2012 $ - $ 5,745,036 $ 42,006,660 $ 2,030,460 $ - $ 49,782,156 Depreciation expense - 1,253,907 7,028,596 206,571 - 8,489,074 Disposals - - (503,296 ) (2,797 ) - (506,093 ) Balance at December 31, 2012 $ - $ 6,998,943 $ 48,531,960 $ 2,234,234 $ - $ 57,765,137 a. As of December 31, 2013, December 31, 2012 and January 1, 2012, the carrying values of $13,458,619
thousand, $20,557,599 thousand and $20,906,790 thousand of land and 12-inch Fab manufacturing facilities were pledged to secure long-term borrowing. The Company was not permitted to sell or pledge all of these pledged assets.
b. Information about capitalized interest
For the Year Ended December 31 2013 2012 Capitalized interest amounts $ 39,120 $ 49,146 Capitalized interest rate 2.40%-2.65% 2.62%-2.70%
16. INTANGIBLE ASSET
December 31,
2013 December 31,
2012 January 1,
2012 Deferred technical assets, net $ 52,000 $ 38,430 $ 548,754
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Deferred Technical
Assets Cost Balance at January 1, 2013 $ 17,711,553 Addition 52,000 Balance at December 31, 2013 $ 17,763,553 Accumulated amortization and impairment Balance at January 1, 2013 $ 17,673,123 Amortization expense 38,430 Balance at December 31, 2013 $ 17,711,553 Cost Balance at January 1, 2012 $ 17,711,553 Balance at December 31, 2012 $ 17,711,553 Accumulated amortization and impairment Balance at January 1, 2012 $ 17,162,799 Amortization expense 510,324 Balance at December 31, 2012 $ 17,673,123 The amounts of deferred technical assets were the technical transfer fee in connection with certain technical transfer agreements. The above technical assets pertained to different products or process technology. The assets were depreciated on a straight-line basis from the commencement of production.
17. BORROWINGS
December 31,
2013 December 31,
2012 January 1,
2012 Short-term borrowings $ 1,893,878 $ 2,716,474 $ 1,539,592 Short-term bills payable $ - $ 499,376 $ 199,763 Long-term borrowings $ 9,939,290 $ 11,033,330 $ 15,124,990
a. Short-term borrowings
December 31, 2013 December 31, 2012 January 1, 2012 Interest Rate Amount Interest Rate Amount Interest Rate Amount Bank lines of credit 1.08%-2.36% $ 1,847,740 1.33%-1.87% $ 2,562,100 - $ - Materials procurement loans 1.06% 46,138 1.11%-1.70% 154,374 1.09%-2.73% 1,539,592 $ 1,893,878 $ 2,716,474 $ 1,539,592
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b. Short-term bills payable
December 31,
2013 December 31,
2012 January 1,
2012 Commercial paper payable $ - $ 500,000 $ 200,000 Less: Unamortized discount on commercial
paper payable - (624) (237) $ - $ 499,376 $ 199,763
Outstanding short-term bills payable were as follows: December 31, 2012
Bills Financial Corporation Nominal Amount
Discount Amount
Carrying Value Interest Rate
China bills $ 200,000 $ 142 $ 199,858 0.85% MEGA bills 300,000 482 299,518 1.15% $ 500,000 $ 624 $ 499,376 January 1, 2012
Bills Financial Corporation Nominal Amount
Discount Amount
Carrying Value Interest Rate
China bills $ 200,000 $ 237 $ 199,763 0.92%
c. Long-term borrowings
December 31, 2013 December 31,
2012 January 1,
2012 Period Interest Rate Amount Amount Amount
Chinatrust Commercial Bank syndication
agreement (II) 2008.06.27-2013.06.27 - $ - $ 1,283,330 $ 3,849,990
Bank of Taiwan syndication agreement (I)
2009.07.27-2012.07.27 - - - 2,775,000
Bank of Taiwan syndication agreement (II)
2010.06.18-2015.06.18 2.81%-3.11% 1,650,000 4,850,000 6,000,000
Bank of Taiwan syndication agreement (III)
2011.12.23-2016.12.23 2.33%-2.64% 3,289,290 2,900,000 2,500,000
Chinatrust Commercial Bank syndication agreement (III)
2012.12.27-2015.12.27 2.24%-2.65% 5,000,000
2,000,000
-
9,939,290 11,033,330 15,124,990 Less: Current portion (3,863,097 ) (4,483,330 ) (7,158,327 ) $ 6,076,193 $ 6,550,000 $ 7,966,663 1) Chinatrust Commercial Bank Syndication Agreement (II)
a) On June 4, 2008, the Company entered into a syndication agreement, amounting to $7.7 billion,
with a group of financial institutions to procure equipment for 12-inch Fab. b) The principal will be repaid every six months from December 27, 2010 until maturity. c) Please refer to Note 15 for collateral on bank borrowing. d) The agreement was fully redeemed on January 25, 2013.
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2) Bank of Taiwan Syndication Agreement (I)
a) On July 15, 2009, the Company entered into a syndication agreement, amounting to $3.7 billion,
with a group of financial institutions to fund the long-term loan payments and finance the working capital.
b) The principal will be repaid every three months from October 27, 2011 until maturity. c) Please refer to Note 15 for collateral on bank borrowing and the chairman of the Company is a
joint guarantor. d) The agreement was fully redeemed on July 27, 2012.
3) Bank of Taiwan Syndication Agreement (II)
a) On May 31, 2010, the Company entered into a syndication agreement, with a group of financial institutions to procure equipment for 12-inch Fab and fund the long-term loan payments, credit line was divided into parts a and b, which amounted to $3.3 billion and $3.5 billion, respectively; the total line of credit $6.8 billion.
b) Part A will be repaid every six months from December 18, 2012 until maturity; part B will be
repaid from June 18, 2012 at 20%, 20% and 60% of the principal, respectively. c) Please refer to Note 15 for collateral on bank borrowing and Note 27 for the joint guarantor.
4) Bank of Taiwan Syndication Agreement (III) a) On September 19, 2011, the Company entered into a syndication agreement, the original amount
of $7 billion was deducted $0.25 billion because prepayment, finally amounting to $6.75 billion, with a group of financial institutions to procure equipment for 12-inch Fab.
b) The Company changed the terms and repayment schedule of the agreement on December 18,
2013. The loan utilized before December 22, 2013 will be repaid every six months from June 23, 2014 and the loan utilized after December 22, 2013 will be repaid every six months at 30%, 30% and 40% from December 23, 2015, respectively.
c) Please refer to Note 15 for collateral on bank borrowing.
5) Chinatrust Commercial Bank Syndication Agreement (III) a) On November 19, 2012, the Company entered into a syndication agreement, amounting to $5
billion, with a group of financial institutions to fund the long-term loan payments and finance the working capital.
b) The principal will be repaid every six months from December 27, 2014 until maturity. c) Please refer to Note 15 for collateral on bank borrowing.
The Company is required to maintain certain financial covenants, including current ratio, debt ratio and tangible net equity, on June 30 and December 31 during the tenors of the loans. Additionally, the principal and interest coverage should be also maintained on December 31 during the tenors of the loans except for the interest coverage ratio of Bank of Taiwan Syndication Agreement (II), (III) and Chinatrust Commercial Bank Syndication Agreement (III) which should be maintained on June 30 and December 31. The computations of financial ratios mentioned above are done based on the audited consolidated financial statements.
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18. RETIREMENT BENEFIT PLANS
a. Defined contribution plan
The Company 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.
b. Defined benefit plan The Company adopted the defined benefit plan under the Labor Standards Law, under which pension benefits are calculated on the basis of the length of service and average monthly salaries of the six months before retirement. The Company contributes 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. The actuarial valuations of plan assets and the present value of the defined benefit obligation were carried out by qualified actuaries. The principal assumptions used for the purposes of the actuarial valuations were as follows:
December 31,
2013 December 31,
2012 January 1,
2012 Discount rate 2.25% 1.75% 2.00% Expected return on plan assets 1.25% 2.00% 2.00% Expected rate of salary increase 3.00% 3.00% 3.00% Amounts recognized in profit or loss in respect of these defined benefit plans were as follows: For the Year Ended December 31 2013 2012 Current service cost $ 16,777 $ 17,677 Interest cost 16,827 17,316 Expected return on plan assets (9,580) (9,687) $ 24,024 $ 25,306 An analysis by function
Manufacturing expense $ 13,685 $ 14,502 Selling expenses 2,211 2,318 General and administrative expenses 2,634 2,785 Research and development expenses 5,494 5,701
$ 24,024 $ 25,306 Actuarial gains and losses recognized in other comprehensive income for the years ended December 31, 2013 and 2012 were gain of $38,828 thousand and loss of $89,434 thousand, respectively. The cumulative amount of actuarial gains and losses recognized in other comprehensive income as of December 31, 2013 and 2012 was loss of $50,606 thousand and $89,434 thousand, respectively.
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The amount included in the balance sheet in respect of the Company’s obligation on its defined benefit plan was as follows:
December 31,
2013 December 31,
2012 January 1,
2012 Present value of funded defined benefit
obligation $ 955,348 $ 980,045 $ 880,412 Fair value of plan assets (494,437) (490,682) (492,265) Accrued pension liabilities $ 460,911 $ 489,363 $ 388,147 Movements in present value of funded defined benefit obligation were as follows: For the Year Ended December 31 2013 2012 Opening defined benefit obligation $ 980,045 $ 880,412 Current service cost 16,777 17,677 Interest cost 16,827 17,316 Actuarial (gain) loss (42,212) 84,432 Benefit paid of plan assets (16,089) (19,792) Closing defined benefit obligation $ 955,348 $ 980,045 Movements in fair value of plan assets were as follows:
For the Year Ended December 31 2013 2012 Opening fair value of plan assets $ 490,682 $ 492,265 Actual return on plan assets 6,195 4,685 Contribution of plan assets 13,648 13,524 Benefit paid of plan assets (16,089) (19,792) Closing fair value of plan assets $ 494,436 $ 490,682 The major categories of plan assets at the end of reporting period were disclosed based on the information announced by Labor Pension Fund Supervisory Committee. The overall expected rate of return was based on historical return trends and analysts’ predictions of the market for the asset over the life of the related obligation, with reference to the use of the Labor Pension Fund by Labor Pension Fund Supervision Committee, taking into consideration the effect of possible differences between the guaranteed minimum income and the return on local banks’ two-year time deposits. The Company expects to make a contribution of $31,415 thousand to the defined benefit plan during the annual period beginning after 2014.
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19. EQUITY a. Common stock
December 31,
2013 December 31,
2012 January 1,
2012 Number of shares authorized (in thousands) 6,700,000 6,700,000 6,700,000 Share authorized $ 67,000,000 $ 67,000,000 $ 67,000,000 Number of shares issued and fully paid (in
thousands) 3,694,023 3,685,601 3,680,230 Share issued $ 36,940,232 $ 36,856,012 $ 36,802,302 Reconciliation of outstanding share:
Shares
(In Thousands) Capital January 1, 2013 3,685,601 $ 36,856,012 Employee executed the stock options 8,422 84,220 December 31, 2013 3,694,023 $ 36,940,232 January 1, 2012 3,680,230 $ 36,802,302 Employee executed the stock options 5,371 53,710 December 31, 2012 3,685,601 $ 36,856,012 As of December 31, 2012, the balance of the Company’s capital account amounted to $36,856,012 thousand, divided into 3,685,601 thousand shares at par NT$10.00 per share. Employees executed the stock options at NT$3.02 to NT$6.46 per share totaling 8,422 thousand shares during the year of 2013. As of December 31, 2013, the balance of the Company’s capital account amount to $36,940,232 thousand, divided into 3,694,023 thousand shares at par NT$10.00 per share.
b. Retained earnings and dividend policy According to the Company Law of the ROC and the Company’s Articles of Incorporation, if the Company has surplus earnings at the end of a fiscal year, after covering all losses incurred in prior years and paying all taxes, the Company shall set aside 10% of said earnings as legal reserve. However, legal reserve need not be made when the accumulated legal reserve equals the paid-in capital of the Company. After setting aside or reversing special reserve pursuant to applicable laws and regulations and orders of competent authorities from (1) the remaining amount plus undistributed retained earnings; or (2) the differences between the undistributed retained earnings and the losses suffered by the Company at the end of a fiscal year if the losses can be fully covered by the undistributed retained earnings, the Company shall distribute the remaining amount (if not otherwise set aside as special reserve and reserved based on business needs) in the following order: a. 1% to 2% as remuneration to directors and supervisors; b. 10% to 15% as bonus to employees; c. The remaining amount as bonus to shareholders. Not less than 10% of the total shareholders
bonus shall be distributed in form of cash.
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“Employees” referred to in item b of the preceding paragraph, when distributing the stock bonus, include the employees of subsidiaries of the Company meeting certain criteria. The board of directors is authorized to determine the above “certain criteria” or the board of directors may authorize the Chairman to ratify the above “certain criteria”. The Company’s results were loss for the years ended December 31, 2012 and 2011, so the stockholders’ meetings on June 19, 2013 and June 15, 2012 did not include appropriations of earnings. The Company’s results were loss for the year ended December 31, 2013; the Company’s board of directors determined not to make appropriation of earnings on March 28, 2014. The relevant information about the Company is available on MOPS. The Company had operating loss in the years 2013, 2012 and 2011; thus it did not estimate bonus to employees, directors and supervisors. Under Rule No. 1010012865 issued by the FSC on April 6, 2012 and the directive titled “Questions and Answers for Special Reserves Appropriated Following Adoption of IFRSs”, on the first-time adoption of IFRSs, a company should appropriate a special reserve of an amount the same as that of unrealized revaluation increment and cumulative translation differences (gains) transferred to retained earnings as a result of the Company’s use of exemptions under IFRS 1. At the transition date for the first-time adoption of IFRS, the Company had negative retained earnings; thus, the rule was not applicable to the Company.
c. Capital surplus Movements in the capital surplus for the year ended December 31, 2013 and 2012 were as follows:
Employee Stock
Options Treasury Stock
Change in Equity of
Subsidiaries and Associates
Accounted for Using Equity
Method Others Total January 1, 2012 $ 13,960 $ 1,971,862 $ 2,453 $ 222,784 $ 2,211,059 Change in equity of subsidiaries and
associates accounted for using equity method - - (255 ) - (255 )
Write-off of equity due to merger of subsidiary - - 3,886 - 3,886
Issuance of ordinary shares under employee stock options (4,816 ) - - (32,673 ) (37,489 )
Compensation cost of employee stock options 141 - - - 141
December 31, 2012 9,285 1,971,862 6,084 190,111 2,177,342 Issuance of ordinary shares under
employee stock options (7,588 ) - - (50,742 ) (58,330 ) Change in equity of subsidiaries and
associates accounted for using equity method - - 29,347 - 29,347
December 31, 2013 $ 1,697 $ 1,971,862 $ 35,431 $ 139,369 $ 2,148,359 The capital surplus arising from treasury stock transactions, and the excess of the consideration received over the carrying amount of the subsidiaries’ net assets during disposal or acquisition may be distributed as cash dividends or transferred to share capital, provided, the Company has no deficit, and transfer is limited to a certain percentage of the Company’s capital surplus and made once a year. The capital surplus from investments accounted for using equity method and employee stock options may not be used for any purpose.
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d. Other equity items
Exchange differences on translation of foreign financial statements are the exchange differences on net assets of foreign operations translated into the Company’s functional currency (New Taiwan dollar), which are recognized directly in other comprehensive income. For the years ended December 31, 2013 and 2012, the Company recognized gain of $22,181 thousand and loss of $81,748 thousand in other comprehensive income, respectively. Unrealized gain (loss) on available-for-sale financial assets For the Year Ended December 31 2013 2012 Balance, beginning of year $ (1,408,417) $ (1,461,970) Unrealized gain (loss) arising on revaluation of available-for-sale
financial assets
847,259 (90,636) Share of unrealized gain on revaluation of available-for-sale
financial assets of subsidiaries and associates accounted for using the equity method
640,213 144,189 Balance, end of year $ 79,055 $ (1,408,417)
e. Treasury stock Treasury stock transactions for the year of 2013 were summarized as follows:
Purpose of Buyback
Treasury Stock Held as of January 1,
2013
Increase During the
Year
Decrease During the
Year
Treasury Stock Held as
of December 31,
2013 Common shares held by
subsidiaries 7,518,364 - - 7,518,364 Treasury stock transactions for the year of 2012 were summarized as follows:
Purpose of Buyback
Treasury Stock Held as of January 1,
2012
Increase During the
Year
Decrease During the
Year
Treasury Stock Held as
of December 31,
2012 Common shares held by
subsidiaries 7,518,364 - - 7,518,364
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The Company’s shares held by its subsidiaries at the end of the reporting periods were as follows:
Name of Subsidiary Number of
Shares Held Carrying Value Market Value December 31, 2013 Baystar Holdings Ltd. 7,518,364 $ 106,387 $ 60,147 December 31, 2012 Baystar Holdings Ltd. 7,518,364 $ 106,387 $ 37,968 January 1, 2012 Baystar Holdings Ltd. 7,518,364 $ 106,387 $ 31,571 The purpose of holding the shares is to maintain Stockholders’ equity. The Company’s shares held by subsidiaries were treated as treasury stock, and the holders are entitled to the rights of stockholders, except for the right to participate in the Company’s share issuance for cash and vote in stockholders’ meeting when the subsidiary held more than 50%. Other rights are the same as common stock.
20. EMPLOYEE BENEFITS EXPENSE, DEPRECIATION, AND AMORTIZATION
Year Ended December 31, 2013
Classified as Operating
Costs
Classified as Operating Expenses
Classified as Non-operating
Income and Losses Total
Short-term employee benefits $ 1,376,854 $ 920,782 $ - $ 2,297,636 Post-employment benefits $ 74,435 $ 44,116 $ - $ 118,551 Depreciation $ 5,979,165 $ 145,288 $ - $ 6,124,453 Amortization $ - $ 38,430 $ 22,811 $ 61,241
Year Ended December 31, 2012
Classified as Operating
Costs
Classified as Operating Expenses
Classified as Non-operating
Income and Losses Total
Short-term employee benefits $ 1,332,467 $ 854,684 $ - $ 2,187,151 Post-employment benefits $ 72,873 $ 42,099 $ - $ 114,972 Depreciation $ 8,372,380 $ 116,694 $ - $ 8,489,074 Amortization $ - $ 510,324 $ 18,717 $ 529,041
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21. INCOME TAXES RELATING TO CONTINUING OPERATIONS a. Income tax recognized in profit or loss
The major components of income tax expense (benefit) were as follows:
Year Ended December 31 2013 2012 Current tax
In respect of the current year $ 35,000 $ (377,000) Deferred tax
In respect of the current year (35,000) 377,000 Income tax expense recognized in profit or loss $ - $ - Reconciliation of accounting profit and income tax expense is as follows: Year Ended December 31 2013 2012 Profit (loss) before tax from continuing operations $ 35,000 $ (377,000) Deferred tax
Temporary difference (35,000) 377,000 Income tax expense recognized in profit or loss $ - $ -
b. Current tax assets and liabilities
December 31,
2013 December 31,
2012 January 1,
2012 Current income tax assets
Tax refund receivable $ 5,994 $ 7,136 $ 25,986 c. As of December 31, 2013, December 31, 2012 and January 1, 2012, deferred tax assets of $3,742,000
thousand were mainly net operating loss carryforwards.
d. Information about the Company’s investment tax credit and operating loss carryforwards as of December 31, 2013 was as follows:
Law Tax Credit Item Credit Expiry Year Statute for Upgrading Industries Machinery equipment $ 239,000 2014 Operating loss carryforwards as of December 31, 2013 comprised of: Operating Loss Carryforwards
Expiry Year
$ 3,700,000 2015-2019 559,000 2022 $ 4,259,000
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e. The information on the integrated income tax was as follows:
December 31,
2013 December 31,
2012 January 1,
2012 Balance of imputation credit account $ 297,186 $ 252,935 $ 217,239 Undistributed earnings for the years of 1997
and before $ - $ - $ - Undistributed deficits for the years of 1998
and thereafter $ (4,187,772) $ (4,430,750) $ (2,418,258) f. The tax returns through 2010 have been assessed by the tax authorities.
22. EARNINGS (LOSS) PER SHARE
Year Ended December 31, 2013 Amounts (Numerator) Shares Earnings Per Share (NT$) Before After (Denominator) Before After Tax Tax (In Thousands) Tax Tax Basic earnings per share
Net income attributed to common shareholders $ 206,564 $ 206,564 3,682,410 $ 0.06
$ 0.06
Effect of potentially dilutive ordinary shares
Employee stock option - - 287 Diluted earnings per share
Net income attributed to common shareholders $ 206,564 $ 206,564 3,682,697 $ 0.06
$ 0.06
Year Ended December 31, 2012 Amounts (Numerator) Shares Loss Per Share (NT$) Before After (Denominator) Before After Tax Tax (In Thousands) Tax Tax Basic loss per share
Net loss attributed to common shareholders $ (1,862,883) $ (1,862,883) 3,676,698 $ (0.51)
$ (0.51)
23. SHARE-BASED PAYMENT ARRANGEMENT
Employee Stock Option In 2008 and 2009, the Company granted employee stock options in the quantity of 45,764 thousand and 1,585 thousand units, respectively. Each individual employee stock options is granted the right to purchase the Company’s new issued one common share. The stock options were granted to qualified employees of the Company and its subsidiaries. The stock options granted are valid for 5 years and exercisable at certain percentages after the second anniversary year from the grant date. The stock options were granted at an exercise price equal to the closing price of the Company’s common shares listed on the Taiwan Stock Exchange on the grant date. For any subsequent changes in the Company’s capital surplus, the exercise price and the number of options are adjusted accordingly.
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Employee stock options were summarized as follows:
Year Ended December 31 2013 2012
Employee Stock Options
Number of Options (In Thousands)
Weighted Average Exercise
Price (NT$)
Number of Options (In Thousands)
Weighted Average Exercise
Price (NT$)
Outstanding balance, beginning of year 9,774 $ 3.28 15,516 $ 3.20 Options exercised (8,422) 3.07 (5,371) 3.02 Options expired (393) 3.32 (371) 3.49 Outstanding balance, end of year 959 5.08 9,774 3.28 Options exercisable, end of year 959 5.08 9,751 3.28 Information about outstanding options was as follows:
December 31 2013 2012
Range of Exercise Price (NT$)
Weighted Average Remaining
Contractual Life (Years)
Range of Exercise Price (NT$)
Weighted Average Remaining
Contractual Life (Years)
$3.19-$6.46 0.39 $3.02-$6.46 0.90
The Company used the fair value method to evaluate the option using Black-Scholes model, the assumptions and proforma result were as follows: Grant-date share price (NT$) $3.02-$6.46 Exercise price (NT$) $3.02-$6.46 Expected volatility 52.03%-74.48% Expected duration (years) 3.75 Expected dividend yield 0% Risk-free interest rate 0.94%-1.95% Compensation costs recognized under the fair value method were zero and $141 thousand for the years ended December 31, 2013 and 2012, respectively.
24. NON-CASH TRANSACTIONS
2013 2012 Non-cash investing and financing activities
Current portion of long-term borrowings $ 3,863,097 $ 4,483,330 Exchange differences on translation of foreign financial statements $ 22,181 $ (81,748) Unrealized gain on available-for-sale financial assets $ 1,487,472 $ 53,553 Change in equity of subsidiaries and associates accounted for
using equity method
$ 29,347 $ 3,631 Acquisitions of available-for-sale financial assets by offset with
accounts receivable
$ 6,330 $ 86,501 Property, plant and equipment was reclassified to finance lease
receivable
$ 527,656 $ -
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25. OPERATING LEASE ARRANGEMENTS
The Company as Lessee
a. Lease arrangements
The Company leased land from Science Park Administration until 2023, and the lease term can extended after the expiration of the lease period. The Company leased some of the offices, and the lease terms will expire between 2013 and 2015 which can be extended after the expiration of the lease periods. As of December 31, 2013, December 31, 2012 and January 1, 2012, deposits paid under operating leases amounted to $2,688 thousand, $2,772 thousand and $2,602 thousand, respectively (recorded as “other non-current assets”).
b. Lease expense
2013 2012 Lease expenditure $ 10,352 $ 10,107
26. CAPITAL MANAGEMENT
The Company’s capital management objective is to ensure it has the necessary financial resources and operational plan so that it can cope with the next twelve months working capital requirements, capital expenditures, debt repayments and dividends payments.
27. RELATED PARTY TRANSACTIONS
a. The names and relationships of related parties are as follows:
Related Party Relationship with the Company Walsin Lihwa Corporation Investor that exercises significant
influence over the Company Winbond Electronics (H.K.) Limited Subsidiary Mobile Magic Design Corporation Subsidiary Win Investment Corporation (Note) Subsidiary Winbond Electronics (Suzhou) Limited Subsidiary Winbond Electronics Corporation America Subsidiary Winbond Electronics Corporation Japan Subsidiary Winbond Technology LTD Subsidiary Nuvoton Technology Corporation Subsidiary Global Brands Manufacture Ltd. Related party in substance Walton Advanced Engineering Inc. Related party in substance Global Brands Manufacture (Dongguan) Ltd. Related party in substance Walton Advanced Engineering (Suzhou) Inc. Related party in substance Note: As of December 31, 2012, Win was merged into Chin Xin Investment Co., Ltd.
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b. Operating activities For the Year Ended December 31 2013 2012 1) Operating revenue
Subsidiaries $ 7,493,745 $ 6,723,423 Related party in substance 108,814 153,884
$ 7,602,559 $ 6,877,307 2) Manufacturing expenses
Related party in substance $ 2,329,857 $ 2,142,353 Subsidiaries - 2,563
$ 2,329,857 $ 2,144,916 3) Selling expenses
Subsidiaries $ 125,548 $ 119,855
4) General and administrative expenses
Investor that exercises significant influence over the Company
$ 8,651 $ 7,891
5) Research and development expenses
Subsidiaries $ 512,392 $ 447,868
6) Service revenue (recorded as “non-operating income and
losses-other income ”)
Subsidiaries $ 396 $ 396
December 31,
2013 December 31,
2012 January 1,
2012 7) Accounts receivable due from related
parties Subsidiaries $ 849,717 $ 563,653 $ 687,703 Related party in substance 18,743 14,915 14,068
$ 868,460 $ 578,568 $ 701,771 8) Accounts payable from related parties
Related party in substance $ 518,745 $ 531,278 $ 713,278 Investor that exercises significant
influence over the Company 2,609 2,654 2,113 Subsidiaries 478 - -
$ 521,832 $ 533,932 $ 715,391
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December 31,
2013 December 31,
2012 January 1,
2012 9) Other receivables and other current assets
Subsidiaries $ 99 $ 3,125 $ 2,301 Investor that exercises significant
influence over the Company - 20 1,438 $ 99 $ 3,145 $ 3,739 10) Other payables
Subsidiaries $ 292,692 $ 199,745 $ 238,373 Related party in substance 7,178 6,487 9,359 Investor that exercises significant
influence over the Company 1,048 1,076 2,496 $ 300,918 $ 207,308 $ 250,228 11) Refundable deposits ( recorded as “other
non-current assets”) Subsidiaries $ 440 $ 440 $ 440 Investor that exercises significant
influence over the Company 203 203 203 $ 643 $ 643 $ 643 The related party transactions were conducted under normal terms.
c. Property, plant and machinery acquired Price For the Year Ended December 31
Related Parties Types Items 2013 2012 Subsidiaries Machinery and equipment $ 485 $ -
d. Other assets acquired
Price For the Year Ended December 31
Related Parties Types Items 2013 2012 Subsidiaries Professional technical $ 52,000 $ -
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e. Investment properties acquired For the year ended December 31, 2013
Related Parties Types Securities Name Shares
(Thousand) Acquired
Price Investor that exercises
significant influence over the Company
Chin Xin Investment Co., Ltd.
12,128 $ 151,236
For the year ended December 31, 2012
Related Parties Types Securities Name Shares
(Thousand) Acquired
Price Investor that exercises
significant influence over the Company
Chin Xin Investment Co., Ltd.
40,000 $ 403,856
Subsidiaries
Harbinger III Venture Capital Corp.
4,080 43,228
Subsidiaries Dynacard Co., Ltd. 2,495 12,138 $ 459,222
f. Investment properties disposed of
For the year ended December 31, 2012
Related Parties Types Securities Name
Shares (Thousand) Price
Gain (Loss) on Disposal
Subsidiaries YH Bio Explore &
Application Co., Ltd. 6,955 $ 36,472 $ 952
Subsidiaries Vita Genomic Inc. 1,115 10,065 (96) $ 46,537 $ 856
g. Guarantee
As of December 31, 2013, the chairman of the Company is a joint guarantor of the long-term borrowings - Bank of Taiwan Syndication Agreement (II). Please refer to Note 17.
h. Compensation of key management personnel
For the Year Ended December 31 2013 2012 Short-term employment benefits $ 62,851 $ 59,616 Post-employment benefits 307 307 Share - based payments 6,708 795 $ 69,866 $ 60,718 The remuneration of directors and key management personnel was determined by the remuneration committee having regard to the performance of individuals and market trends.
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28. PLEDGED AND COLLATERALIZED ASSETS Please refer to Note 6, Note 10, Note 15 and Note 17.
29. SIGNIFICANT CONTINGENT LIABILITIES AND UNRECOGNIZED COMMITMENTS Amounts available under unused letters of credit as of December 31, 2013 were approximately US$8,485 thousand and JPY58,451 thousand.
30. FINANCIAL INSTRUMENT
a. Categories of financial instruments
1) Fair values of financial instruments were summarized as follows:
December 31, 2013 December 31, 2012 January 1, 2012
Carrying Amount Fair Value
Carrying Amount Fair Value
Carrying Amount Fair Value
Financial assets Loans and receivables
Cash and cash equivalents $ 4,957,922 $ 4,957,922 $ 3,707,404 $ 3,707,404 $ 3,812,987 $ 3,812,987 Notes and accounts receivable
(included related parties)
4,021,410 4,021,410 3,583,429 3,583,429 3,150,051 3,150,051 Other receivables 242,054 242,054 168,037 168,037 111,595 111,595 Refundable deposits (recorded in
other non-current assets)
73,544 73,544 73,522 73,522 80,455 80,455 Finance lease receivable
(recorded in other non-current assets) 440,436 440,436 - - - -
Financial assets at FVTPL - - 23,551 23,551 1,703 1,703 Available-for-sale financial assets
(current and non-current)
2,017,965 2,017,965 768,621 768,621 772,342 772,342 Held-to-maturity financial assets 97,770 96,792 - - - - Financial assets measured at cost 40,161 40,161 56,481 56,481 61,855 61,855 $ 11,891,262 $ 11,890,284 $ 8,381,045 $ 8,381,045 $ 7,990,988 $ 7,990,988 Financial liabilities Measured at amortized cost
Short-term borrowings $ 1,893,878 $ 1,893,878 $ 2,716,474 $ 2,716,474 $ 1,539,592 $ 1,539,592 Short-term bills payable - - 499,376 499,376 199,763 199,763 Notes and accounts payable 3,226,004 3,226,004 3,611,176 3,611,176 3,490,643 3,490,643 Payable on equipment and other
payables
2,092,092 2,092,092 1,722,276 1,722,276 2,296,760 2,296,760 Long-term borrowings 9,939,290 9,939,290 11,033,330 11,033,330 15,124,990 15,124,990
Financial liabilities at FVTPL 15,841 15,841 - - - - $ 17,167,105 $ 17,167,105 $ 19,582,632 $ 19,582,632 $ 22,651,748 $ 22,651,748
2) Fair value measurements recognized in the balance sheets
The following table provides an analysis of financial instruments that are measured subsequent to initial recognition at fair value, grouped into Levels 1 to 2 based on the degree to which the fair value is observable: a) Level 1 fair value measurements are those derived from quoted prices in active markets for
identical assets or liabilities.
December 31,
2013 December 31,
2012 January 1,
2012 Available-for-sale financial assets $ 1,736,895 $ 704,091 $ 707,542 Held-to-maturity financial assets 96,792 - - $ 1,833,687 $ 704,091 $ 707,542
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b) Level 2 fair value measurements are those derived from inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly.
December 31,
2013 December 31,
2012 January 1,
2012 Financial assets at FVTPL $ - $ 23,551 $ 1,703 Available-for-sale financial assets 281,070 64,530 64,800 $ 281,070 $ 88,081 $ 66,503 Financial liabilities at FVTPL $ 15,841 $ - $ - The fair values of other financial assets and financial liabilities (excluding those described above) were determined in accordance with generally accepted pricing models based on discounted cash flow analysis.
b. Financial risk management objectives and policies
The Company’s major financial instruments included equity and debt investments, borrowings, accounts receivable and accounts payable. The Company’s Corporate Treasury function provides services to the business, coordinates access to domestic and international financial markets, monitors and manages the financial risks relating to the operations of the Company through internal risk reports which analyze exposures by degree and magnitude of risks. These risks include market risk, credit risk and liquidity risk. The Company sought to minimize the effects of these risks by using derivative financial instruments to hedge risk exposures. The use of financial derivatives was governed by the Company’s policies approved by the board of directors, which provided written principles on foreign exchange risk, and use of financial derivatives. Compliance with policies and exposure limits was reviewed by the internal auditors on a continuous basis. 1) Market risk
The Company’s activities expose it primarily to the financial risks of changes in foreign currency exchange rates and interest rates. The Company uses forward foreign exchange contracts to hedge the exchange rate risk on export. There had been no change to the Company’s exposure to market risks or the manner in which these risks were managed and measured. a) Foreign currency risk
The Company uses forward foreign exchange contracts to hedge the exchange rate risk within approved policy parameters utilizing forward foreign exchange contracts. The carrying amounts of the Company’s foreign currency denominated monetary assets and monetary liabilities at the end of the reporting period are set out in Note 31. The sensitivity analysis included only outstanding foreign currency denominated monetary items at the end of the reporting period and an increase in net income and equity if New Taiwan dollars strengthen by 1% against U.S. dollars. For a 1% weakening of New Taiwan dollars against U.S. dollars, there would be impact on net income in the amounts of $17,229 thousand and $28,975 thousand and on equity in the amounts of $16,982 thousand and $28,785 thousand for the years ended December 31, 2013 and 2012.
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b) Interest rate risk The Company’s interest rate risk arises primarily from floating rate deposits and borrowings. The carrying amount of the Company’s financial assets and financial liabilities with exposure to interest rates at the end of the reporting period were as follows:
December 31,
2013 December 31,
2012 January 1,
2012 Cash flow interest rate risk
Financial assets $ - $ 9,192 $ 272,836 Financial liabilities 9,939,290 11,200,934 15,463,475
The sensitivity analyses below were determined based on the Company’s exposure to interest rates for fair value of variable-rate derivatives instruments at the end of the reporting period. If interest rates had been higher by one percentage point, the Company’s cash flows for the years ended December 31, 2013 and 2012 would have increased by $99,393 thousand and $111,917 thousand, respectively.
2) Credit risk
Credit risk refers to the risk that counterparty will default on its contractual obligations resulting in financial loss to the Company. The Company adopted a policy of only dealing with creditworthy counterparties and obtaining sufficient collateral, where appropriate, as a means of mitigating the risk of financial loss from defaults. In order to minimize credit risk, the management of the Company has delegated a team responsible for determination of credit limits, credit approvals and other monitoring procedures to ensure that follow-up action is taken to recover overdue receivables. In addition, the Company reviews the recoverable amount of each individual accounts receivable at the end of the reporting period to ensure that adequate impairment losses are recognized for irrecoverable amounts. In this regard, the directors of the Company consider that the Company’s credit risk was significantly reduced.
3) Liquidity risk
The Company has enough operating capital to comply with loan covenants; liquidity risk is low. a) The Company’s non-derivative financial liabilities and their agreed repayment period were as
follows:
December 31, 2013 Within 1 Year 1-2 Years Over 2 Years Total
Non-derivative financial liabilities Non-interest bearing $ 5,318,096 $ - $ - $ 5,318,096 Variable interest rate liabilities 3,863,097 4,979,763 1,096,430 9,939,290 Fixed interest rate liabilities 1,893,878 - - 1,893,878 $ 11,075,071 $ 4,979,763 $ 1,096,430 $ 17,151,264
December 31, 2012 Within 1 Year 1-2 Years Over 2 Years Total
Non-derivative financial liabilities Non-interest bearing $ 5,333,452 $ - $ - $ 5,333,452 Variable interest rate liabilities 4,650,934 2,733,333 3,816,667 11,200,934 Fixed interest rate liabilities 3,048,246 - - 3,048,246 $ 13,032,632 $ 2,733,333 $ 3,816,667 $ 19,582,632
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January 1, 2012 Within 1 Year 1-2 Years Over 2 Years Total
Non-derivative financial liabilities Non-interest bearing $ 5,787,403 $ - $ - $ 5,787,403 Variable interest rate liabilities 7,496,812 4,216,663 3,750,000 15,463,475 Fixed interest rate liabilities 1,400,870 - - 1,400,870 $ 14,685,085 $ 4,216,663 $ 3,750,000 $ 22,651,748
31. EXCHANGE RATE OF FINANCIAL ASSETS AND LIABILITIES DENOMINATED IN FOREIGN CURRENCIES The significant financial assets and liabilities denominated in foreign currencies were follows: December 31, 2013 December 31, 2012 January 1, 2012
Foreign Currencies (Thousand)
Exchange Rate
New Taiwan Dollars
(Thousand)
Foreign Currencies (Thousand)
Exchange Rate
New Taiwan Dollars
(Thousand)
Foreign Currencies (Thousand)
Exchange Rate
New Taiwan Dollars
(Thousand) Financial assets Monetary items
USD $ 166,036 29.805 $ 4,948,691 $ 171,780 29.04 $ 4,988,486 $ 139,235 30.275 $ 4,215,347 EUR 1,451 41.09 59,626 951 38.49 36,586 2,049 39.18 80,298 JPY 832,166 0.2839 236,252 316,678 0.3364 106,531 2,264,748 0.3906 884,611 RMB 70,005 4.8885 342,218 46,856 4.6202 216,483 - - -
Financial liabilities Monetary items
USD 108,229 29.805 3,225,768 72,005 29.04 2,091,023 107,175 30.275 3,244,717 EUR 24,479 41.09 1,005,861 1,264 38.49 48,656 2,197 39.18 86,063 JPY 642,330 0.2839 182,357 747,460 0.3364 251,445 2,336,787 0.3906 912,749
32. FIRST-TIME ADOPTION OF THE REGULATIONS
The Company’s date of transition to the Regulations was January 1, 2012. The impact of the transition to the Regulations on the Company’s balance sheets and statement of comprehensive income is stated as follows: a. Reconciliation of balance sheet as of January 1, 2012
Impact of Transition
ROC GAAP Recognition and
Measurement Presentation Regulations Item Amount Difference Difference Amount Item Notes
Current assets Current assets
Cash and cash equivalents $ 3,812,987 $ - $ - $ 3,812,987 Cash and cash equivalents Financial assets at fair value through
profit or loss - current 1,703 - - 1,703 Financial assets at fair value through
profit or loss - current
Available-for-sale financial assets - current
707,542 - - 707,542 Available-for-sale financial assets - current
Note and accounts receivable 2,448,280 - - 2,448,280 Note and accounts receivable, net Accounts receivable due from related
parties 701,771 - - 701,771 Accounts receivable due from related
parties, net
Other financial assets - current 111,595 - - 111,595 Other receivables Inventories 6,427,420 - - 6,427,420 Inventories Deferred income tax assets - current 210,000 - (210,000 ) - - Note 1 Other current assets 328,827 - - 328,827 Other current assets Total current assets 14,750,125 - (210,000 ) 14,540,125 Total current assets
Fund and investment Non-current assets Available-for-sale financial assets -
non-current 64,800 - - 64,800 Available-for-sale financial assets,
non-current
Financial assets measured at cost - non-current
61,855 - - 61,855 Financial assets measured at cost, non-current
Long-term equity investments at equity method
4,825,200
(54,805 )
-
4,770,395
Investments accounted for using equity method
Note 2
Total fund and investment 4,951,855 (54,805 ) - 4,897,050 Property, plant and equipment 34,395,036 - - 34,395,036 Property, plant and equipment Intangible assets 548,754 - - 548,754 Intangible assets Other assets
Deferred income tax assets, non-current
3,532,000 - 210,000 3,742,000 Deferred income tax assets Note 1
Other non-current assets 193,602 - - 193,602 Other non-current assets Total other assets 3,725,602 - 210,000 3,935,602 Total non-current assets
Total $ 58,371,372 $ (54,805 ) $ - $ 58,316,567 Total
(Continued)
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Impact of Transition
ROC GAAP Recognition and
Measurement Presentation Regulations Item Amount Difference Difference Amount Item Notes
Current liabilities Current liabilities
Short-term borrowings $ 1,539,592 $ - $ - $ 1,539,592 Short-term borrowings Short-term bills payable 199,763 - - 199,763 Short-term bills payable Notes payable 849,714 - - 849,714 Notes payable Accounts payable 2,640,929 - - 2,640,929 Accounts payable Payable for equipment 632,910 - - 632,910 Payable on equipment Accrued expense and other payables 1,623,695 40,155 - 1,663,850 Other payables Note 3 Current portion of long-term
borrowings 7,158,327 - - 7,158,327 Current portion of long-term
borrowings
Other current liabilities 23,503 - - 23,503 Other current liabilities Total current liabilities 14,668,433 40,155 - 14,708,588 Total current liabilities
Long-term liabilities Non-current liabilities Long-term borrowings 7,966,663 - - 7,966,663 Long-term borrowings
Other liabilities Accrued pension liabilities 154,308 233,839 - 388,147 Accrued pension liabilities Note 4 Others 226,468 (45 ) - 226,423 Other non-current liabilities Total other liabilities 380,776 233,794 - 614,570 Total non-current liabilities Total liabilities 23,015,872 273,949 - 23,289,821 Total liabilities
Stockholders’ equity Equity Common stock 36,802,302 - - 36,802,302 Common stock Capital surplus 2,232,519 (21,460 ) - 2,211,059 Capital surplus Note 5 Accumulated deficit (2,483,440 ) 65,182 - (2,418,258 ) Accumulated deficits Cumulative translation adjustments 359,900 (359,900 ) - - Exchange difference on translation of
foreign financial statements Note 6
Unrealized loss on financial instrument
(1,449,394 ) (12,576 ) - (1,461,970 ) Unrealized gain (loss) on available-for-sale financial assets
Note 7
Treasury shares (106,387 ) - - (106,387 ) Treasury stock Total stockholders’ equity 35,355,500 (328,754 ) - 35,026,746 Total equity
Total $ 58,371,372 $ (54,805 ) $ - $ 58,316,567 Total
(Concluded) Note 1: Deferred income tax assets - current, in accordance with the Regulations are classified as
non-current items. Please see Note e) 1) Note 2: The difference is net effect of equity changes in the subsidiaries after adoption of the
Regulations. Note 3: Under the Regulations, the Company recognized the accumulating compensated absences as
expense when employees provide service to increase their vocation. Please see Note e) 2). Note 4: Under the Regulations, the Company elects to recognize actuarial gains and losses
immediately in full in the period in which they occur, as other comprehensive income. The subsequent reclassification to earnings is not permitted. Please see Note e) 3).
Note 5: The changes of investment percentage arise when the investment company did not subscribe
for new shares issued by the investee; the increase or decrease in the investment company’s equity is adjusted in the capital surplus. In accordance with the Regulations, the above-mentioned capital surplus should be restoratively adjusted to accumulated deficit. Please see Note e) 4).
Note 6: In accordance with the Regulations, the Company elected to set to zero its cumulative
translation adjustment in stockholders’ equity by reclassifying the amount to retained earnings at the date of transition to the Regulations. Please see Note d).
Note 7: The translation of functional currency of subsidiaries restoratively and adjustment of
unrealized loss on financial instruments. Please see Note e) 5).
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b. Reconciliation of balance sheet as of December 31, 2012
Impact of Transition
ROC GAAP Recognition and
Measurement Presentation Regulations Item Amount Difference Difference Amount Item Notes
Current assets Current assets
Cash and cash equivalents $ 3,707,404 $ - $ - $ 3,707,404 Cash and cash equivalents Financial assets at fair value through
profit or loss - current 23,551 - - 23,551 Financial assets at fair value through
profit or loss - current
Available-for-sale financial assets - current
704,091 - - 704,091 Available-for-sale financial assets - current
Notes and accounts receivable 3,004,861 - - 3,004,861 Notes and accounts receivable, net Accounts receivable due from related
parties 578,568 - - 578,568 Accounts receivable due from related
parties, net
Other financial assets - current 168,037 - - 168,037 Other receivables Inventories 7,107,687 - - 7,107,687 Inventories Deferred income tax assets - current 147,000 - (147,000 ) - - Note 1 Other current assets 370,674 - - 370,674 Other current assets Total current assets 15,811,873 - (147,000 ) 15,664,873 Total current assets
Fund and investment Non-current assets Available-for-sale financial assets -
non-current 64,530 - - 64,530 Available-for-sale financial assets -
non-current
Financial assets measured at cost - non-current
56,481 - - 56,481 Financial assets measured at cost - non-current
Long-term equity investment at equity method
5,387,887
(102,834 )
-
5,285,053
Investments accounted for using equity method
Note 2
Total fund and investment 5,508,898 (102,834 ) - 5,406,064 Property, plant and equipment 28,396,274 - - 28,396,274 Property, plant and equipment Intangible assets 38,430 - - 38,430 Intangible assets Other assets
Deferred income tax assets, non-current
3,595,000 - 147,000 3,742,000 Deferred income tax assets Note 1
Other non-current assets 208,504 (16,907 ) - 191,597 Other non-current assets Note 4 Total other assets 3,803,504 (16,907 ) 147,000 3,933,597 Total non-current assets
Total $ 53,558,979 $ (119,741 ) $ - $ 53,439,238 Total Current liabilities Current liabilities
Short-term borrowings $ 2,716,474 $ - $ - $ 2,716,474 Short-term borrowings Short-term bills payable 499,376 - - 499,376 Short-term bills payable Notes payable 812,253 - - 812,253 Notes payable Accounts payable 2,798,923 - - 2,798,923 Accounts payable Payable for equipment 125,116 - - 125,116 Payable on equipment Accrued expenses and other payables 1,551,004 46,156 - 1,597,160 Other payables Note 3 Current portion of long-term
borrowings and bonds payable 4,483,330 - - 4,483,330 Current portion of long-term
borrowings
Other current liabilities 22,962 - - 22,962 Other current liabilities Total current liabilities 13,009,438 46,156 - 13,055,594 Total current liabilities
Long-term liabilities Non-current liabilities Long-term borrowings 6,550,000 - - 6,550,000 Long-term borrowings
Other liabilities Accrued pension liabilities 193,077 296,286 - 489,363 Accrued pension liabilities Note 5 Others 334,025 4,204 - 338,229 Other non-current liabilities Total other liabilities 527,102 300,490 - 827,592 Total non-current liabilities Total liabilities 20,086,540 346,646 - 20,433,186 Total liabilities
Stockholders’ Equity Equity Common stock 36,856,012 - - 36,856,012 Common stock Capital surplus 2,199,126 (21,784 ) - 2,177,342 Capital surplus Note 5 Accumulated deficit (4,335,976 ) (94,774 ) - (4,430,750 ) Accumulated deficits Cumulative translation adjustments 268,081 (349,829 ) - (81,748 ) Exchange difference on translation of
foreign financial statements Note 6
Unrealized loss on financial instrument
(1,408,417 ) - - (1,408,417 ) Unrealized gain (loss) on available-for-sale financial assets
Treasury shares (106,387 ) - - (106,387 ) Treasury stock Total stockholders’ equity 33,472,439 (466,387 ) - 33,006,052 Total equity
Total $ 53,558,979 $ (119,741 ) $ - $ 53,439,238 Total
Note 1: Deferred income tax asset - current, in accordance with the Regulations are classified as
non-current items. Please see Note e) 1) Note 2: The difference is net effect of equity change in the subsidiaries after adoption of the
Regulations. Note 3: Under the Regulations, the Company recognized the accumulating compensated absences as
expense when employees provide service to increase their vocation. Please see Note e) 2).
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Note 4: Under the Regulations, the Company elects to recognize actuarial gains and losses immediately in full in the period in which they occur, as other comprehensive income. The subsequent reclassification to earnings is not permitted. The Company reclassified unrecognized actuarial loss into accumulated deficits, which increased by $233,859 thousand accrued pension liabilities. Furthermore, under the Regulations, the Company reclassified net pension cost and difference in actuarial loss into other comprehensive income, which decreased non-current assets by $16,907 thousand and increased accrued pension liabilities by $62,447 thousand. As a result, accrued pension liabilities increased by $296,286 thousand. Please see Note e) 3).
Note 5: The changes of investment percentage arise when the investment company did not subscribe
for new shares issued by the investee; the increase or decrease in the investment company’s equity is adjusted in the capital surplus. In accordance with the Regulations, the above-mentioned capital surplus should be retrospectively adjusted to accumulated deficits. The capital surplus had decreased by $21,784 thousand. Please see Note e) 4).
Note 6: In accordance with the Regulations, the Company elected to set to zero its cumulative
translation adjustment in stockholders’ equity by reclassifying the amount to retained earnings at the date of transition to the Regulations. The cumulative translation adjustment decreased by $359,900 thousand. The translation of functional currency increased cumulative translation adjustments by $10,071 thousand. Please see Note d).
c. Reconciliation of statement of comprehensive income for the year ended December 31, 2012
ROC GAAP Impact of Transition Regulations
Item Amount Amount Amount Item Note Operating revenue $ 25,418,819 $ - $ 25,418,819 Operating revenue Operating cost 23,475,716 (2,388 ) 23,473,328 Operating cost Note 1 Gross profit 1,943,103 2,388 1,945,491 Gross profit Operating expense 3,970,845 (1692 ) 3,969,153 Total operating expenses Note 1 Loss from operations (2,027,742 ) 4,080 (2,023,662 ) Loss from operations Non-operating income and expense 175,206 (14,427 ) 160,779 Non-operating income and losses Note 2 Loss before income tax (1,852,536 ) (10,347 ) (1,862,883 ) Loss before income tax Income tax expense - - - Income tax expense Net loss $ (1,852,536 ) $ (10,347 ) (1,862,883 ) Net loss (81,748 ) Exchange difference on translation of
foreign financial statements
53,553 Unrealized gain on available-for-sale financial assets
(149,609 )
Actuarial gain and loss arising from defined benefit plans
(177,804 )
Other comprehensive loss for the year
$ (2,040,687 ) Total comprehensive income for the
year
Note 1: According to the Regulations, the Company evaluated deferred vacation and re-estimated
actual defined benefit plan in 2012. This resulted in a decrease in pension cost; there was decrease in operating cost and increase in operating expenses. Please see Note e) 2) and 3).
Note 2: In accordance with the Regulations, the subsidiaries’ and associates’ income had been
adjusted; as a result, the share of profit of subsidiaries and associates decreased.
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d. Exemptions Except for optional exemptions and mandatory exceptions to retrospective application provided under the Regulations, the Company retrospectively applied the Regulations to prepare its opening balance sheet at the date of transition, January 1, 2012. The major optional exemptions the Company elected are summarized as follows: Share-based payment transactions The Company elected to take the optional exemption from applying the Regulations retrospectively for the shared-based payment transactions granted and vested before the date of transition. Employee benefits The Company elected to recognize all cumulative actuarial gains and losses in accumulated deficit as of the date of transition. Exchange differences on translation of foreign financial statements The Company elected to set to zero its cumulative translation adjustment in stockholders’ equity by reclassifying the amount to retained earnings at the date of transition to the Regulations. Compound financial instruments As the liability component was no longer outstanding at the date of transition to the Regulations, the Company elected not to split the compound financial instruments issued before the date of transition to the Regulations into two separate portions of equity. Borrowing costs The Company elected to capitalize borrowing costs. The capitalization starts from the date of transition to the Regulations. The effect of the above mentioned optional exemptions elected by the Company was stated in the following Note e Explanations of significant reconciling items in the transition.
e. Explanations of significant reconciling items in the transition The Company-specific areas of possible material differences between the existing accounting policies and the accounting policies to be adopted under the Regulations were as follows: 1) Deferred income tax asset/liability
Under ROC GAAP, valuation allowance is provided to the extent, if any, that it is more likely than not that deferred income tax assets will not be realized. In accordance with the Regulations “Income Taxes,” deferred income tax assets are only recognized to the extent that it is probable that there will be sufficient taxable profits and the valuation allowance account is no longer used. In addition, under ROC GAAP, a deferred tax asset or liability is classified as current or non-current in accordance with the classification of its related asset or liability. However, if a deferred income tax asset or liability does not relate to an asset or liability in the financial statements, it is classified as either current or non-current based on the expected length of time before it is realized or settled. Under the Regulations, a deferred income tax asset or liability is classified as non-current asset or liability.
153
2) Short-term employee benefits Short-term employee benefits under ROC GAAP are not expressly stipulated and usually recorded when paid. After the date of transition to the Regulations, it is recognized the accumulating compensated absences as an expense when employees provided services to increase their vacation.
3) Employee benefits - gain or loss on actuarial valuation of defined benefit plan According to SFAS No. 18, the unrecognized transition obligation due to first adoption of SFAS No. 18, “Accounting for Pension,” should be amortized over the expected remaining working lives of employees. On the date of transition to the Regulations, the retained earnings should be adjusted for unrecognized transition obligation. Under ROC GAAP, when using the corridor approach, actuarial gains and losses should be amortized over the expected average remaining working lives of the participating employees. Under IAS No. 19, “Employee Benefits,” the Company elects to recognize actuarial gains and losses immediately in full in the period in which they occur, as other comprehensive income. The subsequent reclassification to earnings is not permitted.
4) Long-term equity investments when associates/subsidiaries issue new shares and the shareholder is not subscribing in accordance with its percentage of shares of the investee/parent company According to ROC GAAP, the changes of investment percentage arise when the investment company did not subscribe for new shares issued by the investee in accordance with its percentage of ownership before the new subscription; the increase or decrease in the investment company’s equity is adjusted in the “capital surplus and “long-term equity investment.” Under the Regulations, such transaction is deemed a disposal and any difference is recognized in the same accounts accordingly. In addition, according to “Q&A for adopting IFRSs” issued by the TSE, accounts that do not conform to IFRSs or not covered under the Company Law as well as capital surplus items required by the Ministry of Economics Affairs should be adjusted at the date of transition to the Regulations.
5) Translation of functional currency of foreign operations Under ROC GAAP, various indicators are comprehensively adopted to identify functional currency. Under the Regulations, primary indicators should be considered first and then the secondary indicators in the determination of functional currency. According to the rules, the overseas associates and subsidiaries changed their functional currency from U.S. dollars to NT dollars and adjusted retroactively the balances of assets and liabilities in NT dollars at the date of transition to the Regulations.
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Financial Status, Financial Performance and Risk Analysis
1. Financial status Unit: NT$1,000
Item\Year 2013 Consolidated
financial statements 2012 Consolidated
financial statements Change (amount) Change (%)
Current assets 22,408,255 20,065,265 2,342,990 11 Property, plant and equipment
24,804,025 29,021,114 (4,217,089) (15)
Intangible assets 193,947 183,310 10,637 6 Other assets 8,272,451 7,006,349 1,266,102 18 Total Assets 55,678,678 56,276,038 (597,360) (1) Current liabilities 12,501,610 14,443,119 (1,941,509) (13) Non-current liabilities 7,288,966 7,717,384 (428,418) (6) Total liabilities 19,790,576 22,160,503 (2,369,927) (11) Equity attributable to owners of parent
34,813,920 33,006,052 1,807,868 5
Paid-in capital 36,940,232 36,856,012 84,220 - Capital surplus 2,148,359 2,177,342 (28,983) (1) Accumulated loss (4,187,772) (4,430,750) 242,978 5 Other interests 19,488 (1,490,165) 1,509,653 101 Treasury stock (106,387) (106,387) - -
Non-controlling interests 1,074,182 1,109,483 (35,301) (3) Total equity 35,888,102 34,115,535 1,772,567 5 Reasons for changes exceeding 20%: 1. Increase in other interests was mainly due to reversal of unrealized valuation loss on available-for-sale financial assets.
2. Financial performance Unit: NT$1,000
Item\Year 2013 Consolidated
financial statements 2012 Consolidated
financial statements Change (amount) Change (%)
Net sales 33,135,448 32,965,283 170,165 1 Operating cost 26,226,516 27,802,298 (1,575,782) (6) Gross profit 6,908,932 5,162,985 1,745,947 34 Operating expenses 6,143,734 6,444,347 (300,613) (5) Operating income (loss) 765,198 (1,281,362) 2,046,560 160 Non-operating income and
expense (206,544) (168,158) (38,386) (23)
Net income (loss) before tax 558,654 (1,449,520) 2,008,174 139 Income tax expense 271,288 175,037 96,251 55 Net income (loss) 287,366 (1,624,557) 1,911,923 118 Other comprehensive
income 1,567,420 (227,705) 1,795,125 788
Total comprehensive income 1,854,786 (1,852,262) 3,707,048 200
Reasons for changes exceeding 20%: 1. Rise in gross profit and increase in operating income were mainly due to increase in sales and cost improvement. 2. Increase in income tax expense was mainly due to increase in profit that resulted in increase in estimated income tax payment. 3. Decrease in net non-operating income was mainly due to recognition of investment loss. 4. Increase in other comprehensive income was mainly due to reversal of unrealized valuation loss on available-for-sale financial
assets in the midst of economic upswing. Sales forecast for the coming year and main reasons for the forecast of growth in sales: Based on current market performance, future market demands and the Company’s capacity, we project that the outputs of 12-inch wafer (equivalent) could reach 420,000 units in 2014.
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3. Cash flow analysis
3.1 Cash flow analysis of 2013 consolidated financial statements including its subsidiaries
Unit: NT$1m
Cash balance, beginning
(December 31, 2012)
Net cash flow from operating activities
(2013)
Cash outflow due to investing and financing
activities (2013)
Cash surplus (December 31, 2013)
Remedial measures for cash deficit
Investment plan
Financial plan
5,711 7,258 (5,299) 7,670 - - 1. Analysis on the cash flow changes in 2013 consolidated financial statements: (1) Operating activities: Operating activities produced a net cash inflow of NT$7.3 billion. (2) Investing activities: Purchase of production equipment produced a cash outflow of NT$2.2 billion. In addition, equity investment
and others produced a cash outflow of NT$900 million. (3) Financing activities: Net cash outflow of NT$2.2 billion primarily resulted from repayment of long- and short-term borrowing.
2. Remedial action for cash deficit and liquidity analysis: N/A. Note: The financial figures above are not CPA audited.
3.2 Analysis on consolidated cash flow for the coming year
Net cash inflow from operating activities of the Company and subsidiaries for the coming year is estimated at NT$7.8 billion, and net cash outflow due to investing and financing activities, to be used mainly on capital spending and equity investment, is estimated at NT$9.7 billion.
4. Effect of major capital spending on financial position and business operation
4.1 Utilization of fund on major capital spending and sources of funds Unit: NT$1m
Project Actual or expected source of funds
Actual or estimated completion date
Total funding need
Actual or expected status of spending
2013 2014
Expansion of capacity and process upgrade
Bank loan, capitalization of retained earnings or operating profit
Y2014 11,543 1,915 9,628
4.2 Anticipated benefit
Expanded capacity, accelerated upgrade of process technology, and sustained market share.
5. Industry-specific key performance indicator Performance indicator 2013
Output of 12-inch wafer 382,787
Average in-line yield 99.27%
6. Investment policy in the past year, profit/loss analysis, improvement plan, and investment plan for the coming year
(1) Investment policy: The Company makes investments in the hope of enhancing business performance in principle. (2) Investment profit or loss in recent years: The Company recognized NT$44 million of gain on equity method
investments in 2013 (NT$92 million of loss on equity method investments in consolidated statements). (3) Investment plan for the next year: The Company will formulate investment plan in view of operating needs of the
Company and invested enterprises.
7. Risk management and evaluation
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7.1 Impact of interest rate and exchange rate changes and inflation on Company’s profit and response measures
(1) Interest rate change
The Company currently has both variable-rate and fixed-rate long-term loans. The Company keeps constant watch of and analyze the impact of interest rate fluctuation in the financial markets on cash flows associated with the Company's loans and would take response actions in view of actual needs.
(2) Exchange rate change
The Company exports most of its products. Because the products are denominated mostly in USD, the Company frequently has net inflow of USD. Thus the Company engaged in hedging on the basis of exchange rate at the time of book entry by selling USD and selling forwards. The exchange gains (losses) on the disposal of USD are within controllable range. The Company will continue this hedging policy in the hope to minimize the impact of exchange rate fluctuation on Company profit. In addition, as machinery and equipment purchased by the Company this year will need to be paid in different foreign currencies later on, the Company will engage in necessary hedging transactions in consideration of the payment term and changes in the international financial markets to minimize the impact of exchange rate changes on Company profit.
(3) Inflation
The inflation problem has not been serious in recent years and hence has had limited impact on Company's profit.
7.2 Policies of engaging in high-risk, high-leverage investments, lending to others, providing endorsement and guarantee, and derivatives transactions, profit/loss analysis, and future response measures
(1) The Company does not engage in any high-risk, high-leverage investment. The Company's derivatives trading policy aims to minimize the risk of fair value fluctuation for assets and liabilities actually owned by the Company under the objective of economic hedge. Under this principle, all derivatives trading undertaken by the Company correspond to the real positions held by the Company. Any gain or loss resulting from derivative transactions and hedged positions during the period arises from difference in time of disposing a real position and the time a gain or loss on a derivative trading is realized. Such gain or loss is insignificant. Other than those derivatives transactions described above, the Company does not engage in other high-risk derivatives transactions and will continue to observe the principle of hedging only positions actually owned by the Company.
(2) The Company does not extend loans to other companies or individuals. (3) The Company does not make endorsement/guarantee for other companies or individuals.
7.3 Future R&D projects and estimated R&D expenditure
The Company and its including Nuvoton Technology are expected to spend NT$5 billion on R&D in 2014 in the following directions:
For DRAM products, we will focus on the development of Specialty DRAM for 3C, automotive, industrial electronic and medical electronic applications, as well as mobile DRAM for applications in handsets, low-power mobile devices, wearable devices, consumer electronics and networking products.
For flash memory products, we employ advanced process technologies to produce high-density, high-performance and low power consumption products, providing a complete Code Storage Flash product line to meet the requirements of the following applications: networking, wearable devices, mobile devices and peripheral modules, computer and peripheral modules, consumer electronics, automotive electronics and industrial control products.
The future R&D undertaking of subsidiary Nuvoton Technology will focus on the research of more advanced process platform, low-voltage, low-power and high-speed CPU, and special IP technology geared at enhancing the anti-noise capability, low-temperature works, heat resistance and anti-static capability. The goal is to make gradual headway into energy efficient solutions and automotive electronics markets and achieve a technological level on a par with MCU suppliers in Europe, U.S. and Japan as soon as possible. Nuvoton Technology will also carry out the R&D of cloud computing, smart handheld devices and logic IC for PC, and moves in the directions of green energy, human-machine
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interface and security management to expand production lines and applications based on the solid foundation of existing operations.
7.4 Major changes in government policies and laws at home and broad and the impact on Company finance and business
The Company finance and business are not affected by major changes in government policies and laws at home and abroad in 2013.
7.5 Impact of recent technological and market changes on the Company’s finance and business, and response measures
The Company watches closely technological and market changes, and will, in view of the circumstances, assign staff or a project team to study and evaluate the impact of those changes on the Company's development, finance and business in the future as well as response measures. As of the date of report, there have not been significant technological changes that may produce material impact on the Company's finance and business.
7.6 Impact of corporate image change on risk management and response measures
Winbond believes in honesty and integrity in business practice. We emphasize honest dealing with customers and rigorously demand self-discipline and compliance with internal rules from employees. We are committed to information disclosure and financial transparency, and utilize all kinds of communication channels to help shareholders, institutional investors and the general public know more about Winbond and win their recognition and support for our management philosophy and directions. In addition, we have departments set up to take charge of investor relations, employee relationship, internal audit, risk management, quality management, and customer service. Those departments work closely with related business units to unite the resources and strength throughout the company. In case of any contingency, the Company’s senior officer will act as the convenor and promptly set up a crisis response team to quickly address the crisis, and prepare readiness plans to prevent and control all kinds of latent risks. As of the date of report, the Company is free of corporate image change event that calls for prompt actions in crisis management.
7.7 Expected benefits and potential risks of merger and acquisition
The Company does not any merger and acquisition plan in the last year and up to the date of report.
7.8 Expected benefits and potential risks of capacity expansion
All undertakings of expansion and construction of new-generation fab have had feasibility evaluation done by relevant professional teams before the project is proceeded. The purpose of fab expansion is to enhance the process technology and reduce production costs so as to fend off market competition and make headway into end-market applications. In light of the high market volatility of the memory industry, we will watch closely the market movement and supply-demand situation. We will take a prudent approach to capacity allocation, and opt for a diversity of optimal product mixes to keep our production plans flexible. We will also adopt advanced process to optimize the cost structure in the efforts to minimize the risk associated with market volatility. Financially, we will plan our future expansion and the necessary capital expenditure and funds in a prudent manner. We will also draw up sound business plans to lower the risk of incurring heavy debt. We believe we will have sufficient profit and cash flows to meet the additional investment needs and repayment obligations. Our technical team consists of wafer fabrication experts and IC design experts with dozens of years of experience in related fields. We also import advanced processes from abroad and embark on R&D with our own technology. Our 46nm DRAM and 58nm flash processes have been successfully validated and entered into volume production. The switch to high-end process is expected to improve our cost control capacity and augment the possibility of product expansion. To sum up, Winbond will endeavor in fending off the risk of market volatility from the aspects of product, finance and technology, and in the process, maximize our profitability.
7.9 Risks associated with over-concentration in purchase or sale and response measures
Purchasing from a sole supplier offers the advantage of price negotiation power, but it also carries the risk of over-concentration that the Company may not receive timely delivery when the supplier's plant has an accident or the supplier has financial or quality problems. The Company has at least two key suppliers for all of its main materials and hence does not have the concern of over-concentration in purchasing.
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Concentration in sales was a result of adjustment of customer structure and long-term strategic cooperation. The Company has credit management and internal control and audit systems in place, and conforms with the sales computer system, and hence does not run the risk of over-concentration in sales.
7.10 Impact of mass transfer of equity by or change of directors, supervisors, or shareholders holding more than 10% interest on the Company, associated risks and response measures
The Company is free of the aforementioned situation in recent years up to the date of report.
7.11 Impact of change of management rights on the Company, associated risk and response measures
The Company is free of the aforementioned situation in recent years up to the date of report.
7.12 Material litigious or non-litigious events
7.12.1 Concluded or pending litigious, non-litigious or administrative litigation event as of the date of report:
The Company and its U.S. subsidiary are accused of violating the U.S. antitrust law on price-fixing involving Winbond's DRAM products sold in the U.S. and are named as co-defendants in a class action suit in the U.S. federal court. Currently only the class action suit with the state attorney generals and the indirect purchasers is in progress, and the suit has reached settlement, pending the court's approval.
7.12.2 The outcome of concluded or pending litigious, non-litigious, or administrative litigation events involving the director, supervisor, president, de facto responsible person, major shareholders holding more than 10% interest, or subsidiary of the Company
(1) With respect to pending litigious events as of the date of report, Winbond Chairman Arthur Yu-Cheng Chiao has made a reply to the Company as follows:
A. I am involved in only one pending lawsuit as of the date of your company’s annual report.
B. Description of the lawsuit: (A) Facts, amount of claim, lawsuit start date, main parties concerned:
The Securities and Futures Investor Protection Center ("SFIPC") filed a lawsuit with Taiwan Taipei District Court on April 27, 2005 over misrepresentation of the financial statements of Pacific Electric Wire & Cable Co., Ltd. ("Pacific Electric"). The lawsuit names myself and others (including other directors, supervisors and accounting firm) as co-defendants on grounds that I acted as a director of Pacific Electric between 1999 and 2001 and SFIPC requests compensation for damages from the co-defendants (Case No.: Taiwan Taipei District Court (referred to as "Taipei District Court" hereunder) 94-Jing-Zi-#22). When SFIPC first initiated the action on April 27, 2005, it sought compensation in the amount of NT$7,910,422,313 from 277 defendants. SFIPC later added Fubon Life Insurance and Hsing Yo Investment to the list of defendants on June 21, 2005 that brought the number of defendants to 279. SFIPC subsequently made several expansions and reductions of claim due to increase in the number of people who appoint SFIPC as their representative in the class action suit and settlement reached with several defendants. Thus the court has been in the stage of procedural examination for a long time. So far, SFIPC has reached settlement with 248 defendants involving total settlement amount of NT$196,100,000. The court started the trial phase in 2009.
(B) Current status: This case is currently in first instance proceedings in the Taipei District Court.
(C) My and my attorney’s views and action plan on the case: The case is still in first instance proceedings. The oral argument phase has started, but has not yet concluded. Thus my appointed attorney and I are not in a position to assess the results of the trial at the present time.
(D) Possible maximum loss and possible amount of indemnification received from the case: Based on the settlement information provided by SFIPC, the amount of settlement reached between SFIPC and individual director or supervisor of Pacific Electric ranges between NT$12,330,000 and NT$26,000,000. Thus even if I am later found to be liable for damages as a director of Pacific Electric at one time, my liability should not be too far off the amounts of settlement described above.
C. I am not financially strapped or losing my good credit standing as of the date of this reply.
An evaluation of the aforementioned lawsuit by the Company concludes that because the lawsuit is a personal affair of
159
the director and does not involve the Company's finance or business, it is not expected to have any material impact on the interests of the Company's shareholders or stock price.
(2) With respect to pending litigious events as of the date of report, Winbond Director Yung Chin has made a reply to the Company as follows:
A. I am involved in only one pending lawsuit as of the date of your company’s annual report.
B. Description of the lawsuit: (A) Facts, amount of claim, lawsuit start date, main parties concerned:
The Securities and Futures Investor Protection Center ("SFIPC") filed a lawsuit with Taiwan Taipei District Court on April 27, 2005 over misrepresentation of the financial statements of Pacific Electric Wire & Cable Co., Ltd. ("Pacific Electric"). The lawsuit names myself and others (including other directors, supervisors and accounting firm) as co-defendants on grounds that I acted as a supervisor of Pacific Electric from 1999 to September 24, 2001 and SFIPC requests compensation for damages from the co-defendants (Case No.: Taiwan Taipei District Court (referred to as "Taipei District Court" hereunder) 94-Jing-Zi-#22). When SFIPC first initiated the action on April 27, 2005, it sought compensation in the amount of NT$7,910,422,313 from 277 defendants. SFIPC later added Fubon Life Insurance and Hsing Yo Investment to the list of defendants on June 21, 2005 that brought the number of defendants to 279. SFIPC subsequently made several expansions and reductions of claim due to increase in the number of people who appoint SFIPC as their representative in the class action suit and settlement reached with several defendants. Thus the court has been in the stage of procedural examination for a long time. So far, SFIPC has reached settlement with 248 defendants involving total settlement amount of NT$196,100,000. The court started the trial phase in 2009.
(B) Current status: This case is currently in first instance proceedings in the Taipei District Court.
(C) My and my attorney’s views and action plan on the case: The case is still in first instance proceedings. The oral argument phase has started, but has not yet concluded. Thus my appointed attorney and I are not in a position to assess the results of the trial at the present time.
(D) Possible maximum loss and possible amount of indemnification received from the case: Based on the settlement information provided by SFIPC, the amount of settlement reached between SFIPC and individual director or supervisor of Pacific Electric ranges between NT$12,330,000 and NT$26,000,000. Thus even if I am later found to be liable for damages for I was once a director of Pacific Electric, my liability should not be too far off the amounts of settlement described above.
C. I am not financially strapped or losing my good credit standing as of the date of this reply.
An evaluation of the aforementioned lawsuit by the Company concludes that because the lawsuit is a personal affair of the director and does not involve the Company's finance or business, it is not expected to have any material impact on the interests of the Company's shareholders or stock price.
7.13 Risk management organization framework The Company's risk management tasks are dispersed among different functions inside the Company. The Company has established sound internal management guidelines and operating procedures, and has developed comprehensive plans and processes for risk aversion, loss prevention and crisis management. In addition, the Company's management keeps continuous watch over changes in the macroeconomic environment that might affect the Company business and operations, and has assigned staff to make planning and formulate response actions against all kinds of contingencies to reduce operational uncertainties to the minimum.
7.14 Other significant risks and response measures: None.
8. Other important events: None.
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1.1.2 Profile of individual subsidiary Dec. 31, 2013; Unit: NT$1,000
Name of enterprise Date of establishment
Address Paid-in capital Principal business or core products
Winbond Electronics Corporation 1987.09.29 No. 8, Keya 1st Rd.,Daya Dist., Taichung City 428, Taiwan, R.O.C.
NT$36,940,232
Research,development,production, and sale of semiconductor parts and components used in integrated circuits and other system products
Landmark Group Holdings Ltd. 2005.07.25 Palm Grove House, P.O.Box 438, Road Town, Tortola, British Virgin Islands
US$9,523 Investments
Winbond Electronics Corporation Japan 2001.01.05 Shin-Yokohama Square Bldg. 9F, 2-3-12 Shin-Yokohama, Kouhoku-ku, Yokohama, Kanagawa 222-0033, Japan
JPY 148,500 Research, development and sales of semiconductor parts and components, and after-sale service
Peaceful River Corporation 1997.03.12 Flemming House, Wickhams Cay, P.O. Box 662, Road Town, Tortola, British Virgin Islands
US$9,930 Investments
Winbond International Corporation 1995.08.28 Flemming House, Wickhams Cay, P.O. Box 662, Road Town, Tortola, British Virgin Islands
US$104,270 Investments
Winbond Electronics Corporation America
1998.07.01 32 Loockerman Square, suite L-100, Dover, Kent 19904, Delaware
US$58,917 Design, sales and service of semiconductor parts and components
Mobile Magic Design Corporation 2003.07.25 2F, No. 40, Industrial East 4th Road, Hsinchu Science-Based Industrial Park
NT$50,000 Research, development, design, manufacturing and sales of Pseudo RAM and Low-Power SDRAM
Winbond Electronics (H.K.) Ltd. 2008.06.13 Unit 9-11, 22F, Millennium City 2, No 378 Kwun Tong Road, Kowloon, Hong Kong
HKD 500 Sales and service of semiconductor parts and components
Pine Capital Investment Ltd. 2011.01.12 Unit 9-11, 22F, Millennium City 2, No 378 Kwun Tong Road, Kowloon, Hong Kong
HKD 70,590 Investments
Winbond Electronics (Suzhou) Ltd. 2011.06.21 No.8, Zhao Feng Road, Huaqiao Town, Kunshan City, Jiangsu Province, China
US$9,000 Research, design, development and sales of integrated circuit and equipments, and after-sale service
Winbond Technology LTD 2013.07.31 8 Hasadnaot Street, Herzlia B. 4672835, Israel ILS 1 Design, sales and service of semiconductor parts and components
Nuvoton Technology Corp. 2008.04.09 No. 4, Yan Hsing 3rd Road, Hsinchu Science-Based Industrial Park
NT$2,075,544 Research, design, development, manufacturing and sales of logic IC, 6” fab production, testing, and OEM
Marketplace Management Limited 2000.07.28 P.O.Box 957, Offshore Incorporations Centre, Road Town, Tortola, British Virgin Islands
US$8,506 Investments
Goldbond LLC 2000.09.22 1912 Capitol Ave, Cheyenne, WY 82001 US$44,518 Investments
Nuvoton Electronics Technology (Shanghai) Ltd
2001.03.30 27F, No. 2299, Yen An W. Road, Shanghai US$2,000 Revision, testing and technology consultation service on IC, system and related software
Winbond Technology (Nanjing) Ltd. 2005.09.21 Suite 413-40, Gao Xing Technology Industrial Development Zone Office Building, Nanjing
US$500 Computer software services (except for IC design)
Pigeon Creek Holding Co., Ltd. 1997.03.12 Flemming House, Wickhams Cay, P.O. Box 662, Road Town, Tortola, British Virgin Islands
US$13,868 Investments
Nuvoton Technology Corporation America
2008.05.01 2711 Centerville Road, Suite 400, Wilmington, DE 19808, Delaware
US$6,050 Design, sales and service of semiconductor parts and components
Nuvoton Electronics Technology (H.K.) Ltd.
1989.04.04 Unit 9-11, 22F, Millennium City 2, No 378 Kwun Tong Road, Kowloon, Hong Kong
HKD 107,400 Sales and service of semiconductor parts and components
Nuvoton Electronics Technology (Shenzhen) Ltd.
2007.02.16 8F Microprofit Building, Gaoxinnan 6 Road, High-Tech Industrial Park, Nanshan Dist. Shenzhen, P.R. China
US$6,000
Computer software services (except for IC design), computer and peripheral equipment, and wholesale of software
Nuvoton Investment Holding Ltd. 2005.03.21 3rd Floor, Omar Hodge Building, Wickhams Cay I, PO Box 362, Road Town, Tortola, British Virgin Islands
US$21,000 Investments
Nuvoton Technology Israel Ltd. 2005.03.22 8 Hasadnaot Street, Herzlia B, 4672835 Israel ILS 1 Design, sales and service of semiconductor parts and components
Newfound Asian Corporation 1997.03.12 Flemming House, Wickhams Cay, P.O. Box 662, Road Town, Tortola, British Virgin Islands
US$6,555 Investments
Baystar Holdings Ltd. 1998.08.18 Flemming House, Wickhams Cay, P.O. Box 662, Road Town, Tortola, British Virgin Islands
US$22,590 Investments
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1.1.3 Profiles on shareholders deemed to have dominant-subordinate relations： None
1.1.4 Profiles of directors, supervisors and presidents of affiliates and subsidiaries Dec. 31, 2013; Unit: shares
Name of enterprise Title Name or Representative Shares held Shares %
Winbond Electronics Corp. Chairman Arthur Yu-Cheng Chiao 58,264,955 2% Director Ching-Chu Chang 10,067,591 - Director Matthew Feng-Chiang Miau 100,000 - Director Yung Chin 10,720,537 -
Director Peter Chu (Representative of Chih Xin Investment Co..) 858,091,531(Note1)
23%
Director Lu-Pao Hsu 8,000 - Director Robert I.S. Hsu 970,524 - Director Tung-Yi Chan 100,000 - Director Hong-Chi Yu - - Supervisor Yu-Chi Chiao 22,859,166 1% Supervisor Wang-Tsai Lin - - Supervisor Hui-Ming Cheng 250,000 - President Tung-Yi Chan 100,000 -
Landmark Group Holdings Ltd. Director Director Director
Winbond Electronics Corp. Representative - Arthur Yu-Cheng Chiao Winbond Electronics Corp. Representative - Tung-Yi Chan Winbond Electronics Corp. Representative - Robert I.S. Hsu
9,523,000 100% (Note1)
Winbond Electronics Corporation Japan Director Director Director Director Director Supervisor
Landmark Group Holdings Ltd. Representative - Tatsuo Okamoto Landmark Group Holdings Ltd. Representative - Tung-Yi Chan Landmark Group Holdings Ltd. Representative - Robert I.S. Hsu Landmark Group Holdings Ltd. Representative - James Wen Landmark Group Holdings Ltd. Representative – Jessica Huang Landmark Group Holdings Ltd. Representative - Yung Chin
2,970 100% (Note1)
President Tatsuo Okamoto Peaceful River Corporation
Director Director Director
Landmark Group Holdings Ltd. Representative - Arthur Yu-Cheng Chiao Landmark Group Holdings Ltd. Representative - Tung-Yi Chan Landmark Group Holdings Ltd. Representative - Yung Chin
9,930,000 100%
(Note1)
Winbond International Corporation Director Winbond Electronics Corp. Representative - Arthur Yu-Cheng Chiao Director Winbond Electronics Corp. Representative - Tung-Yi Chan 104,270,000 100% Director Winbond Electronics Corp. Representative - Robert I.S. Hsu (Note1)
Winbond Electronics Corporation America Chairman Director Director Director Director Director Director
Winbond International Corporation Representative – Yuan-Mow Su Winbond International Corporation Representative - Arthur Yu-Cheng Chiao Winbond International Corporation Representative - Tung-Yi Chan Winbond International Corporation Representative - Kuang-Yi Chiu Winbond International Corporation Representative - Yung Chi Winbond International Corporation Representative - Pei-Ming Chen Winbond International Corporation Representative - James Wen
3,067 100% (Note1)
President Eungjoon Park Mobile Magic Design Corporation Chairman
Director Director Supervisor
Winbond Electronics Corp. Representative - Wilson Wen Winbond Electronics Corp. Representative - Tung-Yi Chan Winbond Electronics Corp. Representative - James Wen Winbond Electronics Corp. Representative - Jessica Huang
5,000,000 100% (Note1)
President Yuan-Mow Su
163
Winbond Electronics (H.K.) Ltd. Chairman Director Director Director
Winbond Electronics Corp. Representative - Yung Chin Winbond Electronics Corp. Representative - Pei-Ming Chen Winbond Electronics Corp. Representative - James Wen Winbond Electronics Corp. Representative – Jessica Huang
500,000 100% (Note1)
President Pei-Ming Chen Pine Capital Investment Ltd. Chairman
Director Director
Winbond Electronics Corp. Representative - Yung Chin Winbond Electronics Corp. Representative - Tung-Yi Chan Winbond Electronics Corp. Representative – Cheng-Kung Lin
70,590,000 100% (Note1)
President James Wen Winbond Electronics (Suzhou) Ltd. Chairman
Director Director Director Supervisor
Pine Capital Investment Ltd. Representative - Tung-Yi Chan Pine Capital Investment Ltd. Representative –Cheng-Kung Lin Pine Capital Investment Ltd. Representative - Yuan-Mou Su Pine Capital Investment Ltd. Representative - James Wen Pine Capital Investment Ltd. Representative - Yung Chin
(Note2) 100%
President Pei-Ming Chen Winbond Technology LTD Chairman
Director Director
Winbond Electronics Corp. Representative - Tung-Yi Chan Winbond Electroncs Corp. Representative - Por-Yuan Huang Winbond Electronics Corp. Representative - Jessica Huang
100,000 100% (Note1)
President Por-Yuan Huang
Name of enterprise Title Name or Representative Shares held Shares %
Nuvoton Technology Corp Chairman Director Director
Winbond Electronics Corp. Representative - Arthur Yu-Cheng Chiao Winbond Electronics Corp. Representative - Yung Chin Winbond Electronics Corp. Representative - Keh-Shew Lu
126,620,087 61%(Note1)
Director Robert I.S. Hsu 243,328Director Chi-Lin Wea Director Gary Y.Cheng Director Shan-Ke,Xu Director David Huang Director Yu-Chun Hong Supervisor Chin Xin Investment Co., Ltd Representative - Yang-Kun Lai 1,853,185 1%Supervisor Chao-Ming Meng Supervisor Lu Pao Hsu President Robert I.S. Hsu 243,328
Marketplace Management Limited Director Director Director
Nuvoton Technology Corp. Representative - Arthur Yu-Cheng Chiao Nuvoton Technology Corp. Representative - Robert I.S. Hsu Nuvoton Technology Corp. Representative - Tung-Yi Chan
8,505,524 100%(Note1)
Goldbond LLC Manager (Note 3) Manager (Note 3) Manager (Note 3)
Marketplace Management Limited Representative – Arthur Yu-Cheng Chiao Marketplace Management Limited Representative – Hsiang-Yun Fan Marketplace Management Limited Representative – Jessica C. Huang
(Note 2) 100%
Nuvoton Electronics Technology (Shanghai) Ltd
Chairman Director Director Supervisor
Goldbond LLC Representative - Robert I.S. Hsu Goldbond LLC Representative - Stephen R. M. Huang Goldbond LLC Representative - Hsiang-Yun Fan Goldbond LLC Representative - Yung Chin
(Note 2) 100%
President Mao-Sen ,Chen Winbond Technology (Nanjing) Ltd. Chairman
Director Director
Goldbond LLC Representative - Stephen R. M. Huang Goldbond LLC Representative - Robert I.S. Hsu Goldbond LLC Representative - James Wen
(Note 2) 100%
President Mao-Sen ,Chen Pigeon Creek Holding Co., Ltd. Director
Director
Nuvoton Technology Corp. Representative - Arthur Yu-Cheng Chiao Nuvoton Technology Corp. Representative - Tung-Yi Chan Nuvoton Technology Corp. Representative - Robert I.S. Hsu
13,867,925 100%(Note1)
164
Director Nuvoton Technology Corporation America Chairman
Director Director Director Director
Pigeon Creek Holding Co., Ltd. Representative – His-Jung Tsai Pigeon Creek Holding Co., Ltd. Representative - Robert I.S. Hsu Pigeon Creek Holding Co., Ltd. Representative - Tung-Yi Chan Pigeon Creek Holding Co., Ltd. Representative - Hsiang-Yun Fan Pigeon Creek Holding Co., Ltd. Representative - Stephen R. M. Huang
60,500 100%(Note1)
President Gary Adrig Nuvoton Electronics Technology (H.K.) Ltd.
Chairman Director Director Director Director
Nuvoton Technology Corp. Representative - Robert I.S. Hsu Nuvoton Technology Corp. Representative - Yung Chin Nuvoton Technology Corp. Representative - Hsiang-Yun Fan Nuvoton Technology Corp. Representative -Bosco Chi-Sing Law Nuvoton Technology Corp. Representative - His-Yung Lin
107,400,000 100%(Note1)
President His-Yung Lin Nuvoton Electronics Technology (Shenzhen) Ltd
Chairman Director Director Supervisor
Nuvoton Electronics Tech. (H.K.) Ltd. Representative - Stephen R. M. Huang Nuvoton Electronics Tech. (H.K.) Ltd. Representative - Robert I.S. Hsu Nuvoton Electronics Tech. (H.K.) Ltd. Representative - Hsiang-Yun Fan Nuvoton Electronics Tech. (H.K.) Ltd. Representative - His-Yung Lin
(Note2) 100%
President Zhi-Sheng,Luo Nuvoton Investment Holding Ltd. Director
Director Director
Nuvoton Technology Corp. Representative - Arthur Yu-Cheng Chiao Nuvoton Technology Corp. Representative - Robert I.S. Hsu Nuvoton Technology Corp. Representative – James Wen
21,000,000 100%(Note1)
Nuvoton Technology Israel Ltd. Chairman Director Director Director Director Director
Nuvoton Investment Holding Ltd. representative – His-Jung Tsai Nuvoton Investment Holding Ltd. representative - Robert I.S. Hsu Nuvoton Investment Holding Ltd. representative – Hsiang-Yun Fan Nuvoton Investment Holding Ltd. representative - Bor-Yuan,Huang Nuvoton Investment Holding Ltd. representative – Biranit Levany Nuvoton Investment Holding Ltd. representative – Erez Naory
1,000 100%(Note1)
President Por-Yuan HuangNewfound Asian Corporation Director
Director Director
Winbond Electronics Corp. Representative - Arthur Yu-Cheng Chiao Winbond Electronics Corp. Representative - Tung-Yi Chan Winbond Electronics Corp. Representative - Yung Chin
6,555,000 100%(Note1)
Baystar Holdings Ltd. Director Director Director
Newfound Asian Corporation Representative - Arthur Yu-Cheng Chiao Newfound Asian Corporation Representative - Tung-Yi Chan Newfound Asian Corporation Representative - Robert I.S. Hsu
22,590,000 100%(Note1)
Note1 Institutional Shareholder Note 2 Winbond Electronics (Suzhou)Ltd., Goldbond LLC , Nuvoton Electronics Technology (Shanghai) Ltd ,
Winbond Technology (Nanjing) Ltd. and Nuvoton Electronics Technology (Shenzhen) Ltd. are not share issuing limited liability companies.
Note 3 Goldbond LLC adopts the manager system.
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1.1.5 Business overview of affiliates and subsidiaries
Dec. 31, 2013 Unit: NT$1,000
Name of enterprise Capital Total Assets Total liabilities Book Value Revenue Operating
Profit (loss) Net Profit (loss)
Net earnings (loss) per share (NTD)
Winbond Electronics Corporation 36,940,232 52,855,715 18,041,795 34,813,920 26,165,961 344,684 206,564 0.06 Landmark Group Holdings Ltd. 283,833 212,216 190 212,026 31,275 28,616 28,616 3.00 Winbond Electronics Corporation Japan 42,159 436,581 245,707 190,874 2,734,114 22,587 27,733 9,337.66 Peaceful River Corporation 295,964 36,333 12,209 24,124 3,670 3,542 3,542 0.36 Winbond International Corporation 3,107,767 1,719,903 31,711 1,688,192 9,506 8,868 8,868 0.09 Winbond Electronics Corporation America 1,756,027 1,299,055 45,931 1,253,124 779,085 22,775 9,496 3,096.31 Mobile Magic Design Corporation 50,000 67,513 79,627 (12,114) 123,029 (4,323) (4,877) (0.98) Winbond Electronics (H.K.) Ltd. 1,922 514,988 539,707 (24,719) 3,927,698 (4,568) (5,250) (10.50) Pine Capital Investmenr Ltd. 271,277 266,515 279 266,236 28 (2,384) (2,384) (0.03) Winbond Electronics (Suzhou) Ltd. 268,245 428,617 162,782 265,835 790,640 (3,926) (1,998) ( 1) Winbond Technology LTD 9 47,723 25,006 22,717 29,625 1,139 1,231 12.31 Nuvoton Technology Corp. 2,075,544 4,888,731 2,082,012 2,806,719 6,514,347 408,464 259,215 1.25 Marketplace Management Limited 253,507 80,663 75 80,588 11 (5,518) (5,518) (0.65) Goldbond LLC 1,326,866 82,692 2,120 80,572 242 (5,178) (5,178) ( 1) Nuvoton Electronics Technology (Shanghai) Ltd. 80,928 91,199 8,602 82,597 37,223 (3,460) 241 ( 1)
Winbond Technologies (Nanjing) Ltd. 19,777 1,479 3,422 (1,943) 0 0 1 ( 1) Pigeon Creek Holding Co., Ltd. 413,334 164,941 13,466 151,475 6,687 6,520 6,520 0.47 Nuvoton Technology Corporation America 180,320 230,520 66,107 164,413 674,238 15,254 6,670 110.25 Nuvoton Electronics Technology (H.K.) Ltd. 412,738 518,716 92,834 425,882 2,395,798 745 1,122 0.01 Nuvoton Electronics Technology (Shenzhen) Ltd. 226,993 231,722 18,356 213,366 50,061 (3,270) 135 ( 1)
Nuvoton Investment Holding Ltd. 625,905 312,467 46 312,421 20,814 20,671 20,671 0.98 Nuvoton Technology Israel Ltd. 9 368,184 56,873 311,311 552,645 21,256 20,799 20,799.20 Newfound Asian Corporation 195,372 60,654 40 60,614 23 (255) (255) (0.04) Baystar Holdings Ltd. 673,295 60,222 40 60,182 6 (129) (129) (0.01)
Note 1: Goldbond LLC, Nuvoton Electronics Technology (Shanghai) Ltd. Winbond Technology (Nanjing) Ltd., and Nuvoton Electronics Technology (Shenzhen) Ltd., Winbond Electronics (Suzhou) Ltd. are not share issuing limited liability companies
Note 2: Exchange rates of items of “total assets and total liabilities”: 1 USD= 29.805 NTD 1JPY= 0.2839 NTD 1RMB= 4.8885 NTD; 1 ILS= 8.5851 NTD
Note 3: Exchange rates of items of “profit and loss” 1 USD=29.69 NTD 1 JPY= 0.2999NTD 1 RMB =4.7921NTD; 1 ILS= 8.1877 NT
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