Transcend - Interim / Quarterly Report 2014

TRANSCEND INFORMATION, INC. AND SUBSIDIARIES

CONSOLIDATED FINANCIAL STATEMENTS AND REVIEW REPORT OF INDEPENDENT

ACCOUNTANTS

JUNE 30, 2014 AND 2013

-----------------------------------------------------------------------------------------------------------------------------------For the convenience of readers and for information purpose only, the auditors’ report and the accompanying financial statements have been translated into English from the original Chinese version prepared and used in the Republic of China. In the event of any discrepancy between the English version and the original Chinese version or any differences in the interpretation of the two versions, the Chinese-language auditors’ report and financial statements shall prevail.

REVIEW REPORT OF INDEPENDENT ACCOUNTANTS TRANSLATED FROM CHINESE

PWCR14000031

To the Board of Directors and Stockholders of Transcend Information, Inc.

We have reviewed the accompanying consolidated balance sheets of Transcend Information, Inc. and its subsidiaries as of June 30, 2014 and 2013 and the related consolidated statements of comprehensive income for the three-month and six-month periods ended June 30, 2014 and 2013, as well as the consolidated statements of changes in equity and of cash flows for the six-month periods ended June 30, 2014 and 2013. These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to issue a report on these consolidated financial statements based on our reviews. We did not review the financial statements of equity investments accounted for under the equity method. The investment loss from these equity investments amounting to NT$1,253 thousand for both the three-month and six-month periods ended June 30, 2013, and the information of investee company as disclosed in Note 13 were solely based on the financial statements which were reviewed by other independent accountants. As of June 30, 2013, the equity investment accounted for under the equity method was NT$250,405 thousand.

We conducted our reviews in accordance with the Statement of Auditing Standards No. 36 “Engagements to Review Financial Statements” in the Republic of China. A review consists primarily of inquiries of company personnel and analytical procedures applied to financial data. It is substantially less in scope than an audit conducted in accordance with generally accepted auditing standards in the Republic of China, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion.

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Based on our reviews, we are not aware of any material modifications that should be made to the consolidated financial statements referred to in the first paragraph for them to be in conformity with the “Rules Governing the Preparations of Financial Statements by Securities Issuers” and International Accounting Standard No. 34, “Interim Financial Reporting” as endorsed by the Financial Supervisory Commission.

August 7, 2014 Taipei, Taiwan Republic of China

------------------------------------------------------------------------------------------------------------------------------------------------The accompanying consolidated financial statements are not intended to present the financial position and results of operations and cash flows in accordance with accounting principles generally accepted in countries and jurisdictions other than the Republic of China. The standards, procedures and practices in the Republic of China governing the audit of such financial statements may differ from those generally accepted in countries and jurisdictions other than the Republic of China. Accordingly, the accompanying consolidated financial statements and report of independent accountants are not intended for use by those who are not informed about the accounting principles or auditing standards generally accepted in the Republic of China, and their applications in practice.

As the financial statements are the responsibility of the management, PricewaterhouseCoopers cannot accept any liability for the use of, or reliance on, the English translation or for any errors or misunderstandings that may derive from the translation.

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TRANSCEND INFORMATION, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS

(Expressed in thousands of New Taiwan Dollars)

(The consolidated balance sheets as of June 30, 2014 and 2013 are reviewed, not audited)

1100 1110 1147 1150 1170 1180 1200 1210 130X 1470 11XX 1523 1550 1600 1760 1840 1900 15XX 1XXX	Assets	Notes	June 30, 2014 AMOUNT % `$` `11,599,585` `44` `-` `-` `657,856` `3` `1,000` `-` `2,917,994` `11` `-` `-` `287,725` `1` `10,235` `-` `6,260,636` `24` `50,995` `-` `21,786,026` `83` `301,821` `1` `221,717` `1` `3,208,703` `12` `297,858` `1` `95,195` `1` `225,262` `1` `4,350,556` `17` `$` `26,136,582` `100`	December 31, 2013 AMOUNT % `$` `11,639,505` `48` `-` `-` `123,698` `1` `4,158` `-` `2,732,001` `11` `-` `-` `254,528` `1` `-` `-` `5,075,939` `21` `36,311` `-` `19,866,140` `82` `264,422` `1` `221,255` `1` `3,330,875` `14` `303,232` `1` `78,915` `-` `183,691` `1` `4,382,390` `18` `$` `24,248,530` `100`	June 30, 2013
			AMOUNT `$` `11,599,585` `-` `657,856` `1,000` `2,917,994` `-` `287,725` `10,235` `6,260,636` `50,995` `21,786,026` `301,821` `221,717` `3,208,703` `297,858` `95,195` `225,262` `4,350,556` `$` `26,136,582`	AMOUNT `$` `11,639,505` `-` `123,698` `4,158` `2,732,001` `-` `254,528` `-` `5,075,939` `36,311` `19,866,140` `264,422` `221,255` `3,330,875` `303,232` `78,915` `183,691` `4,382,390` `$` `24,248,530`	AMOUNT % `$` `10,097,113` `41` `1,064` `-` `494,808` `2` `6,563` `-` `2,844,646` `12` `68,171` `-` `176,088` `1` `-` `-` `6,524,528` `26` `79,942` `-` `20,292,923` `82` `242,069` `1` `250,405` `1` `3,429,212` `14` `306,571` `1` `79,031` `-` `166,651` `1` `4,473,939` `18` `$` `24,766,862` `100`
	Current assets Cash and cash equivalents Current financial assets at fair value through profit or loss Current bond investments without active market Notes receivable, net Accounts receivable, net Accounts receivable due from related parties, net Other receivables Other receivables - related parties Inventories, net Other current assets Current Assets Non-current assets Available-for-sale financial assets-non-current Investments accounted for using equity method Property, plant and equipment Investment property, net Deferred tax assets Other non-current assets Non-current Assets Total Assets	6(1) 6(2) 6(3) 6(4) 7 7 6(5) 6(6) 6(7) 6(8), 7 and 8 6(9) 6(10) and 8

(Continued)

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TRANSCEND INFORMATION, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS

(Expressed in thousands of New Taiwan Dollars)

(The consolidated balance sheets as of June 30, 2014 and 2013 are reviewed, not audited)

					June 30, 2014			December 31, 2013	December 31, 2013			June 30, 2013
	Liabilities and Equity	Notes			AMOUNT	%		AMOUNT	%			AMOUNT	%
	Current liabilities
2100	Short-term borrowings	6(11)		`$`	`681,815`	`3`	`$`	`579,040`		`2`	`$`	`151,800`	`-`
2120	Financial liabilities at fair value	6(2)
	through profit or loss - current				`6,240`	`-`		`-`		`-`		`-`	`-`
2150	Notes payable				`4`	`-`		`1,215`		`-`		`3,780`	`-`
2170	Accounts payable				`2,721,654`	`10`		`2,669,584`	`11`			`2,243,697`	`9`
2180	Accounts payable to related	7
	parties				`68,057`	`-`		`45,801`		`-`		`24,136`	`-`
2200	Other payables	6(15)			`3,246,798`	`13`		`393,810`		`2`		`3,181,241`	`13`
2230	Current tax liabilities				`275,072`	`1`		`239,967`		`1`		`227,469`	`1`
2300	Other current liabilities				`34,442`	`-`		`50,013`		`-`		`37,555`	`-`
21XX	Current Liabilities				`7,034,082`	`27`		`3,979,430`	`16`			`5,869,678`	`23`
	Non-current liabilities
2570	Deferred tax liabilities				`378,535`	`2`		`395,542`		`2`		`387,644`	`2`
2600	Other non-current liabilities				`57,120`	`-`		`49,349`		`-`		`55,975`	`-`
25XX	Non-current Liabilities				`435,655`	`2`		`444,891`		`2`		`443,619`	`2`
2XXX	Total Liabilities				`7,469,737`	`29`		`4,424,321`	`18`			`6,313,297`	`25`
	Share capital	6(13)
3110	Common stock				`4,307,617`	`16`		`4,307,617`	`18`			`4,307,617`	`18`
	Capital surplus	6(14)
3200	Capital surplus				`4,799,075`	`18`		`4,799,075`	`20`			`4,799,075`	`19`
	Retained earnings	6(15)
3310	Legal reserve				`3,053,235`	`12`		`2,733,339`	`11`			`2,733,339`	`11`
3350	Unappropriated retained
	earnings				`6,509,834`	`25`		`7,975,047`	`33`			`6,643,680`	`27`
	Other equity interest	6(17)
3400	Other equity interest		`(`		`2,916)`	`-`		`9,131`		`- (`		`30,146)`	`-`
31XX	Total equity attributable to
	owners of parent				`18,666,845`	`71`		`19,824,209`	`82`			`18,453,565`	`75`
3XXX	Total Equity				`18,666,845`	`71`		`19,824,209`	`82`			`18,453,565`	`75`
	Commitments and contingent	9
	liabilities
	Total Liabilities and Equity			`$`	`26,136,582`	`100`	`$`	`24,248,530`	`100`		`$`	`24,766,862`	`100`

The accompanying notes are an integral part of these consolidated financial statements. See review report of independent accountants dated August 7, 2014.

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TRANSCEND INFORMATION, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Expressed in thousands of New Taiwan dollars, except Earnings Per Share) (Unaudited)

Items	Notes	Three	months endedJune30	months endedJune30
		2014		2013
4000 Operating Revenue 5000 Operating Costs 5900 Gross Profit Operating Expenses 6100 Sales and marketing expenses 6200 General and administrative expenses 6300 Research and development expenses 6000 Total operating expenses 6900 Operating Profit Non-operating Income and Expenses 7010 Other income 7020 Other gains and losses 7050 Finance costs 7060 Share of profit/(loss) of associates and joint ventures accounted for under equity method 7000 Total non-operating income and expenses 7900 Profit before Income Tax 7950 Income tax expense 8200 Profit for the period Other Comprehensive Income 8310 Foreign exchange translation differences for foreign operations 8325 Unrealized gain (loss) on available-for-sale financial assets 8399 Income tax on other comprehensive income 8300 Other comprehensive income for period 8500 Total comprehensive income Net Profit attributable to: 8610 Owners of parent Comprehensive Income attributable to: 8710 Owners of parent Earnings Per Share 9750 Basic earnings per share 9850 Diluted earnings per share

The accompanying notes are an integral part of these consolidated financial statements. See review report of independent accountants dated August 7, 2014.

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TRANSCEND INFORMATION, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY FOR THE SIX-MONTH PERIODS ENDED JUNE 30, 2014 AND 2013

(Expressed in thousands of New Taiwan Dollars)

(Unaudited)

Notes			Equityattributable to	Equityattributable to	Equityattributable to	wners of theparent	wners of theparent			Total equity
	Common stock		Capital Reserves			Retained	Earnings	Other equity interest
		Additional paid-in capital		Donated assets received	Premium from merger	Legal reserve	Unappropriated retained earnings	Currency translation differences of foreign operations	Unrealized gain or loss on available-for- sale financial assets
6(15) 6(17) 6(15) 6(17)	`$ 4,307,617` `-` `-` `-` `-` `$ 4,307,617` `$ 4,307,617` `-` `-` `-` `-` `$ 4,307,617`	`$ 4,975,222` `-` `(` `215,381 )` `-` `-` `$ 4,759,841` `$ 4,759,841` `-` `-` `-` `-` `$ 4,759,841`		`$` `4,106` `-` `-` `-` `-` `$` `4,106` `$` `4,106` `-` `-` `-` `-` `$` `4,106`	`$` `35,128` `-` `-` `-` `-` `$` `35,128` `$` `35,128` `-` `-` `-` `-` `$` `35,128`	`$ 2,448,801` `284,538` `-` `-` `-` `$ 2,733,339` `$ 2,733,339` `319,896` `-` `-` `-` `$ 3,053,235`	`$ 7,639,812` `(` `284,538 )` `(` `2,584,571 )` `1,872,977` `-` `$ 6,643,680` `$ 7,975,047` `(` `319,896 )` `(` `2,886,103 )` `1,740,786` `-` `$ 6,509,834`	`($` `95,549 )` `-` `-` `-` `106,389` `$` `10,840` `$` `27,764` `-` `-` `-` `(` `49,446 )` `($` `21,682 )`	`($` `20,718 )` `-` `-` `-` `(` `20,268 )` `($` `40,986 )` `($` `18,633 )` `-` `-` `-` `37,399` `$` `18,766`	`$ 19,294,419` `-` `(` `2,799,952 )` `1,872,977` `86,121` `$ 18,453,565` `$ 19,824,209` `-` `(` `2,886,103 )` `1,740,786` `(` `12,047 )` `$ 18,666,845`

The accompanying notes are an integral part of these consolidated financial statements. See review report of independent accountants dated August 7, 2014.

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TRANSCEND INFORMATION, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS

(Expressed in thousands of New Taiwan Dollars)

(Unaudited)

CASH FLOWS FROM OPERATING ACTIVITIES
Consolidated profit before tax for the period
Adjustments to reconcile profit before tax to net cash provided by operating
activities:
Income and expenses having no effect on cash flows
Net gains on financial assets at fair value through profit or loss

Gain on disposal of financial assets

Share of gain (loss) of associates and joint ventures accounted for using
equity method

Provision for bad debt expense

Loss (gain) on market price decline (recovery) of inventory

Net loss on financial liabilities at fair value through profit or loss

Depreciation expense

Interest income

Gains on disposal of property, plant and equipment

Changes in assets/liabilities relating to operating activities
Net changes in assets relating to operating activities
Net gain on financial assets at fair value through profit or loss
Notes and accounts receivable
Other receivables
Other receivables - related parties
Inventories
Other current assets
Increase in other non-current assets
Net changes in liabilities relating to operating activities
Net gain on financial liabilities at fair value through profit or loss
Notes and accounts payable
Other payables
Other current liabilities
Other non-current liabilities
Cash generated from operations
Interest received
Interest paid
Income tax paid
Net cash provided by operating activities
CASH FLOWS FROM INVESTING ACTIVITIES
(Increase) decrease in bond investments without active markets
Acquisition of property, plant and equipment

Proceeds from disposal of property, plant and equipment

Net cash used in investing activities
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from short-term borrowings
Net cash provided by financing activities
Effect of foreign exchange rate changes
(Decrease) increase in cash and cash equivalents
Cash and cash equivalents at beginning of period
Cash and cash equivalents at end of period For the six-month
periods ended June 30,
Notes
2014
2013
$
2,010,608 $
2,155,838
6(2)(20)
- (
27,784 )
6(3)(20)
(
5,799 ) (
106,904 )
6(7)
(
462 )
1,253
6(4)
-
3,070
6(5)
2,821 (
34,410 )
6(2)(20)
6,632
-
6(21)
117,999
118,105
6(19)
(
92,869 ) (
52,963 )
6(20)
(
813 ) (
1,450 )
-
26,719
(
182,835 ) (
331,616 )
(
11,538 )
99,341
(
10,235 )
-
(
1,187,518 ) (
267,788 )
(
14,684 ) (
21,044 )
(
41,571 ) (
8,685 )
(
392 )
-
73,115 (
1,055,326 )
(
28,077 ) (
86,913 )
(
15,571 ) (
2,022 )
7,771 (
3,892 )
626,582
403,529
71,210
55,815
(
5,038 )
-
(
257,876 ) (
259,462 )
434,878
199,882
(
534,857 )
8,485
6(8)
(
65,766 ) (
31,714 )
6(8)
56,519
4,225
(
544,104 ) (
19,004 )
98,555
-
98,555
-
(
29,249 )
43,992
(
39,920 )
224,870
11,639,505
9,872,243
$
11,599,585 $
10,097,113

The accompanying notes are an integral part of these consolidated financial statements. See review report of independent accountants dated August 7, 2014.

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TRANSCEND INFORMATION, INC. AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS JUNE 30, 2014 AND 2013

(EXPRESSED IN THOUSANDS OF NEW TAIWAN DOLLARS,

EXCEPT AS OTHERWISE INDICATED)

(Unaudited)

1. HISTORY AND ORGANIZATION

Transcend Information, Inc. (the “Company”) was incorporated under the provisions of the Company Law of the Republic of China (R.O.C.) in August 1989. The main activities of the Company and its subsidiaries (collectively referred herein as the “Group”) are manufacturing, processing and the sale of computer software and hardware, peripheral equipment and other computer components. The Securities and Futures Commission of the Republic of China had approved the Company’s shares to be listed on the Taiwan Stock Exchange and the shares started trading on May 3, 2001.

2. THE DATE OF AUTHORIZATION FOR ISSUANCE OF THE CONSOLIDATED FINANCIAL STATEMENTS AND PROCEDURES FOR AUTHORIZATION

These consolidated financial statements were authorized for issuance by the Board of Directors on August 7, 2014.

3. APPLICATION OF NEW STANDARDS, AMENDMENTS AND INTERPRETATIONS

(1) Effect of the adoption of new issuances of or amendments to International Financial Reporting Standards (“IFRS”) as endorsed by the Financial Supervisory Commission (“FSC”)

None.

(2) Effect of new issuances of or amendments to IFRSs as endorsed by the FSC but not yet adopted by the Group

According to Financial-Supervisory-Securities-Auditing No. 1030010325 issued on April 3, 2014, commencing 2015, companies with shares listed on the TWSE or traded on the Taiwan GreTai Securities Market or Emerging Stock Market shall adopt the 2013 version of IFRS (not including IFRS 9, ‘Financial instruments’) as endorsed by the FSC in preparing the consolidated financial statements. The related new standards, interpretations and amendments are listed below:

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New Standards,Interpretations andAmendments
Limited exemption from comparative IFRS 7
disclosures for first-time adopters (amendment to IFRS 1)
Severe hyperinflation and removal of fixed dates
for first-time adopters (amendment to IFRS 1)
Government loans (amendment to IFRS 1)
Disclosures－Transfers of financial assets
(amendment to IFRS 7)
Disclosures－Offsetting financial assets and financial
liabilities
IFRS 10, ‘Consolidated financial statements’
IFRS 11,‘Joint arrangements’
IFRS 12,‘Disclosure of interests in other entities’
IFRS 13, ‘Fair value measurement’
Presentation of items of other comprehensive income
(amendment to IAS 1)
Deferred tax: recovery of underlying assets
(amendment to IAS 12)
IAS 19 (revised), ‘Employee benefits’
IAS 27,‘Separate financial statements’
(as amended in 2011)
IAS 28,‘Investments in associates and joint ventures’
(as amended in 2011)
Offsetting financial assets and financial liabilities
(amendment to IAS 32)
IFRIC 20, ‘Stripping costs in the production phase
of a surface mine’
Improvements to IFRSs 2010
Improvements to IFRSs 2009－2011 Effective Date by
International Accounting
StandardsBoard

July 1, 2010
July 1, 2011
January 1, 2013
July 1, 2011
January 1, 2013
January 1, 2013
(Investment entities: January 1, 2014)
January 1, 2013
January 1, 2013
January 1, 2013
July 1, 2012
January 1, 2012
January 1, 2013
January 1, 2013
January 1, 2013
January 1, 2014
January 1, 2013
January 1, 2011
January 1, 2013

New Standards,Interpretations andAmendments Limited exemption from comparative IFRS 7 disclosures for first-time adopters (amendment to IFRS 1) Severe hyperinflation and removal of fixed dates for first-time adopters (amendment to IFRS 1) Government loans (amendment to IFRS 1) Disclosures`－`Transfers of financial assets (amendment to IFRS 7) Disclosures`－`Offsetting financial assets and financial liabilities IFRS 10, ‘Consolidated financial statements’ IFRS 11,‘Joint arrangements’ IFRS 12,‘Disclosure of interests in other entities’ IFRS 13, ‘Fair value measurement’ Presentation of items of other comprehensive income (amendment to IAS 1) Deferred tax: recovery of underlying assets (amendment to IAS 12) IAS 19 (revised), ‘Employee benefits’ IAS 27,‘Separate financial statements’ (as amended in 2011) IAS 28,‘Investments in associates and joint ventures’ (as amended in 2011) Offsetting financial assets and financial liabilities (amendment to IAS 32) IFRIC 20, ‘Stripping costs in the production phase of a surface mine’ Improvements to IFRSs 2010 Improvements to IFRSs 2009－2011	Effective Date by International Accounting StandardsBoard
	July 1, 2010 July 1, 2011 January 1, 2013 July 1, 2011 January 1, 2013 January 1, 2013 (Investment entities: January 1, 2014) January 1, 2013 January 1, 2013 January 1, 2013 July 1, 2012 January 1, 2012 January 1, 2013 January 1, 2013 January 1, 2013 January 1, 2014 January 1, 2013 January 1, 2011 January 1, 2013

Based on the Group’s assessment, the adoption of the 2013 version of IFRS has no significant impact on the consolidated financial statements of the Group, except for the following:

A. IAS 1, ‘Presentation of financial statements’

The amendment requires entities to separate items presented in OCI classified by nature into two groups on the basis of whether they are potentially reclassifiable to profit or loss subsequently when specific conditions are met. If the items are presented before tax then the tax related to each of the two groups of OCI items (those that might be reclassified and those that will not be

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reclassified) must be shown separately. Accordingly, the Group will adjust its presentation of the statement of comprehensive income.

B. IFRS 12, ‘Disclosure of interests in other entities’

The standard integrates the disclosure requirements for subsidiaries, joint arrangements, associates and unconsolidated structured entities. And, the Group will disclose additional information about its interests in consolidated entities and unconsolidated entities accordingly.

For the above items, the Group is assessing their impact on the consolidated financial statements and will disclose the affected amounts accordingly.

(3) IFRSs issued by IASB but not yet endorsed by the FSC

New standards, interpretations and amendments issued by IASB but not yet included in the 2013 version of IFRS as endorsed by the FSC:

New Standards,Interpretations and Amendments	Effective Date by International Accounting Standards Board
IFRS 9, ‘Financial instruments' Accounting for acquisition of interests in joint operations (amendments to IFRS 11) IFRIC 14, 'Regulatory deferral accounts' IFRS 15, ‘Revenue from contracts with customers' Clarification of acceptable methods of depreciation and amortisation (amendments to IAS 16 and IAS 38) Agriculture: bearer plants (amendments to IAS 16 and IAS 41) Defined benefit plans: employee contributions (amendments to IAS 19R) Recoverable amount disclosures for non-financial assets (amendments to IAS 36) Novation of derivatives and continuation of hedge accounting (amendments to IAS 39) IFRIC 21, ‘Levies’ Improvements to IFRSs 2010-2012 Improvements to IFRSs 2011-2013	January 1, 2018 January 1, 2016 January 1, 2016 January 1, 2017 January 1, 2016 January 1, 2016 July 1, 2014 January 1, 2014 January 1, 2014 January 1, 2014 July 1, 2014 July 1, 2014

New Standards,Interpretations and Amendments

Effective Date by
International Accounting
Standards Board

IFRS 9, ‘Financial instruments'
Accounting for acquisition of interests in joint operations
(amendments to IFRS 11)
IFRIC 14, 'Regulatory deferral accounts'
IFRS 15, ‘Revenue from contracts with customers'
Clarification of acceptable methods of depreciation and
amortisation (amendments to IAS 16 and IAS 38)
Agriculture: bearer plants (amendments to IAS 16 and IAS 41)
Defined benefit plans: employee contributions
(amendments to IAS 19R)
Recoverable amount disclosures for non-financial assets
(amendments to IAS 36)
Novation of derivatives and continuation of hedge accounting
(amendments to IAS 39)
IFRIC 21, ‘Levies’
Improvements to IFRSs 2010-2012
Improvements to IFRSs 2011-2013

January 1, 2018
January 1, 2016
January 1, 2016
January 1, 2017
January 1, 2016
January 1, 2016
July 1, 2014
January 1, 2014
January 1, 2014
January 1, 2014
July 1, 2014
July 1, 2014

The Group is assessing the potential impact of the new standards, interpretations and amendments above and has not yet been able to reliably estimate their impact on the consolidated financial statements.

4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Except for the compliance statement, basis of preparation and basis of consolidation that are set out below, the rest of the principal accounting policies applied in the preparation of these consolidated financial statements are the same as those disclosed in Note 4 to the consolidated financial statements

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as of and for the year ended December 31, 2013. These policies have been consistently applied to all the periods presented, unless otherwise stated.

(1) Compliance statement

A. The consolidated financial statements of the Group have been prepared in accordance with the “Rules Governing the Preparation of Financial Statements by Securities Issuers” and IAS 34, ‘Interim Financial Reporting’ as endorsed by the FSC.
B. The consolidated financial statements as of and for the six-month period ended June 30, 2014 should be read together with those as of and for the year ended December 31, 2013.

(2) Basis of preparation

A. Except for the following items, the consolidated financial statements have been prepared under the historical cost convention:
(a) Available-for-sale financial assets measured at fair value.
(b) Defined benefit liabilities recognized based on the net amount of pension fund assets less present value of defined benefit obligations.
B. The preparation of financial statements in conformity with International Financial Reporting Standards, International Accounting Standards, IFRIC Interpretations, and SIC Interpretations as endorsed by the FSC (collectively referred herein as the “IFRSs”) requires the use of certain critical accounting estimates. It also requires management to exercise its judgment in the process of applying the Group’s accounting policies. The areas involving a higher degree of judgment or complexity, or areas where assumptions and estimates are significant to the consolidated financial statements are disclosed in Note 5.

(3) Basis of consolidation

A. Basis for preparation of consolidated financial statements:
Basis for preparation of these consolidated financial statements is the same as that for preparation of the consolidated financial statements as of and for the year ended December 31, 2013.

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B. Subsidiaries included in the consolidated financial statements:

Name of Investor	Name of Subsidiary	Main Business Activities	June December June 30, 2014 31, 2013 30, 2013 Description 100 100 100 - 100 100 100 - - - 100 Note 2 100 100 100 Note 1 100 100 100 - 100 100 100 - 100 100 100 - 100 100 100 Note 1 100 100 100 - 100 100 100 - 100 100 100 - Ownership (%)	June December June 30, 2014 31, 2013 30, 2013 Description 100 100 100 - 100 100 100 - - - 100 Note 2 100 100 100 Note 1 100 100 100 - 100 100 100 - 100 100 100 - 100 100 100 Note 1 100 100 100 - 100 100 100 - 100 100 100 - Ownership (%)
			June 30, 2014	December 31, 2013
Transcend Taiwan 〞〞〞〞 Saffire Investment Ltd. Memhiro Pte. Ltd. 〞〞〞〞	Saffire Investment Ltd. (Saffire) Transcend Japan Inc. (Transcend Japan) Transcend Information UK Limited (Transcend UK) Transcend Information Inc. (Transcend USA) Transcend Korea Inc. (Transcend Korea) Memhiro Pte. Ltd. (Memhiro) Transcend Information Europe B.V. (Transcend Europe) Transcend Information Trading GmbH, Hamburg (Transcend Germany) Transcend Information (Shanghai), Ltd. (Transcend Shanghai) Transtech Trading (Shanghai) Co., Ltd. (Transtech Shanghai) Transcend Information (Hong Kong), Ltd. (Transcend Hong Kong)	Investment holding company Wholesaler of computer memory modules and peripheral products Wholesaler of computer memory modules and peripheral products Wholesaler of computer memory modules and peripheral products Wholesaler of computer memory modules and peripheral products Investment holding company Wholesaler of computer memory modules and peripheral products Wholesaler of computer memory modules and peripheral products Manufacturing, processing and sale of computer software and hardware, peripheral equipment and other computer components Wholesaler of computer memory modules, peripheral equipment and other computer components Wholesaler of computer memory modules and peripheral products	100 100 - 100 100 100 100 100 100 100 100	100 100 - 100 100 100 100 100 100 100 100

Note 1:The financial statements of Transcend USA and Transcend Germany as of and for the year ended December 31, 2013 were audited by other independent accountants. Note 2:Transcend UK is in the process of liquidation for the purpose of reorganization for the Group’s operational requirments. The investment funds were repatriated in September, 2013.

C. Subsidiaries not included in the consolidated financial statements: None.

D. Adjustment for subsidiaries with different balance sheet dates: None.

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E. Nature and extent of the restrictions on fund remittance from subsidiaries to the parent company: None.
CRITICAL ACCOUNTING JUDGEMENTS, ESTIMATES AND KEY SOURCES OF ASSUMPTION UNCERTAINTY

There was no significant change during this period. Please refer to Note 5 to the consolidated financial statements as of and for the year ended December 31, 2013 for the related information.

6. DETAILS OF SIGNIFICANT ACCOUNTS

(1) Cash and cash equivalents

Cash on handand petty cash Checking accounts and demand deposits Time deposits Cash equivalents - Bond with repurchase agreement Total	June 30,2014 1,031 $ 4,575,962 6,858,334 164,258 11,599,585 $	December31,2013 736 $ 5,608,593 5,985,468 44,708 11,639,505 $	June 30,2013
			854 $ 4,113,192 5,983,067 -
			10,097,113 $

A. The Group transacts with a variety of financial institutions all with high credit quality to disperse credit risk, so it expects that the probability of counterparty default is remote. The Group’s maximum exposure to credit risk at balance sheet date is the carrying amount of all cash and cash equivalents.
B. Cash and cash equivalents pledged as collateral had been reclassified as ‘other non-current assets’ in the amounts of $2,987, $2,981 and $3,000, as of June 30, 2014, December 31, 2013 and June 30, 2013, respectively. Please refer to Note 8.
C. As of June 30, 2014 and December 31, 2013, the bond with repurchase agreement recognized as cash equivalents is 30-day highly-liquid investments with annual interest rate of 1.50%.

(2) Financial assets / liabilities at fair value through profit or loss

Items		June 30,2014		December31,2013	June 30,2013
Current item : Financial assets at fair value through profit or loss Non-hedging derivatives Financial liabilities fair value through profit or loss Non-hedging derivatives	- $ 6,240) ($			- $ - $	1,064 $ - $

A. The Group recognised net gain (loss) of ($6,632), $2,548, ($6,632), $27,784 on financial assets / liabilities held for trading for the three-month and six-month periods ended June 30, 2014 and 2013, respectively.

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B. The non-hedging derivative instruments transaction and contract information are as follows:

DerivativeInstruments Current items: Forward foreign exchange contracts DerivativeInstruments Current items: Forward foreign exchange contracts		June 30,2014	June 30,2014
		Contract Amount (Notional Principal)	ContractPeriod

		Contract Amount (Notional Principal)	ContractPeriod
		900,000 JPY	April 23, 2013 to September 9, 2013

The Group entered into forward foreign exchange contracts to buy USD to hedge exchange rate risk of export proceeds. However, these forward foreign exchange contracts are not accounted for under hedge accounting.

(3) Current bond investments without active markets

Items Current items`：` Funds-bonds Bond with repurchase agreement	June30,2014 48,610 $ 609,246 657,856 $	December31,2013 49,185 $ 74,513 123,698 $	June30,2013
			494,808 $ -
			494,808 $

A. The counterparties of the Group’s funds investments, namely Industrial and Commercial Bank of China, Bank of China, China Construction Bank and Shanghai Pudong Development Bank, are well-known banks in the People’s Republic of China. The bond with repurchase agreements is sold by Yuanta Asset Management Limited. The maximum exposure to credit risk at balance sheet date is the carrying amount of bond investments without active markets.
B. The Group recognised gain on disposal of financial assets of $3,367, $5,289, $5,799 and $10,226 in profit or loss for the three-month and six-month periods ended June 30, 2014 and 2013, respectively.
C. No bond investments without active market were pledged to others.

(4) Accounts receivable

Accounts receivable
			June 30,2014	December31,2013				June 30,2013
Accounts receivable		$	2,964,277	$	2,779,323		$	2,880,138
Less: Allowance for bad debts	(		46,283)	(	47,322)	(		35,492)
		$	2,917,994	$	2,732,001		$	2,844,646

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A.The Group has insured credit insurance that covers accounts receivable of its major customers. Should bad debt occur, the Group will receive 90% of the losses resulting from non-payment.

B.The ageing analysis of accounts receivable that were past due but not impaired is as follows ：

Up to 30 days 31 to 90 days 91 to 180 days	June 30,2014 589,116 $ 25,010 1,899 616,025 $	December31,2013 656,958 $ 20,339 1,775 679,072 $	June 30,2013 517,575 $ 76,870 43,854 638,299 $

The above ageing analysis was based on past due date.

C.Movement analysis of financial assets that were impaired is as follows:

(a)As of June 30, 2014, December 31, 2013, and June 30, 2013, the Group’s accounts receivable that were impaired amounted to $46,283 , $47,322 and $35,492, respectively.
(b)Movements on the Group provision for impairment of accounts receivable are as follows:

			2014			2013
	Individualprovision			Individualprovision
AtJanuary 1		$	47,322		$	57,267
Provision for impairment			-			3,070
Write-offs during the period			-	(		24,845)
Net exchange differences	(		1,039)			-
At June 30		$	46,283		$	35,492

D.The credit quality of accounts receivable that were neither past due nor impaired was in the following categories based on the Group’s Credit Quality Control Policy:

Group 1 Group 2	June 30,2014 691,464 $ 1,610,505 2,301,969 $	December31,2013 682,540 $ 1,370,389 2,052,929 $	June 30,2013 879,467 $ 1,326,880 2,206,347 $

Group 1:Customers with credit line under $20,000, including a comprehensive consideration of revenues, capital, and operational performance.

Group 2:Customers with credit line over $20,000, including a comprehensive consideration of revenues, capital, and operational performance.
E.The Group’s maximum exposure to credit risk as of June 30, 2014, December 31, 2013 and June 30, 2013 was the carrying amount of every class of receivables less 90% of insurance claims.
F.The Group does not hold any collateral as security.

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(5) Inventories

June 30, 2014

		June 30,2014	June 30,2014
Raw materials Work in progress Finished goods Total Raw materials Work in progress Finished goods Total Raw materials Work in progress Finished goods Total	Cost	Allowanceforvaluation loss		Bookvalue
	3,457,742 $ 1,397,223 1,485,466 6,340,431 $	48,804) ($ 10,472) ( 20,519) ( 79,795) ($ December 31,2013		3,408,938 $ 1,386,751 1,464,947 6,260,636 $
	Cost		Allowanceforvaluation loss	Bookvalue
	2,581,990 $ 1,057,654 1,513,269 5,152,913 $	24,610) ($ 7,210) ( 45,154) ( 76,974) ($ June 30,2013		2,557,380 $ 1,050,444 1,468,115 5,075,939 $
	Cost		Allowanceforvaluation loss	Bookvalue
	3,326,693 $ 1,064,582 2,185,485 6,576,760 $	30,308) ($ 5,325) ( 16,599) ( 52,232) ($		3,296,385 $ 1,059,257 2,168,886 6,524,528 $

A.Expense and loss incurred on inventories for the three-month and six-month periods ended June 30, 2014 and 2013 were as follows:

For the three-month periods June 30,

			2014			2013
Cost of inventories sold		$	5,226,142		$	4,593,701
Reversal of inventory write-down	(		17,031)	(		4,621)
		$	5,209,111		$	4,589,080
	For the six-monthperiods					endedJune30,
			2014			2013
Cost of inventories sold		$	10,674,142		$	10,370,603
Loss on (reversal of) inventory write-down			2,821	(		34,410)
		$	10,676,963		$	10,336,193

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The reversal of inventory write-down for the six-month periods ended June 30, 2014 and 2013 was caused by the price recovery of certain finished goods affecting the allowance of valuation loss on certain raw materials, work-in-process goods and finished goods.

B.No inventories were pledged to others.

(6) Non-current available-for-sale financial assets

Items			June 30,2014	December	31,2013			June 30,2013
Non-current items`：`
Listed stocks		$	281,930	$	281,930		$	281,930
Others			31,125		31,125			31,125
Subtotal			313,055		313,055			313,055
Valuation adjustments of
available-for-sale
financial assets			18,766	(	18,633)	(		40,986)
Accumulated impairment	(		30,000)	(	30,000)	(		30,000)
Total		$	301,821	$	264,422		$	242,069

A. The Group recognised $2,197, ($149,230), $37,399 and ($20,268) in other comprehensive income (loss) for fair value change for the three-month and six-month periods ended June 30, 2014 and 2013, respectively.
B. Equity investment in Taiwan IC Packaging Corporation was initially recognized as available-for-sale financial assets. On June 17, 2013, as resolved by the Board of Directors and the shareholders’ meeting, the Group and Group’s Chairman of the Board were elected as a director and the Chairman of the Board of Taiwan IC Packaging Corporation, respectively. Pursuant to the above, the Group gained significance influence on Taiwan IC Packaging Corporation. The Group, in accordance with IAS and IFRS, reclassified the investment to investment accounted for using equity method for the amount of $251,658. Please refer to Note 6(7).
C. No available-for-sale financial assets were pledged to others.

(7) Investments accounted for using equity method

A.Details are as follows:

Investee Company	June 30,	Bookvalue 2014	Percentage of ownership Bookvalue 13.55 221,255 $ Percentage of ownership Bookvalue 13.55 250,405 $ December31,2013 June30,2013	Percentage of ownership Bookvalue 13.55 221,255 $ Percentage of ownership Bookvalue 13.55 250,405 $ December31,2013 June30,2013
	Percentage of ownership		Percentage of ownership
Taiwan IC Packaging Corp. Investee Company	13.55	221,717 $
			Percentage of ownership
Taiwan IC Packaging Corp.			13.55	250,405 $

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B.Associates – Entity controlled by the Group’s key management

The financial information of the Company’s principal associates is summarized below:

June 30, 2014 Taiwan IC Packaging Corp. December 31, 2013 Taiwan IC Packaging Corp. June 30, 2013 Taiwan IC Packaging Corp.	Assets 2,978,533 $ 3,051,768 $ 3,386,254 $	Liabilities 435,866 $ 504,558 $ 563,629 $	Revenue Profit/(Loss) 1,041,036 $ 4,543) ($ 2,249,714 $ 405,554) ($ 1,163,767 $ 119,896) ($	%interestheld 13.55% 13.55% 13.55%

C.Share of loss of investments accounted for using the equity method are as follows:

Investee Company Taiwan IC Packaging Corp. InvesteeCompany Taiwan IC Packaging Corp.	2014 2013 625 $ 1,253) ($ 2014 2013 462 $ 1,253) ($ Forthe three-monthperiods ended June 30, Forthe six-monthperiods ended June 30,

D.The Group’s investment in Taiwan IC Packaging Corporation has quoted market price. The fair value of Taiwan IC Packaging Corporation was $459,200, $291,100 and $251,289 as of June 30, 2014 , December 31, 2013 and June 30, 2014, respectively.
E.The investment loss for the three-month and six-month periods ended June 30, 2013 was recognised based on the financial statements of the investee company which was reviewed by other independent accountants.
F.The investment in Taiwan IC Packaging Corporation was reclassified from the non-current available-for-sale financial assets. Please refer to Note 6(6)C.

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(8) Property, plant and equipment

At January 1, 2014 Cost Accumulated depreciation 2014 Opening net book amount Additions Disposals Depreciation charge Net exchange differences Closing net book amount At June 30, 2014 Cost Accumulated depreciation		Land	Buildings	Machinery	Vehicles	Office Equipment	Others	Total
		729,847 $ - 729,847 $ 729,847 $ - - - 3,995 733,842 $ 733,842 $ - 733,842 $	2,780,284 $ 648,599) ( 2,131,685 $ 2,131,685 $ 804 - 59,264) ( 17,762) ( 2,055,463 $ 2,718,084 $ 662,621) ( 2,055,463 $	863,765 $ 431,096) ( 432,669 $ 432,669 $ 58,389 55,482) ( 49,453) ( 3,612) ( 382,511 $ 788,805 $ 406,294) ( 382,511 $	12,411 $ 9,238) ( 3,173 $ 3,173 $ 1,618 189) ( 707) ( 55) ( 3,840 $ 8,956 $ 5,116) ( 3,840 $	53,981 $ 39,088) ( 14,893 $ 14,893 $ 1,085 10) ( 1,888) ( 43) ( 14,037 $ 55,147 $ 41,110) ( 14,037 $	71,969 $ 53,361) ( 18,608 $ 18,608 $ 3,525 25) ( 2,782) ( 316) ( 19,010 $ 73,347 $ 54,337) ( 19,010 $	4,512,257 $ 1,181,382) ( 3,330,875 $ 3,330,875 $ 65,421 55,706) ( 114,094) ( 17,793) ( 3,208,703 $ 4,378,181 $ 1,169,478) ( 3,208,703 $

~19~

At January 1, 2013 Cost Accumulated depreciation 2013 Opening net book amount Additions Disposals Depreciation charge Net exchange differences Closing net book amount At June 30, 2013 Cost Accumulated depreciation		Land	Buildings	Machinery	Vehicles	Office Equipment	Others	Total
	748,603 $ - 748,603 $ 748,603 $ - - - 11,333) ( 737,270 $ 737,270 $ - 737,270 $		2,722,444 $ 517,899) ( 2,204,545 $ 2,204,545 $ 1,307 - 58,944) ( 39,257 2,186,165 $ 2,774,183 $ 588,018) ( 2,186,165 $	814,401 $ 330,516) ( 483,885 $ 483,885 $ 19,197 1,793) ( 48,846) ( 11,805 464,248 $ 849,455 $ 385,207) ( 464,248 $	17,820 $ 12,575) ( 5,245 $ 5,245 $ - 67) ( 1,141) ( 135 4,172 $ 16,987 $ 12,815) ( 4,172 $	52,365 $ 35,873) ( 16,492 $ 16,492 $ 2,477 219) ( 2,812) ( 117 16,055 $ 52,569 $ 36,514) ( 16,055 $	66,298 $ 51,177) ( 15,121 $ 15,121 $ 8,733 698) ( 2,533) ( 679 21,302 $ 71,987 $ 50,685) ( 21,302 $	4,421,931 $ 948,040) ( 3,473,891 $ 3,473,891 $ 31,714 2,777) ( 114,276) ( 40,660 3,429,212 $ 4,502,451 $ 1,073,239) ( 3,429,212 $

Information about the property, plant and equipment that were pledged to others as collaterals is provided in Note 8.

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(9) Investment property

Investment property
At January 1, 2014 Cost Accumulated depreciation and impairment 2014 Opening net book amount Additions Depreciation charge Net exchange differences Closing net book amount At June 30, 2014 Cost Accumulated depreciation and impairment At January 1, 2013 Cost Accumulated depreciation and impairment 2013 Opening net book amount Depreciation charge Net exchange differences Closing net book amount At June 30, 2013 Cost Accumulated depreciation and impairment	Land	Buildings	Total
	137,037 $ - 137,037 $ 137,037 $ - - - 137,037 $ 137,037 $ - 137,037 $ Land	232,509 $ 66,314) ( 166,195 $ 166,195 $ 345 3,905) ( 1,814) ( 160,821 $ 230,548 $ 69,727) ( 160,821 $ Buildings	369,546 $ 66,314) ( 303,232 $ 303,232 $ 345 3,905) ( 1,814) ( 297,858 $ 367,585 $ 69,727) ( 297,858 $ Total
	137,037 $ - 137,037 $ 137,037 $ - - 137,037 $ 137,037 $ - 137,037 $	226,931 $ 57,696) ( 169,235 $ 169,235 $ 3,829) ( 4,128 169,534 $ 231,842 $ 62,308) ( 169,534 $	363,968 $ 57,696) ( 306,272 $ 306,272 $ 3,829) ( 4,128 306,571 $ 368,879 $ 62,308) ( 306,571 $

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A. Rental income from the investment property and direct operating expenses arising from investment property are shown below:

For the three-month periods ended June 30,

	For the three-monthperiods endedJune30,	riods endedJune30,
Rental income from investment property Direct operating expenses arising from investment property that generated rental income in the period Direct operating expenses arising from investment property that did not generate rental income in the period Rental income from investment property Direct operating expenses arising from investment property that generated rental income in the period Direct operating expenses arising from investment property that did not generate rental income in the period	2014 2013 3,633 $ 3,933 $ 1,492 $ 1,240 $ 236 $ 211 $ Forthe six-monthperiods ended June 30,	2013
		3,933 $
		1,240 $
		211 $
	2014 7,714 $ 3,458 $ 447 $	2013
		7,580 $
		3,407 $
		422 $

B. The fair value of the investment property held by the Group was $1,186,410, $1,027,201 and $1,038,174 as of June 30, 2014, December 31, 2013 and June 30, 2013, respectively, which was based on the transaction prices of similar properties in the same area.
C. No investment property was pledged to others.

(10) Other non-current assets

Long-term prepaid rents Guarantee deposits paid Others	June 30,2014 112,757 $ 65,333 47,172 225,262 $	December31,2013 116,669 $ 34,581 32,441 183,691 $	June 30,2013
			117,337 $ 33,920 15,394
			166,651 $

In May, 2005, the Group signed a land-use right contract with the People's Republic of China for the use of land with a term of 50 years. All rentals had been paid on the contract date. The Group recognised rental expenses of $682, $695, $1,393 and $1,373 for the three-month and six-month periods ended June 30, 2014 and 2013, respectively.

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(11) Short-term borrowings

Type ofborrowings	June 30,2014	Interestrate	Collateral
Bank secured borrowings Bank unsecured borrowings Type ofborrowings	294,600 $ 387,215 681,815 $ December31,2013	0.64~0.65% 0.99~2.78% Interestrate	Transcend Japan’s Land and Buildings - Collateral
Bank secured borrowings Bank unsecured borrowings Type ofborrowings	283,900 $ 295,140 579,040 $ June 30,2013	0.65% 2.46% Interestrate	Transcend Japan’s Land and Buildings - Collateral
Bank secured borrowings	151,800 $	0.91%	Transcend Japan’s Land and Buildings

(12) Pensions

A.(a)The Company has a defined benefit pension plan in accordance with the Labor Standards Law, covering all regular employees’ service years prior to the enforcement of the Labor Pension Act on July 1, 2005 and service years thereafter of employees who chose to continue to be subject to the pension mechanism under the Law. Under the defined benefit plan, two units are accrued for each year of service for the first 15 years and one unit for each additional year thereafter, subject to a maximum of 45 units. Pension benefits are based on the number of units accrued and the average monthly salaries and wages of the last 6 months prior to retirement. The Company contributes monthly an amount equal to 2% of the employees’ monthly salaries and wages to the retirement fund deposited with the Bank of Taiwan, the trustee, under the name of the independent retirement fund committee.
(b)For the aforementioned pension plan, the Group recognised pension costs of $350, $418, $700 and $835 for the three-month and six-month periods ended June 30, 2014 and 2013, respectively.
(c)Expected contributions to the defined benefit pension plans of the Group within one year from June 30, 2014 amounts to $2,804.
B.(a)Effective July 1, 2005, the Company and its domestic subsidiaries have established a defined contribution pension plan (the “New Plan”) under the Labor Pension Act (the “Act”), covering all regular employees with R.O.C. nationality. Under the New Plan, the Company and its domestic subsidiaries contribute monthly an amount based on 6% of the employees’ monthly salaries and wages to the employees’ individual pension accounts at the Bureau of Labor Insurance. The benefits accrued are paid monthly or in lump sum upon termination of employment.
(b)The Group’s mainland subsidiaries have a defined contribution plan. Monthly contributions to an independent fund administered by the government in accordance with the pension regulations in the People’s Republic of China (PRC) are based on certain percentage of employees' monthly salaries and wages, ranging from 12.5% to 22%. Other than the monthly contributions, the Group has no further obligations.

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(c)Transcend Japan, Transcend Korea, Transcend USA, Transcend Europe and Transcend Germany have a defined contribution plan. Monthly contributions are based on a certain percentage of employees’ monthly salaries and wages and are recognized as pension costs accordingly. Other than the monthly contributions, the Group has no further obligations.
(d)The pension costs under defined contribution pension plans of the Group for the three-month and six-month periods ended June 30, 2014 and 2013 were $11,328, $10,582, $21,942 and $20,682, respectively.

(13) Share capital

As of June 30, 2014, the Company’s authorized capital was $5,000,000, consisting of 500,000 thousand shares of ordinary stock (including 25 thousand shares reserved for employee stock options). The paid-in capital was $4,307,617 with a par value of $10 (in dollars) per share, and consisting of 430,762 thousand shares of ordinary stock outstanding. All proceeds from shares issued have been collected.

(14) Capital surplus

Pursuant to the R.O.C. Company Law, capital reserve arising from paid-in capital in excess of par value on issuance of common stocks and donations can be used to cover accumulated deficit or to issue new stocks or cash to shareholders in proportion to their share ownership, provided that the Company has no accumulated deficit. Further, the R.O.C. Securities and Exchange Law requires that the amount of capital reserve to be capitalized mentioned above should not exceed 10% of the paid-in capital each year. Capital reserve shall not be used to cover accumulated deficit unless the legal reserve is insufficient.

(15) Retained earnings

A.In accordance with the Company’s Articles of Incorporation, the current year’s earnings, if any, shall first be used to pay all taxes and offset prior years’ operating losses and then 10% of the remaining amount shall be set aside as legal reserve. The Company shall also set aside special reserve in accordance with the regulations. On the premise that there is no effect on the Company’s normal operations and no violation of regulations, the Company shall reserve certain amount for maintaining stability of dividends. The remainder, if any, is distributable earnings. When distributing earnings, the Company shall appropriate 0.2% of the total distributable amount as the directors’ and supervisors’ remuneration. Bonus distributed to the employees shall account for at least 1% of the total distributable earnings. The remainder to be appropriated shall be resolved by stockholders at the stockholders’ meeting, and cash dividends shall account for at least 5% of the total dividends distributed.
B.The Company distributes dividends taking into consideration the Company's economic environment and growth phases, future demands of funds, long-term financial planning, and the cash flows that the stockholders desire. Cash dividends shall account for at least 5% of the total dividend distributed.
C.Except for covering accumulated deficit or issuing new stocks or cash to shareholders in proportion to their share ownership, the legal reserve shall not be used for any other purpose. The use of legal reserve for the issuance of stocks or cash to shareholders in proportion to their share ownership is permitted, provided that the distribution of the reserve is limited to the portion in excess of 25% of the Company’s paid-in capital.
D.In accordance with the regulations, the Company shall set aside special reserve from the debit balance on other equity items at the balance sheet date before distributing earnings. When debit balance on other equity items is reversed subsequently, the reversed amount could be included

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in the distributable earnings.

E.For the three-month and six-month periods ended June 30, 2014 and 2013, employees’ bonus was accrued at $7,560, $9,030, $15,667 and $35,664, respectively, which was based on a certain percentage prescribed by the Company's Articles of Incorporation of net profit after taking into account the legal reserve and other factors (under the Company’s Articles of Incorporation, bonus distributed to the employees shall account for at least 1% of total distributable earnings the six-month periods ended June 30, 2014 and 2013, respectively.)

The difference between the actual appropriations of employees’ bonus for the year ended December 31, 2012 and the amount recognized in the 2012 financial statements was $6,650, and the difference had been adjusted in the comprehensive income for the year ended December 31, 2013. The actual appropriation of directors’ and supervisors’ remuneration was in agreement with the amount approved at the shareholders’ meeting.

Information about the appropriation of employees’ bonus and directors’ and supervisors’ remuneration by the Company as proposed by the Board of Directors and resolved by the stockholders will be posted in the “Market Observation Post System” at the website of the Taiwan Stock Exchange.

F. The appropriation of earnings and distribution of capital reserve of years 2013 and 2012 had been resolved at the stockholders’ meeting on June 12, 2014 and June 13, 2013, respectively. Details are summarized below:


Amount
		6.0 $ 0.5 2012 5,166 85,361 90,527
	$
	$

(a) The above appropriation of 2013 and 2012 earnings as resolved by the shareholders was in agreement with those amounts recognized in the 2013 and 2012 financial statements.
(b) The Company had unpaid cash dividends (including cash distribution from capital reserve) recorded as “other payables” in the amounts of $2,886,103 and $2,799,952, as of June 30, 2014 and 2013, respectively.

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(16) Share-based payment-employee compensation plan

A.The Company’s share-based payment transactions were set forth below:

Type ofarrangement	Grant date	Quantity granted (inthousands)	Contract period	Vesting conditions 2 years’ service
Employee stock options	2007.10.15	4,536	6 years

B.The fair value of stock options granted on October 15, 2007 is measured using the Black-Scholes option-pricing model. Relevant information is as follows:

Type of arrangement	Grant date	Stock price	Exercise price	Expected price volatility	Expected vesting period	Expected dividend yield rate	Risk-free interest rate	Fair value per unit
Employee stock options	2007.10.15	120 $	120 $	39.68%	4.375 years	0%	2.61%	43.32 $

C.The expiry date and exercise price of stock options outstanding at balance sheet date are as follows:

Issue date approved	Expirydate	June 30,	2013
		No.of shares(in thousands)	Exerciseprice(in dollars) 107.8 $
2007.10.15	2013.10.15	1,064

D.Detail of the employee stock options are set forth below:

Forthe six-monthperiods ended June 30,	Forthe six-monthperiods ended June 30,	Forthe six-monthperiods ended June 30,
No. of shares Weighted- average exercise price (inthousands) (indollars) - $ - $ - - - - - - 2014	2013
No. of shares (inthousands)	No. of shares (inthousands)	Weighted- average exercise price (indollars)
- $ - - -	1,192 $ 128) ( 1,064 1,064	107.8 $ 107.8 107.8 107.8

E.The Company has no expense incurred on share-based payment transactions for the six-month periods ended June 30, 2014 and 2013.

~26~

(17) Other equity items

Operating revenue At January 1, 2014 Change in unrealized gains or losses for available-for-sale financial assets Foreign exchange translation differences for foreign operations Effect from income tax At June 30, 2014 At January 1, 2013 Change in unrealized gains or losses for available-for-sale financial assets Foreign exchange translation differences for foreign operations Effect from income tax At June 30, 2013 Sales revenue Sales revenue	Unrealised gain or loss on Foreign exchange available-for- translation differences salefinancialassets for foreignoperations Total 18,633) ($ 27,764 $ 9,131 $ 37,399 - 37,399 - 59,574) ( 59,574) ( - 10,128 10,128 18,766 $ 21,682) ($ 2,916) ($ Unrealised gain or loss on Foreign exchange available-for- translation differences salefinancialassets for foreignoperations Total 20,718) ($ 95,549) ($ 116,267) ($ 20,268) ( - 20,268) ( - 128,180 128,180 - 21,791) ( 21,791) ( 40,986) ($ 10,840 $ 30,146) ($ 2014 2013 6,656,660 $ 5,967,805 $ 2014 2013 13,451,271 $ 13,018,934 $ For the six-monthperiods endedJune30, Forthe three-monthperiods ended June 30,	Unrealised gain or loss on Foreign exchange available-for- translation differences salefinancialassets for foreignoperations Total 18,633) ($ 27,764 $ 9,131 $ 37,399 - 37,399 - 59,574) ( 59,574) ( - 10,128 10,128 18,766 $ 21,682) ($ 2,916) ($ Unrealised gain or loss on Foreign exchange available-for- translation differences salefinancialassets for foreignoperations Total 20,718) ($ 95,549) ($ 116,267) ($ 20,268) ( - 20,268) ( - 128,180 128,180 - 21,791) ( 21,791) ( 40,986) ($ 10,840 $ 30,146) ($ 2014 2013 6,656,660 $ 5,967,805 $ 2014 2013 13,451,271 $ 13,018,934 $ For the six-monthperiods endedJune30, Forthe three-monthperiods ended June 30,	Unrealised gain or loss on Foreign exchange available-for- translation differences salefinancialassets for foreignoperations Total 18,633) ($ 27,764 $ 9,131 $ 37,399 - 37,399 - 59,574) ( 59,574) ( - 10,128 10,128 18,766 $ 21,682) ($ 2,916) ($ Unrealised gain or loss on Foreign exchange available-for- translation differences salefinancialassets for foreignoperations Total 20,718) ($ 95,549) ($ 116,267) ($ 20,268) ( - 20,268) ( - 128,180 128,180 - 21,791) ( 21,791) ( 40,986) ($ 10,840 $ 30,146) ($ 2014 2013 6,656,660 $ 5,967,805 $ 2014 2013 13,451,271 $ 13,018,934 $ For the six-monthperiods endedJune30, Forthe three-monthperiods ended June 30,	Unrealised gain or loss on Foreign exchange available-for- translation differences salefinancialassets for foreignoperations Total 18,633) ($ 27,764 $ 9,131 $ 37,399 - 37,399 - 59,574) ( 59,574) ( - 10,128 10,128 18,766 $ 21,682) ($ 2,916) ($ Unrealised gain or loss on Foreign exchange available-for- translation differences salefinancialassets for foreignoperations Total 20,718) ($ 95,549) ($ 116,267) ($ 20,268) ( - 20,268) ( - 128,180 128,180 - 21,791) ( 21,791) ( 40,986) ($ 10,840 $ 30,146) ($ 2014 2013 6,656,660 $ 5,967,805 $ 2014 2013 13,451,271 $ 13,018,934 $ For the six-monthperiods endedJune30, Forthe three-monthperiods ended June 30,

			2014 13,451,271 $	2013
				13,018,934 $

(18) Operating revenue

~27~

(19) Other income

Other income
Interest income Rental revenue Total Interest income Rental revenue Total	Forthe three-monthperiod ended June 30,
	2014 2013 54,285 $ 30,643 $ 3,633 3,933 57,918 $ 34,576 $ Forthe six-monthperiod ended June 30,	2013
		30,643 $ 3,933
		34,576 $
	2014 92,869 $ 7,714 100,583 $	2013
		52,963 $ 7,580
		60,543 $

(20) Other gains and losses

Other gains and losses
			Forthe three-monthperiods ended June 30,
			2014			2013
Net gain on financial assets at fair value
through profit or loss		$	-		$	2,548
Net loss on financial liabilities at fair value	(		6,632)			-
through profit or loss
Gain on disposal of financial assets			3,367			101,968
Loss on disposal of property, plant	(		42)	(		520)
and equipment
Net currency exchange (loss) gain	(		82,153)			41,109
Others			12,296			17,009
Total	($		73,164)		$	162,114
			Forthe six-monthperiods ended June 30,
			2014			2013
Net gain on financial assets at fair value
through profit or loss		$	-		$	27,784
Net loss on financial liabilities at fair value	(		6,632)			-
through profit or loss
Gain on disposal of financial assets			5,799			106,904
Gain on disposal of property, plant			813			1,450
and equipment
Net currency exchange (loss) gain	(		12,893)			59,435
Others			14,288			20,879
Total		$	1,375		$	216,452

~28~

(21) Expenses by nature

Expenses by nature
Wages and salaries Labor and health insurance fees Pension costs Other personnel expenses Depreciation on property, plant and equipment (including investment property) Wages and salaries Labor and health insurance fees Pension costs Other personnel expenses Depreciation on property, plant and equipment (including investment property)	For the three-monthperiods endedJune30,
	2014 2013 379,598 $ 336,669 $ 36,098 37,081 11,678 11,000 15,313 14,616 58,257 59,112 Forthe six-monthperiods ended June 30,	2013
	2014 775,354 $ 76,090 22,642 30,827 117,999	2013
		679,946 $ 71,273 21,517 29,839 118,105

(22) Income tax

A. Income tax expense

(a)Components of income tax expense:

me tax come tax expense )Components of income tax expense:
		Forthe three-monthperiods			ended June 30,
			2014		2013
Current tax:
Current tax on profits for the period		$	136,486	$	117,878
Prior year income tax underestimated			16,667		-
Total current tax			153,153		117,878
Deferred tax:
Origination and reversal of temporary
differences	(		4,749)		32,656
Total deferred tax	(		4,749)		32,656
Income tax expense		$	148,404	$	150,534

~29~

For the six-month periods ended June 30,

2014 Current tax: Current tax on profits for the period 275,898 $ Prior year income tax underestimated 17,083 Total current tax 292,981 Deferred tax: Origination and reversal of temporary differences 23,159) ( Total deferred tax 23,159) ( Income tax expense 269,822 $	2013
	233,198 $ 4,938
	238,136
	44,725
	44,725
	282,861 $

(b)The income tax relating to components of other comprehensive income is as follows:

	Forthe three-monthperiods ended June 30,	Forthe three-monthperiods ended June 30,	Forthe three-monthperiods ended June 30,	Forthe three-monthperiods ended June 30,
		2014		2013
Foreign exchange translation differences
for foreign operations	($	12,837)	$	8,653
	Forthe six-monthperiods ended June 30,
		2014		2013
Foreign exchange translation differences
for foreign operations	($	10,128)	$	21,791

B. As of June 30, 2014, the Company’s income tax returns through 2011 have been assessed and approved by the National Taxation Bureau of Taipei, Ministry of Finance, except for the 2009 income tax return.
C. Unappropriated retained earnings:

Earnings generated in and before 1997 Earnings generated in and after 1998	June30,2014 121,097 $ 6,388,737 6,509,834 $	December31,2013 121,097 $ 7,853,950 7,975,047 $	June30,2013 121,097 $ 6,522,583 6,643,680 $

D. As of June 30, 2014, December 31, 2013 and June 30, 2013, the balance of the imputation tax credit account was $1,244,845, $1,028,831 and $1,334,314, respectively. The creditable tax rate was 17.75% for 2012 and is estimated to be 15.85% for 2013.

~30~

(23) Earnings per share

For the three-monthperiod ended June 30,2014	For the three-monthperiod ended June 30,2014	For the three-monthperiod ended June 30,2014
Profit after tax	Weighted-average outstanding common shares (in thousands)	Earnings per share (in dollars)
		1.95 $ 1.95 $ June 30,2014
Profit aftertax	Weighted-average outstanding common shares (inthousands)	Earnings per share (indollars)
1,740,786 $ 1,740,786 $ - 1,740,786 $	430,762 430,762 320 431,082	4.04 $ 4.04 $

~31~

For the three-month period ended June 30, 2013

Profit aftertax	Weighted-average outstanding common shares (inthousands)	Earnings per share (indollars)
		2.33 $ 2.32 $ June 30,2013
Profit after tax	Weighted-average outstanding common shares (in thousands)	Earnings per share (in dollars)
1,872,977 $ 1,872,977 $ - 1,872,977 $	430,762 430,762 1,159 431,921	4.35 $ 4.34 $

(24) Operating leases

A.The Group leases land and buildings to others under operating lease agreements. Rental revenue of $3,633, $3,933, $7,714 and $7,580 were recognised for these leases in profit or loss for the three-month and six-month periods ended June 30, 2014 and 2013, respectively. The leases for buildings have terms expiring between 2016 and 2017, and all these lease agreements are not renewable at the end of the lease period. The future aggregate minimum lease payments receivable under non-cancellable operating leases are as follows:

~32~

Not later than one year Later than one year but not later than five years	June 30,2014 18,519 $ 32,628 51,147 $	December31,2013 10,059 $ 17,640 27,699 $	June 30,2013
			13,747 $ 22,050
			35,797 $

B.On April 8, 2009, the Company signed a land lease contract with its major stockholders, Won Chin and Cheng Chuan, to build a new plant on the leased land. The lease has a term of 10 years from April 10, 2009 to April 9, 2019. The annual rental payment is $35,633 (exclusive of tax), which was determined based on the average rent of land near the leased land shown in the appraisal report issued by CCIS Real Estate Joint Appraisers Firm. Rent was paid on the contract date and become payable on the same date each following year until the end of the lease. The future aggregate minimum lease payments payable under non-cancellable operating leases are as follows:

leases are as follows:
Not later than one year Later than one year but not later than five years Later than five years	June30,2014 37,415 $ 143,423 - 180,838 $	December31,2013 37,415 $ 149,659 12,472 199,546 $	June30,2013
			37,415 $ 149,659 31,179
			218,253 $

7. RELATED PARTY TRANSACTIONS

(1) Significant transactions and balances with related parties

A.Sales

For the three-month periods ended June 30,

	Forthe three-monthperiods ended June 30,	riods ended June 30,
Sales of goods`－`Entity controlled by the Group's key management Sales of goods`－`Entity controlled by the Group's key management	2014 2013 - $ 62,565 $ For the six-monthperiods endedJune30,	2013
		62,565 $
	2014 - $	2013
		252,871 $

The sales prices charged to related parties are almost equivalent to those charged to third parties. The credit term to Transcend H.K. is 120 days. The credit term to third parties is 30 to 60 days after monthly billings.

~33~

B.Purchases of goods

For the three-month periods ended June 30,

	Forthe three-monthperiods ended June 30,	riods ended June 30,
Purchases of goods`－`Entity controlled by the Group's key management Purchases of goods`－`Entity controlled by the Group's key management	2014 2013 87,769 $ 53,938 $ Forthe six-monthperiods ended June 30,	2013
		53,938 $
	2014 144,978 $	2013
		69,735 $

The purchase prices charged by related parties are almost equivalent to those charged by third parties. The credit term from Taiwan IC Packaging Corporation is 30 days after monthly billings. The credit term from third parties is 30 to 45 days after monthly billings.

C.Accounts receivable

		June 30,2014	December31,2013	December31,2013		June 30,2013
Receivables from related
parties`－`Entity controlled
by the key management	$	-	$	-	$	68,171
The receivables from related	parties arise mainly from sales transactions. The credit ter
Transcend H.K. is 120 days.	The receivables are unsecured and bear				no	interest. There ar
provisions held against receivables from related parties.
.Accounts payable
		June 30,2014	December31,2013			June 30,2013
Payables to related parties`－`
Entity controlled by the
key management	$	68,057	$	45,801	$	24,136

The receivables from related parties arise mainly from sales transactions. The credit term to Transcend H.K. is 120 days. The receivables are unsecured and bear no interest. There are no provisions held against receivables from related parties.

D.Accounts payable

The payables to related parties arise mainly from purchase transactions and are due 30 days after the date of purchase. The payables bear no interest.

E.Property transactions

Disposal of property, plant and equipment:

Six-month period ended June 30, 2014

Entity controlled by the key management		Disposalproceeds		Gain(loss) ondisposal	Other receivables
		10,235 $		- $	10,235 $

The Group had no property transactions for the six-month period ended June 30, 2013.

~34~

F.Lease contracts

On April 8, 2009, the Company signed a land lease contract with its major stockholders, Won Chin and Cheng Chuan, to build a new plant on the leased land. Please refer to Note 6(24).

(2) Compensation of key management

Compensation of key management
Salaries and other short-term employee benefits Salaries and other short-term employee benefits	For the three-monthperiods endedJune30,
	2014 2013 28,349 $ 29,367 $ Forthe six-monthperiods ended June 30,	2013
		29,367 $
	2014 52,321 $	2013
		49,491 $

8. PLEDGED ASSETS

The Group’s assets pledged as collateral are as follows:

Nature ofassets Property, plant and equipment Other non-current assets Time deposit				Bookvalue		June 30,2013 996,395 $ 3,000 999,395 $	Pledge purpose Long-term and short-term loans Patent deposit
		June 30,2014		December31,2013
		980,530 $ 2,987 983,517 $		979,500 $ 2,981 982,481 $

9. COMMITMENTS AND CONTINGENT LIABILITIES

As of June 30, 2014, in addition to the significant commitments and contingent liabilities mentioned in Note 13(1)B and the lease contract described in Note 6(24), the Group had unused letters of credit for purchases of merchandise inventory amounting to $50,000.

10. SIGNIFICANT CATASTROPHE

None.

11. SIGNIFICANT SUBSEQUENT EVENT

None.

12. OTHERS

(1) Capital risk management

There is no significant change in this period. Please refer to Note 12 to the consolidated financial statements as of and for the year ended December 31, 2013 for the related information.

(2) Financial instruments

A.Fair value information of financial instruments

There is no significant change in this period. Please refer to Note 12 to the consolidated financial statements as of and for the year ended December 31, 2013 for the related information.

B.Financial risk management policies

~35~

There is no significant change in this period. Please refer to Note 12 to the consolidated financial statements as of and for the year ended December 31, 2013 for the related information.

C.Significant financial risks and degrees of financial risks

There is no significant change except for the following information. Please refer to Note 12 to the consolidated financial statements as of and for the year ended December 31, 2013 for the related information.

Foreign exchange risk

The Group’s businesses involve some non-functional currency operations (the Company’s functional currency: NTD; the subsidiaries’ functional currencies: JPY, KRW, USD, EUR, GBP and RMB, etc.). The information on assets and liabilities denominated in foreign currencies whose values would be materially affected by the exchange rate fluctuations is as follows:

	June30,2014	June30,2014	BookValue
ForeignCurrency	Foreign Currency Amount 143,218 $ 622,646 2,563,327 11,034 128,877 $ 60,000 December	Exchange Rate 29.8650 4.8110 0.2946 40.7800 29.8650 4.8110 31,2013
USD:NTD RMB:NTD JPY:NTD EUR:NTD USD:NTD RMB:NTD			4,277,206 $ 2,995,550 755,156 449,967 3,848,912 $ 288,660 BookValue
ForeignCurrency	Foreign Currency Amount Exchange Rate 100,687 $ 29.8050 459,499 4.9190 43,645 6.0592 2,512,345 0.2839 12,084 41.0900 119,640 $ 29.8050 60,000 4.9190 June 30,2013
USD:NTD RMB:NTD USD:RMB JPY:NTD EUR:NTD USD:NTD RMB:NTD			3,000,976 $ 2,260,276 264,454 713,255 496,532 3,565,870 $ 295,140 BookValue
ForeignCurrency	Foreign Currency Amount 78,276 $ 2,837,022 11,228 28,304 52,373 $ 134,510	ExchangeRate 30.0000 0.3036 39.1500 4.8880 30.0000 4.8880
USD:NTD JPY:NTD EUR:NTD RMB:NTD USD:NTD RMB:NTD			2,348,280 $ 861,320 439,576 138,350 1,571,190 $ 657,485

Sensitivity analyses relating to foreign exchange rate risks are primarily for financial reporting period-end date of foreign currency monetary item. If the New Taiwan dollar

~36~

exchange rate to the U.S. dollar increases or decreases by 1%, the Group’s net income will increase or decrease by $ 4,283 and $7,771 for the six-month periods ended June 30, 2014 and 2013, respectively.

(3) Fair value estimation

A.The table below analyses financial instruments measured at fair value, by valuation method. The different levels have been defined as follows:

Level 1:Quoted prices in active markets for identical assets or liabilities.

Level 2:Inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly (that is, as prices) or indirectly (that is, derived from prices).

Level 3:Inputs for the assets or liabilities that are not based on observable market data.

The following table presents the Group’s financial assets and liabilities that are measured at fair value at June 30, 2014, December 31, 2013 and June 30, 2013:

June 30,2014 Financial assets: Non-current available-for-sale financial assets Financial liabilities: Current financial liabilities at fair value through profit or loss December31,2013 Financial assets: Non-current available-for-sale financial assets June 30,2013 Financial assets: Non-current available-for-sale financial assets Current financial assets at fair value through profit or loss	Level 1 Level 2 300,696 $ - $ - $ 6,240) ($ Level 1 Level 2 263,297 $ - $ Level 1 Level 2 240,944 $ - $ - 1,064 240,944 $ 1,064 $	Level3 Total 1,125 $ 301,821 $ - $ 6,240) ($ Level3 Total 1,125 $ 264,422 $ Level3 Total 1,125 $ 242,069 $ - 1,064 1,125 $ 243,133 $

B.The fair value of financial instruments traded in active markets is based on quoted market prices at the balance sheet date. A market is regarded as active if quoted prices are readily and regularly available from an exchange, dealer, broker, industry group, pricing service, or regulatory agency, and those prices represent actual and regularly occurring market transactions on an arm‘s length basis. The quoted market price used for financial assets held by the Group is the closing price. These instruments are included in level 1. Instruments included in level 1 comprise primarily equity instruments classified as available-for-sale financial assets.

~37~

C.The fair value of financial instruments not traded in an active market (such as the derivative instruments which are traded in GTSM) is based on the cost of the investment.
D.If one or more of the significant inputs is not based on observable market data, the instrument is included in level 3.
E.Forward foreign exchange contracts resulting fair value estimates are included in level 2.

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13. SUPPLEMENTARY DISCLOSURES

(1) Significant transactions information
A. Loans to others: None.

B. Provision of endorsements and guarantees to others:

Number (Note 1)	Endorser/ guarantor	Party being endorsed/guaranteed	Party being endorsed/guaranteed	Limit on endorsements/ guarantees provided for a single party (Note 3)	Maximum outstanding endorsement/guarantee amount as of June 30, 2014 (Note 4)	Outstanding endorsement/guarantee amount as of June 30, 2014 (Note 4)	Actual amount drawn down (Note 5)	Amount of endorsements/ guarantees secured with collateral	Ratio of accumulated endorsement/guarantee amount to net asset value of the endorser/guarantor company (%)	Ceiling on total amount of endorsements/ guarantees provided (Note 6)	Provision of endorsements/ guarantees by parent company to subsidiary (Note 7)	Provision of endorsements/ guarantees by subsidiary to parent company	Provision of endorsements/ guarantees to the party in Mainland China	Footnote
		Company name	Relationship with the endorser/guarantor (Note 2)
0	Transcend Taiwan	Transcend Japan Inc.	2	$ 3,733,369	$ 441,900	$ 441,900	$ 294,600	-	2	$ 7,466,738	Y	N	N	-

Note 1: The numbers filled in for the endorsements/guarantees provided by the Company or subsidiaries are as follows:

(a)The Company is ‘0’.
(b)The subsidiaries are numbered in order starting from ‘1’.
Note 2: Relationship between the endorser/guarantor and the party being endorsed/guaranteed is classified into the following six categories:
(a)Having business relationship.
(b)The endorser/guarantor parent company owns directly more than 50% voting shares of the endorsed/guaranteed subsidiary.
(c)The endorser/guarantor parent company and its subsidiaries jointly own more than 50% voting shares of the endorsed/guaranteed company.
(d)The endorsed/guaranteed parent company directly or indirectly owns more than 50% voting shares of the endorser/guarantor subsidiary.
(e)Mutual guarantee of the trade as required by the construction contract.
(f)Due to joint venture, each shareholder provides endorsements/guarantees to the endorsed/guaranteed company in proportion to its ownership.

Note 3: Not exceeding 20% of the Company’s net asset value. ($18,666,845*20%=$3,733,369)

Note 4: The maximum outstanding endorsement/guarantee amount during and as of June 30, 2014 is JPY$1,500,000.

Note 5: The actual amount of endorsement drawn down is JPY$1,000,000.

Note 6: Not exceeding 40% of the Company’s net asset value. ($18,666,845*40%=$7,466,738)

Note 7: Fill in ‘Y’ for those cases of provision of endorsements/guarantees by listed parent company to subsidiary.

~39~

C. Holding of marketable securities as of June 30, 2014 (not including subsidiaries, associates and joint ventures):

Securities held by Transcend Taiwan Transcend Shanghai	Marketable securities(Note 1)	Relationshipwith the securities issuer(Note 2)	General ledger account		As of June 30,2014	As of June 30,2014
				Number of shares or units 6,220,933 3,060,017 259,812 60,816 - -	Book value(Note 3) 238,884 $ 61,812 - 1,125 301,821 $ 609,246 $ 48,610 $	Ownership (%) 8 1 2 1 - -	Fair value
	Stocks Alcor Micro Corp. Hitron Tech. Inc. Skyviia Corp. Dramexchange Tech Inc. Bonds Bond with repurchase agreement Finance products 2013 Liduoduo financial planning No.433, Financial products of Shanghai pudong Development Bank	- - - - - -	Non-current available-for-sale financial assets `〞` `〞` `〞` Current bond investment without active market Current bond investment without active market				238,884 $ 61,812 - 1,125 - -

Note 1: Marketable securities in the table refer to stocks, bonds, beneficiary certificates and other related derivative securities within the scope of IAS 39 ‘Financial instruments: recognition and measurement’.

Note 2: Leave the column blank if the issuer of marketable securities is non-related party.

Note 3: Fill in the amount after adjusted at fair value and deducted by accumulated impairment for the marketable securities measured at fair value; fill in the acquisition cost or amortised cost deducted by accumulated impairment for the marketable securities not measured at fair value.
Note 4: The number of shares of securities and their amounts pledged as security or pledged for loans and their restrictions on use under some agreements should be stated in the footnote if the securities presented herein have such conditions.

D.Acquisition or sale of the same security with the accumulated cost exceeding NT$300 million or 20% of the Company’s paid-in capital: None.

E.Acquisition of real estate exceeding NT$300 million or 20% of paid-in capital or more: None.

F.Disposal of real estate exceeding NT$300 million or 20% of paid-in capital or more: None.

~40~

G.Purchases or sales of goods from or to related parties exceeding NT$100 million or 20% of the Company’ paid-in capital or more:

Relationshipwith the counterparty	Transaction	Transaction		Differences in transaction terms compared to thirdpartytransactions	Differences in transaction terms compared to thirdpartytransactions
	Amount $ 1,593,225 1,384,098 446,783 379,935 376,967 285,704 223,964 133,463 360,820 133,936 ( 398,933) ( 144,978)	12 11 3 3 3 2 2 1 24 5 3 1 Percentage of total sales (purchases)	Credit term
				Unitprice No significant difference `〞` `〞` `〞` `〞` `〞` `〞` `〞` `〞` `〞` Note 1 No significant difference	Credit term
The Company's subsidiary Subsidiary of Memhiro Subsidiary of Memhiro The Company's subsidiary The Company's subsidiary Subsidiary of Memhiro Subsidiary of Memhiro Subsidiary of Memhiro Together with Transcend Information Europe B.V. are controlled by parent company Together with Transcend Shanghai are controlled by parent company Subsidiary of Memhiro Entity controlled by the key management			120 days after monthly billings `〞` `〞` 60 days after monthly billings 120 days after monthly billings `〞` `〞` `〞` 30 days after receipt of goods 60 days after receipt of goods 60 days after receipt of goods 30 days after monthly billings		30 to 60 days after monthly billings to third parties `〞` `〞` `〞` `〞` `〞` `〞` `〞` 7 to 60 days after receipt of goods to third parties 30 to 60 days after monthly billings to third parties 7 to 30 days after receipt of goods to third parties 30 to 45 days after monthly billings to third parties

Note 1:The purchase transactions between Transcend Taiwan and Transcend Shanghai were attributed to processing of supplied materials. No other similar transactions can be used for comparison. Note 2:The Company’s sales to subsidiaries were equivalent to subsidiaries’s purchases from the Company; accordingly, the Company did not disclose the information on subsidiaries’ purchases from the Company.

~41~

H.Receivables from related parties exceeding NT$100 million or 20% of the Company’s paid-in capital or more:

Overdue receivables

Creditor	Counterparty	Relationship with the counterparty	Balance at June 30, 2014	Turnover rate	Amount	Action taken	Amount collected subsequent to the balance sheet date	Allowance for doubtful accounts
Transcend Taiwan `〞` `〞` `〞` Transcend Shanghai	Transcend Japan Inc. Transcend Information Europe B.V. Transcend Information Inc. Transtech Shanghai Transcend Taiwan	Subsidiary of the Company Subsidiary of Memhiro Subsidiary of the Company Subsidiary of Memhiro Parent company	$ 680,499 307,217 146,172 106,706 1,365,852	4.76 8.62 4.22 4.89 4.75	$ - - - - -	- - - - -	$ 246,028 171,556 43,303 17,998 472,649	$ - - - - -

I. Derivative financial instruments undertaken during the six-month period ended June 30, 2014: Please refer to Note 6(2).

~42~

J.Significant inter-company transactions during the six-month period ended June 30, 2014:

Number (Note 1)	Company name	Counterparty	Relationship (Note 2)	Transaction	Transaction	Transaction	Transaction
				General ledger account	Amount	Transaction terms	Percentage of consolidated total operating revenues or total assets (Note 3)
0 `〞` `〞` `〞` `〞` `〞` `〞` `〞` `〞` `〞` `〞` 1	Transcend Taiwan `〞` `〞` `〞` `〞` `〞` `〞` `〞` `〞` `〞` `〞` Transcend Information Europe B. V.	Transcend Japan Inc. Transcend Information Europe B. V. Transcend Information Trading GmbH, Hamburg Transcend Korea Inc. Transcend Information, Inc. Transcend Information (H.K.) Ltd Transtech Trading (Shanghai) Co., Ltd. Transcend Information (Shanghai), Ltd. Transcend Japan Inc. Transcend Information Europe B. V. Transcend Information (Shanghai), Ltd. Transcend Information Trading GmbH, Hamburg	1 `〞` `〞` `〞` `〞` `〞` `〞` `〞` `〞` `〞` `〞` 3	Sales `〞` `〞` `〞` `〞` `〞` `〞` Purchases Accounts Receivable `〞` Accounts Payable Sales	$ 1,593,225 1,384,098 446,783 379,935 376,967 285,704 223,964 398,933 680,499 307,217 1,365,852 360,820	There is no significant difference in unit price from those to third parties. `〞` `〞` `〞` `〞` `〞` `〞` Processing with supplied materials. No other similar transactions can be used for comparison. 120 days after monthly billings `〞` 60 days after receipt of goods There is no significant difference in unit price from those to third parties.	12% 10% 3% 3% 3% 2% 2% 3% 3% 1% 5% 3%

Note 1: Transaction information between parent company and subsidiaries should be noted in the first column, the number is written as below:

(a) Parent company: 0
(b) Subsidiaries were numbered from 1.

Note 2: Relationship between transaction company and counterparty is classified into the following three categories:

(a) Parent company to subsidiary.
(b) Subsidiary to parent company.
(c) Subsidiary to subsidiaries.
Note 3: Regarding percentage of transaction amount to consolidated total operating revenues or total assets, it is computed based on period-end balance of transaction to consolidated total assets for balance sheet accounts and based on accumulated transaction amount for the period to consolidated total operating revenues for income statement accounts.

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(2) Information on investees (not including investees in Mainland China)

Investor	Investee	Location	Main business activities	Initial investment amount	Initial investment amount	Shares held at June 30,2014	Shares held at June 30,2014	Shares held at June 30,2014	Net profit (loss) of the investee for the six- month period ended June 30,2014	Investment income(loss) recognised by the Company for the six- month period ended June 30,2014(Note 1)	Footnote
				Balance at June 30,2014	Balance at December 31, 2013	No. of Shares (in units)	Ownership (%) 100 100 100 100 13.55 100 100	Book value $ 3,261,024 136,437 89,900 34,474 221,717 3,254,292 164,287
Transcend Taiwan Saffire Investment Ltd. Memhiro Pte Ltd.	Saffire Investment Ltd. B.V.I. Transcend Japan Inc. Japan Transcend Information, Inc. United States of America Transcend Korea Inc. Korea Taiwan IC Packaging Corp. Taiwan Memhiro Pte Ltd. Singapore Transcend Information Europe B.V. Netherlands		Investments holding company Wholesaler of computer memory modules and peripheral products Wholesaler of computer memory modules and peripheral products Wholesaler of computer memory modules and peripheral products Packaging of Semi- conductors Investments holding company Wholesaler of computer memory modules and peripheral products	$ 1,202,418 89,103 38,592 6,132 251,658 1,156,920 1,693	$ 1,202,418 89,103 38,592 6,132 251,658 1,156,920 1,693	36,600,000 6,400 625,000 40,000 41,000,000 55,132,000 100			$ 25,437 ( 31,045) ( 29,307) 7,292 ( 4,543) 25,471 ( 13,689)	$ 20,425 ( 31,045) ( 29,307) 7,292 462 25,471 ( 13,685)	Note 2 Note 2 Note 2 Note 2 Note 5 Note 3 Note 4

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Investor	Investee	Location	Main business activities	Initial investment amount	Initial investment amount	Shares held at June 30,2014	Shares held at June 30,2014	Shares held at June 30,2014	Net profit (loss) of the investee for the six-month period ended June 30, 2014	Investment income(loss) recognised by the Company for the six-month period ended June 30, 2014 (Note 1)	Footnote
				Balance at June 30,2014	Balance at December 31,2013	No. of Shares (in units)	Ownership (%) 100 100	Book value 67,909 6,453
Memhiro Pte Ltd.	Transcend Information Trading GmbH, Hamburg Transcend Information (H.K.) Ltd.	Germany Hong Kong	Wholesaler of computer memory modules and peripheral products Wholesaler of computer memory modules and peripheral products	2,288 7,636	2,288 7,636	- 2,000,000			( 4,378) ( 1,793)	( 4,378) ( 1,793)	Note 4 Note 4

Note 1 ： The Company does not directly recognize the investment income (loss) except for the subsidiaries directly held.

Note 2 ： Subsidiaries of the Company.

Note 3 ： Subsidiary of Saffire.

Note 4 ： Subsidiaries of Memhiro. . Note 5 ： Please refer to Note 6 (7).

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(3) Information on investments in Mainland China

Information on investments in Mainland China	Information on investments in Mainland China	Information on investments in Mainland China	Information on investments in Mainland China	Information on investments in Mainland China	Information on investments in Mainland China	Information on investments in Mainland China
A.Basic information`：` Remitted to Mainland China Remitted back to Taiwan $ 1,134,178 (2) $ 1,134,178 - - $ 1,134,178 $ 50,217 100 $ 49,858 $ 2,984,421 - - 16,310 (2) 16,310 - - 16,310 ( 4,468) 100 ( 4,468) 9,086 - - Net income of investee as of June 30, 2014 Transcend Information (Shanghai), Ltd. Manufacturer and seller of computer memory modules, storage products and disks Transtech Trading (Shanghai) Co., Ltd. Manufacturer and seller of computer memory modules, storage products and disks. Wholesaler and agent of computer memory modules and peripheral products. Retailer of computer components. Accumulated amount of remittance from Taiwan to Mainland China as of June 30, 2014 Investee in Mainland China Main business activities Paid-in capital Investment method (Note 1) Accumulated amount of remittance from Taiwan to Mainland China as of January 1, 2014 Amount remitted from Taiwan to Mainland China/Amount remitted back to Taiwan for the six- month period ended June 30, 2014 Ownership held by the Company (direct and indirect) Investment income (loss) recognized by the Company for the six- month period ended June 30, 2014 `（`Note 2`）` Book value of investments in Mainland China as of June 30, 2014 Accumulated amount of investment income remitted back to Taiwan as of June 30, 2014 Footnote Company name Accumulated amount of remittance from Taiwan to Mainland China as of June 30, 2014 Investment amount approved by the Investment Commission of the Ministry of Economic Affairs (MOEA) Ceiling on investments in Mainland China imposed by the Investment Commission of MOEA Transcend Information (Shanghai), Ltd. $ 1,134,178 $ 1,134,178 $ - Transtech Trading (Shanghai) Co., Ltd. 16,310 16,310 - $ 1,150,488 $ 1,150,488 $ 11,200,107
	Investee in Mainland China	Main business activities	Paid-in capital		Investment method (Note 1)	Accumulated amount of remittance from Taiwan to Mainland China as of January 1, 2014	Amount remitted from Taiwan to Mainland China/Amount remitted back to Taiwan for the six- month period ended June 30, 2014			Accumulated amount of remittance from Taiwan to Mainland China as of June 30, 2014	Net income of investee as of June 30, 2014	Ownership held by the Company (direct and indirect)	Investment income (loss) recognized by the Company for the six- month period ended June 30, 2014 `（`Note 2`）`	Book value of investments in Mainland China as of June 30, 2014	Accumulated amount of investment income remitted back to Taiwan as of June 30, 2014	Footnote
							Remitted to Mainland China	Remitted back to Taiwan
	Transcend Information (Shanghai), Ltd.	Manufacturer and seller of computer memory modules, storage products and disks	$ 1,134,178		(2)	$ 1,134,178	-	-		$ 1,134,178	$ 50,217	100	$ 49,858	$ 2,984,421	-	-
	Transtech Trading (Shanghai) Co., Ltd.	Manufacturer and seller of computer memory modules, storage products and disks. Wholesaler and agent of computer memory modules and peripheral products. Retailer of computer components.	16,310		(2)	16,310	-	-		16,310	( 4,468)	100	( 4,468)	9,086	-	-

	Company name			Accumulated amount of remittance from Taiwan to Mainland China as of June 30, 2014					Investment amount approved by the Investment Commission of the Ministry of Economic Affairs (MOEA)				Ceiling on investments in Mainland China imposed by the Investment Commission of MOEA
	Transcend Information (Shanghai), Ltd.			$ 1,134,178					$ 1,134,178				$ -
	Transtech Trading (Shanghai) Co., Ltd.			16,310					16,310				-
				$ 1,150,488					$ 1,150,488				$ 11,200,107

Note 1 ： Investment methods are classified into the following three categories:

(1) Directly invest in a company in Mainland China.

(2) Through investing in an existing company in the third area, which then invested in the invested in Mainland China. (3) Others.

Note 2 ： The financial statements that are audited and attested by R.O.C. parent company’s CPA.

Note 3 ： The numbers in this table are expressed in New Taiwan Dollars.

B.Significant transactions conducted with investees in Mainland China directly or indirectly through other companies in the third areas: None.

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14. SEGMENT INFORMATION

(1) General information

The Group operates business only in a single industry, allocating resources and assessing performance of the Group as a whole, and has identified that the Group has only one reportable operating segment.

(2) Segment information

The segment information provided to the chief operating decision-maker for the reportable segments is as follows:

Segment revenue Segment income Segment revenue Segment income		Forthe three-monthperiods ended June 30,	Forthe three-monthperiods ended June 30,
		2014 2013 6,656,660 $ 5,967,805 $ 839,975 $ 1,003,332 $ For the six-monthperiods endedJune30,
		2014 13,451,271 $ 1,740,786 $	2013 13,018,934 $ 1,872,977 $

(3) Reconciliation for segment income (loss)

None.

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AI assistant

Transcend — Interim / Quarterly Report 2014

52092_rns_2014-11-06_efdb6501-95c6-4f7b-93c2-e97440565519.pdf

TRANSCEND INFORMATION, INC. AND SUBSIDIARIES

CONSOLIDATED FINANCIAL STATEMENTS AND REVIEW REPORT OF INDEPENDENT

ACCOUNTANTS

JUNE 30, 2014 AND 2013

August 7, 2014 Taipei, Taiwan Republic of China

TRANSCEND INFORMATION, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS

TRANSCEND INFORMATION, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS

TRANSCEND INFORMATION, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

TRANSCEND INFORMATION, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY FOR THE SIX-MONTH PERIODS ENDED JUNE 30, 2014 AND 2013

TRANSCEND INFORMATION, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS

TRANSCEND INFORMATION, INC. AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS JUNE 30, 2014 AND 2013

1. HISTORY AND ORGANIZATION

2. THE DATE OF AUTHORIZATION FOR ISSUANCE OF THE CONSOLIDATED FINANCIAL STATEMENTS AND PROCEDURES FOR AUTHORIZATION

3. APPLICATION OF NEW STANDARDS, AMENDMENTS AND INTERPRETATIONS

(3) IFRSs issued by IASB but not yet endorsed by the FSC

4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

(1) Compliance statement

(2) Basis of preparation

(3) Basis of consolidation

B. Subsidiaries included in the consolidated financial statements:

6. DETAILS OF SIGNIFICANT ACCOUNTS

(1) Cash and cash equivalents

(2) Financial assets / liabilities at fair value through profit or loss

(3) Current bond investments without active markets

(4) Accounts receivable

(5) Inventories

(6) Non-current available-for-sale financial assets

(7) Investments accounted for using equity method

(8) Property, plant and equipment

(9) Investment property

(10) Other non-current assets

(11) Short-term borrowings

(12) Pensions

(13) Share capital

(14) Capital surplus

(15) Retained earnings

(16) Share-based payment-employee compensation plan

(17) Other equity items

(19) Other income

(20) Other gains and losses

(21) Expenses by nature

(22) Income tax

A. Income tax expense

(23) Earnings per share

(24) Operating leases

7. RELATED PARTY TRANSACTIONS

C.Accounts receivable

D.Accounts payable

E.Property transactions

F.Lease contracts

(2) Compensation of key management

8. PLEDGED ASSETS

9. COMMITMENTS AND CONTINGENT LIABILITIES

10. SIGNIFICANT CATASTROPHE

11. SIGNIFICANT SUBSEQUENT EVENT

12. OTHERS

(1) Capital risk management

(2) Financial instruments

Foreign exchange risk

(3) Fair value estimation

13. SUPPLEMENTARY DISCLOSURES

Overdue receivables

(3) Information on investments in Mainland China

14. SEGMENT INFORMATION

(1) General information

(2) Segment information

(3) Reconciliation for segment income (loss)

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Transcend Interim / Quarterly Report 2014