Macronix — Interim / Quarterly Report 2015

Nov 12, 2015

Macronix International Co., Ltd. and Subsidiaries

Consolidated Financial Statements for the Nine Months Ended September 30, 2015 and 2014 and Independent Auditors’ Review Report

INDEPENDENT AUDITORS’ REVIEW REPORT

The Board of Directors and the Stockholders Macronix International Co., Ltd.

We have reviewed the accompanying consolidated balance sheets of Macronix International Co., Ltd. (the “Company”) and its subsidiaries (collectively referred to as the “Group”) as of September 30, 2015 and 2014 and the related consolidated statements of comprehensive income for the three months ended September 30, 2015 and 2014 and for the nine months ended September 30, 2015 and 2014, and the consolidated statements of changes in equity and cash flows for the nine months ended September 30, 2015 and 2014. These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to issue a report on these consolidated financial statements based on our reviews.

Except as stated in the following paragraph, we conducted our reviews in accordance with Statement of Auditing Standards No. 36 “Review Financial Statements” issued by the Auditing Standards Committee of the Accounting Research and Development Foundation of the Republic of China. A review consists principally of applying analytical procedures to financial data and of making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with auditing standards generally accepted in the Republic of China, the objective of which is the expression of an opinion regarding the consolidated financial statements taken as a whole. Accordingly, we do not express such an opinion.

As disclosed in Note 12 to the consolidated financial statements, the financial statements of some insignificant subsidiaries included in the consolidated financial statements were not reviewed. As of September 30, 2015 and 2014, the combined total assets of these insignificant subsidiaries were NT$4,585,386 thousand and NT$4,575,200 thousand, representing 11.82% and 9.62%, respectively, of the consolidated total assets, and the combined total liabilities of these subsidiaries were NT$817,659 thousand and NT$628,287 thousand, representing 4.40% and 2.75%, respectively, of the consolidated total liabilities, and for the three months ended September 30, 2015 and 2014, the combined comprehensive loss of these subsidiaries amounted to NT$141,678 thousand and NT$82,640 thousand, representing 13.25% and 7.69%, respectively, of the consolidated total comprehensive loss, and for the nine months ended September 2015 and 2014, the combined comprehensive loss of these subsidiaries amounted to NT$327,493 thousand and NT$342,734 thousand, representing 12.39% and 8.75%, respectively, of the consolidated total comprehensive loss. As stated in Note 13 to the consolidated financial statements and other related information disclosed, we did not review the financial statements of equity-method investees as of and for the nine months ended September 30, 2015 and 2014. The carrying value of the related investments as of September 30, 2015 and 2014 were NT$20,695 thousand and NT$47,550 thousand, and the share of comprehensive loss of associates were NT$4,907 thousand and NT$8,156 thousand for the three months ended September 30, 2015 and 2014, and the share of comprehensive loss of associates were NT$18,028 thousand and NT$15,082 thousand for the nine months ended September 30, 2015 and 2014. These amounts as well as the related financial information of the investees as disclosed in Note 39 to the financial statements were based on the subsidiaries’ and associates’ unreviewed financial statements for the same reporting periods as those of the Company.

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Based on our reviews, except as discussed in the preceding paragraph that the carrying values of the investments in subsidiaries and associates as well as the related disclosures of the investment information were based on unreviewed financial statements of the subsidiaries and associates, and except for the effects of such adjustment, if any, as might have been made had we applied review procedures on the financial statements of the investees referred to in the preceding paragraph, we are not aware of any material modifications that should be made to the consolidated financial statements referred to above for them to be in conformity with the Regulations Governing the Preparation of Financial Reports by Securities Issuers and International Accounting Standard 34 “Interim Financial Reporting” endorsed by the Financial Supervisory Commission of the Republic of China.

As disclosed in Note 3 to the consolidated financial statements, the Group applies the amendments to the Regulations Governing the Preparation of Financial Reports by Securities Issuers and the 2013 version of the International Financial Reporting Standards (IFRS), International Accounting Standards (IAS), Interpretations of IFRS (IFRIC) and Interpretations of IAS (SIC) endorsed by the FSC starting in 2015. As a result of this retrospective application of the accounting policy, the consolidated financial statements as of December 31, 2014, September 30, 2014 and January 1, 2014 have been restated.

October 28, 2015

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 review such consolidated financial statements are those generally applied in the Republic of China.

For the convenience of readers, the independent auditors’ review report and the accompanying consolidated financial statements have been translated into English from the original Chinese version prepared and used in the Republic of China. If there is any conflict between the English version and the original Chinese version or any difference in the interpretation of the two versions, the Chinese-language independent auditors’ review report and consolidated financial statements shall prevail.

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MACRONIX INTERNATIONAL CO., LTD. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS (In Thousands of New Taiwan Dollars) (Reviewed, Not Audited)

ASSETS CURRENT ASSETS Cash and cash equivalents (Notes 6 and 34) Financial assets at fair value through profit or loss - current (Notes 7 and 34) Notes receivable and trade receivables, net (Notes 10 and 34) Receivables from related parties, net (Notes 34 and 35) Other receivables (Notes 10, 34 and 35) Inventories (Note 11) Other current assets (Notes 16 and 18) Total current assets NON-CURRENT ASSETS Available-for-sale financial assets - non-current (Notes 8 and 34) Financial assets measured at cost - non-current (Notes 9 and 34) Investments accounted for using equity method (Note 13) Property, plant and equipment (Notes 14 and 36) Intangible assets (Note 15) Deferred tax assets (Notes 4 and 27) Other financial assets - non-current (Notes 17, 34 and 36) Other non-current assets (Notes 16 and 18) Total non-current assets TOTAL LIABILITIES AND EQUITY CURRENT LIABILITIES Short-term borrowings (Notes 19 and 34) Financial liabilities at fair value through profit or loss - current (Notes 7 and 34) Notes payable and trade payables (Notes 20 and 34) Payables to related parties (Notes 34 and 35) Other payables (Notes 21 and 34) Other payables to related parties (Notes 34 and 35) Payables for purchase of equipment (Note 34) Current tax liabilities (Notes 4 and 27) Provisions - current (Note 22) Current portion of long-term borrowings (Notes 19 and 34) Other current liabilities Total current liabilities NON-CURRENT LIABILITIES Long-term borrowings (Notes 19 and 34) Net defined benefit liabilities (Notes 4 and 23) Other non-current liabilities Total non-current liabilities Total liabilities EQUITY ATTRIBUTABLE TO SHAREHOLDERS OF THE PARENT (Note 24) Share Capital Ordinary shares Capital stock to be cancelled Total share capital Capital surplus Retained earnings Accumulated deficit Other equity Treasury shares Equity attributable to shareholders of the parent NON-CONTROLLING INTERESTS (Note 24) Total equity TOTAL		September 30, 2015 (Reviewed) Amount % $ 3,819,079 10 - - 3,210,471 8 480,997 1 173,642 1 10,235,020 26 428,171 1 18,347,380 47 1,098,344 3 94,000 - 20,695 - 17,886,547 46 139,207 1 910,815 2 181,622 1 128,540 - 20,459,770 53 $ 38,807,150 100 $ 1,680,593 4 2,828 - 1,903,858 5 51,649 - 1,040,100 3 10,131 - 154,422 - 183,144 1 209,941 1 2,311,111 6 66,945 - 7,614,722 20 9,851,300 25 1,118,687 3 4,622 - 10,974,609 28 18,589,331 48 36,185,987 93 (7,498) - 36,178,489 93 26,866 - (16,341,763) (42) 501,050 1 (159,061) - 20,205,581 52 12,238 - 20,217,819 52 $ 38,807,150 100	December 31, 2014 (Audited after Restated) Amount % $ 7,636,201 17 95 - 2,699,155 6 483,179 1 161,304 1 9,301,643 21 578,319 1 20,859,896 47 1,243,142 3 113,399 - 38,599 - 21,128,358 47 238,343 1 912,178 2 182,657 - 126,003 - 23,982,679 53 $ 44,842,575 100 $ 2,134,039 5 7,113 - 1,996,003 5 63,185 - 1,682,698 4 - - 475,285 1 302,416 1 150,617 - 12,143,430 27 74,315 - 19,029,101 43 2,073,506 5 1,116,508 2 17,930 - 3,207,944 7 22,237,045 50 35,587,740 79 - - 35,587,740 79 241,652 - (13,812,749) (31) 734,847 2 (159,061) - 22,592,429 50 13,101 - 22,605,530 50 $ 44,842,575 100	September 30, 2014 (Reviewed after Restated) Amount % $ 7,256,880 15 43 - 3,363,830 7 1,442,275 3 190,602 1 9,553,756 20 487,750 1 22,295,136 47 1,197,695 3 112,072 - 47,550 - 22,420,614 47 292,513 1 910,069 2 183,001 - 125,084 - 25,288,598 53 $ 47,583,734 100 $ 1,352,212 3 2,544 - 2,080,963 4 68,090 - 1,444,774 3 9,320 - 233,178 1 298,935 1 117,007 - 6,048,124 13 103,581 - 11,758,728 25 10,093,810 21 1,003,359 2 16,601 - 11,113,770 23 22,872,498 48 35,214,730 74 - - 35,214,730 74 632,199 1 (11,444,329) (24) 452,112 1 (159,061) - 24,695,651 52 15,585 - 24,711,236 52 $ 47,583,734 100	January 1, 2014 (Audited after Restated)	January 1, 2014 (Audited after Restated)
						Amount % $ 11,978,574 22 1,358 - 2,822,661 5 458,302 1 147,208 - 8,795,383 17 525,959 1 24,729,445 46 951,333 2 114,888 - - - 26,728,291 49 316,358 1 910,037 2 185,715 - 93,934 - 29,300,556 54 $ 54,030,001 100 $ 566,577 1 - - 2,004,696 4 90,570 - 2,226,702 4 14 - 432,797 1 355,427 1 143,399 - 7,648,233 14 71,689 - 13,540,104 25 10,935,406 20 927,210 2 3,087 - 11,865,703 22 25,405,807 47 35,214,730 65 - - 35,214,730 65 344,166 1 (7,280,502) (14) 457,785 1 (159,061) - 28,577,118 53 47,076 - 28,624,194 53 $ 54,030,001 100

The accompanying notes are an integral part of the consolidated financial statements.

(With Deloitte & Touche review report dated October 28, 2015)

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MACRONIX INTERNATIONAL CO., LTD. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (In Thousands of New Taiwan Dollars, Except Loss Per Share) (Reviewed, Not Audited)

NET OPERATING REVENUE (Notes 25 and 35) OPERATING COSTS (Notes 11, 23, 26 and 35) GROSS PROFIT REALIZED GAIN TRANSACTIONS WITH ASSOCIATES REALIZED GROSS PROFIT OPERATING EXPENSES (Notes 23, 26 and 35) Selling and marketing expenses General and administrative expenses Research and development expenses Total operating expenses LOSS FROM OPERATIONS NON-OPERATING INCOME AND EXPENSES Other income (Notes 26 and 35) Other gains and losses (Notes 26 and 30) Finance costs (Note 26) Share of loss of associates Total non-operating income and expenses LOSS BEFORE INCOME TAX INCOME TAX EXPENSE (Notes 4 and 27) NET LOSS FOR THE PERIOD OTHER COMPREHENSIVE INCOME Items that may be reclassified subsequently to profit or loss: Exchange differences on translating foreign operations (Note 24) Unrealized gain (loss) on available-for-sale financial assets (Note 24) Share of the other comprehensive loss of associates accounted for using the equity method (Note 24) Other comprehensive income (loss) for the period, net of income tax TOTAL COMPREHENSIVE LOSS FOR THE PERIOD NET LOSS ATTRIBUTABLE TO: Shareholders of the parent Non-controlling interests		For the Three Months	E	nded September 30		**For the Nine Months **	E	nded September 30
		2015 (Reviewed)		2014 (Reviewed after Restated)		2015 (Reviewed)		2014 (Reviewed after Restated)
		Amount % $ 5,647,200 100 4,860,913 86 786,287 14 147 - 786,434 14 260,093 5 366,783 7 1,209,401 21 1,836,277 33 (1,049,843) (19) 76,014 1 112,519 2 (79,758 ) (1 ) (4,907) - 103,868 2 (945,975 ) (17 ) 4,892 - (950,867) (17) 80,955 1 (199,788 ) (3 ) 49 - (118,784) (2) $ (1,069,651) (19) $ (949,199 ) (17 ) (1,668) - $ (950,867) (17)		Amount % $ 6,691,327 100 5,519,772 82 1,171,555 18 76 - 1,171,631 18 291,333 5 421,931 6 1,555,683 23 2,268,947 34 (1,097,316) (16) 64,788 1 12,655 - (70,248 ) (1 ) (8,156) - (961) - (1,098,277 ) (16 ) 1,065 - (1,099,342) (16) 20,494 - 4,306 - 21 - 24,821 - $ (1,074,521) (16) $ (1,094,999 ) (16 ) (4,343) - $ (1,099,342) (16)		Amount % $ 15,328,703 100 13,283,434 86 2,045,269 14 112 - 2,045,381 14 750,350 5 1,115,625 7 3,648,046 24 5,514,021 36 (3,468,640) (22) 1,100,975 7 86,888 - (218,132 ) (1 ) (18,028) - 951,703 6 (2,516,937 ) (16 ) 12,873 - (2,529,810) (16) 33,678 - (147,285 ) (1 ) 12 - (113,595) (1) $ (2,643,405) (17) $ (2,524,483 ) (16 ) (5,327) - $ (2,529,810) (16)		Amount % $ 16,454,101 100 14,086,258 86 2,367,843 14 89 - 2,367,932 14 820,936 5 1,217,013 8 4,492,334 27 6,530,283 40 (4,162,351) (26) 158,489 1 50,557 - (210,578 ) (1 ) (15,082) - (16,614) - (4,178,965 ) (26 ) 4,157 - (4,183,122) (26) 23,071 - 242,582 2 (830) - 264,823 2 $ (3,918,299) (24) $ (4,163,827 ) (26 ) (19,295) - $ (4,183,122) (26) (Continued)

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MACRONIX INTERNATIONAL CO., LTD. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(In Thousands of New Taiwan Dollars, Except Loss Per Share) (Reviewed, Not Audited)

TOTAL COMPREHENSIVE LOSS ATTRIBUTABLE TO: Shareholders of the parent Non-controlling interests LOSS PER SHARE (Note 28) Basic Diluted			For the Three Months	E	nded September 30	nded September 30			**For the Nine Months **	E	nded September 30	nded September 30
			2015 (Reviewed)		2014 (Reviewed after Restated)				2015 (Reviewed)		2014 (Reviewed after Restated)
		$	Amount % (1,068,152 ) (19 ) (1,499) - (1,069,651) (19) $ (0.27) $ (0.27)		$	Amount % (1,069,699 ) (16 ) (4,822) - (1,074,521) (16) $ (0.31) $ (0.31)		$	Amount % (2,638,132 ) (17 ) (5,273) - (2,643,405) (17) $ (0.72) $ (0.72)		$	Amount % (3,899,290 ) (24 ) (19,009) - (3,918,299) (24) $ (1.18) $ (1.18)
		$			$			$			$

The accompanying notes are an integral part of the consolidated financial statements.

(With Deloitte & Touche review report dated October 28, 2015)

(Concluded)

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MACRONIX INTERNATIONAL CO., LTD. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (In Thousands of New Taiwan Dollars) (Reviewed, Not Audited)

BALANCE AT JANUARY 1, 2014 Effect of retrospective application and retrospective restatement Balance at January 1, 2014 as restated Net loss for the nine months ended September 30, 2014 Other comprehensive income for the nine months ended September 30, 2014, net of income tax Total comprehensive income (loss) for the nine months ended September 30, 2014 Issue of ordinary shares under employee share options plans Issue of restricted stock to employees Compensation cost of restricted stock for employees Increase (decrease) in non-controlling interests BALANCE AT SEPTEMBER 30, 2014 BALANCE AT JANUARY 1, 2015 Effect of retrospective application and retrospective restatement Balance at January 1, 2015 as restated Net loss for the nine months ended September 30, 2015 Other comprehensive income (loss) for the nine months ended September 30, 2015, net of income tax Total comprehensive income (loss) for the nine months ended September 30, 2015 Issue of restricted stock to employees Compensation cost of restricted stock for employees Retirement of restricted stock for employees Difference between purchase price and carrying amount arising from capital injection of subsidiaries Increase (decrease) in non-controlling interests BALANCE AT SEPTEMBER 30, 2015			Equity	Equity	Attributable toShareholders of the Parent	Attributable toShareholders of the Parent	Attributable toShareholders of the Parent		Total Non-controlling Interests $ 28,678,777 $ 47,021 (101,659) 55 28,577,118 47,076 (4,163,827 ) (19,295 ) 264,537 286 (3,899,290) (19,009) - 51 - - 17,601 - 222 (12,533) $ 24,695,651 $ 15,585 $ 22,765,127 $ 13,101 (172,698) - 22,592,429 13,101 (2,524,483 ) (5,327 ) (113,649) 54 (2,638,132) (5,273) - - 255,744 - - - (4,531 ) 4,531 71 (121) $ 20,205,581 $ 12,238	Total Equity $ 28,725,798 (101,604) 28,624,194 (4,183,122 ) 264,823 (3,918,299) 51 - 17,601 (12,311) $ 24,711,236 $ 22,778,228 (172,698) 22,605,530 (2,529,810 ) (113,595) (2,643,405) - 255,744 - - (50) $ 20,217,819
			CapitalStock Share Capital Capital Stock to be Cancelled Capital Surplus $ 35,214,730 $ - $ 344,166 - - - 35,214,730 - 344,166 - - - - - - - - - - - - - - 287,811 - - - - - 222 $ 35,214,730 $ - $ 632,199 $ 35,587,740 $ - $ 241,652 - - - 35,587,740 - 241,652 - - - - - - - - - 612,787 - (236,895 ) - - - (14,540 ) (7,498 ) 22,038 - - - - - 71 $ 36,185,987 $ (7,498) $ 26,866		Retained Earnings Accumulated Deficit $ (7,178,843 ) (101,659) (7,280,502) (4,163,827 ) - (4,163,827) - - - - $ (11,444,329) $ (13,640,051 ) (172,698) (13,812,749) (2,524,483 ) - (2,524,483) - - - (4,531 ) - $ (16,341,763)		Other Equity	Employee Unearned Compensation Treasury Shares $ - $ (159,061 ) - - - (159,061) - - - - - - - - (287,811 ) - 17,601 - - - $ (270,210) $ (159,061) $ (209,813 ) $ (159,061 ) - - (209,813) (159,061) - - - - - - (375,892 ) - 255,744 - - - - - - - $ (329,961) $ (159,061)
							Exchange Differences on Unrealized Translating Gain (Loss) from Foreign Operations Available-for-sale Financial Assets $ (49,141 ) $ 506,926 - - (49,141) 506,926 - - 21,955 242,582 21,955 242,582 - - - - - - - - $ (27,186) $ 749,508 $ 27,223 $ 917,437 - - 27,223 917,437 - - 33,636 (147,285) 33,636 (147,285) - - - - - - - - - - $ 60,859 $ 770,152
		Share (Thousands) 3,521,473 - 3,521,473 - - - - - - - 3,521,473 3,558,774 - 3,558,774 - - - 61,278 - (1,454 ) - - 3,618,598

The accompanying notes are an integral part of the consolidated financial statements.

(With Deloitte & Touche review report dated October 28, 2015)

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MACRONIX INTERNATIONAL CO., LTD. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS (In Thousands of New Taiwan Dollars) (Reviewed, Not Audited)

CASH FLOWS FROM OPERATING ACTIVITIES Loss before income tax Adjustments for: Depreciation expense Amortization expense Impairment loss recognized on trade receivables Finance costs Interest income Dividend income Compensation cost of employee share options Compensation cost of employee restricted shares Share of loss of associates (Gain) loss on disposal of property, plant and equipment Gain on disposal of investments Realized gain on the transactions with associates Gain on foreign currency exchange Changes in operating assets and liabilities Decrease in financial assets held for trading Increase in notes receivable and trade receivables Decrease (increase) in receivables from related parties Increase in other receivables Increase in inventories Decrease in other current assets (Decrease) increase in financial liabilities held for trading (Decrease) increase in notes payable and trade payables Decrease in payables to related parties Decrease in other payables Increase in other payables to related parties Increase (decrease) in provisions (Decrease) increase in other current liabilities Increase in net defined benefit liabilities Cash generated from (used in) operations Interest received Dividend received Interest paid Income tax paid Net cash used in operating activities	Nine Months Ended September 30	Nine Months Ended September 30
		2015 (Reviewed) 2014 (Reviewed after Restated) $ (2,516,937) $ (4,178,965) 4,310,537 5,493,037 129,182 187,204 - 271 218,132 210,578 (23,539) (45,814) (95,417) (89,634) - 51 255,744 17,601 18,028 15,082 (5,889) 9,535 (7,491) (39,035) (112) (89) (100,861) (23,485) 95 1,315 (499,061) (478,274) 7,117 (982,182) (14,327) (47,197) (933,377) (765,948) 150,609 32,678 (4,285) 2,544 (85,889) 64,303 (13,871) (23,851) (644,529) (781,896) 10,131 9,306 59,324 (24,273) (7,512) 33,438 2,179 76,149 207,981 (1,327,551) 24,454 45,913 95,063 88,836 (217,085) (212,646) (130,782) (60,681) (20,369) (1,466,129) (Continued)

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MACRONIX INTERNATIONAL CO., LTD. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS (In Thousands of New Taiwan Dollars) (Reviewed, Not Audited)

CASH FLOWS FROM INVESTING ACTIVITIES Proceeds on sale of financial assets measured at cost Proceeds from return of capital on financial assets measured at cost Disposal of subsidiaries (Note 30) Payments for property, plant and equipment Proceeds from disposal of property, plant and equipment Increase in refundable deposits Decrease in refundable deposits Payments for intangible assets Decrease in other financial assets Increase in other non-current assets Net cash used in investing activities CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from short-term borrowings Repayments of short-term borrowings Proceeds from long-term borrowings Repayments of long-term borrowings Proceeds from guarantee deposits received Refund of guarantee deposits received (Decrease) increase in other non-current liabilities (Decrease) increase in non-controlling interests Net cash used in financing activities EFFECT OF EXCHANGE RATE CHANGES ON THE BALANCE OF CASH HELD IN FOREIGN CURRENCIES NET DECREASE IN CASH AND CASH EQUIVALENTS CASH AND CASH EQUIVALENTS AT THE BEGINNING OF THE PERIOD CASH AND CASH EQUIVALENTS AT THE END OF THE PERIOD	Nine Months Ended September 30	Nine Months Ended September 30
		2015 (Reviewed) 2014 (Reviewed after Restated) $ - $ 5,730 28,209 3,481 - (29,343) (1,380,855) (1,395,577) 8,277 6,137 (15,893) (460) 17,569 529 (30,107) (165,397) 542 90 (2,222) (31,256) (1,374,480) (1,606,066) 7,320,798 1,963,322 (7,820,270) (1,203,590) 10,851,747 2,742,372 (12,911,269) (5,176,519) 46 13,154 (13,214) - (141) 360 (51) 38 (2,572,354) (1,660,863) 150,081 11,364 (3,817,122) (4,721,694) 7,636,201 11,978,574 $ 3,819,079 $ 7,256,880

The accompanying notes are an integral part of the consolidated financial statements.

(With Deloitte & Touche review report dated October 28, 2015)

(Concluded)

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MACRONIX INTERNATIONAL CO., LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2015 AND 2014 (In Thousands of New Taiwan Dollars, Unless Stated Otherwise) (Reviewed, Not Audited)

1. GENERAL INFORMATION

Macronix International Co., Ltd. (the “Company”) was incorporated in the Republic of China (“ROC”) on December 9, 1989 and commenced business in December 1989. The Company operates principally as a designer, manufacturer and supplier of integrated circuits and memory chips. The Company also performs design, research and development, consultation and trade of relevant products.

The Company’s shares have been listed on the Taiwan Stock Exchange (TSE) since March 15, 1995.

The consolidated financial statements are presented in the Company’s functional currency, New Taiwan dollars.

2. APPROVAL OF FINANCIAL STATEMENTS

The consolidated financial statements were approved by the Company’s Board of Directors and authorized for issue on October 28, 2015.

3. APPLICATION OF NEW, AMENDED AND REVISED STANDARDS AND INTERPRETATIONS

• a. Initial application of the amendments to the Regulations Governing the Preparation of Financial Reports by Securities Issuers and the 2013 version of the International Financial Reporting Standards (IFRS), International Accounting Standards (IAS), Interpretations of IFRS (IFRIC) and Interpretations of IAS (SIC) endorsed by the Financial Supervisory Commission (FSC).

Rule No.1030029342 and Rule No.1030010325 issued by the FSC on April 3, 2014, stipulated that the Group should apply the 2013 version of IFRS, IAS, IFRIC and SIC (collectively, the “IFRSs”) endorsed by the FSC and the related amendments to the Regulations Governing the Preparation of Financial Reports by Securities Issuers starting January 1, 2015.

Except for the following, whenever applied, the initial application of the amendments to the Regulations Governing the Preparation of Financial Reports by Securities Issuers and the 2013 IFRSs version would not have any material impact on the Group’s accounting policies:

1) 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.

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• 2) 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.

• 3) Revision to IAS 28 “Investments in Associates and Joint Ventures”

Revised IAS 28 requires when a portion of an investment in an associate meets the criteria to be classified as held for sale, that portion is classified as held for sale. Any retained portion that has not been classified as held for sale is accounted for using the equity method. Under current IAS 28, when a portion of an investment in associates meets the criteria to be classified as held for sale, the entire investment is classified as held for sale and ceases to apply the equity method.

• 4) 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 by 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.

The fair value measurements under IFRS 13 will be applied prospectively from January 1, 2015. Refer to Note 34 for related disclosures.

• 5) 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 items that (1) will not be reclassified subsequently to profit or loss; and (2) may be reclassified subsequently to profit or loss. Income taxes on related items of other comprehensive income are grouped on the same basis. Under current IAS 1, there were no such requirements.

The Group retrospectively applied the above amendments starting in 2015. Items not expected to be reclassified to profit or loss are remeasurements of the defined benefit plans. Items expected to be reclassified to profit or loss are the exchange differences on translating foreign operations, unrealized gain (loss) on available-for-sale financial assets, and share of the other comprehensive income (except the share of the remeasurements of the defined benefit plans) of associates accounted for using the equity method. However, the application of the above amendments will not have any impact on the net profit for the period, other comprehensive income for the period (net of income tax), and total comprehensive income for the period.

6) Revision to IAS 19 “Employee Benefits”

Revised IAS 19 requires the recognition of changes in defined benefit obligations and in the fair value of plan assets when they occur, and hence eliminate the “corridor approach” permitted under current IAS 19 and accelerate the recognition of past service costs. The revision requires all remeasurements of the defined benefit plans to be recognized immediately through other comprehensive income in order for the net pension asset or liability to reflect the full value of the plan deficit or surplus. Remeasurement of the defined benefit plans is presented separately as accumulated deficits.

• 10 -

Furthermore, the interest cost and expected return on plan assets used in current IAS 19 are replaced with a “net interest” amount, which is calculated by applying the discount rate to the net defined benefit liability or asset. In addition, the revised IAS 19 introduces certain changes in the presentation of the defined benefit cost, and also includes more extensive disclosures.

In addition, revised IAS 19 changes the definition of short-term employee benefits. The revised definition is “employee benefits (other than termination benefits) that are expected to be settled wholly within twelve months after the end of the annual reporting period in which the employees render the related service”. The Group’s unused annual leave, which can be carried forward through 36 months after the end of the annual period in which the employee renders service and which is currently classified as short-term employee benefits, is classified as other long-term employee benefits under revised IAS 19. Related defined benefit obligation of such other long-term benefit is calculated using the Projected Unit Credit Method. However, this change does not affect unused annual leave to be presented as a current liability in the consolidated balance sheet.

On initial application of the revised IAS 19, the changes in cumulative employee benefit costs as of December 31, 2013 resulting from the retrospective application are adjusted to net defined benefit liabilities, deferred tax assets and retained earnings; the carrying amounts of inventories are not adjusted. In addition, in preparing the consolidated financial statements, the Group elected not to present comparative information about the sensitivity of the defined benefit obligation.

The impact on the current period is set out below:

	September 30,
Impact on Assets, Liabilities and Equity	2015
Decrease in net defined benefit liabilities	$ 4,260
Decrease in accumulated deficit	$ 4,260
	For the Nine
	Months Ended
	September 30,
Impact on Total Comprehensive Income	2015
Decrease in operating costs	$ 2,409
Decrease in operating expenses	1,851
Decrease in net loss for the period	$ 4,260
	For the Three
	Months Ended
	September 30,
Impact on Total Comprehensive Income	2015
Decrease in operating costs	$ 803
Decrease in operating expenses	617
Decrease in net loss for the period	$ 1,420

• 11 -

The impact on the prior reporting periods is set out below:

Impact on Assets, Liabilities and Equity December 31, 2014 Net defined benefit liabilities Accumulated deficit September 30, 2014 Net defined benefit liabilities Accumulated deficit Non-controlling interests January 1, 2014 Net defined benefit liabilities Accumulated deficit Non-controlling interests Impact on Total Comprehensive Income For the nine months ended September 30, 2014 Operating costs Operating expenses Total effect on net loss for the period Total effect on total comprehensive loss for the period Impact on net loss attributable to: Shareholders of the parent Non-controlling interests Impact on total comprehensive loss attributable to: Shareholders of the parent Non-controlling interests	As Originally Stated $ 943,810 $ (13,640,051) $ 907,302 $ (11,348,217) $ 15,530 $ 825,606 $ (7,178,843) $ 47,021 As Originally Stated $ 14,089,404 $ 6,532,684 $ (4,188,669) $ (3,923,846) $ (4,169,374) (19,295) $ (4,188,669) $ (3,904,837) (19,009) $ (3,923,846)	Adjustments Arising from Initial Application $ 172,698 $ (172,698) $ 96,057 $ (96,112) $ 55 $ 101,604 $ (101,659) $ 55 Adjustments Arising from Initial Application $ (3,146) $ (2,401) $ 5,547 $ 5,547 $ 5,547 - $ 5,547 $ 5,547 - $ 5,547	Restated $ 1,116,508 $ (13,812,749) $ 1,003,359 $ (11,444,329) $ 15,585 $ 927,210 $ (7,280,502) $ 47,076 Restated $ 14,086,258 $ 6,530,283 $ (4,183,122) $ (3,918,299) $ (4,163,827) (19,295) $ (4,183,122) $ (3,899,290) (19,009) $ (3,918,299) (Continued)

• 12 -

Impact on Total Comprehensive Income For the three months ended September 30, 2014 Operating costs Operating expenses Total effect on net loss for the period Total effect on total comprehensive loss for the period Impact on net loss attributable to: Shareholders of the parent Non-controlling interests Impact on total comprehensive loss attributable to: Shareholders of the parent Non-controlling interests	As Originally Stated $ 5,520,825 $ 2,269,743 $ (1,101,191) $ (1,076,370) $ (1,096,848) (4,343) $ (1,101,191) $ (1,071,548) (4,822) $ (1,076,370)	Adjustments Arising from Initial Application $ (1,053) $ (796) $ 1,849 $ 1,849 $ 1,849 - $ 1,849 $ 1,849 - $ 1,849	Restated $ 5,519,772 $ 2,268,947 $ (1,099,342) $ (1,074,521) $ (1,094,999) (4,343) $ (1,099,342) $ (1,069,699) (4,822) $ (1,074,521) (Concluded)

7) Amendments to IFRS 7 “Disclosure - Offsetting Financial Assets and Financial Liabilities”

The amendments to IFRS 7 require disclosure of information about rights of offset and related arrangements (such as collateral posting requirements) for financial instruments under enforceable master netting arrangements and similar arrangements. Refer to Note 34 for related disclosure.

• 8) Amendments to IAS 32 “Offsetting Financial Assets and Financial Liabilities”

The amendments to IAS 32 clarify the requirements relating to the offset of financial assets and financial liabilities. Specifically, the amendments clarify the meaning of “currently has a legally enforceable right of set-off” and “simultaneous realization and settlement”.

• 9) Annual Improvements to IFRSs: 2009-2011 Cycle

Several standards including IFRS 1 “First-time Adoption of International Financial Reporting Standards”, IAS 1 “Presentation of Financial Statements”, IAS 16 “Property, Plant and Equipment”, IAS 32 “Financial Instruments: Presentation” and IAS 34 “Interim Financial Reporting” were amended in this annual improvement.

The amendments to IAS 1 clarify that an entity is required to present a balance sheet as at the beginning of the preceding period when a) it applies an accounting policy retrospectively, or makes a retrospective restatement or reclassifies items in its financial statements, and b) the retrospective application, restatement or reclassification has a material effect on the information in the balance sheet at the beginning of the preceding period. The amendments also clarify that related notes are not required to accompany the balance sheet at the beginning of the preceding period.

• 13 -

The amendments to IAS 16 clarify that spare parts, stand-by equipment and servicing equipment should be recognized in accordance with IAS 16 when they meet the definition of property, plant and equipment and otherwise as inventory.

The amendments to IAS 32 clarify that income tax relating to distributions to holders of an equity instrument and to transaction costs of an equity transaction should be accounted for in accordance with IAS 12 “Income Taxes”.

The amendments to IAS 34 clarify that a measure of total liabilities for a reportable segment would be disclosed in interim financial reporting when such amounts are regularly provided to the chief operating decision maker of the Group and there has been a material change from the amounts disclosed in the last annual financial statements for that reportable segment. Refer to Note 40.

The initial application of the amendments to the Regulations Governing the Preparation of Financial Reports by Securities Issuers and the 2013 IFRSs version in 2015 has material effect on the consolidated balance sheet. The Group would present the consolidated balance sheet as of January 1, 2014 in accordance of the above amendments to IAS 1 and disclose related information in accordance with IAS 8 “Accounting Policies, Changes in Accounting Estimates and Errors”, but not required to make disclosures about the line items of the balance sheet as of January 1, 2014.

• b. New IFRSs in issue but not yet endorsed by FSC

The Group has not applied the following New IFRSs issued by the IASB but not yet endorsed by the FSC. As of the date the consolidated financial statements were authorized for issue, the FSC has not announced their effective dates.

New IFRSs Annual Improvements to IFRSs 2010-2012 Cycle Annual Improvements to IFRSs 2011-2013 Cycle Annual Improvements to IFRSs 2012-2014 Cycle IFRS 9 “Financial Instruments” Amendments to IFRS 9 and IFRS 7 “Mandatory Effective Date of IFRS 9 and Transition Disclosures” Amendments to IFRS 10 and IAS 28 “Sale or Contribution of Assets between an Investor and its Associate or Joint Venture” Amendments to IFRS 10, IFRS 12 and IAS 28“'Investment Entities: Applying the Consolidation Exception” Amendment to IFRS 11 “Accounting for Acquisitions of Interests in Joint Operations” IFRS 14 “Regulatory Deferral Accounts” IFRS 15 “Revenue from Contracts with Customers” Amendment to IAS 1 “Disclosure Initiative” Amendments to IAS 16 and IAS 38 “Clarification of Acceptable Methods of Depreciation and Amortization” Amendments to IAS 16 and IAS 41 “Agriculture: Bearer Plants” Amendment to IAS 19 “Defined Benefit Plans: Employee Contributions” Amendment to IAS 36 “Impairment of Assets: Recoverable Amount Disclosures for Non-financial Assets” Amendment to IAS 39 “Novation of Derivatives and Continuation of Hedge Accounting” IFRIC 21 “Levies”

Effective Date Announced by IASB (Note 1)

July 1, 2014 (Note 2) July 1, 2014 January 1, 2016 (Note 4) January 1, 2018 January 1, 2018 January 1, 2016 (Note 3) January 1, 2016 January 1, 2016 January 1, 2016 January 1, 2018 January 1, 2016 January 1, 2016 January 1, 2016 July 1, 2014 January 1, 2014 January 1, 2014 January 1, 2014

• 14 -

• Note 1: Unless stated otherwise, the above New IFRSs are effective for annual periods beginning on or after their respective effective dates.

• Note 2: The amendment to IFRS 2 applies to share-based payment transactions with grant date on or after July 1, 2014; the amendment to IFRS 3 applies to business combinations with acquisition date on or after July 1, 2014; the amendment to IFRS 13 is effective immediately; the remaining amendments are effective for annual periods beginning on or after July 1, 2014.

• Note 3: Prospectively applicable to transactions occurring in annual periods beginning on or after January 1, 2016.

• Note 4: The amendment to IFRS 5 is applied prospectively to changes in a method of disposal that occur in annual periods beginning on or after January 1, 2016; the remaining amendments are effective for annual periods beginning on or after January 1, 2016.

The initial application of the above New IFRSs, whenever applied, would not have any material impact on the Group’s accounting policies, except for the following:

• 1) IFRS 9 “Financial Instruments”

Recognition and measurement of financial assets

With regards to financial assets, all recognized financial assets that are within the scope of IAS 39 “Financial Instruments: Recognition and Measurement” are subsequently measured at amortized cost or fair value. Under IFRS 9, the requirement for the classification of financial assets is stated below.

For the Group’s debt instruments that have contractual cash flows that are solely payments of principal and interest on the principal amount outstanding, their classification and measurement are as follows:

• a) For debt instruments, if they are held within a business model whose objective is to collect the contractual cash flows, the financial assets are measured at amortized cost and are assessed for impairment continuously with impairment loss recognized in profit or loss, if any. Interest revenue is recognized in profit or loss by using the effective interest method;

• b) For debt instruments, if they are held within a business model whose objective is achieved by both the collecting of contractual cash flows and the selling of financial assets, the financial assets are measured at fair value through other comprehensive income (FVTOCI) and are assessed for impairment. Interest revenue is recognized in profit or loss by using the effective interest method, and other gain or loss shall be recognized in other comprehensive income, except for impairment gains or losses and foreign exchange gains and losses. When the debt instruments are derecognized or reclassified, the cumulative gain or loss previously recognized in other comprehensive income is reclassified from equity to profit or loss.

Except for above, all other financial assets are measured at fair value through profit or loss. However, the Group may make an irrevocable election to present subsequent changes in the fair value of an equity investment (that is not held for trading) in other comprehensive income, with only dividend income generally recognized in profit or loss. No subsequent impairment assessment is required and the cumulative gain or loss previously recognized in other comprehensive income cannot be reclassified from equity to profit or loss.

• 15 -

The impairment of financial assets

IFRS 9 requires that impairment loss on financial assets is recognized by using the “Expected Credit Losses Model”. The credit loss allowance is required for financial assets measured at amortized cost, financial assets mandatorily measured at FVTOCI, lease receivables, contract assets arising from IFRS 15 “Revenue from Contracts with Customers”, certain written loan commitments and financial guarantee contracts. A loss allowance for the 12-month expected credit losses is required for a financial asset if its credit risk has not increased significantly since initial recognition. A loss allowance for full lifetime expected credit losses is required for a financial asset if its credit risk has increased significantly since initial recognition and is not low. However, a loss allowance for full lifetime expected credit losses is required for trade receivables that do not constitute a financing transaction.

For purchased or originated credit-impaired financial assets, the Group takes into account the expected credit losses on initial recognition in calculating the credit-adjusted effective interest rate. Subsequently, any changes in expected losses are recognized as a loss allowance with a corresponding gain or loss recognized in profit or loss.

2) 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.

3) IFRIC 21 “Levies”

IFRIC 21 provides guidance on when to recognize a liability for a levy imposed by a government. It addresses the accounting for a liability whose timing and amount is certain and the accounting for a provision whose timing or amount is not certain. The Group accrues related liability when the transaction or activity that triggers the payment of the levy occurs. Therefore, if the obligating event occurs over a period of time (such as generation of revenue over a period of time), the liability is recognized progressively. If an obligation to pay a levy is triggered upon reaching a minimum threshold (such as a minimum amount of revenue or sales generated), the liability is recognized when that minimum threshold is reached.

• 4) 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 2 changes the definitions of “vesting condition” and “market condition” and adds definitions for “performance condition” and “service condition”. The amendment clarifies that a performance target can be based on the operations (i.e. a non-market condition) of the Group or another entity in the same group or the market price of the equity instruments of the Group or another entity in the same group (i.e. a market condition); that a performance target can relate either to the performance of the Group as a whole or to some part of it (e.g. a division); and that the period for achieving a performance condition must not extend beyond the end of the related service period. In addition, a share market index target is not a performance condition because it not only reflects the performance of the Group, but also of other entities outside the Group.

• 16 -

IFRS 3 was amended to clarify that contingent consideration should be measured at fair value, irrespective of whether the contingent consideration is a financial instrument within the scope of IFRS 9 or IAS 39. Changes in fair value should be recognized in profit or loss.

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 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.

• 5) 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.

IFRS 3 was amended to clarify that IFRS 3 does not apply to the accounting for the formation of all types of joint arrangements in the financial statements of the joint arrangement itself.

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.

• 6) Amendments to IAS 16 and IAS 38 “Clarification of Acceptable Methods of Depreciation and Amortization”

The entity should use appropriate depreciation and amortization method to reflect the pattern in which the future economic benefits of the property, plant and equipment and intangible asset are expected to be consumed by the entity.

The amended IAS 16 “Property, Plant and Equipment” requires that a depreciation method that is based on revenue that is generated by an activity that includes the use of an asset is not appropriate. The amended standard does not provide any exception from this requirement.

The amended IAS 38 “Intangible Assets” requires that there is a rebuttable presumption that an amortization method that is based on revenue that is generated by an activity that includes the use of an intangible asset is not appropriate. This presumption can be overcome only in the following limited circumstances:

• 17 -

• a) In which the intangible asset is expressed as a measure of revenue (for example, the contract that specifies the entity’s use of the intangible asset will expire upon achievement of a revenue threshold); or

• b) When it can be demonstrated that revenue and the consumption of the economic benefits of the intangible asset are highly correlated.

An entity should apply the aforementioned amendments prospectively for annual periods beginning on or after the effective date.

• 7) IFRS 15 “Revenue from Contracts with Customers”

IFRS 15 establishes principles for recognizing revenue that apply to all contracts with customers, and will supersedes IAS 18 “Revenue”, IAS 11 “Construction Contracts”.

When applying IFRS 15, an entity shall recognize revenue by applying the following steps:

• Identify the contract with the customer;

• Identify the performance obligations in the contract;

• Determine the transaction price;

• Allocate the transaction price to the performance obligations in the contracts; and

• Recognize revenue when the entity satisfies a performance obligation.

When IFRS 15 is effective, an entity may elect to apply this Standard either retrospectively to each prior reporting period presented or retrospectively with the cumulative effect of initially applying this Standard recognized at the date of initial application.

• 8) Amendments to IFRS 10 and IAS 28 “Sale or Contribution of Assets between an Investor and its Associate or Joint Venture”

The amendments stipulated that, when an entity sells or contributes assets that constitute a business (as defined in IFRS 3) to an associate, the gain or loss resulting from the transaction is recognized in full. Also, when an entity loses control of a subsidiary that contains a business but retains significant influence, the gain or loss resulting from the transaction is recognized in full.

Conversely, when an entity sells or contributes assets that do not constitute a business to an associate, the gain or loss resulting from the transaction is recognized only to the extent of the unrelated investors’ interest in the associate, i.e. the entity’s share of the gain or loss is eliminated. Also, when an entity loses control of a subsidiary that does not contain a business but retains significant influence in an associate, the gain or loss resulting from the transaction is recognized only to the extent of the unrelated investors’ interest in the associate, i.e. the entity’s share of the gain or loss is eliminated.

• 9) Annual Improvements to IFRSs: 2012-2014 Cycle

Several standards including IFRS 5 “Non-current assets held for sale and discontinued operations”, IFRS 7, IAS 19 and IAS 34 were amended in this annual improvement.

IFRS 5 was amended to clarify that reclassification between non-current assets (or disposal group) “held for sale” and non-current assets “held for distribution to owners” does not constitute a change to a plan of sale or distribution. Therefore, previous accounting treatment is not reversed. The amendment also explains that assets that no longer meet the criteria for “held for distribution to owners” and do not meet the criteria for “held for sale” should be treated in the same way as assets that cease to be classified as held for sale.

• 18 -

The amendments to IFRS 7 provide additional guidance to clarify whether a servicing contract is continuing involvement in a transferred asset. In addition, the amendments clarify that the offsetting disclosures are not explicitly required for all interim periods.

IAS 19 was amended to clarify that the depth of the market for high quality corporate bonds used to estimate discount rate for post-employment benefits should be assessed by the market of the corporate bonds denominated in the same currency as the benefits to be paid, i.e. assessed at currency level (instead of country or regional level).

IAS 34 was amended to clarify that other disclosure information required by IAS 34 should be included in interim financial statements. If the Group includes the information in other statements (such as management commentary or risk report) issued at the same time, it is not required to repeat the disclosure in the interim financial statements. However, it is required to include a cross-reference from the interim financial statements to that issued statements that is available to users on the same terms and at the same time as the interim financial statements.

10) Amendment to IAS 1 “Disclosure Initiative”

The amendment clarifies that the consolidated financial statements should be prepared for the purpose of disclosing material information. To improve the understandability of its consolidated financial statements, the Group should disaggregate the disclosure of material items into their different natures or functions, and disaggregate material information from immaterial information.

The amendment further clarifies that the Group should consider the understandability and comparability of its consolidated financial statements to determine a systematic order in presenting its footnotes.

• 11) Amendments to IFRS 10, IFRS 12 and IAS 28 “'Investment Entities: Applying the Consolidation Exception”

The amendments clarified that when the Group (non-investment entity) applies the equity method to an associate or a joint venture that is an investment entity, the Group may retain the fair value measurements that the associate or joint venture used for its subsidiaries.

Except for the above impact, as of the date the consolidated financial statements were authorized for issue, the Group is continuously assessing the possible impact that the application of other standards and interpretations will have on the Group’s financial position and financial performance, and will disclose the relevant impact when the assessment is completed.

4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICY

• a. Statement of compliance

The consolidated financial statements have been prepared in accordance with the Regulations Governing the Preparation of Financial Reports by Securities Issuers, or other regulations and IAS 34 “Interim Financial Reporting” as endorsed by the FSC. Disclosure information included in the consolidated financial reports is less than those required in a complete set of annual financial statements.

b. Basis of consolidation

See Note 12 and Table 4 for the detailed information of subsidiaries (including the percentage of ownership and main business).

• 19 -

c. Other important accounting policies

The accounting policies described in the consolidated financial statements were consistent with those applied in the consolidated financial statements for the year ended December 31, 2014, except for the following:

1) Employee benefits

Defined benefit costs (including service cost, net interest and remeasurement) under the defined benefit retirement benefit plans are determined using the projected unit credit method. Service cost (including current service cost) and net interest on the net defined benefit liability (asset) are recognized as employee benefits expense in the period they occur. Remeasurement, comprising actuarial gains and losses, the effect of the changes to the asset ceiling and the return on plan assets (excluding interest), is recognized in other comprehensive income in the period in which they occur and is reflected immediately in accumulated deficit and will not be reclassified to profit or loss.

Net defined benefit liability (asset) represents the actual deficit (surplus) in the Group’s defined benefit plan. Any surplus resulting from this calculation is limited to the present value of any refunds from the plans or reductions in future contributions to the plans.

Pension cost for an interim period is calculated on a year-to-date basis by using the actuarially determined pension cost rate at the end of the prior financial year, adjusted for significant market fluctuations since that time and for significant plan amendments, settlements, or other significant one-off events.

2) Taxation

Income tax expense represents the sum of the tax currently payable and deferred tax. Interim period income taxes are assessed on an annual basis and calculated by applying to an interim period's pre-tax income the tax rate that would be applicable to expected total annual earnings.

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

The same critical accounting judgments and key sources of estimation uncertainty of consolidated financial statements have been followed in these consolidated financial statements as were applied in the preparation of the consolidated financial statements for the year ended December 31, 2014, except for the following:

• a. Useful lives of property, plant and equipment

As described in Note 4 (h) to the consolidated financial statements for the year ended December 31, 2014, the Group reviews the estimated useful lives of property, plant and equipment at the end of each reporting period. Based on the valuation report provided by China Credit Information Service Ltd., the actual useful lives of certain items of property, plant and equipment have exceeded their estimated useful lives. Due to the consideration of physical depletion, functional depletion and economic depletion, management determined that the useful lives of machinery equipment and R&D equipment, facility equipment and main buildings should be extended from 6 years to 11 years, 6 years to 15 years and 21 years to 31 years, respectively, from January 1, 2016.

• 20 -

The effect of this reassessment within the next 3 years, assuming the assets are held until the end of their extended useful lives, is to decrease the consolidated depreciation expense for, by the following amounts:

	Year ended 2016								$	3,775,234
	Year ended 2017									2,558,159
	Year ended 2018									240,530
	CASH AND CASH EQUIVALENTS
			September 30,			December 31,			September 30,
				2015				2014		2014
	Cash on hand		$		341	$		452	$	214
	Checking accounts and demand deposits			2,325,544			1,893,935			1,595,576
	Cash equivalent
	Time deposits			1,493,194			5,741,814			5,661,090
			$	3,819,079		$	7,636,201		$	7,256,880
	FINANCIAL INSTRUMENTS AT FAIR VALUE THROUGH PROFIT							OR LOSS
			September 30,			December 31,			September 30,
				2015				2014		2014
	Financial assets at FVTPL-current
	Financial assets held for trading
	Derivative financial assets (not under hedge
	accounting)
	Foreign exchange forward contracts		$		-		$	95	$	43
	Financial liabilities at FVTPL-current
	Financial liabilities held for trading
	Derivative financial liabilities	(not under hedge
	accounting)
	Foreign exchange forward contracts		$	2,828			$	7,113	$	2,544
	At the end of the reporting period, outstanding		foreign exchange forward contracts						not under hedge
	accounting were as follows:
								Contract Amount
	Contract	Currency	Maturity Date					(In	Thousands)
	September 30, 2015
	Sell	USD/NTD		2015.10				USD8,000/NTD262,254
	Sell	JPY/NTD		2015.10				JPY400,000/NTD108,600
	December 31, 2014
	Sell	USD/NTD		2015.01				USD18,000/NTD562,947
										(Continued)

6. CASH AND CASH EQUIVALENTS

7. FINANCIAL INSTRUMENTS AT FAIR VALUE THROUGH PROFIT OR LOSS

• 21 -

				Contract Amount
	Contract	Currency	Maturity Date	(In Thousands)
September 30, 2014
Sell		USD/NTD	2014.10	USD16,000/NTD484,630
Sell		JPY/NTD	2014.10	JPY200,000/NTD55,725
				(Concluded)

The Group entered into foreign exchange forward contracts to manage exposures due to exchange rate fluctuations of foreign currency denominated assets and liabilities.

8. AVAILABLE-FOR-SALE FINANCIAL ASSETS

	September 30,	September 30,	December 31,	December 31,	September 30,	September 30,
		2015		2014		2014
Non-current
Domestic investments
Listed shares	$	813,664	$	982,975	$	989,282
Foreign investments
Listed shares		284,680		260,167		208,413
	$	1,098,344	$	1,243,142	$	1,197,695
FINANCIAL ASSETS MEASURED AT COST
	September 30,		December 31,		September 30,
		2015		2014		2014
Non-current
Domestic unlisted common shares	$	58,500	$	79,217	$	79,218
Overseas unlisted common shares		35,500		34,182		32,854
	$	94,000	$	113,399	$	112,072
Classified according to financial asset
measurement categories
Available-for-sale financial assets	$	94,000	$	113,399	$	112,072

9. FINANCIAL ASSETS MEASURED AT COST

Management believed that the fair value of the above unlisted equity investments held by the Group cannot be reliably measured due to the significant range of reasonable fair value estimates, therefore, they were measured at cost less impairment at the end of the reporting period.

• 22 -

10. NOTES RECEIVABLE, TRADE RECEIVABLES AND OTHER RECEIVABLES

	September 30,	September 30,	December 31,	December 31,	September 30,	September 30,
		2015		2014		2014
Notes receivable
Operating	$	478	$	790	$	603
Trade receivables
Operating		3,210,264		2,698,636		3,363,498
Less: Allowance for impairment loss		271		271		271
		3,209,993		2,698,365		3,363,227
	$	3,210,471	$	2,699,155	$	3,363,830
Other receivables
Tax receivable	$	123,098	$	148,843	$	175,750
Others		50,544		12,461		14,852
	$	173,642	$	161,304	$	190,602

a. Trade Receivables

The average credit period for sales of goods was 60 days. In determining the recoverability of a trade receivable, the Group evaluates each customer’s credibility and financial position and considered any change in the credit quality of the trade receivable since the date credit was initially granted to the end of the reporting period.

Before accepting any new customer, the Group uses an internal credit scoring system to assess the potential customer’s credit quality and defines credit limits by customer.

Of the trade receivables balance (see aging analysis below) that were past due at the end of the reporting period, the Group had not recognized an allowance for impaired notes receivables and trade receivables, because there had not been a significant change in credit quality and the amounts were still considered recoverable.

The aging of receivables was as follows:

	September 30,	December 31,	September 30,
	2015	2014	2014
Less than 60 days	$ 3,209,345	$ 2,690,795	$ 3,183,408
61-120 days	-	6,315	154
Over 121 days	919	1,526	179,936
	$ 3,210,264	$ 2,698,636	$ 3,363,498

• 23 -

The aging of receivables that were past due but not impaired was as follows:

	September 30,	September 30,	December 31,	December 31,	September 30,	September 30,
		2015		2014		2014
Past due but not impaired
Less than 60 days	$	49,482	$	54,113	$	63,320
61-120 days		-		6,315		154
Over 121 days		648		1,255		179,665
	$	50,130	$	61,683	$	243,139

The above aging schedule was based on the past due date.

As of September 30, 2015, the Group did not hold collateral for most of the receivables.

Movements in the allowance for impairment loss recognized on trade receivables were as follows:

Individually Assessed for Impairment Assembly Assessed for Impairment Balance at January 1, 2014 $ 1,976 $ - Add: Impairment losses recognized on receivables 271 - Consolidated entity change effects (1,976) - Balance at September 30, 2014 $ 271 $ - Balance at January 1, 2015 and September 30, 2015 $ 271 $ -	Total $ 1,976 271 (1,976) $ 271 $ 271

b. Notes Receivable and other receivables

No allowance for impairment loss of notes receivable and other receivables was recognized since the notes receivable and other receivables of the Group were not past due and the Group assessed that there was no uncertainty of recoverability.

11. INVENTORIES

	September 30,	September 30,	December 31,	December 31,	September 30,	September 30,
		2015		2014		2014
Finished goods and merchandise	$	1,718,221	$	1,156,530	$	967,724
Work in progress		8,228,508		7,857,969		8,300,007
Raw materials		288,291		287,144		286,025
	$	10,235,020	$	9,301,643	$	9,553,756

The cost of inventories recognized as cost of goods sold for the three months ended September 30, 2015 included inventory write-downs of NT$71,831 thousand, and the cost of inventories recognized as cost of goods sold for the nine months ended September 30, 2015 included inventory write-downs of NT$358,576 thousand. The cost of inventories recognized as cost of goods sold for the three months ended September 30, 2014 included reversal of inventory write-downs of NT$13,614 thousand, and the cost of inventories recognized as cost of goods sold for the nine months ended September 30, 2014 included inventory

• 24 -

write-downs of NT$791,497 thousand. The reversal of inventory write-downs was due to disposal of certain long non-moving inventories.

12. SUBSIDIARIES

Subsidiary included in consolidated financial statements

As of September 30, 2015, the Company has direct and indirect majority ownership in the following subsidiaries: Run Hong Investment, Ltd. (“Run Hong”), Hui Ying Investment, Ltd. (“Hui Ying”), Mxtran Inc. (“Mxtran”), Infomax Communication Co., Ltd. (“INFOMAX”), Macronix America Inc. (“MXA”), Macronix (BVI) Co., Ltd. (“MXBVI”), Mxtran Holding (Samoa) Co., Ltd. (“Mxtran Samoa”), Mxtran (H.K.) Holding Co., Limited (“Mxtran HK”), Maxtran Technology Co., Ltd. (“Maxtran Beijing”), Infomax Holding Co., Ltd. (“Infomax Samoa”), Infomax Holding Company Limited (“Infomax HK”), Infomax Communication (Suzhou) Co., Ltd. (“Infomax SU”), New Trend Technology Inc. (“NTTI”), Macronix (Asia) Limited (“MX Asia”), Macronix Pte. Ltd. (“MPL”), Macronix Europe NV. (“MXE”), Macronix (Hong Kong) Co., Ltd. (“MXHK”) and Macronix Microelectronics (Suzhou) Co., Ltd. (“MXm”).

Investor Investee Main Business The Company Run Hong Investment company The Company Hui Ying Investment company The Company and Run Hong Mxtran Combi-SIM IC and the related service The Company and Run Hong INFOMAX Baseband chip, analog baseband chip, and power management chip The Company MXA Sales and marketing The Company MXBVI Investment company Mxtran Mxtran Samoa Investment company Mxtran Samoa Mxtran HK Investment company Mxtran HK Maxtran Beijing Technical support of Combi-SIM IC INFOMAX Infomax Samoa Investment company Infomax Samoa Infomax HK Investment company Infomax HK Infomax SU Software, rendering and technical service MXBVI NTTI IC design MXBVI MX Asia Investment company MXBVI MPL After-sales service MXBVI MXE After-sales service MXBVI MXHK Sales and marketing MXHK MXm Development of integrated circuit system and software

% of Ownership September 30, 2015 December 31, 2014 September 30, 2014 Remark 100.00 100.00 100.00 - 100.00 100.00 100.00 - 94.84 94.15 94.15 - 99.02 99.02 99.02 - 100.00 100.00 100.00 - 100.00 100.00 100.00 - 100.00 100.00 100.00 - 100.00 100.00 100.00 - 100.00 100.00 100.00 - 100.00 100.00 100.00 - 100.00 100.00 100.00 - 100.00 100.00 100.00 - 100.00 100.00 100.00 - 100.00 100.00 100.00 - 100.00 100.00 100.00 - 100.00 100.00 100.00 - 100.00 100.00 100.00 - 100.00 100.00 100.00 -

13. INVESTMENTS ACCOUNTED FOR USING EQUITY METHOD

Investments in associates

September 30, 2015 December 31, 2014 September 30, 2014 Associates MoDioTek Co., Ltd. (“MoDioTek”) $ 20,695 $ 38,599 $ 47,550 % of Ownership Name of Associate Main Business Principal Place of Business September 30, 2015 December 31, 2014 September 30, 2014 MoDioTek Wi-Fi video transmission IC and smart security systems Hsinchu City 23.39 23.39 23.39	September 30, 2015 December 31, 2014 September 30, 2014 Associates MoDioTek Co., Ltd. (“MoDioTek”) $ 20,695 $ 38,599 $ 47,550 % of Ownership Name of Associate Main Business Principal Place of Business September 30, 2015 December 31, 2014 September 30, 2014 MoDioTek Wi-Fi video transmission IC and smart security systems Hsinchu City 23.39 23.39 23.39	September 30, 2015 December 31, 2014 September 30, 2014 Associates MoDioTek Co., Ltd. (“MoDioTek”) $ 20,695 $ 38,599 $ 47,550 % of Ownership Name of Associate Main Business Principal Place of Business September 30, 2015 December 31, 2014 September 30, 2014 MoDioTek Wi-Fi video transmission IC and smart security systems Hsinchu City 23.39 23.39 23.39
	September 30, 2015 December 31, 2014 23.39 23.39	September 30, 2014 23.39

• 25 -

14. PROPERTY, PLANT AND EQUIPMENT

Cost Freehold land Buildings Machinery equipment Research and development equipment Transportation equipment Leasehold improvements Miscellaneous equipment Advance payments and construction in progress Accumulated depreciation and Impairment Freehold land Buildings Machinery equipment Research and development equipment Transportation equipment Leasehold improvements Miscellaneous equipment Carrying amount at September 30, 2015			Ni	ne Months Ended September 30, 2015	ne Months Ended September 30, 2015
		Balance, Beginning of Period $ 1,294,628 23,088,007 80,734,087 6,322,265 30,323 41,247 1,198,945 1,804,262 114,513,764 393,380 17,930,640 70,414,495 3,520,962 22,073 26,909 1,076,947 93,385,406 $ 21,128,358	Additions $ - - - 5,099 - 420 7,764 1,046,709 $ 1,059,992 $ - 919,357 2,834,540 498,968 2,709 4,132 50,831 $ 4,310,537	Disposals E $ - 13,081 212,597 7,127 900 2,419 14,327 - $ 250,451 $ - 13,081 211,005 6,947 465 2,419 14,146 $ 248,063	ffect of Foreign Currency Exchange Differences $ 26,850 (258 ) - (41 ) (2 ) 373 192 (42) $ 27,072 $ 15,164 45 - 17 (2 ) 388 338 $ 15,950	Reclassification Balance, End of Period $ - $ 1,321,478 613,754 23,688,422 2,000,343 82,521,833 (1,221,583 ) 5,098,613 900 30,321 3,230 42,851 13,286 1,205,860 (1,409,930) 1,440,999 $ - 115,350,377 $ - 408,544 - 18,836,961 597,284 73,635,314 (597,284 ) 3,415,716 - 24,315 - 29,010 - 1,113,970 $ - 97,463,830 $ 17,886,547

Cost Freehold land Buildings Machinery equipment Research and development equipment Transportation equipment Leasehold improvements Miscellaneous equipment Advance payments and construction in progress Accumulated depreciation and impairment Freehold land Buildings Machinery equipment Research and development equipment Transportation equipment Leasehold improvements Miscellaneous equipment Carrying amount at September 30, 2014				Nine Months	**Ended September **	30, 2014
		Balance, Beginning of Period $ 1,254,023 22,684,751 78,439,414 6,229,051 30,816 45,496 1,201,836 3,289,120 113,174,507 370,449 16,721,347 65,465,651 2,780,190 19,831 26,528 1,062,220 86,446,216 $ 26,728,291	Additions $ - - - 5,082 - - 11,519 1,179,357 $ 1,195,958 $ - 911,493 3,817,085 691,846 2,996 4,017 65,600 $ 5,493,037	Disposals $ - 9,198 261,145 2,538 585 4,653 52,757 - $ 330,876 $ - 6,989 247,712 2,538 585 4,653 52,727 $ 315,204	Effect of Foreign Currency Exchange Differences $ 13,535 2,762 - 379 18 336 541 6 $ 17,577 $ 7,643 365 - 215 16 186 491 $ 8,916	Disposal of Subsidiaries $ - - - (27,899 ) - (914 ) (11,747 ) - $ (40,560) $ - - - (25,775 ) - (914 ) (10,284) $ (36,973)	Reclassification Balance, End of Period $ - $ 1,267,558 260,437 22,938,752 1,789,531 79,967,800 322,284 6,526,359 1,200 31,449 - 40,265 50,372 1,199,764 (2,423,824) 2,044,659 $ - 114,016,606 $ - 378,092 - 17,626,216 41,908 69,076,932 (41,908 ) 3,402,030 - 22,258 - 25,164 - 1,065,300 $ - 91,595,992 $ 22,420,614

The carrying amount of the freehold land in the U.S.A. which is unutilized by the Group as of September 30, 2015, December 31, 2014 and September 30, 2014 were US$9,579 thousand, respectively.

• 26 -

The above items of property, plant and equipment were depreciated on a straight-line basis over the following estimated useful life of the asset:

Buildings Main buildings 21-40 years Electronic equipment 11-20 years Facility equipment 6 years Landscape engineering 20 years Machinery equipment 4-6 years Research and development equipment 5-6 years Transportation equipment 5-6 years Leasehold improvements 3-16 years Miscellaneous equipment 2-16 years

Refer to note 36 for the carrying amount of property, plant and equipment that had been pledged by the Group to secure long-term bank loans granted to the Group.

15. INTANGIBLE ASSETS

Cost Software Licenses Mask Others Accumulated amortization Software Licenses Mask Others Carrying amounts at September 30, 2015			Nine Months	EndedSeptember	30, 2015
		Balance, Beginning of Period $ 643,272 58,913 - 18,459 720,644 455,190 16,629 - 10,482 482,301 $ 238,343	Additions $ 23,368 2,859 2,535 1,345 $ 30,107 $ 110,574 13,667 1,268 3,673 $ 129,182	Disposals $ 300,702 - - 1,274 $ 301,976 $ 300,702 - - 1,274 $ 301,976	Effect of Foreign Currency Exchange Differences $ (802 ) - - - $ (802) $ (741 ) - - - $ (741)	Balance, End of Period $ 365,136 61,772 2,535 18,530 447,973 264,321 30,296 1,268 12,881 308,766 $ 139,207

Cost Software Licenses Mask Others Accumulated amortization Software Licenses Mask Others Carrying amounts at September 30, 2014				Nine Month	s Ended September 30, 2014	s Ended September 30, 2014
		Balance, Beginning of Period $ 579,412 38,151 8,028 11,545 637,136 289,649 26,780 1,857 2,492 320,778 $ 316,358	Additions $ 117,681 45,545 83 2,088 $ 165,397 $ 167,823 10,442 4,844 4,095 $ 187,204	Disposals $ 37,114 5,866 - 789 $ 43,769 $ 37,114 5,866 - 789 $ 43,769	Effect of Foreign Currency Exchange Differences $ 1,077 - - (2,039) $ (962) $ 1,039 - - - $ 1,039	Disposal of Subsidiaries $ (111 ) (10,500 ) (8,111 ) (1,666) $ (20,388) $ (95 ) (8,653 ) (6,701 ) (935) $ (16,384)	Reclassification $ 156 - - 3,967 $ 4,123 $ 156 - - - $ 156	Balance, End of Period $ 661,101 67,330 - 13,106 741,537 421,458 22,703 - 4,863 449,024 $ 292,513

• 27 -

The above items of other intangible assets were amortized on a straight-line basis over the following estimated useful life of the asset:

Software 1-6 years Licenses 1-3 years Mask 1-3 years Others 1-3 years

16. PREPAYMENTS FOR LEASE

	September 30,	September 30,	December 31,	December 31,	September 30,	September 30,
		2015		2014		2014
Current asset (included in other current assets)	$	585	$	585	$	559
Non-current asset (included in other non-current
assets)		23,531		23,994		23,075
	$	24,116	$	24,579	$	23,634

Prepaid lease payments include land use rights are located in Mainland China. The Group has obtained the land use right certificates.

17. OTHER FINANCIAL ASSETS

	September 30,	December 31,	September 30,
	2015	2014	2014
Non-current
Restricted time deposits (Note 36)	$ 166,951	$ 165,799	$ 165,594
Refundable deposits	11,705	13,088	12,402
Long-term receivables	2,966	3,770	5,005
	$ 181,622	$ 182,657	$ 183,001

18. OTHER ASSETS

OTHER ASSETS
	September 30,		December 31,		September 30,
		2015		2014	2014
Current
Prepayments	$ 222,053		$ 197,475		$ 123,726
Spare parts		174,729		350,070	333,774
Offset against business tax payable		30,747		29,530	28,449
Prepayments for lease		585		585	559
Others		57		659	1,242
	$ 428,171		$ 578,319		$ 487,750
					(Continued)

• 28 -

September 30, 2015 Non-current Prepayments for lease $ 23,531 Prepayments 105,009 $ 128,540 BORROWINGS a. Short-term borrowings September 30, 2015 Import loans $ 730,593 Unsecured borrowings 950,000 $ 1,680,593 Interest rate 1.07%-1.90% b. Long-term borrowings September 30, 2015 Secured borrowings (Note 36) Loans from financial institution $ 10,437,491 Unsecured borrowings Loans from financial institution 1,763,333 12,200,824 Less: Current portion 2,311,111 Less: Arrangement fee 38,413 Long-term borrowings: Non-current $ 9,851,300 Interest rate 1.80%-3.02%

December 31, 2014 September 30, 2014 $ 23,994 $ 23,075 102,009 102,009 $ 126,003 $ 125,084 (Concluded) December 31, 2014 September 30, 2014 $ 535,039 $ 502,212 1,599,000 850,000 $ 2,134,039 $ 1,352,212 1.09%-1.92% 1.12%-1.94% December 31, 2014 September 30, 2014 $ 9,822,258 $ 11,454,498 4,405,000 4,700,000 14,227,258 16,154,498 12,143,430 6,048,124 10,322 12,564 $ 2,073,506 $ 10,093,810 1.57%-2.52% 1.56%-2.52%

19. BORROWINGS

• 29 -

		September 30,	December 31,	December 31,	September 30,	September 30,
	Repayment Terms And Maturity Date	2015		2014		2014
Secured syndicated loan denominated	Repayable semi-annually from June 2015	$ 7,650,000	$	-	$	-
in NT$	to June 2018.
Unsecured bank borrowing	Pay off in October 2016.	1,000,000		-		-
denominated in NT$
Secured bank borrowing denominated	Repayable quarterly from January 2015 to	650,000		800,000		800,000
in NT$	October 2018.
Secured bank borrowing denominated	Repayable quarterly from September 2015	650,000		-		-
in NT$	to September 2018.
Unsecured bank borrowing	Repayable quarterly from December 2014	630,000		855,000		900,000
denominated in NT$	to March 2016.
Secured bank borrowing denominated	Repayable monthly from January 2014 to	529,719		646,799		685,409
in NT$	December 2018.
Secured bank borrowing denominated	Repayable quarterly from April 2016 to	251,900		-		-
in NT$	January 2020.
Secured bank borrowing denominated	Repayable quarterly from September 2015	250,000		-		-
in NT$	to September 2017.
Secured bank borrowing denominated	Repayable quarterly from January 2015 to	230,000		320,000		320,000
in NT$	July 2017.
Unsecured bank borrowing	Repayable semi-annually from March	133,333		200,000		200,000
denominated in NT$	2015 to September 2017.
Secured bank borrowing denominated	Repayable quarterly from June 2015 to	98,981		109,280		114,814
in JPY	March 2019.
Secured bank borrowing denominated	Repayable monthly from September 2015	87,000		-		-
in NT$	to February 2018.
Secured bank borrowing denominated	Repayable monthly from May 2003 to	39,891		91,179		108,275
in NT$	April 2016.
Unsecured bank borrowing	Pay off in March 2015.	-		1,200,000		1,200,000
denominated in NT$
Unsecured bank borrowing	Pay off in March 2015.	-		50,000		100,000
denominated in NT$
Secured syndicated loan denominated	Pay off in June 2015.	-		7,855,000		9,426,000
in NT$
Unsecured syndicated loan	Pay off in June 2015.	-		1,500,000		1,500,000
denominated in NT$
Unsecured bank borrowing	Pay off in September 2015.	-		600,000		800,000
denominated in NT$
Less: Current portion		2,311,111		12,143,430		6,048,124
Arrangement fee		38,413		10,322		12,564
Total long-term borrowings		$ 9,851,300	$	2,073,506	$	10,093,810

To repay the vested liabilities, the company has entered into a 3-year syndicated loan agreement with 15 financial institutions including Taiwan Cooperative Bank in June 2015. The total amount of 7.65 billion of the syndicated loan has been fully used as of September 30, 2015.

The Group had provided notes used as refundable guarantees for borrowings that will be cancelled upon termination of the guarantee.

In addition, the Group’s interest bearing floating rate borrowing was reset every one to three months.

The loan agreement requires the maintenance of current ratio, debt ratio, and times interest earned ratio based on semi-annual and annual consolidated financial statements. The Group’s financial ratios during the first half of 2015 conform to the required ratios.

The details of assets pledged as collaterals for long-term loans are shown in Note 36.

• 30 -

20. NOTES PAYABLE AND TRADE PAYABLES

	September	September	30,	December	December	31,	September	September	30,
		2015			2014			2014
Notes payable
Operating	$		7	$		30	$		7
Trade payables
Operating		1,903,851			1,995,973			2,080,956
	$	1,903,858		$	1,996,003		$	2,080,963

The Group has financial risk management policies in place to ensure that all payables are paid within the pre-agreed credit terms.

21. OTHER PAYABLES

September 30, 2015 Payable for maintenance and repair $ 168,169 Bonus 141,806 Payable for pension 57,992 Payable for legal fees 48,037 Payable for rework fees 41,736 Payable for royalties 19,387 Others 562,973 $ 1,040,100 PROVISIONS September 30, 2015 Current Employee benefits (a) $ 78,436 Customer returns and rebates (b) 131,505 $ 209,941	December 31, 2014 September 30, 2014 $ 183,195 $ 150,449 282,949 146,988 58,305 58,739 561,109 176,717 41,172 374,672 18,937 21,117 537,031 516,092 $ 1,682,698 $ 1,444,774 December 31, 2014 September 30, 2014 $ 76,761 $ 70,793 73,856 46,214 $ 150,617 $ 117,007

22. PROVISIONS

• 31 -

Balance at January 1, 2015 Additional provisions recognized Reversing un-usage balances/usage Net exchange differences Balance at September 30, 2015	Employee Benefits Customer Returns and Rebates $ 76,761 $ 73,856 64,967 178,629 (63,565) (125,030) 273 4,050 $ 78,436 $ 131,505	Total $ 150,617 243,596 (188,595) 4,323 $ 209,941

• a. The provision for employee benefits represents vested long service leave entitlements accrued.

• b. The provision of customer returns and rebates was based on historical experience, management’s judgments and other known reasons estimated product returns and rebates may occur in the year. The provision was recognized as a reduction of operating income in the years of the related goods sold.

23. RETIREMENT BENEFIT PLANS

a. Defined contribution plans

The Company, Mxtran and INFOMAX of the Group adopted a pension plan under the Labor Pension Act (the “LPA”), which is a state-managed defined contribution plan. Based on the LPA, the Group makes monthly contributions to employees’ individual pension accounts at 6% of monthly salaries and wages.

The employees of the Group’s subsidiary in China are members of a state-managed retirement benefit plan operated by the government of China. The subsidiary is 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 plans

The defined benefit plan adopted by the Company in accordance with the Labor Standards Law is operated by the government. Pension benefits are calculated on the basis of the length of service and average monthly salaries of the six months before retirement. The 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 and are managed by the Bureau of Labor Funds, Ministry of Labor (“the Bureau”); the Group has no right to influence the investment policy and strategy. Before the end of each year, the Group assesses the balance in the pension fund. If the amount of the balance in the pension fund is inadequate to pay retirement benefits for employees who conform to retirement requirements in the next year, the Group is required to fund the difference in one appropriation that should be made before the end of March of the next year.

The amounts included in the consolidated balance sheets in respect of the Group’s defined benefit plans were as follows:

were as follows:
	December 31,
		2014
Present value of defined benefit obligation	$	1,576,706
Fair value of plan assets		(839,728)
Net defined benefit liability	$	736,978

• 32 -

Movements in net defined benefit liability were as follows:

Present Value of Defined Benefit Obligation Fair Value of the Plan Assets Balance at January 1, 2014 $ 1,466,736 $ 797,238 Service cost Current service cost 6,450 - Net interest expense 32,944 - Recognized in profit or loss 39,394 - Remeasurement Return on plan assets - 10,137 Actuarial loss - experience adjustments 76,340 6,287 Recognized in other comprehensive income 76,340 16,424 Contributions from the employer - 31,830 Benefits paid (5,764) (5,764) Balance at December 31, 2014 $ 1,576,706 $ 839,728

Net Defined Benefit Liability $ 669,498 6,450 32,944 39,394 (10,137) 70,053 59,916 (31,830) - $ 736,978

An analysis by function of the amounts recognized in profit or loss in respect of the defined benefit plans is as follows:

Operating costs Selling and marketing expenses General administration expenses Research and development expenses	For the Three Months Ended September 30 2015 2014 $ 3,313 $ 3,995 278 377 4,968 28,596 1,262 1,587 $ 9,821 $ 34,555	For the Three Months Ended September 30 2015 2014 $ 3,313 $ 3,995 278 377 4,968 28,596 1,262 1,587 $ 9,821 $ 34,555	For the Nine Months Ended September 30	For the Nine Months Ended September 30	For the Nine Months Ended September 30
		2015 $ 3,313 278 4,968 1,262 $ 9,821		2015 $ 9,959 945 16,264 3,702 $ 30,870	2014 $ 12,074 1,133 87,621 5,060 $ 105,888

Through the defined benefit plans under the Labor Standards Law, the Group is exposed to the following risks:

• 1) Investment risk: The plan assets are invested in domestic/ foreign equity and debt securities, bank deposits, etc. The investment is conducted at the discretion of the Bureau or under the mandated management. However, in accordance with relevant regulations, the return generated by plan assets should not be below the interest rate for a 2-year time deposit with local banks.

• 2) Interest risk: A decrease in the government/corporate bond interest rate will increase the present value of the defined benefit obligation; however, this will be partially offset by an increase in the return on the plan’s debt investments.

• 3) Salary risk: The present value of the defined benefit obligation is calculated by reference to the future salaries of plan participants. As such, an increase in the salary of the plan participants will increase the present value of the defined benefit obligation.

• 33 -

The actuarial valuations of 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:

as follows:
	December 31,
	2014
Discount rate	2.25%
Expected rate of salary increase	3.00%
Expected return on plan assets increase	1.25%
The average duration of the defined benefit obligation	7 years

The Company maintains a separate executive pension plan and the net periodic pension costs were $3,943 thousand and $27,418 thousand for the three months ended September 30, 2015 and 2014 and $13,235 thousand and $84,151 thousand for the nine months ended September 30, 2015 and 2014.

24. EQUITY

• a. Share capital

Ordinary shares

September 30, 2015 Numbers of shares authorized (in thousand) 6,550,000 Share authorized $ 65,500,000 Numbers of shares issued and fully paid (in thousand) 3,618,598 Shares issued $ 36,185,987	December 31, 2014 September 30, 2014 6,550,000 6,550,000 $ 65,500,000 $ 65,500,000 3,558,774 3,521,473 $ 35,587,740 $ 35,214,730

Fully paid ordinary shares, which have a par value of $10, carry one vote per share and carry a right to dividends.

A total of 864,704 thousand shares and 650,000 thousand shares of the Company’s authorized shares were reserved for the issuance of convertible bonds and employee share options.

b. Capital surplus

	September 30,	December 31,	September 30,
	2015	2014	2014
May be used to offset a deficit, distributed
as cash dividends, or transferred to share
capital (1)
Arising from employee share options	$ 317,204	$ 317,204	$ 317,204
Arising from donations	37	37	37
	$ 317,241	$ 317,241	$ 317,241
			(Continued)

• 34 -

	September 30,	September 30,	December 31,	December 31,	September 30,	September 30,
		2015		2014		2014
May be used to offset a deficit only (2)
Arising from changes in percentage of
ownership interest in subsidiaries	$	732	$	661	$	645
May not be used for any purpose
Arising from treasury share transactions	$	26,502	$	26,502	$	26,502
Arising from employee restricted shares		(317,609)		(102,752)		287,811
	$	(291,107)	$	(76,250)	$	314,313
						(Concluded)

• 1) Such capital surplus may be used to offset a deficit; in addition, when the Company has no deficit, such capital surplus may be distributed as cash dividends or transferred to share capital (limited to a certain percentage of the Company’s paid-in capital and once a year).

• 2) Such capital surplus arises from changes in capital surplus of subsidiaries accounted for by using equity method.

• c. Retained earnings and dividend policy

The Company’s Articles of Incorporation provide that any profit after annual closing should be used first to cover income tax and accumulated deficit and then make appropriation for legal reserve 10% of the remaining amount (until the amount of the legal reserve equals the amount of the Company’s paid-in capital) and special reserve in accordance with law. The remaining amount will be distributed in the following order:

• 1) Employee bonus - 15%;

• 2) Directors remuneration - 2%;

• 3) Shareholders’ dividends - any remaining amount will be added to the undistributed earnings from previous years.

The company is classified as capital intensive industry. In accordance with the long-term financial program of the company, the above shareholders’ dividends can retain as undistributed earnings, and distribute in future, as determined by the shareholders at Annual General Meeting.

Distributions take the form of cash dividend as the first choice. Nevertheless, it still depends on the Company’s financial, sales or operating condition. The Company’s Articles of Incorporation provide that no more than 50% of the current year’s total amount of distributable earnings can be distributed in the form of stock dividend.

In accordance with the amendments to the Company Act in May 2015, the recipients of dividends and bonuses are limited to shareholders and do not include employees. The Company has made consequential amendments to the Company’s Articles of Incorporation and been approved by the annual shareholders’ meeting on June 18, 2015. Due to the net loss for the three months ended September 30, 2015 and 2014 and the nine months ended September 30, 2015 and 2014, there were no accrual for bonus to employees and remuneration to directors and supervisors.

• 35 -

Appropriation of earnings to legal reserve shall be made until the legal reserve equals the Company’s paid-in capital. Legal reserve may be used to offset deficit. If the Company has no deficit and the legal reserve has exceeded 25% of the Company’s paid-in capital, the excess may be transferred to capital or distributed in cash.

Except for non-ROC resident shareholders, all shareholders receiving the dividends are allowed a tax credit equal to their proportionate share of the income tax paid by the Company.

Information on the bonus to employees, directors and supervisors proposed by the Company’s board of directors is available on the Market Observation Post System website of the Taiwan Stock Exchange.

• d. Others equity items

• 1) Exchange differences on translating foreign operations

Balance at January 1 Exchange differences arising on translation of foreign entities Balance at September 30	For the Nine Months Ended September 30	For the Nine Months Ended September 30	For the Nine Months Ended September 30
		2015 $ 27,223 33,636 $ 60,859	2014 $ (49,141) 21,955 $ (27,186)

• 2) Unrealized gain on available-for-sale financial assets

Balance at January 1 Unrealized gain (loss) on available-for-sale financial assets Balance at September 30		For the Nine Months Ended September 30	For the Nine Months Ended September 30
		2015 $ 917,437 (147,285) $ 770,152	2014 $ 506,926 242,582 $ 749,508

3) Unearned employee benefit

In the meeting of shareholders on June 18, 2014, the shareholders approved a restricted share plan for employees. Refer to Note 29 for the information of restricted shares issued.

Balance at January 1 Issuance of shares Share-based payment expenses recognized Balance at September 30		For the Nine Months Ended September 30	For the Nine Months Ended September 30
		2015 $ (209,813) (375,892) 255,744 $ (329,961)	2014 $ - (287,811) 17,601 $ (270,210)

• 36 -

e. Non-controlling interests

Balance at January 1 Effect of retrospective application and retrospective restatement Attributable to non-controlling interests: Share of loss for the period Issue of employee share options by subsidiaries Exchange difference arising on translation of foreign entities Non-controlling interest arising from acquisition at a percentage different from its earlier ownership percentage of subsidiaries (Note 31) Non-controlling interest relating to outstanding vested share options held by the employees of subsidiaries Disposal of subsidiaries Balance at September 30	For the Nine Months Ended September 30	For the Nine Months Ended September 30	For the Nine Months Ended September 30
		2015 $ 13,101 - (5,327) - 54 4,531 (121) - $ 12,238	2014 $ 47,021 55 (19,295) 51 286 - - (12,533) $ 15,585

f. Treasury shares

The Company’s shares held by its subsidiaries at the end of the reporting periods were as follows:

		Number of
		Shares Held	Carrying
	Name of Subsidiary	(In Thousands)	Amount		Market Price
September	30, 2015
Hui Ying		3,899	$	159,061	$	16,377
December	31, 2014
Hui Ying		3,899		159,061		27,023
September	30, 2014
Hui Ying		3,899		159,061		26,594

The Company’s shares held by subsidiaries are regarded as treasury shares; shareholder’s rights are retained, except the rights to participate in any share issuance for cash and to vote.

25. REVENUE

Revenue from the sale of goods Royalty revenue and others		For the Three Months Ended September 30 2015 2014 $ 5,640,333 $ 6,674,918 6,867 16,409 $ 5,647,200 $ 6,691,327		For the Nine Months Ended September 30	For the Nine Months Ended September 30
		2015 $ 5,640,333 6,867 $ 5,647,200		2015 $ 15,313,499 15,204 $ 15,328,703	2014 $ 16,428,901 25,200 $ 16,454,101

• 37 -

The analysis of the Group’s revenue and main products was disclosed in Note 40.

26. NET LOSS

Net loss was attributable to:

a. Other income

Intellectual property rights income Interest income Dividend income Others Other gains and losses Net foreign exchange gains Net losses arising on financial assets designated as at FVTPL Gain on disposal investment Others Finance costs Interest on loans Less: Amounts included in the cost of qualifying assets	For the Three Months Ended September 30 2015 2014 $ - $ - 5,121 12,371 60,018 41,757 10,875 10,660 $ 76,014 $ 64,788 For the Three Months Ended September 30 2015 2014 $ 134,668 $ 4,796 (7,175) (2,853) - 17,822 (14,974) (7,110) $ 112,519 $ 12,655 For the Three Months Ended September 30 2015 2014 $ 81,342 $ 75,657 (1,584) (5,409) $ 79,758 $ 70,248	For the Three Months Ended September 30 2015 2014 $ - $ - 5,121 12,371 60,018 41,757 10,875 10,660 $ 76,014 $ 64,788 For the Three Months Ended September 30 2015 2014 $ 134,668 $ 4,796 (7,175) (2,853) - 17,822 (14,974) (7,110) $ 112,519 $ 12,655 For the Three Months Ended September 30 2015 2014 $ 81,342 $ 75,657 (1,584) (5,409) $ 79,758 $ 70,248		For the Nine Months Ended September 30	For the Nine Months Ended September 30
				2015 2014 $ 951,300 $ - 23,539 45,814 95,417 89,634 30,719 23,041 $ 1,100,975 $ 158,489 For the Nine Months Ended September 30
				2015 2014 $ 102,295 $ 30,175 (7,051) (7,648) 7,491 39,035 (15,847) (11,005) $ 86,888 $ 50,557 For the Nine Months Ended September 30
		2015 $ 81,342 (1,584) $ 79,758		2015 $ 224,032 (5,900) $ 281,132	2014 $ 229,549 (18,971) $ 210,578

• b. Other gains and losses

c. Finance costs

• 38 -

Information about capitalized interest was as follows:

Capitalized interest Capitalization rate Depreciation and amortization Property, plant and equipment Intangible assets An analysis of depreciation by function Operating costs Operating expenses An analysis of amortization by function Operating costs Selling and marking expenses General administration expenses Research and development expenses		For the Three Months Ended September 30 2015 2014 $ 1,584 $ 5,409 1.57% 2.07% For the Three Months Ended September 30 2015 2014 $ 1,423,454 $ 1,827,521 37,022 64,645 $ 1,460,476 $ 1,892,166 $ 1,236,308 $ 1,562,848 187,146 264,673 $ 1,423,454 $ 1,827,521 $ 23,701 $ 39,192 151 198 4,938 15,287 8,232 9,968 $ 37,022 $ 64,645		For the Nine Months Ended September 30	For the Nine Months Ended September 30
				2015 2014 $ 5,900 $ 18,971 1.67% 1.88% For the Nine Months Ended September 30
		2015 $ 1,423,454 37,022 $ 1,460,476 $ 1,236,308 187,146 $ 1,423,454 $ 23,701 151 4,938 8,232 $ 37,022		2015 $ 4,310,537 129,182 $ 4,439,719 $ 3,733,040 577,497 $ 4,310,537 $ 84,284 447 19,648 24,803 $ 129,182	2014 $ 5,493,037 187,204 $ 5,680,241 $ 4,634,093 858,944 $ 5,493,037 $ 114,429 539 45,893 26,343 $ 187,204

d. Depreciation and amortization

e. Employee benefits expense

Post-employment benefits (Note 23) Defined contribution plans Defined benefit plans		For the Three Months Ended September 30 2015 2014 $ 62,805 $ 63,127 9,821 34,555 72,626 97,682	For the Nine Months Ended September 30
		2015 $ 62,805 9,821 72,626	2015 2014 $ 186,996 $ 190,878 30,870 105,888 217,866 296,766 (Continued)

• 39 -

Share-based payments Equity-settled share-based payments Other employee benefits Total employee benefits expense An analysis of employee benefits expense by function Operating costs Operating expenses		For the Three Months Ended September 30	For the Three Months Ended September 30		For the Nine Months Ended September 30	For the Nine Months Ended September 30
		2015 $ 99,070 1,388,410 $ 1,560,106 $ 626,811 933,295 $ 1,560,106	2014 $ 17,607 1, 395,852 $ 1,511,141 $ 721,128 790,013 $ 1,511,141		2015 $ 255,744 4,225,741 $ 4,699,351 $ 2,082,549 2,616,802 $ 4,699,351	2014 $ 17,652 4,263,250 $ 4,577,668 $ 2,192,737 2,384,931 $ 4,577,668 (Concluded)

27. INCOME TAXES RELATING TO CONTINUING OPERATIONS

• a. Income tax recognized in profit or loss

The major components of tax expense were as follows:

For the Three Months Ended September 30 2015 2014 Current tax In respect of the current year $ 5,236 $ 859 In respect of prior years - - Deferred tax In respect of the current year (344) 206 Income tax expense recognized in profit or loss $ 4,892 $ 1,065 b. Integrated income tax September 30, 2015 Accumulated deficit Unappropriated earnings generated before January 1, 1998 $ - Unappropriated earnings generated on and after January 1, 1998 (16,341,763) $ (16,341,763) Balance of the imputation credit accounts $ 421,581	For the Three Months Ended September 30	For the Nine Months Ended September 30 2015 2014 $ 11,509 $ 4,063 1 126 1,363 (32) $ 12,873 $ 4,157 December 31, 2014 September 30, 2014 $ - $ - (13,812,749) (11,444,329) $ (13,812,749) $ (11,444,329) $ 289,482 $ 289,482

• 40 -

No tax creditable ratios were calculated for accumulated deficit as of September 30, 2015, December 31, 2014 and September 30, 2014, respectively.

c. Income tax assessments

The Company’s tax returns through 2013 have been assessed by the tax authorities except 2010. The Company disagreed with the tax authorities’ assessment on its 2013 and 2012 tax returns and had applied for re-examination. The Company was also not satisfied with the results of the review of the 2009 tax returns and had applied for appeal. Nevertheless, the Company has accrued extra income tax base on the assessment by the tax authorities.

28. LOSS PER SHARE

LOSS PER SHARE
Basic and diluted loss per share	For the Three Months Ended September 30 2015 2014 $ (0.27) $ (0.31)		Unit: NT$ Per Share For the Nine Months Ended September 30
		2015 $ (0.27)		2015 $ (0.72)	2014 $ (1.18)

The amount of loss and weighted average number of ordinary shares outstanding used in the computation of loss per share from continuing operations were as follows:

Net Loss for the Period

Loss for the period attributable to owners of the parent		For the Three Months Ended September 30 2015 2014 $ (949,199) $ (1,094,999)		For the Nine Months Ended September 30	For the Nine Months Ended September 30
		2015 $ (949,199)		2015 $ (2,524,483)	2014 $ (4,163,827)

Weighted average number of ordinary shares outstanding (in thousand shares):

Weighted average number of ordinary shares in computation of basic and diluted loss per share		For the Three Months Ended September 30 2015 2014 3,522,841 3,517,574		For the Nine Months Ended September 30	For the Nine Months Ended September 30
		2015 3,522,841		2015 3,519,349	2014 3,517,574

As disclosed in Note 29 to the financial statements in determining whether the share-based payments are potential ordinary shares. The aforementioned stock options were not included in the calculation of diluted loss per share because they were antidilutive for the nine months ended September 30, 2015 and 2014.

• 41 -

29. SHARE-BASED PAYMENT ARRANGEMENTS

• a. Employee share option plan

Mxtran

Approved by the Board of Directors of Mxtran on August 12, 2011, Mxtran was authorized to issue employee stock options for 2,344 thousand units. Each stock option may subscribe for one new share of common stock of Mxtran. The options are valid for six years and exercisable at certain percentages after the second anniversary from the grant date. For any subsequent changes in Mxtran’s capital surplus, the exercise price is adjusted accordingly.

Information on employee share options was as follows:

Balance at January 1 Options cancelled Balance at September 30	For the Nine Months	Ended September 30
	2015 Number of Options (In Thousands) Weighted- average Exercise Price (NT$) 1,309 $ 10.00 (52) - 1,257 10.00	2014
		Number of Options (In Thousands) Weighted- average Exercise Price (NT$) 1,732 $ 10.00 (350) - 1,382 10.00

As of September 30, 2015, information about Mxtran’s outstanding and exercisable option was as follows:

Range of Exercise Price (NT$) $ 10.00	Options Issued on or After January 1, 2004 and Outstanding Number Outstanding Options (Thousand) Remaining Contractual Life (In Years) Exercise Price (NT$/Per Share) 1,257 1.86 $ 10.00	Options Exercisable
		Number Exercisable Options (Thousand) Exercise Price (NT$/Per Share) 1,257 $ 10.00

Options granted were priced using the Black-Scholes pricing model and the inputs to the model were as follows:

Grant-date share price (NT$)	$	3.23
Exercise price (NT$)		10.00
Expected volatility		44.82%
Expected life (years)		4.25 years
Expected dividend yield		-
Risk-free interest rate		1.11%

For the three months ended September 30, 2015 and 2014, the compensation cost recognized was NT$0 and NT$6 thousand, respectively. For the nine months ended September 30, 2015 and 2014, the compensation cost recognized was NT$0 and NT$51 thousand, respectively. As of September 30, 2015 and 2014, the estimated percentages of forfeiture due to termination of employment over the remaining vesting period were 4.1% and 6%, respectively.

• 42 -

INFOMAX

Approved by the Board of Directors of INFOMAX on December 21, 2007, April 2, 2010 and January 26, 2011, INFOMAX was authorized to issue employee stock options for 1,910 thousand units, 8,654 thousand units and 1,346 thousand units, respectively. Each stock option may subscribe for one new share of common stock of INFOMAX. The options authorized on December 21, 2007 are valid for eight years. The options authorized on April 2, 2010 and January 26, 2011 are valid for the earlier of six years to the grant dates or two months to the date of application for share listing on the TSE or Taipei Exchange. The options granted are exercisable at certain percentages after the second anniversary from the grant date. For any subsequent changes in INFOMAX’s capital surplus, the exercise price is adjusted accordingly.

INFOMAX made capital deduction and increased its share capital by 109,797 thousand shares and 100,000 thousand shares on December 1, 2012 and April 3, 2013, respectively. Each stock option has subscribed for 0.3 common stock share and the exercise price was subject to adjustments for any change of capital structure.

Information on employee share option was as follows:

Balance at January 1 Options cancelled Balance at September 30	For the Nine Months	Ended September 30
	2015 Number of Options (In Thousands) Weighted- average Exercise Price (NT$) 7,116 $ 31.87 (93) - 7,023 31.87	2014
		Number of Options (In Thousands) Weighted- average Exercise Price (NT$) 7,341 $ 31.87 (225) - 7,116 31.87

As of September 30, 2015, information about INFOMAX’s outstanding and exercisable option was as follows:

Options Issued on or After January 1, 2004

	Options Issued on or After January 1, 2004
Range of Exercise Price (NT$) $ 31.87 31.87 31.87	and Outstanding Number Outstanding Options (Thousand) Remaining Contractual Life (In Years) Exercise Price (NT$/Per Share) 1,111 0.22 $ 31.87 5,363 0.50 31.87 549 1.32 31.87 7,023	Options Exercisable
		Number Exercisable Options (Thousand) Exercise Price (NT$/Per Share) 1,111 $ 31.87 5,363 31.87 549 31.87 7,023

Options granted were priced using the Black-Scholes pricing model and the inputs to the model were as follows:

Grant-date share price (NT$)	$	5.17
Exercise price (NT$)		10.00
Expected volatility		37.82%
Expected life (years)		4.25 years
Expected dividend yield		-
Risk-free interest rate		0.91%

• 43 -

For the three months ended September 30, 2015 and 2014, and the nine months ended September 30, 2015 and 2014, the compensation cost recognized both were NT$0. As of September 30, 2015 and 2014, the estimated percentages of forfeiture due to termination of employment over the remaining vesting period were both 3%.

• b. Restricted Stock Plan for employees

In the shareholders’ meeting on June 18, 2014, the shareholders approved a restricted stock plan for employees of 2014, consisting of 123,251 thousand shares and issuance price of NT$ 0 per share, which has also been approved by the board of directors on July 24, 2014. On August 19, 2014, the FSC issued approval No. 1030031466 which approved this plan. The board of directors approved a restricted stock plan were as below:

	Grant Shares				Issued Shares
Grant Date	(Thousand)	Fair	Value	Issued Date	(Thousand)
2014/08/28	38,365	$	7.76	2014/12/25	37,301
2015/03/16	62,213		6.82	2015/07/22	61,279

To meet the vesting conditions, an employee has to meet performance and other conditions over the vesting period, as follows:

• 1) Remain employed by the Company within one year after the grant date; and has a current year’s performance rating of “successful” (or higher) - 40% of restricted shares will be vested;

• 2) Remain employed by the Company within two years after the grant date; and has a current year’s performance rating of “successful” (or higher) - 30% of restricted shares will be vested;

• 3) Remain employed by the Company within three years after grant date; and has a current year’s performance rating of “successful” (or higher) - 30% of restricted shares will be vested.

In addition to the vesting conditions, the limitations are as follows:

• 1) Employees, except for inheritance, should not sell, transfer, pledge, donate or in any other way dispose of the shares.

• 2) The shares should be held in stock trust.

• 3) Except for the above two paragraphs, other rights of restricted stock plan for employees, including but not limited to, dividends, bonuses, the distribution rights of legal reserve and capital surplus, share options of cash capital and voting rights of shareholders, etc. are the same as the Group’s issued ordinary shares.

• 4) The dividends of restricted stock plan for employees are not restricted by existing conditions.

When employees do not reach the vesting conditions of restricted stock plan for employees during the year, the Company will recover and cancel the shares.

• 44 -

Information on restricted stock plan for employees was as follows:

Information on restricted stock plan for employees was as follows:
Balance at January 1 Granted (Note 1) Vested Forfeited (Note 2) Balance at September 30		Number of Shares (In Thousands)
		For the Nine Months Ended September 30
		2015 $ 37,301 62,213 (14,253) (3,138) $ 82,123	2014 $ - 38,365 - - $ 38,365

Note 1: The given shares in this year is not equal to the actual issued shares.

• Note 2: The forfeited shares in this period were consisted of 750 thousand shares which will be cancelled, 1,454 thousand shares have been cancelled and 934 thousand shares were the difference between granted and issued on March 16, 2015.

For the three months ended September 30, 2015 and 2014, the compensation cost recognized was NT$99,070 thousand and NT$17,601 thousand, respectively. For the nine months ended September 30, 2015 and 2014, the compensation cost recognized was NT$255,744 thousand and NT$17,601 thousand, respectively.

30. DISPOSAL OF SUBSIDIARIES

On April 23, 2014, the Group did not participate in MoDioTek’s capital increase. Since the Group has lost control over MoDioTek, it was no longer consolidated. MoDioTek was required to be recognized on the same basis as if it had been disposed of.

On August 28, 2014, the Group entered into a sale agreement to dispose of Magic Pixel Inc. (“MPI”), the disposal was completed on September 10, 2014, on which date control of MPI passed to the acquirer.

MoDioTek

a. Analysis of assets and liabilities on the date control was lost

Analysis of assets and liabilities on the date control was lost
	April 23, 2014
Current assets
Cash and cash equivalents	$ 50,687
Trade receivables	4,163
Other receivables	3,538
Inventories	2,412
Others	603
Non-current assets
Property, plant and equipment	2,599
Intangible assets	2,100
Others	1,665
Current liabilities
Trade payables	(2,948)
Other payables	(4,464)
Others	(2,449)

Net assets disposed of

$ 57,906

• 45 -

b. Gain on disposal of subsidiary

	For the Nine
	Months Ended
	September 30,
	2014
Fair value of interest retained	$ 64,205
Net assets disposed of	(57,906)
Non-controlling interests	9,179
Gain on disposal	$ 15,478
MPI

a. Consideration received from the disposal

	September 10,
	2014
Consideration received in cash and cash equivalents	$ 32,448
Analysis of assets and liabilities on the date control was lost
	September 10,
	2014
Current assets
Cash and cash equivalents	$ 11,104
Trade receivables	2,697
Other receivables	168
Inventories	5,163
Others	2,087
Non-current assets
Property, plant and equipment	988
Intangible assets	1,904
Others	1,054
Current liabilities
Trade payables	(1,822)
Other payables	(5,049)
Others	(1,362)
Net assets disposed of	$ 16,932
Gain on disposal of subsidiary
	For the Nine
	Months Ended
	September 30,
	2014
Consideration received	$ 32,448
Net assets disposed of	(16,932)
Non-controlling interests	2,311
Gain on disposal	$ 17,827

b. Analysis of assets and liabilities on the date control was lost

c. Gain on disposal of subsidiary

• 46 -

• d. Net cash inflow on disposal of subsidiary

	For the Nine
	Months Ended
	September 30,
	2014
Consideration received in cash and cash equivalents	$ 32,448
Less: Cash and cash equivalent balances disposed of	11,104
	$ 21,344

31. EQUITY TRANSACTIONS WITH NONCONTROLLING INTERESTS

On April 30, 2015, the Group subscribed for additional new shares of Mxtran at a percentage different from its exiting ownership percentage, raising its continuing interest from 94.15% to 94.84%.

The above transactions were accounted for as equity transactions since the Group did not cease to have control over the subsidiary.

Cash consideration paid The proportionate share of the carrying amount of the net assets of the subsidiary Difference arising from equity transactions Line items adjusted for equity transaction Accumulated deficits	Mxtran $ (89,995) 85,464 $ (4,531) $ (4,531)

32. OPERATING LEASE ARRANGEMENTS

• a. The Group as lessee

Operating leases relate to leases of land, offices, employee dormitories and office equipment with lease terms between 1 and 50 years. The Group does not have a bargain purchase option to acquire the leased land, offices, employee dormitories and office equipment at the expiry of the lease periods.

The future minimum lease payments for non-cancellable operating lease commitments were as follows:

	September 30,	September 30,	December 31,	December 31,	September 30,	September 30,
		2015		2014		2014
Not later than 1 year	$	40,176	$	62,176	$	74,927
Later than 1 year and not later than 5 years		123,169		119,670		123,303
Later than 5 years		201,470		217,055		222,552
	$	364,815	$	398,901	$	420,782

• 47 -

The lease payments recognized as expenses were as follows:

Minimum lease payment	For the Three Months Ended September 30 2015 2014 $ 25,460 $ 26,699	For the Three Months Ended September 30 2015 2014 $ 25,460 $ 26,699	For the Nine Months Ended September 30	For the Nine Months Ended September 30	For the Nine Months Ended September 30
		2015 $ 25,460		2015 $ 79,251	2014 $ 80,978

b. The Group as lessor

Operating leases relate to the building owned by the Group with lease terms between 1 to 5 years. All operating lease contracts contain market review clauses in the event that the lessee exercises its option to renew. The lessee does not have a bargain purchase option to acquire the property at the expiry of the lease period.

The future minimum lease revenue from non-cancellable operating leases was as follows:

	September 30,	September 30,	December 31,	December 31,	September 30,	September 30,
		2015		2014		2014
Not later than 1 year	$	4,142	$	4,433	$	3,950
Later than 1 year and not later than 5 years		1,649		4,509		5,437
	$	5,791	$	8,942	$	9,387

33. CAPITAL MANAGEMENT

The Group manages its capital to ensure that the Group will be able to operate under the premises of going concern and growth while maximizing the return to shareholders through the optimization of the debt and equity balance.

The Group’s strategy for managing the capital structure is to lay out the plan of product development and expand the market share considering the growth and the magnitude of industry and further developing an integral plan founded on the required capacity, capital outlay, and magnitude of assets in long-term development. Ultimately, considering the risk factors such as the fluctuation of the industry cycle and the life cycle of products, the Group determines the optimal capital structure by estimating the profitability of products, operating profit ratio, and cash flow based on the competitiveness of products. The management of the Group periodically examines the capital structure and contemplates on the potential costs and risks involved while exerting different financial tools. In general, the Group implements prudent strategy of risk management.

34. FINANCIAL INSTRUMENTS

• a. Fair value of financial instruments that are not measured at fair value

The management considers that the carrying amounts of financial assets and financial liabilities recognized in the consolidated financial statements approximate their fair values or their fair values cannot be reliably measured.

• 48 -

• b. Fair value of financial instruments that are measured at fair value

• 1) Fair value hierarchy

September 30, 2015 Available-for-sale financial assets - non-current Securities listed in ROC Securities listed in other countries Financial liabilities at FVTPL Derivative financial instrument December 31, 2014 Financial assets at FVTPL Derivative financial instrument Available-for-sale financial assets - non-current Securities listed in ROC Securities listed in other countries Financial liabilities at FVTPL Derivative financial instruments September 30, 2014 Financial assets at FVTPL Derivative financial instrument Available-for-sale financial assets - non-current Securities listed in ROC Securities listed in other countries Financial liabilities at FVTPL Derivative financial instruments	Level 1 $ 813,664 284,680 $ 1,098,344 $ - Level 1 $ - $ 982,975 260,167 $ 1,243,142 $ - Level 1 $ - $ 989,282 208,413 $ 1,197,695 $ -	Level 2 $ - - $ - $ 2,828 Level 2 $ 95 $ - - $ - $ 7,113 Level 2 $ 43 $ - - $ - $ 2,544	Level 3 $ - - $ - $ - Level 3 $ - $ - - $ - $ - Level 3 $ - $ - - $ - $ -	Total $ 813,664 284,680 $ 1,098,344 $ 2,828 Total $ 95 $ 982,975 260,167 $ 1,243,142 $ 7,113 Total $ 43 $ 989,282 208,413 $ 1,197,695 $ 2,544

There were no transfers between Level 1 and Level 2 in the current and prior periods.

• 49 -

• 2) Valuation techniques and inputs applied for the purpose of measuring Level 2 fair value measurement

Financial Instruments Valuation Techniques and Inputs Derivatives - foreign currency Future cash flows are estimated based on observable forward forward contracts exchange rates at the end of the reporting period and contract forward rates.

• c. Categories of financial instruments

	September	30,	December	31,	September	30,
	2015		2014		2014
Financial assets
Fair value through profit or loss (FVTPL)
Held for trading	$	-	$	95	$	43
Loans and receivables (i)	7,865,811		11,162,496		12,436,588
Available-for-sale financial assets (ii)	1,192,344		1,356,541		1,309,767
Financial liabilities
Fair value through profit or loss (FVTPL)
Held for trading	2,828		7,113		2,544
Amortized cost (iii)	17,003,164		20,568,146		21,330,471

• i) The balances included loans and receivables measured at amortized cost, which comprise cash and cash equivalents, notes receivable and trade receivables (including receivables from related parties), other receivables and other financial assets (including current and non-current).

• ii) The balances included the carrying amount of available-for-sale financial assets measured at cost.

• iii) The balances included financial liabilities measured at amortized cost, which comprise short-term loans, notes payable and trade payables (including payables to related parties), other payables (including other payables to related parties), payable for purchase of equipment and long-term loans (including current portion).

• d. Financial risk management objectives and policies

The Group manages its exposure to risks relating to the operations through market risk, credit risk, and liquidity risk with the objective to reduce the potentially adverse effects the market uncertainties may have on its financial performance.

The plans for material treasury activities are reviewed by management in accordance with procedures required by relevant regulations or internal controls. During the implementation of such plans, the Group must comply with certain treasury procedures that provide guiding principles for overall financial risk management.

1) Market risk

The Group’s activities exposed it primarily to the financial risks of changes in foreign currency exchange rates (see (a) below), interest rates (see (b) below), and other price risk (see (c) below).

• 50 -

• a) Foreign currency risk

The Group had foreign currency sales and purchases, which exposed to foreign currency risk. Exchange rate exposures were managed within approved policy parameters utilizing forward foreign exchange contracts.

Sensitivity analysis

The Group was mainly exposed to the USD and JPY.

Sensitivity analysis of rate is for the transactions in currencies other than the entity’s functional currency (foreign currencies) which are recognized at the rates of exchange prevailing at the dates of the transactions.

The following table details the Group’s sensitivity to a 3% and 10% increase in New Taiwan dollars (the functional currency) against the relevant foreign currencies, respectively. The sensitivity rates used are 3% and 10% when reporting foreign currency risk internally to key management personnel.

Pre-tax loss	Currency USD Impact For the Nine Months Ended September 30 2015 2014 $ 26,565 $ 10,389	Currency USD Impact For the Nine Months Ended September 30 2015 2014 $ 26,565 $ 10,389	Currency JPY Impact	Currency JPY Impact	Currency JPY Impact
			For the Nine Months Ended September 30
		2015 $ 26,565		2015 $ 19,236	2014 $ 116,162

b) Interest rate risk

The Group was exposed to interest rate risk because entities in the Group borrowed funds at both fixed and floating interest rates. The risk is managed by the Group by maintaining an appropriate mix of fixed and floating rate borrowings.

The carrying amounts of the Group’s financial assets and financial liabilities with exposure to interest rates at the end of the reporting period were as follows:

	September 30,	September 30,	December 31,	December 31,	September 30,	September 30,
		2015		2014		2014
Fair value interest rate risk
Financial assets	$	1,575,525	$	4,868,205	$	5,784,237
Financial liabilities		1,500,234		1,599,000		850,000
Cash flow interest rate risk
Financial assets		2,410,164		2,933,344		1,638,023
Financial liabilities		12,342,770		14,751,975		16,644,146

Sensitive analysis

Sensitivity analysis of interest is calculated based on the financial liabilities exposed to cash flow interest rate risk at the end of each reporting period.

If interest rates had been 50 basis points higher/lower, the Group’s pre-tax loss for the nine months ended September 30, 2015 and 2014 would increase/decrease by $46,285 thousand and $62,416 thousand, respectively.

• 51 -

c) Other price risk

The Group was exposed to equity price risk through its investments in listed equity securities. Equity investments are held for strategic rather than trading purposes. The Group does not actively trade these investments.

Sensitive analysis

Sensitivity analysis of equity price is calculated based on the fair values of available-for-sale investments at the end of each reporting period.

If equity prices had been 10% higher/lower, equity for the nine months ended September 30, 2015 and 2014 would have increased/decreased by $109,834 thousand and $119,770 thousand, respectively, as a result of the changes in fair value of available-for-sale investments.

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’s exposure to credit risk mainly arises from trade receivables - operating, bank deposits, and other financial instruments. Credit risk is managed separately for business related and financial related exposures.

Business related credit risk

In order to maintain the credit quality of trade receivables, the Group has established procedures to monitor and limit exposure to credit risk on trade receivables.

Credit evaluation is performed in the consideration of the relevant factors which may affects the customer’s paying ability such as financial condition, external and internal credit scoring, historical experience, and economic conditions. The Group holds some of the credit enhancements such as prepayments and collateral to mitigate its credit risks.

Trade receivables consisted of a large number of customers, spread across diverse industries and geographical areas. Ongoing credit evaluation is performed on the financial condition of trade receivables and, where appropriate, credit guarantee insurance cover is purchased.

As of September 30, 2015, December 31, 2014 and September 30, 2014, the Group’s ten largest customers accounted for 47%, 52% and 60% of total trade receivables (including receivables from related parties), respectively. The Group believed the concentration of credit risk was relatively insignificant for the remaining trade receivables.

Financial credit risk

The Group’s exposure to financial credit risk which pertained to bank deposits and other financial instruments were evaluated and monitored by Corporate Treasury function. The Group only deals with creditworthy counterparties and banks so that no significant credit risk was identified.

• 3) Liquidity risk

The objective of liquidity risk management is to ensure the Group has sufficient liquidity to fund its business requirements of cash and cash equivalents and the unused of financing facilities associated with existing operations.

• 52 -

The Group relies on bank borrowings as a significant source of liquidity. As of September 30, 2015, December 31, 2014 and September 30, 2014, the Group had available unutilized overdraft and short-term bank loan facilities of approximately $2,375,728 thousand, $3,922,524 thousand and $4,676,131 thousand, respectively.

Liquidity and interest rate risk tables for non-derivative financial liabilities

The following table details the Group’s remaining contractual maturity for its non-derivative financial liabilities with agreed repayment periods. The tables had been drawn up based on the undiscounted cash flows of financial liabilities from the earliest date on which the Group can be required to pay. The tables included both interest and principal cash flows.

Specifically, bank loans with a repayment on demand clause were included in the earliest time band regardless of the probability of the banks choosing to exercise their rights. The maturity dates for other non-derivative financial liabilities were based on the agreed repayment dates.

To the extent that interest flows are floating rate, the undiscounted amount was derived from the expected borrowing interest rate at the end of the reporting period.

September 30, 2015

On Demand or Less than 1 Year Non-derivative financial liabilities Non-interest bearing $ 3,160,160 Variable interest rate liabilities 2,747,942 Fixed interest rate liabilities 1,503,440 $ 7,411,542 December 31, 2014 On Demand or Less than 1 Year Non-derivative financial liabilities Non-interest bearing $ 4,217,171 Variable interest rate liabilities 12,929,684 Fixed interest rate liabilities 1,603,482 $ 18,750,337 September 30, 2014 On Demand or Less than 1 Year Non-derivative financial liabilities Non-interest bearing $ 3,836,325 Variable interest rate liabilities 6,790,758 Fixed interest rate liabilities 852,665 $ 11,479,748	1-3 Years $ - 9,916,052 - $ 9,916,052 1-3 Years $ - 1,704,910 - $ 1,704,910 1-3 Years $ - 9,720,275 - $ 9,720,275	3-5 Years $ - 201,738 - $ 201,738 3-5 Years $ - 443,796 - $ 443,796 3-5 Years $ - 510,011 - $ 510,011	5+ Years $ - - - $ - 5+ Years $ - - - $ - 5+ Years $ - - - $ -	Total $ 3,160,160 12,865,732 1,503,440
				$ 17,529,332
				Total $ 4,217,171 15,078,390 1,603,482
				$ 20,899,043
				Total $ 3,836,325 17,021,044 852,665
				$ 21,710,034

The amounts included above for variable interest rate instruments for both non-derivative financial assets and liabilities was subject to change if changes in variable interest rates differ from those estimates of interest rates determined at the end of the reporting period.

• 53 -

Liquidity and interest risk rate tables for derivative financial liabilities

The following table detailed the Group’s liquidity analysis for its derivative financial instruments. The table was based on the undiscounted contractual net cash inflows and outflows on derivative instruments that settle on a net basis, and the undiscounted gross inflows and outflows on those derivatives that require gross settlement. When the amount payable or receivable is not fixed, the amount disclosed has been determined by reference to the projected interest rates as illustrated by the yield curves at the end of the reporting period.

September 30, 2015

	On Demand or	On Demand or
		Less than			3	Months to
		1 Month	1-3	Months		1 Year	1-5 Years		5+ Years
Gross settled
Foreign exchange forward contracts
Inflows	$	370,854	$	-	$	-	$	-	$	-
Outflows		373,682		-		-		-		-
December 31, 2014
	On Demand or
		Less than			3	Months to
		1 Month	1-3	Months		1 Year	1-5 Years		5+ Years
Gross settled
Foreign exchange forward contracts
Inflows	$	562,947	$	-	$	-	$	-	$	-
Outflows		569,965		-		-		-		-
September 30, 2014
	On Demand or
		Less than			3	Months to
		1 Month	1-3	Months		1 Year	1-5 Years		5+ Years
Gross settled
Foreign exchange forward contracts
Inflows	$	540,355	$	-	$	-	$	-	$	-
Outflows		542,856		-		-		-		-

35. TRANSACTIONS WITH RELATED PARTIES

Balances and transactions between the Company and its subsidiaries, which are related parties of the Company, had been eliminated on consolidation and are not disclosed in this note. Details of transactions between the Group and other related parties are disclosed below.

• a. Operating revenues

Operating revenues
Related Parties Listed Account Categories Sales Key management personnel Others Associates		For the Three Months Ended September 30 2015 2014 $ 937,062 $ 1,978,161 - 517 1,594 644 $ 938,656 $ 1,979,322		For the Nine Months Ended September 30
		2015 $ 937,062 - 1,594 $ 938,656		2015 $ 1,994,512 1,447 2,616 $ 1,998,575	2014 $ 3,415,861 2,144 1,044 $ 3,419,049

• 54 -

Sales prices to related parties were not comparable to those with external customers as the Group was the sole provider for them. The sales terms to the related parties were between 30 to 60 days after monthly closing, similar to those with external customers.

• b. Purchases

Related Parties Categories Key management personnel	For the Three Months Ended September 30 2015 2014 $ - $ 184,016	For the Three Months Ended September 30 2015 2014 $ - $ 184,016	For the Nine Months Ended September 30	For the Nine Months Ended September 30	For the Nine Months Ended September 30
		2015 $ -		2015 $ 24,419	2014 $ 187,672

Materials purchased from related parties were for manufacturing process. The payment term was 30 days after monthly closing, similar to those with external vendors.

• c. Trade receivables from related parties

	September 30,	September 30,	December 31,	December 31,	September 30,	September 30,
Listed Account Related Parties Categories		2015		2014		2014
Receivables from Key management personnel	$	479,717	$	482,213	$	1,441,750
Related parties, Others		-		182		175
net Associates		1,280		784		350
	$	480,997	$	483,179	$	1,442,275
Other receivables Associates	$	277	$	217	$	126
The Group is its major		91		32		-
management authority
	$	368	$	249	$	126

The outstanding trade receivables from related parties are unsecured. No expense was recognized for the nine months ended September 30, 2015 and 2014 for allowance for impaired trade receivables with respect to the amounts owed by related parties.

d. Trade payables to related parties

Listed		September 30,	September 30,	December	December	31,	September 30,	September 30,
Account	Related Parties Categories		2015		2014			2014
Payables to	The Group is its major	$	51,649	$	62,957		$	66,532
related	management authority
parties	Associates		-		228			1,558
		$	51,649	$	63,185		$	68,090
Other payables	Others	$	9,770	$		-	$	9,320
To related	Associates		361			-		-
parties
		$	10,131	$		-	$	9,320

The outstanding trade payables from related parties are unsecured and will be settled in cash.

• 55 -

e. Other transactions

Related Parties Listed Account Categories Manufacturing expense The Group is its major management authority Operating expense Others The Group is its major management authority Key management personnel Associates Software and pattern Associates revenue The Group is its major management authority Rental revenue Associates	For the Three Months Ended September 30 2015 2014 $ 59,057 $ 68,305 $ 5,550 $ 6,000 156 67 - 10 450 760 $ 6,156 $ 6,837 $ 282 $ 502 140 10 $ 422 $ 512 $ 1,606 $ 1,211	For the Three Months Ended September 30 2015 2014 $ 59,057 $ 68,305 $ 5,550 $ 6,000 156 67 - 10 450 760 $ 6,156 $ 6,837 $ 282 $ 502 140 10 $ 422 $ 512 $ 1,606 $ 1,211	For the Nine Months Ended September 30	For the Nine Months Ended September 30	For the Nine Months Ended September 30
		2015 $ 59,057 $ 5,550 156 - 450 $ 6,156 $ 282 140 $ 422 $ 1,606		2015 $ 179,580 $ 16,650 586 2,727 1,281 $ 21,244 $ 1,202 355 $ 1,557 $ 4,820	2014 $ 211,553 $ 18,000 152 10 760 $ 18,922 $ 598 134 $ 732 $ 2,018

The subcontract processing charges and operating expense of related parties were comparable to those with other vendors. The payment term was 75 days after monthly closing.

The Group leases offices to associates (rentals are classified under other gains and losses). The amount of lease payment was based on the office space leased by each related party and was collected on a monthly basis.

Under certain contracts, the Group authorized the above related parties to use the Group’s pattern and software. The specifically negotiated terms were not comparable to those with external customers.

f. Other assets disposed

Listed Account Parties Categories Gain on disposal investment Associates Listed Account Parties Categories Gain on disposal investment Associates		For the Three Months Ended September 30	For the Three Months Ended September 30	For the Three Months Ended September 30	For the Three Months Ended September 30	For the Three Months Ended September 30
		Price			**Gain(Loss) on Disposal **
				2015 $ - Ended September 30		2014 $ 17,827
		Price	2014 $ 32,448		Gain (Loss) on Disposal
		2015 $ -			2015 $ -	2014 $ 17,827

• 56 -

g. Compensation of key management personnel

The remuneration of key management personnel for the three and nine months ended September 30, 2015 and 2014 was as follows:

Short-term benefits Post-employment benefits Share-based payments	For the Three Months Ended September 30	For the Three Months Ended September 30	For the Three Months Ended September 30	For the Nine Months Ended September 30 2015 2014 $ 89,210 $ 94,579 11,909 84,446 24,800 5 $ 125,919 $ 179,030	For the Nine Months Ended September 30 2015 2014 $ 89,210 $ 94,579 11,909 84,446 24,800 5 $ 125,919 $ 179,030	For the Nine Months Ended September 30 2015 2014 $ 89,210 $ 94,579 11,909 84,446 24,800 5 $ 125,919 $ 179,030
		2015 $ 25,885 3,969 9,076 $ 38,930	2014 $ 25,570 27,445 1 $ 53,016		2015 $ 89,210 11,909 24,800 $ 125,919	2014 $ 94,579 84,446 5 $ 179,030

The remuneration of key executives was determined by the remuneration committee having regard to the performance of individuals and market trends.

36. ASSETS PLEDGED AS COLLATERAL OR FOR SECURITY

The following assets were provided as collateral for bank borrowings, the tariff of imported raw materials guarantees, natural gas agreement, land lease agreement or the deposit for hiring foreign workers:

September 30, 2015 Property, plant and equipment, net $ 13,691,542 Pledge deposits (classified as other financial assets - non-current) 166,951 $ 13,858,493	December 31, 2014 September 30, 2014 $ 14,573,603 $ 15,150,660 165,799 165,594 $ 14,739,402 $ 15,316,254

37. SIGNIFICANT CONTINGENT LIABILITIES AND UNRECOGNIZED COMMITMENTS

In addition to those disclosed in other notes, significant commitments and contingencies of the Group as of September 30, 2015 were as follows:

• a. As of September 30, 2015, December 31, 2014 and September 30, 2014, unused letters of credit amounted to approximately $0, $6,647 thousand and $0, respectively.

• b. Unrecognized commitments are as follows:

				September 30,	December 31,	September 30,
				2015	2014	2014
Acquisition	of property,	plant	and equipment	$ 411,508	$ 639,834	$ 855,142

• c. The Company entered into the Phase-change memory technology agreement with IBM Company in January 2010, and the term of the agreement is from January 2010 to January 2013. Under the agreement, both parties have to share in the related expenditures of the technology development, and the Company has completed the payment in January, 2013. The Company entered into another Phase-change memory technology agreement with IBM Company in January 2013. The term of the agreement is from January 2013 to January 2016. As of September 30, 2015, the Company has paid US$7,700 thousand and unrecognized commitment is US$700 thousand.

• 57 -

• d. The Company entered into the Patents Cross-License Agreement with J Company in December 2009, and the term of the agreement is from December 2009 to December 2015. Under the agreement, the Company has completed in April 2011.

38. SIGNIFICANT ASSETS AND LIABILITIES DENOMINATED IN FOREIGN CURRENCIES

The following information was aggregated by the foreign currencies other than functional currencies of the group entities and the exchange rates between foreign currencies and respective functional currencies were disclosed. The significant assets and liabilities denominated in foreign currencies were as follows:

September 30, 2015 Foreign Exchange Currencies Rate Financial assets Monetary items JPY $ 2,252,008 0.27 USD 87,208 32.87 Financial liabilities Monetary items JPY 1,139,578 0.27 USD 52,269 32.87 December 31, 2014 Foreign Exchange Currencies Rate Financial assets Monetary items JPY $ 3,208,671 0.26 USD 85,878 31.65 Financial liabilities Monetary items JPY 1,894,756 0.26 USD 56,627 31.65	Carrying Amount $ 608,042 2,866,527 $ 3,474,569 $ 307,686 1,718,082 $ 2,025,768 Carrying Amount $ 834,254 2,718,039 $ 3,552,293 $ 492,637 1,792,245 $ 2,284,882

• 58 -

September 30, 2014

Foreign Exchange Currencies Rate Financial assets Monetary items JPY $ 5,728,959 0.28 USD 85,584 30.42 Financial liabilities Monetary items JPY 1,380,302 0.28 USD 58,200 30.42	Carrying Amount $ 1,604,109 2,603,465 $ 4,207,574 $ 386,485 1,770,444 $ 2,156,929

For the three months ended September 30, 2015 and 2014 and for the nine months ended September 30, 2015 and 2014, realized and unrealized net foreign exchange gains were $134,668 thousand, $4,796 thousand, $102,295 thousand and $30,175 thousand, respectively. It is impractical to disclose net foreign exchange gains by each significant foreign currency due to the variety of the foreign currency transactions and functional currencies of the group entities.

39. SEPARATELY DISCLOSED ITEMS

Information on significant transactions and information on investees:

• a. Financing provided to others: None

• b. Endorsements/guarantees provided: None

• c. Marketable securities held (excluding investment in subsidiaries and associates): Table 1 (attached)

• d. Marketable securities acquired and disposed at costs or prices at least NT$300 million or 20% of the paid-in capital: None

• e. Acquisition of individual real estate at costs of at least NT $300 million or 20% of the paid-in capital: None

• f. Disposal of individual real estate at prices of at least NT$300 million or 20% of the paid-in capital: None

• g. Total purchases from or sales to related parties amounting to at least NT$100 million or 20% of the paid-in capital: Table 2 (attached)

• h. Receivables from related parties amounting to at least NT$100 million or 20% of the paid-in capital: Table 3 (attached)

• i. Trading in derivative instruments: Please see Note 7

• j. Intercompany relationships and significant intercompany transactions: Table 5 (attached)

• 59 -

• k. Information on investees: Table 4 (attached)

• l. Information on investments in mainland China

• 1) Information on any investee company in mainland China, showing the name, principal business activities, paid-in capital, method of investment, inward and outward remittance of funds, shareholding ratio, investment gains or losses, carrying amount of the investment at the end of the period, repatriated investment gains or losses, and limit on the amount of investment in the mainland China area: Table 6 (attached)

• 2) Any of the significant transactions with investee companies in mainland China, either directly or indirectly through a third area, and their prices, payment terms, and unrealized gains or losses: None

40. SEGMENT INFORMATION

Information reported to the chief operating decision maker for the purposes of resource allocation and assessment of segment performance focuses on the types of goods or services delivered or provided. Specifically, the Group’s reportable segments were as follows:

Memory products and wafer fabrication IC design

The Group’s reportable segments were separated according to the nature of its business activities. The accounting policies adopted by the reportable segments had no material difference from those disclosed in Note 4.

• a. Segment revenues and results

The following was an analysis of the Group’s revenue and results from continuing operations by reportable segment.

				Segment Net Operating Revenue	Segment Net Operating Revenue	Segment Net Operating Revenue	Segment Net Operating Revenue				**Segment **	**Segment **	**Loss from Operations and Net **	**Loss from Operations and Net **	**Loss from Operations and Net **	Loss
		For the	Three Months Ended			For the Nine		Months	Ended	For the Three		Months Ended		For the Nine		Months	Ended
			September 30				September 30				September 30			September 30
		2015			2014	2015			2014		2015		2014	2015			2014
	Memory products and wafer
	fabrication	$ 5,644,713		$ 6,672,528		$ 15,312,101		$ 16,403,309		$	(958,302 )	$	(981,882 )	$ (3,188,260	)	$ (3,788,224 )
	IC design	2,487			18,799	16,602			50,792		(91,541)		(115,434)	(280,380	)		(374,127)
	Loss from operations	$ 5,647,200		$ 6,691,327		$ 15,328,703		$ 16,454,101			(1,049,843 )		(1,097,316 )	(3,468,640	)	(4,162,351 )
	Other income										76,014		64,788	1,100,975			158,489
	Other gains and losses										112,519		12,655	86,888			50,557
	Finance costs										(79,758 )		(70,248 )	(218,132	)		(210,578 )
	Share of loss of associates										(4,907)		(8,156)	(18,028	)		(15,082)
	Loss before tax (continuing
	operations)									$	(945,975)	$	(1,098,277)	$ (2,516,937	)	$ (4,178,965)
	Segment total assets and liabilities
								September		30, December 31,				September 30,
									2015			2014			2014
	Segment assets
	Memory products	and wafer fabrication						$ 38,253,696			$	44,087,905		$ 46,724,402
	IC design								553,454				754,670			859,332
	Consolidated total	assets						$ 38,807,150			$	44,842,575		$ 47,583,734

b. Segment total assets and liabilities

(Continued)

• 60 -

September 30, 2015 Segment liabilities Memory products and wafer fabrication $ 18,546,367 IC design 42,964 Consolidated total liabilities $ 18,589,331	December 31, 2014 September 30, 2014 $ 22,176,137 $ 22,823,730 60,908 48,768 $ 22,237,045 $ 22,872,498 (Concluded)

• 61 -

TABLE 1

MACRONIX INTERNATIONAL CO., LTD. AND SUBSIDIARY

MARKETABLE SECURITIES HELD SEPTEMBER 30, 2015

(In Thousands of New Taiwan Dollars, Unless Stated Otherwise)

Holding Company Name	Type and Name of Marketable Securities	Relationship with the Holding Company	Financial Statement Account		September 30, 2015	September 30, 2015		Note
				Shares/Units (In Thousands)	Carrying Amount	Percentage of Ownership	Fair Value (Note 3)
The Company MXBVI Hui Ying	Stock Ardentec Corporation United Industrial Gases Co., Ltd. Aetas Technology Inc. Zowie Technology Co., Ltd. Quality Test System Inc. Honbond Venture Capital Co., Ltd. Stock Chipbond Technology Corporation Key ASIC Bhd Tower Semiconductor Ltd. Global Strategic Investment Fund (Cayman) Global Strategic Investment Fund (Samoa) Stock Macronix International Co., Ltd. Raio Technology Co., Ltd.	The Company serves as member of its board of directors None None None None The Company serves as member of its board of directors None None None None None The Company None	Available-for-sale financial assets - non-current Financial assets measured at cost - non-current Financial assets measured at cost - non-current Financial assets measured at cost - non-current Financial assets measured at cost - non-current Financial assets measured at cost - non-current Available-for-sale financial assets - non-current Available-for-sale financial assets - non-current Available-for-sale financial assets - non-current Financial assets measured at cost - non-current Financial assets measured at cost - non-current Available-for-sale financial assets - non-current Financial assets measured at cost - non-current	35,595,830 6,671,877 145,850 20,426 4,538,333 1,803,526 1,088,319 26,924,500 584,893 490,000 1,739,783 3,899,382 947,125	$ 761,751 58,500 - - - - 51,913 37,249 247,431 - 35,500 16,377 -	7.40 3.06 0.29 0.18 14.64 15.00 0.17 3.34 0.75 2.52 4.90 0.11 10.43	$ 761,751 141,434 - 56 - 1,582 51,913 37,249 247,431 10,386 60,477 16,377 22,275	Note 1 Note 2 - Note 2 - Note 2 Note 1 Note 1 Note 1 Note 2 Note 2 Note 1 Note 2

Note 1: The market value was based on the closing price as of September 30, 2015.

Note 2: The calculation is based upon the most recent financial statements available to the Company.

Note 3: Active market is market value; and no market is net value, which calculated by closing rate.

• 62 -

TABLE 2

MACRONIX INTERNATIONAL CO., LTD. AND SUBSIDIARY

TOTAL PURCHASES FROM OR SALES TO RELATED PARTIES AMOUNTING TO AT LEAST NT$100 MILLION OR 20% OF THE PAID-IN CAPITAL FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2015

(In Thousands of New Taiwan Dollars, Unless Stated Otherwise)

Buyer	Related Party	Relationship		Transaction Details	Transaction Details	Transaction Details	Abnormal Transaction	Abnormal Transaction	Notes/Accounts Receivable (Payable)	Notes/Accounts Receivable (Payable)	Note
			Purchase/ Sale	Amount	% to Total	Payment Terms	Unit Price	Payment Term	Ending Balance	% to Total
The Company MXHK MXA	MegaChips Corporation MXHK MXA The Company The Company	Its subsidiary, Shun Ying Investment, is represented in MXIC’s board of directors Indirect subsidiary Subsidiary Indirect subsidiary Subsidiary	Sales Sales Sales Purchase Purchase	$ 1,994,512 2,461,036 515,074 US$ 78,552 US$ 16,442	13 16 3 100 100	30 days after monthly closing 45 days after monthly closing Net 60 days 45 days after monthly closing Net 60 days	Note 35 Note 35 Note 35 No material difference No material difference	Note 35 Note 35 Note 35 No material difference No material difference	$ 479,717 535,505 79,926 US$ 16,292 US$ 2,432	13 14 2 100 100	- - - - -

• 63 -

TABLE 3

MACRONIX INTERNATIONAL CO., LTD. AND SUBSIDIARY

RECEIVABLES FROM RELATED PARTIES AMOUNTING TO AT LEAST NT$100 MILLION OR 20% OF THE PAID-IN CAPITAL SEPTEMBER 30, 2015

(In Thousands of New Taiwan Dollars, Unless Stated Otherwise)

Company Name	Related Party	Relationship	Ending Balance	Turnover Rate	Overdue	Overdue	Amounts Received in Subsequent Period	Allowance for Impairment Loss
					Amount	**Action Taken **
The Company	MegaChips Corporation MXHK	Its subsidiary, Shun Ying Investment, is represented in MXIC’s board of directors Indirect subsidiary	$ 479,717 535,505	5.53 times 7.37 times	$ - -	- -	JPY 1,521,229 thousand US$ 9,464 thousand	$ - -

• 64 -

TABLE 4

MACRONIX INTERNATIONAL CO., LTD. AND SUBSIDIARY

INFORMATION ON INVESTEES FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2015 (In Thousands of New Taiwan Dollars, Unless Stated Otherwise)

Investor Company	Investee Company	Location	Main Businesses and Products	Original Investment Amount	Original Investment Amount	Balance a	s ofSeptember 30, 2015	s ofSeptember 30, 2015	Net Income (Loss) of the Investee (Note 3)	Share of Profit (Loss)	Note
				September 30, 2015 (Note 1)	December 31, 2014 (Note 1)	Shares	Percentage of Ownership	Carrying Amount (Note 2)
The Company MXBVI Run Hong Hui Ying INFOMAX Infomax Samoa Mxtran Mxtran Samoa	MXA MXBVI Hui Ying Run Hong INFOMAX Mxtran MoDioTek NTTI MXE MPL MXHK MX Asia INFOMAX Mxtran MoDioTek MoDioTek Infomax Samoa Infomax HK Mxtran Samoa Mxtran HK	San Jose, California, U.S.A. Tortola, British Virgin Islands Taipei, Taiwan Taipei, Taiwan Hsinchu, Taiwan Hsinchu, Taiwan Hsinchu, Taiwan San Jose, California, U.S.A. Belgium Singapore Hong Kong Cayman Island Hsinchu, Taiwan Hsinchu, Taiwan Hsinchu, Taiwan Hsinchu, Taiwan Samoa Hong Kong Samoa Hong Kong	Sales and marketing Investment holding company Investment Investment Baseband chip, analog baseband chip, and power management chip Combi-SIM IC and the related service Wi-Fi video transmission IC and security systems IC design After-sales service After-sales service Sales and marketing Investment holding company Baseband chip, analog baseband chip, and power management chip Combi-SIM IC and the related service Wi-Fi video transmission IC and security systems Wi-Fi video transmission IC and security systems Investment holding company Investment holding company Investment holding company Investment holding company	$ 2,640 7,348,057 500,000 984,432 1,502,711 697,374 59,944 853,767 2,106 3,291 378,427 26,325 27,423 34,271 4,241 4,241 283,030 97,521 27,809 23,880	$ 2,640 7,348,057 500,000 984,432 1,502,711 607,379 59,944 850,637 2,106 3,291 378,427 26,325 27,423 34,271 4,241 4,241 264,448 97,521 27,809 23,880	100,000 223,300,000 - - 150,271,240 69,627,323 5,994,371 25,950,000 999 174,000 89,700,000 800,000 2,742,506 3,393,200 403,245 403,245 9,170,000 23,352,500 920,000 6,152,000	100.00 100.00 100.00 100.00 97.25 90.43 20.61 100.00 100.00 100.00 100.00 100.00 1.77 4.41 1.39 1.39 100.00 100.00 100.00 100.00	$ 180,409 1,633,550 24,003 25,214 421,141 66,116 18,248 317,361 96,929 16,895 519,898 53,761 7,665 3,229 1,224 1,224 8,741 5,332 (3,706 ) (4,030 )	$ (45,577 ) 22,395 (236 ) (7,639 ) (214,692 ) (58,962 ) (77,127 ) (3,860 ) 5,688 984 9,743 3,107 (214,692 ) (58,962 ) (77,127 ) (77,127 ) (23,205 ) (2,391 ) (4,886 ) (4,886 )	$ (45,568 ) 22,395 (236 ) (7,639 ) (208,788 ) (52,988 ) (15,885 ) Note 4 Note 4 Note 4 Note 4 Note 4 Note 4 Note 4 Note 4 Note 4 Note 4 Note 4 Note 4 Note 4

Note 1: The foreign currency amount was converted into New Taiwan dollars at the historical exchange rate.

Note 2: The foreign currency amount was based on unreviewed financial statements for the same reporting period; the amount was converted into New Taiwan dollars at the exchange rate on September 30, 2015

Note 3: The foreign currency amount was based on unreviewed financial statements for the same reporting period; the amount was converted into New Taiwan dollars at the average exchange rate for the nine months ended September 30, 2015.

Note 4: Under relevant regulations, no disclosure of investment gain (loss) is needed.

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TABLE 5

MACRONIX INTERNATIONAL CO., LTD. AND SUBSIDIARY

INTERCOMPANY RELATIONSHIPS AND SIGNIFICANT TRANSACTIONS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2015 (In Thousands of New Taiwan Dollars, Unless Stated Otherwise)

Investee Company	Counterparty	Relationship (Note 1)			Transaction Summary
			Account	Amount	Payment Terms (Note 4)	% to Total Revenues or Assets
MXIC	MXHK	2	Sales	$2,461,036	Note 2	16
			Notes receivable and trade receivables	535,505		1
	MXE	2	Operatingexpenses	84,957		1
			Otherpayables	30,096		-
	MXA	1	Sales	515,074	Note 2	3
			Operatingexpenses	105,319		1
			Notes receivable and trade receivables	79,926		-
			Otherpayables	51,915		-
	Mxtran	1	Rental revenue	2,591	Note3	-
	MX Asia	2	Operatingexpenses	70,014		-
			Otherpayables	21,066		-
	INFOMAX	1	Rental revenue	5,649	Note3	-

• Note 1: 1. Transaction was between the parent company and subsidiaries.

• Transaction was between the parent company and indirect subsidiaries.

Note 2: The sale price referred to the product price to end customer.

Note 3: The Company leased office to related parties and collected rental revenue according to the floor space per month.

Note 4: The transaction terms with related parties were 30 to 60 days after monthly closing and were similar to those with third parties.

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TABLE 6

MACRONIX INTERNATIONAL CO., LTD. AND SUBSIDIARY

INFORMATION ON INVESTMENT IN MAINLAND CHINA FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2015 (In Thousands of New Taiwan Dollars, Unless Stated Otherwise)

Investee Company	Main Businesses and Products	Main Businesses and Products	Total Amount of Paid-in Capital (Note 3)	Method of Investment	Accumulated Outward Remittance for Investment from Taiwan as of January 1, 2015 (Note 3)	Accumulated Outward Remittance for Investment from Taiwan as of January 1, 2015 (Note 3)	Investment Flows	Investment Flows	Accumulated Outward Remittance for Investment from Taiwan as of September 30, 2015 (Note 3)	Net Income (Loss) of the Investee	% Ownership for Direct or Indirect Investment (Note 4)	Investment Gain (Loss) (Note 5)	Carrying Amount as of September 30, 2015 (Note 6)	Accumulated Inward Remittance of Investment Income as of September 30, 2015
							Outward	Inward
MXm Infomax SU Maxtran Beijing	Development of integrated circuit system and software Software, rendering and technical service Technical support of Combi-SIM IC		$ 296,160 82,415 23,435	(Note 1) (Note 2) (Note 2)		$ 296,160 82,415 23,435	$ - - -	$ - - -	$ 296,160 82,415 23,435	$ 12,368 (1,830 ) (4,885 )	100.00 99.02 94.84	$ 12,368 (1,812 ) (4,633 )	$ 366,836 4,266 (4,278 )	$ - - -
Accumulated Investment in Mainland China as of September 30, 2015		Investment Amount Authorized by the Investment Commission, MOEA				Upper Limit on Investment
$ 402,010 (Note 3)		$ 402,010 (Note 3)				$ 12,123,349

Note 1: The Company invested in a company located in Mainland China indirectly through the existing company in the third country.

Note 2: The Company invested in a company located in Mainland China indirectly through the investing company in the third country.

Note 3: The foreign currency amount was converted into New Taiwan dollars at the historical exchange rate.

Note 4: The percentage of ownership is based on the total holding percentage owned by the Company and its subsidiaries.

Note 5: The foreign currency amount was based on unreviewed financial statements for the same reporting period; the amount was converted into New Taiwan dollars at the average exchange rate for the nine months ended September 30, 2015.

Note 6: The foreign currency amount was based on unreviewed financial statements for the same reporting period; the amount was converted into New Taiwan dollars at the exchange rate on September 30, 2015.

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