T3EX - Annual Report 2012 | FinancialReports.eu

T.H.I. GLOBAL HOLDINGS CORP. AND SUBSIDIARIES CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2012 AND 2011 (With Independent Auditors’ Audit Report Thereon)

Independent Auditors’ Report

The Board of Directors T.H.I. Global Holdings Corp.:

We have audited the accompanying consolidated balance sheets of T.H.I. Global Holdings Corp. and its subsidiaries (the Consolidated Companies) as of December 31, 2012 and 2011, and the related consolidated statements of income, changes in stockholders’ equity, and cash flows for the years then ended. We did not audited the financial statements of long-term equity investments of the Consolidated Companies amounting to $3,074 thousand and $2,739 thousand as of December 31, 2012 and 2011, respectively, constituting 0.10% and 0.09% of the related consolidated total assets, nor the related investment income recognized under the equity method of $1,994 thousand and $1,843 thousand for the years then ended, respectively, constituting 1.92% and 0.99% of the related consolidated net income. Those statements were audited by other auditors whose report has been furnished to us, and our opinion, insofar as it relates to the amounts included above is based solely on the report of the other auditors.

We did not audit a consolidated subsidiary, which the financial statements reflect the total assets amounting to $11,124 thousand, constituting 0.37% of the related consolidated total assets, and total liabilities amounting to $4,998 thousand, constituting 0.28% of the related consolidated total liabilities, as of December 31, 2012, and net revenues amounting to $47,594 thousand, constituting 0.55% of the related consolidated net revenues, and a total net income amounting to $2,827 thousand, constituting 4.10% of the related consolidated net income, for the year then ended December 31, 2012. Those amounts mentioned in the paragraph based solely on the report of the other auditors.

We conducted our audits in accordance with the generally accepted auditing standards and the Regulations Governing Auditing and Certification of Financial Statements by Certified Public Accountants in the Republic of China. Those standards and regulations require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and the significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits and the report of other auditors provide a reasonable basis for our opinion.

In our opinion, based on our audits and the report of other auditors, the consolidated financial statements referred to in the first paragraph present fairly, in all material respects, the financial position of T.H.I. Global Holdings Corp. and its subsidiaries as of December 31, 2012 and 2011, and the results of its operations and its cash flows for the years then ended, in conformity with the Regulations Governing Financial Reporting for Issuers of Stock Certificates, and the generally accepted accounting principles in Republic of China.

KPMG March 26, 2013

Note to Readers

The accompanying consolidated financial statements are intended only to present the financial position, results of operations, and cash flows in accordance with accounting principles and practices generally accepted in the Republic of China and not those of any other jurisdictions. The standards, procedures and practices to Audit such consolidated financial statements are those generally accepted and applied in the Republic of China.

T.H.I. GLOBAL HOLDINGS CORP. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

DECEMBER 31, 2012 AND 2011 (Expressed in thousands of New Taiwan dollars)

	2012	2011		2012	2011
	Amount 653,580 20,054 37,303 1,284,038 11,887 97,551 2,104,413 38,800 7,682 46,482 132,594 69,299 149,295 69,042 4,851 8,096 433,177 (146,987) 2,450 288,640 335,358 21,003 9,557 365,918 124,639 23,621 27,896 176,156 2,981,609	Amount 609,574 20,188 40,249 1,269,500 33,593 77,567 2,050,671 38,800 7,455 46,255 132,594 69,299 113,948 61,864 1,389 19,689 398,783 (120,016) 26,040 304,807 337,641 9,481 - 347,122 123,241 14,689 39,373 177,303 2,926,158		Amount	Amount 245,000 49,853 - 18,044 841 523,329 698 21,468 29,766 - 247,126 1,136,125 32,883 419,490 53,363 501 506,237 24,978 24,978 1,667,340 639,076 355,808 60,089 145,188 51,610 (14,548) - 1,237,223 21,595 1,258,818 2,926,158	%
$ $			$ $	235,000 49,916 32,133 20,591 1,419 591,030 353 16,679 70,730 431,615 235,194 1,684,660 - - 20,606 483 21,089 49,877 49,877 1,755,626 726,648 356,942 74,291 73,652 3,102 (21,233) (10,121 ) 1,203,281 22,702 1,225,983 2,981,609		8 2 - - - 18 - 1 1 - 9 39 1 14 2 - 17 1 1 57 21 12 2 5 2 - - 42 1 43 100

The consolidated financial statements of T.H.I. Global Holdings Corp. and its subsidiaries were prepared in Chinese originally. The consolidated financial statements have been translated into English. The translated information is derived from the Chinese language consolidated financial statements.

T.H.I. GLOBAL HOLDINGS CORP. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

FOR THE YEARS ENDED DECEMBER 31, 2012 AND 2011 (Expressed in thousands of New Taiwan dollars, except for earnings per common share)

	2012	2011
	Amount 8,643,377 7,378,803 1,264,574 827,477 331,003 1,158,480 106,094 2,099 2,410 616 22,487 27,612 21,070 4,035 - 4,783 29,888 103,818 34,942 68,876 67,769 1,107 68,876 After tax 0.95 0.87	Amount 7,935,051 6,602,927 1,332,124 725,384 386,699 1,112,083 220,041 3,518 834 - 17,566 21,918 21,264 20,864 8,892 4,223 55,243 186,716 40,947 145,769 142,024 3,745 145,769 After tax 2.37 2.08 2.14 1.88	%
$ $ $ $			100 83 17 9 5 14 3 - - - - - - - - - - 3 1 2 2 - 2
$ $

T.H.I. GLOBAL HOLDINGS CORP. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY AND MINORITY INTEREST

FOR THE YEARS ENDED DECEMBER 31, 2012 AND 2011

(Expressed in thousands of New Taiwan dollars)

Balance at January 1, 2011 Appropriation of 2010 earnings in 2011 (note 4(m)) (note A): Legal reserve Stock dividends Cash dividends Issuance of convertible bonds(note 4(j)) Issuance of common stock arising from exercise of convertible bonds (note 4(j)) Transfer of treasury stock to employee (note 4(m)) Capital increase by cash (note 4(m)) Net income for the year ended December 31, 2011 Foreign currency translation adjustment Changes in minority interest Balance at December 31, 2011 Appropriation of 2011 earnings in 2012 (note 4(m)) (note B): Legal reserve Stock dividends Cash dividends Purchase of treasury stock (note 4(m)) Transfer of treasury stock to employee (note 4(m)) Compensation cost recognized from granting of employee stock options Unrecognized pension cost (note 4(k)) Net income for the year ended December 31, 2012 Foreign currency translation adjustment Balance at December 31, 2012		Common Stock 514,222 - 30,086 - - 10,768 - 84,000 - - - 639,076 - 87,572 - - - - - - - 726,648		Capital Surplus 147,140 - - - 33,403 19,134 6,527 149,604 - - - 355,808 - - - - (552) 1,686 - - - 356,942		Legal Reserve 45,068 15,021 - - - - - - - - - 60,089 14,202 - - - - - - - - 74,291		Unappropriated Earnings 178,643 (15,021) (30,086) (130,372) - - - - 142,024 - - 145,188 (14,202) (87,572) (37,531) - - - - 67,769 - 73,652		Cumulative Translation Adjustments 7,526 - - - - - - - - 44,084 - 51,610 - - - - - - - - (48,508 ) 3,102		Unrecognized Pension Cost - - - - - - - - - - - - - - - - - - (10,121) - - (10,121 )		Treasury Stock (24,008) - - - - - 9,460 - - - - (14,548) - - - (22,841) 15,604 - - - - (21,233 )		Minority Interest 25,048 - - - - - - - 3,745 - (7,198 ) 21,595 - - - - - - - 1,107 - 22,702		Total Stockholders’ Equity
	$ $																	893,639 - - (130,372) 33,403 29,902 15,987 233,604 145,769 44,084 (7,198 ) 1,258,818 - - (37,531) (22,841) 15,604 1,686 (10,121) 68,876 (48,508 ) 1,225,983

Note A: The employees’ bonus of $1,352 and directors’ emoluments of $4,056 appropriated from 2010 earnings have been deducted from the 2010 consolidated net income.

Note B: The employees’ bonus of $1,278 and directors’ emoluments of $3,835 appropriated from 2011 earnings have been deducted from the 2011 consolidated net income.

T.H.I. GLOBAL HOLDINGS CORP. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE YEARS ENDED DECEMBER 31, 2012 AND 2011 (Expressed in thousands of New Taiwan dollars)

FOR THE YEARS ENDED DECEMBER 31, 2012 AND 2011 (Expressed in thousands of New Taiwan dollars)
Cash flows from operating activities: Consolidated net income Adjustments to reconcile consolidated net income to net cash provided by (used in) operating activities: Evaluation loss (gain) in financial instruments, net Allowance for accounts receivable Net investment income recognized under equity method Depreciation Amortization Impairment loss Compensation cost recognized from granting of employee stock options Deferred income tax benefit Discount on bonds payable Others Change in operating assets and liabilities: Net operating assets: Increase in financial assets and liabilities at fair value through profit or loss Decrease (increase) in notes receivable Increase in accounts receivable Increase in other current assets Others Net operating liabilities: Increase (decrease) in notes payable Increase in notes payable－related parties Increase in accounts payable Increase (decrease) in accounts payable－related parties Decrease in income tax payable Increase in accrued expenses and other current liabilities Increase in accrued pension liabilities Net cash provided by (used in) operating activities Cash flows from investing activities: Proceeds from disposal of investment in financial assets carried at cost Net impact of loss of control over subsidiary Increase in new subsidiary Acquisition of property, plant and equipment Proceeds from disposal of property, plant and equipment Decrease (increase) in refundable deposits Additions to other assets－deferred charges Decrease in restricted assets Cash dividends received Cash in-flows (out-flows) from acquisition Net cash used in investing activities Cash flows from financing activities: Decrease in short-term borrowings Increase in short-term notes and bills payable Issuance of convertible bonds Increase (decrease) in long-term borrowings Increase (decrease) in lease liabilities－non-current Decrease in other liabilities Cash dividends paid Issuance of common stock Purchase of treasury stock Transfer of treasury stock to employees Change in minority interest Net cash provided by (used in) financing activities Effect of exchange rate changes Net increase in cash and cash-in-banks Cash and cash-in-banks at beginning of period Cash and cash-in-banks at end of period Supplemental disclosures of cash flow information: Cash paid during the period for: Interest, excluding capitalized interest Income taxes Supplemental information on non-cash investing and financing activities: Increase in capital surplus resulting from issuance of convertible bonds Foreign currency translation adjustment Stock dividends Acquisition of 100% of Wai Hung (China-HK) Cargo Transport Co., Ltd. in 2012. The balance on the acquisition date was as below. Accounts receivable Refundable deposits Cash and cash-in-banks Other current assets Accounts payable Accrued expense Other payable Income tax payable Net assets on the acquisition date Intangible assets Proceeds from long-term investment Less: cash balance Cash out-flows from acquisition		2012 68,876 (616) 26,127 (2,410) 39,506 14,223 1,039 2,771 (1,512) 12,125 (474) - 2,946 (24,366) (18,224) (3,542) 2,547 578 59,506 (345) (5,995) (22,001) 3,256 154,015 - - - (23,034) 7,259 1,301 (4,788) 12,774 1,659 (14,037 ) (18,866 ) (10,000) - - 8,207 (18) - (37,531) - (22,841) 14,519 - (47,664 ) (43,479 ) 44,006 609,574 653,580 8,945 40,908 - (48,508 ) 87,572 19,082 2,699 2,262 3,665 (8,195) (5,609) (4,461) (1,206 ) 8,237 8,062 16,299 2,262 14,037		2011 145,769 8,892 6,467 (834) 29,491 16,846 - 6,547 (8,588) 11,968 (1,801) (5,675) (9,327) (240,870) (11,499) - (22,294) 841 18,949 557 (21,295) 29,235 2,927 (43,694 ) 4 225 (325,558) (56,248) 542 (25,674) (22,648) 23,718 - 191 (405,448 ) (161,980) 49,853 495,000 (21,631) 501 (3,651) (130,372) 233,604 - 9,440 4,171 474,935 44,084 69,877 539,697 609,574 8,315 53,561 29,902 44,084 30,086
	$ $ $ $ $ $ $ $ $

T.H.I. GLOBAL HOLDINGS CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2012 and 2011

(amounts expressed in thousands of New Taiwan dollars, unless otherwise noted)

1. Organization and Business Scope

T.H.I. Global Holdings Corp. (the “Company”) was incorporated on February 4, 1987, as a company limited by shares under the laws of the Republic of China (ROC). The Company was officially listed on the Gre Tai Securities Market (the “GTSM”) on March 31, 2009.

In October 2010, in order to improve the business performance and its competitiveness, the board of directors approved a resolution to invest in Taiwan Express Co., Ltd. (TEC) to acquire 100% of its ownership.

In pursuant to a restructuring plan of the Company, which was approved by the on June 6, 2012, to transform into a holding company and to provide professional service, T.H.I. Logistics Co., Ltd. (T.H.I. Logistics) was formed to acquire the net assets spun off from the Company’s sea and air freight forwarding business. The restructuring plan was approved by the GTSM on July 2, 2012, and the restructuring date was set on November 1, 2012.

On November 1, 2012, the Company spun off its forwarding business and transfer related assets and liabilities to T.H.I. Logistics, and T.H.I. Logistics issued common shares to the Company accordingly. The book values of above-mentioned assets and liabilities were as follows.

Assets Cash and cash-in-banks Notes receivable Accounts receivable Other receivable－related parties Other current assets Property, plant and equipment Liabilities Notes payable Accounts payable Accrued expenses Accrued pension liabilities Net Assets	T.H.I. Logistics	T.H.I. Logistics
	$ $	15,055 11,791 111,526 17,462 4,027 4,783 (3,806) (12,771) (18,176) (9,891 ) 120,000

The Company mainly engages in investment after the spin-off on November 1, 2012.

T.H.I. GLOBAL HOLDINGS CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The consolidated subsidiaries (the Company and its subsidiaries, hereinafter jointly referred to as “the Consolidated Companies”), which are classified according to their primary business activities, are as follows.

T.H.I Group Ltd. (in B.V.I.) (T.H.I. BVI) Greatline International Limited (Greatline) T.H.I Group Vietnam Co., Led. (T.H.I. Vietnam) T.H.I. Group (Bangkok) Company Limited (T.H.I. Bangkok) Taiwan Express Co., Ltd. (TEC) (Note 1) T.H.I. Logistics (Note 3) T.H.I. Group (Cambodia) Co., Ltd. (T.H.I. Cambodia) T.H.I. Group Limited (in HK) (T.H.I. HK) T.H.I. Shanghai Co., Ltd. (T.H.I. Shanghai) Shanghai Yao Hua Co., Ltd. (Shanghai Yao Hua) T.H.I. Shanghai Logistics Co., Ltd. (T.H.I. Shanghai Logistics) Shanghai Long Hua Trading Co., Ltd. (Shanghai Long Hua) Shanghai Kai Hua Co., Ltd. (Shanghai Kai Hua) Taiwan Express (HK) Co., Ltd. (TEC HK) Taiwan Express (USA) Inc. (TEC US) Jin Da Logistics Co., Ltd. (Jin Da Logistics) Taiwan Express Logistics Co., Ltd. (TEC Logistics) HiWin Logistics Co., Ltd. (Note 2) (HiWin Logistics)	Date of incorporation Place of incorporation Registered capital March 2001 British Virgin Islands US$ 1,000 thousand June 2001 British Virgin Islands US$ 7,000 thousand April 2008 Ho Chi Minh City, Vietnam US$ 312,500 (VND 5,000,000 thousand) July 2009 Bangkok, Thailand US$ 72,000 (THB 5,000 thousand) September 1992 Republic of China 359,584 June 2012 Republic of China 130,000 March 2012 Cambodia US$ 100 thousand April 1988 Hong Kong US$ 1,600 thousand (HK$ 12,480 thousand) March 2001 Shanghai, China US$ 3,060 thousand (CNY 24,194 thousand) June 2004 Shanghai, China US$ 1,700 thousand (CNY 13,945 thousand) July 2009 Shanghai, China US$ 200 thousand (CNY 1,366 thousand) September 2009 Shanghai, China CNY 1,000 thousand September 2010 Shanghai, China CNY 1,000 thousand November 1997 Hong Kong HK$ 70,550 thousand February 2010 California, USA US$ 1,000 thousand June 1983 Republic of China 10,000 October 2003 Republic of China 10,000 August 1998 Republic of China 50,000	(Continued) Primary business Offshore settlement centre Offshore holding company Air & sea freight forwarding and packaging Air & sea freight forwarding and packaging Air & sea freight forwarding and customs clearance Air & sea freight forwarding Air & sea freight forwarding Air & sea freight forwarding Air & sea freight forwarding and customs clearance Air & sea freight forwarding and customs clearance Warehousing and logistics Goods & technology import/export services Transport and logistics Freight forwarding, customs clearance, and distribution Freight forwarding, customs clearance, and distribution Freight forwarding, customs clearance, and distribution Freight forwarding, customs clearance, and delivery services Freight forwarding, customs clearance, and distribution

T.H.I. GLOBAL HOLDINGS CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Taiwan Express (Shenzhen) Co., Ltd. (TEC Shenzhen) TEC Logistics (USA), Inc. (TEC Logistics USA) Wai Hung (China-HK) Cargo Transport Co., Ltd. (Wai Hung)	Date of incorporation Place of incorporation Registered capital February 2005 Shenzhen, China HK$ 8,500 thousand October 2010 New York, USA US$ 50 thousand September 2003 Hong Kong HK$ 100 thousand	Primary business Freight forwarding, customs clearance, and distribution Freight forwarding, customs clearance, and distribution Warehousing and distribution

Note 1: On March 24, 2011, the board of directors of Taiwan Express Co., Ltd. resolved to increase capital through the issuance of 16,000 thousand new shares, amounting to $200,000.

Note 2: In order to reduce the operating costs and integrate existing resources, Han Hsan Rai Logistics Co., Ltd. merged with Yi Hsie Logistics Co., Ltd. and was renamed HiWin Logistics Co., Ltd. The merger was registered with the ROC government authority.

Note 3: T.H.I. Logistics issued 12 million shares at $10 per share to exchange for the sea and air freight forwarding business from the Company as set-forth in the spin-off plan.

As of December 31, 2012 and 2011, the Consolidated Companies had 1,447 and 1,346 employees, respectively.

2. Summary of Significant Accounting Policies

The consolidated financial statements are prepared in accordance with the Guidelines Governing the Preparation of Financial Reports by Securities Issuers, and accounting principles and practices generally accepted in the Republic of China. The significant accounting policies and measurement basis adopted in preparing the accompanying consolidated financial statements are summarized as follows.

(a) Consolidation policies

Companies in which the Company directly or indirectly owns more than 50% of the voting shares, or owns less than 50% but has the power to exercise control over their operations and financial policies, are fully consolidated. All significant inter-company transactions among the Consolidated Companies are eliminated in consolidation.

If the fair value of net identifiable assets of the acquired subsidiary is less than the net purchase price, the differences between the net purchase price and the net equity of the acquired subsidiary which are not individually identified and separately recognized are accounted for as goodwill.

(Continued)

T.H.I. GLOBAL HOLDINGS CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

i Consolidated subsidiaries were as follows.

Investing Company The Company The Company The Company The Company The Company The Company The Company Greatline T.H.I. HK T.H.I. HK T.H.I. HK Shanghai Yao Hua TEC TEC TEC TEC TEC TEC TEC HK TEC HK	Subsidiary T.H.I. B.V.I. Greatline T.H.I Vietnam T.H.I Bangkok TEC T.H.I. Logistics T.H.I. Cambodia T.H.I. HK T.H.I. Shanghai Shanghai Yao Hua T.H.I. Shanghai Logistics Shanghai Kai Hua TEC HK TEC USA Jin Da Logistic TEC Logistic TEC Logistics USA HiWin Logistics TEC Shenzhen Wai Hung	Percentage of	Shares Held 2011.12.31 Explanation 100% 100% direct ownership by the Company 100% 100% direct ownership by the Company 51% 51% direct ownership by the Company 49% 49% direct ownership by the Company 100% 100% direct ownership by the Company - 100% direct ownership by the Company - 100% direct ownership by the Company 100% 100% indirect ownership by the Company 100% 100% indirect ownership by the Company 100% 100% indirect ownership by the Company 100% 100% indirect ownership by the Company 100% 100% indirect ownership by the Company 100% 100% indirect ownership by the Company 100% 100% indirect ownership by the Company 100% 100% indirect ownership by the Company 100% 100% indirect ownership by the Company 100% 100% indirect ownership by the Company 97.51% 97.51% indirect ownership by the Company 100% 100% indirect ownership by the Company - 100% indirect ownership by the Company
		2012.12.31 100% 100% 51% 49% 100% 100% 100% 100% 100% 100% - 100% 100% 100% 100% 100% 100% 97.51% 100% 100%

ii Movements of consolidated subsidiaries were as follows.

Investing Company	Subsidiary T.H.I. Logistics T.H.I. Cambodia T.H.I. Shanghai Logistics Wai Hung	Nature of Business Air & sea freight forwarding Air & sea freight forwarding Warehousing and logistics Warehousing and distribution	Percentage of Shares Held 2012.12.31 2011.12.31 100% - 100% - - 100% 100% -	Percentage of Shares Held 2012.12.31 2011.12.31 100% - 100% - - 100% 100% -	Changes Established in June 2012 Established in March 2012 Liquidated on August 2012. Since the liquidation date, income/loss are no longer included in the consolidated financial statements. Invested in January 2012
			2012.12.31 100% 100% - 100%
The Company The Company T.H.I. HK TEC HK				- - 100% -

iii Subsidiaries not consolidated: None.

(Continued)

T.H.I. GLOBAL HOLDINGS CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(b) Use of estimates

The preparation of the accompanying consolidated financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the consolidated financial statements and reported amounts of revenues and expenses during the reporting periods. Actual results could differ from these estimates.

(c) Foreign currency transactions and translation

The functional currency of the domestic consolidated entities is the New Taiwan dollar. The functional currency of T.H.I. B.V.I., Greatline, TEC USA, TEC Logistics USA, and T.H.I. Cambodia is the US dollar. The functional currency of T.H.I. HK, TEC HK, and Wai Hung is the Hong Kong dollar. The functional currency of T.H.I. Shanghai, Shanghai Yao Hua, T.H.I. Shanghai Logistics, Shanghai Kai Hua, and TEC Shenzhen is the Chinese Yuan. The functional currency of T.H.I. Vietnam is the Vietnamese Dong. The functional currency of T.H.I. Bangkok is the Thai Baht. The entities of the Consolidated Companies record transactions in their respective local currencies. Non-derivative foreign currency transactions are recorded at the exchange rates prevailing at the transaction date. At the balance sheet date, monetary assets and liabilities denominated in foreign currencies are translated using the exchange rates on that date. The resulting unrealized exchange gains or losses from such translations are reflected in the accompanying consolidated statements of income. Non-monetary assets and liabilities that are measured in terms of historical cost in a foreign currency are translated using the exchange rate at the date of the transaction. Non-monetary assets and liabilities that are measured at fair value in a foreign currency are translated into the reporting currency at the rates prevailing at the balance sheet date. If the non-monetary assets or liabilities are measured at fair value through profit or loss, the resulting unrealized exchange gains or losses from such translation are reflected in the accompanying consolidated statements of income. If the non-monetary assets or liabilities are measured at fair value through stockholders’ equity, the resulting unrealized exchange gains or losses from such translation are recorded as a separate component of stockholders’ equity.

Foreign long-term equity investments are recorded in their functional currencies. Their financial statements are translated into the Company’s reporting currency. Assets and liabilities in a foreign currency are translated using the exchange rate at the balance sheet date. Stockholders’ equity is translated at the historical rate with the exception of the beginning retained earnings, which are brought forward. Income and expense items are translated at the weighted-average exchange rate. Differences arising from the translations are accounted for as cumulative translation adjustment, which is a separate component of stockholders’ equity.

(Continued)

T.H.I. GLOBAL HOLDINGS CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(d) Classification criteria for current and non-current assets and liabilities

Cash or cash equivalents, and assets that will be held primarily for the purpose of being traded or are expected to be realized within 12 months after the balance sheet date are classified as current assets; all other assets are classified as non-current assets.

Liabilities that will be held primarily for the purpose of being traded or are expected to be settled within 12 months after the balance sheet date are classified as current liabilities; all other liabilities are classified as non-current liabilities.

(e) Asset impairment

The Consolidated Companies assess at each balance sheet date whether there is any indication that an asset (individual asset or cash-generating unit) other than goodwill may have been impaired. If any such indication exists, the Consolidated Companies estimate the recoverable amount of the asset. Impairment loss is recognized for an asset whose carrying value is higher than the recoverable amount. An impairment loss recognized in prior periods is reversed for assets other than goodwill if there is any indication that the impairment loss recognized no longer exists or has decreased. The carrying value after the reversal should not exceed the recoverable amount or the depreciated or amortized balance of the assets assuming no impairment loss was recognized in prior periods.

Goodwill, intangible assets with indefinite useful life, and not-in-use intangible assets are subject to impairment testing annually, and an impairment loss is recognized on the excess of carrying value over the recoverable amount thereof.

(f) Financial instruments
i Financial assets at fair value through profit or loss

An instrument is classified as a financial instrument at fair value through profit or loss if it is held for trading or investment.

The Consolidated Companies adopt transaction-date accounting for financial instrument transactions. At the beginning of recognition, financial instruments are evaluated at fair value. Except for trading-purpose financial instruments, acquisition cost or issuance cost is added to the original recognized amount.

The financial instruments the Consolidated Companies held or issued for selling or repurchasing in the short term are classified into financial assets/liabilities at fair value through profit or loss. The financial instruments held by the Consolidated Companies are open-ended funds and convertible corporate bonds.

(Continued)

T.H.I. GLOBAL HOLDINGS CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Financial instruments at fair value through profit or loss are measured at fair value. Fair value is the amount at which the asset could be bought or sold in a current transaction between willing parties. Public quotation is used for fair value. The net asset value and the closing price at the balance sheet date for open-ended funds and convertible corporate bonds, respectively, are their quotation.

Realized or unrealized changes in fair value are recognized in profit or loss.

ii Financial assets carried at cost

Financial assets that do not have a quoted market price in an active market and whose fair value cannot be reliably measured are carried at their original cost. If there is an objective evidence which indicates that a financial asset is impaired, a loss is recognized. A subsequent reversal of such impairment loss is prohibited, until these assets are disposed of.

iii Notes and accounts receivable, and other receivables

All notes and accounts receivable arise from providing services. All other receivables arise from non-operating activities.

The Consolidated Companies consider evidence of impairment for notes and accounts receivable at both a specific asset and collective level. All individually significant receivables are assessed for specific impairment. All individually significant notes and accounts receivable found not to be specifically impaired are then collectively assessed for any impairment that has been incurred but not yet identified. Receivables that are not individually significant are collectively assessed for impairment by grouping together receivables with similar risk characteristics.

In assessing collective impairment, the Consolidated Companies use historical trends of the probability of default, the timing of recoveries, and the amount of loss incurred, adjusted for management’s judgment as to whether current economic and credit conditions are such that the actual losses are likely to be greater or less than suggested by historical trends.

Losses are recognized in profit or loss and reflected in an allowance account against loans and notes and accounts receivable. When a subsequent event (e.g. repayment by a debtor) causes the amount of impairment loss to decrease, the decrease in impairment loss is reversed through profit or loss.

(Continued)

T.H.I. GLOBAL HOLDINGS CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(g) Long-term equity investments

Long-term investments in which the Consolidated Companies, directly or indirectly, own 20% or more of the investee companies’ voting shares, or own less than 20% of the investee companies’ voting shares but have significant influence on the investee companies, are accounted for by the equity method.

In accordance with the revised ROC Statement of Financial Accounting Standards (SFAS) No. 5, “Long-term Investments under Equity Method”, effective January 1, 2006, the difference between the net investment cost and investee’s net equity is accounted for as follows.

i If the cause of the difference arises from the difference between the book value and the fair value, the unamortized difference should be recognized once the cause is terminated.
ii If the fair value of net identifiable assets of the investee is less than the net purchase price, the difference is accounted for as goodwill.

When a long-term equity investment is sold, the difference between the selling price and the book value of long-term equity investments under the equity method is recognized as disposal gains or losses in the statement of income. If there is a capital surplus arising from long-term equity investments, such capital surplus is charged against the disposal gains or losses based on the disposal ratio.

(h) Finance lease

Leased assets are recognized in amounts equal to the fair value of the leased property or, if lower, the present value of the minimum lease payments, each determined at the inception of the lease. Any initial direct costs of the lessee are added to the amount recognized as an asset. The leased assets are depreciated using the straight-line method over their estimated useful lives.

(i) Property, plant and equipment

Property, plant and equipment are stated at acquisition cost. Property, plant and equipment are depreciated over their estimated useful lives using the straight-line method. Leasehold improvements are depreciated over the shorter of the lease term or estimated useful lives using the straight-line method. Depreciable assets continue to be depreciated over reassessed estimated useful lives if they are still available for use when the original estimated useful lives expire.

(Continued)

T.H.I. GLOBAL HOLDINGS CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The removal and recovery costs for property, plant and equipment that are accrued during the nonproduction period are accounted for in accordance with Interpretation (97) 340 issued by the Accounting Research and Development Foundation. A component of the property, plant and equipment is depreciated individually if it is a significant part of its total cost. The residual useful lives, the depreciation method, and the residual value are evaluated by the Consolidated Companies at each fiscal year-end, and changes therein are accounted for as changes in accounting estimates.

The estimated useful lives of the respective classes of property, plant and equipment are as follows:

Buildings and improvements	35 to 50 years
Transportation equipment	4 to 7 years
Office equipment	3 to 6 years
Leasehold improvement	1 to 5 years
Other equipment	3 to 7 years

Significant additions, improvements and replacements are capitalized. Maintenance and repair costs are expensed in the periods incurred. Gains or losses arising from disposal of property, plant and equipment are recognized as non-operating income or expense.

(j) Other assets

Deferred expenses primarily consist of the costs of computer software, office renovation, and telephone installation, and are stated at cost and amortized using the straight-line method over their economic useful lives of 1 to 5 years.

(k) Short-term notes and bills payable

Short-term notes and bills payable are valued at the present value, and discounts are recognized as a reduction of short-term notes and bills payable.

(l) Convertible bonds

Convertible bonds issued by the Company contain both a financial liability and an equity component and are recognized as compound financial instruments in accordance with ROC SFAS No. 36, “Financial Instruments: Disclosure and Presentation.” On initial recognition, the carrying amount of the liability component is measured at the fair value of a similar liability that does not have an associated equity component. The carrying amount of the equity component is then determined by deducting the fair value of the liability component from the proceeds from the issuance of convertible bonds. Transaction costs directly attributable to the issuance of the bonds are allocated to the liability and equity components in proportion to their initial carrying amounts.

(Continued)

T.H.I. GLOBAL HOLDINGS CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The difference between the initial carrying amount of the liability component and the redeemable amount that is payable on maturity is amortized and charged to interest expense using the effective interest rate method over the life of the bond.

The embedded financial instruments (put and call options) are accounted for as financial liabilities at fair value through profit and loss and measured at fair value. Changes in fair value are recognized in profit or loss.

The equity component of the convertible bonds is recognized in capital surplus upon initial recognition. In accordance with Interpretation (97) 331 issued by the Accounting Research and Development Foundation, when the conversion price is adjusted, the difference between the fair value under the revised price and the fair value under the original price is recognized in equity.

When bonds are converted, the carrying amount of the liability component (bonds and embedded derivatives) is adjusted to the fair value on the conversion date, and the resulting differences are recognized in profit or loss. The new issued common shares are recognized as the sum of the fair value of the liability component and the book value of conversion options.

(m) Retirement plan

The Company and its domestic consolidated subsidiary TEC and T.H.I. Logistics established noncontributory employee defined benefit retirement plans (the “Plans”) covering full-time employees. In accordance with the Plans, employees are eligible for retirement or are required to retire after meeting certain age or service requirements. Payments of retirement benefits are based on an employee’s average monthly salary for the last six months before the employee’s retirement and the number of points accumulated by the employee according to his/her years of service. Under this retirement plan, the Company and its domestic consolidated subsidiaries TEC and T.H.I. Logistics are responsible for making the entire pension payment.

Starting from July 1, 2005, the enforcement rules of the newly enacted Labor Pension Act (the “New Act”) require the following categories of employees to be covered by the New Act, which prescribes a defined contribution plan:

i. employees covered by the original Plan who opted to be subject to the pension mechanism under the New Act; and
ii. employees who commenced working after the enforcement date of the New Act.

In accordance with the New Act, the employer contributes monthly to the Bureau of Labor Insurance the minimum rate of 6% of each employee’s monthly wages.

(Continued)

T.H.I. GLOBAL HOLDINGS CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the defined benefit retirement plans, the Company, TEC and T.H.I. Logistics adopted ROC SFAS No. 18, “Accounting for Pensions”, which requires a company to have an actuarial calculation of its pension liability using the balance sheet date as the measurement date. Based on the actuarial calculation, these companies recognize a minimum pension liability and net periodic pension costs covering the service lives of the employees. Net pension costs include current service costs, interest costs, and projected return on plan assets, and the amortization of net transition obligation, gains or losses, and prior service cost.

The Company and TEC contribute an amount to the retirement fund monthly. This retirement fund is deposited with Bank of Taiwan. The pension payment is made from the retirement fund or recognized as current expense if insufficient.

In accordance with the New Act, the Company and its domestic consolidated subsidiaries contribute monthly to the Bureau of Labor Insurance the minimum rate of 6% of each employee’s monthly wages. Pension cost contribution is recognized as expense.

Certain of the Company’s foreign subsidiaries have defined contribution retirement plans. These plans are funded in accordance with the regulations of their respective countries. Contributions to these plans are expensed as incurred.

Subsidiaries in Hong Kong have defined contribution retirement plans. These plans are funded in accordance with the regulations of Hong Kong. Contributions to these plans are expensed as incurred periodically.

Subsidiaries in the People's Republic of China, Vietnam, and Thailand, where establishing a retirement plan is not mandatory, have defined contribution plans. These plans are funded in accordance with the regulations of their respective countries.

The remaining overseas subsidiaries are not required to establish pension plans and have not established rules for the retirement of employees. Accordingly, those entities do not apply ROC SFAS No. 18, “Accounting for Pensions.”

In accordance with ROC SFAS No. 23, “Interim Financial Reporting”, the Consolidated Companies are not required to disclose pension information normally prescribed under ROC SFAS No. 18, “Accounting for Pensions”, in their interim financial statements.

(Continued)

T.H.I. GLOBAL HOLDINGS CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(n) Treasury stock

Treasury stock is accounted for at acquisition cost. Upon disposal of the treasury stock, the sales － proceeds in excess of cost are accounted for as capital surplus treasury stock. If the sales proceeds are less than cost, the deficiency is accounted for as a reduction of the remaining balance －－ of capital surplus treasury stock. If the remaining balance of capital surplus treasury stock is insufficient to cover the deficiency, the remainder is recorded as a reduction of retained earnings. The carrying amount of the treasury stock is valued using the weighted-average method and calculated separately based on its acquisition purpose.

If treasury stock is retired, the cost of the retired treasury stock (calculated using the weightedaverage method) is written off against the par value and capital surplus, if any, of the stock retired. The excess of the cost of the treasury stock retired over the sum of both its par value and the －－ capital surplus treasury stock is accounted for as a reduction of capital surplus treasury stock, － or a reduction of retained earnings if the capital surplus treasury stock is insufficient to cover the excess. If the cost of written-off treasury stock retired is less than the sum of both its par value and － capital surplus, if any, the difference is accounted for as an increase in capital surplus treasury stock.

(o) Employees’ bonus and directors’ emoluments

Employees’ bonus and directors’ emoluments are accounted for based on Interpretation (96) 052 issued by the Accounting Research and Development Foundation. Under this interpretation, the Company and its domestic subsidiaries estimate the amount of employees’ bonus and directors’ emoluments, and recognize it as expense as services are rendered. The difference between the amount approved in the stockholders’ meeting and the amount estimated and recognized in the consolidated financial statements, if any, is accounted for as a change in accounting estimate and recognized in profit or loss.

(p) Share-based payment transactions

The Company accounts for its employee share-based payment transactions in accordance with ROC SFAS No. 39, “Share-based Payment”.

i For equity-settled share-based payment transactions, the entity shall measure the goods or services received, and the corresponding increase in equity, at the fair value of the goods or services received. The entity shall account for those services as expense as they are rendered by the counterparty during the vesting period, with a corresponding increase in equity. The vesting period varies depending on the vesting conditions. The vesting conditions include service conditions and performance conditions (including market conditions). However, vesting conditions that are not market conditions are not taken into account when estimating the fair.

(Continued)

T.H.I. GLOBAL HOLDINGS CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

ii The Black-Scholes Option Pricing Model is used when estimating the grant date fair value of the options. The factors take into account, including exercise price, expected duration, underlying stock price, expected volatility, expected dividend yield, and risk-free interest rate, are the best estimate of the authorities.

According to Section 267 of the ROC Company Act, when issuing new shares for cash, 10%-15% of new shares issued shall be reserved for employees to purchase. In accordance with Interpretation (96) 267 issued by the Accounting Research and Development Foundation, the fair value of equity on the grant date will be recognized as salary expense and capital surplus – stock option. On the exercise date, the amount shall be reclassified to capital surplus – premium on issuance.

(q) Revenues and cost recognition

Revenue of the Consolidated Companies is mainly generated from providing logistic services. Revenue is recognized when service is rendered. Costs are recognized with revenues when they occur. Expenses are recognized as incurred on an accrual basis.

(r) Income taxes

The Consolidated Companies adopted ROC SFAS No. 22, “Income Taxes,” which requires an asset and liability approach in accounting for income tax. Accordingly, deferred income tax assets and liabilities are recognized for the temporary differences between the accounting and tax basis of assets and liabilities using anticipated or enacted tax rates in effect during the years in which the differences are expected to reverse. The income tax effects resulting from taxable temporary differences are recognized as deferred income tax liabilities. The income tax effects resulting from deductible temporary differences, operating loss carryforwards, and investment tax credit are recognized as deferred income tax assets. In addition, the realization of deferred income tax assets is evaluated in order to recognize a valuation allowance, if needed. Deferred income tax assets or liabilities are classified as current or non-current based on the classification of the asset or liability related to the deferred item or, on certain transactions not directly related to an asset or liability, the timing of recognition of the deferred item for income tax purposes.

The Company and its domestic subsidiaries account for the surtax of 10% on undistributed earnings as expenses of the year the distribution of earnings is approved by a stockholders’ meeting.

In accordance with the ROC “Income Basic Tax Act,” the Company and its domestic consolidated subsidiaries’ income tax shall be the higher of taxable income calculated in accordance with the Income Tax Act or 10% of taxable income plus other tax credits. The Company and its subsidiaries have taken the above act into consideration when calculating the current period’s income tax payable.

(Continued)

T.H.I. GLOBAL HOLDINGS CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

In accordance with the ROC “Income Tax Act,” the Consolidated Companies should file their tax separately. No consolidated tax filing is allowed. The tax expense in the consolidated financial statements is the aggregate of the Company’s and its subsidiaries’ tax expenses.

(s) Earnings per common share

Earnings per common share are calculated by dividing net income by the weighted-average number of outstanding common shares. The weighted-average number of outstanding common shares is adjusted retroactively for the distribution of stock dividends to stockholders from retained earnings or capital surplus.

Stock options and common stock issued for employees’ bonus are potential common shares. Only basic earnings per share are disclosed if these potential common shares are not dilutive. Otherwise, both basic and diluted earnings per share are disclosed. In calculating the diluted earnings per share, the net income and weighted-average number of common shares outstanding are retroactively adjusted for the potential common shares assuming they are converted into common stock at the beginning of the year.

(t) Operating segment information

Operating segments are components of the Consolidated Companies that engage in business activities from which they may earn revenues and incur expenses (including revenues and expenses relating to transactions with other components of the same entity). The segment’s operating results are Audited regularly by the Consolidated Companies’ chief operating decision maker to make decisions pertaining to the allocation of resources to the segment and to assess its performance for which discrete financial information is available.

3. Changes in Accounting Principles

(a) The Consolidated Companies adopted the third revised provisions of ROC SFAS No. 34, “Financial Instruments: Recognition and Measurement”, effective January 1, 2011, for the recognition, measurement and impairment of originated loans and receivables. The adoption of this amended accounting principle had no significant impact on the Consolidated Companies’ financial statements as of and for the year ended December 31, 2011.
(b) The Consolidated Companies likewise adopted ROC SFAS No. 41, “Operating Segments”, effective January 1, 2011. According to this new accounting standard, an entity shall disclose information to enable users of its financial statements to evaluate the nature and financial effect of the business activities in which it engages and the economic environment in which it operates. Internal information that is provided to the chief operating decision maker is used as the basis for determining and disclosing the operating segment. This standard replaces ROC SFAS No. 20, “Segment Reporting”. The adoption of this new accounting standard had no impact on the Consolidated Companies’ profit and loss for the year ended December 31, 2011.

(Continued)

T.H.I. GLOBAL HOLDINGS CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

4. Significant Account Disclosures

(a) Cash and cash-in-banks

Cash on hand Cash-in-banks		2012.12.31 6,000 647,580 653,580	2011.12.31
	$ $		4,505 605,069
			609,574

(b) Financial instruments

Financial assets at fair value through profit or loss－current

Held for trading Convertible corporate bond Beneficiary certificate—fund Foreign currency forward contracts		2012.12.31 9,866 10,059 129 20,054	2011.12.31
	$ $		10,014 9,872 302
			20,188

For the years ended December 31, 2012 and 2011, loss arising from changes in the fair market value amounted to $134 and $182, respectively.

Notes receivable Less: allowance for impairment loss Accounts receivable Less: allowance for impairment loss Notes and accounts receivable, net		2012.12.31 37,327 24 37,303 1,307,107 23,069 1,284,038 1,321,341	2011.12.31
	$ $		40,273 24
			40,249
			1,282,074 12,574
			1,269,500
			1,309,749

As of December 31, 2012 and 2011, no accounts receivable were factored or provided as collateral.

(Continued)

T.H.I. GLOBAL HOLDINGS CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

－
(d) Financial assets carried at cost non-current

Central Taiwan Science Park Logistics		2012.12.31 38,800	2011.12.31
	$		38,800

(1) No publicly quoted prices were available for the above financial assets carried at cost; therefore, values were measured under the cost method.
(2) The Consolidated Companies received cash dividends of $1,940 in 2012.
(e) Long-term equity investments

THI & Maruzen Co., Ltd. Orient Air G.S.A. Co., Ltd. THI & Maruzen Co., Ltd. Orient Air G.S.A. Co., Ltd.		2012.12.31	Book value 4,608 3,074 7,682 Book value 4,716 2,739 7,455	2012 Investment income
	Percentage of ownership Acquisition cost 33.33 $ 7,449 30.00 600 $ 8,049 2011.12.31
				416 1,994 2,410 2011 Investment income (loss)
	Percentage of ownership Acquisition cost 33.33 $ 7,449 30.00 600 $ 8,049
				(1,009) 1,843 834

(Continued)

T.H.I. GLOBAL HOLDINGS CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(f) Goodwill

The movements of goodwill for the years ended December 31, 2012 and 2011, were as follows.

At January 1, 2012 Impairment loss Currency retranslations At December 31, 2012 At January 1, 2011 Currency retranslations At December 31, 2011		Goodwill 337,641 (1,039) (1,244 ) 335,358 Goodwill 337,572 69 337,641
	$ $
	$ $

(g) Short-term borrowings

Secured loans Credit loans		2012.12.31 10,000 225,000 235,000	2011.12.31
	$ $		45,000 200,000 245,000

For the years ended December 31, 2012 and 2011, the average annual interest rates ranges on short-term borrowings were 1.75% to 2.45% and 1.25%, respectively. Unused credit facilities of short-term borrowings as of December 31, 2012 and 2011, amounted to $991,472 and $975,758, respectively.

Summary of security assets is described in note 6.

(Continued)

T.H.I. GLOBAL HOLDINGS CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(h) Short-term notes and bills payable

Commercial paper Less: discount		2012.12.31 Amount Annual interest rate 50,000 2.038 (84 ) 49,916	2011.12.31	2011.12.31
		Amount 50,000 (84 ) 49,916	Amount 50,000 (147 ) 49,853	Annual interest rate
	$ $			1.43

As of December 31, 2012 and 2011, the credit facilities of commercial paper were fully used.

(i) Long-term borrowings

Type Repayment period Secured loans 2009.11.29~2014.06.10 $ Secured loans 2011.09.05~2014.09.05 Secured loans 2012.09.19~2015.09.05 Secured loans 2009.11.11~2014.11.10 Secured loans 2011.12.30~2014.09.30 Secured loans 2011.08.03~2014.04.02 Credit loans 2012.10.30~2013.03.13 Credit loans 2012.12.26~2013.12.26 Less: Current portion $	2012.12.31 4,028 2,055 3,117 11,656 40,000 480 20,000 10,000 91,336 (70,730 ) 20,606		2011.12.31 7,424 3,189 - 22,516 50,000 - - - 83,129 (29,766 ) 53,363

For the years ended December 31, 2012 and 2011, the average annual interest rates ranges on longterm borrowings were 2.00% to 7.00% and 2.00% to 4.50%, respectively. As of December 31, 2012 and 2011, unused credit facilities of long-term borrowings amounted to $90,000 and $110,000, respectively.

(j) Bond payable

(1) The Company issued the 1[st] domestic unsecured convertible bonds on January 27, 2011, with face value of $500,000.

(Continued)

T.H.I. GLOBAL HOLDINGS CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(2) The liability and equity components of the convertible bonds as of December 31, 2012 and 2011, were as follows.

Bond payable Exercise of conversion options Bond discount Less: Current portion Liability components－put and call option (accounted for as financial liabilities at fair value through profit or loss－current and non-current) Equity components－conversion option (accounted for as capital surplus－bonds conversion option) Liability components－put and call option (accounted for as evaluation gain (loss) on financial instruments) Interest expense (3) Movement of liability components－put and call option 2012 and 2011, were as follows.
	$ $ $ $

Bond payable
Exercise of conversion options
Bond discount
Less: Current portion
Liability components－put and call option (accounted
for as financial liabilities at fair value through profit
or loss－current and non-current)
Equity components－conversion option (accounted for
as capital surplus－bonds conversion option)
Liability components－put and call option (accounted
for as evaluation gain (loss) on financial instruments)
Interest expense
(3) Movement of liability components－put and call option
2012 and 2011, were as follows.

$

$
$
$

Balance on issuance date Accumulated evaluation gain (loss) on options of the convertible bonds (evaluation gain (loss) were $750 and $(8,710), respectively, for the years then ended) Less: exercise of conversion options		2012 26,423 7,960 (2,250 ) 32,133		2011 26,423 8,710 (2,250 ) 32,883
	$ $

(Continued)

T.H.I. GLOBAL HOLDINGS CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(4) The convertible bond
(i) Coupon rate: 0%
(ii) Issuance period: 5 years (January 27, 2011, to January 27, 2016)
(iii) Redemption at the option of the Company

At any time on or after February 28, 2011, and prior to December 18, 2015, when the closing price of its common shares on the Gre Tai Securities Market is equal to or greater than 30% of the conversion price for 30 consecutive trading days, or more than 90% of the bonds have been redeemed, repurchased, or converted, the Company may redeem the bonds with cash at face value.

(iv) Put option of the bondholders

On January 27, 2013, the bondholders may request the Company to repurchase the convertible bond at face value.

(v) Conversion period: At any time on or after February 28, 2011, and prior to January 17, 2016
(vi) Conversion price and its adjustments

The conversion price at issuance was $33.3 (dollars) per share. The conversion price is adjusted when the amount of issued capital increases, the cash dividend is greater than 1.5% of market price per share, the Company issues convertible debt securities and warrants at a price below the conversion price, or the issued capital decreases other than due to the retirement of stock.

On March 24, 2011, the board of directors of the Company decided to raise capital through private placement with an issuance date of May 16, 2011. Pursuant to the terms of convertible debt, the initial conversion price of $33.3 (dollars) was adjusted to $32.5 (dollars) per share. Later, in order to offset the dilution impact of dividend payment, the conversion price was adjusted to $28.68 (dollars) per share on September 5, 2011.

On June 6, 2012, the Company’s stockholders approved a resolution to distribute a stock dividend, and the dividend distribution date was set on September 21, 2012. In order to offset the dilution impact of dividend payment, the conversion price was adjusted to $24.48 (dollars) per share.

(Continued)

T.H.I. GLOBAL HOLDINGS CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

In 2011, convertible bonds with the principal amount of $31,000 had been converted into 1,077 thousand shares of common stock. There was no conversion in 2012.

The Company reclassifies the bond payable as current liabilities in accordance with the put option of the bondholders effective at any time on January 27, 2013. The reclassification is based on the conservative principle rather than the assumption that the bond payable will be settled in full within one year.

(k) Accrued pension liabilities

(1) The following table set forth the benefit obligation and accrued pension liabilities related to the Consolidated Companies as of December 31, 2012 and 2011.

Benefit obligation: Vested benefit obligation Non-vested benefit obligation Accumulated benefit obligation Projected compensation increases Projected benefit obligation Plan assets at fair value Funded status Unrecognized transition obligation Unrecognized net actuarial loss Additional minimum pension liability Accrued pension liabilities Deferred pension cost Unrecognized pension cost		2012.12.31 (53,053) (27,170 ) (80,223) (32,810 ) (113,033) 28,765 (84,268) 21,312 44,203 (31,124 ) (49,877 ) 21,003 10,121		2011.12.31
	$ $ $ $			(29,495) (24,088 ) (53,583) (31,500 ) (85,083) 28,605 (56,478) 22,858 18,123 (9,481 ) (24,978 ) 9,481 -

On November 1, 2012, the Company spun off its forwarding business and transfer all related employees to T.H.I. Logistics. As a result, a proportionate share of plan assets was transferred to T.H.I. Logistics. As of March 26, 2013, the title of plan assets has not yet been transferred.

(Continued)

T.H.I. GLOBAL HOLDINGS CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(2) The components of the net periodic pension cost for 2012 and 2011 were as follows. In 2012 and 2011, the net periodic pension cost for subsidiaries which amounted to $1,452 and $ 1,068, respectively, was included.

Service cost Interest cost Return on plan assets Amortization and deferral Net periodic pension cost		2012 1,091 1,714 (90) 1,451 4,166		2011
	$ $			974 1,381 (297 1,595
				3,653

(3) Significant actuarial assumptions used in the above calculation were as follows.

Discount rate Rate of increase in future compensation levels Expected long-term rate of return on plan assets	2012 1.375%~1.75% 3.00% 1.75%~1.875%	2011
		2.00% 3%~3.5% 2.00%

(4) In 2012 and 2011, pension cost under Defined Contribution Pension Plan was $21,161 and $23,761, respectively.
(l) Income taxes
(1) Each consolidated entity files its own separate income tax return. Income of the Company and subsidiaries incorporated in the ROC are subject to a corporate income tax rate of 17%, and they apply the Income Basic Tax Act to the calculation of their basic income tax. The income tax of the foreign subsidiaries is calculated according to their respective tax rates. In 2012 and 2011, the applicable tax rates for the foreign subsidiaries ranged from 0% to 35%.
(2) The components of income tax expense For the years ended December 31, 2012 and 2011, were as follows.

Current income tax expense Deferred income tax benefit Income tax expense		2012 36,454 (1,512 ) 34,942	2011
	$ $		49,535 (8,588 ) 40,947

(Continued)

T.H.I. GLOBAL HOLDINGS CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(3) The estimated income tax calculated on pre-tax income at each consolidated entity’s statutory income tax rate was reconciled with the income tax expense reported in the accompanying consolidated statements of income for the years ended December 31, 2012 and 2011, as follows.

Estimated income tax calculated based on financial income before tax at statutory tax rate 10% surtax on undistributed earnings Long-term investment gain under equity method Entertainment expense not deductible for tax purposes Interest expense of bond payable Prior-period adjustment in long-term investment gain or loss Prior-period tax expense adjustment and others		2012 42,725 272 (18,754) 1,774 2,061 - 6,864 34,942	2011
	$ $		92,221 - (50,808) 1,674 2,034 (3,789) (385 ) 40,947

(4) The components of temporary timing differences between the financial and tax basis, and the related income tax effects which resulted in deferred income tax assets as of December 31, 2012 and 2011, were as follows.

Deferred income tax assets－current Accrued payroll and bonuses Loss carryforwards Others Less: valuation allowance Net deferred income tax assets－current Deferred income tax assets－non-current Loss carryforwards Others Less: valuation allowance Net deferred income tax assets－non-current		2012.12.31 13,164 401 797 - 14,362 4,232 2,098 (443 ) 5,887		2011.12.31
	$ $ $ $			12,663 3,174 1,406 (976 ) 16,267 1,666 804 - 2,470

(Continued)

T.H.I. GLOBAL HOLDINGS CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

－ The net deferred income tax assets current were accounted for as “other current assets”. The － net deferred income tax assets non-current were accounted for under “other assets”

(5) The ROC tax authorities have examined the income tax returns of the Company, TEC, TEC Logistics, Jin Da Logistics, and HiWin Logistics for all years through 2010.
(6) Imputation credit account (ICA) and creditable ratio

As of December 31, 2012 and 2011, the undistributed earnings and balance of the ICA were as follows.

Undistributed earnings, from January 1, 1998 Balance of ICA Creditable ratio for earnings distribution to domestic stockholders

(m) Stockholders’ equity
(1) Common stock

As of both December 31, 2012 and 2011, the Company’s authorized capital comprised 120,000 thousand shares, of which 8,000 thousand shares were reserved for convertible debt securities and warrants, at par value of $10 (dollars) per share. Total issued capital amounted to $726,648 and $639,076 as of December 31, 2012 and 2011, respectively.

On June 6, 2012, the Company’s stockholders approved a resolution to set aside $14,202 as legal reserve and distribute a stock dividend of $87,572, a cash dividend of $37,531, bonuses for employees of $1,278, and directors’ emoluments of $3,835. The dividend distribution date was set as September 21, 2012, and the related registration processes were completed.

On March 24, 2011, in order to increase the operating capital and expand operations, the Company’s stockholders approved a resolution to raise capital through private placement. The capital raised comprised 8,400 thousand shares at $27.81 (dollars) per share, amounting to $233,604. The capital increase was registered on March 30, 2011.

(Continued)

T.H.I. GLOBAL HOLDINGS CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

On June 28, 2011, the Company’s stockholders approved a resolution to set aside $15,021 as legal reserve and distribute a stock dividend of $30,086, a cash dividend of $130,372, bonus for employees of $1,352, and directors’ emoluments of $4,056. The dividend distribution date was set as September 5, 2011, and the related registration processes were completed.

As of December 31, 2012 and 2011, the conversions of bond payable were as disclosed in note 4(j) “bond payable”.

(2) Treasury stock

(i) The Company has acquired treasury stock and transferred it to employees to provide an incentive to employees. For the years ended December 31, 2012 and 2011, the movements of the treasury stock were as below.

Item Treasury stock acquired for transfer to employees－shares (in thousands) Treasury stock acquired for transfer to employees－amount Item Treasury stock acquired for transfer to employees－shares (in thousands) Treasury stock acquired for transfer to employees－amount		2012.1.1 775 14,548 2011.1.1 1,279 24,008	Increase 1,089 22,841 Increase - -	Decrease 775 16,156 Decrease 504 9,460	2012.12.31
	$				1,089
					21,233
					2012.12.31
	$				775
					14,548

On August 1, 2012, the Company acquired 775 thousand shares with the buyback price of $18.79 (dollar) and recognized a compensation cost of $1,085. The treasury-stock acquired was fully transferred to employees for $14,519, net of transaction costs.

On April 22 and July 21, 2011, the Company acquired 525 thousand shares with the buyback price of $18.79 (dollar) and recognized a compensation cost of $6,806. The treasury-stock acquired was fully transferred to employees for $9,835, net of transaction costs. In 2011, the employee returned the treasury stocks of 21 thousand shares with a purchase price of $395.

(Continued)

T.H.I. GLOBAL HOLDINGS CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(ii) The Company valued the treasury stock using the Black Scholes stock option valuation model. The relevant inputs for the years ended December 31, 2012 and 2011, were as below.

Exercise price (in dollars) Duration Expected volatility of share price Expected dividend yield on shares Risk-free interest rate	2012 $ 18.79 - 25.406% - 0.995%	2011
		18.79 - 0.72% 1.77% 0.54%

(iii) Pursuant to the Securities and Exchange Act, the number of treasury shares shall not exceed 10% of the number of shares issued. Moreover, the total amount of treasury stock shall not exceed the sum of retained earnings, paid-in capital in excess of par value, and realized capital surplus. The Company was in possession of 1,356 thousand shares, amounting to $28,267, as of December 31, 2012, which was below the ceiling set under the Securities and Exchange Act. The ceilings set were as below.

Series 1st 2nd 3rd	Acquisition Date 2009.03.31 2011.09.30 2012.09.30	Ceiling (thousand shares) 4,897 5,532 7,266	Ceiling
			195,310 449,656 400,529

(iv) According to the Securities and Exchange Act, treasury stock cannot be collateralized. In addition, treasury shares held do not bear stockholders’ rights.
(3) Employee stock option plan

On June 28, 2012, the board of directors resolved to issue 2 thousand stock options for 2 million shares. The grant date was July 9, 2012, at which time the Company and employees agreed to the share-based payment arrangement. The major terms of the plan were as follows.

(i) Exercise price: $20.5 (the price is adjusted in accordance with the plan if there are changes in common stock)

(Continued)

T.H.I. GLOBAL HOLDINGS CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(ii) Vesting period: The options are exercisable according to the following schedule subsequent to the second anniversary of the grant date.

Exercise period 2014/7/10 2015/7/10 2016/7/10	Accumulated exercisable percentage
	50% 75% 100%

(iii) Shares to be issued: new common stock.

(iv) Applicable object: employees of the Company and subsidiaries

(v) Exercise procedure:

According to the employee stock option plan, the Company will apply to the government authorities for approval to convert options into common stock at least once each quarter and, likewise, apply to register the change in share capital with the authorities after issuing the new shares.

The Company adopted the Black-Scholes option pricing model to estimate the fair value of the options on grant date, the estimated fair value of each of the options granted on July 11, 2012, would be $4.5 dollar, and the related compensation cost would be $9,000, of which $106 and $1,580 was recognized under the Company and subsidiaries for the year ended December 31, 2012, respectively. The related assumptions used under this pricing model are as follows:

Expected cash dividend yield 0% Expected volatility of stock price 25.998% Risk-free interest rate 0.951% Duration 4 years

(Continued)

T.H.I. GLOBAL HOLDINGS CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The information related to the employee stock option plan for the year ended December 31, 2012 was as follow.

Stock options Outstanding balance at the beginning of period Options granted Options exercised Outstanding balance at the end	2012	2012
	Number of options
		- 2,000 - 2,000

(4) Capital surplus

The ROC Company Act stipulates that capital surplus must be used to offset accumulated deficit, and excess realized capital surplus can be converted to common stock for distribution of stock dividends or can be used to distribute cash dividends. Excess realized capital surplus includes additional paid-in capital and donated surplus.

Paid-in capital derived from premium on issuance of common shares Surplus arising from bond conversion option Surplus arising from treasury stock transactions Surplus arising from long-term equity investments - donated surplus and others Surplus arising from long-term equity investments under equity method Surplus arising from stock options		2012.12.31 275,828 21,205 5,975 18,004 2,912 33,018 356,942	2011.12.31
	$ $		275,828 21,205 6,527 18,004 2,912 31,332 355,808

(5) Legal reserve

The ROC Company Act stipulates that the Company must retain 10% of its annual earnings as defined in the Act until such retention equals the amount of authorized share capital. If the Company has no accumulated deficit, the legal reserve in excess of 25% of the amount of issued share capital can be transferred to new shares and distributed as stock dividends or distributed as cash dividends upon approval at a stockholders’ meeting.

(Continued)

T.H.I. GLOBAL HOLDINGS CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(6) Special reserve

Pursuant to regulations promulgated by the Financial Supervisory Commission and effective from the distribution of earnings for fiscal year 1999 onwards, a special reserve equal to the total amount of contra accounts that are accounted for as deductions from the stockholders’ equity shall be set aside from current earnings, and not distributed. This special reserve shall be made available for appropriation when these contra accounts to stockholders’ equity are reversed in subsequent periods.

(7) Unappropriated earnings and distribution of earnings

Pursuant to the Company’s articles of incorporation, after paying taxes, setting aside an amount to cover any deficit in previous years, and setting aside a legal reserve in accordance with the ROC Company Act, 1% and 3% of the remaining net earnings are to be set aside as employees’ bonus and directors’ emoluments, respectively. After the above appropriations, the distribution of remaining earnings should be determined during the stockholders’ meeting.

In order to maintain the stockholders’ return on investment, the dividend distribution shall not be lower than 50% of current earnings or unappropriated earnings, whichever is lower. However, the cash dividend shall not be lower than 10% of the total distribution of dividends.

For the years ended December 31, 2012 and 2011, the Company accrued and recognized employees’ bonus amounting to $667 and $1,278, respectively, and directors’ emoluments amounting to $2,002 and $3,835, respectively. The difference between the actual amounts of earnings appropriated for employees’ bonus and directors’ emoluments as approved in the stockholders’ meeting and those accrued in the financial statements would be treated as changes in accounting estimate and recognized in the year of distribution. Appropriation of employees’ bonus and directors’ emoluments, and the related information can be obtained from the public information website.

(Continued)

T.H.I. GLOBAL HOLDINGS CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(n) Earnings per share (“EPS”)

For the years ended December 31, 2012 and 2011, the Company’s earnings per share were calculated as follows.

2011	2011	2011
Before income tax 140,529 59,896 68,281 2.35 2.06 140,529 20,678 161,207 59,896 95 16,083 76,074 86,724 2.12 1.86	After income tax
		142,024
		59,896
		68,281
		2.37
		2.08
		142,024 20,678
		162,702
		59,896 95 16,083
		76,074
		86,724
		2.14
		1.88

(Continued)

T.H.I. GLOBAL HOLDINGS CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(o) Disclosure of financial instruments
(1) Derivative financial instruments

As of December 31, 2012 and 2011, unsettled derivative financial instruments were as below.

	2012.12.31	2012.12.31
Financial instruments Foreign exchange forward contracts – sell USD/RMB	Notional principal Contract date USD1,200 thousand 2012.12.11~ 2012.12.13 2011.12.31		Maturity date	Contract rate	Fair value
			2013.07.31~ 2013.12.31	6. 3071~ 6. 3356	129
Financial instruments Foreign exchange forward contracts – sell USD/RMB	Notional principal USD1,900 thousand	Contract date 2011.08.15~ 2011.10.14	Maturity date	Contract rate	Fair value
			2012.01.16~ 2012.05.15	6. 3216~ 6.3556	302

The unsettled derivative financial instruments were accounted for as “financial assets at fair － value through profit or loss current”.

Fair value of a derivative financial instrument is assumed to be the amount settled at the balance sheet date before the maturity date and often includes unrealized gain or losses of the current period. Fair value was determined based on quotation from financial institutions.

Notional principal only indicates outstanding contracts at the balance sheet date and is not the potential gain or loss exposed to market risk or credit risk. The Consolidated Companies do not expect any material loss on the above-mentioned financial instruments.

For the years ended December 31, 2012 and 2011, loss on the derivative contracts due to the change in fair market value amounted to $173 and $302, respectively.

Please see note 4(j) for the embedded derivative financial liabilities that arose from convertible bond payable as of December 31, 2012 and 2011.

(Continued)

T.H.I. GLOBAL HOLDINGS CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(2) Non-derivative financial instruments

The following methods and assumptions were used to estimate the fair value of each class of financial instruments.

(i) The book value of short-term financial instruments is considered to be the fair value because of the short maturity of these instruments. Therefore, the book value is considered to be a reasonable basis to assess the fair value. Such method is applicable to cash and cash-in-banks, notes and accounts receivable/payable (related parties included), other receivables/payables (related parties included), restricted assets － current, short-term borrowings, current portion of long-term borrowings, and accrued expenses.
(ii) If public quotation of the financial assets and liabilities is available, then the quote price will be the fair value. Otherwise, valuation techniques are used which should be the same as those used by market traders when quoting their prices. The fair value of privately held stock was unable to be determined because it was not traded in public markets.
(iii) Fair values of bonds payable are measured using valuation techniques in which the assumptions used should be the same as those used by market traders when quoting their prices. However, the fair value is not equivalent to the future cash outflow.
－
(iv) Since the collecting period for restricted assets non-current and refundable deposits is indeterminable, the book value is used as the fair value.
(v) The fair value of long-term borrowings is calculated by discounting the estimate future cash flows. Discount rates applied are based on rates currently available to the Company for debt with similar terms.
(vi) The contract price of off-balance-sheet financial instruments is considered to be their fair value.

(Continued)

T.H.I. GLOBAL HOLDINGS CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(3) The fair values of financial assets and liabilities evaluated by the Consolidated Companies using public quote or a valuation method were as follows.

Non-derivative financial instruments: Financial assets: Cash and cash-in-banks Notes and accounts receivable Financial assets at fair value through profit or loss－current －convertible bonds －open-end fund Financial assets carried at cost Refundable deposit Restricted assets－current and non-current Financial liabilities: Short-term borrowings Short-term notes and bills payable Notes and accounts payable (related parties included) Bond payable (current portion included) Long-term borrowings (current portion included) Lease payable－non-current Derivative Financial Instruments: Financial liabilities at fair value through profit or loss－current and non-current Financial assets at fair value through profit or loss－forward contract	2012.12.31 Public quote value Valuation method value $ 653,580 - - 1,321,341 9,866 - 10,059 - - 2 (ii) - 124,639 - 35,508 - 235,000 - 49,916 - 613,393 - 431,615 - 91,336 - 483 - 32,133 - 129	2011.12.31	2011.12.31
	Public quote value $ 653,580 - 9,866 10,059 - - - - - - - - - - -	Public quote value 609,574 - 10,014 9,872 - - - - - - - - - - -	Valuation method value
			- 1,309,749 - - 2 (ii) 123,241 48,282 245,000 49,853 542,912 419,490 83,129 501 32,883 302

(4) The fair values of non-derivative financial instruments evaluated by other than public quote or a valuation method were as follows.

Off-balance-sheet assets and liabilities: Guarantee	2012.12.31 Book Value Fair Value $ - 116,556	2011.12.31	2011.12.31
		Book Value -	Fair Value
			262,600

(Continued)

T.H.I. GLOBAL HOLDINGS CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(5) Disclosure of financial risks

(i) Market risk

The convertible bonds and open-end fund held by the Consolidated Companies were － classified as financial assets at fair value through profit or loss current and were evaluated at fair value. The Consolidated Companies are exposed to the risk of price fluctuation in beneficiary certificate markets and equity markets. The market risk is managed by professional managers. As sales and cost transactions are denominated in foreign currency, the Consolidated Companies’ foreign currency assets and liabilities are exposed to exchange rate fluctuation risk. To manage such risk, the Consolidated Companies ensure the net exposure is kept to an acceptable level.

(ii) Concentrations of credit risk

Concentrations of credit risk arise from financial instruments such as notes and accounts receivable. Like other logistics companies, the Consolidated Companies are not exposed to concentration of credit risk. To reduce credit risk of receivables, the Consolidated Companies evaluate customers’ financial position periodically. In addition, the Consolidated Companies evaluate the aging of accounts receivable periodically and accrue an allowance for impairment loss, if necessary.

(iii) Liquidity risk

Liquidity risk arises when the Consolidated Companies encounter difficulties to meet commitments associated with liabilities and other payment obligations. The Consolidated Companies’ capital and operating funds are sufficient to fulfill all obligations; therefore, the Consolidated Companies do not have material liquidity risk.

(iv) Cash flow risk related to the fluctuation of interest rates

No financial instruments of the Consolidated Companies bear floating interest rates; therefore, the Consolidated Companies do not have material cash flow risk related to the fluctuation of interest rates.

(Continued)

T.H.I. GLOBAL HOLDINGS CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

5. Transactions with Related Parties

(a) The names and relationships of the related parties with which the Consolidated Companies had significant transactions were as follows.

Name T.H.I. & Maruzen Co., Ltd (THI Japan) Orient Air G.S.A. Co Ltd (Orient Air） Mr. Yi-Tsai Yen Mr. Hsu-Hue Hsu All directors, supervisors, general manager and vice general manager	Relationship Investee of the Consolidated Companies accounted for by equity method Investee of the Consolidated Companies accounted for by equity method Chairman of the Company Director of the Company and chairman of subsidiary TEC Main management of the Consolidated Companies

(b) Significant transactions with related parties for the years ended December 31, 2012 and 2011, were as follows.
(1) Revenues

THI Japan	Type Logistics revenue		2012 Amount % of net revenue 10,490 -	2011	2011
			Amount 10,490	Amount 6,115	% of net revenue
		$			-

Trading terms of sales transactions require payment within 30 to 60 days or depend on funding needs, and are not significantly different from those with third-party customers.

(2) Cost of revenues

	2012	2011
	Amount 895 12,284 13,179	Amount 505 10,453 10,958	% of net cost
$ $			- -
			-

Trading terms of cost transactions require payment within 30 to 60 days or depend on funding needs, and are not significantly different from those with third-party vendors.

(Continued)

T.H.I. GLOBAL HOLDINGS CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(3) Accounts receivable

Orient Air		2012.12.31 Amount % - -	2011.12.31	2011.12.31
		Amount -	Amount 3	%
	$			-

(4) Notes and accounts payable

Orient Air		2012.12.31 Amount % 1,772 -	2011.12.31	2011.12.31
		Amount 1,772	Amount 1,539	%
	$			-

(5) For the years ended December 31, 2012 and 2011, Mr. Yi-Tsai Yen and Mr. Hsu-Hue Hsu provided bank loan guarantees for the Consolidated Companies.
(c) Main management compensation

For the years ended December 31, 2012 and 2011, the compensations of the Consolidated Companies’ main management were as follows.

Salaries Bonus and special allowances Professional expense	2012 $ 23,737 6,118 1,560	2011
		20,71 3,33 1,38

For the details of the above amounts, including estimated employees’ bonus and directors’ and supervisors’ emolument, please see note 4(m).

(Continued)

T.H.I. GLOBAL HOLDINGS CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

6. Pledged Assets

Pledged Assets Land Buildings and Improvements, net Transportation Equipment Restricted Assets－－Bank Deposit－Reserve Account －Bank Deposit－Reserve Account －Bank Deposit－Reserve Account －Certificate of Deposit －Certificate of Deposit －Time Deposit －Certificate of Deposit －Certificate of Deposit	Collateralized Asset/Borrowing		2012.12.31 132,594 49,677 23,592 - 6,719 1,638 13,754 - 8,439 2,309 2,649 241,371	2011.12.31
	Short-term Loans Credit Short-term Loans Credit Long-term Loans Credit Airline Guarantees Short-term Loans Credit Forward Exchange Guarantees Harbour Bureau and Airline Guarantees Short-term Notes and Bills Payable Bank Guarantees Forward Exchange Guarantees Warehouse Rental and Customs Guarantees	$ $		126,559 53,251 22,654 2,910 18,344 - 5,100 10,000 7,957 - 3,971 250,746

7. Significant Commitments and Contingencies

(a) As of December 31, 2012, guarantees issued by financial institutions for the Consolidated Companies with air freight forwarding services were US$50 thousand, HK$5,600 thousand and $33,450.
(b) In order to improve the quality of customer service, decrease operating costs, and increase competitiveness, the Consolidated Companies have signed annual contracts with American-line sea cargo companies for a predetermined volume of containers.
(c) In order to expand market share in the China market, the Consolidated Companies signed a transportation agent agreement with Shanghai Dazhong International Freight Forwarding Co., Ltd., a subsidiary of Shanghai Dazhong Transportation Group Co., Ltd.
(d) In order to integrate and strengthen the Company’s information system, the Company signed a contract for enterprise resource planning system development in 2011 and 2010. The aggregate cost of the contract was $6,922 as of December 31, 2012; the amount yet to be paid is $2,018.

(Continued)

T.H.I. GLOBAL HOLDINGS CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(e) As of December 31, 2012, the Consolidated Companies had operating lease contracts for office premises, warehouses, and vehicles for business use, with future rental commitments as follows:

Period 2013.1.1～2013.12.31 2014.1.1～2014.12.31 2015.1.1～2015.12.31 2016.1.1～2016.12.31		Amount
	$ $	127,156 78,787 6,176 3,721 215,840

(f) For commitments and guarantees of related parties, please see Note 5.
(g) The Consolidated Companies issued a promissory note of $163,210 to the bank as collateral for short-term bank borrowings, and logistics business, etc.

8. Significant Casualty Loss: None.

9. Significant Subsequent Events: None.

(a) On January 27, 2013, the bondholders exercised the put option and requested the Company to repurchase the convertible bond at face value with $332,600.
(b) On December 27, 2012, in order to improve business performance and competitive, the board of directors approved a resolution to invest in PT. Dexter Eurekatama with $45,000 to acquire 30% of its ownership. The Company has wired US$1,598 thousand after the balance sheet date.

10. Other

(a) Total personnel, depreciation, and amortization expenses incurred, categorized by function, For the years ended December 31, 2012 and 2011, were as follows:

Personnel cost: Salaries (note) Labor and health insurance Pension Others Depreciation expenses Amortization expenses	Operating costs	2012 Operating expenses 597,522 82,709 21,535 27,631 31,240 14,223	Total 646,476 87,369 23,875 29,741 39,506 14,223	Operating costs	2011 Operating expenses 554,437 64,348 27,414 37,403 29,469 16,846	Total
	48,954 4,660 2,340 2,110 8,266 -			- - - - - -		554,437 64,348 27,414 37,403 29,469 16,846

(Continued)

T.H.I. GLOBAL HOLDINGS CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note: For the years ended December 31, 2012 and 2011, the employees’ bonus amounted to $667 and $1,278, respectively, accounted for under “salary expenses”.

(b) The significant foreign currency financial assets and liabilities were as follows:

Unit: thousand

	2012.12.31			2011.12.31
Foreign currency $ 26,465 53,675 113,798 6,993 29,806 45,184	Exchange rate 29.03 3.7447 4.6186 29.03 3.7447 4.6186	NTD 768,285 200,995 525,581 203,008 111,615 208,687	Foreign currency 18,400 180,005 124,764 5,622 34,057 58,663	Exchange rate 30.28 3.90 4.81 30.28 3.90 4.81	NTD
					557,164 701,282 599,580 170,222 132,681 281,918

Certain amounts in the 2011 consolidated financial statements have been reclassified to conform to the presentation adopted in the 2012 consolidated financial statements for comparison purposes. These reclassifications do not have a significant impact on the consolidated financial statements.

(Continued)

T.H.I. GLOBAL HOLDINGS CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(d) In accordance with an FSC Ruling, all public companies should prepare their financial statements to comply with International Financial Reporting Standards (“IFRSs”). As a result, the Consolidated Companies set up an IFRSs project team led by the General Manager. The plan and progress of the IFRSs project were as follows.

Plan 1. Assessment (January 1, 2010, to December 31, 2011): ◎Establish IFRSs project team ◎Internal employee training Phase I ◎Compare differences between the accounting policy and IFRSs ◎Assess adjustments of the accounting policy ◎Assess adoption for IFRS 1 ◎Assess adjustments of IT systems and internal control policy 2. Preparation (January 1, 2011 to December 31, 2012): ◎Adjust the accounting policy based on IFRSs ◎Determine how to apply IFRS 1 ◎Adjust IT systems and internal control policy ◎Internal employee training Phase II 3. Application (January 1, 2012, to December 31, 2013): ◎Test IT systems ◎Prepare opening IFRS statement of financial position at the date of transition to IFRSs ◎Prepare financial statements under IFRSs	Responsible Department Accounting Accounting Accounting Accounting Accounting Internal Audit, IT Accounting Accounting Internal Audit, IT Accounting IT Accounting Accounting	Status of Execution
		Done Done Done Done Done Done Done Done Done Done Done Done In progress

(Continued)

T.H.I. GLOBAL HOLDINGS CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(e) Major reconciliations between ROC GAAP and IFRSs were as follows.
(1) Balance sheet as of January 1, 2012

Current assets (i) Long-term investments Net property, plant and equipment Intangible assets (iii) (iv) Other assets (i), (ii) and (iii) Total assets Current liabilities (ii) Long-term liabilities Other liabilities (iii) Total liabilities Common stock Capital surplus Retained earnings (vi) Cumulative translation adjustments (v) Treasury stock Non-controlling interest Stockholders’ equity Total liabilities and stockholders’ equity		ROC GAAP 2,050,671 46,255 304,807 347,122 177,303 2,926,158 1,136,125 506,237 24,978 1,667,340 639,076 355,808 205,277 51,610 (14,548) 21,595 1,258,818 2,926,158	Reconciliation (16,267) - - (15,481) 22,210 (9,538 ) 2,936 - 32,020 34,956 - - 7,116 (51,610) - - (44,494 ) (9,538 )	IFRSs
	$ $ $ $			2,034,404 46,255 304,807 331,641 199,513 2,916,620 1,139,061 506,237 56,998 1,702,296 639,076 355,808 212,393 - (14,548) 21,595 1,214,324 2,916,620

(Continued)

T.H.I. GLOBAL HOLDINGS CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(2) Balance sheet as of December 31, 2012

Current assets (i) Long-term investments Net property, plant and equipment Intangible assets (iii) (iv) Other assets (i), (ii) and (iii) Total Assets Current liabilities (ii) Long-term liabilities Other liabilities (iii) Total liabilities Common stock Capital surplus Retained earnings (vi) Cumulative translation adjustments (v) Treasury stock Unrecognized pension cost (iii) Non-controlling interest Stockholders’ equity Total liabilities and stockholders’ equity		ROC GAAP 2,104,413 46,482 288,640 365,918 176,156 2,981,609 1,684,660 21,089 49,877 1,755,626 726,648 356,942 147,943 3,102 (21,233) (10,121) 22,702 1,225,983 2,981,609	Reconciliation (14,362) - - (33,003) 20,305 (27,060 ) 2,936 - 8,641 11,577 - - 2,852 (51,610) - 10,121 - (38,63 7) (27,060 )		IFRSs
	$ $				2,090,051 46,482 288,640 332,915 196,461 2,954,549 1,687,596 21,089 58,518 1,767,203 726,648 356,942 150,795 (48,508) (21,233) - 22,702 1,187,346 2,954,549

(3) Income statement for the year ended December 31, 2012

Net revenues Cost of revenues Gross profit Operating expense (iii)(iv) Operating income Non-operating income and gains Non-operating expenses and losses Income before income tax Income tax expense Consolidated net income Attribution: Equity holders of the parent Minority interest net income	ROC GAAP $ 8,643,377 7,378,803 1,264,574 1,158,480 106,094 27,612 29,888 103,818 34,942 68,876 67,769 1,107 $ 68,876	Reconciliation - - - 4,264 (4,264) - - (4,264) - (4,264 ) (4,264) - (4,264 )	IFRSs
			8,643,377 7,378,803 1,264,574 1,162,744 101,830 27,612 29,888 99,554 34,942 64,612 63,505 1,107 64,612

(Continued)

T.H.I. GLOBAL HOLDINGS CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(4) Explanation of transition to IFRSs
(i) The income tax effects resulting from taxable temporary differences are recognized as deferred income tax assets or liabilities. Under IFRSs, deferred tax assets and liabilities are classified as non-current assets and liabilities. In addition, an entity is eligible to offset tax assets against tax liabilities generated from the same taxable entity only if the entity has a legally enforceable right to make this offset and meets other related conditions. As of January 1 and December 31, 2012, the amounts reclassified from －－
deferred income tax assets current to deferred income tax assets non-current were $16,267 and $14,362, respectively.
(ii) Under IFRSs, the expected cost of accumulated compensated absences should be recognized as the employees render services that increase their entitlement to these compensated absences. As of January 1 and December 31, 2012, the evaluation adjustments resulted in an increase in accrued expense of $2,936 and in deferred income tax assets of $499. In addition, unappropriated earnings were decreased by $2,437.
(iii) The Consolidated Companies had previously applied actuarial valuation to their defined benefit obligations and recognized the related pension cost and retirement benefit obligation in conformity with the ROC GAAP. At the transition date, the Consolidated Companies performed an actuarial valuation under IAS No. 19 and recognized the valuation difference as retained earnings under the adoption of IFRS 1. As of January 1, 2012, the evaluation adjustments resulted in a decrease in deferred pension cost of $9,481, an increase in accrued pension liabilities of $32,020 and in deferred income tax assets of $5,444, and a decrease in unappropriated earnings of $36,057. As of December 31, 2012, the evaluation adjustments resulted in a decrease in deferred pension cost of $21,003, a net loss not recognized as pension cost of $10,121, an increase in accrued pension liabilities of $8,641 and in deferred income tax assets of $5,444, a decrease in unappropriated earnings of $36,057, and a decrease in pension expense of $1,736.
(iv) The Consolidated Companies designated the identifiable assets acquired in the business combination and reclassified it as intangible assets amounting to $60,000. The intangible assets were amortized using the straight-line method starting from the acquisition date. As of January 1, 2012, the evaluation adjustments resulted in a decrease in unappropriated earnings of $6,000. For the year ended December 31, 2012, the amortization expense was increased by $6,000.
(v) The Consolidated Companies elected to use the exemption in IFRS 1, and cumulative translation differences for all foreign operations are deemed to be zero at the date of transition to IFRSs and are reclassified to retained earnings in the amount of $51,610.

(Continued)

T.H.I. GLOBAL HOLDINGS CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

  - (vi) The Consolidated Companies elected to use the exemption in IFRS 1 and reclassified the cumulative translation differences to retained earnings of $51,610 and appropriated special reserve of $7,116 accordingly pursuant to FSC Ruling No. 1010012865 effective April 6, 2012.

(f) The Consolidated Companies shall use the accounting policy that complies with IFRSs, except for exceptions in IFRS 1 or exemptions the Consolidated Companies elected, in their opening IFRS statement of financial position and throughout all periods presented in their first IFRS financial statements. The exemptions the Consolidated Companies elected were as follows.
(1) The Consolidated Companies elected not to apply IFRS 3 retrospectively to business combinations that occur before December 31, 2011.
(2) The Consolidated Companies elected the exemption regarding cumulative translation differences. As a result, cumulative translation differences for all foreign operations are deemed to be zero at the date of transition to IFRSs and are reclassified to retained earnings.
(3) The Consolidated Companies elected to recognize all cumulative actuarial gains and losses at December 31, 2011.
(4) The Consolidated Companies elected not to split a compound financial instrument into separate liability and equity components if the liability component is no longer outstanding at December 31, 2011.
(5) The Consolidated Companies will not restate the service cost for the equity instruments that were vested or settled before December 31, 2011.
(g) The Consolidated Companies’ foregoing assessment is based on the 2010 version of IFRSs approved by the FSC. However, the assessment result may change as the FSC may issue new rules governing the adoption of IFRSs and as other laws and regulations may be amended to comply with the adoption of IFRSs. Actual results may differ from these assessments.

11. Segment Financial Information

(a) General Information

The Consolidated Companies base segments on geographic regions such as Taiwan, China and Hong Kong, and other regions. Each segment provides its own sea and air freight forwarding service and logistics support service. The Consolidated Companies’ reporting segments are regional institutions providing different services customized to individual needs of customers in different regions. Because each regional institution faces a different market environment, different operating strategies and separate management are required.

(Continued)

T.H.I. GLOBAL HOLDINGS CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(b) Information regarding reporting segments’ profit and loss, assets, liabilities, measuring method, and adjustments

			2012.12.31
Revenue from External Customers Internal-departmental Income Total Revenue Segment Income Interest Revenue Interest Expense Investment Income General Revenue/Expense (Net) Net Income Before Income Tax Segment Assets Long-term Equity Investments Total Segment Assets		Taiwan 2,252,215 137,940 2,390,155 (4,391 ) 1,064,370		Other regions 151,362 97,020 248,382 6,976 447,956	Elimination - (526,140 ) (526,140 ) 3,221 $ (367,489) $	Total
	$ $ $ $					8,643,377 - 8,643,377 106,094 2,099 (21,070) 2,410 14,285 103,818 2,973,927 7,682 2,981,609
Revenue from External Customers Internal-departmental Income Total Revenue Segment Income Interest Revenue Interest Expense Investment Income General Revenue/Expense (Net) Net income Before Income Tax Segment Assets Long-term Equity Investments Total Segment Assets		Taiwan 2,185,118 200,821 2,385,939 (3,258 ) 989,715	China and Hong Kong 5,628,554 406,034 6,034,588 214,997 1,739,550	Other regions 121,379 80,193 201,572 7,234 350,252	Elimination - (687,048 ) (687,048 ) 1,068 $ (160,814 ) $	Total
	$ $ $ $					7,935,051 - 7,935,051 220,041 3,518 (21,264) 834 (16,413 ) 186,716 2,918,703 7,455 2,926,158

T.H.I. GLOBAL HOLDINGS CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(c) Entity integral information
(1) Production information

Revenues from external customers

Sea export Air export Others		2012 5,019,151 1,963,609 1,660,617 8,643,377		2011
	$ $			4,172,475 2,143,746 1,618,830 7,935,051

(2) Geographic information

The noncurrent assets are categorized by the area where the assets located. The consolidated companies provide freight forwarding service. Related financial information about revenues from external customers is referred to segment information.

Non-current assets

Taiwan China and Hong Kong Other regions		2012 231,870 54,387 2,383 288,640		2011
	$ $			238,807 63,183 2,817 304,807

(d) Significant customer information

In 2012 and 2011, there is no sales to individual customer constituting over 10% of the consolidated companies’ revenue.

AI assistant

T3EX — Annual Report 2012

52176_rns_2013-05-16_9b24645b-dea4-41da-b6a2-af7d7d437138.pdf

Independent Auditors’ Report

Note to Readers

T.H.I. GLOBAL HOLDINGS CORP. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

DECEMBER 31, 2012 AND 2011 (Expressed in thousands of New Taiwan dollars)

T.H.I. GLOBAL HOLDINGS CORP. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

FOR THE YEARS ENDED DECEMBER 31, 2012 AND 2011 (Expressed in thousands of New Taiwan dollars, except for earnings per common share)

T.H.I. GLOBAL HOLDINGS CORP. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY AND MINORITY INTEREST

FOR THE YEARS ENDED DECEMBER 31, 2012 AND 2011

(Expressed in thousands of New Taiwan dollars)

T.H.I. GLOBAL HOLDINGS CORP. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE YEARS ENDED DECEMBER 31, 2012 AND 2011 (Expressed in thousands of New Taiwan dollars)

T.H.I. GLOBAL HOLDINGS CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2012 and 2011

(amounts expressed in thousands of New Taiwan dollars, unless otherwise noted)

1. Organization and Business Scope

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

T.H.I. GLOBAL HOLDINGS CORP. AND SUBSIDIARIES

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2. Summary of Significant Accounting Policies

(a) Consolidation policies

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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(b) Use of estimates

(c) Foreign currency transactions and translation

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

T.H.I. GLOBAL HOLDINGS CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

T.H.I. GLOBAL HOLDINGS CORP. AND SUBSIDIARIES

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(m) Retirement plan

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(n) Treasury stock

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(q) Revenues and cost recognition

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

3. Changes in Accounting Principles

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

4. Significant Account Disclosures

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(f) Goodwill

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(h) Short-term notes and bills payable

(i) Long-term borrowings

(j) Bond payable

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

T.H.I. GLOBAL HOLDINGS CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(k) Accrued pension liabilities

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

T.H.I. GLOBAL HOLDINGS CORP. AND SUBSIDIARIES

T3EX Annual Report 2012