TXC - Annual Report 2013 | FinancialReports.eu

Annual Report 2013 Table of Contents

I.	Business Report ………………………………………………………………3
II.	Company Overview
	A. Company Introduction……………………………………………………….9
	B. Company Structure and the Subsidiaries ……………………………………..11
III.	Corporate governance
	A. Directors and Supervisors ……………………………………………….…13
	B. Personnel data of the general manager, vice general manager, assistant vice
	general manager, chief of divisions ………………………………14
	C.Corporate governance and variations with management principles of
	publicly-listed companies and reasons ………………………………………15
IV.	Capitals and Stocks
	A. Source of Capitals ……………………………………………………………25
	B. Shareholders structures ………………………………………………………25
	C. Data on share price, net value, profit, and dividend of the past two years …25
	D. Company’s dividend policy and its current implementation status ………26
	E. Employee bonus and rewards for directors and auditors …………………28
	F. Buying back company stocks ………………………………………………29
	G. Convertible Corporate Bond ………………………………………………29
	H. Employee stock option handling………………………………………………29
V.	Business Information
	A. Business Contents …………………………………………………………...31
	B. Marketing & Sales Situation …………………………………….……….42
	C. Employees’ average years in service, age, and educational background
	distribution of the past two years. . . . . . . . . . . . . . . . . . . . . . . . .52
	D. Data on our environmental protection expense ……………………………52
	E. Employer/Employee Relation ………………………………………………55
VI.	An Overview of the Company’s Financial Status
	A. Abbreviated Balance Sheets and P/L Statements for the Past 5 Years ……59
	B. Financial Analysis for the past 5 Years …………………………………..67
	C. Consolidated Financial Statement for the Parent Company and its
	Subsidiaries for the most recent year, Certified by a CPA …………………..72
	D. Financial Statements for the most Recent years, including an auditor’s
	Report Prepared by a CPA ………….…………………………………….154

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Enterprise Vision

The core value of an enterprise lies with its published management philosophy and its attendant mission and the continuous development of an enterprise is ofen built on a long-term architecture, as well as its core value. In view of the imperativeness and importance of the enterprise’s core value for long-term development following gradual development of the company.

Vision Statement

To provide the frequency controlled application products for the computer, communication, optical, and automotive industry so as to become, the most outstanding company in FCP industry judged by performance matrix and managerial capability.

Mission Statement

Through the continuous improvement and the urge for discipline and execution to enhance the productivity to interact with tier one vendors' requests by promoting company's professionalism and globalization framework.

Corporate Culture

To strive for the declared goals in management philosophy and mission, the company shall further develops its founding spirit of Integrity, Practicality, Innovation and Services and convert the guildlines of Unity, Harmony and High Efficiency into a precise corporate culature.

I. Business Report

TXC celebrated its 30[th] year in business this year. At this juncture of time, thoughts about the journey we have taken and what kind of steps forward to take in the future constantly preoccupy our minds. This was especially true in 2013 when our Japanese competitors gained an unprecedented boost in market competitiveness due to industry changes and the depreciation of the Japanese yen which caused our Company to experience its first year of negative growth in a decade. This was a strong warning to us but also an opportunity for transformation. As a result, how to seek out innovation opportunities to achieve breakthrough growth, how to integrate company resources to optimize operating efficiency and how to strengthen upstream and downstream supplier chain to rapidly respond to market changes are key questions ever present in our minds.

In 2013, we decided not to fully engage in the price competition appearing in the market which resulted from the devaluation of the Japanese yen and therefore were unable to reach the forecast growth. However, we were able to retain a certain profit margin level and continue to enjoy profitability which can be shared with shareholders. With regard to operating performance in 2013, consolidated sales were NT$9.503 billion, 13.04% lower than the previous year’s consolidated sales of NT$10.928 billion which reached 84.57% of the forecast target. Net income after tax was NT$935 million, representing a decrease of 18.65% compared to the previous year’s net income after tax of NT$1.15 billion which reached 85.41% of the forecast target. Basic EPS was NT$3.02 which was 20.32% lower than the basic EPS of NT$3.79 recorded in the previous year. Looking forward to this year, the Company, while setting clear performance indicators, expects that sales and profits will continue to maintain a certain level of performance as the economic outlook improves slightly. Growth is expected to continue and the momentum will come from market niche and competitive products. Though the Company did not continue to grow in 2013, our commitment to R&D investment and innovation never ceased or wavered. Our market-driven approach and ability to overcome competitive pressures and obstacles give us full confidence that the Company will continue to enjoy growth in the future. Having strong intent to grow and urging ourselves forward to compete and meet challenges, the 2013 Operating Results and 2014 Operating Plan Summary are provided below:

A. Operational achievements in 2013

Revenue and net profit after tax Unit: NT$1,000

	2013	2012	Increase(decr ease)amount	Percentage increase
Net consolidated revenueincome	9,503,583	10,928,495	(1,424,912)	-13.04%
Consolidated operationalprofit	2,194,030	2,508,295	(314,265)	-12.53%
Net consolidated profit (loss) after tax	935,161	1,149,534	(214,373)	-18.65%

2. Revenue income and expenditure and profitability:

Consolidated revenue income and expenditure and profitability:

	Year	2013	2012
Finance Structure (%)	Liability vs assetratio	35.88%	39.36%
	Longterm fund vs fixed assetratio	184.67%	164.03%
Debt-paying Capability (%)	Liquidityratio	243.93%	195,52%
	Quick ratio	180.81%	150.24%
Profitability (%)	Returnonassetsratio	7.48%	9.45%
	Return on shareholders equitiesratio	11.57%	15.28%
	Earnings per basic share （NT$）	3.02	3.79

Budget Implementation Status
For 2013, the Company only set internal budget targets and did not externally disclose financial estimates or overall sales or profit information. Due to the effect of industry changes and market competition, the Company only reached 85% of the announced operating target. However, we still remain highly confident about future growth.

4. R&D Status

With regard to R&D, in addition to continuing to focus on existing quartz product technology and product improvement, the Company is working on the development of new product lines as laid out in our technology roadmap. With respect to key items, products which completed development in 2013 included the miniature 3-in-1 proximity sensor, stratum-3 high precision temperature-compensated crystal oscillator, oven controlled quartz crystal oscillators, miniaturized temperature compensated quartz crystal oscillators and temperature sensing quartz units (TSX) and inverted mesa high frequency quartz manufacturing technology which should have a positive effect on future sales growth and profitability.

5. Other Project Implementation Results

(1) Green Enterprise

The Company continues to perform greenhouse gas inventories (ISO14064-1), product carbon footprint inventories (PAS2050) as well as energy management system (ISO50001) and product carbon neutrality (PAS2060) actions. We are also engaged in various low carbon activities and have received low carbon labels and logos from the EPA in line with our expectations. Carbon label certification was also obtained from TEEMA for our AM product series. In order to jointly safeguard the Earth and create a sustainable environment in Taiwan, the Company and all employees have actively participated in the Plant a Tree for the Earth, Support Taiwan Green Belts activity launched by the Environmental Quality Protection Foundation and the Zhuwei Fishing Harbor beach cleaning activity as part of our effort to fulfill our corporate social responsibility.

(2) Occupational Safety and Health

Under the guidance and direction of the Occupational Safety and Health Committee and Labor-Management Meeting, the Company continues to introduce OHSAS 18001 Occupational Safety and Health Management System and has passed CNS 15506 Taiwan Occupational Safety and Health Management System certification in order to guarantee worker safety and health. Furthermore, we obtained Occupational Safety and Health

Performance Recognition again in March 2013 and held a number of health promotion activities such as weight reduction, stop smoking and parenting education classes. Prompt assistance and special attention is provided for personnel involved in traffic accidents outside the plant area. In the future, the Company will continue to create a safe work environment in order to offer the maximum assurance of safety to our employees.

(3) System Certification

With regard to the maintenance of various operating systems, the quality management system (ISO9001), automotive industry quality management system (ISO/TS16949), environmental management system (ISO14001), Taiwan occupational safety and health management system (CNS15506), information security management system (ISO/IEC27001), supplier chain security management system (ISO28000) and energy management system (ISO50001) were under continued review in 2013 and the hazardous substance process management system (IECQ QC 080000:2012), occupational safety and health management system (OHSAS 18001:2007) and occupational safety and health performance recognition as well as ISO 14064-1 greenhouse gas verification, PAS 2050 product carbon footprint verification (PAS2060:2010 AB series product carbon neutralization verification), and TEEMA carbon footprint logo were under review again in 2013. The management systems introduced at TXC have reached international standards. Through the active operation of these various systems, it is hoped that the Company may satisfy customer requirements not to mention set even higher benchmarks for us.

(4) Technology Upgrading

In addition to continuing rollout of the Six Sigma Improvement Project, a Design for Six Sigma course and project planning was launched in 2013. A total of six major projects for DFSS have been completed including the TSX, proximity sensor, inverted MESA, 1612XO/TCXO and 1210 crystal development projects. As of now, the financial benefits received from these projects have already reached NT$23 million. In the future, the Company will continue to strengthen and improve our R&D standards through the introduction of Six Sigma Green Belt, Black Belt and Design for Six Sigma.

(5) Corporate Governance and Responsibility

The Company has made a strong commitment to corporate governance for a number of years and thereby have continued to promote ‘setting down roots of education and fostering the shoots of learning’. We have cooperated with elementary schools located near Pingzhen and Beitou to have students tour the Company so that they can understand how hard their parents work. Roots and Shoots Awards were presented to outstanding teachers. Growth and Progress Awards were given out to students who have showed the most academic progress. In October 2013, the Company received the Excellence Award for Business Innovation from the Taoyuan County Government. In September, the Taipei City Government was presented with the three star Happiest Company Award. In August, TXC received the Inclusion Green Growth Award from BSI and was honored with seventh annual CSR Top50 award by Commonwealth Magazine. In July, TXC received an A++ rating again for information disclosure. In June, the Company completed CG6008 Advanced Corporate Governance System Assessment Certification. In May, TXC was ranked 280 out of 1000 large manufacturers by Commonwealth Magazine. In February, the company received the first Taiwan Mittelstand Award from the MOEA. These honors are ample proof of the tireless effort that the Company has invested in corporate governance and corporate social responsibility.

B. 2014 Operation Plan Summary
1 、 Operation Directions and Major Policies
(1) R&D Unit Organization Reengineering

As company product lines are being expanded beyond existing quartz crystal unit series and the organization following strategy is being adjusted, the Company decided totally overhaul its R&D organization in 2014 to address changes in the industry environment and conform to future product development trends. In addition to the existing quartz crystal resonators and oscillators, adequate resources were deployed to engage in light sensor component hardware and software development.

(2) Enter the light sensor component market
After successfully developing the temperature sensing crystal (TSX) and 3-in-1 light sensor (PA12) in 2013, the Company is focusing on promoting these two products in the marketplace. In addition to company sales, TXC will also top performing distributors in various countries to win more business from major international corporations. It is forecast that these two products will make a significant contribution to company sales and profits.
(3) Establish Product Lifecycle and Supplier Chain Platform System
The Company gradually introduced the Oracle Agile Product Lifetime Management module in 2013. Further optimization and strengthening will be done this year to improve project schedules and process controls as well as enhance communication and work efficiency in order to ensure smooth logistics operations between Taiwan and group subsidiaries. TXC is also gradually introducing a supplier chain management platform system to allow full communication and unobstructed material flow between the upstream and downstream companies of each plant and reduce inventory.
(4) Water Footprint Certification

Following the introduction of carbon footprint and carbon neutrality, the Company conducted a water footprint (blue water and gray water) inventory with assistance from the Industrial Development Bureau and guidance from the NCKU Industrial Sustainable Development Center in order to be able to announce water footprint information if so requested by customers, reduce wastewater discharge amounts and reduce water use and also stay current with global environmental protection trends to fulfill our responsibility as a global citizen.

(5) Corporate Governance

The Company passed CG6008 Advanced Corporate Governance certification and received the highest A++ rating for information disclosure in 2013. In response to the first corporate governance assessment held by the Taiwan Stock Exchange in 2015, the Company will conduct a full review of the related assessment content to conform and exceed the requirements of the competent authorities towards public listed companies. Since corporate social responsibility guidelines have been upgraded from GRI 3.1 to GRI 4.0, the Company shall make disclosures in the specified order inside the CSR report. For TXC, the goal of corporate governance is to fully disclose operation information and explain CSR promotion results. For stakeholders, the above information may be used to fully understand operating results so one can make the required investment decisions.

(6) Production Line Expansion

Since the production capacity of our LED Division is currently unable to satisfy customer requirements and business and market expansion limitations, the Company decided to make further investments in the LED business and expand production lines in 2014. The pattern sapphire substrate (PSS) process production line will be expanded to build up sufficient capacity, satisfy customer requirements and reduce costs in order to achieve a greater breakthrough in our LED business efforts. The Company will continue to enhance its competitive advantage, reduce product costs, expand production capacity at the Ningbo and Chongqing plants and adjust product mix to better satisfy customer requirements.

Sales Quantity Forecast and Basis

One can say that 2013 was a year full of strange twists and turns for the quartz industry. Everyone in the industry was forced to take countermeasures in response to market changes. Compared to 2012, TXC sales fell below expectations but operating performance was maintained at an acceptable level. Therefore, the Company has taken a cautiously optimistic outlook when determining the sales forecasts for 2014. In addition to the orders received from major international corporations, the Company is also planning to expand production capacity for new products and optimize existing product processes to boost sales. Moreover, as automotive and high precision products receive customer certification and approval, these products will start to make a significant and increasing contribution to sales. In addition, our existing quartz technology may be carried over to LED and light sensor products. Overall, due to the results seen in the development of miniature, high frequency and low energy consumption precision products and broad customer trust in our product quality, it is forecast that consolidated sales will reach 2.5 billion dollars and market share will rise to over 10% due to efficient handling of customer relations and product diversification which will make TXC one of the top two companies in the global quartz crystal resonator industry.

Being unable to reach our sales forecasts for the first time in a decade was indisputably a significant challenge for company management. Even though we remained a relatively profitable company in the quartz industry, we not only redirected internal resources and reorganized the R&D section, but also reexamined our efforts to expand new product channels in order to rapidly respond and acclimate to changes. Being aware of the increasing profit pressures on the electronic industry, all TXC employees to need to bravely face and surmount this extreme and difficult challenge. Bold innovation is an idea requiring deep thought when resources are being invested by the Company. This is the way to eliminate all habitual domains that obstruct progress and move on to future growth. How to improve human resource quality, reorganize resource allocation and optimize processes will again become issues that must be honestly faced in order to achieve meaningful and long-term sustainable operations.

After thirty years in operation as a company, we deeply believe that through the positive pressures of facing competition and breaking out of the status quo like what management guru Patrick M. Lencioni said “though reestablishment of team thinking, further improvement of internal information transparency of the organization, full understanding and raising communication efficiency” and by further strengthening of Company core values, TXC will certainly be able to spread our wings again and reward our stakeholders with growth and profits.

II.Company Overview

A.Company Introduction

1. Date of the company´s incorporation

TXC Corporation, founded in 1983, is a leading professional frequency control product manufacturer. We have devoted to the research, design, manufacture, and sale of Dual-Inline-Package (DIP) and Surface Mount Device (SMD) quartz crystal products. TXC now specializes in five categories of products such as high quality Quartz Unit Crystal, Automotive Crystal, Crystal Oscillator (CXO), Surface Acoustic Wave (SAW) Filter, and Timing Module (TM). In addition, TXC has extended our core technology competence to related LED substrate processes and crossed over into the sapphire LED field to support future group expansion and development. Over the years, we have upgraded customer value objectives and offered customers a variety of frequency control components for module design-in requirements to provide a total solution to satisfy the overall requirements of customers. TXC performance with regard to price, quality, delivery time and service continues to exceed customer expectations time and time again.

2. Company History

1983 Founded in Taiwan with US$95,000 capital.
1984 Began production on DIP type crystals and oscillators in Peitou factory.
1993 ISO9002 certified.
1995 Winner of the 4[th] National Award of Small and Medium Enterprises.
1997 Began production of SMD type crystals and oscillators in Taoyuan factory.
1998 Began production os SAW devices.
Implemented Oracle ERP system.
1999 Established US sales office.
2000 Increased capital to US$25.3 million.
2001 IPO’ed with capital increased to US$37 million.
2002 Listed in the Taiwan Stock Exchange(Code-3042)
Ranked among the top 10 worldwide frequency control product manufacturers.
2003 Began to offer value-added products(HF CXO/VCXO,OCXO,FX,etc.) for the telecom market.
Began production in new factory in NIngbo, China.
2004 Implemented QoS and 6-Sigma management systems.
Established US Technology Center.
2005 ISO/TS16949 certified.
Ranked number 6 among the worldwide frequency control product manufacturers.
2006 Expanding Tauouan factory. Adding production lines in Taiwan and China. The capacity reached to 70 million units per month. Authorized Capital: US$57.9 million.
2007 New factory in Pingzhen inaugurated, factory expansion project in Ningbo factory launched, Intel presented the Preferred Quality Supplier, promotion of the Six Sigma project to Ningbo plant green belt training, procurement of the Shenzhen office, implementation of employee stock option, CB conversion, and recapitalization of surplus to NT$2,415,530,000.
2008 Simultaneously expanded factories in Pingzhen, Taiwan and Ningbo, China; won Intel’s Supplier Continuous Quality Improvement (SCQI) Award; won A+ evaluation for information disclosure and top 10 potential golden torch award; continued to promote the 6-Sigma black belt training program at Ningbo and Pingzhen plants. Set up sales operations in Osaka, Japan and Singapore

to promote sales. Issued employee options and implement the treasury stock system. Set up subsidiary TXC Hongkong; execute employee option, CB conversion, surplus conversion to increase capitalization to NT$2,716,980,000.

2009 Second phase of Taiwan Pingchen and China Ningbo plant expansion initiated, received A+ ranking and top 10 award at sixth annual Information Disclosure and Transparency Ranking, on-the-job training plan launched for personnel at Ningbo and Pingchen plants, received Preferred Quality Supplier Award recognition again from Intel, strengthen company internal controls to ensure corporate governance effectiveness, promoted transparency of corporate governance information, exercised employee stock warrants, convertible bonds, capital increase by retained earnings to NT$2,887.27 million.
2010 Issued third convertible bond, received corporate governance system evaluation certification from the Taiwan Corporate Governance Associations, received industry model award for the Technology Industry B group from Commonwealth Magazine, awarded National Quality Award from Executive Yuan, continued to implement 6-Sigma black belt training plan for Ningpo and Pingchen plants, set up sales office in Europe to expand business, purchased offices in Shanghai and Suzhou, started third phase of plant expansion for Taiwan PCF, purchased 5,733 level ground of land, built the factories for new energy business unit, execute employee stock option and increase capital out of earning to 2.971 billion NT dollars.
2011 Completion and launch of Taiwan Pingzhen Third-Stage plant expansion and New Energy Division plant, establishment if TXC (Chongqing) Electronics Co., Ltd. production site, established TXC (Chongqing) Corporation and Ningbo Jingyu Company Limited, expansion of European subsidiary, receives A+ grade and top 10 award at Eighth Annual Information Disclosure and Evaluation, passed CGR report review, received Energy Conservation Elite, Outstanding Innovation Award and Commonwealth Corporate Citizen Award, received Taoyuan County Corporate Innovation Award, received ISO50001 Energy Management System, ISO28000 Supplier Chain Management System, ISO27001 Information Security Management System certification, Oracle ERP system upgraded to R12 version, valid assessment of remuneration fairness combined with performance evaluation, establishment of remuneration committee, exercise of employee stock warrants, NT$3,022,420,000 capital increase by capital surplus.
2012 TXC (Chongqing) Corporation plant construction, awarded Authorized Economic Operator (AEO) by the MOF Customs Administration, passed BSI greenhouse gas (ISO 14064-1), product carbon footprint (PAS 2050) inventory, product carbon neutralization (PAS 2060) inventory, given Corporate Citizenship Award by Commonwealth Magazine, received green sustainable enterprise award from BSI, external certification of CSR Report conformed to GRI G3.1 A+ and AA 1000 standards, passed CNS 15506 TOSHMS, awarded ninth annual Information Disclosure and Transparency A++ and top ten ranking, exercised employee stock options, convertible bond and NT$3,097,579,000 capital increase.
2013 Issued fourth convertible bond, TXC (Chongqing) Corporation begin formal mass production, received Taiwan Mittlestadt Award from the Ministry of Economic Affairs, passed review for R&D subsidy for a leading new product development project from the Industrial Development Bureau, was awarded CG6008 Advanced Corporate Governance certification, 10[th] annual A++ information disclosure assessment rating, passed greenhouse gas inventory (ISO14064-1), product carbon footprint inventory (PAS2050) and product carbon neutrality (PAS2060) verification, named as one of the top 50 Excellence in CSR Award winners by Commonwealth Magazine and a three star 3[rd] annual Happiest Company Award from the Taipei City Government Department of Labor
2014 Received carbon label certification for its AM product series and carbon neutrality inventory certification from the Environmental Protection Administration

B 、 Company Structure and the Subsidiaries

1.The chart of TXC corporation and the subsidiaries

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2. The basic data of the subsidiaries

				2013.12.31
Name	Incorporated	Address	Capital	Business Nature
Taiwan Crystal Technology International Limited	1998.12.23	WESTERN SAMOA	USD45,835,294	Investment holding
Growing Profits Trading Ltd	1999.03.09	BRITISH VIRGIN ISLANDS	USD 50,000	National trading
TXC (NGB) Electronic Co., Ltd. corporation	1999.03.12	No.189, Huangshan Xi Rd., Economic & Technical Development Zone,Ningbo Zhejiang, China	USD45,835,294	Manufacture and sales of electronics products
TXC Technology Inc	2000.12.01	431 Lambert Road,Suite 306 Brea,California 92812, U.S.A. .	USD 300,000	Marketing activities
TXC Japan Corporation	2005.09.13	Davinici-shin-yokohama Bldg.,1-3-1, Shin-yokohama, Kohoku-ku,Yokohama,222-00 33 Japan	YEN 21,000,000	Marketing activities
TAIWAN CRYSTAL TECHNOLOGY(HK)LIMITED	2010.07.06	Rm.804, Sino Centre, 582-592 Nathan Rd.,Kln.H.K	USD 10,080,000	Investment holding
TXC (Chongqing) Electronic Co., Ltd. corporation	2010.10.11	JinFeng Industrial Region, Jiulongpo District, Chongqing City, China	RMB 146,842,032	Manufacture and sales of electronics products
Chongqing All Suns Company Limited	2011.02.14	Jiulongpo District, Chongqing, ChinaJinfengRoad 108,	RMB 66,000,000	Marketing activities
Ningbo Jingyu Company Limited	2011.09.07	No.189, Huangshan Xi Rd., Economic & Technical Development Zone,Ningbo Zhejiang,China	RMB 1,000,000	Purchasing and selling electronic component

III. Corporate governance

A. Directors

2014.04.20

ectors			2014.04.20
Title	Name	Major academic (professional) experience	Current position in our company or other company

Chairman of the Board of Directors	Lin, Jin-Bao	MBA, West Texas A&M University, USA	Director of TaiwanCrystal Industry Association Director of Tai Shing Electronics Components Corporation Director of UPI Semiconductor Corporation
Vice-Chairman of the Board of Directors	Hsu, Der-Jun	Kei-Nan Institute of Technology and Business	Chairman of the Board of Director of Chan-Yu Corporation Chairman of the Board of Director of Kuan-Ya Int’l Corporation Chairman of the Board of Director,TCTI Corporation Supervisor of Tai SShing Electronics Components Corporation
Director of Board	Lin, Wan-Shing	Master in Management, Taipei Science and Technological University	Chairman of the Board of Director of Tai Shin Electronics Corporation Chairman of the Board of Director of TXC Ninpo Corp Independent Director of Protech Systems Co.Ltd.
Director of Board	Go, Tien-Chong	Electronics Dept, Taipei Institute	Chairman of the Board of Director of ESS Technology International Inc.
Director of Board	Kuo, Shu-Hsin	Business Major, Taipei Business School	Vice-Chairman of the Board of Director of Chan-Yu Corporation
Director of Board	Chen Chueh, Shang-Hsin	Master of management, Zhejiang University	Marketing inspector of TXC Director ofTai Shing Electronics Components Corporation
Corporate Director of Board	TLC Capital Co.,LTD	Investment Company of UMC Group	Investment Company of UMC Group Supervisor of Simplo Technology
Corporate Director of Board	Yang, Du-An	History Dept, TamKung University	-
Independent Director of Board	Peng, yun-Ho	Department of Civil Engineering, University of Texas Dean of the Design School of National Taiwan University of Science and Technology	Doctor of National Taiwan University
Independent Director of Board	Yu, Shang-Wu	Ph.D., Birmingham University	Professor, Taipei Science and Technological University
Independent Director of Board	Cai, Song-Qi	Finance and Accounting Department of Shanghai University Business Administration, National Chengchi University	Chairman of the Board of Director ofEMCC Corporation

B. Personnel data of the general manager, vice general manager, assistant vice general manager, chief of divisions

general manager, chief of divisions	general manager, chief of divisions	general manager, chief of divisions
				2014.04.20
Title	Name	Date of	Major academic (professional)	Other part time position with
		employment		other companies
General Manager	Lin, Wan-Hsing	1989.11.11	Master in Management, Taipei Science and Technological University	Chairman of the Board of Director of Tai Shin Electronics Corporation Chairman of the Board of Director of TXC Ninpo Corp Independent Director of Protech Systems Co.Ltd.
Vice General Manager	Chen Chueh,Shan-hs ing	2002.04.01	Master of management, Zhejiang University	President of TXC Ninpo Corp Chairman of the Board of Director, Shin Mau Electronics Corporation
Vice General Manager	Chang, Qi-Zhong	2006.04.01	Lunghwa University of Science and Technology	-
Vice General Manager	Kuo, Ya-Ping	2009.08.01	BOSTON UNIVERSITY, MBA	-
Vice General Manager	Adam Lee	2011.01.31	Ph.D., National Taiwan University of Science & Technology, Department of Business Administration Vice President, Sequel Technology, Inc.	-
Vice President Manager	Colin Chang	2012.01.01	City University of Macau, MBA Plant Manager, Taitien Electronics Co., Ltd.	-
Vice President Manager	M.K. Chao	2012.01.01	Ph.D., Naval Architecture & Ocean Engineering, National Taiwan University Engineer, Biomedical Engineering Center, ITRI	-
Assistant Vice General Manager	Kuo, Ya Han	2009.08.01	West Coast University, MBA Sales & Marketing Center TXC Corp.	-
Assistant Vice General Manager	Lin, Sufen	2010.07.01	Electrical Department of Kaohsiung Institute Director, OEM Product Division, TXC Corp.	-
Assistant Vice General Manager	Lin, Shi Bo	2011.01.31	Master of Physics, UC, Riverside, USA Director, Marketing Center, TXC Corp.	-
Assistant Vice General Manager	Su Zheming	2011.01.31	Department of Electrical Engineering, National Taiwan Ocean University Director, Manufacturing Center, TXC Corp.	-
Assistant Vice General Manager	Blue Larn	2014.05.01	Doctor of. Materials Engineering of the National Taiwan University Project Manager of TSMC Corporation	-
Assistant Vice General Manager	Stephen You	2012.0101	Department of Electronic Engineering, Oriental Institute of Technology Special Assistant, Sales/Marketing Center, TXC Corp.	-
Chief of Finance	Hong, Gon-Wen	2003.03.11	MBA, National Taipei University Financial Manager, TXC Corp.	-

Note 1: AVP M.K. Chao transferred to VP on January 1, 2013. Note 2.Tenture of AVP Blue Larn began on May 1, 2013

C. Corporate governance and variations with management principles of publicly-listed companies and reasons

Items	Enforcement	Discrepancy with best-practice principles of TWSE/GTSM listed companies
I. Company ownership structure and shareholders' equity (A) Company handling of shareholders' proposals and disputes (B) Search for information on the identities of major shareholders and their ultimate controlling persons (C) The establishment of risk control mechanism and firewalls with affiliates	1. The Company has set up spokesperson and substitute spokesperson positions and a dedicated email address as well as independent director and supervisor positions and a dedicated email address to handle shareholder recommendations and disputes. The Ningbo and Chongqing plants are 100% company owned subsidiaries and related shareholder and stakeholder questions are answered by the Company on their behalf. 2. In accordance with Article 25 of the Securities and Exchange Act, the Company reports the changes in shareholdings of internal personnel, including directors, supervisors, managers and shareholders with 10% or higher shareholdings monthly to the Market Post Observation System designated by the Securities and Futures Bureau. 3. In addition to the risk control systems set up by the Company, related work procedures have been established for operation business and financial transactions between the Company and its affiliates such as the Subsidiary Operation Management Procedure. Guidance has been provided to subsidiaries for establishment of written internal controls and subsidiary level of authority, related party transaction management, transaction procedures for designated companies, related parties and group companies and acquisition and disposal of assets procedures, endorsement and guarantee procedures, lending of funds procedures and financial derivative transaction procedures in conformance with parent company requirements to implement the risk control system towards subsidiaries. The Ningbo and Chongqing subsidiaries have set up their own risk control systems. Risk control systems and firewalls have been established for affiliated companies in accordance with related procedures.	Conforms with best-practice principles, no discrepancy

II. The composition and duties of board of directors (A) Company independent director placement (B) Regularly evaluation of CPA independence	1. The Company convened its annual shareholders’ meeting in June 19, 2013 and elected three independent directors who meet the independent director criteria. The articles in incorporation revised to include independent directors in order to comply with the Securities and Exchange Act. The academic backgrounds, business philosophy, declarations, terms of agreement of the independent directions, the respective election process and results are posted on the Company website. The related key statements made by the independent directors at the board meeting are listed individually in the board minutes. Independent directors have not yet been established for the subsidiary Ningbo and Chongqing plants. 2. In order to strengthen CPA independence and familiarity towards company operations, the Company internally evaluates CPA competence and regularly reports the results to the board of directors for review and assessment of CPA independence. A new CPA evaluation and performance assessment procedure was established on April 29, 2013 for evaluation of CPA independence, competence and performance. The CPA performance evaluation sheet completed before the first quarter of the following year was submitted for Audit Committee approval and then reported to the board for review to implement corporate governance and upgrade the function of the board of directors. In the future, the Company will further strengthen the evaluation function of the Audit Committee. Before a CPA is replaced, the Chairman and President will first understand the reasons for the replacement, the related circumstances and then interview the CPA replacement candidate. After the evaluation, the related CV information will be submitted to the board of directors for review. Then, if deemed necessary, the CPA will be invited to attend boardmeetings onanadhoc basis.	Conforms with best-practice principles, no discrepancy
III. Establishment of communication channels with stakeholders	The Company has set up multiple channels including a spokesperson system and website to serve as a news and communication channel for the Company and its subsidiaries. Dedicated shareholder and investor relations mailboxes have been established. Contact windows have been set up for sales, management and operation items and stakeholder concerns are properly handled. In addition, the Company has set up a clean and fair transaction mailbox. If any employee of the Company engages in illegal practices during a transaction process, the incident may be reported throughthis Site address: http://www.txccorp.com/tw/f_investor/10.asp	Conforms with best-practice principles, no discrepancy

IV. Disclosure of information (A) Establishment of website to disclose financial, operation and corporate governance information (B) Other means of disclosing information (such as establishment of English website, designation of dedicated personnel responsible for the collection and disclosure of company information, setting up spokesperson system, placement of investor conference details on the company website).	1、 The Company and subsidiaries has set up simplified, complex Chinese, English and Japanese versions of website. The website at http://www.txccorp.com provides financial and business information and dedicated personnel are responsible for its maintenance and information updating. 2、 The Company holds investor conferences as required and relevant information is placed on the company website and posted on the MOPS site designated by the competent authorities. 3、 As for corporate governance information disclosure, the Company's important information, financial status, board and shareholder meetings, dividend issuance, internal audit organization and operation, major laws and regulations and procedures for internal persons and past board meeting minutes were posted on the company website for investor reference. 4、 The Company has set up Chinese, English and Japanese versions of the company website and dedicated personnel are responsible for collection of related information. Disclosure of major company events is done uniformly through a spokesperson. Recordings or video files of the company's investor conference are posted on the company information disclosure website to allow convenient access by outside persons. Related information is also reported to the MOPS site designated by the competent authorities.	Conforms with best-practice principles, no discrepancy

V. Company establishment, nomination or operation of other functional committees		The Company passed the resolution to establish a remuneration committee on December 28, 2011. The board of directors then passed a resolution to call a second session of the remuneration committee on July 10, 2013 which has convened two times on August 8thand December 19th, 2013. In 2013, the supervisor system was eliminated and an audit committee was established during the 2013 director elections. This committee convened three meetings on August 12th, November 7th and December 19thin 2013. Related information and meeting minutes of the remuneration and audit functional committees are disclosed on the company website. For related information, refer to the company website http://www.txccorp.com/tw/f_investor/09.asp http://www.txccorp.com/tw/f_investor/11.asp The subsidiary Ningbo and Chongqing Plants have not yet established functional committees.	To establish supervisor, audit committee or other function committees in accordance with the law, it will be proposed to revoke the supervisor system and elect three independent and establish an audit committee at the June 19, 2013 shareholders' meeting.
VI. If your Company has established corporate governance principles according to Best-Practice Principles of TWSE/GTSM Listed Companies, describe any discrepancies between them: 1. The Company's board of directors passed the initial version of Corporate Governance Best-Practice Principles on October 27, 2009. Amendments were made on April 29, 2013. Actual operations of the Company comply with Corporate Governance Best-Practice Principles. Its enforcement principles are: (1) Encourage shareholder participation and corporate governance (2) Establish corporate governance relations between the Company and affiliated companies (3) Strength board of directors functions (4) Plan to establish audit committee to replace supervisor positions in 2013 (5) Set board resolution rules and decision making procedures (6) Exercise remuneration committee and audit committee functions (7) Respect rights of stakeholders (8) Raise information transparency (9) Improve corporate government disclosure 2. In order to enhance corporate governance content and spirit, the Company and the subsidiaries will continue to establish more detailed and concrete rules and procedures, the code of conduct, management of transactions with interested parties, procedure for transactions with designated companies, interested parties and group companies and major internal information guidelines, scope of duties of independent directors, code of ethical business management, corporate social responsibility best-practice principles have been passed at board of directors and shareholders' meetings and are implemented by the Company. In order to conform to customer and company sustainable development requirements, a CSR report is submitted annually to the board of directorsforpassage.

VII. Other major information that is helpful to understand corporate governance enforcement (such as employee rights, employee concern, investor relations, supplier relations, stakeholder rights, director and supervisor continuing studies, risk management policy and risk weighing criterion implementation conditions, consumer protection or customer policy implementation conditions, purchase of liability insurance for company directors and supervisors):
Employee rights: The Company has set up employee welfare measures, retirement system, continuing studies and various employee rights based upon the Labor Standards Act.
- Related employee rights at the subsidiary Ningbo and Chongqing Plants are handled in accordance with the Labor Law and Labor Contract Law of the People’s Republic of China.
Employee concern: The Company has set up a medical office with professional medical staff, established a labor safety and health committee to govern employee safety and health matters and offers employee assistance programs including psychological, medical and health. Many communication channels have been opened for employees to submit suggestions and recommendations to create excellent two-way communication channels.
Supplier relations, stakeholders’ rights: Procedures are followed for each aspect of company work. Cooperation with companies is conducted in accordance with contract provisions to uphold the legal rights of both parties. As of today, no related litigation has arisen.
Investor relations: The Company is very concerned about investor rights. In addition to reporting related information to the MOPS site designed by the competent authorities and posting related information on the company website, the Company received an A+ rating for four consecutive years by the Securities & Futures Institute information disclosure and evaluation system, awarded the voluntary disclosure and transparent company honors for eight consecutive years and given an A++ rating for the ninth and tenth annual rating period.
The Company's directors and supervisors attend continuing education finance and business classes on a non-regular basis. See the director and supervisor education & training table of the Company's Annual Report.
Company risk management policy and risk weighing criterion implementation: See the Company's Annual Report for related company risk management policy, organization framework and related risk control work. In addition, the Company conducts analysis, tracks and devises countermeasures for business targets that could result in high risks to establish a sound risk control mechanism.
Consumer protection and customer policy implementation: Customer first, mission accomplishment shows TXC commitment and determination to create a customer-oriented business. Our dedication towards quality has earned deep customer recognition over the years. The outstanding supplier awards given to us by numerous customers are a source of pride and encouragement.
The Company has purchased liability insurance for directors and supervisors in 2004. In 2008, the policy was increased to US$5 million.

9. Corporate governanceinstruction, training and continuing education forexecutive officers: Position Name Training Period Continuing Education Date Organizer Name of Course Start Finish President Peter Lin 3H 102/07/10 102/07/10 Taiwan Corporate Governance Association Independent director participation and audit committee effectiveness Marketing Director Levi Chen Vice President Yapin Guo Vice President Landau Chang Vice President Adam Lee Vice President Colin Chang Vice President M.K. Chao President Peter Lin 3H 102/08/12 102/08/12 Taiwan Corporate Governance Association Business secret protection and Personal Information Protection Act introduction Marketing Director Levi Chen Vice President Yapin Guo Vice President Landau Chang Vice President Adam Lee Vice President Colin Chang Vice President M.K. Chao Audit Supervisor Chang Wei-Han 6H 102/10/9 102/10/9 Accounting Research and Development Foundation Company sales receipts and purchasing payment audit practices andmethods 6H 102/11/8 102/11/8 Accounting Research and Development Foundation Skill requirements of modern internal audit personnel – Professional skills, communications and problem solving Financial Controller Vivien Hong 18H 102/09/25 102/09/27 Accounting Research and Development Foundation / Taiwan Corporate Governance Association Profession Development of Principal Accounting Officers of Issuers, Securities Firms and Securities Exchanges / Independent Director Participation and Audit Committee Effectiveness / Business Secret Protection and Personal Information Protection Act Introduction	9. Corporate governanceinstruction, training and continuing education forexecutive officers: Position Name Training Period Continuing Education Date Organizer Name of Course Start Finish President Peter Lin 3H 102/07/10 102/07/10 Taiwan Corporate Governance Association Independent director participation and audit committee effectiveness Marketing Director Levi Chen Vice President Yapin Guo Vice President Landau Chang Vice President Adam Lee Vice President Colin Chang Vice President M.K. Chao President Peter Lin 3H 102/08/12 102/08/12 Taiwan Corporate Governance Association Business secret protection and Personal Information Protection Act introduction Marketing Director Levi Chen Vice President Yapin Guo Vice President Landau Chang Vice President Adam Lee Vice President Colin Chang Vice President M.K. Chao Audit Supervisor Chang Wei-Han 6H 102/10/9 102/10/9 Accounting Research and Development Foundation Company sales receipts and purchasing payment audit practices andmethods 6H 102/11/8 102/11/8 Accounting Research and Development Foundation Skill requirements of modern internal audit personnel – Professional skills, communications and problem solving Financial Controller Vivien Hong 18H 102/09/25 102/09/27 Accounting Research and Development Foundation / Taiwan Corporate Governance Association Profession Development of Principal Accounting Officers of Issuers, Securities Firms and Securities Exchanges / Independent Director Participation and Audit Committee Effectiveness / Business Secret Protection and Personal Information Protection Act Introduction	9. Corporate governanceinstruction, training and continuing education forexecutive officers: Position Name Training Period Continuing Education Date Organizer Name of Course Start Finish President Peter Lin 3H 102/07/10 102/07/10 Taiwan Corporate Governance Association Independent director participation and audit committee effectiveness Marketing Director Levi Chen Vice President Yapin Guo Vice President Landau Chang Vice President Adam Lee Vice President Colin Chang Vice President M.K. Chao President Peter Lin 3H 102/08/12 102/08/12 Taiwan Corporate Governance Association Business secret protection and Personal Information Protection Act introduction Marketing Director Levi Chen Vice President Yapin Guo Vice President Landau Chang Vice President Adam Lee Vice President Colin Chang Vice President M.K. Chao Audit Supervisor Chang Wei-Han 6H 102/10/9 102/10/9 Accounting Research and Development Foundation Company sales receipts and purchasing payment audit practices andmethods 6H 102/11/8 102/11/8 Accounting Research and Development Foundation Skill requirements of modern internal audit personnel – Professional skills, communications and problem solving Financial Controller Vivien Hong 18H 102/09/25 102/09/27 Accounting Research and Development Foundation / Taiwan Corporate Governance Association Profession Development of Principal Accounting Officers of Issuers, Securities Firms and Securities Exchanges / Independent Director Participation and Audit Committee Effectiveness / Business Secret Protection and Personal Information Protection Act Introduction	9. Corporate governanceinstruction, training and continuing education forexecutive officers: Position Name Training Period Continuing Education Date Organizer Name of Course Start Finish President Peter Lin 3H 102/07/10 102/07/10 Taiwan Corporate Governance Association Independent director participation and audit committee effectiveness Marketing Director Levi Chen Vice President Yapin Guo Vice President Landau Chang Vice President Adam Lee Vice President Colin Chang Vice President M.K. Chao President Peter Lin 3H 102/08/12 102/08/12 Taiwan Corporate Governance Association Business secret protection and Personal Information Protection Act introduction Marketing Director Levi Chen Vice President Yapin Guo Vice President Landau Chang Vice President Adam Lee Vice President Colin Chang Vice President M.K. Chao Audit Supervisor Chang Wei-Han 6H 102/10/9 102/10/9 Accounting Research and Development Foundation Company sales receipts and purchasing payment audit practices andmethods 6H 102/11/8 102/11/8 Accounting Research and Development Foundation Skill requirements of modern internal audit personnel – Professional skills, communications and problem solving Financial Controller Vivien Hong 18H 102/09/25 102/09/27 Accounting Research and Development Foundation / Taiwan Corporate Governance Association Profession Development of Principal Accounting Officers of Issuers, Securities Firms and Securities Exchanges / Independent Director Participation and Audit Committee Effectiveness / Business Secret Protection and Personal Information Protection Act Introduction	9. Corporate governanceinstruction, training and continuing education forexecutive officers: Position Name Training Period Continuing Education Date Organizer Name of Course Start Finish President Peter Lin 3H 102/07/10 102/07/10 Taiwan Corporate Governance Association Independent director participation and audit committee effectiveness Marketing Director Levi Chen Vice President Yapin Guo Vice President Landau Chang Vice President Adam Lee Vice President Colin Chang Vice President M.K. Chao President Peter Lin 3H 102/08/12 102/08/12 Taiwan Corporate Governance Association Business secret protection and Personal Information Protection Act introduction Marketing Director Levi Chen Vice President Yapin Guo Vice President Landau Chang Vice President Adam Lee Vice President Colin Chang Vice President M.K. Chao Audit Supervisor Chang Wei-Han 6H 102/10/9 102/10/9 Accounting Research and Development Foundation Company sales receipts and purchasing payment audit practices andmethods 6H 102/11/8 102/11/8 Accounting Research and Development Foundation Skill requirements of modern internal audit personnel – Professional skills, communications and problem solving Financial Controller Vivien Hong 18H 102/09/25 102/09/27 Accounting Research and Development Foundation / Taiwan Corporate Governance Association Profession Development of Principal Accounting Officers of Issuers, Securities Firms and Securities Exchanges / Independent Director Participation and Audit Committee Effectiveness / Business Secret Protection and Personal Information Protection Act Introduction	9. Corporate governanceinstruction, training and continuing education forexecutive officers: Position Name Training Period Continuing Education Date Organizer Name of Course Start Finish President Peter Lin 3H 102/07/10 102/07/10 Taiwan Corporate Governance Association Independent director participation and audit committee effectiveness Marketing Director Levi Chen Vice President Yapin Guo Vice President Landau Chang Vice President Adam Lee Vice President Colin Chang Vice President M.K. Chao President Peter Lin 3H 102/08/12 102/08/12 Taiwan Corporate Governance Association Business secret protection and Personal Information Protection Act introduction Marketing Director Levi Chen Vice President Yapin Guo Vice President Landau Chang Vice President Adam Lee Vice President Colin Chang Vice President M.K. Chao Audit Supervisor Chang Wei-Han 6H 102/10/9 102/10/9 Accounting Research and Development Foundation Company sales receipts and purchasing payment audit practices andmethods 6H 102/11/8 102/11/8 Accounting Research and Development Foundation Skill requirements of modern internal audit personnel – Professional skills, communications and problem solving Financial Controller Vivien Hong 18H 102/09/25 102/09/27 Accounting Research and Development Foundation / Taiwan Corporate Governance Association Profession Development of Principal Accounting Officers of Issuers, Securities Firms and Securities Exchanges / Independent Director Participation and Audit Committee Effectiveness / Business Secret Protection and Personal Information Protection Act Introduction	9. Corporate governanceinstruction, training and continuing education forexecutive officers: Position Name Training Period Continuing Education Date Organizer Name of Course Start Finish President Peter Lin 3H 102/07/10 102/07/10 Taiwan Corporate Governance Association Independent director participation and audit committee effectiveness Marketing Director Levi Chen Vice President Yapin Guo Vice President Landau Chang Vice President Adam Lee Vice President Colin Chang Vice President M.K. Chao President Peter Lin 3H 102/08/12 102/08/12 Taiwan Corporate Governance Association Business secret protection and Personal Information Protection Act introduction Marketing Director Levi Chen Vice President Yapin Guo Vice President Landau Chang Vice President Adam Lee Vice President Colin Chang Vice President M.K. Chao Audit Supervisor Chang Wei-Han 6H 102/10/9 102/10/9 Accounting Research and Development Foundation Company sales receipts and purchasing payment audit practices andmethods 6H 102/11/8 102/11/8 Accounting Research and Development Foundation Skill requirements of modern internal audit personnel – Professional skills, communications and problem solving Financial Controller Vivien Hong 18H 102/09/25 102/09/27 Accounting Research and Development Foundation / Taiwan Corporate Governance Association Profession Development of Principal Accounting Officers of Issuers, Securities Firms and Securities Exchanges / Independent Director Participation and Audit Committee Effectiveness / Business Secret Protection and Personal Information Protection Act Introduction
Position	Name	Training Period	Continuing Education Date		Organizer	Name of Course
			Start	Finish
President	Peter Lin	3H	102/07/10	102/07/10	Taiwan Corporate Governance Association	Independent director participation and audit committee effectiveness
Marketing Director	Levi Chen
Vice President	Yapin Guo
Vice President	Landau Chang
Vice President	Adam Lee
Vice President	Colin Chang
Vice President	M.K. Chao
President	Peter Lin	3H	102/08/12	102/08/12	Taiwan Corporate Governance Association	Business secret protection and Personal Information Protection Act introduction
Marketing Director	Levi Chen
Vice President	Yapin Guo
Vice President	Landau Chang
Vice President	Adam Lee
Vice President	Colin Chang
Vice President	M.K. Chao
Audit Supervisor	Chang Wei-Han	6H	102/10/9	102/10/9	Accounting Research and Development Foundation	Company sales receipts and purchasing payment audit practices andmethods
		6H	102/11/8	102/11/8	Accounting Research and Development Foundation	Skill requirements of modern internal audit personnel – Professional skills, communications and problem solving
Financial Controller	Vivien Hong	18H	102/09/25	102/09/27	Accounting Research and Development Foundation / Taiwan Corporate Governance Association	Profession Development of Principal Accounting Officers of Issuers, Securities Firms and Securities Exchanges / Independent Director Participation and Audit Committee Effectiveness / Business Secret Protection and Personal Information Protection Act Introduction

VIII. If the corporate governance self-evaluation or corporate governance rating report by an external body, describe the self-evaluation (or external evaluation) results, major deficiencies (or suggestions) and improvement conditions:
(A) The Company hired the Taiwan Corporate Governance Association on March 2, 2010 to rate the corporate governance of the Company and received CG6005 general version corporate governance system rating certification on March 23, 2010. The rating recommendations were as follows. The Company will continue to make improvements based on the recommendations.
Recommended the Company to refer to corporate governance best-practice principles and spirit and conduct a comprehensive examination of the overall connection and integration of the rules and procedures passed as a result of the high speed growth over recent years. A internal corporate governance system and related work procedures need to set up that conform to company attributes and requirements to aid compliance.
Recommend the Company think from a corporate group perspective and differentiate the Company from ordinary companies and set up a system and related procedures that conform to affiliated company requirements to implement group company management procedures.
Recommend the Company's board of directors take the high ground when setting business targets and strategy development at different stages for the Company, identifying various risks and establishing a suitable risk appetite and tolerance. In addition, take a pro-active stance in bringing together the risk management procedures currently distributed in different company systems and procedures, set up a comprehensive risk management policy as well as clearly worded procedures, rules, guidelines and measures, assign dedicated sections to be responsible for implementation and auditing to achieve the goals of risk management. Risk management policy results should be reported regularly to the board of directors.
Recommend the Company set up a board of directors performance evaluation system and conduct regular evaluations to urge board of directors to upgrade performance and raise the overall operation performance of the board of directors.
Recommend the Company have the board of directors approve the performance evaluation standards of the president and other executive officers.
The Company is currently in a high growth stage. The Company's chairperson concurrently serves as the CEO and the Vice Chairman serves as the Deputy CEO. It is recommended the Company think about what concrete steps can be taken to gradually separate the Chairman and Vice Chairman from business operations team including increasing the number of independent directors and raising the board of direction supervisory functions which should be the long-term development goal for the Company's corporate governance system.
In order to raise board of director meeting attendance, first schedule the board of director meetings six months or one year in advance or use teleconferencing for the meeting. Also follow related procedures to ensure that the legality of the teleconference.
Based on the spirit of corporate governance, when a director or supervisor has a conflict of interest involving a matter before the board of directors, the independent director shall fulfill their decision-making responsibility and oversee related director recusal at board meetings. For effective implementation, the board secretary can be responsible for reminding the meeting chairperson and have the independent directors supervise the recusal procedure and work.
The Company's information disclosure system is very effective but it is recommended that procedures set up for reporting major information to the board, independent directors and supervisors including reporting period, type of information reported and reporting method to ensure board members are familiar with major company information and directors and supervisors are able to fulfill their duties.
It is recommended that the Company set up regular / formal meeting or communication channels between independent directors,

supervisors and CPA outside of board meetings. Appropriate meeting minutes should be made of the meeting and communications to conduct tracking and oversight of financial record quality and internal control system and operation results.

(B) The Company received CG6008 Advanced Corporate Governance Assessment certification from the Taiwan Corporate Governance Association in 2013. The assessment recommendations were: Continue improvement of these recommendation items.
The Company discloses its top 10 shareholders and list of shareholders with 5% or higher shareholdings in the annual report. However, the major shareholder Cathay Life Insurance Company Ltd. was no longer disclosed in the Annual Report. In order to raise information transparency requirements for corporate governance, it is recommended that a significant effort be made to obtain and disclose related information to recognize and protect the right to know of minor shareholders.
The chairman of the Company serves concurrently as the CEO and the vice chairman as serves as the Vice CEO to fully utilize the industry professional expertise of these two individuals. This arrangement has continued for some years. However, the responsibilities of the chairman and vice chairman are to oversee and guide the operations and management team so it is preferable that one not concurrently occupy two positions to prevent role conflicts. It is recommended that the company take gradual steps to eliminate this practice and use the increase of independent director method to institute dedicated roles and enhance effectiveness of decision-making supervision.
The chairman and internal directors of the Company make up over 1/3 of the total number of director positions. In order to ensure the independence of the board, it is recommended that the Company reduce the number of internal directors and increase the number of independent directors so they may independently oversee company management performance.
Company independent directors have academic and industrial expertise and the number of independent director positions have been established in the Independent Director Qualification Guidelines but the required professional qualifications required for independent directors are not included. It is recommended that the Company discuss what set of industry specific and overall qualifications are needed for independent directors and clearly specify these qualifications in related articles and guidelines.
The Company submits comprehensive evaluation reports to the board for individual fund raising activities (i.e. issuance of corporate bonds) to provide a basis for merger, fund raising, private placement and other major decisions. It is recommended that the Company set up a formal procedure for related purchase transactions, fund raising and issuance or private placement of equity securities.
The Company respects the opinions of independent directors and supervisors during routine CPA appointment. However, a board of directors lacks a written evaluation system for CPA competence. It is recommended that a competency evaluation be conducted annually for CPAs for submission to the board for use as reference when making CPA appointment decisions.
The independent directors and supervisors of the Company perform their duties responsibly. Overall attendance of board of director members is high. However, there was no record of oversight of company major operation plan and financial report preparation by independent directors or supervisors. It is recommended that this information be fully disclosed so that shareholders fully understand the duties performed by independent directors and supervisors.
How significant random events which occur on regular days are reported to the board is especially important for independent directors and

supervisors who are not present at the Company on regular days. Though there are no clear written regulations available to follow, the Company gives guidance at appropriate times to ensure that board members are promptly informed of significant company information. It is recommended that the Company establish a procedure for reporting key information to the board of directors, independent directors and supervisors including reporting periods, type of information reported and reporting methods.
The Company has set up performance evaluation procedures for directors, supervisors and managers at the remuneration meeting and submitted them to the board for passage but it has not yet set up a function committee performance evaluation system. Since the board of director’s functional committees are important for corporate governance effectiveness. It is recommended that the Company establish a subjective evaluation system for functional committee operation discipline, significant decisions and effectiveness to effect the self-discipline function of committee members.
In order to strengthen the communication system for supervisors and CPAs, improve supervisor effectiveness, it is recommended that the company’s CPA routinely report to the supervisors alone without being accompanied by other members of management and make a written report to facilitate further tracking and guidance by supervisors.
Company supervisors and CPAs do actively participate in board meetings but it is preferable that company supervisors and CPA not only participate at board meetings but also interact and communicate sufficiently during audit planning and before issuing the audit report to improve CPA audit work quality and leave a written record for future reference and tracking.
Within the organizational structure, the internal audit is directly reported to the board of directors. Regular, close contact must be kept between the independent directors and supervisors. Company internal audit personnel performance is currently evaluated by the Chairman and President. It is recommended that the board of directors conduct regular evaluations in the future and consider the opinions of independent directors and supervisors.
The Company was fined by competent authorities for violation of the Waste Disposal Law and Water Pollution Prevention and Control Law and completed improvements after the incident occurred. It is recommended that strengthen oversight of responsible units and add them to the performance evaluation to prevent violations from occurring again.
When convening the shareholders’ meeting, effort should be made to allow full participation from all shareholders (including minor shareholders and foreign shareholders) and enable them to exercise their voting rights for significant company proposal. June 10 and June 13, 2012 were the dates on which the most recent shareholders’ meeting were held. On June 10, 2011, 202 companies convened shareholders’ meetings on that day which was over the 200 company limit. It is recommended that the Company work harder in the future on shareholders’ meeting preparation to reach the goal of holding the meeting before the end of May.
According to Article 7 of the Corporate Governance Best Practice Principles for TWSE / GTSM Listed Companies “TWSE / GTSM Listed Companies are advised to arrange for their shareholders to vote by poll on the proposals included in the meeting agenda one by one and enter the voting result, namely the number of votes casts “for” and “against” and the number of “abstentions” for each proposal, after the shareholders’ meeting on the same day that is held, into the Internet information designated by the TWSE. It is recommended that the

  - Company gradually introduce the above voting by poll system and record the number “for” and “against” votes in the shareholders’ meeting minutes to conform to international practices and improve company corporate governance standards.

The independent director election and nomination system is clearly established in the current director and supervisor election procedure but there are no procedures for all of the directors and supervisors. It is recommended that the Company refer to Articles 22 and 32 of the Corporate Governance Best Practice Principles for TWSE / GTSM Listed Companies and include all of the directors and supervisors in the scope of nomination. The candidate nomination system for directors and supervisors should be added in the articles so that competent directors and supervisors may be elected.
The Company has 9 directors and 3 supervisors and two independent directors were elected in 2010. However, the number of independent directors did not exceed 1/3 of the total director positions. Due to the growing importance of independent directors to corporate governance and having independent director available to participate and get involved in functional committees, it is recommended that the Company add at least one independent director with industry-specific and general qualifications so that the independent directors may perform their board duties.
Each of the company board members have taken three or more hours of corporate governance classes each year. Due to the fast changing conditions of the future industry environment, it is recommended that the Company increase the number of corporate governance classes scheduled for each board member to six or more hours to raise the professional ability of board members and improve overall board of director effectiveness in response to company growth requirements.
Supervisors are tasked with company supervision duties. In addition to attending routine board meetings, it is advisable for the Company to establish multiple communication channels for employees, shareholders and stakeholders and also stay in constant contact with the CPA. It is recommended that company supervisors make more use of occasions other than board meetings to interact more closely with the CPA.
For performance evaluations of company managers, there are three company performance evaluations conducted each year. In addition, the Company has set up a performance evaluation procedure for upper management and refers to industry standards when setting salaries and remuneration. However, the coherence of association for future risk was not considered. In order to prevent managers from engaging in behavior which exceeds the Company’s risk appetite to obtain higher salaries, it is recommended that the above ‘coherence of association for future risk’ be added to the manager performance evaluation system by the remuneration committee to conform to the requirements of the remuneration committee establishment and exercise of duties procedure.
Note 1: For continuing education of directors and supervisors, refer to the Directions for the Implementation of Continuing Education for Directors and Supervisors of TWSE Listed and GTSM Listed Companies issued by the Taiwan Stock Exchange.
Note 2: If a securities firm, securities investment trust, securities investment consulting firm or futures operator, describe risk management policy, risk weighing criterion and consumer protection or customer policy implementation.
Note 3: What is referred to as corporate governance self-evaluation reports is a self-evaluation and description of corporate governance self-evaluation items by the company and a report of the company's current operation and enforcement status of each self-evaluation item.

IV.Capitals and Stocks

A. Source of Capitals

2014.04.20 unit:shares

				2014.04.20unit:shares
Shares Class		Approved Shares		Remark
	Circulated in Market(note)	Uncirculate shares	Total
Common shares	309,757,040	190,242,960	500,000,000

note:these shares are listed shares 。

B. Shareholders structures

				2014.04.20 unit:people/shares/%	2014.04.20 unit:people/shares/%	2014.04.20 unit:people/shares/%
Shareholders Numbers	Government	Financial institutions	Other institutions	Individuals	Foreign institutions and foreigners	Total(note)
Numbers	4	10	146	29,274	127	29,561
Number of Shares	9,979,197	23,497,457	47,088,301	183,223,575	45,968,510	309,757,040
Percentage of shares	3.22%	7.59%	15.21%	59.14%	14.84%	100.00%

note ︰ The above based on the transactions end at 21/4/2013

C. Data on share price, net value, profit, and dividend of the past two years

item year	item year	item year	2012	2013	2014.03.31 end
Marketprice / share (note 1)	Highest		52.80	48.90	41.30
	Lowest		34.35	30.20	35.75
	Average		45.81	40.91	37.10
Net value per share (note2)	Before distribution		25.44	26.88	27.80
	After distribution		23.24	Note 9	Note 9
Earnings Per Share	Weight average number of shares (1000’s share)		303,070	309,757	309,757
	earnings per share (note3)	Before adjustment	3.79	3.02	0.73
		After adjustment	3.79	Note 9	-
Dividend Per share	Cash dividend		2.20	Note 9	-
	Stock dividend without compensation	Earning per share	-	Note 9	-
		Stock dividend	-	Note 9	-
	Accrued undistributed dividend (note 4)		-	-	-
Analysis of rate of return	P/E (note 5)		12.90	13.55	-
	P/C (note 6)		20.82	Note 9	-
	C/P (note 7)		4.80%	Note 9	-

＊ If use profits or capital reserve for raising capital shares appropriate, then it should announce the information of the number of appropriate shares and retroactivlye adjust 。 market price and cash dividend

note1 ： list the hightest and lowest price of the common stocks in that year, and the average market price for that year is calculated based on the transaction values and transaction amounts 。

note2 ： Use the number of circulated shares at the end of the year as the base, then the dividend 。
distributed determined in the coming year’s stockholders’ meeting
note3 ： If there is any retroactive adjustment from the stock dividend without compensation, 。
then it should list earning per share on before and after adjustment
note4 ： If the equity investment has constraint that limits the undistributed dividend for that year and it is cumulated until to later profitable year. Then it should disclose the cumulative 。
undistributed dividend up to that year
note5 ： P/E ＝ current year average share price at closing ／ earning per share 。
note6 ： P/C ＝ current year average share price at closing ／ cash dividend per share 。
note7 ： C/P ＝ cash dividend per share ／ current year average share price 。
note8 ︰ The financial statements of TXC Corporation were audited or view or certified by CPA.
note9 ︰ Up to 2014.03.31 ， The retain earnings of 2013 has not yet admitted by the stockholders’ meeting.

D. Company’s dividend policy and its current implementation status

1.Dividend policy as defined in the articles of incorporation ：

If there is a profit at the final settling of accounts after paying all taxes and offsetting of losses from previous years, the Company shall first set aside ten percent of the profits as legal reserve. This shall not apply when the legal reserve amounts to the total authorized capital. Director remuneration shall be no more than 2% and employee bonus shall be no lower than 3% of the special reserve allocated from the profits in accordance with the law or after reversal. The remainder together with undistributed earnings from previous periods after an appropriate amount is reserved depending on operating conditions is distributed as shareholder dividends as resolved by the shareholders' meeting. The board of directors is authorized to determine the counterparts for employee stock dividend distribution which include those company employees that conform to certain conditions.

The Company's dividend distribution policy is made in consideration of factors such as industry development being in a growth phase, long-term financial planning and shareholder cashflow requirements. Therefore, the earnings available for distribution for that year, after allocation of the legal reserve and special reserve in accordance with the law, shall be distributed as provided in the previous paragraph. Of this, the cash dividend portion of shareholder dividends shall not be lower than 20% of total dividends.

2.Suggested dividend appropriate in this shareholders’ meeting ：

Profit distribution for 2013

unit ： NTD

Item	Amount	Amount
	Sub-total	Sum
Beginning period undistributed profits Adjusted amounts by TIFRS Special Reserve of first adoption of TIFRS Adjusted Beginning period undistributed profits Actuarial gain（loss）to retained earning Adjusted undistributed profits Net profit after tax for this year Appropriate legal reserve (10%) Profits available for distribution Shareholder bonus—cash ($2.2 per share) Total of distribution End period of undistributed profits	213,413,785 (222,793,290) (681,465,488)	1,483,604,087 (9,379,505) __ 1,474,224,582 (6,731,337) __ 1,467,493,245 935,161,705 (93,516,171) __ 2,309,138,779 (681,465,488)1 __ 1,627,673,291
Reference: Employee bonus—cash Directors and supervisor remuneration—cash	100,998,482 16,832,910

Note 1.Undistributed earning of 2013 will be distributed with priority.

E. Employee bonus and rewards for directors and auditors

The principle of surplus distribution in accordance with company regulations: Surplus in this year’s final account should first be used to pay tax and to make up for past deficits, then followed by allocation of 10% as legal reserve or appropriate or divert the special surplus reserve in accordance with applicable laws and regulations, but if where such legal reserve amounts to the total authorized capital, this provision shall not apply and after retaining an appropriate amount in view of the operation status, the balance unallocated surplus should be allocated by percentages as follows:
（ 1 ） Employee bonus must not be less than 3%.
（ 2 ） Reward for directors and auditors must not be over 2%.

Moreover, the objects of employee bonus should comprise employees of affiliated companies under specific conditions and authorize the board of directors to formulate the stipulations.

Proposal by the Board of Directors for surplus distribution in 2013:
As proposed by the Board of Directors on 5 May, 2014 surplus distribution for employee bonus and reward for directors and auditors are as follows:
(1) Propose to allocate employee cash bonus amounting to NT$100,998,482 and cash reward for directors and auditors amonting to NT$16,832,910. There is no difference between the planned allocation amount from expense for employee bonus and surplus in the 2013 financial statement. So, no adjustment for income and loss is required.
(2) Propose to allocate employee bonus and reward for directors and auditors in accordance with par value setting earnings per share at: NT$3.02
The Company Board of Directors on surplus allocation in 2012:

The actual surplus allocation of employee bonus and reward for directors and auditors according to resolution adopted by the shareholders meeting on 19 June, 2013.

(1) Actual reward for employee, directors and supervisors in cash respectively: NT$124,078,878 and NT$20,679,813.
(2) No difference between the proposed allocation adopted by the Board of Directors and the resolution by shareholders meeting.

F. Buying back company stocks: None

G. Convertible Corporate Bond:

Convertible Corporate bond data

Type of corporate bond(note 2)	Type of corporate bond(note 2)	4th domestic convertible bond(note 5）
Date of issuance		January25,2013
Face value		NT$100,000.00
Location of issuance and trade(note 3)		N/A
Issuanceprice		Issued at face value
Total amount		NT$800,000,000.00
Interest rate		Coupon rate 0%
Term		Three-year term Due date: January25,2016
Guarantee institute		N/A
Trustee		Chinatrust Commercial Bank
Underwriter		Yuanta Securities Co.,Ltd.
Attorney		Chiu Ya-wen
CPA		Deloitte & Touche CPAs GongShuang-hsiung,WongBo-ren
Solvency
Outstanding principal		NT$800,000,000.00
Redemption or liquidated before maturity
Restrictive clauses(note 4)		None
Ratinginstitute,ratingdate,corporate bond rating		N/A
Other rights	Converted (exchanged or subscribed) common stock, GDR or marketable security up to the reportpublishingdate	As of the publishing date of the annual report, there has been no request by bondholders for conversion to common stock, so the unconverted amount is NT$800,000,000.
Other rights	Issuance and conversion (exchange or subscription) measures	See attachment 1 (2012 fourth domestic unsecured convertible bond issuance and conversion procedure).
Issuance and conversion, exchange or subscription measures, dilution effect of issuance conditions on equity and shareholder equity		Thus domestic unsecured convertible bond issue is converted at a conversion price of NT$46.5per share. Provided all of the corporate bonds are converted into common shares, the share dilution will be 5.26%. Therefore, it will not have a very significant effect on shareholders' equity
Custodian		N/A

Note 1: Publicly offered and private placement company bonds are including in the company bond procedure. Publicly offered corporate bonds in the procedures refers to board validated (approved) issues. Private placement corporate bonds in the procedures refers to issues that have passed board resolution.

Note 2: The number of columns may be adjusted based on the number of issues. Note 3: List for overseas corporate bond.

Note 4: If issuance of cash dividend, outward investment is restricted or certain capital ratio is maintained. Note 5: Indicate in a conspicuous manner if it is a private placement.

Note 6: Convertible bonds that are convertible corporate bonds, exchangeable bonds, shelf registration bonds or warrant bonds shall be listed in a table format according to their attributes for disclosure of convertible corporate bond, exchangeable bond, shelf registration bond or warrant bond information.

Type of corporate bond	Type of corporate bond	domestic 4thunsecured convertible corporate bond	domestic 4thunsecured convertible corporate bond
Year Item		2013	As of April 20, 2014
Convertible corporate bond market price	Highest	104.75	109.95
	Lowest	98	99.2
	Average	102.58	103.77
Conversion price		NT$49.2 / NT$46.5	NT$46.5
Issuance (handling) date & conversion price at issuance		2010.01.11，NT$57.6	2010.01.11，NT$57.6

、 V Business Information

A 、 Business Contents

1 、 Business Scope

(1). The Major Business Contents

(2). Business Proportions

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(unit NT$ 1000’s)
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2013 Consolidated Revenue
NTD9,503,583 thousand dollars
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2012 Consolidated Revenue
NTD10,928,495 thousand dollars
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2013 Parent Revenue NTD 8,336,979 thousand dollars

2012 Parent Revenue NTD9,477,481 thousand dollars

(3). Company’s current products

Product Type	Type	Product Size
Crystals	Metal Can Type Crystals	HC-49S / HC-49S SMD
	Glass Sealing Crystals	5.0 x 3.2mm 3.2 x 2.5mm 2.5x 2.0mm
	Seam Sealing Crystals	5.0 x 3.2mm 3.2 x 2.5mm 2.5 x 2.0mm 2.0 x 1.6mm 1.6 x 1.2mm 1.2 x 1.0mm
	Temperature Sensing Crystals (TSX)	2.5 x 2.0mm 2.0 x 1.6mm 1.6x 1.2mm
	KHz Crystals(Tuning Fork)	6.9 x 1.4mm 3.2 x 1.5mm 2.0 x 1.2mm 1.6x 1.0mm
Oscillators	Crystal Oscillators (CMOS)	14.0 x 9.0mm 7.0 x 5.0mm 5.0 x 3.2mm 3.2 x 2.5mm 2.5 x 2.0mm 2.0x 1.6mm
	Crystal Oscillators (Differential)	14.0 x 9.0mm 7.0 x 5.0mm 5.0 x 3.2mm 3.2 x 2.5mm
	RTC Crystal Oscillators	7.0 x 5.0mm 5.0 x 3.2mm 3.2 x 2.5mm
	Voltage Controlled Crystal Oscillators (VCXO)	14.0 x 9.0mm 7.0 x 5.0mm 5.0 x 3.2mm
	Oven Controlled Crystal Oscillators (OCXO)	36 x 27 x 14 mm(Dip type) 25 x 25 x 11mm(Dip type) 20 x 20 x 10mm(Dip type) 21 x 13 x 10mm(Dip type) 9x 14 x7.7mm(SMDtype)
	Temperature Compensated Crystal Oscillators (TCXO)	3.2 x 2.5mm 2.5 x 2.0mm 2.0 x 1.6mm 1.6x 1.2mm
	Precise Temperature Compensated Crystal Oscillators (TCXO Stratum-3)	7.0 x 5.0mm 5.0 x 3.2mm

Product Type	Type	Product Size
	MEMS Oscillators	7.0 x 5.0mm 5.0 x 3.2mm 3.2 x 2.5mm 2.5 x 2.0mm 2.0x 1.6mm
Real-Time Clock (RTC)	Real Time Clock Module	SOP 14
Light Sensor	Light Sensor	2.5 x 2.0mm
Automotive	DIP / Glass Sealed Crystal / Seam Sealed Crystal /XO/TCXO /KHz Crystal	HC49S / HC-49S SMD / 84.5mm / 53.2mm / 3.22.5mm / 2.52 mm /2.0*1.6 mm
Sapphire	2”/4”/6” Single-side / Double-side Polished Sapphire Wafer 2”/ 4” PSS wafer	430 um / 650 um / 900 um / 1000 um / 1300 um

(4). Scheduled new products development

The Company will invest more resources to develop new products to expand our market share for high-end application and high added value products and actively cross over into technical R&D in the optics, microelectromechanics, sensor and medical electronics fields. Due to adherence to sustainable business concepts, the Company will continue to make advancements in basic research. Faced with domestic and foreign competition, the Company's new product and technology development will extend in the following directions:

(1) SMD miniaturized product development and process technology upgrading: Having worked for many years on quartz element miniaturization, the Company has completed development of a 1.2x1.0x0.35mm quartz element. In order to meet future product miniaturization and advanced deployment of process technology requirements as well as make progress towards 1.0 x 0.8 x 0.35mm quartz crystal element development, TXC will continue to focus on the development of higher precision process technology to pursue research towards lower costs, reduced energy consumption, high vibration resistance and enlarge frequency range.
(2) Automotive product development
The Company received TS-16949 advanced product quality planning system certification in 2006 and completed the conversion to ISO/TS16949-2009 version. Automotive product is now entering a growth period. TXC will continue to raise product technology, safety and quality to the highest grade 1 quality and reliability rank.
(3) High-end oscillator and module product development TXC will continue to develop high-end products such as special TCXO for telecommunication use, VCSO for optical fiber telecommunication modules, HFF VCXO, VCXO for high frequency communications and high precision frequency

temperature controllers (OCXO) for base station use. These products can meet the brisk demand for telecommunication systems in Asia and emerging countries.

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(d).Basic Research

Effectively integrate company internal engineering department technical problems, upgrade basic research capability and speed up new production market entry time through our technical team cross-functional platform.

2 、 The Industry

(1). Current industry status and development

The current domestic quartz industries are mainly for producing components such as crystals, crystal oscillators, and crystal filters. The basic manufacturing process of making crystals starts from cutting the quartz, and then after grinding and polish to the desired sizes; followed by depositing thin metal film electrodes on its surface under the vaccum, and subsequently, it is connected with condut wires; afterward it is packaged. In addition, by assembling and packaging the crystal components with IC oscillators then it will result the crystal oscillators. Assembling and packaging the crystal components and capacitors, wires, and resistors then it will be the crystal filters.

When you comparing the three crystal technologies: frequency, precision, and size dimension you can see that the European and US manufacturers are strong in the frequencies development. It was because of their development of the wireless technology that it gives them an advantage in the design and development; but production efficiency is lower. Japan manufacturers are the technology leaders and they are excellent in the precision and the scale size of the products. They have the advantages of products improvement, and can further to make it in mass production and automatic production. To the Taiwanese manufacturers, most of them are buying the material & know-how, machinery equipments, or purchasing the manufacturing process of which usually lead to a faster time in marketing the product. But recently, the manufacturers have improved their manufacturing process, and the manufacturing equipments; also the learning of the manufacturing process further improves it. Presently, the mainland manufacturers mainly produce low-end products wherein 80% of them are for export and their products still have not effectively satisfied the demand of their massive domestic market. In recent years Chinese manufacturers are aggressively to promote their technology abilities and to advance to the middle and high end. Below table is a comparison of advantages/disadvantages of competitions from the major producers.

Key	European, USA	Japanese	Taiwanese	China
technology	manufactures	manufactures	manufactures	manufactures
Frequency	high	High	High-middle	Middle-low
Precision	high	Veryhigh	High-middle	Middle-low
Sizes	High-middle	High	High-middle	Middle-low

Currently, in Taiwan the major crystal manufacturers are TXC Corp, Siward Crystal Technology, Harmony Electronics, Taitien Electronics, Tai-Saw Technology, and EChina Technology. TXC Corp has the highest market share and Harmony Electronics is next. (2). Market relationship of up, middle, and down stream companies

Crystal components are our major product and it is also the basic electronics parts. Our upstream industries include crystal growth, material manufacturing, and precision machinery. The downstream applications include information technology, wire and wireless communications, consumer electronics, and network products etc. The relationship between the up, middle, and downstream manufacturers is given in the below diagram:

Potential entrants

‧ Electronics components channels ‧ Other non frequency electronics components manufacturers

Upstream suppliers

‧ Crystal growth－ Manufacturing man-made crystals
‧ Materials manufacturing－ Crystal bar, wafer/crystal disk、metal and cermic package materials(top cover、base cover)、plastic、 IC…
‧ precision machinary－ cleaning/plating、fine tuning/package、 examing/testing (photo-mask manufacturing、vaccum plating machine、yellowish light plating equipments、 testing instruments、jug & fixture…)

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Downstream clients
．
Wire, wireless communication
Manufacturers of Crystal
． industry
crystal gridding ．
． Consumer electronics industry
circuit design ．Mobile communication
．
crystal/oscillator package
industry
crystal/oscillator testing ．
Basestation and equipments
industry
．Automotives electronics
industry
．
Mobile computing
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Substitutes
． Silicon Timing Devices
．self-stimulatedLCVariable frequency filter,、 oscillator
． Dielectric Resonance (DR Oscillator)
． FilmBody Accoustic (FBAR)
． MEMS technooogy
．Green Clock

3. Development Trend of Crystal Industry

Crystal products are important components in the electronics products. To sponsor the future 3C growth and trend, the future product style, its size, and the precision will have the following trend ：

(3). Production trend ：

(a). Slim down and usage of SMD

In terms of the technology aspect, we have achieved the slim down level for use the single crystal IC, crystal design & manufacturing, and packaging & testing etc. For example take 、 the case of SMD quartz crystal, its dimension has downsized from 11.8×5.5mm 8×4.5mm 、 7×5mm to 6×3.5mm 、 5×3.2mm ， and further to 4×2.5mm 、 3×2.5mm 、 2.5×2.0mm 、 2.0×1.6mm 、 even to the dimension of 2.01.6mm 、 1.61.2mm 、 1.2*1.0 ； its height has also improved from 2mm 、 1.8mm 、 1.5mm 、 1.2mm to 1mm 、 0.9mm 、 0.8mm 、 0.7mm 、 0.5mm 、 0.35mm 、 0.30mm. By the effective SMD scale down improvement, we are also toning with the development trend of Chipset, design trend of brand clients and the SMT production from our downstream clients.

(b). High frequency modularized 、 high precision ：

High frequency, high frequency element modularization, high precision:

Fiber channel, gigabit Ethernet, synchronous optical networking (SONET), synchronous digital hierarchy (SDH), smallcells base station or access point base station, 3G/4G base station and other various high speed transmission system advances has raised high frequency, modularization, high precision requirements for quartz elements. Through the Company's self developed high frequency, high precision and low phase noise crystal oscillators (XO), voltage control crystal oscillators (VCXO), temperature compensating crystal oscillators (TCXO) and constant temperature crystal oscillators (OCXO) will assist simplification of customer circuit design and satisfy performance requirements for the high speed networks and the next generation of wireless telecommunication systems.

The products are as the below list:

		PKG
No	Projects		Type	Features
		(mm)

		7x5	LVPECL	High Freq.
	High Frequency XO
1		5x3.2	LVDS
	(above 100MHz)			Low Noise
		3.2*2.5	HCSL

		7x5	CMOS	High Freq.
	High Frequency VCXO
2		5x3.2	LVPECL	Low Noise
	b 50MH
	(aove z)	3.2*2.5	LVDS	High Pull

			CMOS	High Freq.
	High Frequency SO	7x5
3			LVPECL
	(above 150MHz)	5x3.2		Low Noise
			LVDS

		3.2x2.5
		2.5x2.0
4	TCXO		Clipped Sine	High Stability
		2.0x1.6

		1.6*1.2
		7.0x5.0
5	32.768KHz CXO (TF)	5.0x3.2	CMOS	High Stability
		3.2x2.5

		7x5
		5x3.2
6	Precise XO/MO	3.2x2.5	CMOS	High Stability
		2.5x2.0
		2.0x1.6
		7x5
7	Stratum 3 TCXO		Clipped Sine	Ultra High Stability
		5x3.2

		36*27
			LVCMOS
		25*25		High Stability
8	OCXO		HCMOS
		20*20		Ultra Low Noise
			Sinewave
		21*13

(4). Competitions

For quite some time Taiwan electronics industry usually take the OEM fashion to function as a supplier to world’s largest electronics and information technology companies. Applying Taiwan’s capital, technical skills, labor or other market unique advantages that takes the 、 advantages of ”global labor division” ”regional labor division” to achieve the vertical integration purpose 。 With the advance of Taiwanese electronics manufacturer’s technical level, their business operatios have transformed from the parts assembled in the early days, to the OEM, and even promoted to the ODM and OBM scale. In order to gain a more added value, many Taiwan electronics companies, reposition their value chain locations, and have gradually extended themselves from manufacturing to product R&D, design and even further to sales and marketing, post-sale and brand management; and amid the global work divisions, have stance in a unique place . The major global companies with their procurement arranging, are team with Taiwan electronics companies in value creations; and themselves would be able to intend more on their brand and sales management. This ends up in a win-win situation for both parties.

With Taiwanese electronics industry forms in the nature cluster groups, and it thus has a demand of 30% of the global crystal component product. But Taiwanese manufactures can only produce no more than the 20% of total global production, and this China domestic market would provide growing space for Taiwanese companies. But the crystal component industries are in the border of oligopoly competition since the ten largest manufacturers in the world have a total combination of production of 71% and more. This illustrates the great differences of the manufacturers in this industry, and this can be said it is a oligopoly competition market. But because the wide applications of the products, each manufacturer emphasizes its own product and the market. The lower end, and mature market has a stronger tendency in cutting price to competition. This results a very strong competition market.

In the global crystal component industry, Japan is still the largest producer and it has about 60% of the worldwide productions. Our domestic competitors are SiWard Crystal Corporation, EChina Technology, Harmony Electronics, Taitien Electronics, and Tai-Saw Technology and Hosonic Electronics. Each corporation differentiates by specializing in different products and market. Our company has the highest market share which demonstrates our leading role in the crystal component industry.

3. Technology and Recent Research and Development

(1) Ratio of R&D expense in Total Operating Cost during recent years up to 2014.03.31 units ： NT$ 1,000’s ， %

Year	2012	2013	2014.03.31
Net Operating Cost	10,928,495	9,503,583	2,165,532
Cost for Research and Development	422,614	429,642	99,845
R&D cost/net operating Cost(%)	3.9%	4.5%	4.6%

(2). Research and Development Results

SMD 4.0 x 2.4mm Ambient Light Sensor and Proximity Sensor with Integrated IR LED for Mobile Phone.
SMD 2.5 x 2.0mm Ambient Light Sensor and Proximity Sensor with Integrated IR LED for Mobile Phone.
SMD Crystal 2.5 x 2.0 mm for Automotive.
SMD Crystal 2.0 x 1.6 mm for Automotive.
SMD Crystal 1.6 × 1.2 mm for SIP. 6. SMD 5.0 × 3.2 mm TF CXO for variable. 7. SAW-based Oscillator for SAN. 8. SMD Seam CXO 2.0 × 1 .6 mm 2~54 MHz for digital camera, Portable TV. 9. SMD 3.2 x 2.5 mm TCXO for GPS and WiMAX. 10. SMD 2.5 x 2.0 mm TCXO for GPS and WiMAX SMD 2.0 x 1.6 mm TCXO for GPS and WiMAX. 12. SMD 1.6 x 1.2 mm TCXO for GPS and WiMAX. 13. SMD 5.0 x 3.2 mm Stratum-3 VC-TCXO for Base Station, Small-cell, Networking Infrastructure. 14. SMD 7.0 x 5.0 mm Stratum-3 TCXO for Base Station, Small-cell, Networking Infrastructure. Products 15. SMD Crystal 1.2×1.0mm for future. development 16. SMD 5.0 × 3.2 mm TF CXO for variable. 17. Inverted MESA BLK 1.3 × 1.03mm 18. Inverted MESA BLK 1.6 × 1.14mm 19. Inverted MESA BLK 2.49 × 1.83mm 20. SMD 2.0 x 1.6 mm TSX for GPS 21. SMD 2.5 x 2.0 mm TSX for GPS 22. SMD 3.2 x 1.5 mm Tuning Fork 23. SMD 3.2 x 1.5 mm Tuning Fork for Automotive. 24. SMD 2.0 x 1.2 mm Tuning Fork 25. SMD 1.6 x 1.0 mm Tuning Fork 26. SMD 7.0 x 5.0 mm Oscillator for HCSL 27. SMD 5.0 x 3.2 mm Oscillator for HCSL 28. DIP 25 x 25 mm OCXO for stratum-level and base-station. 29. DIP 20 x 20 mm OCXO for telecommunication. 30. 4” Single-side Polished Sapphire Wafer for LED application 31. 4” Double-side Polished Sapphire Wafer for LED application 32. 6” Single-side Polished Sapphire Wafer for LED application 33. 6” Double-side Polished Sapphire Wafer for LED application

Patents and[Patent][︰]

	1. Electrode of the piezoelectric crystal oscillator components	1. Electrode of the piezoelectric crystal oscillator components
Academic	2. Vacuum gas-tight system integration package structure
publications	3. Structure and production method of the piezoelectric quartz oscillator chip
	4. The production of piezoelectric quartz oscillator chip
	5. quartz crystal oscillator
	6. Crystal oscillator with layout structure for the miniaturization of size
	7. Piezoelectric material thinning device
	8. Grooved resonator unit packaging structure
	9. Light sensor chip packaging structure
	10. Stacked light sensor chip packaging structure
	11. Thru-hole resonator device wafer level packaging structure
	12. Thru-hole resonator device wafer level packaging structure
		manufacturing method
	13. Improved resonator wafer grade packaging structure
	14. Strengthen hermetic sealing of oscillator wafer grade packaging
		structure
	15. Partition and serial-type light sensor chip packaging structure
		For the patents or possible patents of TXC, please refer to relative patent database
		http://www.tipo.gov.tw/ch/
		Paper︰
	1、Laser Measurement and Identification of Vibration Modes of AT-cut Quartz Crystal
		Resonators. (English), 2013.

2 、 The Study of Aging Frequency Drift Mechanism for Quartz Crystal Resonators. (English), 2013.
3 、 Advanced TSV-Based Crystal Resonator Devices Using 3-D Integration Scheme With Hermetic Sealing. (English), 2013.
4 、 TSV-based quartz crystal resonator using 3D integration and Si Packaging technologies. (English), 2013.
5 、 A Brief View of the Current State of the Development and Aging Performance of Fixed Frequency Surface Acoustic Wave (SAW) Oscillator (English), 2012.
6 、 Properties of Miniature X- and Z’-Elongated Rectangular AT-CUT Quartz Resonators of Different Sizes (English), 2012.
7 、 Vibration Mode Identification and Coupling Assessment with the Mindlin Plate Equations and Measurements is a Quartz Crystal Plate (English), 2012.
8 、 Aging Performance of Small Size MHz Quartz Crystal Under High Drive (English),2011
9 、 Inharmonic Overtones in Partially Plated AT-cut Quartz Crystal Plates (English),2011
10 、 The Study of Activation Energy (Ea) by Aging and High Temperature Storage for Quartz Resonators' Life Evaluation (English), 2011.
11 、 An Efficient AT-cut quartz Crystal Resonator Design Tool for Activity Dip in Working Temperature Range (English), 2011.
12 、 Quartz Crystal Industry of China at Crossroads (English), 2011.

13 、 Resonant Frequency Function of Thickness- Shear Vibrations of Rectangular Crystal Plates (English), 2011. For relative paper, please refer to the website of TXC: http://txccorp.com/

Long and short term sales and marketing plan

(1). Short term Development Plan
(a). Sales and Marketing Strategy ：
Consolidate existing market share for mobile computing, mobile telecommunications and consumer electronics industry customers
Deepen and expand customer base, maintain high rate of growth for high-end products including AOM (high frequency) and ACAP (automotive electronic products).
Concurrently control and introduce design-in and CM based on the customer business operation model to exploit market opportunities and enlarge profit margins.
Maintain service and flexibility advantages, deepen relations with core customers.
Further strengthen position in European, American and Japanese markets, develop emerging markets, make TXC the no. 1 brand in China.
Establish project-based organization, improve team work atmosphere and organization operation efficiency.
Further optimize marketing function to help broaden and deepen marketing strategy deployment.
Set up a comprehensive global logistics network to satisfy customer demands for instant delivery and provide instant technology integration services to customers.
Set up flexible and responsive sales channel for global rollout.
Establish learning curve with information systems to assist sales personnel devise and determine sales strategies.
Use Internet of Things to extend reach to eight major service fields and search for new markets including industrial monitoring, medical, wearable, and M2M to broadly develop new product and industry applications.
Broaden and deepen overall relations with each IDH, strengthen IDH information mastery and linkage.
Raise engineering and technical capabilities as well as professional ability of sales personnel.
(b). Manufacturing Strategy ：
Time to Volume ， Time to Market. Orders taking and planned production policy run in ，，
parallel delivery on time and have the appropriate amounts of products in stock.
In response to special circumstances of the industry: Response capability+Control capability+Integration capability=Core.
Integrate production resources on both sides of Taiwan Strait for optimum production capacity and benefit allocation for maximum company benefit.
Establish new products, new technology and automated factories for development of company core technology.
Targeting the ”ideal cost” ， by using the ”comparing cost” as the base ， gradually improve monthly until the cost becomes reasonable.
Full introduce TPS production management and promote “99.99%” of yield rate for all stations.
Introduce management systems based on PAT/SYA management concepts to optimize and further improve product quality.
An effective operation, management; and well organizedin driving the business projects.
(c). Quality Assurance Strategy ：
Optimize the quality management system, work towards the goal of “Zero Defect”.
Improve global environmental protection awareness related green product and process service provision to ensure that all product, production processes and work environments at the company conform to international standards and requirements.
Launch COPQ (quality failure cost) analysis refinement and improvement response.
Launch basic and advanced job training of quality tools on the basis of continuous improvement
Reinforce reliable equipment and personnel analysis, satisfy with the goal of miniaturization, high precision, and high stability and meet the operation of verification

and monitoring.

To our suppliers and outsourcing partners we need to further raise their quality requirements and management level. Looking for the SCM system implementation ， and further in link up with global companies.
Audit development of professional personnel to re-strength product quality and system
Promote quality system of security product of automotive industry to re-create new decade of TXC corporation
(d). Product R&D Strategy ：
According to the marketing & sales strategy and needs; we need to map the direction of the product that it should go. We will aim the product’s specifications meet the clients’ needs.
According to the new specifications from the clients, our RD or engineering can provide the product within the scheduled time frame that will help us to win the business opportunity.
According to our business strategy and planning; our RD will fix on the product development or work as team with other company in the industry that we could bring the new product to the market.
Execute the scheduled progress RD project management ， effectively monitoring and managing the RD development that to shorten the RD time.
Continuously to strengthen the RD staff, conduct the effective training and upgrade the overall professional attribute.
Cooperation between the industry and the academic circle, cooperative development with schools and research institutes, strengthening of R&D technological capability.
Have an effective RD management practice, reasonable reward system, and to motivate the group’s efficiency and attitude.
(2). Long term Development Plan
(a) Focus on development of high-end products used for fiber channel, gigabit Ethernet, SDH-SONET (synchronous optical network), small cells, terminal communications applications and high precision frequency control products used for medical electronic product applications. Also, develop miniaturized products used for wearable and smart home applications.
(b) Actively develop frequency control devices for automotive peripheral control module applications to achieve our foremost goal of meeting stringent quality requirements.
(c) Continue to expand sales service network. Besides strengthening sales deployment in Europe and America, broaden and deepen the sales network in southern China (Shenzhen, Wuhan and Chongqing), eastern China (Suzhou, Beijing and Shanghai), Japan (Shin-Yokohama, Osaka) and also aggressively expand in the Korea market, strengthen Singapore, India and Vietnam sales marketing channel deployment to supply services and meet market demand in each region, increase market scale and build a foundation for China and emerging market development in order to reach the goal of becoming one of the top two manufacturers in the quartz crystal industry.
(d) Continue to develop high-end timing products and also focus on sensor product development. Develop diverse product applications and diversified operation strategy to find new blue water business opportunities.
(e) Continue to seek out strategic alliances and beneficial cooperation opportunities to strengthen overall company competitiveness.
(f) In addition to retaining our present market share, actively develop new application industries and new customers. Continue to develop new products and new part numbers.

B 、 Marketing & Sales Situation

1 、 Market Analysis

(1).Market for our major products

The product trend is toward to small and light . The products that use the SMD crystal will have a higher percentage than others. In the future, Asia still is the major OEM center, and the products from Asia are still very high. TXC would still need to work hard on the market expansion in America and Europe.

Regional sales distribution of our major products in the past two years ：

			unit:Thousand NT$	unit:Thousand NT$
Region year	2012 (consolidated)		2013 (consolidated)
	$ dollars	%	$ dollars	%
America	275,479	2.52	307,844	3.24
Europe	120,181	1.10	97,488	1.03
Asia	9,896,578	90.56	8,423,300	88.63
Domestic	636,257	5.82	674,951	7.10
Total	10,928,495	100.00	9,503,583	100.00

(2). Market share

unit ： million USD

2012 Rank	2013 Rank	Company Name	2012 Revenue USD: Million	2013 Revenue USD: Million	2012-2013 Percent Change	2012 Market Share	2013 Market Share
1	1	Epson Toyocom	610	500	-18.0%	17.5%	15.3%
2	2	NDK	540	433	-20.0%	15.5%	13.3%
3	3	*TXC*	*377*	*326*	*-13.6%*	*10.8%*	*10.0%*
5	4	KED	292	298	2.0%	8.8%	9.1%
4	5	KDS	309	260	-15.9%	8.4%	8.0%
6	6	Vectron	166	170	2.0%	4.8%	5.2%
8	7	SiWard	97	96	-1.5%	3.0%	2.9%
7	8	Rakon	106	95	-10.0%	2.8%	2.9%
9	9	Hosonic	92	94	2.1%	2.6%	2.9%
10	10	River	73	66	-9.4%	1.7%	2.0%
		Other	828	928
		Total Revenue	3,489	3,264

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Resource: CS&A, 2014.04

(3). Market future demand and supply condition, and its growth potential
(a) Industry

The global economy slipped in 2013. Quantity demand in global quartz crystal and oscillator markets fell by 2% in 2013 while market price competition intensified. The ASP for the overall quartz element industry (X'tal / XO / TCXO / OCXO) fell faster than expected. Global quartz crystal and oscillator sales declined by 6.5%. According to market survey consultant CS&A forecasts, shipments should return to positive growth in 2014 but sales will still experience negative growth due to industry competition.

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Unit: pcs
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Source ： CS&A, 2014.04

Unit: US Dallor

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Source ： CS&A, 2014.04

(b) Markets

A. Tablets

According to Institute for Information Industry forecasts, tablet shipments are expected to exceed overall NB shipments by 82% to reach 295 million units in 2014 which is 24% higher the 2013. Total tablet and NB shipments are estimated to reach 457 million units which is 11% higher than 2013. Tablet shipments will continue to outpace NB at a ratio of 65 : 35.
The brand with the highest tablet market share is still Apple’s iPad. Other major brand manufacturers (including Acer, Intel and Microsoft) started to focus on 7-inch tablets in 2013 to gain market share through lower pricing. It is forecast that the low priced models released by these brand manufacturers will quickly shrink the price gap with Chinese white label products which should put pressure on Chinese white label product sales in 2014. In the past, the dimensions of major models were 7” and 9” but the next generation Google product is an 8.9” design. In the second half of this year, Apple may launch 12.9” model with a foldable keyboard. Sales of 8” and larger than 10” tablet models will increase in 2014 to become a major indicator of product differentiation for manufacturers.
Shipment quantities for this industry will be affected as end-user application product designs reduce the use of quartz crystal units.

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Unit ： Thousand pcs
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B. Smartphones

In 2014, it is forecast that the global intelligent terminal growth will slow significantly. The domestic market in China is also gradually becoming saturated. According to market research agency forecasts, smart phone market conditions for the entire year in 2014 will benefit from the huge potential base of users in emerging markets who will be switching from function-based phones to smart phones which could drive annual market shipments to over 1.24 billion units representing an annual growth rate of over 30%. However, the ASP for quartz element products used for this industry will decline due to intense industry competition, high price cutting pressure and material changes in end-user application product designs.

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Three smart phone development trends:

(1) New trend of 4G diffusion, new services launched on LTE foundation
Wide scale construction of LTE base stations is expected to accompany all-out LTE deployment in many countries and the most populous nation China. It will be necessary to develop more convenient applications and accelerate LTE end-user and terminal device growth.

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Unit: million pcs
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Users Growth Rate
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Source: MIC, 2013.09

(2) Continued development of wearable smart devices
Wearable electronic products including head-, wrist- and ankle-wearable devices are becoming more popular and shipments are forecast to reach 100 million in 2014. The main demand in the market is for sports, exercise and personal health management which will also be market highlights in 2014. Major brand manufacturers have all started to focus on the development and promotion or wearable pproducts.

Unit ： Millions of US Dollar

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(3) Booming Internet of Things market

4G LTE networks are steadily being completed, 5G development has gained pace and integration of telecommunication devices is heating up. The next booming market will be the Internet of Things. It is forecast that this market including the eight major service fields will have an output value of 1.9 trillion USD by 2020.

C. Smallcell

Smallcells is a general term which encompasses femtocells and picocells which are designated according to their specification and installation site standards. As LTE continue to raise data traffic, more mobile network operators evaluate the feasibility of small cell introduction. Total shipment amounts of small cells reached 7.9 million units in 2013. Starting in 2014, new small cell models will be for companies and urban areas. Telecommunication firms are starting to introduce indoor small cell products to satisfy user data transmission demands. The above opportunities will drive fast growth of small cells. Output value is forecast to reach NTD 90 million in 2014.

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(4). Niches competition, the advantages/disadvantages of the future development, and the response strategies.

SWOT analysis

Advantages Disadvantages

Have been in the industry for long time, and a higher market share, have good knowledge of customers and their production base, can team with their design and technical service 。
High flexible in adjust production line, has large and complete capability in production lines, excellent manufacturing improvement ability, efficient in 。

production, and good competitness in unit cost

more miniaturized sizes and more stringent specifications close the gap in technology with the advanced US and Japanese quartz component manufacturers.
Global operation management, fast product delivery, a good customer service team, wide product line, can 。

satisfy clients’ one stop shop

It is insufficient channel in America, Europe and the other new area.
Insufficient guidance in areas of critical materials, equipment development.
Extent of Automation is limited in the front end manufacturing process.
With a comparative edge in brand recognition, control of raw material production and technology capability, the Japanese manufacturers have comparative advantage in cost structure.
The material and labor cost is higher than before.
High technical in vertical integration; better quality management and fast response in proposing total solution to clients application needs 。

Opportunities

China service network can supply nearby downstream customers. The Chinese economy has grown to become the second largest economy in the world in recent years so there is great potential for growth in this market.
As car electronics supply chain and design centers for major chipset manufacturers move to China, TXC has the competitive advantage of sharing the same cultural background.

Threatens

Low price competition
Customers can switch from high priced products to lower priced products due to customer cost considerations.
End user product design may reduce quartz element use amounts due to cost consideration.
MEMS products have started to threaten some low-end applications.
Develop business opportunities for emerging M2M, wearable, medical applications to drive future demand growth.
Seek out niche markets and products to provide stable profits for the company.
Wireless communication application development is booming which will stimulate market growth.
High-end, high precision product and market deployment is gradual reaching completion which will significantly raise profitability.
Having received numerous special honors and recognition such as the Taiwan Mittlestadt Award, CSR, Taiwan Excellence Award, Safety Certification AEO as well as greenhouse gas inventory (ISO14064-1),

product carbon footprint inventory (PAS2050) and carbon neutrality (PAS2060) certification will not only increase of brand exposure but also help to build our company image.

Respond Strategies

Enhance abroad sales teams ， actively seeking Europe, USA,Japan and Korea etc Tier 1 clients 。
Develop the market agreesively and expect to be the largest brand in China
Enhance the engineering technlolist of NGB factory, train material handling/ manufacture process automatic 。

professionals in China

Continuously to hire domestic trained as well as from abroad the research scientists and professionals in the communication and automobile parts industries.
Create more advantageous products ， may take strategic alliance and partnership in some of the products for cost reduction 。
Enhance product R&D ability ， develop smaller size and high end products that to improve the overall 。

profitability

Enhance the development of quartz crystal modularized products 。
Exercise stringent control over receivables and timely and closely verify demand on the customer side to facilitate flexible allocation.

2 、 Major products’ important applications and their manufacturing process (1). Major products’ important applications

Crystal componentsproduct	Crystal componentsproduct	Major Applications
Crystals		Mobile phone、wireless equipment、W-LAN、wireless telephone、WiFi Module、Sip Module、bluetooth、 telephone terminal equipment 、 intelligent transport(ITS)、car accessories、LCD projector、coping machine、computer、printer、scanner、audio-visual equipments、camera、games、beeper
Crystal Oscillators	CXO	base、wireless equipments、W-LAN、coxial cable communication 、fiber optics communication 、 telphony terminal equipments、counter/sythesizers、 intelligent transport(ITS) 、computer 、storage device、printer、audio-isual device、camera、games
	VC-TCXO、TCXO	Mobile phone、basestation、wireless equipment、 satellitecommunication、W-LAN、bluetooth、global positioning systems、coaxial cable communication、 fiber optics communication
	VCXO	base、wireless equipments、satellite communication、 W-LAN、coaxial cable communication、fiber optics communication 、phony terminal equipment 、 counter/synthesizer
	OCXO	base、wireless equipments、satellite communication、 global positioning systems 、 coaxial cable communication 、fiber optics communication 、 counter/synthesizer
Tuning Fork		mobile phone、digital home、camera、wireless networking、computers、automotives
Light Sensor		mobile device
		With the technology of GaN by MOCVD (metal organic vapor phase epitaxy), produce high-brightness blue LED. Applied to the LED backlight and lightingsystems.
Sapphire

(2). Manufacturing Process

Steps for crystal components manufacturing are: first we need to manufacture the quartz crysal needed for the electrical material. It involves the cutting, polish, cleaning of the wafer form. Then with the mechanical arms to place the wafer on the base and fixed with the silver based glue. Then package it under vaccum. For oscillators it is necessary to add one more unit of oscillating circuit IC with golden line conduction via amplified output of crystal chip oscillation. It requires more IC placement and wire bonding process compared to the quartz crystal.

－ (a). Pre-manufacturing process quartz crystal.

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Crystal grinding grinding
Crystal cut (machines to bar or (crude、medium、fine)
bar round shape)
Store Clean Differentiate frequency
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－ (b). Post-manufacturing process quartz crystal (use silver, gold, nickel for electroplating, and the process would reduce crystal frequency. Fine tuning the electroplating that would reduce frequency error to 3~10ppm)

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Crystal Electroplating Crude freq Base fixed
cleaning adjustment
Aging/electrical Base, outside Fine tuning Glue and bake
/temperature prebaking/weld frequency, to fix the
testing ing, seal plating with crystal
silver
Final check and
storage
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－ (c). Post manufacturing process crystal oscillator (use silver, gold, nickel for electroplating, and the process would reduce crystal frequency.)

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IC placement Crystal placement
Crystal Electroplating (assembly electronic (assembly crystal)
cleaning component)
Aging/electric Base, shell
Add barcode al/temperature Check for gas prebake/weldi
test barcode testing leaking ng, seal
Final check
and storage
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(d) Sapphire substrate process

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Cleaning and
Boule Cutting Grinding Polishing
inspection
Exposure and Photoressisting
Etchengraving development Storage
Cleaning and
inspection Storage
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(e) Light Sensor manufacturing process

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、
(3) State of the major materials suppliers
The major materials for crystal and crystal oscillators include the base, wire bond, IC 。
package, crystal slice and crystal bars The main raw material of the sapphire substrate such as alumina. Major materials in light sensors are ceramic substrate, IC, IR LED and packaging tape.
(a). All the materials come from the at least three suppliers, and this would minimize the risk of all materials coming from a single supplier. Our company’s procurement depends on the buying terms, state of supply, and specifications; before the materials to be ordered. And, it also depends on some special conditions that we would adjust the ratio of buying materials and this approach would help us not too concentrated the ordering from a single supplier, or running the risks of the orders 。
being interrupted
(b). All the suppliers have long term relationship with us. And, our friendship is good. With our company is growing strongly, these suppliers would also take highest 。
priority to satisfy our company needs Annually, we also meet with our suppliers on regular or irregular base to review our purchasing terms and any room for the improvement. This also helps a stable and continuous relationship in the materials 。
supply
(c). In considering the steady material supply, our company will provide the Rolling Forecast ， to the suppliers and the production preparations. This can shorten the delivery time and an assurance of on time delivery. If there is any unusual situation, these suppliers will accommodate our needs to assure a stable supply.

、 (4) The suppliers and customers over than 10% of the past two years:

(a). Ten largest supplier

				unit：NT$1,000	unit：NT$1,000
	2012			2013
Company	amount	The Percentage of annual procurement (%)	Company	amount	The Percentage of annual procurement(%)
S Company	1,258,882	18.37%	S Company	1,127,406	20.23%
Other	5,593,457	81.63%	Other	4,445,867	79.77%
Total	6,852,339	100.00%	Total	5,573,273	100.00%

(b). Ten largest clients

unit ： NT$ 1,000’s

				unit：NT	$ 1,000’s
	2012			2013
Name of client	Amount	Percentage of annual sale (%)	Name of Client	amount	percentage of annual sale (%)
F Group	1,774,450	16.24%	F Group	1,355,391	14.26%
Other	9,154,045	83.76%	Other	8,148,192	85.74%
Total	10,928,495	100.00%	Total	9,503,583	100.00%

、 (5) Production and monetary values for the past two years

Year Majorproducts		2012		2013	2013	2013
	capacity	Production	value	capacity	production	value
DIP Crystal product	330,000	320,946	489,822	280,000	243,315	381,087
SM Crystal products	1,800,000	1,688,230	6,661,702	2,200,000	1,983,218	6,860,769
Others	0	565,720	468,611	0	734,230	499,787
Total	2,130,000	2,574,896	7,620,135	2,480,000	2,960,763	7,741,643

、 (6) Volumes of sales and monetary values of the past two years

unit1000’s ， $1000’s

					unit1000’s，$1000’s	unit1000’s，$1000’s	unit1000’s，$1000’s	unit1000’s，$1000’s
year Major products	2012				2013
	Domestic sales		export		Domestic sales		Export
	quantity	value	quantity	value	quantity	value	quantity	value
DIP Crystal product	26,528	59,563	233,982	451,326	17,492	35,298	219,285	407,721
SM Crystal products	98,602	519,468	1,996,217	8,670,169	89,290	393,960	1,901,264	7,578,529
Others	457	57,226	1,658,283	1,170,743	938	208,921	1,160,493	879,154
total	125,587	636,257	3,888,481	10,292,238	107,721	636,257	3,281,042	8,865,404

、 C Employees’ average years in service, age, and educational background distribution of the past two years

Year	Year	2012	2013	2014/03/31
Total number employees	engineer	404	390	402
	administrative	508	515	508
	Sales	158	159	160
	Technicians/operators	1,413	1,379	1455
	total	2,483	2,443	2,525

Average age		29.41	30.01	29.93
Average yearsinservice		3.38	3.97	3.88

Distribution of educational background	Ph.D.	0.48%	0.5%	0.45%
	M.S.	5.17%	5.36%	5.22%
	B.S.	42.56%	36.80%	36.04%
	HighSchool	35.40%	33.69%	33.13%
	Below High School	16.39%	23.65%	25.16%

D 、 Data on our environmental protection expense

A. There were no environmental protection fines levied on the Pingzhen Plant and Chongqing Plant.

B. There was one administration penalty each for air pollution and fire protection levied on the Ningbo Plant. The details are as follows:

(1) 2013 air pollution violation administrative penalty

Reason: During P1 building plant facility etching production, the accompanying air pollution control equipment was not used properly and the acid mist alkaline spray column tested acidic when checked with pH test paper.

Corrective action: Install auto chemical addition device

Fine amount: 30,000 RMB

(2) 2013 fire protection violation administrative penalty

Reason: Malfunction present on automatic fire alarm, fire protection gear not kept in good and effective working condition.

Corrective action:

a. The fire protection facility contractor Yongchang Company helped to check for deficiencies and eliminate them.

b. Set up a system operation deficiency handling and warning response instructions. Ask on-duty personnel to promptly handle any incident and determine on-site if there is a fire. If there is no fire, then directly return to positions.

c. Set up a deficiency handling log to be checked and handled every day by the dedicated fire protection manager in the plant affairs section.

Fine amount: 10,000 RMB

Pollution facility installation permit or pollution discharge permit applied for, pollution control fees paid or dedicated environment protection job positions established in accordance with the law. Details are as follows:
A. The Pingzhen Plant is responsible for crystal, surface mounted component and sapphire substrate production. Special attention is paid to controlling potential sources of pollution such as noise, dust, particles and waste and various corrective actions are taken. For example, investment in water pollution treatment and control equipment to address water pollution from grinding solution was completed. The equipment has passed inspection and a water discharge permit was obtained. The application process for the air pollution facility installation permit from the Taoyuan County Environmental Protection Bureau was completed and related job positions have been established to perform environmental protection work. Environmental protection expenditures totaled NT$10,076,000. The funds were mainly used for environment cleanup, work environment inspection & testing, pollution control equipment operation & maintenance and protective gear.
B. The Ningbo Plant is responsible for crystal, surface mounted component production. Special attention is paid to controlling potential sources of pollution such as noise, dust, particles and waste and various corrective actions are taken. For example, 520,000 RMB was invested to add biochemical fluorine removal equipment to the wastewater station to further lower the COD and fluorine concentrations in discharged wastewater to reach the annual emission amount in environment protection requirements. The funds invested in related environmental protection improvement work totaled 1,060,000 RMB. Related job positions have been established to perform environmental protection work.
C. The environmental impact assessment was performed for the Chongqing Plant in accordance with laws and regulations when the plant was being planned for construction. Related job positions have been set up for environmental protection work. The installed equipment in the newly constructed plant was inspected and tested by Jiulongpo District Environmental Protective Bureau and all met wastewater, noise and air pollution emissions standards. A sewage discharge permit was obtained on September 26, 2013. Funds invested in environmental protection products include 750,000 RMB to install wastewater treatment plant facilities and 280,000 RMB to install air pollution filtration scrubbing tower facilities.

3. Safety and Health Implementation Status

A. In 2009, Pingzhen Plant established a labor safety and health committee which currently has 15 members. Of these, six are elected. The number of committee members currently make up 1.53% of total employees. A labor safety and health meeting is convened every quarter to handle various environmental safety and health problems. In order to improve work site safety, the Company initiated occupational safety and health performance recognition work in 2009 in accordance with related work guidelines as promoted by the labor safety and health committee. After risks are identified, and related corrective and preventative measures are taken, the Council on Labor Affairs (CLA) grants three year recognition. The second performance recognition was received in March 2013 and two year recognition was granted by the CLA. In September 2013, ongoing certification for the ISO14001 environmental management system, OHSAS18001 occupational safety and

health management system and CNS 15506 Taiwan occupational safety and health management system. A total of 16 health promotion activities attended by 3280 people were held in 2013. In January and March 2014, the Company held (1) ‘How diet and health affects immunity’ lecture given by the Anfa Clinic attended by 133 people (2) ‘parent – child outside hike activity’ which 100 people took part in (3) Support me to quit smoking Quit smoking class start-up and announcement activity attended by 83 people which shows what the Company is doing to create a safe and healthy work environment and also provide maximum safety to employees.

B. The Ningbo Plant established an environmental safety and health team in 2007. Environmental safety and health meetings are convened each month to handle environmental safety and health problems, track stage-by-stage objective achievement, identify suitability of law and regulations after amendment and check level of customer requirement satisfaction to display the Company’s dedication and concern for employee health and safety management improvement performance and environment protection.
C. The Chongqing has not yet obtained the related safety and health management system certification but operation is done in accordance with national and local laws and regulations.
(1) The safe production management committee was established in March 2013. The safe production management activities fully complied with Chongqing Jiulongju Safety Inspection Bureau requirements and the Chongqing City Safe Production Supervision and Management Regulations. In order to reach the goal of zero work safety accidents, monthly roving safety inspections are held at each unit in the organization. Meetings are convened to track deficiency improvements to ensure that potential safety hazards are promptly eliminated. In addition, the safe production office has a comprehensive work safety incident investigation, reporting and handling system. As of the date of publication, no major safety accident has occurred inside the plant.
(2) The Company also performs occupational health evaluation work. Expert team pre-evaluation and control effect evaluations must be passed before formal production begins. Afterwards, reevaluation of control effects are performed every three years. Qualified institutions are commissioned each year to perform occupational hazard factor evaluations. The Company schedules pre-job, on-the-job and post-job occupational disease exams for personnel working in certain job positions.

The company's non-use of hazardous substances policy is as follows: To fulfill our responsibility as global citizen, we are committed to:

Become the best green partner to customers based on the strictest regulations or customer requirements.
Check organization operations and supply resources, promote environmental education, strengthen environmental awareness and goals of all employees and supplier partners.
Design green products and emphasize products and production processes that do not use hazardous substances.
Make continuous improvement through related company activities to achieve the sustainable business goals of the Company.

· TXC complies with RoHS (Restriction of Hazardous Substances in Electrical and Electronic Equipment) 2011/65/EU, WEEE (Waste Electrical and Electronic Equipment) 2012/19/EU, PFOS 2006/122/EC, REACH (Registration, Evaluation, Authorization and Restriction of

Chemicals) (EC) No 1907/2006 requirements. Starting from July 1, 2006, TXC has been in compliance with international standards banning the use of substances containing Pb, Cd, Hg, Cr[6+] , PBB, PBDE and PFOS. In addition to receiving ISO 14001: 2004 environmental management system and IECQ/QC 080000: 2005 hazardous material management system certifications, the company through the efforts of our employees passed Sony Green Partner, Samsung ECO-Partner and Huawei Green Partner certification. Voluntary Certification on the Pollution Control of Electronic Information Products was obtained from China RoHS in accordance with electronic and information product pollution control management regulations. Building upon the foundation of mutual understanding and joint introduction of environment improvements, green purchasing activities serve as a basis for the continuous provision of green products. In order to ensure that product quality conforms to the related green and environmental protection regulations, the company strictly prohibits the use of banned substances in its production processes and instructs our suppliers not to use banned substances in either products or production so that the requirements of non-use, non-containment and non-contamination are complied with at each stage from product design and manufacturing to delivery so to reduce the environmental impact of our products and services.

In order to strengthen fulfillment of social corporate responsibility, Pingzhen Plant completed greenhouse gas inventory report, product carbon footprint inventory report and carbon neutrality declaration, passed BSI certification, obtained ISO 14064-1, PAS 2050 and PAS 2060 certification and received a TEEMA carbon footprint logo certificate. In addition to conducting organizational and product carbon inventories, the Company performs annual energy use inventories of power, public facilities, and process machinery and equipment to understand energy power consumption at the Company and achieve management and control objectives. BSI was also asked to conduct certification of ISO 50001 energy management system. The Company continues to promote low carbon activities under the guidance of Environmental Protection Administration. In 2013, low carbon activity logos were received for four activities: the year-end review meeting held on February 6 (EPA no. 10200125), arts and culture activity – bugs charge forward on March 23 (EPA no. 10200180), Dayuan beach cleaning activity on April 28 (EPA no. 10200540) and mid-year review meeting on July 15 (EPA no. 10201826). The Company will continue to take action to promote various environmental safety and health-related work to provide maximum safety to employees.

Related introduction and tracking of environmental protection is listed in detail on the company website. Refer to http://www.txc.com.tw/tw/i_esh/02.html

E 、 Employer/Employee Relation

The Company has maintained harmonious employer/employee relation since its establishment. In recent years and since the closing date for publication of the annual report, there are no losses due to employer/employee disputes and there have never been any major employer/employee disputes since its establishment. Aside from holding employor/employee meetings and discussion meetings for new employees and for foreign nationals, and conducting employee satisfaction investigation, we have also set up an employee opinions mailbox and other channels for reflecting their opinions. We have spared no efforts toward employee benefits. We have often stressed the importance of employees and have provided employee bonus in stock allotment, stock options, and cash for wedding ／ funeral ／ other festive occasions, emergency relief fund, group insurance ／ medical checkup, subsidies for tour at home or abroad, as well as discounts for books, magazines and special convenience stores; and sponsor birthday celebrations, sports competition, year-end party and luck draw, various recreational activities and commendation of senior and outstanding employees; also

provide canteen, hostel and parking lots, table tennis table, pool table and other facilities. It is hoped that through coordination of the employee welfare committee with the Company to promote employer/employee harmony and guarantee employee benefits and health in a bid for win-win for both the employer and the employees.

Insurance and retirement	Labor, health, group insurance (occupation injury), pension reserve fund, housing accumulation fund (NGB & CKG factory)
Profit sharing	Stock dividends, stock options, convertible corporate bonds, treasury stock systems
Gifts	Cash gifts for three major holidays, birthdays, weddings, births, hospitalization and white card consolationgifts(cash or a blasket of flower)
Medical insurance	Group insurance: Major disease insurance, accident injury insurance, emergency medical treatment, group hospitalization treatment and occupational injury insurance. Regular health exams: Physical exam, complete blood count (CBC), vision exam, hearing exam, liver function exam, blood fat exam, urine examination, chest X-rays, seasonal flu vaccine inoculation subsidy. Manager insurance
Activities	Domestic and international travel activities, birthday parties, employee athletic meets, year-end banquet and employee drawing, ball sport competitions, painting contests, photography contests, contracted merchant discounts, book reading club, a variety of employee social club activities and group purchase of movie ticket, art activies, course or activity for employee’s anti-pressure, and course for anti-smokingand anti-weight
Emergency relief	Grants allocated based on real-life conditions experienced by employees
Book reading	Regularly purchase books, magazine, newspapers for the reading enjoyment of company personnel,and VCD/DVD multimedia for employees to watch
Other welfare	Solid promotion channels, overseas assignment development opportunities for outstanding employees, performance bonuses issued based on operation status, recognition of veteran and exceptional personnel, top ten outstanding project commendations, incentives for employee project proposals, bonuses for emplyees’ child, bonsus for patents and proposal; oversea training opportunity (NGB & CKG factory)、
Facilities	Employee cafeteria, employee dormitory, car and motorcycle parking spaces, table tennis room, billiards room, badminton court, fitness room, breast-feeding room, medical service office, employee welfare association, lounge bar, soga room,shootingmachines,and KTV and convenience store

2. Employee education and training:

The Company provides employees a multiple learning environment. Colleagues can continually challenge their growth limit through internal ／ external training, OJT, KM （ knowledge management system ） , reading clubs, online ／ physical library, and supervisor ／ peer instruction. At the same time, through the new employees ／ professional technology ／ supervisor coaching ／ general knowledge course ／ self-development education and training system to bring maximun satisfaction for employees! On the other hand, through planning of job category ／ job level, work rotation, project allocation and overseas assignments to integrate their lives with their careers and enable them enjoy the happiness of growth in knowledge and skills and develop a bright future.

The Company has established Education and Training Guidelines and Mandatory Occupational Course Guidelines and our subsidiaries have established Employee Promotion and Reassignment Guidelines to plan related training courses in accordance with occupational and professional requirements in order to improve employee knowledge and skills, overall quality of employees and operation performance. Related education and training performance in 2013 is listed in the table below:

a. PCF Factory

a. PCF Factory
Item	No. of Class	Total No. ofsessions	Total No of Trainees	Total No. of Hours	Total Expense
1. General Knowledge Training	21	117	3,565	8,270	82,280
2. Management Level Training	13	13	301	857	283,089
3. New employees training	12	12	106	1,404	0
4. JobFunction Training	7	42	745	3,341	1,199,351
5. JobFunction Training	275	385	7,000	9,480	721,865
6. Self Heuristic Growth Training Course	12	12	523	400	7,200
Total	340	581	12,240	23,752	2,293,785

b. NGB Factory

b. NGB Factory
Item	No. of Class	Total No. of sessions	Total No of Trainees	Total No. of Hours	Total Expense
1. General Knowledge Training	51	220	16,808	21,171	221,588
2. Job Training	16	25	673	1,424	0
3. Management Training	12	14	869	1,405	0
4. Other Training	7	9	816	907	0
Total	86	268	19,166	24,907	221,588

c. CKG Factory

c. CKGFactory
Item 1. General Knowledge Training 2. New employees training 3. Job Training Total	No. of Class	Total No. of sessions	Total No of Trainees	Total No. of Hours	Total Expense
	3	6	354	708	0
	7	15	62	744	0
	16	16	285	570	91,316
	26	37	701	2,022	91,316

(1)The Company’s finance supervisor qualified for Professional Certification of Finance and Accounting Supervisor of Publicly-listed Companies sponsored by the R.O.C. Accounting Research Development Fund.

(2)Two financial staffs of the Company acquired the Internal Auditor Certificate issued by the Internal Auditing Association.

(3)One financial staff of the Company acquired the Certified Public Accountant issued by the Ministry of Examination.

(4)One financial staff of the Company acquired the Stock Professional Services certification test issued by the Securities and Futures Bureau , Financial Supervisory Commission.
(5)One financial staff of the Company acquired the Certified Accountant issued by the Ministry of Examination.
(6)Two financial staffs of the Company acquired the Certificate of Securities Salespeerson issued by the Ministry of Examination.
Pension System Implementation
- The Company has established employee pension procedures in accordance with the Labor Standards Act and regularly allocates pension reserve funds for deposit in the Bank of Taiwan in accordance with the law. The employee pension reserve fund committee is responsible for the management and use of the pension reserve fund. In 2013 and 2012, the Company recognized NT47,289 thousand and NT39,552 thousand in pension reserve funds respectively and allocated the pensions funds for deposit in individual labor pension fund accounts set up the Bureau of Labor Insurance in compliance with the new labor pension system. An employee pension fund manager appointment system was established in January 2007 to guarantee profession management of pension plans.
To protect employees with work safety the Company has formulated the following control methods regarding the work environment and employee body safety protection and call on employees for thorough implementation: Besides, establish the “Environmental and Occupational Safety and Health Committee” and hold the meeting regularly to review the effectiveness of business development and related matters of environmental safety and health. Aside from purchasing yearly group insurance, sponsoring regular work safety seminars, and dispatched employees to attend relevant industrial safety courses, it has revised the TXC Contingency Plan in Octomber, 2009 and issued the manual for Environmental Safety and Health Management to ensure employee life security and handling of contingency incidents. Please go to website: www.txccorp.com. To achieve the zero disaster goal, the company regularly revised the annual contingency plan and formulated detailed implementation operation according to contents of the plan. The business units shall implement the schedule and contents of the plan, and find out shortcomings via the auditing system to formulate the contingency plan for the coming year, and review and revise the implementation processes and auditing operation from time to time and lower risk of disasters by the business units to achieve the final goal of zero disaster.
Fulfillment of Social Responsibility: In line with humanitarian conviction of care for the disadvantaged, the Company would compile budget every year for feeding back to society. In performing our corporate social responsibility, every year the Company will continue to donate to basic education and education business for the disadvantaged and contribute to public charity. Our company was listed by the Global Views Monthly among the top 50 enterprises for corporate social responsibility. In August 2011, TXC was ranked second for the mid-sized enterprise category in Commonweath Magazine’s Corporate Citizen Award, the Energy Conservation Elite, Outstanding Innovation Award presented by the Bureau of Energy and received ISO50001 Energy Management System certification. Moreover, TXC published its corporate social accountability report in January 2009

http://www.txc.com.tw/download/other/Social%20Responsibility.pdf. and has strived to fulfill its corporate social accountability by making contributions to society. Please refer to information in the Company website: http://www.txc.com.tw/tw/h_csr/02.html.

VI. An Overview of the Company’s Financial Status

A. Abbreviated Balance Sheets and P/L Statements for the Past 5 Years

、 (1) Abbreviated Consolidated Balance Sheets (IFRS)

Unit ： NT$ 1,000

							Unit：NT$ 1,000
Year Item		Finan cial infor mation for th e post 5 years					Up to 2014.03.31
		2009	2010	2011	2012	2013
Current assets		Note 2				6,858,639	7,476,459
Property, plant and equipment						5,508,064	5,351,302
Intangible assets						0	0
Other assets						616,827	629,530
Total assets						12,983,530	13,457,291
Current liabilities	Before distribution					2,811,689	3,098,978
	After distribution					Note 6	Note 6
Long-term liabilities						1,846,958	1,750,805
Total liabilities	Before distribution					4,658,647	4,849,783
	After distribution					Note 6	Note 6
Interests attributable to parent company						8,324,883	8,607,508
Common stock						3,097,570	3,097,570
Capital surplus						1,662,181	1,662,181
Retained earnings	Before distribution					3,489,796	3,711,908
	After distribution					Note 6	Note 6
Other interests						75,336	135,849
Treasury Stock						0	0
Non-controlling interests						0	0
Total stockholders’ equity	Before distribution					8,324,883	8,607,508
	After distribution					Note 6	Note 6

＊ If individual financial reports are prepared, the Company shall also prepare condensed balance sheets and statements of income for the past five years.

＊ For financial data that has used international accounting reporting standards for less than five years, table (2) should be prepared separately with financial data which uses our country’s financial accounting standards.

Note 1: The years which have not yet been audited and certified by a CPA should be noted.

Note 2: The assessment date and reassessed value amount should be listed for assets which have been reassessed in that year. Note 3: Listed companies or companies with securities sold by securities firms should list the annual report publishing dates

up to the previous quarter. Whether or not the financial data has been certified, audited or both should also be noted.
Note 4: For the above amounts after distribution, the amounts listed should be based on the following year’s shareholders meeting resolution.
Note 5: For financial data which requires self-correction or revision as notified by the competent authorities, the corrected or revised amounts should be listed and the circumstances and reasons should be noted.
Note 6: Earnings in 2013 have not yet passed shareholders’ meeting resolution as of March 31, 2014.

、 (2) Abbreviated Balance Sheets (IFRS)

Unit ： NT$ 1,000

							Unit：NT$ 1,000
Year Item		Financial information for the post 5 years					Up to 2014.03.31
		2009	2010	2011	2012	2013	Not Applied
Current assets		Note 2				4,931,108
Property, plant and equipment						3,013,892
Intangible assets						0
Other assets						4,598,770
Total assets						12,543,77 0
Current liabilities	Before distribution					2,373,019
	After distribution					Note 6
Long-term liabilities						1,845,868
Total liabilities	Before distribution					4,218,887
	After distribution					Note 6
Interests attributable to parent company						8,324,883
Common stock						3,097,570
Capital surplus						1,662,181
Retained earnings	Before distribution					3,489,796
	After distribution					Note 6
Other interests						75,336
Treasury Stock						0
Non-controlling interests						0
Total stockholders’ equity	Before distribution					8,324,883
	After distribution					Note 6

＊ If individual financial reports are prepared, the Company shall also prepare condensed balance sheets and statements of income for the past five years.
＊ For financial data that has used international accounting reporting standards for less than five years, table (2) should be prepared separately with financial data which uses our country’s financial accounting standards.
Note 1: The years which have not yet been audited and certified by a CPA should be noted.
Note 2: The assessment date and reassessed value amount should be listed for assets which have been reassessed in that year. Note 3: Listed companies or companies with securities sold by securities firms should list the annual report publishing dates up to the previous quarter. Whether or not the financial data has been certified, audited or both should also be noted.
Note 4: For the above amounts after distribution, the amounts listed should be based on the following year’s shareholders meeting resolution.
Note 5: For financial data which requires self-correction or revision as notified by the competent authorities, the corrected or revised amounts should be listed and the circumstances and reasons should be noted.
Note 6: Earnings in 2013 have not yet passed shareholders’ meeting resolution as of March 31, 2014.

、 (3) Abbreviated Conslodiated Balance Sheets (GAAP)

Unit ： NT$ 1,000

		Unit：NT$ 1,000	Unit：NT$ 1,000	Unit：NT$ 1,000	Unit：NT$ 1,000	Unit：NT$ 1,000
Year Item		Financial information forthe post 5 years
		2009	2010	2011	2012	2013
Current assets		5,175,178	5,690,645	5,727,08 6	6,737,268	Not Applied
Long-term equity investments		3,000	137,935	294,102	299,192
Property, plant and equipment		4,109,812	5,061,636	5,689,646	5,734,497
Intangible assets		16,547	15,144	117,530	115,024
Other assets		160,177	163,293	114,957	110,221
Total assets		9,464,714	11,068,653	11,943,321	12,996,202
Current liabilities	Before distribution	2,565,903	2,808,544	2,623,371	3,445,764
	After distribution	2,565,903	2,808,544	2,623,371	3,445,764
Long-term liabilities		892,625	1,717,897	2,087,835	1,525,637
Other liabilities		85,258	13,397	71,715	144,305
Total liabilities	Before distribution	3,543,786	4,539,838	4,782,921	5,115,706
	After distribution	3,543,786	4,539,838	4,782,921	5,115,706
Common stock		2,887,272	2,971,831	3,022,423	3,097,570
Capital surplus		1,168,416	1,302,853	1,356,078	1,616,549
Retained earnings	Before distribution	1,818,658	2,375,441	2,545,465	3,029,417
	After distribution	1,185,265	1,575,417	1,880,531	2,347,952
Unrealized gains on financial instruments		0	(3,235)	(18,133)	(13,105)
Cumulative translation adjustments		168,373	3,716	264,762	167,431
Asset revaluation increment(note 3)		0	0	(15,637)	(22,808)
Treasure Stock		5,920,928	6,528,815	7,160,400	7,880,496
Total stockholder s’ equity	Before distribution	5,345,114	5,788,052	6,495,466	7,199,031
	After distribution	5,175,178	5,690,645	5,727,086	6,737,268

Note 1: The years which have not yet been audited and certified by a CPA should be noted.

Note 2: The assessment date and reassessed value amount should be listed for assets which have been reassessed in that year.

Note 3: For the above amounts after distribution, the amounts listed should be based on the following year’s shareholders meeting resolution.

Note 4: For financial data which requires self-correction or revision as notified by the competent authorities, the corrected or revised amounts should be listed and the circumstances and reasons should be noted.

、 (4) Abbreviated Balance Sheets (GAAP)

Unit ： NT$ 1,000

					Unit：NT$ 1,000	Unit：NT$ 1,000
Year Item		Financial information forthe post			5 years
		2009	2010	2011	2012	2013
Current assets		5,175,178	5,690,645	5,727,086	6,737,268	Not Applied
Long-term equity investments		3,000	137,935	294,102	299,192
Property, plant and equipment		4,109,812	5,061,636	5,689,646	5,734,497
Intangible assets		16,547	15,144	117,530	115,024
Other assets		160,177	163,293	114,957	110,221
Total assets		9,464,714	11,068,653	11,943,321	12,996,202
Current liabilities	Before distribution	2,565,903	2,808,544	2,623,371	3,445,764
	After distribution	2,565,903	2,808,544	2,623,371	3,445,764
Long-term liabilities		892,625	1,717,897	2,087,835	1,525,637
Other liabilities		85,258	13,397	71,715	144,305
Total liabilities	Before distribution	3,543,786	4,539,838	4,782,921	5,115,706
	After distribution	3,543,786	4,539,838	4,782,921	5,115,706
Common stock		2,887,272	2,971,831	3,022,423	3,097,570
Capital surplus		1,168,416	1,302,853	1,356,078	1,616,549
Retained earnings	Before distribution	1,818,658	2,375,441	2,545,465	3,029,417
	After distribution	1,185,265	1,575,417	1,880,531	2,347,952
Unrealized gains on financial instruments		0	(3,235)	(18,133)	(13,105)
Cumulative translation adjustments		168,373	3,716	264,762	167,431
Asset revaluation increment(note 3)		0	0	(15,637)	(22,808)
Total stockholder s’ equity	Before distribution	5,920,928	6,528,815	7,160,400	7,880,496
	After distribution	5,345,114	5,788,052	6,495,466	7,199,031

Note 1: The years which have not yet been audited and certified by a CPA should be noted.

Note 2: The assessment date and reassessed value amount should be listed for assets which have been reassessed in that year.
Note 3: For the above amounts after distribution, the amounts listed should be based on the following year’s shareholders meeting resolution.
Note 4: For financial data which requires self-correction or revision as notified by the competent authorities, the corrected or revised amounts should be listed and the circumstances and reasons should be noted.

、 (5) Abbreviated Consolidated P/L Statements (IFRS)

Unit ： NT$ 1,000

Year Item	Financial information for the post 5 years (Note 1)	Financial information for the post 5 years (Note 1)	Financial information for the post 5 years (Note 1)	Financial information for the post 5 years (Note 1)	Financial information for the post 5 years (Note 1)	U p t o 2 0 1 4 . 0 3 . 3 1
	2009	2010	2011	2012	2013
Net operating revenue	Not Applied				9,503,583	2,165,532
Gross profit					2,194,030	509,403
Operating income					951,154	214,156
Nonoperating gains and losses					110,611	38,892
Income before income tax					1,061,765	253,048
Continuing operations net Income					1,061,765	253,048
Discontinuing operations net Loss					0	0
Net income (loss)					935,161	222,112
Other comprehensive income （net amount）					179,040	60,513
Total comprehensive income					1,114,201	282,625
Net income attributable toparent company					935,161	222,112
Net income attributable to non-controlling interests					0	0
Comprehensive income attributable to parent company					1,114,201	282,625
Comprehensive income attributable to non-controllinginterests					0	0
Earnings per share					3.02	0.72

＊ If individual financial reports are prepared, the Company shall also prepare condensed balance sheets and statements of income for the past five years.
＊ For financial data that has used international accounting reporting standards for less than five years, table (2) should be prepared separately with financial data which uses our country’s financial accounting standards.

Note1: The years which have not yet been audited and certified by a CPA should be noted.

2: Listed companies or companies with securities sold by securities firms should list the annual report publishing dates up to the previous quarter. Whether or not the financial data has been certified, audited or both should also be noted.
3: Gains (losses) from discontinued operations are listed as net amounts after income tax deduction.
4: For financial data which requires self-correction or revision as notified by the competent authorities, the corrected or revised amounts should be listed and the circumstances and reasons should be noted.

、 (6) Abbreviated P/L Statements (IFRS)

Unit ： NT$ 1,000

Year Item	Financial information for the post 5 years (Note 1)	Financial information for the post 5 years (Note 1)	Financial information for the post 5 years (Note 1)	Financial information for the post 5 years (Note 1)	Financial information for the post 5 years (Note 1)	U p t o 2 0 1 4 . 0 3 . 3 1
	2009	2010	2011	2012	2013
Net operating revenue	Not Applied				8,336,979	Not Applied
Gross profit					1,509,975
Operating income					678,460
Nonoperating gains and losses					345,119
Income before income tax					1,023,579
Continuing operations net Income					1,023,579
Discontinuing operations net Loss					0
Net income (loss)					935,161
Other comprehensive income （net amount）					179,040
Total comprehensive income					1,114,201
Net income attributable toparent company					935,161
Net income attributable to non-controlling interests					0
Comprehensive income attributable to parent company					1,114,201
Comprehensive income attributable to non-controllinginterests					0
Earnings per share					3.02

＊ If individual financial reports are prepared, the Company shall also prepare condensed balance sheets and statements of income for the past five years.
＊ For financial data that has used international accounting reporting standards for less than five years, table (2) should be prepared separately with financial data which uses our country’s financial accounting standards.

Note1: The years which have not yet been audited and certified by a CPA should be noted.

2: Listed companies or companies with securities sold by securities firms should list the annual report publishing dates up to the previous quarter. Whether or not the financial data has been certified, audited or both should also be noted.
3: Gains (losses) from discontinued operations are listed as net amounts after income tax deduction.
4: For financial data which requires self-correction or revision as notified by the competent authorities, the corrected or revised amounts should be listed and the circumstances and reasons should be noted.

、 (7) Abbreviated Consolidated P/L Statements (GAAP)

Unit ： NT$ 1,000

Year Item	Financial information for thepost 5years(Note 1)	Financial information for thepost 5years(Note 1)	Financial information for thepost 5years(Note 1)	Financial information for thepost 5years(Note 1)	Financial information for thepost 5years(Note 1)
	2009	2010	2011	2012	2013
Net operatingrevenue	7,727,524	9,650,594	9,897,341	10,928,495	Not Applied
Grossprofit	1,904,410	2,536,096	2,400,646	2,508,295
Operatingincome	1,003,975	1,346,840	1,151,521	1,257,655
Nonoperating income and gains	298,006	506,905	145,019	159,188
Nonoperating expenses and losses	(333,546)	(528,931)	(83,330)	(114,224)
Income before income tax	968,435	1,324,814	1,213,210	1,302,619
Net income before cumulative effect of change in accounting principles	782,223	1,190,178	1,050,216	1,148,886
Income(loss) from operations of discontinued segment	0	0	0	0
Extraordinary gain or loss	0	0	0	0
Cumulative effect of change in accounting principles	0	0	0	0
Net income	782,223	1,190,178	1,050,216	1,148,886
Earningsper share	2.7	4.06	3.48	3.79

Note1: The years which have not yet been audited and certified by a CPA should be noted.

2: Gains (losses) from discontinued operations, extraordinary gains or losses and cumulative effects resulting from changes in accounting principles are listed as net amounts after income tax deduction.
3: For financial data which requires self-correction or revision as notified by the competent authorities, the corrected or revised amounts should be listed and the circumstances and reasons should be noted.

Unit ： NT$ 1,000

、 (8) Abbreviated P/L Statements (GAAP)

Year Item	Financial information for thepost 5years(Note 1)	Financial information for thepost 5years(Note 1)	Financial information for thepost 5years(Note 1)	Financial information for thepost 5years(Note 1)	Financial information for thepost 5years(Note 1)
	2009	2010	2011	2012	2013
Net operatingrevenue	6,557,116	8,156,933	8,918,023	9,477,481	Not Applied
Grossprofit	1,267,998	1,702,014	1,658,329	1,708,304
Operatingincome	552,205	805,521	744,212	866,519
Nonoperating income and gains	398,136	565,225	457,626	449,511
Nonoperating expenses and losses	38,791	125,316	42,650	57,327
Income before income tax	911,550	1,245,430	1,159,188	1,258,703
Net income before cumulative effect of change in accounting principles	782,223	1,190,178	1,050,216	1,148,886
Income(loss) from operations of discontinued segment	0	0	0	0
Extraordinary gain or loss	0	0	0	0
Cumulative effect of change in accounting principles	0	0	0	0
Net income	782,223	1,190,178	1,050,216	1,148,886
Earningsper share	2.75	4.06	3.48	3.79

Note1: The years which have not yet been audited and certified by a CPA should be noted.

2: Gains (losses) from discontinued operations, extraordinary gains or losses and cumulative effects resulting from changes in accounting principles are listed as net amounts after income tax deduction.
3: For financial data which requires self-correction or revision as notified by the competent authorities, the corrected or revised amounts should be listed and the circumstances and reasons should be noted.

B 、 Financial Analysis for the past 5 Years

（ 1 ） Consolidated Financial Analysis (IFRS)

Item	Yesr	Financial analysis for the post 5 years	Financial analysis for the post 5 years	Financial analysis for the post 5 years	Financial analysis for the post 5 years	Financial analysis for the post 5 years	Up to 2014.03.31
		2009	2010	2011	2012	2013
Capital Structure Analysis (%)	Debt ratio (%)	Not Applied				35.88%	36.04%
	Long-term fund to fixed asstes ratio (%)					184.67%	189.94%
Liquidity Analysis (%)	Current Ratio (%)					243.93%	241.26%
	Quick Ration (%)					180.81%	175.80%
	Times interest earned (%)					2406	2,314
Operating performace Analysis (%)	Average collection turnover(times)					3.07	3.26
	Days sales outstanding					118.79	111.91
	Average inventory turnover(times)					4.67	3.85
	Average payment turnover(times)					5.57	5.16
	Average inventory turnover(days)					78.13	94.74
	Fixed assets turnover(times)					1.73	0.40
	Total assets turnover(times)					0.73	0.16
Profitabilit y Analysis (%)	Turn on total assets (%)					7.48%	1.75%
	Turn on total equity (%)					11.57%	2.62%
	Paid-in capital ratio (%)					34.28%	8.17%
	Net margin (%)					9.84%	10.26%
	Earnings per share(Basic) Note I					3.02	0.72
Cash Flow	Cash flow ratio (%)					70.80%	15.12%
	Cash flow adequacy ratio (%)					88.26%	89.74%
	Cash flow reinvestment ration(%)					9.89%	8.80%
Leverage	Operating leverage					7.3581	2.1064
	Financial Leverage					1.0506	1.0564
Please explain the reasons of changes in financial ratio for the post two years (No needs for analysis if change of financial ratio is less than 20%) The reasons for the change was not determined because the international financial reporting standards have been used for less than twoyears for this financial data.

NoteII ： Glossary ：

  1. Capital StructureAnalysis

     - (1) Debt ratio ＝ Total liabilities ／ Total assets

(2) Long-term fund to fixed asstes ratio ＝（ Total stockholders’ equity ＋ Long-term liabilities ）／ Net Fixed Assets
Liquidity Analysis
(1) Current Ratio ＝ current assets ／ current liabilities
－－
(2) Quick Ration ＝（ current assets Inventories Prepaid expenses ）／ current liabilities
＝
(3) Times interest earned Earnings before interest and taxs ／ Interest expenses
Operating performace Analysis
＝

(1) Average collection turnover

    - Net sales ／ Average trade Receivables

(2) Days sales outstanding ＝ 365 ／ Average collection turnover
＝。
(3) Average inventory turnover Cost of good sold ／ Average inventory
＝
(4) Average payment turnover Cost of good sold ／ Average trade Payables
(5) Average inventory turnover(Days) ＝ 365 ／ Average inventory turnover
(6) Fixed assets turnover ＝ Net sales ／ Net Fixed Assets
(7) Total assets turnover ＝ Net sales ／ Total assets

Profitability Analysis

 - －

 - (1) Turn on total assets ＝［ Net income ＋ Interest expenses× （ 1 Effective tax rate ）］／ 。

 - Average total assets

(2) Turn on total equit ＝ Net income ／ Average stockholders’ equit 。
(3) Net margin ＝ Net income ／ net sales 。
－
(4) Earnings per share ＝（ Net income Perferred stock dividend ）／ Weighted average number of shares outstanding
Cash Flow
(1) Cash flow ratio ＝ Net cash provided by operating activities ／ current liabilities
＝
(2) Cash flow adequacy ratio Five-year sum of cash from operations ／ Five-year sum of capital expenditures, inventory additions, and cash dividend.
＝
(3) Cash flow reinvestment ration (Cash provided from operating activities – Cash dividend) ／（ Grosss fixed assets + investment + Other assets + Working capital ）
Leverage
(1) Operating leverage ＝（ Net sales – Variable cost ）／ Income from operations
(2) Financial Leverage ＝ Income from operations ／（ Income from operations － Interest expenses ）

（ 2 ） Financial Analysis (IFRS)

Item	Yesr	Financial analysis for the post 5 years	Financial analysis for the post 5 years	Financial analysis for the post 5 years	Financial analysis for the post 5 years	Financial analysis for the post 5 years	Up to 2014.03.31
		2009	2010	2011	2012	2013
Capital Structure Analysis (%)	Debt ratio (%)	Not Applied				33.63%	Not Applied
	Long-term fund to fixed asstes ratio (%)					337.46%
Liquidity Analysis (%)	Current Ratio (%)					207.80%
	Quick Ration (%)					156.54%
	Times interest earned (%)					2732
Operating performace Analysis (%)	Average collection turnover(times)					3.03
	Days sales outstanding					120.55
	Average inventory turnover(times)					6.19
	Average payment turnover(times)					5.03
	Average inventory turnover(days)					58.95
	Fixed assets turnover(times)					2.77
	Total assets turnover(times)					0.66
Profitabilit y Analysis (%)	Turn on total assets (%)					7.66%
	Turn on total equity (%)					11.57%
	Paid-in capital ratio (%)					33.04%
	Net margin (%)					11.22%
	Earnings per share(Basic) Note I					3.02
Cash Flow	Cash flow ratio (%)					56.83%
	Cash flow adequacy ratio (%)					77.66%
	Cash flow reinvestment ration(%)					5.82%
Leverage	Operating leverage					9.5741
	Financial Leverage					1.0563
Please explain the reasons of changes in financial ratio for the post two years (No needs for analysis if change of financial ratio is less than 20%) The reasons for the change was not determined because the international financial reporting standards have been used for less than twoyears for this financial data.

NoteII ： Glossary ：

  1. Capital StructureAnalysis

     - (1) Debt ratio ＝ Total liabilities ／ Total assets

(2) Long-term fund to fixed asstes ratio ＝（ Total stockholders’ equity ＋ Long-term liabilities ）／ Net Fixed Assets
Liquidity Analysis
(1) Current Ratio ＝ current assets ／ current liabilities
－－
(2) Quick Ration ＝（ current assets Inventories Prepaid expenses ）／ current liabilities
＝
(3) Times interest earned Earnings before interest and taxs ／ Interest expenses
Operating performace Analysis
＝

(1) Average collection turnover

    - Net sales ／ Average trade Receivables

(2) Days sales outstanding ＝ 365 ／ Average collection turnover
＝。
(3) Average inventory turnover Cost of good sold ／ Average inventory
＝
(4) Average payment turnover Cost of good sold ／ Average trade Payables
(5) Average inventory turnover(Days) ＝ 365 ／ Average inventory turnover
(6) Fixed assets turnover ＝ Net sales ／ Net Fixed Assets
(7) Total assets turnover ＝ Net sales ／ Total assets

Profitability Analysis

 - －

 - (1) Turn on total assets ＝［ Net income ＋ Interest expenses× （ 1 Effective tax rate ）］／ 。

 - Average total assets

(2) Turn on total equit ＝ Net income ／ Average stockholders’ equit 。
(3) Net margin ＝ Net income ／ net sales 。
－
(4) Earnings per share ＝（ Net income Perferred stock dividend ）／ Weighted average number of shares outstanding
Cash Flow
(1) Cash flow ratio ＝ Net cash provided by operating activities ／ current liabilities
＝
(2) Cash flow adequacy ratio Five-year sum of cash from operations ／ Five-year sum of capital expenditures, inventory additions, and cash dividend.
＝
(3) Cash flow reinvestment ration (Cash provided from operating activities – Cash dividend) ／（ Grosss fixed assets + investment + Other assets + Working capital ）
Leverage
(1) Operating leverage ＝（ Net sales – Variable cost ）／ Income from operations
(2) Financial Leverage ＝ Income from operations ／（ Income from operations － Interest expenses ）

（ 3 ） Consolidated Financial Analysis (GAAP)

Item	Year	Year	Financial Analysisforthe past 5Years	Financial Analysisforthe past 5Years	Financial Analysisforthe past 5Years	Financial Analysisforthe past 5Years	Financial Analysisforthe past 5Years
			2009	2010	2011	2012	2013
Capital StructureAn alysis	Debt ratio (%)		37.44%	41.02%	40.05%	39.36%	Not Applied
	Long-term fund to fixed asstes ratio (%)		165.79%	162.93%	162.54%	164.03%
Liquidity Analysis	Current Ratio (%)		201.69%	202.62%	218.31%	195.52%
	Quick Ration (%)		164.03%	160.77%	170.70%	150.24%
	Times interest earned (%)		3033	4914	3994	3764
Operating performace Analysis	Average collection turnover(times)		3.25	3.64	3.32	3.28
	Days sales outstanding		112.19	100.24	110.08	111.24
	Average inventory turnover(times)		6.55	6.96	6.34	6.19
	Average payment turnover(times)		5.79	5.53	5.98	6.44
	Average inventory turnover(days)		55.70	52.46	57.60	58.97
	Fixed assets turnover(times)		1.88	1.91	1.74	1.91
	Total assets turnover(times)		0.82	0.87	0.83	0.84
Profitability Analysis	Turn on total assets (%)		8.82%	11.82%	9.35%	9.45%
	Turn on total equity (%)		13.55%	19.12%	15.34%	15.28%
	Paid-in capital ratio (%)	Operatingincome	34.94%	45.32%	38.10%	41.61%
		Pre-tax income	33.70%	44.58%	40.14%	43.10%
	Net margin (%)		10.12%	12.33%	10.61%	10.51%
	Earnings per share(Basic) Note I		2.75	4.06	3.48	3.79
Cash Flow	Cash flow ratio (%)		79.32%	64.87%	59.60%	48.53%
	Cash flow adequacy ratio (%)		95.82%	85.50%	81.67%	77.61%
	Cash flow reinvestment ration (%)		15.44%	10.89%	6.37%	8.56%
Leverage	Operating leverage		1.8236	1.6305	1.7930	1.6875
	Financial Leverage		1.0314	1.0209	1.0278	1.0291

Note I ： The financial statements of TXC Corporation were audited and certified by CPA. EPS is before retroactively adjust.

NoteII ： Glossary ：

  1. Capital StructureAnalysis

     - (1) Debt ratio ＝ Total liabilities ／ Total assets

(2) Long-term fund to fixed asstes ratio ＝（ Total stockholders’ equity ＋ Long-term liabilities ）／ Net Fixed Assets
Liquidity Analysis
(1) Current Ratio ＝ current assets ／ current liabilities
－－
(2) Quick Ration ＝（ current assets Inventories Prepaid expenses ）／ current liabilities
＝
(3) Times interest earned Earnings before interest and taxs ／ Interest expenses
Operating performace Analysis
＝

(1) Average collection turnover

    - Net sales ／ Average trade Receivables

(2) Days sales outstanding ＝ 365 ／ Average collection turnover
＝。
(3) Average inventory turnover Cost of good sold ／ Average inventory
＝
(4) Average payment turnover Cost of good sold ／ Average trade Payables

(5) Average inventory turnover(Days) ＝ 365 ／ Average inventory turnover
(6) Fixed assets turnover ＝ Net sales ／ Net Fixed Assets
(7) Total assets turnover ＝ Net sales ／ Total assets
Profitability Analysis
－
(1) Turn on total assets ＝［ Net income ＋ Interest expenses× （ 1 Effective tax rate ）］／。
Average total assets
(2) Turn on total equit ＝ Net income ／ Average stockholders’ equit 。
(3) Net margin ＝ Net income ／ net sales 。
－
(4) Earnings per share ＝（ Net income Perferred stock dividend ）／ Weighted average number of shares outstanding
Cash Flow
(1) Cash flow ratio ＝ Net cash provided by operating activities ／ current liabilities
＝
(2) Cash flow adequacy ratio Five-year sum of cash from operations ／ Five-year sum of capital expenditures, inventory additions, and cash dividend.
＝
(3) Cash flow reinvestment ration (Cash provided from operating activities – Cash dividend) ／（ Grosss fixed assets + investment + Other assets + Working capital ）
Leverage
(1) Operating leverage ＝（ Net sales – Variable cost ）／ Income from operations
(2) Financial Leverage ＝ Income from operations ／（ Income from operations － Interest expense

INDEPENDENT AUDITORS’ REPORT

The Board of Directors and Stockholders TXC Corporation

We have audited the accompanying consolidated balance sheets of TXC Corporation (the “Company”) and its subsidiaries (collectively referred to as the “Group”) as of December 31, 2013, December 31, 2012 and January 1, 2012, and the related consolidated statements of comprehensive income, changes in equity and cash flows for the years ended December 31, 2013 and 2012. These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

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

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of the Group as of December 31, 2013, December 31, 2012 and January 1, 2012, and their consolidated financial performance and their consolidated cash flows for the years ended December 31, 2013 and 2012, in conformity with the Regulations Governing the Preparation of Financial Reports by Securities Issuers and International Financial Reporting Standards (IFRS), International Accounting Standards (IAS), IFRIC Interpretations (IFRIC), and SIC Interpretations (SIC) endorsed by the Financial Supervisory Commission of the Republic of China.

May 10, 2014

Notice to Readers

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

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

72 -

TXC CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(In Thousands of New Taiwan Dollar)

ASSETS CURRENT ASSETS Cash and cash equivalents (Notes 4 and 6) Financial assets at fair value through profit or loss - current (Notes 4 and 7) Available-for-sale financial assets - current (Notes 4 and 8) Notes receivable (Notes 4, 5 and 12) Accounts receivable (Notes 4, 5 and 12) Receivables from related parties (Notes 4, 5, 12 and 33) Other receivables (Notes 4 and 12) Other receivables from related parties (Notes 4, 12 and 33) Inventories (Notes 4 and 13) Prepayments Prepaid rental (Notes 4 and 17) Other financial assets - current (Note 11) Other current assets - other (Note 18) Total current assets NONCURRENT ASSETS Available-for-sale financial assets - noncurrent (Notes 4 and 8) Held-to-maturity financial assets (Notes 4, 5 and 9) Financial assets carried at cost (Notes 4 and 10) Investments accounted for using equity method (Notes 4 and 14) Property, plant and equipment (Notes 4 and 15) Investment properties (Notes 4 and 16) Deferred income tax assets (Notes 4, 5 and 26) Prepayment for equipment Refundable deposits (Notes 4 and 30) Long-term prepaid rent (Note 17) Other noncurrent assets (Note 18) Total noncurrent assets TOTAL LIABILITIES AND EQUITY CURRENT LIABILITIES Short-term loans (Note 19) Financial liabilities at fair value through profit or loss - current (Notes 4 and 7) Notes payable (Note 21) Notes payable from related parties (Notes 21 and 32) Accounts payable (Note 21) Accounts payables to related parties (Notes 21 and 32) Other payables (Note 22) Other payables to related parties (Note 32) Current tax liabilities (Notes 4 and 26) Current portion of bonds payable and long-term bank loans (Notes 19 and 20) Other current liabilities (Note 22) Total current liabilities NONCURRENT LIABILITIES Bonds payable (Note 20) Long-term bank loans (Note 19) Deferred income tax liabilities (Notes 4 and 26) Accrued pension cost (Notes 4 and 23) Guarantee deposits received (Notes 4, 22 and 29) Total noncurrent liabilities Total liabilities EQUITY ATTRIBUTABLE TO OWNERS OF THE PARENT Capital stock (Note 24) Common stock Capital collected in advance Certificates of bond-to-stock conversion Total capital stock Capital surplus Retained earnings Appropriated as legal capital reserve Appropriated as special capital reserve Unappropriated earnings Total retained earnings Other equity Exchange differences on translating foreign operations Unrealized loss on available-for-sale financial assets Total other equity Total equity attributable to owners of the parent Total equity TOTAL		December 31, 2013 Amount % $ 1,829,536 14 445,807 4 49,414 - 20,521 - 2,636,402 20 9,416 - 81,263 1 704 - 1,652,913 13 8,307 - 2,538 - 24,443 - 97,375 1 6,858,639 53 44,510 - 47,840 - 198,245 2 61,747 1 5,508,064 42 55,693 1 29,043 - 12,014 - 4,384 - 115,225 1 48,126 - 6,124,891 47 $ 12,983,530 100 $ 707,268 5 17,329 - - - - - 886,627 7 177 - 594,959 5 1,027 - 67,919 1 489,415 4 46,968 - 2,811,689 22 765,337 6 887,500 7 130,540 1 34,163 - 29,418 - 1,846,958 14 4,658,647 36 3,097,570 24 - - - - 3,097,570 24 1,662,181 13 864,348 7 222,793 2 2,402,655 18 3,489,796 27 75,336 - - - 75,336 - 8,324,883 64 8,324,883 64 $ 12,983,530 100		December 31, 2012 Amount % $ 1,570,747 12 - - 46,895 - 17,220 - 3,453,853 27 10,466 - 69,397 1 582 - 1,476,562 11 17,062 - 2,427 - - - 66,743 1 6,731,954 52 54,997 - - - 198,245 2 45,950 - 5,546,828 43 58,553 1 53,667 - 178,715 1 4,205 - 112,597 1 44,207 - 6,297,964 48 $ 13,029,918 100 $ 290,749 2 26,907 - - - - - 1,415,403 11 2,295 - 538,893 4 12 - 71,726 1 1,049,085 8 70,229 1 3,465,299 27 - - 1,525,637 12 133,154 1 31,422 - 27,891 - 1,718,104 13 5,183,403 40 3,022,423 23 24,460 - 50,687 1 3,097,570 24 1,616,549 12 749,459 6 - - 2,493,373 19 3,242,832 25 (97,331) (1) (13,105) - (110,436) (1) 7,846,515 60 7,846,515 60 $ 13,029,918 100		January 1, 2012
						Amount % $ 1,211,234 10 7,240 - 71,867 1 30,945 - 3,096,920 26 6,152 - 53,070 - 577 - 1,160,036 10 30,524 - 406 - - - 54,979 1 5,723,950 48 47,200 - - - 198,245 2 48,657 - 5,560,083 46 56,926 1 98,813 1 120,609 1 2,462 - 117,124 1 53,910 - 6,304,029 52 $ 12,027,979 100 $ 360,623 3 7,758 - 73,714 1 285 - 1,197,496 10 - - 631,465 5 - - 59,290 1 273,185 2 38,143 - 2,641,959 22 789,367 7 1,298,468 11 131,628 1 25,591 - 12,340 - 2,257,394 19 4,899,353 41 3,022,423 25 - - - - 3,022,423 25 1,356,078 11 644,438 5 - - 2,123,820 18 2,768,258 23 - - (18,133) - (18,133) - 7,128,626 59 7,128,626 59 $ 12,027,979 100

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

73 -

TXC CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (In Thousands of New Taiwan Dollars, Except Earnings Per Share)

SALES (Note 4) COST OF GOODS SOLD (Note 25) GROSS PROFIT OPERATING EXPENSES (Note 25) Selling and marketing expenses General and administrative expenses Research and development expenses Total operating expenses INCOME FROM OPERATIONS (Note 41) NON-OPERATING INCOME AND EXPENSES Other income (Notes 4 and 25) Other gains and losses (Note 25) Finance costs (Notes 4 and 25) Share of profits of associates and joint venture (Note 14) Total non-operating income and expenses INCOME BEFORE INCOME TAX INCOME TAX EXPENSE (Note 26) NET INCOME OTHER COMPREHENSIVE INCOME (LOSS) Exchange differences arising on translation of foreign operations Unrealized loss on available-for-sale financial assets Actuarial loss from defined benefit plans Income tax related to actuarial defined benefits Other comprehensive income (loss) for the period, net of income tax TOTAL COMPREHENSIVE INCOME FOR THE YEAR		For the Years Ended December 31	For the Years Ended December 31	For the Years Ended December 31
		2013 Amount % $ 9,503,583 100 (7,309,553) (77) 2,194,030 23 (441,526) (5) (371,708) (4) (429,642) (4) (1,242,876) (13) 951,154 10 91,970 1 51,025 1 (45,830) (1) 13,446 - 110,611 1 1,061,765 11 (126,604) (1) 935,161 10 172,667 2 13,105 - (10,164) - 3,432 - 179,040 2 $ 1,114,201 12		2012
				Amount % $ 10,928,495 100 (8,420,200) (77) 2,508,295 23 (448,520) (4) (378,749) (3) (422,614) (4) (1,249,883) (11) 1,258,412 12 93,865 1 (22,710) - (35,555) (1) 9,365 - 44,965 - 1,303,377 12 (153,843) (1) 1,149,534 11 (97,331) (1) 5,028 - (10,026) - - - (102,329) (1) $ 1,047,205 10

(Continued)

74 -

TXC CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (In Thousands of New Taiwan Dollars, Except Earnings Per Share)

EARNINGS PER SHARE Basic Diluted		For the Years Ended December 31	For the Years Ended December 31	For the Years Ended December 31
		2013 $ 3.02 $ 2.82		2012
				$ 3.79 $ 3.57

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

(Concluded)

75 -

TXC CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

(In Thousands of New Taiwan Dollars)

BALANCE, JANUARY 1, 2012 Appropriation of 2011 earnings Legal reserve Cash dividends distributed by subsidiaries Net income for the for the year ended December 31, 2012 Other comprehensive income for the for the year ended December 31, 2012, net of income tax Total comprehensive income for the for the year ended December 31, 2012 Convertible bonds converted to ordinary shares Share-based payment transaction BALANCE AT DECEMBER 31, 2012 Appropriation of 2012 earnings Legal reserve Special capital reserve Cash dividends distributed by subsidiaries Equity component of convertible bonds issued by the Company Net income for the year ended December 31, 2013 Other comprehensive income for the year ended December 31, 2013, net of income tax Total comprehensive income for the year ended December 31, 2013 Convertible bonds converted to ordinary shares Share-based payment transaction BALANCE AT DECEMBER 31, 2013	Equity Attributable to Shareholders of the Parent	Equity Attributable to Shareholders of the Parent	Others Unrealized Foreign Currency Gain (Loss) from Translation Reserve Available-for-sale Financial Assets $ - $ (18,133) - - - - - - (97,331) 5,028 (97,331) 5,028 - - - - (97,331) (13,105) - - - - - - - - - - 172,667 13,105 172,667 13,105 - - - - $ 75,336 $ -	Total Equity $ 7,128,626 - (664,934) 1,149,534 (102,329) 1,047,205 243,159 92,459 7,846,515 - - (681,465) 45,632 935,161 179,040 1,114,201 - - $ 8,324,883
	Advance Certificates on Common Stock Receipts for Common Stock Bond-to-stock Conversion Capital Surplus $ 3,022,423 $ - $ - $ 1,356,078 - - - - - - - - - - - - - - - - - - - - - - 50,687 192,472 - 24,460 - 67,999 3,022,423 24,460 50,687 1,616,549 - - - - - - - - - - - - - - - 45,632 - - - - - - - - - - - - 50,687 - (50,687) - 24,460 (24,460) - - $ 3,097,570 $ - $ - $ 1,662,181	Retained Earnings Legal Capital Reserve Special Capital Reserve Unappropriated Earnings $ 644,438 $ - $ 2,123,820 105,021 - (105,021) - - (664,934) - - 1,149,534 - - (10,026) - - 1,139,508 - - - - - - 749,459 - 2,493,373 114,889 - (114,889) - 222,793 (222,793) - - (681,465) - - - - - 935,161 - - (6,732) - - 928,429 - - - - - - $ 864,348 $ 222,793 $ 2,402,655

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

76 -

TXC CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In Thousands of New Taiwan Dollars)

CASH FLOWS FROM OPERATING ACTIVITIES Income before income tax Adjustments for: Bad debt expense (recovery gain) Depreciation expense Amortization expense Net (gain) loss on fair value change of financial liabilities at fair value through profit or loss Interest expense Share of profits of associates and joint venture Interest income Impairment loss of financial assets Impairment loss of property, plant and equipment Loss on valuation of inventories (Gain) loss on disposal of property, plant and equipment Dividend income Gain on disposal of investment Fire loss Changes in operating assets and liabilities: Notes receivable Accounts receivables Receivables from related parties Other receivables Other receivables from related parties Inventories Prepayments Other current assets Notes payable Notes payable to related parties Accounts payable Accounts payable to related parties Other payables Other payables to related parties Other current liabilities Accrued pension costs Cash generated from operations Interest paid Income taxes paid Net cash generated by operating activities		For the Years Ended December 31	For the Years Ended December 31
		2013 $ 1,061,765 706 886,327 43,714 (2,714) 45,830 (13,446) (13,887) 21,072 875 7,912 (1,264) (1,035) (6,368) - (3,304) 816,843 1,050 (10,168) (122) (176,930) 8,755 (30,632) - - (528,776) (2,118) 49,450 1,015 (23,261) (7,423) 2,123,866 (28,542) (104,602) 1,990,722	2012 $ 1,303,377 (2,945) 852,218 26,075 26,747 35,555 (9,365) (14,195) - 22,430 21,885 849 (3,954) (1,094) 625 13,725 (353,847) (4,283) 35,099 (5) (355,666) 13,462 (11,764) (73,714) (285) 217,907 2,295 (86,899) 12 32,086 (4,195) 1,682,136 (25,418) (100,674) 1,556,044

(Continued)

77 -

TXC CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In Thousands of New Taiwan Dollars)

CASH FLOWS FROM INVESTING ACTIVITIES Acquisition of net gain or loss arising on financial assets classified as held for trading recognized originally Disposal of net gain (loss) arising on financial assets classified as held for trading recognized originally Purchase of available-for-sale financial assets Disposal of available-for-sale financial assets Purchase of held-to-maturity financial assets Payments for property, plant and equipment Disposal of property, plant and equipment Increase in refundable deposits Increase in other financial assets Increase in other noncurrent assets Increase in prepayment for equipment Decrease in prepayment for equipment Increase in other prepayment Interest received Dividend received Net cash used in investing activities CASH FLOWS FROM INVESTING ACTIVITIES Increase in short-term loans Decrease in short-term loans Proceeds from issuance of convertible bonds Repayment of bonds Proceeds from long-term borrowings Repayments of long-term borrowings Guarantee deposits received Payments of cash dividend Proceeds from exercise of employee stock options Net cash used in financing activities EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR CASH AND CASH EQUIVALENTS, END OF YEAR		For the Years Ended December 31	For the Years Ended December 31
		2013 $ (2,924,571) 2,480,129 (179,665) 186,034 (47,840) (763,200) 58,575 (179) (24,443) (45,224) - 166,701 - 12,189 1,035 (1,080,459) 416,519 - 800,000 (556,100) 750,000 (1,393,471) 1,527 (681,465) - (662,990) 11,516 258,789 1,570,747 $ 1,829,536	2012 $ - (440) (37,797) 61,094 - (990,260) 27,943 (1,743) - (14,035) (58,106) - (18,963) 14,195 14,721 (1,003,391) - (69,874) - - 800,000 (353,010) 15,551 (664,934) 92,459 (179,808) (13,332) 359,513 1,211,234 $ 1,570,747

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

(Concluded)

78 -

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 2013 AND 2012 (In Thousands of New Taiwan Dollars, Unless Stated Otherwise)

TXC CORPORATION AND SUBSIDIARIES

1. ORGANIZATION AND OPERATIONS

TXC Corporation (TXC) was incorporated on December 28, 1983 under the Company Law and other related regulations of the Republic of China (ROC).

TXC specializes in five categories of products such as high quality Quartz Unite Crystal, Automotive Crystal, Crystal Oscillator (CXO) Surface Acoustic Wave (SAW) Filter, and Timing Module (TM), and provides complete solution in frequency devices and modules, and design service to fully satisfy various needs of the customers.

On August 26, 2002, TXC’s shares began to be traded on the Taiwan Stock Exchange.

The functional currency of the Company is New Taiwan dollars. The consolidated financial statements are presented in New Taiwan dollars.

In order to ensure investors’ rights and interests, the Company had applied to Taiwan Corporate Governance Association for corporate governance assessment certification. The Company has acquired (CG6005 general version of corporate governance assessment and authentication) and (CG6008 advanced version of corporate governance assessment and authentication), on March 23, 2011 and June 27, 2013, respectively. The Company will continue to strengthen corporate governance functions in order to work with international standards and to protect public interests.

2. THE AUTHORIZATION OF FINANCIAL STATEMENTS

The consolidated financial statements were reported to the Board of Directors and issued on March 24, 2014.

3. APPLICATION OF NEW AND REVISED INTERNATIONAL FINANCIAL REPORTING STANDARDS (IFRSs)

a. New, amended and revised standards, and interpretations in issue but not yet effective

The Company and entities controlled by the Company (the “Group”) have not applied the following International Financial Reporting Standards (IFRS), International Accounting Standards (IAS), Interpretations of IFRS (IFRIC), and Interpretations of IAS (SIC) issued by the IASB. On January 28, 2014, the Financial Supervisory Commission (FSC) announced the framework for the adoption of updated IFRSs version in the ROC. Under this framework, starting January 1, 2015, the previous version of IFRSs endorsed by the FSC (the 2010 IFRSs version) currently applied by companies with shares listed on the Taiwan Stock Exchange or traded on the Taiwan GreTai Securities Market or Emerging Stock Market will be replaced by the updated IFRSs without IFRS 9 (the 2013 IFRSs version). However, as of the date that the consolidated financial statements were authorized for issue, the FSC has not endorsed the following new, amended and revised standards and interpretations issued by the IASB (the “New IFRSs”) included in the 2013 IFRSs version. Furthermore, the FSC has not announced the effective date for the following New IFRSs that are not included in the 2013 IFRSs version.

79 -

The New IFRSs Included in the
2013 IFRSs Version Not Yet Endorsed by the FSC
Improvements to IFRSs (2009) - amendment to IAS 39
Amendment to IAS 39 “Embedded Derivatives”
Improvements to IFRSs (2010)
Annual Improvements to IFRSs 2009-2011 Cycle
Amendment to IFRS 1 “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 7 “Disclosure - Offsetting Financial Assets and
Financial Liabilities”
Amendment to IFRS 7 “Disclosure - Transfer of Financial Assets”
IFRS 10 “Consolidated Financial Statements”
IFRS 11 “Joint Arrangements”
IFRS 12 “Disclosure of Interests in Other Entities”
Amendments to IFRS 10, IFRS 11 and IFRS 12 “Consolidated
Financial Statements, Joint Arrangements and Disclosure of
Interests in Other Entities: Transition Guidance”
Amendments to IFRS 10 and IFRS 12 and IAS 27 “Investment
Entities”
IFRS 13 “Fair Value Measurement”
Amendment to IAS 1 “Presentation of Other Comprehensive Income”
Amendment to IAS 12 “Deferred Tax: Recovery of Underlying
Assets”
IAS 19 (Revised 2011) “Employee Benefits”
IAS 27 (Revised 2011) “Separate Financial Statements”
IAS 28 (Revised 2011) “Investments in Associates and Joint
Ventures”
Amendment to IAS 32 “Offsetting Financial Assets and Financial
Liabilities”
IFRIC 20 “Stripping Costs in Production Phase of a Surface Mine”
The New IFRSs Not Included in the 2013 IFRSs Version
Annual Improvements to IFRSs 2010-2012 Cycle
Annual Improvements to IFRSs 2011-2013 Cycle
IFRS 9 “Financial Instruments”
Amendments to IFRS 9 and IFRS 7 “Mandatory Effective Date of
IFRS 9 and Transition Disclosures”
IFRS 14 “Regulatory Deferral Accounts”
Amendment to IAS 19 “Defined Benefit Plans: Employee
Contributions”
Amendment to IAS 36 “Impairment of Assets: Recoverable Amount
Disclosures for Non-financial Assets”
Amendment to IAS 39 “Novation of Derivatives and Continuation of
Hedge Accounting”
IFRIC 21 “Levies”

Effective Date
Announced by IASB (Note 1)

January 1, 2009 and January 1,
2010, as appropriate
Effective for annual periods
ending on or after June 30,
2009
July 1, 2010 and January 1,
2011, as appropriate
January 1, 2013
July 1, 2010
July 1, 2011
January 1, 2013
January 1, 2013
July 1, 2011
January 1, 2013
January 1, 2013
January 1, 2013
January 1, 2013
January 1, 2014
January 1, 2013
July 1, 2012
January 1, 2012
January 1, 2013
January 1, 2013
January 1, 2013
January 1, 2014
January 1, 2013
Effective Date
Announced by IASB (Note 1)

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

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Note 1: Unless stated otherwise, the above New IFRSs are effective for annual periods beginning on or after the respective effective dates.
Note 2: The amendment to IFRS 2 applies to share-based payment transactions for which the grant date is on or after July 1, 2014; the amendment to IFRS 3 applies to business combinations for which the acquisition date is on or after July 1, 2014; the amendment to IFRS 13 is effective immediately; the remaining amendments are effective for annual periods beginning on or after July 1, 2014.
Note 3: IASB tentatively decided that an entity should apply IFRS 9 for annual periods beginning on or after January 1, 2018.
b. Significant impending changes in accounting policy resulted from new, amended and revised standards and interpretations in issue but not yet effective

Except for the following, the initial application of the above new, amended and revised standards and interpretations have not had any material impact on the Group’s accounting policies:

1) IFRS 9 “Financial Instruments”

Recognition and measurement of financial assets

With regards to financial assets, all recognized financial assets that are within the scope of IAS 39 “Financial Instruments: Recognition and Measurement” to be subsequently measured at amortized cost or fair value. Specifically, financial assets that are held within a business model whose objective is to collect the contractual cash flows, and that have contractual cash flows that are solely payments of principal and interest on the principal outstanding are generally measured at amortized cost at the end of subsequent accounting periods. All other financial assets are measured at their fair values at the balance sheet date. However, the Group may make an irrevocable election to present subsequent changes in the fair value of an equity investment (that is not held for trading) in other comprehensive income, with only dividend income generally recognized in profit or loss.

Recognition and measurement of financial liabilities

As for financial liabilities, the main changes in the classification and measurement relate to the subsequent measurement of financial liabilities designated as at fair value through profit or loss. The amount of change in the fair value of such financial liability attributable to changes in the credit risk of that liability, is presented in other comprehensive income and the remaining amount of change in the fair value of that liability is presented in profit or loss, unless the recognition of the effects of changes in the liability's credit risk in other comprehensive income would create or enlarge an accounting mismatch in profit or loss. Changes in fair value attributable to a financial liability's credit risk are not subsequently reclassified to profit or loss. If the above accounting treatment would create or enlarge an accounting mismatch in profit or loss, the Group presents all gains or losses on that liability in profit or loss.

Hedge accounting

The main changes in hedge accounting amended the application requirements for hedge accounting to better reflect the entity’s risk management activities. Compared with IAS 39, the main changes include: (1) enhancing types of transactions eligible for hedge accounting, specifically broadening the risk eligible for hedge accounting of non-financial items; (2) changing the way hedging derivative instruments are accounted for to reduce profit or loss volatility; and (3) replacing retrospective effectiveness assessment with the principle of economic relationship between the hedging instrument and the hedged item.

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Effective date

The mandatory effective date of IFRS 9, which was previously set at January 1, 2015, was removed and will be reconsidered once the standard is complete with a new impairment model and finalization of any limited amendments to classification and measurement.

2) IFRS 13 “Fair Value Measurement”

IFRS 13 establishes a single source of guidance for fair value measurements. It defines fair value, establishes a framework for measuring fair value, and requires disclosures about fair value measurements. The disclosure requirements in IFRS 13 are more extensive than those required in the current standards. For example, quantitative and qualitative disclosures based on the three-level fair value hierarchy currently required for financial instruments only will be extended by IFRS 13 to cover all assets and liabilities within its scope.

3) Amendments to IAS 1 “Presentation of Items of Other Comprehensive Income”

The amendments to IAS 1 require items of other comprehensive income to be grouped into those that (1) will not be reclassified subsequently to profit or loss; and (2) will be reclassified subsequently to profit or loss when specific conditions are met. Income taxes on related items of other comprehensive income are grouped on the same basis. Previously, there were no such requirements.

4) New issued IFRIC 21 “Levies”

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

5) Annual Improvements to IFRSs: 2010-2012 Cycle

Several standards including IFRS 2 “Share-based Payment”, IFRS 3 “Business Combinations” and IFRS 8 “Operating Segments” were amended in this annual improvement.

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

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

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The amended IFRS 8 requires an entity to disclose the judgments made by management in applying the aggregation criteria to operating segments, including a description of the operating segments aggregated and the economic indicators assessed in determining whether the operating segments have ‘similar economic characteristics’. The amendment also clarifies that a reconciliation of the total of the reportable segments’ assets to the entity’s assets should only be provided if the segments’ assets are regularly provided to the chief operating decision-maker.

IFRS 13 was amended to clarify that the issuance of IFRS 13 did not remove the ability to measure short-term receivables and payables with no stated interest rate at their invoice amounts without discounting, if the effect of not discounting is immaterial.

IAS 24 was amended to clarify that a management entity providing key management personnel services to the Group is a related party of the Group. Consequently, the Group is required to disclose as related party transactions the amounts incurred for the service paid or payable to the management entity for the provision of key management personnel services. However, disclosure of the components of such compensation is not required.

6) Annual Improvements to IFRSs: 2011-2013 Cycle

Several standards including IFRS 3, IFRS 13 and IAS 40 “Investment Property” were amended in this annual improvement.

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

The scope in IFRS 13 of the portfolio exception for measuring the fair value of a group of financial assets and financial liabilities on a net basis was amended to clarify that it includes all contracts that are within the scope of, and accounted for in accordance with, IAS 39 or IFRS 9, even if those contracts do not meet the definitions of financial assets or financial liabilities within IAS 32.

IAS 40 was amended to clarify that IAS 40 and IFRS 3 are not mutually exclusive and application of both standards may be required to determine whether the investment property acquired is acquisition of an asset or a business combination.

c. Significant impending changes in accounting policy resulted from the amendments to the Regulations Governing the Preparation of Financial Reports by Securities Issuers in issue but not yet effective

On December 30, 2013, FSC announced the amendments to the Regulations Governing the Preparation of Financial Reports by Securities Issuers. One of the main amendments is to permit fair value model for subsequent measurement of investment properties. This amendment is effective for annual periods beginning on or after January 1, 2014.

The amendment requires that the fair value of an investment property be measured using the income approach, except for undeveloped lands in respect of which are measured using a Land Development Analysis. If the investment property is measured using the income approach, the cash flows are determined by reference to any existing lease, local rents, or market rents for similar comparable subjects, adjusted to exclude those extreme lease subjects, plus the present value of property value at the end of the analysis period, if any. The discount rate is determined by applying a risk premium approach, and is to be no less than the floating rate for the 2-year time savings deposits of Chunghwa Post Co., Ltd plus 0.75% and any asset-specific risk premium. The amendment requires disclosures in addition to those required by IAS 40, including significant lease terms, cash flows, discount rate, etc.

d. As of the date the consolidated financial statements were authorized for issue, the Group is continuingly assessing the possible impact that the application of the above New IFRSs will have on the Group's financial position and operating result, and will disclose the relevant impact when the assessment is complete.
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4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

On May 14, 2009, the FSC announced the “Framework for the Adoption of IFRSs by the Companies in the ROC.” In this framework, starting 2013, companies with shares listed on the Taiwan Stock Exchange or traded on the Taiwan GreTai Securities Market or Emerging Stock Market should prepare their consolidated financial statements in accordance with the Regulations Governing the Preparation of Financial Reports by Securities Issuers and the IFRS, IAS, IFRIC and SIC (the “IFRSs”) endorsed by the FSC. The Group’s consolidated financial statements for the years ended December 31, 2013 is its first IFRS consolidated financial statements. The date of transition to IFRSs was January 1, 2012. Refer to Note 39 for the impact of IFRS conversion on the Group’s consolidated financial statements.

Statement of Compliance

The consolidated financial statements have been prepared in accordance with the Regulations Governing the Preparation of Financial Reports by Securities Issuers, or other regulations and IFRSs as endorsed by the FSC.

Basis of Consolidation

The consolidated financial statements have been prepared on the historical cost basis except for financial instruments that are measured at fair values. Historical cost is generally based on the fair value of the consideration given in exchange for assets.

The opening consolidated balance sheets as of the date of transition to IFRSs were prepared in accordance with IFRS 1 “First-time Adoption of International Financial Reporting Standards”. The applicable IFRSs have been applied retrospectively by the Group except for some aspects where IFRS 1 prohibits retrospective application or grants optional exemptions to this general principle. For the exemptions that the Group elected, refer to Note 39.

Classification of Current and Non-current Assets and Liabilities

Current assets include:

a. Assets held primarily for the purpose of trading;
b. Assets expected to be realized within twelve months after the reporting period; and
c. Cash and cash equivalents unless the asset is restricted from being exchanged or used to settle a liability for at least twelve months after the reporting period.

Current liabilities include:

a. Liabilities held primarily for the purpose of trading;
b. Liabilities due to be settled within twelve months after the reporting period, even if an agreement to refinance, or to reschedule payments, on a long-term basis is completed after the reporting period and before the consolidated financial statements are authorized for issue; and
c. Liabilities for which the Group does not have an unconditional right to defer settlement for at least twelve months after the reporting period. Terms of a liability that could, at the option of the counterparty, result in its settlement by the issue of equity instruments do not affect its classification.

Assets and liabilities that are not classified as current are classified as non-current.

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The Group engages in the construction business, which has an operating cycle of over one year, the normal operating cycle applies when considering the classification of the Group’s construction-related assets and liabilities.

Basis of Consolidation

a. Principles for preparing consolidated financial statements

The consolidated financial statements incorporate the financial statements of the Company and the entities controlled by the Company (i.e. its subsidiaries, including special purpose entities).

Income and expenses of subsidiaries acquired or disposed of during the period are included in the consolidated statement of profit or loss and other comprehensive income from the effective date of acquisition up to the effective date of disposal, as appropriate.

When necessary, adjustments are made to the financial statements of subsidiaries to bring their accounting policies into line with those used by the Company.

All intra-group transactions, balances, income and expenses are eliminated in full upon consolidation.

Changes in the Group’s ownership interests in existing subsidiaries

Changes in the Group’s ownership interests in subsidiaries that do not result in the Group losing control over the subsidiaries are accounted for as equity transactions. The carrying amounts of the Group’s interests and the non-controlling interests are adjusted to reflect the changes in their relative interests in the subsidiaries. Any difference between the amount by which the non-controlling interests are adjusted and the fair value of the consideration paid or received is recognized directly in equity and attributed to the owners of the Company.

When the Group loses control of a subsidiary, a gain or loss is recognized in profit or loss and is calculated as the difference between (i) the aggregate of the fair value of the consideration received and any investment retained in the former subsidiary at its fair value at the date when control is lost and (ii) the assets (including any goodwill) and liabilities and any non-controlling interests of the former subsidiary at their carrying amounts at the date when control is lost. The Group accounts for all amounts recognized in other comprehensive income in relation to that subsidiary on the same basis as would be required if the Group had directly disposed of the related assets or liabilities.

The fair value of any investment retained in the former subsidiary at the date when control is lost is regarded as the fair value on initial recognition for subsequent accounting under IAS 39 “Financial Instruments: Recognition and Measurement” or, when applicable, the cost on initial recognition of an investment in an associate or a jointly controlled entity.

b. The subsidiaries in the consolidated financial statements

The detail information of the subsidiaries at the end of reporting period was as follows:

Investor Investee Business Nature TXC Corporation Taiwan Crystal Technology International Limited (TCTI) Investment holding TXC Technology, Inc. Marketing activities TXC Japan Corporation Marketing activities Taiwan Crystal Technology (HK) Limited (TCT-HK) Investment holding Taiwan Crystal Technology Growing Profits Trading Ltd. (GPT) International trading International Limited TXC (Ningbo) Corporation (NGB) Manufacture and sales of electronic products TXC (Ningbo) Corporation TXC (HK) Limited (TXC HK) International trading	Percentage of Ownersh December 31, 2013 December 31, 2012 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 - 100.00	ip at January 1, 2012 Note 100.00 1), 12) 100.00 2), 12) 100.00 3), 12) 100.00 7), 12) 100.00 4), 12) 100.00 5), 12) 100.00 6), 12)

(Continued)

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Investor Investee Business Nature TXC (Chongqing) Corporation (Chongqing) Manufacture and sales of electronic products Chongqing All Sun Company Limited (Chongqing All sun) Marketing activities Ningbo Jingyu Company Limited (Ningbo Jingyu) Purchasing and selling electronic component Taiwan Crystal Technology (HK) Limited TXC (Chongqing) Corporation (Chongqing) Manufacture and sales of electronic products TXC Europe SRL Marketing activities	Percentage of Ownersh December 31, 2013 December 31, 2012 56.73 40.00 100.00 100.00 100.00 100.00 43.27 60.00 - 100.00	ip at January 1, 2012 Note 30.00 8), 12) 100.00 9), 12) 100.00 10), 12) 70.00 8), 12) 100.00 11), 12) (Concluded)

1) Taiwan Crystal Technology International Limited was incorporated on December 23, 1998 in Samoa.
2) TXC Technology, Inc. was incorporated on December 1, 2000 in California, U.S.A.
3) TXC Japan Corporation was incorporated on September 13, 2005 in Yokohama, Japan.
4) Growing Profits Limited was incorporated on March 9, 1999 in the British Virgin Islands.
5) TXC (Ningbo) Corporation was incorporated on March 12, 1999 in Ningbo, China.
6) TXC (HK) Limited was incorporated on March 31, 2008 in Hong Kong Special Administrative Region, China.
7) Taiwan Crystal Technology (HK) Limited was incorporated on July 16, 2010 in Hong Kong Special Administrative Region, China.
8) TXC (Chongqing) Corporation was incorporated on October 11, 2010 in Chongqing, China.
9) Chongqing All Sun Corporation was incorporated on February 10, 2011 in Chongqing, China.
10) Ningbo Jingyu Company Limited was incorporated on September 7, 2011 in Ningbo, China.
11) TXC Europe SRL was incorporated on November 14, 2011 in Europe and applied for cancellation of registration in 2012. It has received the approval from the government in 2013.
12) Company 1 are immaterial subsidiaries, their financial statements have been audited.

Foreign Currencies

In preparing the financial statements of each individual group entity, transactions in currencies other than the entity’s functional currency (foreign currencies) are recognized at the rates of exchange prevailing at the dates of the transactions.

At the end of each reporting period, monetary items denominated in foreign currencies are retranslated at the rates prevailing at that date. Exchange differences on monetary items arising from settlement or translation are recognized in profit or loss in the period.

Non-monetary items measured at fair value that are denominated in foreign currencies are retranslated at the rates prevailing at the date when the fair value was determined. Exchange differences arising on the retranslation of non-monetary items are included in profit or loss for the period except for exchange differences arising from the retranslation of non-monetary items in respect of which gains and losses are recognized directly in other comprehensive income, in which case, the exchange differences are also recognized directly in other comprehensive income.

Non-monetary items that are measured at historical cost in a foreign currency are not retranslated.

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For the purposes of presenting consolidated financial statements, the assets and liabilities of the Group’s foreign operations (including of the subsidiaries, associates, joint ventures or branches operations in other countries or currencies used different with the Company) are translated into New Taiwan dollars using exchange rates prevailing at the end of each reporting period. Income and expense items are translated at the average exchange rates for the period. Exchange differences arising are recognized in other comprehensive income (attributed to the owners of the Company and non-controlling interests as appropriate).

On the disposal of a foreign operation (i.e. a disposal of the Company’s entire interest in a foreign operation, or a disposal involving loss of control over a subsidiary that includes a foreign operation, a disposal involving loss of joint control over a jointly controlled entity that includes a foreign operation, or a disposal involving loss of significant influence over an associate that includes a foreign operation), all of the exchange differences accumulated in equity in respect of that operation attributable to the owners of the Company are reclassified to profit or loss.

In relation to a partial disposal of a subsidiary that does not result in the Company losing control over the subsidiary, the proportionate share of accumulated exchange differences is re-attributed to non-controlling interests of the subsidiary and is not recognized in profit or loss. For all other partial disposals, the proportionate share of the accumulated exchange differences recognized in other comprehensive income is reclassified to profit or loss.

Inventories

Inventories consist of raw materials, supplies, finished goods and work-in-process and are stated at the lower of cost or net realizable value. Inventory write-downs are made by item, except where it may be appropriate to group similar or related items. Net realizable value is the estimated selling price of inventories less all estimated costs of completion and costs necessary to make the sale. Inventories are recorded at weighted-average cost on the balance sheet date.

Investment in Associates

An associate is an entity over which the Group has significant influence and that is neither a subsidiary nor an interest in a joint venture.

The results and assets and liabilities of associates are incorporated in these consolidated financial statements using the equity method of accounting. Under the equity method, an investment in an associate is initially recognized at cost and adjusted thereafter to recognize the Group’s share of the profit or loss and other comprehensive income of the associate. The Group also recognizes the changes in the Group’s share of equity of associates attributable to the Group.

When the Group subscribes for additional new shares of the associate at a percentage different from its existing ownership percentage, the resulting carrying amount of the investment differs from the amount of the Group’s proportionate interest in the associate. The Group records such a difference as an adjustment to investments with the corresponding amount charged or credited to capital surplus. If the Group’s ownership interest is reduced due to the additional subscription of the new shares of associate, the proportionate amount of the gains or losses previously recognized in other comprehensive income in relation to that associate is reclassified to profit or loss on the same basis as would be required if the investee had directly disposed of the related assets or liabilities. When the adjustment should be debited to capital surplus, but the capital surplus recognized from investments accounted for by the equity method is insufficient, the shortage is debited to retained earnings.

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When the Group’s share of losses of an associate equals or exceeds its interest in that associate (which includes any carrying amount of the investment accounted for by the equity method and long-term interests that, in substance, form part of the Group’s net investment in the associate), the Group discontinues recognizing its share of further losses. Additional losses and liabilities are recognized only to the extent that the Group has incurred legal obligations, or constructive obligations, or made payments on behalf of that associate.

Any excess of the cost of acquisition over the Group’s share of the net fair value of the identifiable assets and liabilities of an associate recognized at the date of acquisition is recognized as goodwill, which is included within the carrying amount of the investment and is not amortized. Any excess of the Group’s share of the net fair value of the identifiable assets and liabilities over the cost of acquisition, after reassessment, is recognized immediately in profit or loss.

The entire carrying amount of the investment (including goodwill) is tested for impairment as a single asset by comparing its recoverable amount with its carrying amount. Any impairment loss recognized forms part of the carrying amount of the investment. Any reversal of that impairment loss is recognized to the extent that the recoverable amount of the investment subsequently increases.

The Group discontinues the use of the equity method from the date on which it ceases to have significant influence. Any retained investment is measured at fair value at that date and the fair value is regarded as its fair value on initial recognition as a financial asset. The difference between the previous carrying amount of the associate attributable to the retained interest and its fair value is included in the determination of the gain or loss on disposal of the associate. The Group accounts for all amounts previously recognized in other comprehensive income in relation to that associate on the same basis as would be required if that associate had directly disposed of the related assets or liabilities.

When a group entity transacts with its associate, profits and losses resulting from the transactions with the associate are recognized in the Group’ consolidated financial statements only to the extent of interests in the associate that are not related to the Group.

Property, Plant and Equipment

Property, plant and equipment are stated at cost, less subsequent accumulated depreciation and subsequent accumulated impairment loss.

Properties in the course of construction for production, supply or administrative purposes are carried at cost, less any recognized impairment loss. Cost includes professional fees and borrowing costs eligible for capitalization. Such properties are depreciated and classified to the appropriate categories of property, plant and equipment when completed and ready for intended use.

Freehold land is not depreciated.

Depreciation is recognized using the straight-line method. Each significant part is depreciated separately. The estimated useful lives, residual values and depreciation method are reviewed at the end of each reporting period, with the effect of any changes in estimate accounted for on a prospective basis.

Assets held under finance leases are depreciated over their expected useful lives on the same basis as owned assets. Assets are depreciated over the shorter of the lease term and their useful lives using the straight-line method.

Any gain or loss arising on the disposal or retirement of an item of property, plant and equipment is determined as the difference between the sales proceeds and the carrying amount of the asset and is recognized in profit or loss.

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Investment Properties

Investment properties are properties held to earn rentals and/or for capital appreciation (including property under construction for such purposes). Investment properties also include land held for a currently undetermined future use.

Investment properties are measured initially at cost, including transaction costs. Subsequent to initial recognition, investment properties are measured at cost less accumulated depreciation and accumulated impairment loss. Depreciation is recognized using the straight-line method.

Investment properties under construction are stated at cost less accumulated depreciation and accumulated impairment loss. Cost includes professional fees and, borrowing costs eligible for capitalization. Depreciation of these assets commences when the assets are ready for their intended use.

Any gain or loss arising on derecognition of the property is calculated as the difference between the net disposal proceeds and the carrying amount of the asset and is included in profit or loss in the period in which the property is derecognized.

Impairment of Tangible and Intangible Assets Other Than Goodwill

At the end of each reporting period, the Company reviews the carrying amounts of its tangible and intangible assets, excluding goodwill, to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss. When it is not possible to estimate the recoverable amount of an individual asset, the Company estimates the recoverable amount of the cash-generating unit to which the asset belongs. Corporate assets are allocated to the individual cash-generating units on a reasonable and consistent basis of allocation.

Intangible assets with indefinite useful lives and intangible assets not yet available for use are tested for impairment at least annually, and whenever there is an indication that the asset may be impaired.

Recoverable amount is the higher of fair value less costs to sell and value in use. If the recoverable amount of an asset or cash-generating unit is estimated to be less than its carrying amount, the carrying amount of the asset or cash-generating unit is reduced to its recoverable amount.

When an impairment loss is subsequently reversed, the carrying amount of the asset or cash-generating unit is increased to the revised estimate of its recoverable amount, but only to the extent of the carrying amount that would have been determined had no impairment loss been recognized for the asset or cash-generating unit in prior years. A reversal of an impairment loss is recognized in profit or loss.

Financial Instruments

Financial assets and financial liabilities are recognized when a group entity becomes a party to the contractual provisions of the instruments.

Financial assets and financial liabilities are initially measured at fair value. Transaction costs that are directly attributable to the acquisition or issue of financial assets and financial liabilities (other than financial assets and financial liabilities at fair value through profit or loss) are added to or deducted from the fair value of the financial assets or financial liabilities, as appropriate, on initial recognition. Transaction costs directly attributable to the acquisition of financial assets or financial liabilities at fair value through profit or loss are recognized immediately in profit or loss.

a. Financial assets

All regular way purchases or sales of financial assets are recognized and derecognized on a trade date basis/settlement date basis.

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1) Measurement category

Financial assets are classified into the following categories: Financial assets at fair value through profit or loss, held-to-maturity investments, available-for-sale financial assets, and loans and receivables.

a) Financial assets at fair value through profit or loss

Financial assets are classified as at fair value through profit or loss when the financial asset is either held for trading or it is designated as at fair value through profit or loss.

Financial assets at fair value through profit or loss are stated at fair value, with any gains or losses arising on remeasurement recognized in profit or loss. The net gain or loss recognized in profit or loss incorporates any dividend or interest earned on the financial asset.

Investments in equity instruments under financial assets at fair value through profit or loss that do not have a quoted market price in an active market and whose fair value cannot be reliably measured and derivatives that are linked to and must be settled by delivery of such unquoted equity instruments are subsequently measured at cost less any identified impairment loss at the end of each reporting period and are presented in a separate line item as financial assets carried at cost. If, in a subsequent period, the fair value of the financial assets can be reliably measured, the financial assets are remeasured at fair value. The difference between the carrying amount and the fair value is recognized in profit or loss.

b) Held-to-maturity investments

Commercial paper, corporate bonds, and foreign government bonds, which are above specific credit ratings and the Company has positive intent and ability to hold to maturity, are classified as held-to-maturity investments.

Subsequent to initial recognition, held-to-maturity investments are measured at amortized cost using the effective interest method less any impairment.

c) Available-for-sale financial assets

Available-for-sale financial assets are non-derivatives that are either designated as available-for-sale or are not classified as loans and receivables, held-to-maturity investments or financial assets at fair value through profit or loss.

Available-for-sale financial assets are measured at fair value. Changes in the carrying amount of available-for-sale monetary financial assets relating to changes in foreign currency exchange rates, interest income calculated using the effective interest method and dividends on available-for-sale equity investments are recognized in profit or loss. Other changes in the carrying amount of available-for-sale financial assets are recognized in other comprehensive income and will be reclassified to profit or loss when the investment is disposed of or is determined to be impaired.

Dividends on available-for-sale equity instruments are recognized in profit or loss when the Company’s right to receive the dividends is established.

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Available-for-sale equity investments that do not have a quoted market price in an active market and whose fair value cannot be reliably measured and derivatives that are linked to and must be settled by delivery of such unquoted equity investments are measured at cost less any identified impairment loss at the end of each reporting period and are presented in a separate line item as financial assets carried at cost. If, in a subsequent period, the fair value of the financial assets can be reliably measured, the financial assets are remeasured at fair value. The difference between carrying amount and fair value is recognized in profit or loss or other comprehensive income on financial assets. Any impairment losses are recognized in profit and loss.

d) Loans and receivables

Loans and receivables (including trade receivables, cash and cash equivalent, debt investments with no active market, and other receivables are measured at amortized cost using the effective interest method, less any impairment, except for short-term receivables when the effect of discounting is immaterial.

Cash equivalent includes time deposits and investments with original maturities within three months from the date of acquisition, highly liquid, readily convertible to a known amount of cash and be subject to an insignificant risk of changes in value. These cash equivalents are held for the purpose of meeting short-term cash commitments.

2) Impairment of financial assets

Financial assets, other than those at fair value through profit or loss, are assessed for indicators of impairment at the end of each reporting period. Financial assets are considered to be impaired when there is objective evidence that, as a result of one or more events that occurred after the initial recognition of the financial asset, the estimated future cash flows of the investment have been affected.

For financial assets carried at amortized cost, such as trade receivables and other receivables, assets are assessed for impairment on a collective basis even if they were assessed not to be impaired individually. Objective evidence of impairment for a portfolio of receivables could include the Company’s past experience of collecting payments, an increase in the number of delayed payments in the portfolio past the average credit period of 60 days, as well as observable changes in national or local economic conditions that correlate with default on receivables, and other situation.

For financial assets carried at amortized cost, the amount of the impairment loss recognized is the difference between the asset’s carrying amount and the present value of estimated future cash flows, discounted at the financial asset’s original effective interest rate.

For financial assets measured at amortized cost, if, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognized, the previously recognized impairment loss is reversed through profit or loss to the extent that the carrying amount of the investment at the date the impairment is reversed does not exceed what the amortized cost would have been had the impairment not been recognized.

For available-for-sale equity investments, a significant or prolonged decline in the fair value of the security below its cost is considered to be objective evidence of impairment.

For all other financial assets, objective evidence of impairment could include significant financial difficulty of the issuer or counterparty, breach of contract, such as a default or delinquency in interest or principal payments, it becoming probable that the borrower will enter bankruptcy or financial re-organization, or the disappearance of an active market for that financial asset because of financial difficulties.

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When an available-for-sale financial asset is considered to be impaired, cumulative gains or losses previously recognized in other comprehensive income are reclassified to profit or loss in the period.

In respect of available-for-sale equity securities, impairment loss previously recognized in profit or loss are not reversed through profit or loss. Any increase in fair value subsequent to an impairment loss is recognized in other comprehensive income. In respect of available-for-sale debt securities, the impairment loss is subsequently reversed through profit or loss if an increase in the fair value of the investment can be objectively related to an event occurring after the recognition of the impairment loss.

For financial assets that are carried at cost, the amount of the impairment loss is measured as the difference between the asset’s carrying amount and the present value of the estimated future cash flows discounted at the current market rate of return for a similar financial asset. Such impairment loss will not be reversed in subsequent periods.

The carrying amount of the financial asset is reduced by the impairment loss directly for all financial assets with the exception of trade receivables and other receivables, where the carrying amount is reduced through the use of an allowance account. When a trade receivable and other receivables are considered uncollectible, it is written off against the allowance account. Subsequent recoveries of amounts previously written off are credited against the allowance account. Changes in the carrying amount of the allowance account are recognized in profit or loss except for uncollectible trade receivables and other receivables that are written off against the allowance account.

3) Derecognition of financial assets

The Company derecognizes a financial asset only when the contractual rights to the cash flows from the asset expire, or when it transfers the financial asset and substantially all the risks and rewards of ownership of the asset to another party.

If the Company neither transfers nor retains substantially all the risks and rewards of ownership and continues to control the transferred asset, the Company recognizes its retained interest in the asset and an associated liability for amounts it may have to pay. If the Company retains substantially all the risks and rewards of ownership of a transferred financial asset, the Company continues to recognize the financial asset and also recognizes a collateralized borrowing for the proceeds received.

On derecognition of a financial asset in its entirety, the difference between the asset’s carrying amount and the sum of the consideration received and receivable and the cumulative gain or loss that had been recognized in other comprehensive income is recognized in profit or loss.

On derecognition of a financial asset other than in its entirety, the Company allocates the previous carrying amount of the financial asset between the part it continues to recognize and the part it no longer recognizes on the basis of the relative fair values of those parts on the date of the transfer. The difference between the carrying amount allocated to the part that is no longer recognized and the sum of the consideration received for the part no longer recognized and any cumulative gain or loss allocated to it that had been recognized in other comprehensive income is recognized in profit or loss. A cumulative gain or loss that had been recognized in other comprehensive income is allocated between the part that continues to be recognized and the part that is no longer recognized on the basis of the relative fair values of those parts.

b. Equity instruments

Debt and equity instruments issued by the Company are classified as either financial liabilities or as equity in accordance with the substance of the contractual arrangements and the definitions of a financial liability and an equity instrument.

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Equity instruments issued by the Company are recognized at the proceeds received, net of direct issue costs.

Repurchase of the Company’s own equity instruments is recognized in and deducted directly from equity. No gain or loss is recognized in profit or loss on the purchase, sale, issue or cancellation of the Company’s own equity instruments.

c. Financial liabilities

1) Subsequent measurement

Except the following situation, all the financial liabilities are measured at amortized cost using the effective interest method:

a) Financial liabilities at fair value through profit or loss

Financial liabilities are classified as at fair value through profit or loss when the financial liability is either held for trading or it is designated as at fair value through profit or loss.

Financial liabilities at fair value through profit or loss are stated at fair value, with any gains or losses arising on remeasurement recognized in profit or loss. The net gain or loss recognized in profit or loss incorporates any interest or dividend paid on the financial liability. Fair value is determined in the manner described in Note 30.

Financial liabilities at fair value through profit or loss that are obligations to deliver unquoted equity instruments borrowed by a short seller whose fair value cannot be reliably measured and derivatives that are linked to and must be settled by delivery of such unquoted equity instruments are subsequently measured at cost less any identified impairment loss at the end of each reporting period and are presented in a separate line item as financial liabilities carried at cost. If, in a subsequent period, the fair value of the financial liabilities can be reliably measured, the financial liabilities are remeasured at fair value. The difference between the carrying amount and the fair value is recognized in profit or loss.

b) Financial guarantee contracts

Financial guarantee contracts issued by the Company are initially measured at their fair values and, if not designated as at fair value through profit or loss, are subsequently measured at the higher of the best estimate of the obligation under the contract or the amount initially recognized less cumulative amortization recognized.

c) Commitments to provide a loan at a below-market interest rate

Commitments to provide a loan at a below-market interest rate issued by the Company are initially measured at fair value and, if not designated as at fair value through profit or loss, are subsequently measured at the higher of the best estimate of the obligation under the contract or the amount initially recognized less cumulative amortization recognized.

2) Derecognition of financial liabilities

The difference between the carrying amount of the financial liability derecognized and the consideration paid, including any non-cash assets transferred or liabilities assumed, is recognized in profit or loss.

93 -

d. Convertible bonds

The component parts of compound instruments (convertible bonds) issued by the Group are classified separately as financial liabilities and equity in accordance with the substance of the contractual arrangements and the definitions of a financial liability and an equity instrument.

On initial recognition, the fair value of the liability component is estimated using the prevailing market interest rate for similar non-convertible instruments. This amount is recorded as a liability on an amortized cost basis using the effective interest method until extinguished upon conversion or the instrument’s maturity date. Any embedded derivative liability is measured at fair value.

The conversion option classified as equity is determined by deducting the amount of the liability component from the fair value of the compound instrument as a whole. This is recognized and included in equity, net of income tax effects, and is not subsequently remeasured. In addition, the conversion option classified as equity will remain in equity until the conversion option is exercised, in which case, the balance recognized in equity will be transferred to capital surplus - share premium. When the conversion option remains unexercised at maturity, the balance recognized in equity will be transferred to capital surplus - share premium.

Transaction costs that relate to the issue of the convertible notes are allocated to the liability and equity components in proportion to the allocation of the gross proceeds. Transaction costs relating to the equity component are recognized directly in equity. Transaction costs relating to the liability component are included in the carrying amount of the liability component.

Convertible bonds issued by the Group that contain both liability and conversion option components are classified separately into respective items on initial recognition. The conversion option that will be settled other than by the exchange of a fixed amount of cash or other financial asset for a fixed number of the Company’s own equity instruments is classified as a conversion option derivative. At the date of issue, both the liability and conversion option components are recognized at fair value.

In subsequent periods, the liability component of the convertible bonds is measured at amortized cost using the effective interest method. The conversion option derivative is measured at fair value and the changes in fair value are recognized in profit or loss.

Transaction costs that relate to the issue of the convertible notes are allocated to the liability and equity components in proportion to their relative fair values. Transaction costs relating to the conversion option derivative are recognized immediately in profit or loss. Transaction costs relating to the liability component are included in the carrying amount of the liability component.

e. Derivative financial instruments

The Company enters into derivative financial instruments, including foreign exchange forward contracts, to manage its exposure to interest rate and foreign exchange rate risks, including.

Derivatives are initially recognized at fair value at the date the derivative contracts are entered into and are subsequently remeasured to their fair value at the end of each reporting period. The resulting gain or loss is recognized in profit or loss immediately unless the derivative is designated and effective as a hedging instrument, in which event the timing of the recognition in profit or loss depends on the nature of the hedge relationship. When the fair value of derivative financial instruments is positive, the derivative is recognized as a financial asset; when the fair value of derivative financial instruments is negative, the derivative is recognized as a financial liability.

Derivatives embedded in non-derivative host contracts are treated as separate derivatives when they meet the definition of a derivative, their risks and characteristics are not closely related to those of the host contracts and the contracts are not measured at fair value through profit or loss.

94 -

Revenue Recognition

Revenue is measured at the fair value of the consideration received or receivable. Revenue is reduced for estimated customer returns, rebates and other similar allowances. Sales returns are recognized at the time of sale provided the seller can reliably estimate future returns and recognizes a liability for returns based on previous experience and other relevant factors.

a. Sale of goods

Revenue from the sale of goods is recognized when the goods are delivered and titles have passed, at which time all the following conditions are satisfied:

1) The Group has transferred to the buyer the significant risks and rewards of ownership of the goods;
2) The Group retains neither continuing managerial involvement to the degree usually associated with ownership nor effective control over the goods sold;
3) The amount of revenue can be measured reliably;
4) It is probable that the economic benefits associated with the transaction will flow to the Group; and
5) The costs incurred or to be incurred in respect of the transaction can be measured reliably.

The Group does not recognize sales revenue on materials delivered to subcontractors because this delivery does not involve a transfer of risks and rewards of materials ownership.

Income from properties developed for sale is recognized when construction is complete, rewards of ownership of the properties are transferred to buyers, and collectability of the related receivables is reasonably assured. Deposits received from sales of properties and installment payments are carried in the consolidated balance sheets under current liabilities.

Sales of goods that result in award credits for customers, under the Group’s award scheme, are accounted for as multiple element revenue transactions and the fair value of the consideration received or receivable is allocated between the goods supplied and the award credits granted. The consideration allocated to the award credits is measured by reference to their fair value, the amount for which the award credits could be sold separately. Such consideration is not recognized as revenue at the time of the initial sale transaction but is deferred and recognized as revenue when the award credits are redeemed and the Group’s obligations have been fulfilled.

b. Dividend and interest income

Dividend income from investments is recognized when the shareholder’s right to receive payment has been established provided that it is probable that the economic benefits will flow to the Group and the amount of income can be measured reliably.

Interest income from a financial asset is recognized when it is probable that the economic benefits will flow to the Group and the amount of income can be measured reliably. Interest income is accrued on a time basis, by reference to the principal outstanding and at the effective interest rate applicable.

Leasing

Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards of ownership to the lessee. All other leases are classified as operating leases.

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a. The Group as lessor

Amounts due from lessees under finance leases are recognized as receivables at the amount of the Group’s net investment in the leases. Finance lease income is allocated to accounting periods so as to reflect a constant periodic rate of return on the Group’s net investment outstanding in respect of the leases.

Rental income from operating leases is recognized on a straight-line basis over the term of the relevant lease unless another systematic basis is representative of the time pattern of the lessee’s benefit from the use of the leased asset. Initial direct costs incurred in negotiating and arranging an operating lease are added to the carrying amount of the leased asset and amortized on a straight-line basis over the lease term. Contingent rents arising under operating leases are recognized as income in the period in which they are incurred.

Lease incentives included in the operating lease are recognized as an asset. The aggregate cost of incentives is recognized as a reduction of rental income on a straight-line basis over the lease term unless another systematic basis is more representative of the time pattern over which the benefit of the leased asset is diminished.

b. The Group as lessee

Assets held under finance leases are initially recognized as assets of the Group at their fair value at the inception of the lease or, if lower, at the present value of the minimum lease payments. The corresponding liability to the lessor is included in the consolidated balance sheets as a finance lease obligation.

Minimum lease payments are apportioned between finance expenses and reduction of the lease obligation so as to achieve a constant rate of interest on the remaining balance of the liability. Finance expenses are recognized immediately in profit or loss, unless they are directly attributable to qualifying assets, in which case they are capitalized in accordance with the Group’s general policy on borrowing costs. Contingent rents are recognized as expenses in the periods in which they are incurred.

Operating lease payments are recognized as an expense on a straight-line basis over the lease term, except where another systematic basis is more representative of the time pattern in which economic benefits from the leased asset are consumed. Contingent rents arising under operating leases are recognized as an expense in the period in which they are incurred.

In the event that lease incentives are received to enter into operating leases, such incentives are recognized as a liability. The aggregate benefit of incentives is recognized as a reduction of rental expense on a straight-line basis, except where another systematic basis is more representative of the time pattern in which economic benefits from the leased asset are consumed.

When the Group sales and leasebacks a property, the excess of sales proceeds over the carrying amount resulted from the sale of the property is deferred and amortized over the lease term regardless of operating lease or finance lease. For indefinite lease term, the excess is amortized over 10 years.

Borrowing Costs

Borrowing costs directly attributable to the acquisition, construction or production of qualifying assets are added to the cost of those assets, until such time as the assets are substantially ready for their intended use or sale.

Investment income earned on the temporary investment of specific borrowings pending their expenditure on qualifying assets is deducted from the borrowing costs eligible for capitalization.

96 -

Other than stated above, all other borrowing costs are recognized in profit or loss in the period in which they are incurred.

Government Grants

Government grants are not recognized until there is reasonable assurance that the Group will comply with the conditions attaching to them and that the grants will be received.

Government grants are recognized in profit or loss on a systematic basis over the periods in which the Group recognizes as expenses the related costs for which the grants are intended to compensate. Specifically, government grants whose primary condition is that the Group should purchase, construct or otherwise acquire non-current assets are recognized as deferred revenue and transferred to profit or loss on a systematic and rational basis over the useful lives of the related assets.

Retirement Benefit Costs

Payments to defined contribution retirement benefit plans are recognized as an expense when employees have rendered service entitling them to the contributions.

For defined benefit retirement benefit plans, the cost of providing benefits is determined using the Projected Unit Credit Method. All actuarial gains and losses on the defined benefit obligation are recognized immediately in other comprehensive income/Actuarial gains and losses that exceed 10% of the greater of the present value of the Company’s defined benefit obligation and the fair value of plan assets as at the end of the prior year are amortized over the expected average remaining working lives of the participating employees. Past service cost is recognized immediately to the extent that the benefits are already vested, and otherwise is amortized on a straight-line basis over the average period until the benefits become vested.

The retirement benefit obligation recognized in the balance sheets represents the present value of the defined benefit obligation as adjusted for unrecognized actuarial gains and losses and unrecognized past service cost, and as reduced by the fair value of plan assets. Any asset resulting from this calculation is limited to the unrecognized actuarial losses and past service cost, plus the present value of available refunds and reductions in future contributions to the plan.

Curtailment or settlement gains or losses on the defined benefit plan are recognized when the curtailment or settlement occurs.

Other Long-term Employee Benefits

Other long-term employee benefits are accounted for in the same way as the accounting required for post-employment benefits except that all past service cost and actuarial gains and losses are recognized immediately.

Employee Share Options

Employee share options granted to employee

Equity-settled share-based payments to employees and others providing similar services are measured at the fair value of the equity instruments at the grant date.

The fair value determined at the grant date of the employee share options is expensed on a straight-line basis over the vesting period, based on the Company’s estimate of employee share options that will eventually vest, with a corresponding increase in capital surplus - employee share options. The fair value determined at the grant date of the employee share options is recognized as an expense in full at the grate date when the share options granted vest immediately.

97 -

Restricted shares for employees are measured at fair value on the date of grant, with a corresponding increase in capital surplus - restricted shares for employees. If restricted shares for employees are granted for consideration, and should be returned, they are recognized as payables. Dividends paid to employees on the restricted shares that do not need to be returned if employees resign in the vesting period, are recognized as expenses when the dividends are declared with a corresponding adjustment in capital surplus - restricted shares for employees.

At the end of each reporting period, the Company revises its estimate of the number of employee share options expected to vest. The impact of the revision of the original estimates is recognized in profit or loss such that the cumulative expense reflects the revised estimate, with a corresponding adjustment to the capital surplus - employee share options.

Taxation

Income tax expense represents the sum of the tax currently payable and deferred tax.

a. Current tax

According to the Income Tax Law, an additional tax at 10% of unappropriated earnings is provided for as income tax in the year the shareholders approve to retain the earnings.

Adjustments of prior years’ tax liabilities are added to or deducted from the current year’s tax provision.

b. Deferred tax

Deferred tax is recognized on temporary differences between the carrying amounts of assets and liabilities in the consolidated financial statements and the corresponding tax bases used in the computation of taxable profit. Deferred tax liabilities are generally recognized for all taxable temporary differences. Deferred tax assets are generally recognized for all [deductible temporary differences, unused loss carry forward and unused tax credits for purchases of machinery, equipment and technology, research and development expenditures, and personnel training expenditures] to the extent that it is probable that taxable profits will be available against which those deductible temporary differences can be utilized. Such deferred tax assets and liabilities are not recognized if the temporary difference arises from goodwill or from the initial recognition (other than in a business combination) of other assets and liabilities in a transaction that affects neither the taxable profit nor the accounting profit.

Deferred tax liabilities are recognized for taxable temporary differences associated with investments in subsidiaries and associates, and interests in joint ventures, except where the Group is able to control the reversal of the temporary difference and it is probable that the temporary difference will not reverse in the foreseeable future. Deferred tax assets arising from deductible temporary differences associated with such investments and interests are only recognized to the extent that it is probable that there will be sufficient taxable profits against which to utilize the benefits of the temporary differences and they are expected to reverse in the foreseeable future.

The carrying amount of deferred tax assets is reviewed at the end of each reporting period and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered. A previously unrecognized deferred tax asset is also reviewed at the end of each reporting period and recognized to the to the extent that it has become probable that future taxable profit will allow the deferred tax asset to be recovered.

98 -

Deferred tax liabilities and assets are measured at the tax rates that are expected to apply in the period in which the liability is settled or the asset realized, based on tax rates (and tax laws) that have been enacted or substantively enacted by the end of the reporting period. The measurement of deferred tax liabilities and assets reflects the tax consequences that would follow from the manner in which the Group expects, at the end of the reporting period, to recover or settle the carrying amount of its assets and liabilities.

c. Current and deferred tax for the year

Current and deferred tax are recognized in profit or loss, except when they relate to items that are recognized in other comprehensive income or directly in equity, in which case, the current and deferred tax are also recognized in other comprehensive income or directly in equity respectively. Where current tax or deferred tax arises from the initial accounting for a business combination, the tax effect is included in the accounting for the business combination.

5. CRITICAL ACCOUNTING JUDGMENTS AND KEY SOURCES OF ESTIMATION AND UNCERTAINTY

In the application of the Group's accounting policies, management is required to make judgments, estimates and assumptions about the carrying amounts of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered relevant. Actual results may differ from these estimates.

The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period in which the estimate is revised if the revision affects only that period or in the period of the revision and future periods if the revision affects both current and future periods.

Held-to-maturity Financial Assets

Management has reviewed the Group's held-to-maturity financial assets in light of its capital maintenance and liquidity requirements and has confirmed the Group's positive intention and ability to hold those assets to maturity.

Income Taxes

As of December 31, 2013, December 31, 2012 and January 1, 2012, the carrying amount of deferred tax assets in relation to unused tax losses was $29,043 thousand, $53,667 thousand and $98,813 thousand, respectively. The realizability of the deferred tax asset mainly depends on whether sufficient future profits or taxable temporary differences will be available. In cases where the actual future profits generated are less than expected, a material reversal of deferred tax assets may arise, which would be recognized in profit or loss for the period in which such a reversal takes place.

Estimated Impairment of Trade Receivables

When there is objective evidence of impairment loss, the Group takes into consideration the estimation of future cash flows. The amount of the impairment loss is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows (excluding future credit losses that have not been incurred) discounted at the financial asset’s original effective interest rate. Where the actual future cash flows are less than expected, a material impairment loss may arise.

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Fair Value of Financial Instruments

As described in Note 31, the Group’s management uses its judgment in selecting an appropriate valuation technique for financial instruments that do not have quoted market price in an active market. Valuation techniques commonly used by market practitioners are applied. For derivative financial instruments, assumptions were based on quoted market rates adjusted for specific features of the instruments. Debt instruments were valued using a discounted cash flow analysis based on assumptions supported, where possible, by observable market prices or rates. The estimation of fair value of listed equity instruments traded in emerging market and unlisted equity instruments was based on the analysis in relation to the financial position and the operation results of investees, recent transaction prices, prices of same equity instruments not quoted in active markets, quoted prices of similar instruments in active markets, valuation multiples of comparable entities, including assumptions not based on unobservable market prices or rates. As of December 31, 2013, December 31, 2012 and January 1, 2012, the carrying amount of these equity instruments was $44,510 thousand, $54,997 thousand and $47,200 thousand, respectively. The Group’s management believes that the chosen valuation techniques and assumptions used are appropriate in determining the fair value of financial instruments.

Write-down of Inventory

Net realizable value of inventory is the estimated selling price in the ordinary course of business less the estimated costs of completion and the estimated costs necessary to make the sale. The estimation of net realizable value was based on current market conditions and the historical experience of selling products of a similar nature. Changes in market conditions may have a material impact on the estimation of net realizable value.

Recognition and Measurement of Defined Benefit Plans

Accrued pension liabilities and the resulting pension expense under defined benefit pension plans are calculated using the Projected Unit Credit Method. Actuarial assumptions comprise the discount rate, rate of employee turnover, and long-term average future salary increase. Changes in economic circumstances and market conditions will affect these assumptions and may have a material impact on the amount of the expense and the liability.

6. CASH AND CASH EQUIVALENTS

	December 31,	December 31,	December 31,	December 31,
		2013		2012	January 1, 2012
Cash on hand	$	933	$	998	$	1,458
Demand deposits		1,055,240		1,117,484		976,076
Check accounts		20,929		10,270		50,700
Cash equivalents
Time deposits with original maturities less than
three		262,434		94,995		140,000
Repurchase agreements collateralized by bonds		490,000		347,000		43,000
	$	1,829,536	$	1,570,747	$	1,211,234

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The market rate intervals of cash in bank repurchase agreements collateralized by bonds at the end of the reporting period were as follows:

	December 31,	December 31,
	2013	2012	January 1, 2012
Deposits in banks	0.02%-3.40%	0.02%-3.10%	0.02%-1.23%
Repurchase agreements collateralized by bonds	0.68%-0.71%	0.80%-0.825%	0.76%

Cash equivalents include time deposits and repurchase agreements collateralized by bonds, that have a maturity of three or less from the date of acquisition, are readily convertible to a known amount of cash, and are subject to an insignificant risk of change in value; these were held for the purpose of meeting short-term cash commitments.

As of December 31, 2013, the carrying amounts of time deposits with original maturities of over three months were $24,443 thousand, which were classified as other financial assets.

7. FINANCIAL ASSETS AND LIABILITIES AT FAIR VALUE THROUGH PROFIT OR LOSS

	December	December	31,	December	December	31,
		2013			2012		January 1, 2012
Financial assets held for trading
Derivative financial instruments (not under hedge
accounting)
Forward exchange contracts	$	860		$		-	$	3,318
Non-derivative financial assets mutual funds		444,947				-		-
Non-derivative financial assets
Convertible bonds			-			-		3,922
	$	445,807		$		-	$	7,240
Current	$	445,807		$		-	$	7,240
Noncurrent			-			-		-
	$	445,807		$		-	$	7,240
Financial liabilities held for trading
Derivative financial instruments (not under hedge
accounting)
Forward exchange contracts	$	17,329		$	26,907		$	7,758

Outstanding forward exchange contracts consisted of the following:

					Contract Amount
			Currency	Maturity Date	(In Thousands)
December	31,	2013
Sell			USD/NTD	2014.01.24-2014.03.03	USD13,000/NTD383,792
Sell			USD/JPY	2014.01.14-2014.03.10	USD17,000/JPY1,733,929
Sell			USD/RMB	2014.01.10-2014.06.26	USD20,100/RMB122,736
					(Continued)

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Contract Amount (In Thousands)

			Contract Amount
	Currency	Maturity Date	(In Thousands)
December 31, 2012
Sell	USD/NTD	2013.01.02-2013.03.26	USD24,500/NTD714,837
Sell	USD/JPY	2013.01.04-2013.03.05	USD19,000/JPY1,561,562
Buy	JPY/NTD	2013.01.10-2013.02.20	JPY160,000/NTD58,484
Sell	USD/RMB	2013.01.30-2013.04.26	USD17,500/RMB110,115
January 1, 2012
Sell	USD/NTD	2012.01.03-2012.04.09	USD55,000/NTD1,656,290
Sell	USD/JPY	2012.01.04-2012.03.09	USD21,000/JPY1,629,455
Sell	NTD/JPY	2012.01.04-2012.02.06	NTD141,889/JPY360,000
Sell	USD/RMB	2012.01.05-2012.05.29	USD23,000/RMB146,059
			(Concluded)

The Group entered into cross-currency swap contracts during the years ended December 31, 2013 and 2012 to manage exposures due to exchange rate and interest rate fluctuations of foreign currency denominated assets and liabilities. However, those contracts did not meet the criteria of hedge effectiveness and therefore were not accounted for by using hedge accounting.

As of December 31, 2012, the Group holds 3-year convertible cooperate bonds issued by Super Dragon Technology Co., Ltd. with a coupon rate of 0%.

8. AVAILABLE-FOR-SALE FINANCIAL ASSETS

	December 31,	December 31,
	2013	2012	January 1, 2012
Domestic investments
Current
Mutual funds	$ 49,414	$ 46,895	$ 71,867
Noncurrent
Listed shares and emerging market shares	$ 44,510	$ 54,997	$ 47,200

The Group’s designated emerging market shares originally recognized as financial assets measured at cost, amounted to $47,200 thousand. Those shares were recognized as available-for-sale financial assets as of January 1, 2012, the transition date to IFRS (Note 39). Refer to Note 31 for the determination of fair values of those shares and other available-for-sale financial assets.

The future cash flow of Shin Kong China Growth Fund this investment has declined. As of December 31, 2013, the Group recognized the loss of impairment amounted to $21,072 thousand.

9. HELD-TO-MATURITY FINANCIAL ASSETS

	December 31,	December	December	31,
	2013		2012		January 1, 2012
Noncurrent
Corporate bonds - Chinatrust	$ 47,840	$		-	$	-

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In 2013, the Group bought 3-year bank debentures issued by Chinatrust with a coupon rate of 2.9% and an effective interest rate of 2.9%.

10. FINANCIAL ASSETS MEASURED AT COST

	December 31,	December 31,
	2013	2012	January 1, 2012
Domestic unlisted common shares	$ 101,000	$ 101,000	$ 101,000
Overseas unlisted common shares	46,478	46,478	46,478
Overseas unlisted professed shares	50,767	50,767	50,767
	$ 198,245	$ 198,245	$ 198,245

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

As stated in Note 8, the Group designated partial emerging market shares originally recognized as financial assets measured at cost leas impairment ($47,200 thousand, as available-for-sale financial assets as of January 1, 2012.)

11. OTHER FINANCIAL ASSETS

	December 31,	December	31,
	2013	2012		January 1, 2012
Current
Time deposits with original maturity more than 3
months	$ 24,443	$	-	$	-

The market interest rates of the time deposits with original maturity more than 3 months were 3.2% per annum from January 1 to December 31, 2013.

12. NOTES, ACCOUNTS RECEIVABLE AND OTHER RECEIVABLES

		December	December	31,	December	December	31,
			2013			2012		January 1, 2012
Notes	receivable
Notes	receivable - operating	$	20,527		$	17,223		$	30,978
Notes	receivable - non-operating			-			-		-
Less:	Allowance for impairment loss			(6)			(3)		(33)
		$	20,521		$	17,220		$	30,945
									(Continued)

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	December 31,	December 31,	December 31,	December 31,
		2013		2012	January 1, 2012
Accounts receivable
Accounts receivable	$	2,654,332	$	3,474,882	$	3,121,283
Accounts receivable - related parties		9,473		10,551		6,183
		2,663,805		3,485,433		3,127,466
Less: Allowance for impairment loss		(17,930)		(21,029)		(24,363)
Less: Allowance for impairment loss - related
parties		(57)		(85)		(31)
	$	2,645,818	$	3,464,319	$	3,103,072
Other receivables
Income tax refund receivable	$	25,353	$	42,090	$	19,374
Equipment payment receivable		33,469		-		16,933
Others		22,441		27,307		16,763
	$	81,263	$	69,397	$	53,070
						(Concluded)

The average credit period on sales of goods was 60 to 120 days. No interest was charged on trade receivables. In determining the recoverability of a trade receivable, the Group considered any change in the credit quality of the trade receivable since the date credit was initially granted to the end of the reporting period. Historical experience shows that the Group recognized an allowance in accordance with the proportion of accounts receivable of each customers.

Of the trade receivables balance (see below for aged analysis) that are past due and had been evaluated impairment loss at the end of the reporting period. The trade receivable which the Group had not recognized an allowance for impairment loss, because there had not been a significant change in credit quality and the amounts were still considered recoverable. The Group did not hold any collateral or other credit enhancements over these balances nor did it have a legal right to offset against any amounts owed by the Group to the counterparty.

Age of receivables that are past due and had been evaluated impairment was as follow:

	December 31,	December 31,
	2013	2012	January 1, 2012
31-60 days	$ 13,752	$ 27,794	$ 20,309
61-90 days	192	5,269	11,389
91-365 days	-	3,049	721
	$ 13,944	$ 36,112	$ 32,419

Above analysis was based on the past due date.

104 -

Movement in the allowance for impairment loss recognized on notes receivable and trade receivables were as follow:

Balance, beginning of period Add (deduct): Provision for (reversal of) doubtful accounts Deduct: Amounts written off Currency exchange difference Balance, end of period Balance, beginning of period Add (deduct): Provision for (reversal of) doubtful accounts Deduct: Amounts written off Currency exchange difference Balance, end of period	For the Year Ended December 31	For the Year Ended December 31
	2013 2012 Notes Receivable Notes Receivable $ 3 $ 33 3 (30) - - - - $ 6 $ 3 For the Year Ended December 31	2012
	2013 Trades Receivable $ 21,114 703 (3,925) 95 $ 17,987	2012
		Trades Receivable $ 24,394 (2,915) (193) (172) $ 21,114

13. INVENTORIES

	December 31,	December 31,	December 31,	December 31,
		2013		2012	January 1, 2012
Finished goods	$	373,430	$	373,686	$	404,539
Work in process		315,908		297,817		191,649
Raw materials		233,073		236,125		221,584
Supplies and spare parts		43,819		53,017		56,312
Merchandise		470,683		315,482		285,952
Land to be development		216,000		200,435		-
	$	1,652,913	$	1,476,562	$	1,160,036

Prepayment for land purchases is the payment made by Chongqing All Sum to acquire the land use right in Chongqing Gao-Shing District to develop and sell real estate. Chongqing All Sum has acquired real estate certificate issued by Chongqing Association of land and real estate resources during 2013. The land has not been constructed yet as of December 31, 2013.

The cost of inventories recognized as cost of goods sold in the years ended December 31, 2013 and 2012 included $7,309,553 thousand and $8,420,200 thousand, respectively, which include $7,912 thousand and $21,885 thousand, respectively, due to write-downs of inventories.

105 -

14. INVESTMENTS ACCOUNTED FOR USING EQUITY METHOD

	December 31,	December 31,
	2013	2012	January 1, 2012
Investments in associates	$ 61,747	$ 45,950	$ 48,657
Investments in Associates
	December 31,	December 31,
	2013	2012	January 1, 2012
Unlisted companies
TSE Technology (Ningbo) Co., Ltd.	$ 61,747	$ 45,950	$ 48,657

As the end of the reporting period, the proportion of ownership and voting rights in associates held by the Group were as follows:

	December 31,	December 31,
Name of Associate	2013	2012	January 1, 2012
TSE Technology (Ningbo) Co., Ltd.	23%	23%	23%

The summarized financial information in respect of the Group’s associates was set out below:

	December 31,	December 31,	December 31,	December 31,
		2013		2012	January 1, 2012
Total assets	$	331,113	$	233,506	$	254,210
Total liabilities	$	79,487	$	49,813	$	59,263
				2013		2012
Revenue			$	341,640	$	235,945
Net income for the period			$	58,460	$	40,772
Other comprehensive income			$	-	$	-

In December 31, 2013, the equity-method investees’ financial statements, which had been used to determine the carrying amount of the Group’s investments share of profit and other comprehensive income of associates, had been audited.

15. PROPERTY, PLANT AND EQUIPMENT

	December 31,	December 31,	December 31,	December 31,
		2013		2012	January 1, 2012
Carrying amounts of each class of
Freehold land	$	598,145	$	598,145	$	598,145
Land improvements		23		48		73
Buildings		1,805,910		1,652,800		1,743,778
Machinery and equipment		3,026,400		2,916,308		3,142,687
Transportation equipment		4,758		6,267		5,512
Office equipment		72,828		67,012		63,898
Construction in progress		-		306,248		5,990
	$	5,508,064	$	5,546,828	$	5,560,083

106 -

Cost Balance at January 1, 2012 Additions Disposals Reclassification Effect of foreign currency exchange differences Fire loss Transfer to investment property Balance at December 31, 2012 Accumulated depreciation and impairment Balance at January 1, 2012 Disposals Depreciation expenses Reclassification Transfer from investment property Fire loss Allowance for impairment Effect of foreign currency exchange differences Balance at December 31, 2012 Carrying value at January 1, 2012 Carrying value at December 31, 2012 Cost Balance at January 1, 2013 Additions Disposals Effect of foreign currency exchange differences Transfer from investment property Reclassification Government grant Balance at December 31, 2013 Accumulated depreciation and impairment Balance at January 1, 2013 Disposals Depreciation expenses Transfer from investment property Allowance for impairment Effect of foreign currency exchange differences Balance at December 31, 2013 Carrying value at December 31, 2013			For the Year Ended December 31, 2013
		Freehold Land Land Improvements $ 598,145 $ 593 - - - - - (442 ) - - $ 598,145 $ 151 $ - $ 520 - - - 25 - (442 ) - - - - - - - - $ - $ 103 $ 598,145 $ 73 $ 598,145 $ 48 $ 598,145 $ 151 - - - - - - - - - - - - $ 598,145 $ 151 $ - $ 103 - - - 25 - - - - - - $ - $ 128 $ 598,145 $ 23	Buildings Machinery and Equipment Transportation Equipment $ 2,221,785 $ 6,610,818 $ 16,172 71,707 576,139 3,405 (13,488 ) (183,954 ) (2,867 ) (128,481 ) (1,850,712 ) (2,557 ) (17,234 ) (77,844 ) (375 ) (62,447 ) (4,909 ) - (3,813) - - $ 2,068,029 $ 5,069,538 $ 13,778 $ 478,007 $ 3,468,131 $ 10,660 (13,488 ) (155,931 ) (2,467 ) 111,651 703,353 2,099 (130,575 ) (1,849,952 ) (2,557 ) 2,432 - - (29,467 ) (3,199 ) - - 22,430 - (3,331) (31,602) (224) $ 415,229 $ 2,153,230 $ 7,511 $ 1,743,778 $ 3,142,687 $ 5,512 $ 1,652,800 $ 2,916,308 $ 6,267 $ 2,068,029 $ 5,069,798 $ 13,778 5,144 778,167 390 - (230,241 ) - 37,309 140,020 648 2,361 - - 240,825 173,197 - - (134,274) - $ 2,353,668 $ 5,796,667 $ 14,816 $ 415,229 $ 2,153,230 $ 7,511 - (173,350 ) - 124,713 723,697 2,158 429 - - - 875 - 7,387 65,815 389 $ 547,758 $ 2,770,267 $ 10,058 $ 1,805,910 $ 3,026,400 $ 4,758	Office Equipment $ 225,429 36,460 (3,970 ) (65,261 ) (3,007 ) (1,008 ) - $ 188,643 $ 161,531 (3,601 ) 31,847 (65,035 ) - (902 ) - (2,209) $ 121,631 $ 63,898 $ 67,012 $ 188,746 36,736 (4,003 ) 4,276 - - - $ 225,755 $ 121,631 (3,583 ) 32,520 - - 2,359 $ 152,927 $ 72,828	Property in Construction $ 5,990 302,549 - (2,239 ) (52 ) - - $ 306,248 $ - - - - - - - - $ - $ 5,990 $ 306,248 $ 306,248 77,037 - 1,509 - (384,794 ) - $ - $ - - - - - - $ - $ -	Total $ 9,678,932 990,260 (204,279 ) (2,049,692 ) (98,512 ) (68,364 ) (3,813) $ 8,244,532 $ 4,118,849 (175,487 ) 848,975 (2,048,561 ) 2,432 (33,568 ) 22,430 (37,366) $ 2,697,704 $ 5,660,083 $ 5,546,828 $ 8,244,895 897,474 (234,244 ) 183,762 2,361 29,228 (134,274) $ 8,989,202 $ 2,697,704 (176,933 ) 883,113 429 875 75,950 $ 3,481,138 $ 5,508,064

For the year ended December 31, 2012 and 2013, the Company recognized impairment loss of $875 thousand and 22,430 thousand related to property, plant and equipment of the foundry reportable segment respectively since this loss was attributable to greater than anticipated wear and tear.

The above items of property, plant and equipment were depreciated on a straight-line basis at the following rates per annum:

Land improvements	6 years
Buildings
Industrial building	35-61 years
Electrical power systems	4-10 years
Engineering systems	1-17 years
Equipment
Major production equipments	1-15 years
Temperature control systems	4-7 years
Transportation equipments	4-7 years
Transportation equipments	3-8 years
Office equipment	2-6 years

107 -

The major component parts of the buildings held by the Group included (plants, electro-powering machinery and engineering systems, etc.), which were depreciated over their estimated useful lives.

Refer to Note 33 for the carrying amount of property, plant and equipment that had been pledged by the Group to secure borrowings/general banking facilities granted to the Group.

16. INVESTMENT PROPERTIES

	December 31,	December 31,
	2013	2012	January 1, 2012
Completed investment property	$ 55,693	$ 58,553	$ 56,926
			Completed
			Investment
			Property
Cost
Balance at January 1, 2012			$ 74,937
Transferred to property, plant and equipment			3,813
Effect of foreign currency exchange differences			(1699)
Balance at December 31, 2012			$ 77,051
Accumulated depreciation and impairment
Balance at January 1, 2012			$ (18,011)
Transferred to property, plant and equipment			2,432
Depreciation expense			(3,243)
Effect of foreign currency exchange differences			324
Balance at December 31, 2012			$ (18,498)
Cost
Balance at January 1, 2013			$ 77,051
Transferred to property, plant and equipment			(2,361)
Effect of foreign currency exchange differences			3,010
Balance at December 31, 2013			$ 77,700
Accumulated depreciation and impairment
Balance at January 1, 2013			$ (18,498)
Transferred to property, plant and equipment			429
Depreciation expense			(3,214)
Effect of foreign currency exchange differences			(724)
Balance at December 31, 2013			$ (22,007)

The investment properties held by the Group were depreciated over their useful lives of 6-61 years, using the straight-line method.

108 -

The fair value of the Group’s investment properties as of December 31, 2013, December 31, 2012 and January 1, 2012 was $131,588 thousand and $91,779 thousand, respectively. The fair value valuation had not been performed by independent qualified professional valuers; however, management of the Group used the valuation model that market participants would use in determining the fair value the valuation was arrived at by reference to market evidence of transaction prices for similar properties.

All of the Group’s investment property was held under freehold interests. The carrying amount of the investment properties that had been pledged by the Group to secure borrowings/general banking facilities granted to the Group were reflected in Note 33.

17. PREPAYMENTS FOR LEASE

	December 31,	December 31,	December 31,	December 31,
		2013		2012	January 1, 2012
Current asset (included in prepaid rent line item)	$	2,538	$	2,427	$	406
Non-current asset		115,225		112,597		117,124
	$	117,763	$	115,024	$	117,530

As of December 31, 2103, December 31, 2012 and January 1, 2012, prepaid lease payments include land use right, which are located in Mainland China.

The carrying amount of the land use right certificates that had been pledged by the Group to secure borrowings/general banking facilities granted to the Group were reflected in Note 33.

18. OTHER ASSETS

	December 31,	December 31,	December 31,
		2013	2012	January 1, 2012
Current
Prepaid expenses	$	8,421	$ 11,888	$ 22,860
Overpaid sales tax		76,703	43,624	17,137
Others		12,251	11,231	14,982
	$	97,375	$ 66,743	$ 54,979
Noncurrent
Long-term prepayments	$	48,126	$ 44,207	$ 53,910

19. BORROWINGS

a. Short-term borrowings

	December 31,	December 31,	December 31,
	2013		2012	January 1, 2012
Secured borrowings(Note 33)
Bank loans (1)	$ 153,000	$	43,483	$	-

(Continued)

109 -

	December 31,	December 31,
	2013	2012	January 1, 2012
Unsecured borrowings
Line of credit borrowings (2)	$ 461,770	$ 111,934	$	66,204
Letters of credit (3)	92,498	135,332		294,419
	554,268	247,266		360,623
	$ 707,268	$ 290,749	$	360,623
				(Concluded)

1) The short-term secured borrowings interest rate on the bank loans was 2.138%-2.737% per annum (December 31, 2012: 0.0611%-0.616% per annum, January 1, 2012: 1.58%-1.867% per annum).
2) The weighted average effective interest rate on the bank loans was 1.1%-2.342% per annum. (December 31, 2012: 0.96%-2.23% per annum, January 1, 2012: 0.6%-1.25% per annum).
3) The letters of credit interest rate on the bank loans was 0.96%-1.903% annum (December 31, 2012: 0.96%-1.024%. January 1, 2012: 0.92%-1.329%).
b. Long-term borrowings

	December	31,	December 31,	December 31,	December 31,
	2013			2012	January 1, 2012
Secured borrowings(Note 33)
Bank loans (1)	$ 737,500		$	1,486,438		$ 1,214,188
Unsecured borrowings
Bank loans	639,415			532,205			357,465
Less: Current portion	(489,415)			(493,006)		(273,185)
Long-term borrowings: Non-current	$ 887,500		$	1,525,637		$ 1,298,468
The borrowings of the Group were as follows:
		December 31,		December 31,		January 1,
	Maturity Date		2013		2012		2012
Floating rate borrowings
Secured bank borrowing denominated in NT$	2013.07.24	$	-	$	43,688	$	101,938
Secured bank borrowing denominated in NT$	2013.07.24		-		5,250		12,250
Secured bank borrowing denominated in NT$	2016.08.17		212,500		562,500		600,000
Secured bank borrowing denominated in NT$	2016.10.13		275,000		500,000		-
Secured bank borrowing denominated in NT$	2015.10.28		250,000		375,000		500,000
Unsecured bank borrowing denominated in NT$	2014.08.20		-		100,000		-
Unsecured bank borrowing denominated in NT$	2014.06.15		-		100,000		100,000
Unsecured bank borrowing denominated in NT$	2015.01.15		-		200,000		-
Unsecured bank borrowing denominated in NT$	2015.01.15		200,000		-		-
Unsecured bank borrowing denominated in NT$	2015.09.06		150,000		-		-
Unsecured bank borrowing denominated in NT$	2015.11.06		200,000		-		-
Unsecured bank borrowing denominated in US$	2014.02.27		59,610		58,758		60,580
Unsecured bank borrowing denominated in US$	2014.02.27		29,805		29,379		30,290
Unsecured bank borrowing denominated in US$	2013.12.19		-		44,068		90,870
Unsecured bank borrowing denominated in US$	2014.03.31		-		-		75,725
Less: Current portion			(489,415)		(493,006)		(273,185)
		$	887,500	$ 1,525,637		$	1,298,468

110 -

The range of effective interest rate of Group’s was as follow:

	2013	2012
Effective interest rate
Floating rate	1.10%-1.836%	1.10%-1.79%

20. BONDS PAYABLE

	December 31,	December 31,	December 31,
	2013		2012	January 1, 2012
Unsecured domestic convertible bonds	$ 800,000	$	556,100	$ 799,400
Less: Discount on bonds payable	(34,663)		(21)	(10,033)
Less: Current portion	-		(556,079)	-
	$ 765,337	$	-	$ 789,367

On January 25, 2013, the Corporation issued forth unsecured domestic convertible bonds with an aggregate value of $800,000 thousand to pay off borrowings and purchase equipment.

Other details of the bond issuance are summarized as follows:

a. Issue date: January 25, 2013.
b. Total issue amount: $800,000 thousand.
c. Issue price: 100%.
d. Par value: $100 thousand.
e. Coupon rate: 0%.
f. Repayment term: The bonds are repayable on January 25, 2016 upon the maturity of the bonds.
g. Conversion right: Holder can request for conversion of the bonds to the Corporation’s common stock.
h. Conversion period: From February 26, 2013 to January 15, 2016.
i. Conversion price: The original conversion price per share is $46.5. The conversion price is subject to adjustment based on a certain formula if there are changes in outstanding shares or execution of conversion below market price.
j. Redemption of bonds
1) Redemption on the maturity date: On the maturity date, the Corporation will redeem the bonds of the principal amounts.
2) Early redemption on the maturity date:
- a) During the period of time between one month after issuance and the 40th day before maturity, if the closing price of the Corporation’s shares reaches 30% of the conversion price for 30 consecutive trading days, the Corporation may redeem the remaining bonds at a price of their book value.
111 -
b) During the period of time between one month after issuance and the 40th day before maturity, when over 90% of the bonds had been redeemed, bought back or converted, the Corporation may redeem the remaining bonds at a price of their book value.
k. Converted bond: As of December 31, 2013, there is no bonds had been converted into common stocks.

The convertible bonds contain both liability and equity components. The equity component was presented in equity under the heading of capital surplus - option. The effective interest rate of the liability component was 1.5% per annum on initial recognition.

Proceeds from issue Liability component at the date of issue Embedded derivatives (less transaction costs allocated to the financial liabilities of $2 thousand) Equity component (less transaction costs allocated to the equity component of $288 thousand) Bonds converted into common stock Interest expenses calculated by effective interest rate Liability component at December 31, 2013	$ 800,000 (5,001) 318 (45,632) - 15,652 $ 765,337

Movements of the conversion option derivative instrument in the current period were as follows:

	The Conversion
	Option
	Derivative
	Instrument
Issued date	$ 318
Fair value changes loss	(318)
Balance at December 31, 2013	$ -

21. NOTES PAYABLE AND TRADE PAYABLES

	December	December	31,	December	December	31,
		2013			2012		January 1, 2012
Notes payable
Notes payable - operating	$		-	$		-	$	73,714
Trade payables
Trade payables - operating	$	886,627		$	1,415,403		$	1,197,496

The average credit period on purchases of certain goods was 2-3 months. The Group has financial risk management policies in place to ensure that all payables are paid within the pre-agreed credit terms.

112 -

22. OTHER LIABILITIES

	December 31,	December 31,	December 31,	December 31,
		2013		2012	January 1, 2012
Current
Other payables
Bonus to employees, directors and supervisors	$	117,831	$	144,759	$	132,203
Commission		69,842		71,305		70,888
Salaries		67,397		69,223		55,266
Bonus		193,454		120,448		189,302
Payables for annual leave		21,186		19,535		18,588
Others		125,249		113,623		165,218
	$	594,959	$	538,893	$	631,465
Other liabilities
Construction receipt payable	$	16,442	$	37,511	$	8,604
Receipts under custody		4,259		12,264		7,961
Others		26,267		20,454		21,578
	$	46,968	$	70,229	$	38,143
Non-current
Refundable deposit (Note 29)	$	29,418	$	27,891	$	12,340

23. RETIREMENT BENEFIT PLANS

a. Defined contribution plans

The plan under the Labor Pension Act (the “Act”) is deemed a defined contribution plan. Taiwan Crystal Technology International Limited has made monthly contributions equal to 6% of each employee’s monthly salary to employees’ pension accounts. Furthermore, TXC (Ninbo) Corporation and TXC (Chongqing) Corporation also make monthly contributions at certain percentages of the basic salary of their employees.

b. Defined benefit plans

Tawian Crystal Technology International Limited has defined benefit plans under the Labor Standards Law that provide benefits based on an employee’s length of service and average monthly salary for the six-month period prior to retirement. The aforementioned companies contribute an amount equal to 4% of salaries paid each month to their respective pension funds (the Funds), which are administered by the Labor Pension Fund Supervisory Committee (the Committee) and deposited in the Committee’s name in the Bank of Taiwan.

113 -

The actuarial valuations of plan assets and the present value of the defined benefit obligation were carried out by qualified actuaries. The principal assumptions of the actuarial valuation were as follows:

Discount rate Future salary rate increase Expected rate of return on plan assets	Measurement Date
	December 31, 2013 December 31, 2012 January 1, 2012 1.750% 1.375% 1.500% 2.000% 1.875% 2.000% 2.000% 2.000% 2.000%

The assessment of the overall expected rate of return was based on historical return trends and analysts’ predictions of the market for the asset over the life of the related obligations, by reference to the aforementioned use of the plan assets and the impact of the related minimum return.

The pension costs of the defined benefit plans recognized in profit or loss were as follows:

Current service cost Interest cost Expected return on plan assets Past service cost		Years Ended December 31	Years Ended December 31
		2013 $ 2,185 1,049 (906) - $ 2,328	2012 $ 2,004 982 (835) 173 $ 2,324

The pension costs of the aforementioned defined benefit plans were recognized in profit or loss by the following categories:

Cost of goods sold General and administrative expenses Marketing expenses Research and development expenses		Years Ended December 31	Years Ended December 31
		2013 $ 1,086 481 286 475 $ 2,328	2012 $ 1,175 447 279 423 $ 2,324

For the years ended December 31, 2013 and 2012, the pre-tax actuarial loss recognized in other comprehensive income were 10,164 thousand and 10,026 thousand, respectively. As of December 31, 2013 and 2012, the pre-tax accumulated actuarial loss recognized in other comprehensive income were 20,190 thousand and 10,026 thousand, respectively.

The amounts arising from the defined benefit obligation of the Company in the consolidated balance sheets were as follows:

	December 31,	December 31,
	2013	2012	January 1, 2012
Present value of defined benefit obligation	$ (94,533)	$ (83,975)	$ (71,529)
Fair value of plan assets	60,370	52,553	45,938
Accrued pension cost	$ (34,163)	$ (31,422)	$ (25,591)

114 -

Movements in the present value of the defined benefit obligation were as follows:

Balance, beginning of year Current service cost Interest cost Actuarial loss Past service cost Benefits paid Balance, end of year		Years Ended December 31	Years Ended December 31
		2013 $ 83,975 2,185 1,049 9,946 - (2,622) $ 94,533	2012 $ 71,529 2,004 982 9,662 173 (375) $ 83,975

Movements in the fair value of the plan assets were as follows:

Balance, beginning of year Expected return on plan assets Actuarial loss Contributions from employer Benefits paid Balance, end of year		Years Ended December 31	Years Ended December 31
		2013 $ 52,553 906 (218) 9,751 (2,622) $ 60,370	2012 $ 45,938 835 (364) 6,519 (375) $ 52,553

The percentage of the fair value of the plan assets by major categories at the end of reporting period was as follows:

		Fair	Value of Plan Assets (%)	Value of Plan Assets (%)	Value of Plan Assets (%)
	December 31,		December 31,		January 1,
		2013		2012		2012
Cash		22.86%		23.39%		23.87%
Equity instruments		44.77%		38.29%		40.75%
Debt instruments		31.58%		37.58%		35.38%
Other		0.79%		0.74%		-
	100.00%		100.00%		100.00%
The Company elects to disclose the historical	information of experience			adjustments	from the adoption
of Taiwan-IFRSs, which is as follows:
	December 31,		December 31,
		2013		2012	January 1, 2012
Present value of defined benefit obligation	$	(94,533)	$	(83,975)	$	(71,529)
Fair value of plan assets	$	60,370	$	52,553	$	45,938
Profit	$	(34,163)	$	(31,422)	$	(25,591)
Experience adjustments on plan liabilities	$	(10,709)	$	(9,622)	$	-
Experience adjustments on plan assets	$	(218)	$	(364)	$	-

The Company elects to disclose the historical information of experience adjustments from the adoption of Taiwan-IFRSs, which is as follows:

The Group expects to make a contribution of $9,751 thousand and $6,519 thousand, respectively to the defined benefit plans during the annual period beginning after 2013 and 2012.

115 -

24. EQUITY

a. Capital stock

Ordinary shares

	December 31,	December 31,
	2013	2012	January 1, 2012
Numbers of shares authorized (in thousands)	500,000	500,000	400,000
Shares authorized	$ 5,000,000	$ 5,000,000	$ 4,000,000
Number of shares issued and fully paid (in
thousands)	309,757	309,757	302,242
Shares issued	$ 3,097,570	$ 3,097,570	$ 3,022,423

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

50,000 thousand shares and 20,000 thousand shares of the Company’s shares authorized were reserved for the issuance of convertible bonds and employee share options.

As of December 31, 2012, exercised stock options in the amount of $24,460 thousand and convertible bonds in the amount of $50,687 thousand have not been registered; therefore, they are classified into advance receipts for common stock - certificates on bond-to-stock conversion. As of January 17, 2013, the registration has been approved by Department of Commence of Ministry of Economic.

b. Capital surplus

A reconciliation of the carrying amount at the beginning and at the end of years ended 2013 and 2012, for each class of capital surplus was as follows:

Balance at January 1, 2012 Arising from conversion of bonds Arising from employee share options Balance at December 31, 2012 Balance at January 1, 2013 Recognition of option premium on issue of convertible bonds Balance at December 31, 2013	Share Premium Employee Share Options $ 325,830 $ 217,947 - - - 67,999 $ 325,830 $ 285,946 $ 325,830 $ 285,946 - - $ 325,830 $ 285,946	Share Warrants $ 39,884 (12,139) - $ 27,745 $ 27,745 - $ 27,745	Bonds Conversion Premium $ 772,417 204,611 - $ 977,028 $ 977,028 45,632 $ 1,022,660	Total $ 1,356,078 192,472 67,999
				$ 1,616,549
				$ 1,616,549 45,632
				$ 1,662,181

The premium from shares issued in excess of par (share premium from issuance of common shares, conversion of bonds and treasury share transactions) and donations may be used to offset a deficit; in addition, when the Company has no deficit, such capital surplus may be distributed as cash dividends or transferred to capital (limited to a certain percentage of the Company’s capital surplus and once a year).

The capital surplus from long-term investments, employee share options and share warrants may not be used for any purpose.

116 -
c. Retained earnings and dividend policy

Appropriation of earnings and dividend policy

Under the Corporation’s Articles of Incorporation, the Corporation should appropriate 10% of its net income less any prior years’ deficit as legal reserve. The remaining amount may be fully retained or partially retained and partially distributed for dividends, upon the stockholders’ approval, according to the following percentages.

1) Employee bonus - not less than 3%.
2) Directors and supervisors’ remuneration - not more than 2%.
3) Stock bonuses to employees include subsidiaries’ employees who meet certain criteria set by the stockholders’ meetings.

Dividends are recommended by the board of directors in accordance with the Corporation’s dividend policy. Under this policy, industry trend and growth should be evaluated, investment opportunities should be fully understood, and proper capital adequacy ratios should be considered in determining the dividend to be distributed. In addition, cash dividends should not be less than 20% of the total dividends to be appropriated.

For the years ended December 31, 2013 and 2012, the bonus to employees was $100,998 thousand and $124,079 thousand, respectively, and the remuneration to directors and supervisors was $16,833 thousand and $20,680 thousand, respectively. The bonus to employees and remuneration to directors and supervisors represented 12% and 2%, respectively, of net income (net of the bonus and remuneration). Material differences between such estimated amounts and the amounts proposed by the Board of Directors in the following year are adjusted for in the current year. If the actual amounts subsequently resolved by the stockholders differ from the proposed amounts, the differences are recorded in the year of stockholders’ resolution as a change in accounting estimate. If a share bonus is resolved to be distributed to employees, the number of shares is determined by dividing the amount of the share bonus by the closing price (after considering the effect of cash and stock dividends) of the shares of the day immediately preceding the stockholders’ meeting.

Under Rule No. 100116 and Rule No. 0950000507 issued by the FSC, an amount equal to the net debit balance of certain shareholders’ equity accounts (including unrealized revaluation increment, unrealized gain or loss on financial instruments, net loss not recognized as pension cost, cumulative translation adjustments) shall be transferred from unappropriated earnings to a special reserve before any appropriation of earnings generated before January 1, 2012 shall be made. Any special reserve appropriated may be reversed to the extent of the decrease in the net debit balance.

Under Rule No. 1010012865 issued by the FSC on April 6, 2012 and the directive titled “Questions and Answers for Special Reserves Appropriated Following Adoption of IFRSs”, on the first-time adoption of IFRSs, a company should appropriate to a special reserve of an amount that was the same as these of unrealized revaluation increment and cumulative translation differences (gains) transferred to retained earnings as a result of the Company’s use of exemptions under IFRS 1. However, at the date of transitions to IFRSs, if the increase in retained earnings that resulted from all IFRSs adjustments is not sufficient for this appropriation, only the increase in retained earnings that resulted from all IFRSs adjustments will be appropriated to special reserve. The special reserve appropriated as above may be reversed in proportion to the usage, disposal or reclassification of the related assets and thereafter distributed. The special reserve appropriated on the first-time adoption of IFRSs may be used to offset deficits in subsequent years. No appropriation of earnings shall be made until any shortage of the aforementioned special reserve is appropriated in subsequent years if the Company has earnings and the original need to appropriate a special reserve is not eliminated.

117 -

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

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

The appropriations of earnings for 2012 and 2011 had been approved in the shareholders’ meetings on June 19, 2013 and June 13, 2012, respectively. The appropriations and dividends per share were as follows:

Legal reserve Cash dividends	Appropriation of Earnings For Fiscal For Fiscal Year 2012 Year 2011 $ 114,889 $ 105,021 681,465 664,934	Dividends Per Share (NT$)
		For Fiscal For Fiscal Year 2012 Year 2011 $ - $ - 2.2 2.2

The bonus to employees and the remuneration to directors and supervisors for 2012 and 2011 approved in the shareholders’ meetings on June 19, 2013 and June 13, 2012, respectively, were as follows:

The appropriations of earnings for 2012 were proposed according to the Company’s financial statements for the years ended December 31, 2012, which were prepared in accordance with the Guidelines Governing the Preparation of Financial Reports by Securities Issuers and International Financial Reporting Standards, and by reference to the balance sheet for the year ended December 31, 2012, which was prepared in accordance with the Guidelines Governing the Preparation of Financial Reports by Securities Issuers (revised) and International Financial Reporting Standards. Thus, they are still subject to the resolution of the shareholders’ meeting to be held on June 19, 2013.

There were no differences between the approved amounts of the bonus to employees and the remuneration to directors and supervisors were primarily due to changes in estimates had been adjusted in profit and loss for the year ended December 31, 2013.

The TXC’s shareholders also resolved to issue cash dividends and bonus to employees and the remuneration to directors in the shareholders’ meeting on June 15 , 2014.

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

d. Special reserves appropriated following first-time adoption of IFRSs

The Company’s special reserves appropriated following first-time adoption of IFRSs were as follows:

	December 31,	December	December	31,
	2013		2012		January 1, 2012
Special reserve	$ 222,793	$		-	$	-

The increase in retained earnings that resulted from all IFRSs adjustments was not enough for this appropriation; therefore, the Company appropriated to the special reserve an amount of $222,793 thousand, the increase in retained earnings that resulted from all IFRSs adjustments on transitions to IFRSs.

118 -

25. NET PROFIT (LOSS) FROM CONTINUING OPERATIONS

Net profit (loss) from continuing operations had been arrived at after charging (crediting)

a. Other income

Interest income Income from government grants Dividends income Others	For the Year Ended December 31	For the Year Ended December 31	For the Year Ended December 31
		2013 $ 13,887 22,563 1,035 54,485 $ 91,970	2012 $ 14,195 9,709 3,954 66,007 $ 93,865

b. Other gains and losses

Gain/(loss) on disposal of property, plant and equipment Gain on disposal of investment Net gain/(loss) arising on financial assets designated as at FVTPL Foreign exchange gains/(losses) Impairment loss on financial assets Property, plant and equipment impairment loss Other expense	For the Year Ended December 31	For the Year Ended December 31	For the Year Ended December 31
		2013 $ 1,264 6,368 2,714 69,475 (21,072) (875) (6,849) $ 51,025	2012 $ (849) 1,094 (26,747) 51,912 - (22,430) (25,690) $ (22,710)

c. Impairment loss on financial assets

Available-for-sale financial assets Finance costs Interest on bank loans Interest on convertible bonds	For the Year Ended December 31	For the Year Ended December 31	For the Year Ended December 31
	2013 2012 $ (21,072) $ - For the Year Ended December 31
		2013 $ (30,157) (15,673) $ (45,830)	2012 $ (25,684) (9,871) $ (35,555)

d. Finance costs

119 -

e. Depreciation and amortization

Property, plant and equipment Investment property Others An analysis of deprecation by function Operating costs Operating expenses An analysis of amortization by function Operating costs Operating expenses f. Employee benefits expense Post-employment benefits (see Note 23) Defined contribution plans Defined benefit plans Other employee benefits An analysis of employee benefits expense by function Operating costs Operating expenses g. Gain or loss on foreign currency exchange Foreign exchange gains Foreign exchange losses	For the Year Ended	December 31
	2013 $ 883,113 3,214 43,714 $ 930,041 $ 800,456 85,871 $ 886,327 $ 13,782 29,932 $ 43,714 For the Year Ended	2012 $ 848,975 3,243 26,075 $ 878,293 $ 735,406 116,812 $ 852,218 $ 9,534 16,541 $ 26,075 December 31
	2013 2012 $ 44,961 $ 37,228 2,328 2,324 47,289 39,552 1,288,827 1,222,008 $ 1,336,116 $ 1,261,560 $ 760,100 $ 712,907 576,016 548,653 $ 1,336,116 $ 1,261,560 For the Year Ended December 31
	2013 $ 370,984 (301,509) $ 69,475	2012 $ 81,258 (29,346) $ 51,912

120 -

26. INCOME TAXES RELATING TO CONTINUING

a. Income tax recognized in profit or loss

The major components of tax expense (income) were as follows:

For the Year Ended December 31 2013 2012 Current tax In respect of the current period $ 59,721 $ 77,884 Income tax of unappropriated earnings 35,253 28,026 Adjustments for prior year 5,821 1,383 100,795 107,293 Deferred tax In respect of the current period 25,809 46,550 Income tax expense recognized in profit or loss $ 126,604 $ 153,843 A reconciliation of accounting profit and current income tax expenses is as follows: For the Year Ended December 31 2013 2012 Profit before tax from continuing operations $ 1,061,765 $ 1,303,377 Income tax expense at the 17% statutory rate Tax effect of adjusting items: Undetectable expenses and losses $ 180,500 $ 221,574 Unrecognized temporary differences 5,385 1,524 Tax-exempt income (12,794) (11,343) Tax-exempt income for five years (40,979) (57,373) Additional income tax on unappropriated earnings 35,253 28,026 Unrecognized temporary differences (431) (2,617) Unrecognized investment tax credit 3,940 4,821 Subsidiaries to repatriate earnings withholding tax 1,216 - Effect of different tax rate of group entities operating in other jurisdictions (15,662) (20,916) Investment tax credits (35,645) (11,236) Adjustment for prior years’ tax 5,821 1,383 Income tax expense recognized in profit or loss $ 126,604 $ 153,843	For the Year Ended	For the Year Ended	For the Year Ended	December 31
				2012 $ 77,884 28,026 1,383 107,293 46,550 $ 153,843 December 31
		2013 $ 1,061,765 $ 180,500 5,385 (12,794) (40,979) 35,253 (431) 3,940 1,216 (15,662) (35,645) 5,821 $ 126,604	2012 $ 1,303,377 $ 221,574 1,524 (11,343) (57,373) 28,026 (2,617) 4,821 - (20,916) (11,236) 1,383 $ 153,843

For the years ended December 31, 2013 and 2012, the Company applied a tax rate of 17% for entities subject to the Income Tax Law of the Republic of China; for other jurisdictions, the Company measures taxes by using the applicable tax rate for each individual jurisdiction.

b. Income tax expense recognized in other comprehensive income

Deferred income tax expense (benefit) Related to actuarial gain/loss from defined benefit plans		Years Ended December 31	Years Ended December 31
		2013 $ (3,432)	2012 $ -

121 -

c. Current income tax assets and liabilities

	December	December	31,	December 31,
		2013		2012	January 1, 2012
Current income - tax assets
Tax refund receivable	$		-	$ 15,743	$	-
Current income tax liabilities
Income tax payable	$	67,919		$ 71,726	$ 59,290

d. Deferred income tax balance

The analysis of deferred income tax in the consolidated balance sheets was as follows:

Year ended December 31, 2013

Balance,
Beginning of
Year
Deferred tax assets
Unrealized loss on inventories
$ 6,971
Unrealized exchange loss
2,051
Financial assets at fair value
through profit or loss
4,423
Payable for annual leave
3,258
Determine benefit obligation
5,649
Property, plant and equipment
5,450
Investment tax credits
25,045
Allowance for doubtful accounts
600
Others

220
$ 53,667
Deferred tax liabilities
Unrealized exchange loss
$ 6,524
Associates
126,630
$ 133,154

Recognized in
Profit or Loss
Other
Comprehensive
Income
Effect of
Exchange Rate
Changes
Balance, End
of Year
$ 53
$ -
$ 60
$ 7,084
(2,051)
-
-
-
(1,477)
-
-
2,946
37
-
142
3,437
(1,264)
3,432
-
7,817
(2,796)
-
199
2,853
(21,065)
-
-
3,980
(25)
-
27
602

104

-

-

324
$ (28,484)
$ 3,432
$ 428
$ 29,043
$ (420)
$ -
$ -
$ 6,104

(2,255)

-

61
124,436
$ (2,675)
$ -
$ 61
$ 130,540

Year ended December 31, 2012
Balance,
Beginning of
Year
Deferred tax assets
Unrealized loss on inventories
$ 6,374
Unrealized exchange loss
250
Financial assets at fair value
through profit or loss
1,319
Vacation payable
3,078
Determine retirement benefit
plans
6,360
Property, plant and equipment
6,777
Investment tax credits
73,457
Allowance for doubtful accounts
985
Others

213
$ 98,813

Recognized in
Profit or Loss
Other
Comprehensive
Income
Effect of
Exchange Rate
Changes
Balance, End
of Year
$ 624
$ -
$ (27)
$ 6,971
1,801
-
-
2,051
3,104
-
-
4,423
198
-
(18)
3,258
(711)
-
-
5,649
(1,226)
-
(101)
5,450
(48,412)
-
-
25,045
(358)
-
(27)
600

7

-

-

220
$ (44,973)
$ -
$ (173)
$ 53,667

(Continued)

122 -

Balance, Beginning of Year Deferred tax liabilities Unrealized gain on inventory $ 5,386 Deferred compensation cost 126,242 $ 131,628	Recognized in Profit or Loss Other Comprehensive Income Effect of Exchange Rate Changes Balance, End of Year $ 1,138 $ - $ - $ 6,524 439 - (51) 126,630 $ 1,577 $ - $ (51) $ 133,154

(Concluded)

e. The investment tax credits, operating loss carryforward and deductible temporary differences for which no deferred income tax assets have been recognized in the consolidated financial statements

The information of the investment tax credits for which no deferred income tax assets have been recognized was as follows:

	December 31,	December 31,	December 31,	December 31,	January	January	1,
		2013		2012		2012
Expiry year
2011	$	417	$	417	$	417
2012		4,821		4,821			-
2013		3,940		-			-
	$	9,178	$	5,238	$	417

f. Unused investment tax credits, operating loss carryforward and tax-exemption information

As of December 31, 2013, investment tax credits consisted of the following:

		Remaining
		Creditable
Law/Statute	Item	Amount	Expiry Year
Statute for Upgrading	Purchase of machinery and	$ 3,908	2014-2016
Industries	equipment

As of December 31, 2013, the profits generated from the following projects are exempt from income tax for a five-year period:

Construction and expansion of 2005 Construction and expansion of 2009	Tax-exemption Period 2010 to 2014 2014 to 2018

g. Integrated income tax

Integrated income tax
	December 31,		December		31,
		2013		2012		January 1, 2012
Unappropriated earnings
Unappropriated earnings generated before
January 1, 1998	$		$		-	$	-
Unappropriated earnings generated on and
after January 1, 1998		2,402,655		2,493,373			2,123,820
	$	2,402,655	$	2,493,373		$	2,123,820
Imputation credits accounts	$	90,043	$	67,705		$	57,799

123 -

The creditable ratio for distribution of earnings of 2013 and 2012 was 6.11% and 5.57%, respectively.

Under the Income Tax Law, for distribution of earnings generated after January 1, 1998, the imputation credits allocated to ROC resident shareholders of the Company was calculated based on the creditable ratio as of the date of dividend distribution. The actual imputation credits allocated to shareholders of the Company was based on the balance of the Imputation Credit Accounts (ICA) as of the date of dividend distribution. Therefore, the expected creditable ratio for the 2013 earnings may differ from the actual creditable ratio to be used in allocating imputation credits to the shareholders

According to legal interpretation No. 10204562810 announced by the Taxation Administration of the Ministry of Finance, when calculating imputation credits in the year of first-time adoption of IFRSs, the cumulative retained earnings include the net increase or net decrease in retained earnings arising from first-time adoption of IFRSs

h. Income tax assessments

The tax returns had been assessed by the tax authorities before 2007 and in 2011, respectively.

27. EARNINGS PER SHARE

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

Net Profit for the Year

Net Profit for the Year
Profit for the period attributable to owners of the Company Effect of dilutive potential ordinary shares: Convertible bonds Employee share option Earnings used in the computation of diluted earnings per share	For the Year Ended		December 31
		2013 $ 935,161 12,991 - $ 948,152	2012 $1,149,534 8,193 - $1,157,727

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

Weighted average number of ordinary shares in computation of basic earnings per share Effect of dilutive potential ordinary shares: Convertible bonds Employee share option Bonus issue to employee Weighted average number of ordinary shares used in the computation of diluted earnings per share	For the Year Ended December 31	For the Year Ended December 31	For the Year Ended December 31
		2013 309,757 22,161 - 4,156 336,074	2012 303,070 16,589 514 3,790 323,963

If the Group was able to settle the bonuses paid to employees by cash or shares, the Group presumed that the entire amount of the bonus would be settled in shares and the resulting potential shares were included in the weighted average number of shares outstanding used in the computation of diluted earnings per share, if the shares had a dilutive effect. Such dilutive effect of the potential shares was included in the computation of diluted earnings per share until the shareholders resolve the number of shares to be distributed to employees at their meeting in the following year.

124 -

28. SHARE-BASED PAYMENT ARRANGEMENTS

Employee Share Option Plan

Qualified employees of the Company and its subsidiaries were granted 8,000 options in February 2007. Each option entitles the holder to subscribe for one thousand common shares of the Company. The options granted are valid for 5 years and exercisable at certain percentages after the second anniversary from the grant date. The options were granted at an exercise price equal to the closing price of the Company’s common shares listed on the grant date. For any subsequent changes in the Company’s capital surplus, the exercise price is adjusted accordingly.

Information on employee share options was as follows:

Balance at January 1 Options granted Options forfeited Options exercised Options expired Balance at December 31 Options exercisable, end of period	For the Year Ended December 31	For the Year Ended December 31
	2013 Number of Options (In Thousands) Weighted- average Exercise Price (NT$) - $ - - - - - - - -	2012
		Number of Options (In Thousands) Weighted- average Exercise Price (NT$) 2,627 $ 39.7 - - (2,446) 37.8 (181) - -

Information about outstanding options as of December 31, 2013, December 31, 2012 and January 1, 2012 were as follows:

	December	31,	December	31,
	2013		2012		January	1, 2012
Range of exercise price	$		$		$	39.7
Weighted-average remaining contractual life		-		-	0.94	year

Options granted in December 2007 were priced using the Black-Scholes pricing model and the inputs to the model were as follows:

Grant-date share price (NT$) $58.8 Exercise price (NT$) $58.8 Expected volatility 43.5% Expected life (years) 3.875 years Expected dividend yield 2.42% Risk-free interest rate

125 -

In the shareholder meeting on September 13, 2012, the shareholders approved a restricted stock plan for employees with a total amount of $20,000 thousand, consisting of 2,000 thousand shares, and authorized the board of directors to determine the issue prices of the restricted shares when they are issued. The restrictions on the rights of the employees who acquire the restricted shares but have not met the vesting conditions are as follows:

a. The employees can not sell, pledge, transfer, donate or in any other way dispose of these shares.
b. The employees holding these shares are not entitled to receive cash and dividends in share.
c. The employees holding these shares have no voting rights.

If an employee fails to meet the vesting conditions, the Company will recall or buy back and cancel his/her restricted shares.

As of December 31, 2013, the Company had not exercised any restricted shares.

29. OPERATING LEASE ARRANGEMENTS

a. The Group as lessee

Operating leases relate to leases of warehouse in trade zone with lease terms 3 years. All operating lease contracts contain clauses for 3-yearly market rental reviews. The Group does not have a bargain purchase option to acquire the leased land at the expiry of the lease periods.

As of December 31, 2013, December 31, 2012 and January 1, 2012, refundable deposits paid under 、 operating lease respectively in $727 thousand $776 thousand and $776 thousand.

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

	December 31,	December 31,	December	December	31,
		2013		2012		January 1, 2012
Not later than 1 year	$	2,909	$	1,191		$	3,104
Later than 1 year and not later than 5 years		4,364			-		1,191
Later than 5 years		-			-		-
	$	7,273	$	1,191		$	4,295

b. The Group as lessor

Operating leases relate to the investment property owned by the Group with lease terms between 1 to 2 years. All operating lease contracts contain market review clauses in the event that the lessee exercises its option to renew. The lessee does not have a bargain purchase option to acquire the property at the expiry of the lease period.

As of December 31, 2013, December 31, 2012 and January 1, 2012, deposits received under operating leases amounted to $603 thousand, $592 thousand, $590 thousand and $603 thousand, respectively.

126 -

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

	December 31,	December 31,	December 31,	December 31,
		2013		2012	January 1, 2012
Not later than 1 year	$	2,525	$	5,736	$	4,925
Later than 1 year and not later than 5 years		210		1,014		3,041
Later than 5 years		-		-		-
	$	2,735	$	6,750	$	7,966

30. CAPITAL MANAGEMENT

The Group manages its capital to ensure that entities in the Group will be able to continue as going concerns while maximizing the return to stakeholders through the optimization of the debt and equity balance.

The capital structure of the Group consists of net debt (borrowings offset by cash and cash equivalents) and equity attributable to owners of the Company (comprising issued capital, reserves, retained earnings and other equity.

The Group is not subject to any externally imposed capital requirements.

31. FINANCIAL INSTRUMENTS

a. Fair value of financial instruments
1) Fair value of financial instruments not carried at fair value

Except as detailed in the following table, the management consider that the carrying amounts of financial assets and financial liabilities recognized in the consolidated financial statements approximate their fair values.

2) Fair value measurements recognized in the balance sheets

The following table provides an analysis of financial instruments that are measured subsequent to initial recognition at fair value, grouped into Levels 1 to 3 based on the degree to which the fair value is observable:

a) Level 1 fair value measurements are those derived from quoted prices (unadjusted) in active markets for identical assets or liabilities;
b) Level 2 fair value measurements are those derived from inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices); and
c) Level 3 fair value measurements are those derived from valuation techniques that include inputs for the asset or liability that are not based on observable market data (unobservable inputs).
127 -

December 31, 2013

Financial assets at FVTPL Mutual funds Forward exchange contracts Available-for-sale financial assets Securities unlisted in ROC Equity securities Mutual funds Financial liabilities at FVTPL Forward exchange contracts December 31, 2012 Available-for-sale financial assets Securities unlisted in ROC Equity securities Mutual funds Financial liabilities at FVTPL Forward exchange contracts January 1, 2012 Financial assets at FVTPL Forward exchange contracts Convertible bonds investment Available-for-sale financial assets Securities unlisted in ROC Equity securities Mutual funds Financial liabilities at FVTPL Forward exchange contracts	Level 1 $ 444,947 - $ 444,947 $ - 49,414 $ 49,414 $ - Level 1 $ - 46,895 $ 46,895 $ - Level 1 $ - 3,922 $ 3,922 $ - 71,867 $ 71,867 $ -	Level 2 $ - 860 $ 860 $ - - $ - $ 17,329 Level 2 $ - - $ - $ 26,907 Level 2 $ 3,318 - $ 3,318 $ - - $ - $ 7,758	Level 3 $ - - $ - $ 44,510 - $ 44,510 $ - Level 3 $ 54,997 - $ 54,997 $ - Level 3 $ - - $ - $ 47,200 - $ 47,200 $ -	Total $ 444,947 860
				$ 445,807
				$ 44,510 49,414
				$ 93,924
				$ 17,329
				Total $ 54,997 46,895
				$ 101,892
				$ 26,907
				Total $ 3,318 3,922
				$ 7,240
				$ 47,200 71,867
				$ 119,067
				$ 7,758

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

128 -
3) Reconciliation of Level 3 fair value measurements of financial assets

December 31, 2013

Balance at January 1, 2013 Purchases Convertible bonds - redemption Total gains or losses In profit or loss Disposals/settlements Net translation differences Balance at December 31, 2013 December 31, 2012 Balance at January 1, 2012 Purchases Total gains or losses In profit or loss Disposals/settlements Net translation differences Balance at December 31, 2012	Available-for- sale Financial Assets
	Unlisted Shares $ 54,997 - - (10,487) - - $ 44,510 Available-for- sale Financial Assets
	Unlisted Shares $ 47,200 7,797 - - - $ 54,997

The total gains or losses for the period included a loss of $(10,487) thousand relating to assets held for the years ended December 31, 2013 and 2012. Such fair value gains or losses were included in other gain and losses.

4) Valuation techniques and assumptions applied for the purpose of measuring fair value

The fair values of financial assets and financial liabilities were determined as follows:

a) The fair values of financial assets and financial liabilities with standard terms and conditions and traded in active liquid markets are determined with reference to quoted market prices (includes listed redeemable bonds, bills of exchange, corporate bonds and perpetual notes). Where such prices were not available, valuation techniques were applied. The estimates and assumptions used by the Group are consistent with those that market participants would use in setting a price for the financial instrument;
b) The fair values of derivative instruments were calculated using quoted prices. Where such prices were not available, a discounted cash flow analysis was performed using the applicable yield curve for the duration of the instruments for non-optional derivatives, and option pricing models for optional derivatives. The estimates and assumptions used by the Group were consistent with those that market participants would use in setting a price for the financial instrument.
129 -
b. Categories of financial instruments

	December 31,	December 31,	December 31,
		2013	2012	January 1, 2012
Financial assets
Fair value through profit or loss (FVTPL) (1)	$	445,807	$ -	$	7,240
Loans and receivables (2)		4,606,669	5,126,470		4,401,360
Held-to-maturity investments (3)		47,840	-		-
Available-for-sale financial assets (4)		93,924	101,892		119,067
Financial assets measured at cost		198,245	198,245		198,245
Financial liabilities
Fair value through profit or loss (FVTPL) (1)		17,329	26,907		7,758
Amortized cost (5)		4,332,310	4,822,074		4,624,603

1) The balances included the carrying amount of structured deposits, forward exchange contracts, bond investment and convertible bonds - redemption.
2) The balances included loans and receivables measured at amortized cost, which comprise cash and cash equivalents, notes receivables, trade and other receivables, other financial assets, and refundable deposits.
3) The balances included the carrying amount of financial bond investment.
4) The balances included the carrying amount of available-for-sale shares and mutual funds.
5) The balances included financial liabilities measured at amortized cost, which comprise short-term and long-term loans, notes, payable, trade and other payables, and bonds issued.
c. Financial risk management objectives and policies

The Group’s major financial instruments included equity and debt investments, bonds payable, borrowings. The Group’s corporate treasury function provides services to the business, coordinates access to domestic and international financial markets, monitors and manages the financial risks relating to the operations of the Group through internal risk reports which analyze exposures by degree and magnitude of risks. These risks include market risk (including currency risk, interest rate risk and other price risk), credit risk and liquidity risk.

The Group sought to minimize the effects of these risks by using derivative financial instruments to hedge risk exposures. The use of financial derivatives was governed by the Group’s policies approved by the board of directors, which provided written principles on foreign exchange risk, interest rate risk, credit risk, the use of financial derivatives and non-derivative financial instruments, and the investment of excess liquidity. Compliance with policies and exposure limits was reviewed by the internal auditors on a continuous basis. The Group did not enter into or trade financial instruments, including derivative financial instruments, for speculative purposes.

The corporate treasury function reported quarterly to the Group’s risk management committee, an independent body that monitors risks and policies implemented to mitigate risk exposures.

130 -

1) Market risk

The Group’s activities exposed it primarily to the financial risks of changes in foreign currency exchange rates (see (1) below) and interest rates (see (2) below). The Group entered into a variety of derivative financial instruments to manage its exposure to foreign currency risk and interest rate risk, including:

a) Forward foreign exchange contracts to hedge the exchange rate risk arising on the Group’s foreign currency monetary.

There had been no change to the Group’s exposure to market risks or the manner in which these risks were managed and measured.

b) Foreign currency risk

Several subsidiaries of the Company had foreign currency sales and purchases, which exposed the Group to foreign currency risk.

The carrying amounts of the Group’s foreign currency denominated monetary assets and monetary liabilities (including those eliminated on consolidation) at the end of the reporting period (see Note 37).

Sensitivity analysis

The Group was mainly exposed to the USD and JPY.

The following table details the Group’s sensitivity to a 1% increase and decrease in New Taiwan dollars (the functional currency) against the relevant foreign currencies. 1% is the sensitivity rate used when reporting foreign currency risk internally to key management personnel and represents management’s assessment of the reasonably possible change in foreign exchange rates. The sensitivity analysis included only outstanding foreign currency denominated monetary items and foreign currency forward contracts designated as cash flow hedges, and adjusts their translation at the end of the reporting period for a 1% change in foreign currency rates. The sensitivity analysis included external loans/borrowings as well as loans/borrowings to foreign operations within the Group where the denomination of the loan is in a currency other than the functional currency of the lender or the borrower. A positive number below indicates an increase in pre-tax/post-tax profit and other equity associated with New Taiwan dollars strengthen 1% against the relevant currency. For a 1% weakening of New Taiwan dollars against the relevant currency, there would be an equal and opposite impact on post-tax profit and other equity and the balances below would be negative.

Profit or loss	USD Impact For the Year Ended December 31 2013 2012 $27,576 $27,125 (a)	JPY Impact
		For the Year Ended December 31
		2013 2012 $(1,613) $(3,820) (b)

a) This was mainly attributable to the exposure outstanding on USD receivables and payables, which were not hedged at the end of the reporting period.
b) This was mainly attributable to the exposure to outstanding JPY payables, which were not hedged, at the end of the reporting period.
131 -

2) Interest rate risk

The Group was exposed to interest rate risk because the Group’s bank deposits and the Group borrowed funds at floating interest rates.

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

	December 31,	December 31,	December 31,	December 31,
		2013		2012	January 1, 2012
Fair value interest rate risk
Financial assets	$	776,877	$	441,995	$	183,000
Financial liabilities		765,337		556,079		789,367
Cash flow interest rate risk
Financial assets		1,055,240		1,117,484		976,076
Financial liabilities		2,084,183		2,309,392		1,932,276

Sensitivity analysis

The sensitivity analyses below were determined based on the Group’s exposure to interest rates for both derivatives and non-derivative instruments at the end of the reporting period. For floating rate liabilities, the analysis was prepared assuming the amount of the liability outstanding at the end of the reporting period was outstanding for the whole year. A 0.25% basis point increase or decrease was used when reporting interest rate risk internally to key management personnel and represents management’s assessment of the reasonably possible change in interest rates.

If interest rates had been 0.25% basis points higher/lower and all other variables were held constant, the Group’s pre-tax profit for the year ended December 31, 2013 would decrease/increase by $2,572 thousand, which was mainly attributable to the Group’s exposure to interest rates on its floating rate bank deposits and bank borrowings.

2) Credit risk

Credit risk refers to the risk that counterparty will default on its contractual obligations resulting in financial loss to the Group. As at the end of the reporting period, the Group’s maximum exposure to credit risk which will cause a financial loss to the Group due to failure to discharge an obligation by the counterparties and financial guarantees provided by the Group is arising from:

The carrying amount of the respective recognized financial assets as stated in the balance sheets.

3) Liquidity risk

The Group manages liquidity risk by monitoring and maintaining a level of cash and cash equivalents deemed adequate to finance the Group’s operations and mitigate the effects of fluctuations in cash flows. In addition, management monitors the utilization of bank borrowings and ensures compliance with loan covenants.

The Group relies on bank borrowings as a significant source of liability. As of December 31, 2013, December 31, 2012 and January 1, 2012, the Group had available unutilized overdraft and short-term bank loan facilities of approximately $3,642,988 thousand, $3,507,078 thousand and $3,547,103 thousand, respectively.

132 -
a) Liquidity and interest risk rate tables

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

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

December 31, 2013

	Weighted
	Interest
	Average
	Effective Rate	Less Than
	(%)		1 Year		2-3 Years		4-5 Years		5+ Years			Total
Non-derivative financial
liabilities
Accounts payable	-	$	886,804	$	-	$	-	$		-	$	886,804
Other payables	-		595,986		-		-			-		595,986
Other current liabilities	-		46,968		-		-			-		46,968
Bonds payable	-		-		765,337		-			-		765,337
Variable interest rate
(liabilities)	0.96-2.737		1,196,683		862,500		25,000			-		2,084,183
Guarantee deposits received	-		-		29,418		-					29,418
December 31, 2012
	Weighted
	Interest
	Average
	Effective Rate	Less Than
	(%)		1 Year		2-3 Years		4-5 Years		5+ Years			Total
Non-derivative financial
liabilities
Accounts payable	-	$	1,417,698	$	-	$	-	$		-	$	1,417,698
Other payables	-		538,905		-		-			-		538,905
Other current liabilities	-		70,229		-		-			-		70,229
Bonds payable	-		556,079		-		-			-		556,079
Variable interest rate
(liabilities)	0.611-2.23		783,755		1,288,137		237,500			-		2,309,392
Guarantee deposits received	-		-		27,891		-			-		27,891
January 1, 2012
	Weighted
	Interest
	Average
	Effective Rate	Less Than
	(%)		1 Year		2-3 Years		4-5 Years		5+ Years			Total
Non-derivative financial
liabilities
Note payable	-	$	73,999	$	-	$	-	$		-	$	73,999
Accounts payable	-		1,197,496		-		-			-		1,197,496
Other payables	-		631,465		-		-			-		631,465
Other current liabilities	-		38,143		-		-			-		38,143
Bonds payable			-		789,367		-			-		789,367
Variable interest rate
(liabilities)	0.89-1.867		633,808		910,968		387,500			-		1,932,276
Guarantee deposits received	-		-		12,340		-			-		12,340

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

133 -

The following table detailed the Group’s liquidity analysis for its derivative financial instruments. The table was based on the undiscounted contractual net cash inflows and outflows on derivative instruments that settle on a net basis, and the undiscounted gross inflows and outflows on those derivatives that require gross settlement.

December 31, 2013

On Demand or Less than 1 Month 1-3 Months 3 Months to 1 Year Net settled Foreign exchange forward contracts $ (10,708) $ (6,621) $ - December 31, 2012 On Demand or Less than 1 Month 1-3 Months 3 Months to 1 Year Net settled Foreign exchange forward contracts $ (20,519) $ (5,760) $ (628) January 1, 2012 On Demand or Less than 1 Month 1-3 Months 3 Months to 1 Year Net settled Foreign exchange forward contracts $ (7,200) $ (718) $ 160	1-5 Years $ - 1-5 Years $ - 1-5 Years $ -	5+ Years $ -
		5+ Years $ -
		5+ Years $ -

32. RELATED-PARTY TRANSACTIONS

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

The related parties were as follows:

Related Party Relationship with the Corporation Tai-Shing Electronics Components Corporation Others (chairman is the Corporation’s general (Tai-Shing) manager) TSE Technology (Ningbo) Co., Ltd. (TSE Technology) Associates

Trading Transactions

Sales of goods Others	For the Year Ended December 31	For the Year Ended December 31	For the Year Ended December 31
		2013 $ 37,681	2012 $ 31,563

134 -

Purchase of goods Associates Others Operating expenses Others Commission revenue Associates	For the Year Ended December 31	For the Year Ended December 31	For the Year Ended December 31
		2013 $ 406 21 $ 427 $ 440 $ 1,495	2012 $ 248 27 $ 275 $ 3,128 $ 1,706

Selling prices to related parties were similar to those for third parties.

Term of purchases from related parties were similar to those for third parties.

Rental Revenue

Related Party Location Rent Collection Associates 1F., No. 189, Huangshan W. Rd., Beilun Dist., Ningbo City Based on contract, and paid on a monthly basis		For the Year Ended December 31	For the Year Ended December 31	For the Year Ended December 31
		2013 Amount % to Total Account Balance $ 3,457 -		2012
				Amount % to Total Account Balance $ 3,119 -

Receivable from and Payable to Related Parties

	December 31,	December 31,	December 31,	December 31,
		2013		2012	January 1, 2012
Accounts receivable from related parties
Others	$	9,473	$	10,551	$	6,183
Less: Allowance for impairment loss		(57)		(85)		(31)
	$	9,416	$	10,466	$	6,152
Notes payable from related parties
Others	$	-	$	-	$	285
Account payable to related parties
Associates	$	31	$	241	$	-
Others		145		2,054		-
	$	176	$	2,295	$	-
Other receivables from related parties
Associates	$	704	$	582	$	577

135 -

December 31, 2013 Other payable from related parties Others $ 1,027 Acquisition of Property, Plant and Equipment Others	December 31, 2012 January 1, 2012 $ 12 $ - Acquisition Amounts	December 31, 2012 January 1, 2012 $ 12 $ - Acquisition Amounts	December 31, 2012 January 1, 2012 $ 12 $ - Acquisition Amounts
	For the Year Ended December 31
		2013 $ 759	2012 $ 692

Compensation of Key Management Personnel

The remuneration of directors and other members of key management personnel for the years ended December 31, 2013 and 2012 were as follows:

Short-term benefits Post-employment benefits	For the Year Ended December 31	For the Year Ended December 31	For the Year Ended December 31
		2013 $ 78,914 2,154 $ 81,068	2012 $ 85,861 1,943 $ 87,804

33. ASSETS PLEDGED AS COLLATERAL OR FOR SECURITY

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

	December 31,	December 31,	December 31,	December 31,
		2013		2012	January 1, 2012
Land	$	573,770	$	573,770	$	573,770
Building equipment, net		1,434,829		1,505,559		1,577,020
Investment property		28,994		45,269		33,950
Prepaid rental		15,592		15,303		16,145
	$	2,053,185	$	2,139,901	$	2,200,885

34. SIGNIFICANT CONTINGENT LIABILITIES AND UNRECOGNIZED COMMITMENTS

In addition to those disclosed in other notes, significant commitments and contingencies of the Group as of December 31, 2013, December 31, 2012 and January 1, 2012 were as follows:

Unused letters of credit amounted to approximately JPY275,956 thousand, JPY189,462 thousand and EUR99 thousand and JPY358,459 thousand as of December 31, 2013, December 31, 2012 and January 1, 2012.

136 -

As of December 31, 2013, the Company unrecognized commitments are as follows:

Acquisition of equipment Acquisition of equipment Acquisition of equipment	Contract Amount Paid Amount Unpaid Amount $ 1,620 $ 486 $ 1,134 US$ 76 US$ - US$ 76 RMB 2,220 RMB - RMB 2,220

35. SIGNIFICANT EVENTS AFTER REPORTING PERIOD: NONE

36. EXCHANGE RATE OF FINANCIAL ASSETS AND LIABILITIES DENOMINATED IN FOREIGN CURRENCIES

The significant financial assets and liabilities denominated in foreign currencies were as follows:

December 31, 2013
		Foreign		Carrying
	Currencies		Exchange Rate	Amount
Financial assets
Monetary items
USD	$	90,497	29.805 (USD:NTD)	$ 2,697,263
USD		31,199	6.0969 (USD:RMB)	929,886
JPY		638,683	0.2839 (JPY:NTD)	181,322
Financial liabilities
Monetary items
USD		7,743	29.805 (USD:NTD)	230,780
USD		21,430	6.0969 (USD:RMB)	638,721
JPY		1,135,388	0.2839 (JPY:NTD)	322,337
JPY		71,367	0.0581 (JPY:RMB)	20,261
December 31, 2012
		Foreign		Carrying
	Currencies		Exchange Rate	Amount
Financial assets
Monetary items
USD	$	119,729	29.136 (USD:NTD)	$ 3,488,424
USD		28,887	6.2855 (USD:RMB)	841,652
JPY		148,631	0.3375 (JPY:NTD)	50,163
Financial liabilities
Monetary items
USD		39,464	29.136 (USD:NTD)	1,149,823
USD		16,054	6.2855 (USD:RMB)	467,749
JPY		1,185,853	0.3375 (JPY:NTD)	400,225
JPY		94,485	0.0730 (JPY:RMB)	31,889

137 -

January 1, 2012

		Foreign		Carrying
	Currencies		Exchange Rate	Amount
Financial assets
Monetary items
USD	$	99,906	30.29 (USD:NTD)	$ 3,026,153
USD		21,378	6.3009 (USD:RMB)	647,540
JPY		287,359	0.3905 (JPY:NTD)	112,214
Financial liabilities
Monetary items
USD		35,481	30.29 (USD:NTD)	1,074,719
USD		16,621	6.3009 (USD:RMB)	503,450
JPY		1,395,595	0.3905 (JPY:NTD)	544,980
JPY		85,756	0.0811 (JPY:RMB)	33,488

37. SEPARATELY DISCLOSED ITEMS

a. Information on significant transactions and information on investees:
1) Lending funds to others. (None)
2) Providing endorsements or guarantees for others. (None)
3) Holding of securities at the end of the period. (Table 1)
4) Aggregate purchases or sales of the same securities reaching NT$300 million or 20 percent of paid-in capital or more. (Table 2)
5) Acquisition of real estate reaching NT$300 million or 20 percent of paid-in capital or more. (None)
6) Disposal of real estate reaching NT$300 million or 20 percent of paid-in capital or more. (None)
7) Purchases or sales of goods from or to related parties reaching NT$100 million or 20 percent of paid-in capital or more. (Table 3)
8) Trade receivables from related parties reaching NT$100 million or 20 percent of paid-in capital or more. (Table 4)
9) Trading in derivative instruments. (Note 7)
10) Others: The business relationship between the parent and the subsidiaries and between each subsidiary, and the circumstances and amounts of any significant transactions between them. (Table 8)
11) Information on investees. (Table 5)
138 -
b. Information on investments in mainland China
1) Information on any investee company in mainland China, showing the name, principal business activities, paid-in capital, method of investment, inward and outward remittance of funds, shareholding ratio, investment gain or loss, carrying amount of the investment at the end of the period, repatriated investment gains, and limit on the amount of investment in the mainland China area. (Table 6)
2) Any of the following significant transactions with investee companies in mainland China, either directly or indirectly through a third area, and their prices, payment terms, and unrealized gains or losses. (Table 7)
- a) The amount and percentage of purchases and the balance and percentage of the related payables at the end of the period.
- b) The amount and percentage of sales and the balance and percentage of the related receivables at the end of the period.
- c) The amount of property transactions and the amount of the resultant gains or losses.
- d) The balance of negotiable instrument endorsements or guarantees or pledges of collateral at the end of the period and the purposes.
- e) The highest balance, the end of period balance, the interest rate range, and total current period interest with respect to financing of funds.
- f) Other transactions that have a material effect on the profit or loss for the period or on the financial position, such as the rendering or receiving of services.

38. SEGMENT INFORMATION

a. Segment revenues and results

Crystal Others Investment income share of profits of associates accounted for using the equity method Interest income Gain (loss) on disposal of property, plant and equipment Exchange gain (loss) Valuation (loss) gain on financial instruments Financial costs Others Profit before tax (continuing operations)	Segment Revenue For the Year Ended December 31 2013 2012 $ 9,271,043 $ 10,865,885 232,540 62,610 $ 9,503,583 $ 10,928,495	Segment Revenue For the Year Ended December 31 2013 2012 $ 9,271,043 $ 10,865,885 232,540 62,610 $ 9,503,583 $ 10,928,495	Segment Profit	Segment Profit	Segment Profit
			For the Year Ended December 31
		2013 $ 9,271,043 232,540 $ 9,503,583		2013 $ 1,015,322 (64,168) 951,154 13,446 13,887 1,264 69,475 2,714 (45,830) 55,655 $ 1,061,765	2012 $ 1,285,456 (27,044) 1,258,412 9,365 14,195 (849) 51,912 26,747 (35,555) 32,644 $ 1,303,377

Segment revenue reported above represents revenue generated from external customers. There were no inter-segment sales for the years ended December 31, 2013 and 2012.

139 -

Segment profit represented the profit before tax earned by each segment without allocation of central administration costs and directors’ salaries, share of profits of associates, gain recognized on the disposal of interest in former associates, rental revenue, interest income, gain or loss on disposal of property, plant and equipment, gain or loss on disposal of financial instruments, exchange gain or loss, valuation gain or loss on financial instruments, finance costs and income tax expense. This was the measure reported to the chief operating decision maker for the purpose of resource allocation and assessment of segment performance.

b. Revenue from major products and services

Crystal Others	2013 2012 $ 9,271,043 $ 10,865,885 232,540 62,610 $ 9,503,583 $ 10,928,495

Assets and liabilities not used by the chief operating decision maker in the allocation of resources and assessment of performance of segments are not disclosed.

c. Geographical information

The Corporation’s revenue from continuing operations from external customers and information about its noncurrent assets by geographical location are detailed below:

Taiwan China Others		Revenue from External Customers December 31 2013 2012 $ 8,753,174 $ 10,224,677 732,371 685,054 18,038 18,764 $ 9,503,583 $ 10,928,495		Noncurrent Assets	Noncurrent Assets
				December 31, 2013 $ 3,034,872 2,705,839 2,795 $ 5,743,506	December 31, 2012 $ 3,316,600 2,623,041 5,464 $ 5,945,105	January 1, 2012 $ 3,466,991 2,440,351 3,772 $ 5,911,114
		2013 $ 8,753,174 732,371 18,038 $ 9,503,583

Noncurrent assets included property, plant and equipment, intangible assets and other assets but excluded deferred tax assets.

d. Major customer information

Major customer did not account for 10% or more of sales in 2013 and 2012.

39. FIRST-TIME ADOPTION OF IFRSs

a. Basis of the preparation for financial information under IFRSs

The Group’s consolidated financial statements for the year ended December 31, 2013 not only follows the significant accounting policies stated in Note 4 but also applies the requirements under IFRS 1 “First-time Adoption of IFRS” as the basis for the preparation.

140 -
b. Impact on the transition to IFRSs

Except for the following additional information on the impact on the transition to IFRSs refer to Note 39 to the consolidated financial statements as of December 31, 2013 for the impact on the Group’s consolidated balance sheets and consolidated statements of comprehensive income after transition to IFRSs.

1) Reconciliation of consolidated balance sheet as of January 1, 2012

				Effect of
			Transition to
	ROC GAAP			IFRSs		IFRSs	Note
Assets
Deferred tax assets - current	$	3,542	$	(3,542)	$	-	5) a)
Financial assets measured at cost -		245,445		(47,200)		198,245	4) e), 5) d)
noncurrent
Available-for-sale financial assets -		-		47,200		47,200	4) e), 5) d)
noncurrent
Property, plant and equipment		5,689,646		(129,563)		5,560,083	4) b), 5) f)
Investment property		-		56,926		56,926	5) e)
Intangible assets		117,530		(117,530)		-	5) g)
Deferred tax assets - noncurrent		1,659		97,154		98,813	5) a), b), c)
Prepayment for equipment		-		120,609		120,609	5) f)
Prepaid rental		-		406		406	5) g)
Long-term prepaid financial lease		-		117,124		117,124	5) g)
Other noncurrent assets		110,836		(56,926)		53,910	5) e)
Liabilities
Other payables		612,877		18,588		631,465	5) b)
Accrued pension cost		9,349		16,242		25,591	5) c)
Deferred tax Liabilities		46,514		85,114		131,628	5) a)
Reserve for land value increment		3,512		(3,512)		-	4) b)
tax
Equity
Cumulative translation		264,762		(264,762)		-	4) d), 5) h)
adjustments/foreign currency
translation reserve
Retained earnings		2,545,465		222,793		2,768,258	4) b), 5) b),
							c)
Unrealized revaluation increment		5,442		(5,442)		-	4)
Net loss not recognized as pension		(15,637)		15,637		-	5) c)
costs

141 -

2) Reconciliation of consolidated balance sheet as of December 31, 2012

				Effect of
			Transition to
	ROC GAAP			IFRSs		IFRSs	Note
Assets
Deferred tax assets - current	$	7,741	$	(7,741)	$	-	5) a)
Financial assets measured at cost -		253,242		(54,997)		198,245	4) e), 5) d)
noncurrent
Available-for-sale financial assets -		-		54,997		54,997	4) e), 5) d)
noncurrent
Property, plant and equipment		5,734,497		(187,669)		5,546,828	4) b), 5) f)
Investment property		-		58,553		58,553	5) e)
Intangible assets		115,024		(115,024)		-	5) g)
Deferred tax assets - noncurrent		3,256		50,411		53,667	5) a), b), c)
Prepayment for equipment		-		178,715		178,715	5) f)
Prepaid rental		-		2,427		2,427	5) g)
Long-term prepaid financial lease		-		112,597		112,597	5) g)
Other noncurrent assets		102,760		(58,553)		44,207	5) e)
Liabilities
Other payables		519,358		19,535		538,893	5) b)
Accrued pension cost		14,028		17,394		31,422	5) c)
Deferred tax liabilities		98,874		34,280		133,154	5) a)
Reserve for land value increment		3,512		(3,512)		-	4) b)
tax
Equity
Cumulative translation		167,431		(264,762)		(97,331)	4) d), 5) h)
adjustments/foreign currency
translation reserve
Retained earnings		3,029,417		213,415		3,242,832	4) b), 5) b),
							c)
Unrealized revaluation increment		5,442		(5,442)		-	4)
Net loss not recognized as pension		(22,808)		22,808		-	5) c)
costs

3) Reconciliation of consolidated statement of comprehensive income for the year ended December 31, 2012

			Effect of
		Transition to
	ROC GAAP		IFRSs	IFRSs Note
Operating expenses	$ (1,250,641)	$	758	$ (1,249,883) 5) b), c)
Income tax expenses	(153,733)		(110)	(153,843) 5) b)
Other comprehensive income
Exchange differences on translating	-		-	(97,331) 4) d), 5) h)
foreign operations
Net loss not recognized as pension	-		-	(10,026) 5) c)
costs

142 -

4) Exemptions from IFRS 1

IFRS 1 establishes the procedures for the Group’s first consolidated financial statements prepared in accordance with IFRSs. According to IFRS 1, the Group is required to determine the accounting policies under IFRSs and retrospectively apply those accounting policies in its opening balance sheet at the date of transition to IFRSs, January 1, 2012; except for optional exemptions and mandatory exceptions to such retrospective application provided under IFRS 1. The major optional exemptions the Group adopted are summarized as follows:

a) Share-based payment transactions

The Group elected to take the optional exemption from applying IFRS 2 “Share-based Payment” retrospectively for the shared-based payment transactions granted and vested before the date of transition.

b) Deemed cost

At the date of transition to IFRSs, the Corporation should measure property, plant and equipment and intangible properties at cost in accordance with IFRSs. The relevant regulations should be retrospectively adopted.

As of January 1, 2012 and December 31, 2012, the amounts reclassified from land - revaluation increment in the amount of $8,954 thousand was credited to reserve for land value increment tax were $3,512 thousand and unrealized revaluation increment $5,442 thousand.

c) Employee benefits

The Group elected to recognize all cumulative actuarial gains and losses in retained earnings as of the date of transition. In addition, the Group elected to apply the exemption disclosure requirement provided by IFRS 1, in which the experience adjustments are determined for each accounting period prospectively from the transition date.

d) Cumulative translation differences

The Group elected to reset to zero, the cumulative translation differences at the date of transition to IFRSs, and adjusted retained earnings by the amount of the cumulative translation difference that existed prior to the reset. Gains or losses of a subsequent disposal of any foreign operations will exclude the translation differences that arose before the date of transition to IFRSs.

e) Designation of previously recognized financial instruments

The Group elected to designate the equity investments previously carried at cost as financial assets at fair value through profit or loss or available-for-sale financial assets at the date of transition to IFRSs.

5) Explanations of significant reconciling items in the transition to IFRSs

Material differences between the accounting policies under ROC GAAP and the accounting policies adopted under IFRSs were as follows:

a) Deferred tax assets/liabilities

Under ROC GAAP, a deferred tax asset or liability is classified as current or noncurrent in accordance with the classification of its related asset or liability. However, if a deferred

143 -

income tax asset or liability does not relate to an asset or liability in the financial statements, it is classified as either current or noncurrent based on the expected length of time before it is realized or settled. Under IFRSs, a deferred tax asset or liability is classified as noncurrent asset or liability.

As of December 31, 2012, the amount reclassified from current deferred income tax assets to non-current assets was $7,741 thousand and 3,542 thousand ； Deferred tax liabilities are 。 reclassified to deferred income tax assets respectively in 34,280 thousand and 85,114 thousand

b) Employee benefits - accumulated compensated absences

Accumulated compensated absences account is not addressed in existing ROC GAAP; thus, the Corporation has not recognized the expected cost of employee benefits in the form of accumulated compensated absences at the end of reporting periods. However, under IFRSs, when the employees render services that increase their entitlement to future compensated absences, an entity should recognize the expected cost of employee benefits at the end of reporting periods.

As of December 31, 2012 and January 1, 2012, the IFRS adjustment increased accrued expenses by $19,535 thousand and $18,588 thousand; deferred income tax assets - noncurrent increased by $3,258 thousand and $3,078 thousand. Retained earnings decreased by $16,277 thousand and $15,510 thousand. Salaries for the year ended December 31, 2012 increased by $947 thousand, income tax expense decreased by $180 thousand.

c) Employee benefits - defined benefit plans

The Corporation had previously applied an actuarial valuation on its defined benefit obligation and recognized the related pension cost and retirement benefit obligation in conformity with ROC GAAP. Under IFRSs, the Group should carry out actuarial valuation on defined benefit obligation in accordance with IAS No. 19, “Employee Benefits.”

In addition, under ROC GAAP, it is not allowed to recognize actuarial gains and losses from defined benefit plans directly to equity; instead, actuarial gains and losses should be accounted for under the corridor approach which requires in the deferral of gains and losses. When using the corridor approach, actuarial gains and losses should be amortized over the expected average remaining working lives of the participating employees.

Under IAS No. 19, “Employee Benefits,” the Corporation elects to recognize actuarial gains and losses immediately in full in the period in which they occur, as other comprehensive income. The subsequent reclassification to earnings is not permitted.

At the transition date, the Corporation performed the actuarial valuation under IAS No. 19 - “Employee Benefits,” and recognized the valuation difference directly in retained earnings under the requirement of IFRS 1. As of December 31, 2012 and January 1, 2012 the IFRSs adjustment increased accrued pension cost by $17,394 thousand and $16,242 thousand, and decreased net loss not recognized as pension cost by $22,808 thousand and $15,637 thousand, and increased deferred income tax assets - noncurrent by $5,132 thousand and $5,420 thousand, and decreased retained earnings by $35,070 thousand and $26,459 thousand, Another 2012 decreased salary by $1,705 thousand, increase income tax expense $290 thousand, increased actuarial loss adjustment by $10,026 thousand.

d) Financial assets carried at cost

As of December 31, 2012 and January 1, 2012 the amounts reclassified from financial assets carried at costs to available-for-sale financial assets were $54,997 thousand and $47,200 thousand.

144 -
e) Classification of investment property

Under ROC GAAP, the property that is held by a lessor under an operating lease is classified under property, plant and equipment. Under IFRSs, the property held to earn rentals or for capital appreciation or both should be classified as investment property.

As of December 31, 2012 and January 1, 2012 are amounted to $58,553 thousand and $56,926 thousand, respectively.

f) Prepayments for equipment

Under IFRSs, prepayments for equipment should be classified to other assets. Advance purchase of equipment be classified to prepayments. Generally classified as non-current assets, As of December 31, 2012 and January 1, 2012 are amounted to $178,715 thousand and $120,609 thousand, respectively.

g) Land use rights

Under ROC GAAP, land use rights are classified under intangible assets. Under IAS No 17 - “Leases,” land use rights are classified as long-term prepaid rent.

As of December 31, 2012 and January 1, 2012, the amounts reclassified from land use rights to other current assets and prepayments - noncurrent $2,427 thousand and $406 thousand, respectively; the amounts reclassified from land use rights to long-term prepaid financial lease were $112,597 thousand and $117,124 thousand, respectively.

h) Cumulative translation adjustments reset to zero

As of December 31, 2012, March 31, 2012 and the date transferred to IFRS, cumulative translation adjustments all decreased by $264,762 thousand; therefore, unappropriated earnings all increased by $222,793. Under IFRS, cumulative translation adjustments was $(97,331) thousand for the year ended December 31, 2012.

8) Significant reconciliation differences in consolidated statements of cash flows.

According to ROC GAAP, interest paid and received and dividends received are classified as operating activities while dividends paid are classified as financing activities. Additional disclosure is required for interest expenses when reporting cash flow using indirect method. However, under IAS 7” Statement of Cash Flow”, cash flows from interest and dividends received and paid shall each be disclosed separately. Each shall be classified in a consistent manner from period to period as operating, investing or financing activities. Therefore, interests received by the Company of $14,195 thousand for the three months ended December 31, 2012 and dividends received by the Company of $14,721 thousand were presented separately at the date of transition to IFRSs.

Except for the above differences, there are no other significant differences between ROC GAAP and IFRSs in the consolidated statement of cash flows.

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TABLE 1

TXC CORPORATION AND SUBSIDIARIES

MARKETABLE SECURITIES HELD DECEMBER 31, 2013

(In Thousands of New Taiwan Dollars or U.S. Dollars)

Holding Company	Marketable Securities Type and Issuer/Name	Security Issuer’s Relationship with the Holding Company	Financial Statement Account		December	December	31, 2013			Note
				Shares/Units	Carrying Amount		Percentage of Ownership	Market Value or Net Asset Value
TXC Corporation NGB	Mutual fund Shin Kong Cross Strait Selective Fund Shin Kong China Growth Fund Stock - emerging company Win Win Precision Technology Co., Ltd. Stock - unlisted company Marson Technology Co., Ltd. Guandong Failong Crystal Technology Co., Ltd. UPI Semiconductor Corp. Si-Time Corporation Financial bonds Chinatrust unsecured priority financial bond Stock - unlisted company TSE Technology Co. Mutual fund China GuangFa Money Market Fund EFund Money Market Fund Southern Cash Fund China Merchants Fund	None None None None None None None None Subsidiary None None None None	Available-for-sale financial assets 〃 Available-for-sale financial assets - noncurrent Financial assets carried at cost 〃〃〃 Held-to-maturity financial assets - noncurrent Investment accounted for by the equity method Financial instruments at FVTPL - current 〃〃〃	2,691 2,177 1,300 414 RMB 10,096 2,000 1,750 RMB 10,000 RMB 10,064 RMB 30,000 RMB 16,500 RMB 30,000 RMB 13,000		$ 27,578 21,836 $ 49,414 $ 44,510 $ 3,000 46,478 98,000 50,767 $ 198,245 $ 47,840 $ 61,747 $ 149,107 82,604 149,504 63,727 $ 444,942	- - 3 5 8 2 1 - 23 - - - -		$ 27,578 21,836 $ 49,414 $ 44,510 None 〃〃〃 $ 47,840 None $ 149,107 82,604 149,504 63,727 $ 444,942

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TABLE 2

TXC CORPORATION AND SUBSIDIARIES

MARKETABLE SECURITIES ACQUIRED AND DISPOSED OF AT COSTS OR PRICES OF AT LEAST NT$100 MILLION OR 20% OF THE PAID-IN CAPITAL FOR THE YEAR ENDED DECEMBER 31, 2013

(In Thousands of New Taiwan Dollars or U.S. Dollars)

Company Name	Marketable Securities Type and Name	Financial Statement Account	Counterparty	Nature of Relationship	Beginning Balance	Beginning Balance	Acquisition	Acquisition	Disposal	Disposal	Disposal	Disposal	Equity in Net Gain (Loss) (Note)	Ending Balance	Ending Balance
					Shares/Units (In Thousands)	Amount (Foreign Currencies in Thousands)	Shares/Units (In Thousands) (Note 1)	Amount (Foreign Currencies in Thousands)	Shares/Units (In Thousands)	Amount (Foreign Currencies in Thousands)	Carrying Value (Foreign Currencies in Thousands)	Gain (Loss) on Disposal (Foreign Currencies in Thousands)		Shares/Units (In Thousands)	Amount (Foreign Currencies in Thousands)
TXC (Ningbo) Corporation	Structure deposits 〃〃〃	Financial instruments at FVTPL - current 〃〃〃	First Sino Bank Ningbo Bank HSBC China Construction Bank	None 〃〃〃	- - - -	$ - - - -	- - - -	$ 728,121 385,504 452,485	- - - -	$ 730,927 387,389 452,963	$ 730,927 387,389 452,963	$ - - - -	$ 2,806 1,885 478	- - - -	$ - - - -

Note: The investment loss recognized under equity method and the charge in translation adjustments were included in equity in net gain (loss).

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TABLE 3

TXC CORPORATION AND SUBSIDIARIES

TOTAL PURCHASES FROM OR SALES TO RELATED PARTIES OF AT LEAST NT$100 MILLION OR 20% OF THE PAID-IN CAPITAL FOR THE YEAR ENDED DECEMBER 31, 2013

(In Thousands of New Taiwan Dollars or U.S. Dollars)

Company Name	Related Party	Nature of Relationship		Transaction Details	Transaction Details	Transaction Details	Abnormal Transaction	Abnormal Transaction	Notes/Accounts Payable or Receivable	Notes/Accounts Payable or Receivable	Note
			Purchase/ Sale	Amount	% to Total	Payment Terms (Note)	Unit Price	Payment Terms	Ending Balance	% to Total
TXC Corporation TXC (Ningbo) Corporation	TXC (Ningbo) Corporation TXC (Chongqing) Limited Growing Profit Trading Ltd. Growing Profit Trading Ltd. TXC (Chongqing) Limited	Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary	Purchase Sale Purchase Purchase Purchase Purchase	$ 2,338,090 240,664 124,454 105,551 629,240 227,348	38 3 2 2 37 10	Note 〃〃〃〃〃	Its trading price depends on its function within the Group 〃〃〃〃〃	Note 〃〃〃〃〃	$ (807,860) 102,319 (612) (39,053) (260,504) (177,509)	(64) 4 - 3 (35) (24)

Note: The terms of purchases from related parties were not significantly different from those with third parties.

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TABLE 4

TXC CORPORATION AND SUBSIDIARIES

RECEIVABLES FROM RELATED PARTIES AMOUNTING TO AT LEAST NT$100 MILLION OR 20% OF THE PAID-IN CAPITAL DECEMBER 31, 2013

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

Company Name	Related Party	Nature of Relationship	Balance of Accounts Receivable - Related Party	Turnover Rate	Overdue	Overdue	Amount Received in Subsequent Period	Allowance for Bad Debt
					Amount	Action Taken
TXC Corporation TXC (Ningbo) Corporation Growing Profits Trading Ltd TXC (Chongqing) Corporation	TXC (Ningbo) Corporation TXC Corporation TXC (Ningbo) Corporation TXC (Ningbo) Corporation	Subsidiary Subsidiary Subsidiary Subsidiary	$ 102,319 807,860 260,504 177,509	2.35 3.13 2.42 1.28	$ - - - -	- - - -	$ 58,154 554,012 118,270 44,382	$ - - - -

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TABLE 5

TXC CORPORATION AND SUBSIDIARIES

NAMES, LOCATIONS, AND RELATED INFORMATION OF INVESTEES ON WHICH THE COMPANY EXERCISES SIGNIFICANT INFLUENCE DECEMBER 31, 2013

(In Thousands of New Taiwan Dollars or U.S. Dollars)

Investor Company	Investee Company	Location	Main Businesses and Products	Original Investment Amount	Original Investment Amount	Balance as of December 31, 2013	Balance as of December 31, 2013	Balance as of December 31, 2013	Net Income (Losses) of the Investee	Equity in the Earnings (Losses)	Note
				December 31, 2013	December 31, 2012	Shares (In Thousands)	Percentage of Ownership	Carrying Value
TXC Corporation Taiwan Crystal Technology International Ltd. TXC (Ningbo) Corporation Taiwan Crystal Technology International (HK) Limited	Taiwan Crystal Technology International Ltd. TXC Technology Inc. TXC Japan Corporation Taiwan Crystal Technology International (HK) Limited Growing Profit Trading Ltd. TXC (Ningbo) Corporation TXC (HK) Limited TXC (Chongqing) Corporation Chongqing All Sun Company Limited Ningbo Jingyu Company Limited TXC (Chongqing) Limited	Western Samoa U.S.A. Japan Hong Kong B.V.I. Ningbo Hong Kong Chongqing Chongqing Ningbo Chongqing	Investment Marketing activities Marketing activities Investment International trading Manufacture and sales of electronics products International trading Manufacture and sales of electronics products Market activities International trading Manufacture and sales of electronics products	$ 1,390,461 9,879 6,172 298,362 1,691 1,487,211 - 396,903 312,644 4,807 298,362	$ 1,390,461 9,879 6,172 298,776 1,691 1,487,211 846 201,823 312,644 4,807 298,362	42,835 300 2 10,080 50 45,835 - 82,710 66,000 1,000 10,080	100.00 100.00 100.00 100.00 100.00 100.00 - 56.73 100.00 100.00 43.27	$ 3,943,223 13,491 12,013 294,776 245,108 3,737,510 - 385,928 322,685 7,216 294,361	$ 320,342 1,963 2,556 (5,214) 46,901 271,167 - (15,435) 549 432 (15,435)	$ 316,118 1,963 2,556 (5,214) 46,901 271,167 - (9,673) 549 432 (5,762)	Difference from upstream transactions $4,560 thousand (Note)

Note: TXC (HK) Limited was liquidation and change of registration in 2013.

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TABLE 6

TXC CORPORATION AND SUBSIDIARIES

INFORMATION ON INVESTMENT IN MAINLAND CHINA FOR THE YEAR ENDED DECEMBER 31, 2013 (In Thousands of New Taiwan Dollars or U.S. Dollars)

Name of the investees in Mainland China, main businesses and products, paid-in capital, method of investment, information on inflow or outflow of capital, percentage of ownership, investment income or loss, ending balance of investment, dividends remitted by the investee, and the limit of investment in Mainland China:

Investee Company	Main Businesses and Products	Main Businesses and Products	Total Amount of Paid-in Capital	Method of Investment	Method of Investment	Accumulated Outflow of Investment from Taiwan as of January 1, 2013 (US$ in Thousand)	Investment Flows	Investment Flows	Accumulated Outflow of Investment from Taiwan as of December 31, 2013 (US$ in Thousand)	Investee Company Current Net income	Percentage of Ownership	Investment Income (Loss) Recognized (Note)	Carrying Amount as of December 31, 2013	Accumulated Inward Remittance of Earnings as of December 31, 2013
							Outflow	Inflow
TXC (Ningbo) Corporation Guandong Failong Crystal Technology Co., Ltd. TSE Technology (Ningbo) Co., Ltd. TXC (Chongqing) Corporation Chongqing All Suns Company Limited Ningbo Jingyu Company Limited	Manufacturing and sales of crystal and crystal oscillator Manufacturing and sales of new electronic components Manufacturing and sales of electronic devices and hardware components Manufacturing and sales of electronic devices and hardware components Real estate intermediary service, real estate management and electronic product wholesale Purchasing and selling electronic component		$ 1,487,211 580,947 139,177 695,265 312,644 4,807	Indirect investment of the Corporation in Mainland China through the Corporation’s subsidiary in a third region Direct investment of the Corporation in Mainland China Other investment of the Corporation Mainland China Indirect investment of the Corporation in Mainland China through the Corporation’s subsidiary in a third region Other investment of the Corporation Mainland China Other investment of the Corporation Mainland China		$ 1,427,630 46,478 - 298,362 - -	$ - - - - - -	$ - - - - - -	$ 1,427,630 46,478 - 298,362 - -	$ 271,167 - 58,460 (15,435) 549 432	100.00 8.00 23.00 100.00 100.00 100.00	$ 271,167 - 13,446 (15,435) 549 432	$ 3,737,510 46,478 61,747 680,289 322,685 7,216	$ 256,146 - - - - -

Accumulated Investment in Mainland China as of December 31, 2013 (US$ in Thousand)		Investment Amounts Authorized by Investment Commission, MOEA (US$ in Thousand)			Upper Limit on Investment
$1,772,470		$1,832,878			$4,994,930

Note: The investment in Mainland China is limited to 60% of stockholders’ equity or consolidated stockholders’ equity whichever is higher.

(Continued)

151 -
Significant direct or indirect transactions with the investees, prices and terms of payment, unrealized gain or loss:

(Concluded)

Company Name	Related Party	Nature of Relationship			Transaction Details			Accounts/Notes Receivable/Payable	Accounts/Notes Receivable/Payable	Unrealized Gain or Loss
			Purchase/Sale	Percentage (%)	Price	Payment Term	Compared with Terms of Third Parties	Balance	%
TXC Corporation GPT	NGB CKG NGB	Subsidiary Subsidiary Subsidiary	Purchase 2,338,090 Sale 240,664 Purchase 124,454 Sale 629,240	38 3 2 48	Its trading price depends on its function within the Group. 〃〃〃	Similar with third parties Similar with third parties Similar with third parties Similar with third parties	Its trading price depends on its function within the Group. 〃〃〃	$ (807,860) 102,319 (612) 260,504	64 4 - 68	$ 38,101 1,546 - -

Endorsements guarantees or collateral directly or indirectly provided to the investees: None.
Financings directly or indirectly provided to the investees: None.
Other transactions that significantly impacted current year’s profit or loss or financial position: None.
152 -

TABLE 7

TXC CORPORATION AND SUBSIDIARIES

INTERCOMPANY RELATIONSHIPS AND SIGNIFICANT INTERCOMPANY TRANSACTIONS FOR THE YEAR ENDED DECEMBER 31, 2013

(In Thousands of New Taiwan Dollars)

For the year ended December 31, 2013

No.	Company Name	Counterparty	Natural of Relationship (Note 1)		Intercompany Transactions	Intercompany Transactions
				Accounts	Amount	Terms (Note 2)	Percentage of Consolidated Total Gross Sales or Total Assets (%)
0	TXC Corporation	TXC Technology, Inc. TXC Japan Corporation TXC (Ningbo) Corporation TXC (Chongqing) Corporation Growing profits Trading Ltd. Ningbo Jingyu Company Limited	1 1 1 1	Sales Other expense - consulting expense Accounts receivable Sales Other expense - consulting expense Purchase Accounts payable Sales Purchase Accounts receivable Accounts payable Other receivable Sales Purchase Accounts receivable Accounts payable Other receivable Purchase Accounts payable Purchase Accounts payable	$ 3,356 48,840 510 2,408 46,769 18,799 3,397 240,664 2,338,090 102,319 807,860 15,427 3,710 124,454 1,339 612 82,822 105,551 39,053 9,744 3,251	1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1	- 1 - - - - - 3 25 1 6 - - 1 1 - 1 1 - - -
1	TXC (Ningbo) Corporation	Growing profits Trading Ltd. Ningbo Jingyu Company Limited TXC (Chongqing) Corporation	3 3 3	Purchase Accounts payable Sales Accounts receivable Sales Purchase Accounts receivable Other receivable	629,240 260,504 10,388 3,508 49,085 227,348 51,977 177,509	3 3 3 3 3 3 3 3	7 2 - - 1 2 - 1

Note 1: a. Represent the transactions from parent company to subsidiary.

b. Represent the transactions between subsidiaries.

Note 2: In 2013 and 2012, the selling price and purchasing price were not significantly different from those with third parties, except those for NGB, GPT, and TXC (HK) Limited which is depends on its function within the Group.

153 -

INDEPENDENT AUDITORS’ REPORT

The Board of Directors and Stockholders TXC Corporation

We have audited the accompanying balance sheets of TXC Corporation as of December 31, 2013, December 31, 2012 and January 1, 2012, and the related statements of comprehensive income, changes in equity and cash flows for the years ended December 31, 2013 and 2012. These financial statements are the responsibility of TXC Corporation’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

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

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of TXC Corporation as of December 31, 2013, December 31, 2012 and January 1, 2012, and its financial performance and its cash flows for the years ended December 31, 2013 and 2012, in conformity with the Regulations Governing the Preparation of Financial Reports by Securities Issuers.

The accompanying schedules of major accounting items of TXC Corporation as of and for the year ended December 31, 2013 are presented for the purpose of additional analysis. Such schedules have been subjected to the auditing procedures described in the second paragraph. In our opinion, such schedules are consistent, in all material respects, with the financial statements required to in the first paragraph.

March 24, 2014

Notice to Readers

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

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

154 -

TXC CORPORATION

BALANCE SHEETS

(In Thousands of New Taiwan Dollar)

ASSETS CURRENT ASSETS Cash and cash equivalents (Notes 4 and 6) Financial assets at fair value through profit or loss - current (Notes 4 and 7) Available-for-sale financial assets - current (Notes 4 and 8) Notes receivable (Notes 4, 5 and 12) Accounts receivable (Notes 4, 5 and 12) Receivables from related parties (Notes 4, 5, 12 and 31) Other receivables (Notes 4 and 12) Other receivables from related parties (Notes 4 and 21) Inventories (Notes 4 and 13) Other financial assets - current (Note 11) Other current assets - other (Note 17) Total current assets NONCURRENT ASSETS Available-for-sale financial assets - noncurrent (Notes 4 and 8) Held-to-maturity financial assets (Notes 4, 5 and 9) Financial assets carried at cost (Notes 4 and 10) Investments accounted for using equity method (Notes 4 and 14) Property, plant and equipment (Notes 4 and 15) Investment properties (Notes 4 and 16) Deferred income tax assets (Notes 4, 5 and 26) Prepayment for equipment Refundable deposits (Notes 4 and 30) Other noncurrent assets (Note 17) Total noncurrent assets TOTAL LIABILITIES AND EQUITY CURRENT LIABILITIES Short-term loans (Note 18) Financial liabilities at fair value through profit or loss - current (Notes 4 and 7) Notes payable (Note 20) Notes payable from related parties (Notes 20 and 31) Accounts payable (Note 20) Accounts payables to related parties (Note 31) Other payables (Note 21) Other payables to related parties (Note 31) Current tax liabilities (Notes 4 and 25) Current portion of bonds payable and long-term bank loans (Notes 18 and 19) Other current liabilities (Note 21) Total current liabilities NONCURRENT LIABILITIES Bonds payable (Note 19) Long-term bank loans (Note 18) Deferred income tax liabilities (Notes 4 and 25) Accrued pension cost (Notes 4 and 22) Guarantee deposits received (Notes 4, 21 and 28) Total noncurrent liabilities Total liabilities EQUITY Capital stock (Note 23) Common stock Capital collected in advance Certificates of bond-to-stock conversion Total capital stock Capital surplus Retained earnings Appropriated as legal capital reserve Appropriated as special capital reserve Unappropriated earnings Total retained earnings Other equity Exchange differences on translating foreign operations Unrealized loss on available-for-sale financial assets Total other equity Total equity TOTAL		December 31, 2013 Amount % $ 1,068,203 9 - - 49,414 - 1,184 - 2,333,245 19 113,216 1 50,770 - 98,603 1 1,182,362 9 24,443 - 9,668 - 4,931,108 39 44,510 - 47,840 1 198,245 2 4,263,503 34 3,013,892 24 6,601 - 23,692 - 5,470 - 1,056 - 7,853 - 7,612,662 61 $ 12,543,770 100 $ 92,498 1 17,329 - - - - - 404,028 3 855,260 7 529,821 4 1,027 - 59,371 1 400,000 3 13,685 - 2,373,019 19 765,337 6 887,500 7 130,540 1 34,163 1 28,328 - 1,845,868 15 4,218,887 34 3,097,570 25 - - - - 3,097,570 25 1,662,181 13 864,348 7 222,793 2 2,402,655 19 3,489,796 28 75,336 - - - 75,336 - 8,324,883 66 $ 12,543,770 100		December 31, 2012 Amount % $ 1,012,212 8 - - 46,895 - 515 - 2,969,463 24 54,710 1 28,066 - 33,069 - 1,022,967 8 - - 14,730 - 5,182,627 41 54,997 - - - 198,245 2 3,776,959 30 3,243,896 26 6,807 - 45,558 - 141,848 1 910 - 10,707 - 7,479,927 59 $ 12,662,554 100 $ 135,332 1 26,019 - - - - - 726,007 6 727,470 6 486,983 4 86 - 63,155 - 1,005,017 8 19,259 - 3,189,328 25 - - 1,437,500 12 130,960 1 31,422 - 26,829 - 1,626,711 13 4,816,039 38 3,022,423 24 24,460 - 50,687 - 3,097,570 24 1,616,549 13 749,459 6 - - 2,493,373 20 3,242,832 26 (97,331) (1) (13,105) - (110,436) (1) 7,846,515 62 $ 12,662,554 100		January 1, 2012
						Amount % $ 537,594 5 3,922 - 71,867 1 327 - 2,765,484 24 48,055 - 38,682 - 50,869 1 923,476 8 - - 34,322 - 4,474,598 39 47,200 - - - 198,245 2 3,323,982 29 3,322,021 28 7,636 - 92,805 1 119,998 1 925 - 16,411 - 7,129,223 61 $ 11,603,821 100 $ 294,419 3 7,758 - 73,714 1 285 - 668,794 6 595,854 5 493,838 4 - - 57,404 - 227,750 2 12,497 - 2,432,313 21 789,367 7 1,086,438 10 129,822 1 25,591 - 11,664 - 2,042,882 18 4,475,195 39 3,022,423 26 - - - - 3,022,423 26 1,356,078 11 644,438 6 - - 2,123,820 18 2,768,258 24 - - (18,133) - (18,133) - 7,128,626 61 $ 11,603,821 100

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

155 -

TXC CORPORATION

STATEMENTS OF COMPREHENSIVE INCOME (In Thousands of New Taiwan Dollars, Except Earnings Per Share)

OPERATING REVENUE (Notes 2 and 31) Sales Less: Sales returns Less: Sales allowances Net operating revenue COST OF GOODS SOLD (Notes 24 and 31) GROSS PROFIT UNREALIZED INTER-COMPANY GAIN REALIZED GROSS PROFIT OPERATING EXPENSES (Notes 4 and 31) Selling and marketing expenses General and administrative expenses Research and development expenses Total operating expenses INCOME FROM OPERATIONS NON-OPERATING INCOME AND EXPENSES Other income (Notes 4 and 24) Other gains and losses (Note 24) Finance costs (Notes 4 and 24) Share of profits of associates and joint venture Total non-operating income and expenses INCOME BEFORE INCOME TAX INCOME TAX EXPENSE (Note 25) NET INCOME OTHER COMPREHENSIVE INCOME (LOSS) Exchange differences arising on translation of foreign operations Unrealized loss on available-for-sale financial assets		For the Years Ended December 31	For the Years Ended December 31	For the Years Ended December 31
		2013 Amount % $ 8,460,339 102 57,405 1 65,955 1 8,336,979 100 6,827,004 82 1,509,975 18 (1,546) - 1,508,429 18 342,597 4 179,228 2 308,144 4 829,969 10 678,460 8 50,904 1 14,931 - (36,139) (1) 315,423 4 345,119 4 1,023,579 12 88,418 1 935,161 11 172,667 2 13,105 -		2012
				Amount % $ 9,607,721 101 23,147 - 107,093 1 9,477,481 100 7,769,177 82 1,708,304 18 - - 1,708,304 18 350,801 4 192,512 2 297,829 3 841,142 9 867,162 9 46,789 - 15,215 - (29,213) - 359,506 4 392,297 4 1,259,459 13 109,925 1 1,149,534 12 (97,331) (1) 5,028 - (Continued)

156 -

TXC CORPORATION

STATEMENTS OF COMPREHENSIVE INCOME (In Thousands of New Taiwan Dollars, Except Earnings Per Share)

Actuarial loss from defined benefit plans Income tax related to actuarial defined benefits Other comprehensive income (loss) for the period, net of income tax TOTAL COMPREHENSIVE INCOME FOR THE YEAR EARNINGS PER SHARE (Note 26) Basic Diluted		For the Years Ended December 31	For the Years Ended December 31	For the Years Ended December 31
		2013 Amount % $ (10,164) - 3,432 - 179,040 2 $ 1,114,201 13 $ 3.02 $ 2.82		2012
				Amount % $ (10,026) - - - (102,329) (1) $ 1,047,205 11 $ 3.79 $ 3.57

The accompanying notes are an integral part of the financial statements. (Concluded)

157 -

STATEMENTS OF CHANGES IN EQUITY (In Thousands of New Taiwan Dollars)

TXC CORPORATION

BALANCE, JANUARY 1, 2012 Appropriation of 2011 earnings Legal reserve Cash dividends distributed by subsidiaries Net income for the for the year ended December 31, 2012 Other comprehensive income for the for the year ended December 31, 2012, net of income tax Convertible bonds converted to ordinary shares Share-based payment transaction Total comprehensive income for the for the year ended December 31, 2012 BALANCE AT DECEMBER 31, 2012 Appropriation of 2012 earnings Legal capital reserve Special capital reserve Cash dividends distributed by subsidiaries Equity component of convertible bonds issued by the Company Net income for the year ended December 31, 2013 Other comprehensive income for the year ended December 31, 2013, net of income tax Total comprehensive income for the year ended December 31, 2013 Convertible bonds converted to ordinary shares Share-based payment transaction BALANCE AT DECEMBER 31, 2013	Equity Attributable to Shareholders of the Parent	Equity Attributable to Shareholders of the Parent		Others Unrealized Foreign Currency Gain (Loss) from Available-for- Translation Reserve sale Financial Assets $ - $ (18,133) - - - - - - (97,331) 5,028 - - - - (97,331) 5,028 (97,331) (13,105) - - - - - - - - - - 172,667 13,105 172,667 13,105 - - - - $ 75,336 $ -	Total Equity $ 7,128,626 - (664,934) 1,149,534 (102,329) 243,159 92,459 1,382,823 7,846,515 - - (681,465) 45,632 935,161 179,040 1,114,201 - - $ 8,324,883
	Advance Certificates on Common Stock Receipts for Common Stock Bond-to-stock Conversion Capital Surplus $ 3,022,423 $ - $ - $ 1,356,078 - - - - - - - - - - - - - - - - - - 50,687 192,472 - 24,460 - 67,999 - 24,460 50,687 260,471 3,022,423 24,460 50,687 1,616,549 - - - - - - - - - - - - - - - 45,632 - - - - - - - - - - - - 50,687 - (50,687) - 24,460 (24,460) - - $ 3,097,570 $ - $ - $ 1,662,181	Retained Earnings Legal Capital Reserve Special Capital Reserve Unappropriated Earnings $ 644,438 $ - $ 2,123,820 105,021 - (105,021) - - (664,934) - - 1,149,534 - - (10,026) - - - - - - - - 1,139,508 749,459 - 2,493,373 114,889 - (114,889) - 222,793 (222,793) - - (681,465) - - - - - 935,161 - - (6,732) - - 928,429 - - - - - - $ 864,348 $ 222,793 $ 2,402,655

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

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TXC CORPORATION

STATEMENTS OF CASH FLOWS

(In Thousands of New Taiwan Dollars)

CASH FLOWS FROM OPERATING ACTIVITIES Income before income tax Adjustments for: Bad debt expense Depreciation expense Amortization expense Net loss on fair value change of financial liabilities at fair value through profit or loss Interest expense Gain on unrealized inter-company Share of profits of associates and joint venture Interest income Impairment loss of financial assets Loss on valuation of inventories Gain on disposal of property, plant and equipment Dividend income Gain on disposal of investment Fire Loss Changes in operating assets and liabilities: Notes receivable Accounts receivables Receivables from related parties Other receivables Other receivables from related parties Inventories Other current assets Notes payable Notes payable to related parties Accounts payable Accounts payable to related parties Other payables Other payables to related parties Other current liabilities Accrued pension costs Cash generated from operations Interest paid Income taxes paid Net cash generated by operating activities		For the Years Ended December 31	For the Years Ended December 31
		2013 $ 1,023,579 54 469,315 27,775 17,647 36,139 1,546 (315,423) (7,211) 21,072 10,069 - (1,035) (6,368) - (669) 636,164 (58,506) (21,006) (65,534) (169,464) 6,684 - - (321,979) 127,790 37,984 941 (5,574) (7,423) 1,436,567 (20,613) (67,324) 1,348,630	2012 $ 1,259,459 1,647 488,913 12,697 25,857 29,213 - (359,506) (4,697) - 18,366 (231) (3,954) (1,094) 625 (188) (205,626) (6,655) 62,042 17,800 (135,112) 19,592 (73,714) (285) 57,213 131,616 (6,686) 86 6,762 (4,195) 1,329,945 (19,511) (55,789) 1,254,645 (Continued)

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TXC CORPORATION

STATEMENTS OF CASH FLOWS

(In Thousands of New Taiwan Dollars)

CASH FLOWS FROM INVESTING ACTIVITIES Acquisition of investment accounted for using equity method Disposal of net loss arising on financial liabilities classified as held for trading recognized originally Purchase of available-for-sale financial assets Disposal of available-for-sale financial assets Purchase of held-to-maturity financial assets Payments for property, plant and equipment Disposal of property, plant and equipment Increase in refundable deposits Decrease in refundable deposits Increase in other financial assets Increase in other noncurrent assets Increase in prepayment for equipment Decrease in prepayment for equipment Interest received Dividend received Net cash used in investing activities CASH FLOWS FROM INVESTING ACTIVITIES Decrease in short-term loans Proceeds from issuance of convertible bonds Repayment of bonds Proceeds from long-term borrowings Repayments of long-term borrowings Guarantee deposits received Payments of cash dividend Proceeds from exercise of employee stock options Net cash used in financing activities EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS NET INCREASE IN CASH AND CASH EQUIVALENTS CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR CASH AND CASH EQUIVALENTS, END OF YEAR		For the Years Ended December 31	For the Years Ended December 31
		2013 $ - (26,019) (179,665) 186,034 (47,840) (273,253) 34,148 (146) - (24,443) (26,543) - 136,378 5,513 1,035 (214,801) (42,834) 800,000 (556,100) 750,000 (1,348,938) 1,499 (681,465) - (1,077,838) - 55,991 1,012,212 $ 1,068,203	2012 $ (190,802) (3,674) (37,797) 61,094 - (472,501) 26,847 - 15 - (5,863) (21,850) - 4,697 3,954 (635,880) (159,087) - - 800,000 (227,750) 15,165 (664,934) 92,459 (144,147) - 474,618 537,594 $ 1,012,212

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

(Concluded)

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NOTES TO FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 2013 AND 2012 (In Thousands of New Taiwan Dollars, Unless Stated Otherwise)

TXC CORPORATION

1. ORGANIZATION AND OPERATIONS

TXC Corporation (TXC) was incorporated on December 28, 1983 under the Company Law and other related regulations of the Republic of China (ROC).

On August 26, 2002, TXC’s shares began to be traded on the Taiwan Stock Exchange.

The functional currency of the Company is New Taiwan dollars. The financial statements are presented in New Taiwan dollars.

2. THE AUTHORIZATION OF FINANCIAL STATEMENTS

The financial statements were reported to the Board of Directors and issued on March 24, 2014.

3. APPLICATION OF NEW AND REVISED INTERNATIONAL FINANCIAL REPORTING STANDARDS (IFRSs)

a. New, amended and revised standards, and interpretations in issue but not yet effective

The Company have not applied the following International Financial Reporting Standards (IFRS), International Accounting Standards (IAS), Interpretations of IFRS (IFRIC), and Interpretations of IAS (SIC) issued by the IASB. As of the date that the financial statements were authorized for issue, the Financial Supervisory Commission (the “FSC”) has not announced the effective dates for the following new, amended and revised standards and interpretations (the “New IFRSs”). On January 28, 2014, the Financial Supervisory Commission (FSC) announced the framework for the adoption of updated IFRSs version in the ROC. Under this framework, starting January 1, 2015, the previous version of IFRSs endorsed by the FSC (the 2010 IFRSs version) currently applied by companies with shares listed on the Taiwan Stock Exchange or traded on the Taiwan GreTai Securities Market or Emerging Stock Market will be replaced by the updated IFRSs without IFRS 9 (the 2013 IFRSs version). However, as of the date that the financial statements were authorized for issue, the FSC has not endorsed the following new, amended and revised standards and interpretations issued by the IASB (the “New IFRSs”) included in the 2013 IFRSs version. Furthermore, the FSC has not announced the effective date for the following New IFRSs that are not included in the 2013 IFRSs version.

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The New IFRSs Included in the 2013 IFRSs Version Not Yet Endorsed by the FSC

Effective Date Announced by IASB (Note 1)

Improvements to IFRSs (2009) - amendment to IAS 39 January 1, 2009 and January 1, 2010, as appropriate Amendment to IAS 39 “Embedded Derivatives” Effective for annual periods ending on or after June 30, 2009 Improvements to IFRSs (2010) July 1, 2010 and January 1, 2011, as appropriate Annual Improvements to IFRSs 2009-2011 Cycle January 1, 2013 Amendment to IFRS 1 “Limited Exemption from Comparative IFRS 7 July 1, 2010 Disclosures for First-time Adopters” Amendment to IFRS 1 “Severe Hyperinflation and Removal of Fixed July 1, 2011 Dates for First-time Adopters” Amendment to IFRS 1 “Government Loans” January 1, 2013 Amendment to IFRS 7 “Disclosure - Offsetting Financial Assets and January 1, 2013 Financial Liabilities” Amendment to IFRS 7 “Disclosure - Transfer of Financial Assets” July 1, 2011 IFRS 10 “Financial Statements” January 1, 2013 IFRS 11 “Joint Arrangements” January 1, 2013 IFRS 12 “Disclosure of Interests in Other Entities” January 1, 2013 Amendments to IFRS 10, IFRS 11 and IFRS 12 “Financial January 1, 2013 Statements, Joint Arrangements and Disclosure of Interests in Other Entities: Transition Guidance” Amendments to IFRS 10 and IFRS 12 and IAS 27 “Investment January 1, 2014 Entities” IFRS 13 “Fair Value Measurement” January 1, 2013 Amendment to IAS 1 “Presentation of Other Comprehensive Income” July 1, 2012 Amendment to IAS 12 “Deferred Tax: Recovery of Underlying January 1, 2012 Assets” IAS 19 (Revised 2011) “Employee Benefits” January 1, 2013 IAS 27 (Revised 2011) “Separate Financial Statements” January 1, 2013 IAS 28 (Revised 2011) “Investments in Associates and Joint January 1, 2013 Ventures” Amendment to IAS 32 “Offsetting Financial Assets and Financial January 1, 2014 Liabilities” IFRIC 20 “Stripping Costs in Production Phase of a Surface Mine” January 1, 2013 Effective Date Announced by The New IFRSs Not Included in the 2013 IFRSs Version IASB (Note 1) Annual Improvements to IFRSs 2010-2012 Cycle July 1, 2014 (Note 2) Annual Improvements to IFRSs 2011-2013 Cycle July 1, 2014 IFRS 9 “Financial Instruments” Note 3 Amendments to IFRS 9 and IFRS 7 “Mandatory Effective Date of Note 3 IFRS 9 and Transition Disclosures” IFRS 14 “Regulatory Deferral Accounts” January 1, 2016 Amendment to IAS 19 “Defined Benefit Plans: Employee July 1, 2014 Contributions” Amendment to IAS 36 “Impairment of Assets: Recoverable Amount January 1, 2014 Disclosures for Non-financial Assets” Amendment to IAS 39 “Novation of Derivatives and Continuation of January 1, 2014 Hedge Accounting” IFRIC 21 “Levies” January 1, 2014

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Note 1: Unless stated otherwise, the above New IFRSs are effective for annual periods beginning on or after the respective effective dates.
Note 2: The amendment to IFRS 2 applies to share-based payment transactions for which the grant date is on or after July 1, 2014; the amendment to IFRS 3 applies to business combinations for which the acquisition date is on or after July 1, 2014; the amendment to IFRS 13 is effective immediately; the remaining amendments are effective for annual periods beginning on or after July 1, 2014.
Note 3: IASB tentatively decided that an entity should apply IFRS 9 for annual periods beginning on or after January 1, 2018.
b. Significant impending changes in accounting policy resulted from new, amended and revised standards and interpretations in issue but not yet effective

Except for the following, the initial application of the above new, amended and revised standards and interpretations have not had any material impact on the Company’s accounting policies:

1) IFRS 9 “Financial Instruments”

Recognition and measurement of financial assets

With regards to financial assets, all recognized financial assets that are within the scope of IAS 39 “Financial Instruments: Recognition and Measurement” to be subsequently measured at amortized cost or fair value. Specifically, financial assets that are held within a business model whose objective is to collect the contractual cash flows, and that have contractual cash flows that are solely payments of principal and interest on the principal outstanding are generally measured at amortized cost at the end of subsequent accounting periods. All other financial assets are measured at their fair values at the balance sheet date. However, the Company may make an irrevocable election to present subsequent changes in the fair value of an equity investment (that is not held for trading) in other comprehensive income, with only dividend income generally recognized in profit or loss.

Recognition and measurement of financial liabilities

As for financial liabilities, the main changes in the classification and measurement relate to the subsequent measurement of financial liabilities designated as at fair value through profit or loss. The amount of change in the fair value of such financial liability attributable to changes in the credit risk of that liability, is presented in other comprehensive income and the remaining amount of change in the fair value of that liability is presented in profit or loss, unless the recognition of the effects of changes in the liability’s credit risk in other comprehensive income would create or enlarge an accounting mismatch in profit or loss. Changes in fair value attributable to a financial liability’s credit risk are not subsequently reclassified to profit or loss. If the above accounting treatment would create or enlarge an accounting mismatch in profit or loss, the Company presents all gains or losses on that liability in profit or loss.

Hedge accounting

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Effective date

2) IFRS 13 “Fair Value Measurement”

3) Amendments to IAS 1 “Presentation of Items of Other Comprehensive Income”

4) Amendments to IAS 36 “Recoverable Amount Disclosures for Non-financial Assets”

In issuing IFRS 13 “Fair Value Measurement”, the IASB made some consequential amendments to the disclosure requirements in IAS 36 “Impairment of Assets”, introducing a requirement to disclose in every reporting period the recoverable amount of an asset or each cash-generating unit. The amendment clarifies that the disclosure of such recoverable amount is required during the period when an impairment loss has been recognized or reversed. Furthermore, the Company is required to disclose the discount rate used in current and previous measurements of the recoverable amount based on fair value less costs of disposal measured using a present value technique.

5) New issued IFRIC 21 “Levies”

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

6) Annual Improvements to IFRSs: 2010-2012 Cycle

Several standards including IFRS 2 “Share-Based Payment”, IFRS 3 “Business Combinations” and IFRS 8 “Operating Segments” were amended in this annual improvement.

The amended IFRS 2 changes the definitions of “vesting condition” and “market condition” and adds definitions for “performance condition” and “service condition”. The amendment clarifies that a performance target can be based on the operations (i.e. a non-market condition) of the Company or another entity in the same group or the market price of the equity instruments of the Company or another entity in the same group (i.e. a market condition); that a performance target can relate either to the performance of the Company as a whole or to some part of it (e.g. a division);

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and that the period for achieving a performance condition must not extend beyond the end of the related service period. In addition, a share market index target is not a performance condition because it not only reflects the performance of the Company, but also of other entities outside the Company.

The amended IFRS 8 requires an entity to disclose the judgments made by management in applying the aggregation criteria to operating segments, including a description of the operating segments aggregated and the economic indicators assessed in determining whether the operating segments have “similar economic characteristics”. The amendment also clarifies that a reconciliation of the total of the reportable segments’ assets to the entity’s assets should only be provided if the segments’ assets are regularly provided to the chief operating decision-maker.

IAS 24 was amended to clarify that a management entity providing key management personnel services to the Company is a related party of the Company. Consequently, the Company is required to disclose as related party transactions the amounts incurred for the service paid or payable to the management entity for the provision of key management personnel services. However, disclosure of the components of such compensation is not required.

7) Annual Improvements to IFRSs: 2011-2013 Cycle

Several standards including IFRS 3, IFRS 13 and IAS 40 “Investment Property” were amended in this annual improvement.

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

c. Significant impending changes in accounting policy resulted from the amendments to the Regulations Governing the Preparation of Financial Reports by Securities Issuers in issue but not yet effective

As of the date the financial statements were authorized for issue, the Company is continuingly assessing the possible impact that the application of the above New IFRSs will have on the Company’s financial position and operating result, and will disclose the relevant impact when the assessment is complete.

4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The accompanying parent company only financial statements are the first annual parent company only financial statements prepared in accordance with the Guidelines Governing the Preparation of Financial Reports by Securities Issuers amended on December 22, 2011.

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For the convenience of readers, the accompanying parent company only financial statements have been translated into English from the original Chinese version prepared and used in the R.O.C. If there is any conflict between the English version and the original Chinese version or any difference in the interpretation of the two versions, the Chinese-language parent company only financial statements shall prevail.

Statement of Compliance

The accompanying parent company only financial statements have been prepared in conformity with the Guidelines Governing the Preparation of Financial Reports by Securities Issuers (the “Accounting Standards Used in Preparation of the Parent Company Only Financial Statements”).

Basis of Preparation

The financial statements have been prepared on the historical cost basis except for financial instruments that are measured at fair values. Historical cost is generally based on the fair value of the consideration given in exchange for assets.

When preparing its parent company only financial statements, the Company used equity method to account for its investment in subsidiaries, associates and jointly controlled entities. In order for the amounts of the net profit for the year, other comprehensive income for the year and total equity in the parent company only financial statements to be the same with the amounts attributable to the owner of the Company in its consolidated financial statements, adjustments arising from the differences in accounting treatment between parent company only basis and consolidated basis were made to investments accounted for by equity method, share of profit or loss of subsidiaries, associates and joint ventures, share of other comprehensive income of subsidiaries, associates and joint ventures and related equity items, as appropriate, in the parent company only financial statements.

Classification of Current and Non-current Assets and Liabilities

Current assets include:

a. Assets held primarily for the purpose of trading;
b. Assets expected to be realized within twelve months after the reporting period; and
c. Cash and cash equivalents unless the asset is restricted from being exchanged or used to settle a liability for at least twelve months after the reporting period.

Current liabilities include:

a. Liabilities held primarily for the purpose of trading;
b. Liabilities due to be settled within twelve months after the reporting period, even if an agreement to refinance, or to reschedule payments, on a long-term basis is completed after the reporting period and before the financial statements are authorized for issue; and
c. Liabilities for which the Company does not have an unconditional right to defer settlement for at least twelve months after the reporting period. Terms of a liability that could, at the option of the counterparty, result in its settlement by the issue of equity instruments do not affect its classification.

Assets and liabilities that are not classified as current are classified as non-current.

The Company engages in the construction business, which has an operating cycle of over one year, the normal operating cycle applies when considering the classification of the Company’s construction-related assets and liabilities.

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Foreign Currencies

Non-monetary items that are measured in terms of historical cost in a foreign currency are not retranslated.

For the purposes of presenting financial statements, the assets and liabilities of the Group’s foreign operations (including of the subsidiaries, associates, joint ventures or branches operations in other countries or currencies used different with the Company) are translated into New Taiwan dollars using exchange rates prevailing at the end of each reporting period. Income and expense items are translated at the average exchange rates for the period. Exchange differences arising are recognized in other comprehensive income attributed to the owners of the Company and non-controlling interests as appropriate.

Inventories

Investment in Associates

An associate is an entity over which the Company has significant influence and that is neither a subsidiary nor an interest in a joint venture.

The results and assets and liabilities of associates are incorporated in these financial statements using the equity method of accounting. Under the equity method, an investment in an associate is initially recognized at cost and adjusted thereafter to recognize the Company’s share of the profit or loss and other comprehensive income of the associate. The Company also recognizes the changes in the Company’s share of equity of associates attributable to the Company.

When the Company subscribes for additional new shares of the associate at a percentage different from its existing ownership percentage, the resulting carrying amount of the investment differs from the amount of the Company’s proportionate interest in the associate. The Company records such a difference as an adjustment to investments with the corresponding amount charged or credited to capital surplus. If the Company’s ownership interest is reduced due to the additional subscription of the new shares of associate, the proportionate amount of the gains or losses previously recognized in other comprehensive income in relation to that associate is reclassified to profit or loss on the same basis as would be required if the investee had directly disposed of the related assets or liabilities. When the adjustment should be debited to capital surplus, but the capital surplus recognized from investments accounted for by the equity method is insufficient, the shortage is debited to retained earnings.

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When the Company’s share of losses of an associate equals or exceeds its interest in that associate which includes any carrying amount of the investment accounted for by the equity method and long-term interests that, in substance, form part of the Company’s net investment in the associate, the Company discontinues recognizing its share of further losses. Additional losses and liabilities are recognized only to the extent that the Company has incurred legal obligations, or constructive obligations, or made payments on behalf of that associate.

Any excess of the cost of acquisition over the Company’s share of the net fair value of the identifiable assets and liabilities of an associate recognized at the date of acquisition is recognized as goodwill, which is included within the carrying amount of the investment and is not amortized. Any excess of the Company’s share of the net fair value of the identifiable assets and liabilities over the cost of acquisition, after reassessment, is recognized immediately in profit or loss.

The Company discontinues the use of the equity method from the date on which it ceases to have significant influence. Any retained investment is measured at fair value at that date and the fair value is regarded as its fair value on initial recognition as a financial asset. The difference between the previous carrying amount of the associate attributable to the retained interest and its fair value is included in the determination of the gain or loss on disposal of the associate. The Company accounts for all amounts previously recognized in other comprehensive income in relation to that associate on the same basis as would be required if that associate had directly disposed of the related assets or liabilities.

When the Company transacts with its associate, profits and losses resulting from the transactions with the associate are recognized in the Company’ financial statements only to the extent of interests in the associate that are not related to the Company.

Property, Plant and Equipment

Property, plant and equipment are stated at cost, less subsequent accumulated depreciation and subsequent accumulated impairment loss.

Freehold land is not depreciated.

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Investment Properties

Impairment of Tangible and Intangible Assets Other Than Goodwill

Financial Instruments

Financial assets and financial liabilities are recognized when a group entity becomes a party to the contractual provisions of the instruments.

a. Financial assets

All regular way purchases or sales of financial assets are recognized and derecognized on a trade date basis/settlement date basis.

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1) Measurement category

a) Financial assets at fair value through profit or loss

Financial assets are classified as at fair value through profit or loss when the financial asset is either held for trading or it is designated as at fair value through profit or loss.

b) Held-to-maturity investments

Subsequent to initial recognition, held-to-maturity investments are measured at amortized cost using the effective interest method less any impairment.

c) Available-for-sale financial assets

Dividends on available-for-sale equity instruments are recognized in profit or loss when the Company’s right to receive the dividends is established.

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can be reliably measured, the financial assets are remeasured at fair value. The difference between carrying amount and fair value is recognized in profit or loss or other comprehensive income on financial assets. Any impairment losses are recognized in profit and loss.

d) Loans and receivables

2) Impairment of financial assets

For available-for-sale equity investments, a significant or prolonged decline in the fair value of the security below its cost is considered to be objective evidence of impairment.

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3) Derecognition of financial assets

b. Equity instruments

Equity instruments issued by the Company are recognized at the proceeds received, net of direct issue costs.

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c. Financial liabilities

1) Subsequent measurement

Except the following situation, all the financial liabilities are measured at amortized cost using the effective interest method:

a) Financial liabilities at fair value through profit or loss

Financial liabilities are classified as at fair value through profit or loss when the financial liability is either held for trading or it is designated as at fair value through profit or loss.

b) Financial guarantee contracts

c) Commitments to provide a loan at a below-market interest rate

2) Derecognition of financial liabilities

d. Convertible bonds

The component parts of compound instruments (convertible bonds) issued by the Company are classified separately as financial liabilities and equity in accordance with the substance of the contractual arrangements and the definitions of a financial liability and an equity instrument.

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Convertible bonds issued by the Company that contain both liability and conversion option components are classified separately into respective items on initial recognition. The conversion option that will be settled other than by the exchange of a fixed amount of cash or other financial asset for a fixed number of the Company’s own equity instruments is classified as a conversion option derivative. At the date of issue, both the liability and conversion option components are recognized at fair value.

e. Derivative financial instruments

The Company enters into derivative financial instruments, including foreign exchange forward contracts, to manage its exposure to interest rate and foreign exchange rate risks, including.

Revenue Recognition

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a. Sale of goods

Revenue from the sale of goods is recognized when the goods are delivered and titles have passed, at which time all the following conditions are satisfied:

1) The Company has transferred to the buyer the significant risks and rewards of ownership of the goods;
2) The Company retains neither continuing managerial involvement to the degree usually associated with ownership nor effective control over the goods sold;
3) The amount of revenue can be measured reliably;
4) It is probable that the economic benefits associated with the transaction will flow to the Company; and
5) The costs incurred or to be incurred in respect of the transaction can be measured reliably.

The Company does not recognize sales revenue on materials delivered to subcontractors because this delivery does not involve a transfer of risks and rewards of materials ownership.

Sales of goods that result in award credits for customers, under the Company’s award scheme, are accounted for as multiple element revenue transactions and the fair value of the consideration received or receivable is allocated between the goods supplied and the award credits granted. The consideration allocated to the award credits is measured by reference to their fair value, the amount for which the award credits could be sold separately. Such consideration is not recognized as revenue at the time of the initial sale transaction but is deferred and recognized as revenue when the award credits are redeemed and the Company’s obligations have been fulfilled.

b. Dividend and interest income

Dividend income from investments is recognized when the shareholder’s right to receive payment has been established provided that it is probable that the economic benefits will flow to the Company and the amount of income can be measured reliably.

Interest income from a financial asset is recognized when it is probable that the economic benefits will flow to the Company and the amount of income can be measured reliably. Interest income is accrued on a time basis, by reference to the principal outstanding and at the effective interest rate applicable.

Leasing

a. The Company as lessor

Amounts due from lessees under finance leases are recognized as receivables at the amount of the Company’s net investment in the leases. Finance lease income is allocated to accounting periods so as to reflect a constant periodic rate of return on the Company’s net investment outstanding in respect of the leases.

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b. The Company as lessee

Assets held under finance leases are initially recognized as assets of the Company at their fair value at the inception of the lease or, if lower, at the present value of the minimum lease payments. The corresponding liability to the lessor is included in the balance sheets as a finance lease obligation.

Minimum lease payments are apportioned between finance expenses and reduction of the lease obligation so as to achieve a constant rate of interest on the remaining balance of the liability. Finance expenses are recognized immediately in profit or loss, unless they are directly attributable to qualifying assets, in which case they are capitalized in accordance with the Company’s general policy on borrowing costs. Contingent rents are recognized as expenses in the periods in which they are incurred.

When the Company sales and leasebacks a property, the excess of sales proceeds over the carrying amount resulted from the sale of the property is deferred and amortized over the lease term regardless of operating lease or finance lease. For indefinite lease term, the excess is amortized over 10 years.

Borrowing Costs

Investment income earned on the temporary investment of specific borrowings pending their expenditure on qualifying assets is deducted from the borrowing costs eligible for capitalization.

Other than stated above, all other borrowing costs are recognized in profit or loss in the period in which they are incurred.

Government Grants

Government grants are not recognized until there is reasonable assurance that the Company will comply with the conditions attaching to them and that the grants will be received.

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Government grants are recognized in profit or loss on a systematic basis over the periods in which the Company recognizes as expenses the related costs for which the grants are intended to compensate. Specifically, government grants whose primary condition is that the Company should purchase, construct or otherwise acquire non-current assets are recognized as a deduction from the carrying amount of the relevant asset and recognized in profit or loss on a systematic and rational basis over the useful lives of the related assets.

Retirement Benefit Costs

Payments to defined contribution retirement benefit plans are recognized as an expense when employees have rendered service entitling them to the contributions.

Curtailment or settlement gains or losses on the defined benefit plan are recognized when the curtailment or settlement occurs.

Other Long-term Employee Benefits

Employee Share Options

Employee share options granted to employee

Equity-settled share-based payments to employees and others providing similar services are measured at the fair value of the equity instruments at the grant date.

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Taxation

Income tax expense represents the sum of the tax currently payable and deferred tax.

a. Current tax

According to the Income Tax Law, an additional tax at 10% of unappropriated earnings is provided for as income tax in the year the shareholders approve to retain the earnings.

Adjustments of prior years’ tax liabilities are added to or deducted from the current year’s tax provision.

b. Deferred tax

Deferred tax is recognized on temporary differences between the carrying amounts of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit. Deferred tax liabilities are generally recognized for all taxable temporary differences. Deferred tax assets are generally recognized for all deductible temporary differences, unused loss carry forward and unused tax credits for purchases of machinery, equipment and technology, research and development expenditures, and personnel training expenditures to the extent that it is probable that taxable profits will be available against which those deductible temporary differences can be utilized. Such deferred tax assets and liabilities are not recognized if the temporary difference arises from goodwill or from the initial recognition (other than in a business combination) of other assets and liabilities in a transaction that affects neither the taxable profit nor the accounting profit.

Deferred tax liabilities are recognized for taxable temporary differences associated with investments in subsidiaries and associates, and interests in joint ventures, except where the Company is able to control the reversal of the temporary difference and it is probable that the temporary difference will not reverse in the foreseeable future. Deferred tax assets arising from deductible temporary differences associated with such investments and interests are only recognized to the extent that it is probable that there will be sufficient taxable profits against which to utilize the benefits of the temporary differences and they are expected to reverse in the foreseeable future.

Deferred tax liabilities and assets are measured at the tax rates that are expected to apply in the period in which the liability is settled or the asset realized, based on tax rates (and tax laws) that have been enacted or substantively enacted by the end of the reporting period. The measurement of deferred tax liabilities and assets reflects the tax consequences that would follow from the manner in which the Company expects, at the end of the reporting period, to recover or settle the carrying amount of its assets and liabilities.

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c. Current and deferred tax for the year

5. CRITICAL ACCOUNTING JUDGMENTS AND KEY SOURCES OF ESTIMATION AND

UNCERTAINTY

In the application of the Company’s accounting policies, management is required to make judgments, estimates and assumptions about the carrying amounts of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered relevant. Actual results may differ from these estimates.

Held-to-maturity Financial Assets

Management has reviewed the Company’s held-to-maturity financial assets in light of its capital maintenance and liquidity requirements and has confirmed the Company’s positive intention and ability to hold those assets to maturity.

Income Taxes

As of December 31, 2013, December 31, 2012 and January 1, 2012, the carrying amount of deferred tax assets in relation to unused tax losses was $23,692 thousand, $45,558 thousand and $92,805 thousand, respectively. The realizability of the deferred tax asset mainly depends on whether sufficient future profits or taxable temporary differences will be available. In cases where the actual future profits generated are less than expected, a material reversal of deferred tax assets may arise, which would be recognized in profit or loss for the period in which such a reversal takes place.

Estimated Impairment of Trade Receivables

When there is objective evidence of impairment loss, the Company takes into consideration the estimation of future cash flows. The amount of the impairment loss is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows (excluding future credit losses that have not been incurred) discounted at the financial asset’s original effective interest rate. Where the actual future cash flows are less than expected, a material impairment loss may arise.

Fair Value of Financial Instruments

As described in Note 30, the Company’s management uses its judgment in selecting an appropriate valuation technique for financial instruments that do not have quoted market price in an active market. Valuation techniques commonly used by market practitioners are applied. For derivative financial instruments, assumptions were based on quoted market rates adjusted for specific features of the instruments. Debt instruments were valued using a discounted cash flow analysis based on assumptions supported, where possible, by observable market prices or rates. The estimation of fair value of listed equity instruments traded in emerging market and unlisted equity instruments was based on the analysis in relation to the financial position and the operation results of investees, recent transaction prices, prices of same equity instruments not quoted in active markets, quoted prices of similar instruments in active markets, valuation multiples of comparable entities, not including assumptions based on unobservable market prices

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or rates. As of December 31, 2013, December 31, 2012 and January 1, 2012, the carrying amount of these equity instruments was $44,510 thousand, $54,997 thousand and $47,200 thousand, respectively. The Company’s management believes that the chosen valuation techniques and assumptions used are appropriate in determining the fair value of financial instruments.

Write-down of Inventory

Recognition and Measurement of Defined Benefit Plans

6. CASH AND CASH EQUIVALENTS

	December 31,	December 31,	December 31,	December 31,
		2013		2012	January 1, 2012
Cash on hand	$	587	$	652	$	1,098
Demand deposits and check accounts		315,182		664,560		353,496
Cash equivalents
Time deposits with original maturities less than
three		262,434		-		140,000
Repurchase agreements collateralized by bonds		490,000		347,000		43,000
	$	1,068,203	$	1,012,212	$	537,594

The market rate intervals of cash in bank repurchase agreements collateralized by bonds at the end of the reporting period were as follows:

	December 31,	December 31,
	2013	2012	January 1, 2012
Deposits in banks	0.02%-3.4%	0.02%-3.1%	0.02%-1.23%
Repurchase agreements collateralized by bonds	0.68%-0.71%	0.8%-0.825%	0.76%

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7. FINANCIAL ASSETS AND LIABILITIES AT FAIR VALUE THROUGH PROFIT OR LOSS

		December 31,	December 31,	December 31,
		2013		2012 January 1, 2012
Financial assets held for trading
Non-derivative financial assets
Convertible bonds		$ -	$	- $ 3,922
Financial liabilities held for trading
Derivative financial assets (not under hedge
accounting)
Forward exchange contracts		$ 17,329	$	26,019 $ 7,758
Outstanding forward exchange contracts consisted		of the following:
				Contract Amount
	Currency	Maturity Date		(In Thousands)
December 31, 2013
Sell	USD/NTD	2014.01.24-2014.03.03		USD13,000/NTD383,792
Sell	USD/JPY	2014.01.14-2014.03.10		USD17,000/JPY1,733,929
December 31, 2012
Sell	USD/NTD	2013.01.02-2013.03.26		USD24,500/NTD714,837
Sell	USD/JPY	2013.01.04-2013.03.05		USD19,000/JPY1,561,562
Buy	JPY/NTD	2013.01.10-2013.02.20		JPY160,000/NTD58,484
January 1, 2012
Sell	USD/NTD	2012.01.03-2012.04.09		USD55,000/NTD1,656,290
Sell	USD/JPY	2012.01.04-2012.03.09		USD21,000/JPY1,629,455
Sell	NTD/JPY	2012.01.04-2012.02.06		NTD141,889/JPY360,000

The Company entered into cross-currency swap contracts during the years ended December 31, 2013 and 2012 to manage exposures due to exchange rate and interest rate fluctuations of foreign currency denominated assets and liabilities. However, those contracts did not meet the criteria of hedge effectiveness and therefore were not accounted for by using hedge accounting.

As of December 31, 2012, the Company holds 3-year convertible cooperate bonds issued by Super Dragon Technology Co., Ltd. with a coupon rate of 0%.

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8. AVAILABLE-FOR-SALE FINANCIAL ASSETS

9.	December 31, 2013 December 31, 2012 January 1, 2012 Domestic investments Current Mutual funds $ 49,414 $ 46,895 $ 71,867 Noncurrent Listed shares and emerging market shares $ 44,510 $ 54,997 $ 47,200 HELD-TO-MATURITY FINANCIAL ASSETS December 31, 2013 December 31, 2012 January 1, 2012 Noncurrent Corporate bonds - Chinatrust $ 47,840 $ - $ -

In 2013, the Company bought 3-year bank debentures issued by Chinatrust with a coupon rate of 2.9% and an effective interest rate of 2.9%.

10. FINANCIAL ASSETS MEASURED AT COST

	December 31,	December 31,
	2013	2012	January 1, 2012
Domestic unlisted common shares	$ 101,000	$ 101,000	$ 101,000
Overseas unlisted common shares	46,478	46,478	46,478
Overseas unlisted professed shares	50,767	50,767	50,767
	$ 198,245	$ 198,245	$ 198,245

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

11. OTHER FINANCIAL ASSETS

	December 31,	December	31,
	2013	2012		January 1, 2012
Current
Time deposits with original maturity more than 3
months	$ 24,443	$	-	$	-

The market interest rates of the time deposits with original maturity more than 3 months were 3.2% per annum from January 1 to December 31, 2013.

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12. NOTES, ACCOUNTS RECEIVABLE AND OTHER RECEIVABLES

	December 31,	December 31,	December 31,	December 31,
		2013		2012	January 1, 2012
Notes receivable
Notes receivable - operating	$	1,190	$	518	$	360
Less: Allowance for impairment loss		(6)		(3)		(33)
	$	1,184	$	515	$	327
Accounts receivable
Accounts receivable	$	2,348,625	$	2,988,689	$	2,783,280
Accounts receivable - related parties		113,273		54,795		48,086
		2,461,898		3,043,484		2,831,366
Less: Allowance for impairment loss		(15,380)		(19,226)		(17,796)
Less: Allowance for impairment loss - related
parties		(57)		(85)		(31)
	$	2,446,461	$	3,024,173	$	2,813,539
Other receivables
Income tax refund receivable	$	15,279	$	26,346	$	19,374
Equipment payment receivable		33,469		-		16,933
Others		2,022		1,720		2,375
	$	50,770	$	28,066	$	38,682

The average credit period on sales of goods was 60 to 120 days. No interest was charged on trade receivables. In determining the recoverability of a trade receivable, the Company considered any change in the credit quality of the trade receivable since the date credit was initially granted to the end of the reporting period. Historical experience shows that the Company recognized an allowance in accordance with the proportion of accounts receivable of each customers.

Age of receivables that are past due and had been evaluated impairment was as follow:

	December 31,	December 31,	December 31,
		2013	2012	January 1, 2012
31-60 days	$	2,965	$ 18,853	$	9,443
61-90 days		127	3,398		4,579
91-365 days		-	2,621		481
	$	3,092	$ 24,872	$	14,503

Above analysis was based on the past due date.

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Movement in the allowance for impairment loss recognized on notes receivable and trade receivables were as follow:

Balance, beginning of period Add (deduct): Provision for (reversal of) doubtful accounts Deduct: Amounts written off Balance, end of period Balance, beginning of period Add: Provision for doubtful accounts Deduct: Amounts written off Balance, end of period	For the Year Ended December 31	For the Year Ended December 31
	2013 2012 Notes Receivable Notes Receivable $ 3 $ 33 3 (30) - - $ 6 $ 3 For the Year Ended December 31	2012
	2013 Trades Receivable $ 19,311 51 (3,925) $ 15,437	2012
		Trades Receivable $ 17,827 1,677 (193) $ 19,311

13. INVENTORIES

	December 31,	December 31,	December 31,	December 31,
		2013		2012	January 1, 2012
Finished goods	$	291,843	$	257,249	$	294,333
Work in process		244,009		237,584		162,837
Raw materials		150,235		143,955		116,924
Supplies and spare parts		28,734		38,547		45,789
Merchandise		430,631		330,830		302,721
Land to be development		36,910		14,802		872
	$	1,182,362	$	1,022,967	$	923,476

As of December 31, 2013 and 2012, the allowance for inventory devaluation was $34,840 thousand and $32,507 thousand, respectively.

The cost of inventories recognized as cost of goods sold in the years ended December 31, 2013 and 2012 included $6,827,004 thousand and $7,769,177 thousand, respectively, which included $10,069 thousand and $18,366 thousand, respectively, due to write-downs of inventories.

14. INVESTMENTS ACCOUNTED FOR USING EQUITY METHOD

	December 31,	December 31,
	2013	2012	January 1, 2012
Investments in subsidiaries	$ 4,263,503	$ 3,776,959	$ 3,323,982

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Investments in Subsidiaries

	December 31,	December 31,
	2013	2012	January 1, 2012
Unlisted companies
Taiwan Crystal Technology International Ltd.	$ 3,943,223	$ 3,467,150	$ 3,184,704
TXC Technology Inc.	13,491	11,378	12,942
TXC Japan Corporation	12,013	11,517	14,863
Taiwan Crystal Technology (HK) Limited	294,776	286,914	111,473
	$ 4,263,503	$ 3,776,959	$ 3,323,982

As the end of the reporting period, the proportion of ownership and voting rights in subsidiaries held by the Company were as follows:

	December 31,	December 31,
Name of Subsidiaries	2013	2012	January 1, 2012
Taiwan Crystal Technology International Ltd.	100%	100%	100%
TXC Technology Inc.	100%	100%	100%
TXC Japan Corporation	100%	100%	100%
Taiwan Crystal Technology (HK) Limited	100%	100%	100%

The summarized financial information in respect of the Company’s associates was set out below:

In December 31, 2013, the equity-method investees’ financial statements, which had been used to determine the carrying amount of the Company’s investments share of profit and other comprehensive income of associates, had been audited.

15. PROPERTY, PLANT AND EQUIPMENT

Cost Balance at January 1, 2012 Additions Disposals Reclassification Transfer from investment property Fire loss Balance at December 31, 2012 Accumulated depreciation and impairment Balance at January 1, 2012 Disposals Depreciation expenses Reclassification Transfer from investment property Fire loss Balance at December 31, 2012 Carrying value at January 1, 2012 Carrying value at December 31, 2013			For the Year	Ended December 31, 2013
	F	reehold Land Land Improvements $ 598,145 $ 593 - - - - - (442 ) - - - - $ 598,145 $ 151 $ - $ 520 - - - 25 - (442 ) - - - - $ - $ 103 $ 598,145 $ 73 $ 598,145 $ 48	Buildings $ 1,598,916 71,708 (13,488 ) (128,481 ) 3,715 (62,447) $ 1,469,923 $ 359,937 (13,488 ) 84,122 (130,575 ) 3,091 (29,467) $ 273,620 $ 1,238,979 $ 1,196,303	Machinery and Equipment Transportatio n Equipment $ 3,807,057 $ 2,557 384,142 - (89,570 ) - (1,852,951 ) (2,557 ) - - (4,909) - $ 2,243,769 $ - $ 2,360,877 $ 2,557 (62,954 ) - 384,169 - (1,849,953 ) (2,557 ) - - (3,199) - $ 828,940 $ - $ 1,446,180 $ - $ 1,414,829 $ -	Office Equipment Total $ 141,243 $ 6,148,511 16,651 472,501 (1,307 ) (104,365 ) (65,261 ) (2,049,692 ) - 3,715 (1,008) (68,364) $ 90,318 $ 4,402,306 $ 102,599 $ 2,826,490 (1,307 ) (77,749 ) 20,392 488,708 (65,035 ) (2,048,562 ) - 3,091 (902) (33,568) $ 55,747 $ 1,158,410 $ 38,644 $ 3,322,021 $ 34,571 $ 3,243,896 (Continued)

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Cost Balance at January 1, 2013 Additions Disposals Balance at December 31, 2013 Accumulated depreciation and impairment Balance at January 1, 2013 Disposals Depreciation expenses Balance at December 31, 2013 Carrying value at December 31, 2013			For the Year	Ended December 31, 2013
	F	reehold Land Land Improvements $ 598,145 $ 151 - - - - $ 598,145 $ 151 $ - $ 103 - - - 25 $ - $ 128 $ 598,145 $ 23	Buildings $ 1,469,923 5,144 - $ 1,475,067 $ 273,620 - 87,361 $ 360,981 $ 1,114,086	Machinery and Equipment Transportatio n Equipment $ 2,243,769 $ - 262,468 - (82,474) - $ 2,423,763 $ - $ 828,940 $ - (48,326 ) - 362,368 - $ 1,142,982 $ - $ 1,280,781 $ -	Office Equipment Total $ 90,318 $ 4,402,306 5,641 273,253 (380) (82,854) $ 95,579 $ 4,592,705 $ 55,747 $ 1,158,410 (380 ) (48,706 ) 19,355 469,109 $ 74,722 $ 1,578,813 $ 20,857 $ 3,013,892 (Concluded)

For the years ended December 31, 2013 and 2012, the Company did not recognize any impairment loss.

The above items of property, plant and equipment were depreciated on a straight-line basis at the following rates per annum:

Land improvements	6 years
Buildings
Industrial building	35-61 years
Electrical power systems	4-10 years
Engineering systems	1-17 years
Equipment
Major production equipments	1-15 years
Temperature control systems	4-7 years
Transportation equipments	4-7 years
Transportation equipments	3-8 years
Office equipment	2-6 years

The major component parts of the buildings held by the Company included (plants, electro-powering machinery and engineering systems, etc.), which were depreciated over their estimated useful lives.

Refer to Note 32 for the carrying amount of property, plant and equipment that had been pledged by the Company to secure borrowings/general banking facilities granted to the Company.

16. INVESTMENT PROPERTIES

	Completed
	Investment
	Property
Cost
Balance at January 1, 2012	$ 14,234
Transferred to property, plant and equipment	(3,715)
Balance at December 31, 2012	$ 10,519
	(Continued)

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	Completed	Completed
	Investment
	Property
Accumulated depreciation and impairment
Balance at January 1, 2012	$	(6,598)
Transferred to property, plant and equipment		3,091
Depreciation expense		(205)
Balance at December 31, 2012	$	(3,712)
Net amount at January 1, 2012	$	7,636
Net amount at December 31, 2012	$	6,807
Cost
Balance at January 1, 2013	$	10,519
Transferred to property, plant and equipment		-
Balance at December 31, 2013	$	10,519
Accumulated depreciation and impairment
Balance at January 1, 2013	$	(3,712)
Transferred to property, plant and equipment		-
Depreciation expense		(206)
Balance at December 31, 2013	$	(3,918)
Net amount at January 1, 2013	$	6,807
Net amount at December 31, 2013	$	6,601
	(Concluded)

The investment properties held by the Company were depreciated over their useful lives of 6-61 years, using the straight-line method.

The fair value of the Company’s investment properties as of December 31, 3013 and 2012 was $93,236 thousand and $55,110 thousand, respectively. The fair value valuation had not been performed by independent qualified professional valuers; however, management of the Company used the valuation model that market participants would use in determining the fair value the valuation was arrived at by reference to market evidence of transaction prices for similar properties.

All of the Company’s investment property was held under freehold interests. The carrying amount of the investment properties that had been pledged by the Company to secure borrowings/general banking facilities granted to the Company were reflected in Note 32.

187 -

17. OTHER ASSETS

	December 31,	December 31,	December 31,
		2013	2012	January 1, 2012
Current
Prepayments	$	4,521	$ 11,745	$ 28,616
Others		5,147	2,985	5,706
	$	9,668	$ 14,730	$ 34,322
Noncurrent
Others	$	7,853	$ 10,707	$ 16,411

18. BORROWINGS

a. Short-term borrowings

	December 31,	December 31,
	2013	2012	January 1, 2012
Unsecured borrowings
Letters of credit	$ 92,498	$ 135,332	$ 294,419
The letters of credit interest rate on the bank loans was 0.96%-1.903% per annum (December 31, 2012:
0.96%-1.024%, January 1, 2012: 0.6%-1.25% per annum).

b. Long-term borrowings

	December 31,	December 31,	December 31,	December 31,
		2013		2012	January 1, 2012
Secured borrowings(Note 33)
Bank loans (1)	$	737,500	$	611,438	$	714,188
Unsecured borrowings
Line of credit borrowings (2)		550,000		1,275,000		600,000
Less: Current portion		(400,000)		(448,938)		(227,750)
Long-term borrowings: Non-current	$	887,500	$	1,437,500	$	1,086,438

1) The weighted average effective interest rate on the bank loan was 1.15%-1.255% per annum (December 31, 2012: 1.155%-1.255%, January 1, 2012: 0.95%-1.250% per annum). See Note 32 for collaterals on long-term loans.
2) The interest rate of the line of credit borrowings on the bank loans was 1.17%-1.18% per annum (December 31, 2012: 1.1%-1.255%, January 1, 2012: 0.98%-1.161% per annum).
188 -

19. BONDS PAYABLE

	December 31,	December 31,	December 31,
	2013		2012	January 1, 2012
Unsecured domestic convertible bonds	$ 800,000	$	556,100	$ 799,400
Less: Discount on bonds payable	(34,663)		(21)	(10,033)
Less: Current portion	-		(556,079)	-
	$ 765,337	$	-	$ 789,367

On January 25, 2013, the Corporation issued forth unsecured domestic convertible bonds with an aggregate value of $800,000 thousand to pay off borrowings and purchase equipment.

Other details of the bond issuance are summarized as follows:

a. Issue date: January 25, 2013.
b. Total issue amount: $800,000 thousand.
c. Issue price: 100%.
d. Par value: $100 thousand.
e. Coupon rate: 0%.
f. Repayment term: The bonds are repayable on January 25, 2016 upon the maturity of the bonds.
g. Conversion right: Holder can request for conversion of the bonds to the Corporation’s common stock.
h. Conversion period: From February 26, 2013 to January 15, 2016.
i. Conversion price: The original conversion price per share is $46.5. The conversion price is subject to adjustment based on a certain formula if there are changes in outstanding shares or execution of conversion below market price.
j. Redemption of bonds
1) Redemption on the maturity date: On the maturity date, the Corporation will redeem the bonds of the principal amounts.
2) Early redemption on the maturity date:
- a) During the period of time between one month after issuance and the 40th day before maturity, if the closing price of the Corporation’s shares reaches 30% of the conversion price for 30 consecutive trading days, the Corporation may redeem the remaining bonds at a price of their book value.
- b) During the period of time between one month after issuance and the 40th day before maturity, when over 90% of the bonds had been redeemed, bought back or converted, the Corporation may redeem the remaining bonds at a price of their book value.
189 -
k. Converted bond: As of December 31, 2013, there is no bonds had been converted into common stocks.

Proceeds from issue Liability component at the date of issue Embedded derivatives (less transaction costs allocated to the financial liabilities of $2 thousand) Equity component (less transaction costs allocated to the equity component of $288 thousand) Bonds converted into common stock Interest expenses calculated by effective interest rate Liability component at December 31, 2013	$ 800,000 (5,001) 318 (45,632) - 15,652 $ 765,337

Movements of the conversion option derivative instrument in the current period were as follows:

	The Conversion
	Option
	Derivative
	Instrument
Issued date	$ 318
Fair value changes loss	(318)
Balance at December 31, 2013	$ -

20. NOTES PAYABLE AND TRADE PAYABLES

	December	December	31,	December	December	31,
		2013			2012		January 1, 2012
Notes payable
Notes payable - operating	$		-	$		-	$	73,999
Trade payables
Trade payables - operating	$	404,028		$	726,007		$	668,794

The average credit period on purchases of certain goods was 2-3 months. The Company has financial risk management policies in place to ensure that all payables are paid within the pre-agreed credit terms.

190 -

21. OTHER LIABILITIES

	December 31,	December 31,	December 31,	December 31,
		2013		2012	January 1, 2012
Current
Other payables
Bonus to employees, directors and supervisors	$	117,831	$	144,759	$	132,203
Commission		65,533		58,234		65,249
Salaries		33,784		36,070		32,229
Bonus		114,327		44,765		125,811
Payables for annual leave		15,896		15,549		14,488
Others		182,450		187,606		123,858
	$	529,821	$	486,983	$	493,838
Other liabilities
Receipts under custody	$	4,245	$	12,255	$	7,961
Others		9,440		7,004		4,536
	$	13,685	$	19,259	$	12,497
Non-current
Guarantee deposits received	$	28,328	$	26,829	$	11,664

22. RETIREMENT BENEFIT PLANS

a. Defined contribution plans

The pension plan under the Labor Pension Act (the “LPA”) is a defined contribution plan. Based on the LPA, the Company makes monthly contributions to employees’ individual pension accounts equal to 6% of monthly salaries and wages.

The Corporation has set up appointed manager’s pension fund and contributes monthly an amount of not less than 8% of the appointed manager’s monthly salaries and wages to the Bank of Taiwan.

b. Defined benefit plans

The Company has defined benefit plans under the Labor Standards Law that provide benefits based on an employee’s length of service and average monthly salary for the six-month period prior to retirement. The aforementioned companies contribute an amount equal to 4% of salaries paid each month to their respective pension funds (the Funds), which are administered by the Labor Pension Fund Supervisory Committee (the Committee) and deposited in the Committee’s name in the Bank of Taiwan.

191 -

Discount rate Future salary rate increase Expected rate of return on plan assets	Measurement Date
	December 31, 2013 December 31, 2012 January 1, 2012 1.750% 1.375% 1.500% 2.000% 1.875% 2.000% 2.000% 2.000% 2.000%

The pension costs of the defined benefit plans recognized in profit or loss were as follows:

Current service cost Interest cost Expected return on plan assets Past service cost	For the Year Ended December 31	For the Year Ended December 31	For the Year Ended December 31
		2013 $ 2,185 1,049 (906) - $ 2,328	2012 $ 2,004 982 (835) 173 $ 2,324

The pension costs of the aforementioned defined benefit plans were recognized in profit or loss by the following categories:

Cost of goods sold Marketing expenses Research and development expenses General and administrative expenses	For the Year Ended	For the Year Ended	December 31
		2013 $ 1,086 286 475 481 $ 2,328	2012 $ 1,175 279 423 447 $ 2,324

For the years ended December 31, 2013 and 2012, the pre-tax actuarial loss recognized in other comprehensive income were $10,164 thousand and $10,026 thousand, respectively. As of December 31, 2013 and 2012, the pre-tax accumulated actuarial loss recognized in other comprehensive income were $20,190 thousand and $10,026 thousand, respectively.

The amounts arising from the defined benefit obligation of the Company in the balance sheets were as follows:

	December 31,	December 31,
	2013	2012	January 1, 2012
Present value of defined benefit obligation	$ (94,533)	$ (83,975)	$ (71,529)
Fair value of plan assets	60,370	52,553	45,938
Accrued pension cost	$ (34,163)	$ (31,422)	$ (25,591)

192 -

Movements in the present value of the defined benefit obligation were as follows:

Balance, beginning of year Current service cost Interest cost Actuarial loss Past service cost Benefits paid Balance, end of year	For the Year Ended December 31	For the Year Ended December 31	For the Year Ended December 31
		2013 $ 83,975 2,185 1,049 9,946 - (2,622) $ 94,533	2012 $ 71,529 2,004 982 9,662 173 (375) $ 83,975

Movements in the fair value of the plan assets were as follows:

Balance, beginning of year Expected return on plan assets Actuarial loss Contributions from employer Benefits paid Balance, end of year	For the Year Ended December 31	For the Year Ended December 31	For the Year Ended December 31
		2013 $ 52,553 906 (218) 9,751 (2,622) $ 60,370	2012 $ 45,938 835 (364) 6,519 (375) $ 52,553

The percentage of the fair value of the plan assets by major categories at the end of reporting period was as follows:

Cash Equity instruments Debt instruments Other	Fair Value of Plan Assets (%)
	December 31, 2013 December 31, 2012 January 1, 2012 22.86 23.39 23.87 44.77 38.29 40.75 31.58 37.58 35.38 0.79 0.74 - 100.00 100.00 100.00

The overall expected rate of return on plan assets was based on the historical return trends, analysts’ predictions of the market over the life of related obligation, reference to the performance of the Funds operated by the Committee and the consideration of the effect that the minimum return should not be less than the average interest rate on a two-year time deposit published by the local banks.

193 -

The Company elects to disclose the historical information of experience adjustments from the adoption of Accounting Standards Used in Preparation of Parent Company Only Financial Statements, which is as follows:

	December 31,	December 31,	December 31,	December 31,
		2013		2012	January 1, 2012
Present value of defined benefit obligation	$	(94,533)	$	(83,975)	$ (71,529)
Fair value of plan assets	$	(60,370)	$	52,553	$ 45,938
Deficit	$	(34,163)	$	(31,422)	$ (25,591)
Experience adjustments on plan liabilities	$	(10,709)	$	(9,622)	$ -
Experience adjustments on plan assets	$	(218)	$	(364)	$ -

The Company expects to make a contribution of $9,751 thousand and $6,519 thousand, respectively to the defined benefit plans during the annual period beginning after 2013 and 2012.

23. EQUITY

a. Capital stock

Ordinary shares

Ordinary shares
	December 31,	December 31,
	2013	2012	January 1, 2012
Numbers of shares authorized (in thousands)	500,000	500,000	400,000
Shares authorized	$ 5,000,000	$ 5,000,000	$ 4,000,000
Number of shares issued and fully paid (in
thousands)	309,757	309,757	302,242
Shares issued	$ 3,097,570	$ 3,097,570	$ 3,022,423

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

50,000 thousand shares and 20,000 thousand shares of the Company’s shares authorized were reserved for the issuance of convertible bonds and employee share options.

b. Capital surplus

A reconciliation of the carrying amount at the beginning and at the end of year ended 2013 and 2012, for each class of capital surplus was as follows:

Balance at January 1, 2012 Arising from conversion of bonds Arising from employee share options Balance at December 31, 2012	Share Premium $ 325,830 - - $ 325,830	Employee Share Options $ 217,947 - 67,999 $ 285,946	Share Warrants $ 39,884 (12,139) - $ 27,745	Bonds Conversion Premium Total $ 772,417 $ 1,356,078 204,611 192,472 - 67,999 $ 977,028 $ 1,616,549 (Continued)

194 -

Balance at January 1, 2013 Recognition of option premium on issue of convertible bonds Balance at December 31, 2013	Share Premium $ 325,830 - $ 325,830	Employee Share Options $ 285,946 - $ 285,946	Share Warrants $ 27,745 - $ 27,745	Bonds Conversion Premium Total $ 977,028 $ 1,616,549 45,632 45,632 $ 1,022,660 $ 1,662,181 (Concluded)

The capital surplus from long-term investments, employee share options and share warrants may not be used for any purpose.

c. Retained earnings and dividend policy

Appropriation of earnings and dividend policy

1) Employee bonus - not less than 3%.
2) Directors and supervisors’ remuneration - not more than 2%.
3) Stock bonuses to employees include subsidiaries’ employees who meet certain criteria set by the stockholders’ meetings.

195 -

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

Legal reserve Cash dividends	Appropriation of Earnings For Fiscal For Fiscal Year 2012 Year 2011 $ 114,889 $ 105,021 681,465 664,934	Dividends Per Share (NT$)
		For Fiscal For Fiscal Year 2012 Year 2011 $ - $ - 2.2 2.2

The bonus to employees and the remuneration to directors and supervisors for 2012 and 2011 approved in the shareholders’ meetings on June 19, 2013 and June 13, 2012, respectively, were as follows:

Employee bonus Directors and supervisors’ remuneration	For Fiscal Year 2012 Cash Bonus Share Bonus $ 124,079 $ - 20,680 -	For Fiscal Year 2011
		Cash Bonus Share Bonus $ 113,317 $ - 18,886 -

196 -

Reports by Securities Issuers (revised) and International Financial Reporting Standards. Thus, they are still subject to the resolution of the shareholders’ meeting to be held on June 19, 2013.

The Company’s shareholders also resolved to issue cash dividends and bonus to employees and the remuneration to directors in the shareholders’ meeting on June 15 , 2014.

d. Special reserves appropriated following first-time adoption of IFRSs

The Company’s special reserves appropriated following first-time adoption of IFRSs were as follows:

	December 31,	December	December	31,
	2013		2012		January 1, 2012
Special reserve	$ 222,793	$		-	$	-

24. NET PROFIT FROM CONTINUING OPERATIONS

Net profit from continuing operations had been arrived at after charging

a. Other income

Interest income Income from government grants Dividends income Others Other gains and losses Gain/(loss) on disposal of property, plant and equipment Gain on disposal of investment Net loss arising on financial assets designated as at FVTPL Foreign exchange gains Impairment loss on financial assets Other expense	For the Year Ended December 31	For the Year Ended December 31	For the Year Ended December 31
	2013 2012 $ 7,211 $ 4,697 6,316 418 1,035 3,954 36,342 37,720 $ 50,904 $ 46,789 For the Year Ended December 31
		2013 $ - 6,368 (17,647) 47,487 (21,072) (205) $ 14,931	2012 $ 231 1,094 (25,857) 42,004 - (2,257) $ 15,215

b. Other gains and losses
197 -

c. Impairment loss on financial assets

For the Year Ended	For the Year Ended	December 31
2013 $ (21,072) For the Year Ended		2012 $ - December 31
2013 $ (20,466) (15,673) $ (36,139) For the Year Ended		2012 $ (19,342) (9,871) $ (29,213) December 31
	2013 $ 469,109 206 27,775 $ 497,090 $ 395,210 776 24,359 48,970 $ 469,315 $ 3,383 4,269 11,199 8,924 $ 27,775	2012 $ 488,708 205 12,697 $ 501,610 $ 402,473 834 24,601 61,005 $ 488,913 $ 958 - 8,469 3,270 $ 12,697

198 -

f. Employee benefits expense

For the Year Ended	For the Year Ended	December 31
2013 $ 26,255 2,328 28,583 757,104 $ 785,687 $ 452,859 332,828 $ 785,687 For the Year Ended		2012 $ 23,897 2,324 26,221 778,310 $ 804,531 $ 476,077 328,454 $ 804,531 December 31
2013 $ 299,641 (252,154) $ 47,487 For the Year Ended		2012 $ 359,012 (317,008) $ 42,004 December 31
	2013 $ (10,069)	2012 $ (18,366)

25. INCOME TAXES RELATING TO CONTINUING

a. Income tax recognized in profit or loss

The major components of tax expense (income) were as follows:

Current tax In respect of the current period Income tax of unappropriated earnings Adjustments for prior year Deferred tax In respect of the current period Income tax expense recognized in profit or loss	For the Year Ended	For the Year Ended	December 31
		2013 $ 21,455 35,253 6,832 63,540 24,878 $ 88,418	2012 $ 35,128 28,026 (1,614) 61,540 48,385 $ 109,925

199 -

A reconciliation of accounting profit and current income tax expenses is as follows:

Profit before tax from continuing operations Income tax expense at the 17% statutory rate Tax effect of adjusting items: Undetectable expenses and losses Tax-exempt income Tax-exempt income for five years Additional income tax on unappropriated earnings Investment tax credits Adjustment for prior years’ tax Income tax expense recognized in profit or loss	For the Year Ended December 31	For the Year Ended December 31	For the Year Ended December 31
		2013 $ 1,023,579 $ 174,009 4,547 (55,599) (40,979) 35,253 (35,645) 6,832 $ 88,418	2012 $ 1,259,459 $ 214,108 743 (62,728) (57,373) 28,026 (11,236) (1,615) $ 109,925

b. Income tax expense recognized in other comprehensive income

Deferred income tax expense (benefit) Related to actuarial gain/loss from defined benefit plans	For the Year Ended December 31	For the Year Ended December 31	For the Year Ended December 31
		2013 $ (3,432)	2012 $ -

c. Current income tax assets and liabilities

	December 31,	December 31,
	2013	2012	January 1, 2012
Current income tax liabilities
Income tax payable	$ 59,371	$ 63,155	$ 57,404

d. Deferred income tax balance

The analysis of deferred income tax in the balance sheets was as follows:

Year ended December 31, 2013

Deferred tax assets Unrealized loss on inventories Unrealized exchange loss Financial assets at fair value through profit or loss Payable for annual leave	Recognized in
	Balance, Beginning of Year Profit or Loss Other Comprehensive Income Balance, End of Year $ 5,527 $ 396 $ - $ 5,923 2,051 (2,051) - - 4,423 (1,477) - 2,946 2,643 59 - 2,702 (Continued)

200 -

Determine benefit obligation Investment tax credits Others Deferred tax liabilities Unrealized exchange profit Associates	Recognized in
	Balance, Beginning of Year Profit or Loss Other Comprehensive Income Balance, End of Year $ 5,649 $ (1,264) $ 3,432 $ 7,817 25,045 (21,065) - 3,980 220 104 - 324 $ 45,558 $ (25,298) $ 3,432 $ 23,692 $ 6,524 $ (420) $ - $ 6,104 124,436 - - 124,436 $ 130,960 $ (420) $ - $ 130,540 (Concluded)

Year ended December 31, 2012

Deferred tax assets
Unrealized loss on inventories
Unrealized exchange loss
Financial assets at fair value through profit or
loss
Payable for annual leave
Determine benefit obligation
Property, plant and equipment
Investment tax credits
Others
Deferred tax liabilities
Unrealized exchange loss
Associates

Recognized in

Balance,
Beginning of
Year
Profit or Loss
Other
Comprehensive
Income
Balance, End of
Year
$ 5,431
$ 96
$ -
$ 5,527
250
1,801
-
2,051
1,319
3,104
-
4,423
2,463
180
-
2,643
6,360
(711)
-
5,649
3,312
(3,312)
-
-
73,457
(48,412)
-
25,045

213

7

-

220
$ 92,805
$ (47,247)
$ -
$ 45,558
$ 5,386
$ 1,138
$ -
$ 6,524
124,436

-

-
124,436
$ 129,822
$ 1,138
$ -
$ 130,960

e. Unused investment tax credits, operating loss carryforward and tax-exemption information

As of December 31, 2013, investment tax credits consisted of the following:

		Remaining
		Creditable	Expiry
Law/Statute	Item	Amount	Year
Statute for Upgrading	Purchase of machinery and	$ 3,980	2014-2016
Industries	equipment

201 -

As of December 31, 2013, the profits generated from the following projects are exempt from income tax for a five-year period:

		Tax-exemption Period
Construction and expansion of	2005	2010 to 2014
Construction and expansion of	2009	2014 to 2018

f. Integrated income tax

	December	December	31,	December	December	31,
		2013			2012		January 1, 2012
Unappropriated earnings
Unappropriated earnings generated before
January 1, 1998	$		-	$		-	$	-
Unappropriated earnings generated on and
after January 1, 1998		2,402,655			2,493,373			2,123,820
	$	2,402,655		$	2,493,373		$	2,123,820
Imputation credits accounts	$	90,043		$	67,705		$	57,799

The creditable ratio for distribution of earnings of 2013 and 2012 was 6.11% and 5.57%, respectively.

According to legal interpretation No. 10204562810 announced by the Taxation Administration of the Ministry of Finance, when calculating imputation credits in the year of frst-time adoption of IFRSs, the cumulative retained earnings include the net increase or net decrease in retained earnings arising from first-time adoption of IFRSs

g. Income tax assessments

The tax returns had been assessed by the tax authorities before 2007 and in 2011, respectively.

202 -

26. EARNINGS PER SHARE

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

Net Profit for the Year

Profit for the period attributable to owners of the Company Effect of dilutive potential ordinary shares: Convertible bonds Employee share option Earnings used in the computation of diluted earnings per share	For the Year Ended	For the Year Ended	December 31
		2013 $ 935,161 12,991 - $ 948,152	2012 $1,149,534 8,193 - $1,157,727

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

Weighted average number of ordinary shares in computation of basic earnings per share Effect of dilutive potential ordinary shares: Convertible bonds Employee share option Bonus issue to employee Weighted average number of ordinary shares used in the computation of diluted earnings per share	For the Year Ended December 31	For the Year Ended December 31	For the Year Ended December 31
		2013 309,757 22,161 - 4,156 336,074	2012 303,070 16,589 514 3,790 323,963

If the Company was able to settle the bonuses paid to employees by cash or shares, the Company presumed that the entire amount of the bonus would be settled in shares and the resulting potential shares were included in the weighted average number of shares outstanding used in the computation of diluted earnings per share, if the shares had a dilutive effect. Such dilutive effect of the potential shares was included in the computation of diluted earnings per share until the shareholders resolve the number of shares to be distributed to employees at their meeting in the following year.

27. SHARE-BASED PAYMENT ARRANGEMENTS

Employee Share Option Plan

203 -

Information on employee share options was as follows:

Balance at January 1 Options granted Options forfeited Options exercised Options expired Balance at December 31 Options exercisable, end of period	For the Year Ended December 31
	2013 2012 Number of Options (In Thousands) Weighted- average Exercise Price (NT$) Number of Options (In Thousands) Weighted- average Exercise Price (NT$) - $ - 2,627 $ 39.7 - - - - - - (2,446) 37.8 - (181) - - - -

Information about outstanding options as of December 31, 2013, December 31, 2012 and January 1, 2012 were as follows:

	December	31,	December	31,
	2013		2012		January	1, 2012
Range of exercise price	$		$		$	39.7
Weighted-average remaining contractual life		-		-	0.94	year

Options granted in December 2007 were priced using the Black-Scholes pricing model and the inputs to the model were as follows:

Grant-date share price (NT$) $58.8 Exercise price (NT$) $58.8 Expected volatility 43.5% Expected life (years) 3.875 years Expected dividend yield 2.42% Risk-free interest rate

28. OPERATING LEASE ARRANGEMENTS

a. The Company as lessee

Operating leases relate to leases of warehouse in trade zone with lease terms 3 years. All operating lease contracts contain clauses for 3-yearly market rental reviews. The Company does not have a bargain purchase option to acquire the leased land at the expiry of the lease periods.

As of December 31, 2013, December 31, 2012 and January 1, 2012, refundable deposits paid under 、 operating lease respectively in $727 thousand $776 thousand and $776 thousand.

204 -

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

	December 31,	December 31,	December	December	31,
		2013		2012		January 1, 2012
Not later than 1 year	$	2,909	$	1,191		$	3,104
Later than 1 year and not later than 5 years		4,364			-		1,191
Later than 5 years		-			-		-
	$	7,273	$	1,191		$	4,295

b. The Company as lessor

Operating leases relate to the investment property owned by the Company with lease terms between 1 to 2 years. All operating lease contracts contain market review clauses in the event that the lessee exercises its option to renew. The lessee does not have a bargain purchase option to acquire the property at the expiry of the lease period.

As of December 31, 2013, December 31, 2012 and January 1, 2012, deposits received under operating leases all amounted to $210 thousand.

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

	December 31,	December 31,	December	December	31,
		2013		2012		January 1, 2012
Not later than 1 year	$	1,260	$	210		$	1,260
Later than 1 year and not later than 5 years		210			-		210
Later than 5 years		-			-		-
	$	1,470	$	210		$	1,470

29. CAPITAL MANAGEMENT

The Company manages its capital to ensure that entities in the Company will be able to continue as going concerns while maximizing the return to stakeholders through the optimization of the debt and equity balance.

The capital structure of the Company consists of net debt (borrowings offset by cash and cash equivalents) and equity attributable to owners of the Company (comprising issued capital, reserves, retained earnings and other equity.

The Company is not subject to any externally imposed capital requirements.

30. FINANCIAL INSTRUMENTS

a. Fair value of financial instruments
1) Fair value of financial instruments not carried at fair value

The management consider that the carrying amounts of financial assets and financial liabilities recognized in the financial statements approximate their fair values.

205 -
2) Fair value measurements recognized in the balance sheets

a) Level 1 fair value measurements are those derived from quoted prices (unadjusted) in active markets for identical assets or liabilities;
b) Level 2 fair value measurements are those derived from inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices); and
c) Level 3 fair value measurements are those derived from valuation techniques that include inputs for the asset or liability that are not based on observable market data (unobservable inputs).

December 31, 2013

Available-for-sale financial assets Securities unlisted in ROC Equity securities Mutual funds Financial liabilities at FVTPL Forward exchange contracts December 31, 2012 Available-for-sale financial assets Securities unlisted in ROC Equity securities Mutual funds Financial liabilities at FVTPL Forward exchange contracts	Level 1 $ - 49,414 $ 49,414 $ - Level 1 $ - 46,895 $ 46,895 $ -	Level 2 $ - - $ - $ 17,329 Level 2 $ - - $ - $ 26,019	Level 3 $ 44,510 - $ 44,510 $ - Level 3 $ 54,997 - $ 54,997 $ -	Total $ 44,510 49,414
				$ 93,924
				$ 17,329
				Total $ 54,997 46,895
				$ 101,892
				$ 26,019

206 -

January 1, 2012

Financial assets at FVTPL Convertible bonds investment Available-for-sale financial assets Securities unlisted in ROC Equity securities Mutual funds Financial liabilities at FVTPL Forward exchange contracts	Level 1 $ 3,922 $ - 71,867 $ 71,867 $ -	Level 2 $ - $ - - $ - $ 7,758	Level 3 $ - $ 47,200 - $ 47,200 $ -	Total $ 3,922
				$ 47,200 71,867
				$ 119,067
				$ 7,758

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

3) Reconciliation of Level 3 fair value measurements of financial assets

December 31, 2013

Balance at January 1, 2013 Purchases Convertible bonds - redemption Total gains or losses In profit or loss Disposals/settlements Net translation differences Balance at December 31, 2013 December 31, 2012 Balance at January 1, 2012 Purchases Total gains or losses In profit or loss Disposals/settlements Net translation differences Balance at December 31, 2012	Available-for- sale Financial Assets
	Unlisted Shares $ 54,997 - - (10,487) - - $ 44,510 Available-for- sale Financial Assets
	Unlisted Shares $ 47,200 7,797 - - - $ 54,997

207 -

4) Valuation techniques and assumptions applied for the purpose of measuring fair value

The fair values of financial assets and financial liabilities were determined as follows:

a) The fair values of financial assets and financial liabilities with standard terms and conditions and traded in active liquid markets are determined with reference to quoted market prices (includes listed redeemable bonds, bills of exchange, corporate bonds and perpetual notes). Where such prices were not available, valuation techniques were applied. The estimates and assumptions used by the Company are consistent with those that market participants would use in setting a price for the financial instrument;
b) The fair values of derivative instruments were calculated using quoted prices. Where such prices were not available, a discounted cash flow analysis was performed using the applicable yield curve for the duration of the instruments for non-optional derivatives, and option pricing models for optional derivatives. The estimates and assumptions used by the Company were consistent with those that market participants would use in setting a price for the financial instrument.
c) The fair values of other financial assets and financial liabilities (excluding those described above) were determined in accordance with generally accepted pricing models based on discounted cash flow analysis.
b. Categories of financial instruments

	December 31,	December 31,
	2013	2012	January 1, 2012
Financial assets
Fair value through profit or loss (FVTPL) (1)	$ -	$ -	$	3,922
Loans and receivables (2)	3,690,720	4,098,945		3,441,936
Held-to-maturity investments (3)	47,840	-		-
Available-for-sale financial assets (4)	93,924	101,892		119,067
Financial assets measured at cost	198,245	198,245		198,245
Financial liabilities
Fair value through profit or loss (FVTPL) (1)	17,329	26,019		7,758
Amortized cost (5)	3,935,471	4,518,395		4,230,459

1) The balances included the carrying amount of structured deposits, forward exchange contracts, bond investment and convertible bonds - redemption.
2) The balances included loans and receivables measured at amortized cost, which comprise cash and cash equivalents, notes receivables, trade and other receivables, other financial assets, and refundable deposits.
3) The balances included the carrying amount of financial bond investment.
4) The balances included the carrying amount of available-for-sale shares and mutual funds.
5) The balances included financial liabilities measured at amortized cost, which comprise short-term and long-term loans, notes, payable, trade and other payables, and bonds issued.
208 -

c. Financial risk management objectives and policies

The Company’s major financial instruments included equity and debt investments, bonds payable, borrowings. The Company’s Corporate Treasury function provides services to the business, coordinates access to domestic and international financial markets, monitors and manages the financial risks relating to the operations of the Company through internal risk reports which analyze exposures by degree and magnitude of risks. These risks include market risk (including currency risk, interest rate risk and other price risk), credit risk and liquidity risk.

The Company sought to minimize the effects of these risks by using derivative financial instruments to hedge risk exposures. The use of financial derivatives was governed by the Company’s policies approved by the board of directors, which provided written principles on foreign exchange risk, interest rate risk, credit risk, the use of financial derivatives and non-derivative financial instruments, and the investment of excess liquidity. Compliance with policies and exposure limits was reviewed by the internal auditors on a continuous basis.

The financial department reported quarterly to the Company’s risk management committee, which monitors risks and policies implemented to mitigate risk exposures.

1) Market risk

The Company’s activities exposed it primarily to the financial risks of changes in foreign currency exchange rates (see (1) below) and interest rates (see (2) below). The Company entered into a variety of derivative financial instruments to manage its exposure to foreign currency risk and interest rate risk, including forward foreign exchange contracts to hedge the exchange rate risk arising on the Company’s foreign currency monetary.

a) Foreign currency risk

Several subsidiaries of the Company had foreign currency sales and purchases, which exposed the Company to foreign currency risk.

The carrying amounts of the Company’s foreign currency denominated monetary assets and monetary liabilities (including those eliminated on consolidation) at the end of the reporting period (see Note 37).

Sensitivity analysis

The Company was mainly exposed to the USD and JPY.

The following table details the Company’s sensitivity to a 1% increase and decrease in New Taiwan dollars (the functional currency) against the relevant foreign currencies. 1% is the sensitivity rate used when reporting foreign currency risk internally to key management personnel and represents management’s assessment of the reasonably possible change in foreign exchange rates. The sensitivity analysis included only outstanding foreign currency denominated monetary items and foreign currency forward contracts designated as cash flow hedges, and adjusts their translation at the end of the reporting period for a 1% change in foreign currency rates. The sensitivity analysis included external loans/borrowings as well as loans/borrowings to foreign operations within the Company where the denomination of the loan is in a currency other than the functional currency of the lender or the borrower. A positive number below indicates an increase in post-tax profit and other equity associated with New Taiwan dollars strengthen 1% against the relevant currency. For a 1% weakening of New Taiwan dollars against the relevant currency, there would be an equal and opposite impact on post-tax profit and other equity and the balances below would be negative.

209 -

Profit or loss	USD Impact For the Year Ended December 31 2013 2012 $ 16,502 $23,386 (i)	JPY Impact
		For the Year Ended December 31
		2013 2012 $ (1,297) $(3,501) (ii)

i. This was mainly attributable to the exposure outstanding on USD receivables and payables, which were not hedged at the end of the reporting period.
ii. This was mainly attributable to the exposure to outstanding JPY payables, which were not hedged, at the end of the reporting period.
b) Interest rate risk

The Company was exposed to interest rate risk because the Company’s bank deposits and the Company borrowed funds at floating interest rates.

The carrying amount of the Company’s financial assets and financial liabilities with exposure to interest rates at the end of the reporting period were as follows.

	December 31,	December 31,	December 31,	December 31,
		2013		2012	January 1, 2012
Fair value interest rate risk
Financial assets	$	776,877	$	347,000	$	183,000
Financial liabilities		765,337		556,079		789,367
Cash flow interest rate risk
Financial assets		315,182		664,560		353,496
Financial liabilities		1,379,998		2,021,770		1,608,607

Sensitivity analysis

The sensitivity analyses below were determined based on the Company’s exposure to interest rates for both derivatives and non-derivative instruments at the end of the reporting period. For floating rate liabilities, the analysis was prepared assuming the amount of the liability outstanding at the end of the reporting period was outstanding for the whole year. A 0.25% basis point increase or decrease was used when reporting interest rate risk internally to key management personnel and represents management’s assessment of the reasonably possible change in interest rates.

If interest rates had been 0.25% basis points higher/lower and all other variables were held constant, the Company’s pre-tax profit for the year ended December 31, 2013 would decrease/increase by $2,662 thousand, which was mainly attributable to the Company’s exposure to interest rates on its floating rate bank deposits and bank borrowings.

2) Credit risk

Credit risk refers to the risk that counterparty will default on its contractual obligations resulting in financial loss to the Company. As at the end of the reporting period, the Company’s maximum exposure to credit risk which will cause a financial loss to the Company due to failure to discharge an obligation by the counterparties and financial guarantees provided by the Company is arising from the carrying amount of the respective recognized financial assets as stated in the balance sheets.

210 -

3) Liquidity risk

The Company manages liquidity risk by monitoring and maintaining a level of cash and cash equivalents deemed adequate to finance the Company’s operations and mitigate the effects of fluctuations in cash flows. In addition, management monitors the utilization of bank borrowings and ensures compliance with loan covenants.

The Company relies on bank borrowings as a significant source of liability. As of December 31, 2013, December 31, 2012 and January 1, 2012, the Company had available unutilized overdraft and short-term bank loan facilities of approximately $2,827,117 thousand, $2,699,721 thousand and $2,871,204 thousand, respectively.

a) Liquidity and interest risk rate tables

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

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

December 31, 2013

	Weighted
	Interest
	Average
	Effective Rate	Less Than
	(%)		1 Year		2-3 Years		4-5 Years		5+ Years			Total
Non-derivative financial
liabilities
Accounts payable	-	$	1,259,288	$	-	$	-	$		-	$	1,259,288
Other payables	-		530,848		-		-			-		530,848
Other current liabilities	-		13,685		-		-			-		13,685
Bonds payable	-		-		765,337		-			-		765,337
Variable interest rate
(liabilities)	0.96-1.255		492,498		862,500		25,000			-		1,379,998
Guarantee deposits received	-		-		28,328		-			-		28,328
December 31, 2012
	Weighted
	Interest
	Average
	Effective Rate	Less Than
	(%)		1 Year		2-3 Years		4-5 Years		5+ Years			Total
Non-derivative financial
liabilities
Accounts payable	-	$	1,453,477	$	-	$	-	$		-	$	1,453,477
Other payables	-		487,069		-		-			-		487,069
Other current liabilities	-		19,259		-		-			-		19,259
Bonds payable	-		556,079		-		-			-		556,079
Variable interest rate
(liabilities)	0.96-1.255		584,270		1,200,000		237,500			-		2,021,770
Guarantee deposits received	-		-		26,829		-			-		26,829

211 -

January 1, 2012

	Weighted
	Interest
	Average
	Effective Rate	Less Than
	(%)		1 Year		2-3 Years		4-5 Years		5+ Years			Total
Non-derivative financial
liabilities
Note payable	-	$	73,999	$	-	$	-	$		-	$	73,999
Accounts payable	-		1,264,648		-		-			-		1,264,648
Other payables	-		493,838		-		-			-		493,838
Other current liabilities	-		12,497		-		-			-		12,497
Bonds payable	-		-		789,367		-			-		789,367
Variable interest rate
(liabilities)	0.6-1.25		522,169		698,938		387,500			-		1,608,607
Guarantee deposits received	-		-		11,664		-			-		11,664

b) Liquidity and interest risk rate tables for derivative financial liabilities

The following table detailed the Company’s liquidity analysis for its derivative financial instruments. The table was based on the undiscounted contractual net cash inflows and outflows on derivative instruments that settle on a net basis, and the undiscounted gross inflows and outflows on those derivatives that require gross settlement.

December 31, 2013

On Demand or Less than 1 Month 1-3 Months 3 Months to 1 Year Net settled Foreign exchange forward contracts $ (10,708) $ (6,621) $ - December 31, 2012 On Demand or Less than 1 Month 1-3 Months 3 Months to 1 Year Net settled Foreign exchange forward contracts $ (20,907) $ (5,112) $ - January 1, 2012 On Demand or Less than 1 Month 1-3 Months 3 Months to 1 Year Net settled Foreign exchange forward contracts $ (7,253) $ (665) $ 160	1-5 Years $ - 1-5 Years $ - 1-5 Years $ -	5+ Years $ -
		5+ Years $ -
		5+ Years $ -

212 -

32. RELATED-PARTY TRANSACTIONS

Related parties and their relationships with the Corporation:

a. Trading transactions

Sales of goods Subsidiaries Associates Purchase of goods Subsidiaries Associates Consulting fees Subsidiaries Operating expenses Subsidiaries Associates	For the Year Ended December 31	For the Year Ended December 31	For the Year Ended December 31
		2013 $ 250,137 37,681 $ 287,818 $ 2,594,013 207 $ 2,594,220 $ 95,604 $ - 440 $ 440	2012 $ 203,737 31,563 $ 235,300 $ 2,559,501 275 $ 2,559,776 $ 102,432 $ 484 3,128 $ 3,612

In 2013 and 2012, the selling price and purchasing price were not significantly different from those with third parties, except those for NGB, GPT, CKG, Ningbo Jingyu and TXC HK whose trading price depends on its function within the group.

b. Receivable from and payable to related parties

	December 31,	December 31,	December 31,
	2013		2012	January 1, 2012
Accounts receivable from related parties
Subsidiaries	$ 103,800	$	44,244	$	41,903
Associates	9,473		10,551		6,183
Less: Allowance for impairment loss	(57)		(85)		(31)
	$ 113,216	$	54,710	$	48,055

The outstanding trade receivables from related parties are unsecured.

213 -

c. d.	December 31, 2013 Notes payable from related parties Associates $ - Account payable to related parties Subsidiaries $ 855,083 Associates 177 $ 855,260 The outstanding trade payables from related parties are unsecured. December 31, 2013 Other payable from related parties Subsidiaries $ - Associates 1,027 $ 1,027 Payments for property, plant and equipment Associates Disposal of property, plant and equipment 2013 The Price Gain/Loss Subsidiaries $ 34,148 $ -	December 31, 2013 Notes payable from related parties Associates $ - Account payable to related parties Subsidiaries $ 855,083 Associates 177 $ 855,260 The outstanding trade payables from related parties are unsecured. December 31, 2013 Other payable from related parties Subsidiaries $ - Associates 1,027 $ 1,027 Payments for property, plant and equipment Associates Disposal of property, plant and equipment 2013 The Price Gain/Loss Subsidiaries $ 34,148 $ -	December 31, 2012 January 1, 2012 $ - $ 285 $ 725,416 $ 595,854 2,054 - $ 727,470 $ 595,854 December 31, 2012 January 1, 2012 $ 74 $ - 12 - $ 86 $ - For the Year Ended December 31	December 31, 2012 January 1, 2012 $ - $ 285 $ 725,416 $ 595,854 2,054 - $ 727,470 $ 595,854 December 31, 2012 January 1, 2012 $ 74 $ - 12 - $ 86 $ - For the Year Ended December 31	December 31, 2012 January 1, 2012 $ - $ 285 $ 725,416 $ 595,854 2,054 - $ 727,470 $ 595,854 December 31, 2012 January 1, 2012 $ 74 $ - 12 - $ 86 $ - For the Year Ended December 31	December 31, 2012 January 1, 2012 $ - $ 285 $ 725,416 $ 595,854 2,054 - $ 727,470 $ 595,854 December 31, 2012 January 1, 2012 $ 74 $ - 12 - $ 86 $ - For the Year Ended December 31
					2013 $ 759 2012	2012 $ 692
		The Price Gain/Loss $ 34,148 $ -			The Price $ 26,550	Gain/Loss $ -

e. Compensation of Key Management Personnel

The remuneration of directors and other members of key management personnel for the years ended December 31, 2013 and 2012 were as follows:

Short-term benefits Post-employment benefits	For the Year Ended December 31	For the Year Ended December 31	For the Year Ended December 31
		2013 $ 79,239 2,154 $ 81,393	2012 $ 85,861 1,943 $ 87,804

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

214 -

33. ASSETS PLEDGED AS COLLATERAL OR FOR SECURITY

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

		December 31,	December 31,	December 31,	December 31,
			2013		2012	January 1, 2012
Land		$	573,770	$	573,770	$	573,770
Building	equipment, net		1,111,598		1,193,664		1,236,306
		$	1,685,368	$	1,767,434	$	1,810,076

34. SIGNIFICANT CONTINGENT LIABILITIES AND UNRECOGNIZED COMMITMENTS

In addition to those disclosed in other notes, significant commitments and contingencies of the Company as of December 31, 2013, December 31, 2012 and January 1, 2012 were as follows:

Unused letters of credit amounted to approximately JPY275,956 thousand, JPY189,462 thousand and EUR99 thousand, JPY358,459 thousand as of December 31, 2013, December 31, 2012 and January 1, 2012.

As of December 31, 2013, the Company unrecognized commitments are as follows:

Acquisition of equipment	Contract Amount Paid Amount Unpaid Amount $ 1,620 $ 486 $ 1,134

35. SIGNIFICANT EVENTS AFTER REPORTING PERIOD: NONE

36. EXCHANGE RATE OF FINANCIAL ASSETS AND LIABILITIES DENOMINATED IN FOREIGN CURRENCIES

The significant financial assets and liabilities denominated in foreign currencies were as follows:

December 31, 2013

		Foreign		Carrying
	Currencies		Exchange Rate	Amount
Financial assets
Monetary items
USD	$	90,502	29.805 (USD:NTD)	$ 2,697,406
JPY		755,098	0.2839 (JPY:NTD)	214,372
				(Continued)

215 -

		Foreign		Carrying
	Currencies		Exchange Rate	Amount
Investments accounted for using equity
method
USD	$	453	29.805 (USD:NTD) $	13,491
JPY		42,315	0.2839 (JPY:NTD)	12,013
RMB		866,932	4.8885 (RMB:NTD)	4,237,999
Financial liabilities
Monetary items
USD		35,137	29.805 (USD:NTD)	1,047,245
JPY		1,212,052	0.2839 (JPY:NTD)	344,102
				(Concluded)
December 31, 2012
		Foreign		Carrying
	Currencies		Exchange Rate	Amount
Financial assets
Monetary items
USD	$	119,729	29.136 (USD:NTD) $	3,488,424
JPY		148,631	0.3375 (JPY:NTD)	50,163
Investments accounted for using equity
method
USD		391	29.136 (USD:NTD)	11,378
JPY		34,125	0.3375 (JPY:NTD)	11,517
RMB		805,593	4.66 (RMB:NTD)	3,754,064
Financial liabilities
Monetary items
USD		39,464	29.136 (USD:NTD)	1,149,823
JPY		1,185,853	0.3375 (JPY:NTD)	400,225
January 1, 2012
		Foreign		Carrying
	Currencies		Exchange Rate	Amount
Financial assets
Monetary items
USD	$	99,906	30.29 (USD:NTD) $	3,026,153
JPY		287,359	0.3905 (JPY:NTD)	112,214
				(Continued)

216 -

		Foreign		Carrying
	Currencies		Exchange Rate	Amount
Investments accounted for using equity
method
USD	$	427	30.29 (USD:NTD) $	12,942
JPY		38,062	0.3905 (JPY:NTD)	14,863
RMB		685,704	4.807 (RMB:NTD)	3,296,177
Financial liabilities
Monetary items
USD		35,481	30.29 (USD:NTD)	1,074,719
JPY		1,395,595	0.3905 (JPY:NTD)	544,980
				(Concluded)

37. SEPARATELY DISCLOSED ITEMS

a. Information on significant transactions and information on investees:
1) Lending funds to others. (None)
2) Providing endorsements or guarantees for others. (None)
3) Holding of securities at the end of the period. (Table 1)
4) Aggregate purchases or sales of the same securities reaching NT$300 million or 20 percent of paid-in capital or more. (Table 2)
5) Acquisition of real estate reaching NT$300 million or 20 percent of paid-in capital or more. (None)
6) Disposal of real estate reaching NT$300 million or 20 percent of paid-in capital or more. (None)
7) Purchases or sales of goods from or to related parties reaching NT$100 million or 20 percent of paid-in capital or more. (Table 3)
8) Trade receivables from related parties reaching NT$100 million or 20 percent of paid-in capital or more. (Table 4)
9) Trading in derivative instruments. (Table 5 and Note 7)
10) Others: The business relationship between the parent and the subsidiaries and between each subsidiary, and the circumstances and amounts of any significant transactions between them. (Table 6)
b. Information on investments in mainland China
1) Information on any investee company in mainland China, showing the name, principal business activities, paid-in capital, method of investment, inward and outward remittance of funds, shareholding ratio, investment gain or loss, carrying amount of the investment at the end of the period, repatriated investment gains, and limit on the amount of investment in the mainland China area. (Table 7)
217 -
2) Any of the following significant transactions with investee companies in mainland China, either directly or indirectly through a third area, and their prices, payment terms, and unrealized gains or losses: (TABLE 8)
a) The amount and percentage of purchases and the balance and percentage of the related payables at the end of the period.
b) The amount and percentage of sales and the balance and percentage of the related receivables at the end of the period.
c) The amount of property transactions and the amount of the resultant gains or losses.
d) The balance of negotiable instrument endorsements or guarantees or pledges of collateral at the end of the period and the purposes.
e) The highest balance, the end of period balance, the interest rate range, and total current period interest with respect to financing of funds.
f) Other transactions that have a material effect on the profit or loss for the period or on the financial position, such as the rendering or receiving of services.

38. FIRST-TIME ADOPTION OF IFRSs

The Company’s date of transition to the Regulations was January 1, 2012. The impact of the transition to the Regulations on the Company’s balance sheets and statements of comprehensive income is stated as follows:

a. Reconciliation of balance sheet as of January 1, 2012

				Effect of
			Transition to
	ROC GAAP			IFRSs		IFRSs	Note
Assets
Deferred tax assets - current	$	1,614	$	(1,614)	$	-	e. 1)
Financial assets measured at cost -		245,445		(47,200)		198,245	e. 4)
noncurrent
Available-for-sale financial assets -		-		47,200		47,200	e. 4)
noncurrent
Investments accounted for using equity		3,327,467		(3,485)		3,323,982	e. 2)
method
Property, plant and equipment		3,450,973		(128,952)		3,322,021	d. 3), e. 6)
Investment property		-		7,636		7,636	e. 5)
Deferred tax assets - noncurrent		-		92,805		92,805	e. 1) 2) 3)
Prepayment for equipment		-		119,998		119,998	e. 6)
Other noncurrent assets		24,972		(7,636)		17,336	e. 5)
							(Continued)

218 -

ROC GAAP
Effect of
Transition to
IFRSs
IFRSs
Note
Liabilities
Other payables
$ 479,350
$ 14,488
$ 493,838
e. 2)
Accrued pension cost
9,349
16,242
25,591
e. 3)
Deferred tax Liabilities
46,514
83,308
129,882
e. 1)
Reserve for land value increment tax
3,512
(3,512)
-
d. 3)
Equity
Cumulative translation
adjustments/foreign currency
translation reserve
264,762
(264,762)
-
d. 5), e. 7)
Retained earnings
2,545,465
222,793
2,768,258
d. 5), e. 2)
3)
Unrealized revaluation increment
5,442
(5,442)
-
d. 3)
Net loss not recognized as pension
costs
(15,637)
15,637
-
e. 3)
(Concluded)
Reconciliation of balance sheet as of December 31, 2012
ROC GAAP
Effect of
Transition to
IFRSs
IFRSs
Note
Assets
Deferred tax assets - current
$ 5,697
$ (5,697)
$ -
e. 1)
Financial assets measured at cost -
noncurrent
253,242
(54,997)
198,245
e. 4)
Available-for-sale financial assets -
noncurrent
-
54,997
54,997
e. 4)
Investments accounted for using equity
method
3,780,330
(3,371)
3,776,959
e. 2)
Property, plant and equipment
3,394,698
(150,802)
3,243,896
d. 3), e. 6)
Investment property
-
6,807
6,807
e. 5)
Deferred tax assets - noncurrent
-
45,558
45,558
e. 1), 2), 3)
Prepayment for equipment
-
141,848
141,848
e. 6)
Other noncurrent assets
18,424
(6,807)
11,617
e. 5)
Liabilities
Other payables
471,434
15,549
486,983
e. 2)
Accrued pension cost
14,028
17,394
31,422
e. 3)
Deferred tax Liabilities
98,874
32,086
130,960
e. 1)
Reserve for land value increment tax
3,512
(3,512 )
-
d. 3)
(Continued)

219 -

		Effect of
		Transition to
	ROC GAAP	IFRSs	IFRSs	Note
Equity
Cumulative translation	$ 167,431	$ (264,762 ) $	(97,331 )	d. 5), e. 7)
adjustments/foreign currency
translation reserve
Retained earnings	3,029,417	213,415	3,242,832	d. 5), e. 2)
				3)
Unrealized revaluation increment	5,442	(5,442 )	-	d. 3)
Net loss not recognized as pension	(22,808 )	22,808	-	e. 3)
costs

(Concluded)

c. Reconciliation of statement of comprehensive income for the year ended December 31, 2012

				Effect of
			Transition to
	ROC GAAP			IFRSs		IFRSs	Note
Operating expenses	$	(841,785)	$	643	$	(841,142)	e. 2), 3)
Share of profits of associates and joint		359,392		114		359,506	e. 2)
venture
Income tax expenses		(109,817)		(108)		(109,925)	e. 2), 3)
Other comprehensive income
Exchange differences on translating		-		(97,331)		(97,331)	d. 5), e. 7)
foreign operations
Actuarial loss from defined benefit		-		(10,026)		(10,026)	e. 3)
plans

d. Exemptions from IFRS 1

IFRS 1 establishes the procedures for the Company’s first financial statements prepared in accordance with IFRSs. According to IFRS 1, the Company is required to determine the accounting policies under IFRSs and retrospectively apply those accounting policies in its opening balance sheet at the date of transition to IFRSs, January 1, 2012; except for optional exemptions and mandatory exceptions to such retrospective application provided under IFRS 1. The major optional exemptions the Company adopted are summarized as follows:

1) Investment on subsidiaries, associates and joint venture

The Company elected to take the balanced amounts of investment on subsidiaries, associates and joint venture at December 31, 2011 which applying ROC GAAP, as the amount of January 1, 2012 in the financial statement.

2) Share-based payment transactions

The Company elected to take the optional exemption from applying IFRS 2 “Share-based Payment” retrospectively for the shared-based payment transactions granted and vested before the date of transition.

220 -

3) Deemed cost

4) Employee benefits

The Company elected to recognize all cumulative actuarial gains and losses in retained earnings as of the date of transition. In addition, the Company elected to apply the exemption disclosure requirement provided by IFRS 1, in which the experience adjustments are determined for each accounting period prospectively from the transition date.

5) Cumulative translation differences

The Company elected to reset to zero, the cumulative translation differences at the date of transition to IFRSs, and adjusted retained earnings by the amount of the cumulative translation difference that existed prior to the reset. Gains or losses of a subsequent disposal of any foreign operations will exclude the translation differences that arose before the date of transition to IFRSs.

e. Explanations of significant reconciling items in the transition to IFRSs

Material differences between the accounting policies under ROC GAAP and the accounting policies adopted under IFRSs were as follows:

1) Deferred tax assets/liabilities

Under ROC GAAP, a deferred tax asset or liability is classified as current or noncurrent in accordance with the classification of its related asset or liability. However, if a deferred income tax asset or liability does not relate to an asset or liability in the financial statements, it is classified as either current or noncurrent based on the expected length of time before it is realized or settled. Under IFRSs, a deferred tax asset or liability is classified as noncurrent asset or liability.

As of December 31 and January 1, 2012, the amount reclassified from current deferred income tax assets to non-current assets was $5,697 thousand and $1,614 thousand. Deferred tax liabilities are reclassified to deferred income tax assets respectively in $32,086 thousand and $83,308 thousand.

2) Employee benefits - accumulated compensated absences

As of December 31, 2012 and January 1, 2012, the IFRS adjustment increased accrued expenses by $15,549 thousand and $14,488 thousand; Investment accounted for using equity method decreased by $3,371 thousand and $3,485 thousand; deferred income tax assets - noncurrent increased by $2,643 thousand and $2,463 thousand. Retained earnings decreased by $16,277 thousand and $15,510 thousand. Salaries for the year ended December 31, 2012 increased by $1,061 thousand, share of profits of associates and joint venture increased by $114 thousand, income tax expense decreased by $180 thousand.

221 -
3) Employee benefits - defined benefit plans

The Corporation had previously applied an actuarial valuation on its defined benefit obligation and recognized the related pension cost and retirement benefit obligation in conformity with ROC GAAP. Under IFRSs, the Company should carry out actuarial valuation on defined benefit obligation in accordance with IAS No. 19, “Employee Benefits.”

At the transition date, the Corporation performed the actuarial valuation under IAS No. 19 - “Employee Benefits,” and recognized the valuation difference directly in retained earnings under the requirement of IFRS 1. As of December 31, 2012 and January 1, 2012 the IFRSs adjustment increased accrued pension cost by $17,394 thousand and $16,242 thousand, and decreased net loss not recognized as pension cost by 22,808 thousand and $15,637 thousand, and increased deferred income tax assets - noncurrent by $5,132 thousand and $5,420 thousand, and decreased retained earnings by $35,070 thousand and 26,459 thousand, Another 2012 decreased salary by $1,704 thousand, increase income tax expense 288 thousand, increased actuarial loss adjustment by $10,026 thousand.

4) Financial assets carried at cost

As of December 31, 2012 and January 1, 2012 the amounts reclassified from financial assets carried at costs to available-for-sale financial assets were $54,997 thousand and 47,200 thousand.

5) Classification of investment property

As of December 31, 2012 and January 1, 2012 are amounted to $6,807 thousand and $7,636 thousand, respectively.

6) Prepayments for equipment

Under IFRSs, prepayments for equipment should be classified to other assets. Advance purchase of equipment be classified to prepayments. Generally classified as non-current assets, As of December 31, 2012 and January 1, 2012 are amounted to $141,848 thousand and $119,998 thousand, respectively.

7) Cumulative translation adjustments reset to zero

222 -
f. Significant reconciliation differences in statements of cash flows.

According to ROC GAAP, interest paid and received and dividends received are classified as operating activities while dividends paid are classified as financing activities. Additional disclosure is required for interest expenses when reporting cash flow using indirect method. However, under IAS 7” Statement of Cash Flow”, cash flows from interest and dividends received and paid shall each be disclosed separately. Each shall be classified in a consistent manner from period to period as operating, investing or financing activities. Therefore, interests received by the Company of $4,697 thousand for the three months ended December 31, 2012 and dividends received by the Company of $3,954 thousand were presented separately at the date of transition to IFRSs.

Except for the above differences, there are no other significant differences between ROC GAAP and IFRSs in the statement of cash flows.

223 -

TABLE 1

TXC CORPORATION

MARKETABLE SECURITIES HELD DECEMBER 31, 2013

(In Thousands of New Taiwan Dollars or U.S. Dollars)

Holding Company	Marketable Securities Type and Issuer/Name	Security Issuer’s Relationship with the Holding Company	Financial Statement Account	December 31, 2013	December 31, 2013	December 31, 2013	December 31, 2013	December 31, 2013	Note
				Shares/Units	Carrying Amount		Percentage of Ownership	Market Value or Net Asset Value
TXC Corporation NGB	Mutual fund Shin Kong Cross Strait Selective Fund Shin Kong China Growth Fund Stock - emerging company Win Win Precision Technology Co., Ltd. Stock - unlisted company Marson Technology Co., Ltd. Guandong Failong Crystal Technology Co., Ltd. UPI Semiconductor Corp. Si-Time Corporation Financial bonds Chinatrust unsecured priority financial bond Stock - unlisted company TSE Technology Co. Mutual fund China GuangFa Money Market Fund EFund Money Market Fund Southern Cash Fund China Merchants Fund	None None None None None The director of the board is the Company’s chairman. None None Subsidiary None None None None	Available-for-sale financial assets 〃 Available-for-sale financial assets - noncurrent Financial assets carried at cost 〃〃〃 Held-to-maturity financial assets - noncurrent Investment accounted for by the equity method Financial instruments at FVTPL - current 〃〃〃	2,691 2,177 1,300 414 RMB 10,096 2,000 1,750 RMB 10,000 RMB 10,064 RMB 30,000 RMB 16,500 RMB 30,000 RMB 13,000		$ 27,578 21,836 $ 49,414 $ 44,510 $ 3,000 46,478 98,000 50,767 $ 198,245 $ 47,840 $ 61,747 $ 149,107 82,604 149,504 63,727 $ 444,942	- - 3 5 8 2 1 - 23 - - - -	$ 27,578 21,836 $ 49,414 $ 44,510 No market value 〃〃〃 $ 47,840 No market value $ 149,107 82,604 149,504 63,727 $ 444,942

224 -

TABLE 2

TXC CORPORATION

MARKETABLE SECURITIES ACQUIRED AND DISPOSED OF AT COSTS OR PRICES OF AT LEAST NT$100 MILLION OR 20% OF THE PAID-IN CAPITAL FOR THE YEAR ENDED DECEMBER 31, 2013

(In Thousands of New Taiwan Dollars or U.S. Dollars)

Company Name	Marketable Securities Type and Name	Financial Statement Account	Counterparty	Nature of Relationship	Beginning Balance	Beginning Balance	Acquisition	Acquisition	Disposal	Disposal	Disposal	Disposal	Equity in Net Gain (Loss) (Note)	Ending Balance	Ending Balance
					Shares/Units (In Thousands)	Amount (Foreign Currencies in Thousands)	Shares/Units (In Thousands) (Note 1)	Amount (Foreign Currencies in Thousands)	Shares/Units (In Thousands)	Amount (Foreign Currencies in Thousands)	Carrying Value (Foreign Currencies in Thousands)	Gain (Loss) on Disposal (Foreign Currencies in Thousands)		Shares/Units (In Thousands)	Amount (Foreign Currencies in Thousands)
TXC (Ningbo) Corporation	Structure deposits 〃〃	Financial instruments at FVTPL - current 〃〃	First Sino Bank Ningbo Bank HSBC	None 〃〃	- - -	$ - - -	- - -	$ 728,121 385,504 452,485	- - -	$ 730,927 387,389 452,963	$ 730,927 387,389 452,963	$ - - -	$ 2,806 1,885 478	- - -	$ - - -

Note: The investment loss recognized under equity method and the charge in translation adjustments were included in equity in net gain (loss).

225 -

TABLE 3

TXC CORPORATION

TOTAL PURCHASES FROM OR SALES TO RELATED PARTIES OF AT LEAST NT$100 MILLION OR 20% OF THE PAID-IN CAPITAL FOR THE YEAR ENDED DECEMBER 31, 2013

(In Thousands of New Taiwan Dollars or U.S. Dollars)

Company Name	Related Party	Nature of Relationship		Transaction Details	Transaction Details		Abnormal Transaction	Abnormal Transaction	Notes/Accounts Payable or Receivable	Notes/Accounts Payable or Receivable	Note
			Purchase/ Sale	Amount	% to Total	Payment Terms (Note)	Unit Price	Payment Terms	Ending Balance	% to Total
TXC Corporation TXC (Ningbo) Corporation	TXC (Ningbo) Corporation TXC (Chongqing) Limited Growing Profit Trading Ltd. Growing Profit Trading Ltd. TXC (Chongqing) Limited	Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary	Purchase Sale Purchase Purchase Purchase Purchase	$ 2,338,090 240,664 124,454 105,551 629,240 227,348	38 3 2 2 37 10	Note 〃〃〃〃〃	Its trading price depends on its function within the Company 〃〃〃〃〃	Note 〃〃〃〃〃	$ (807,860) 102,319 (612) (39,053) (260,504) (177,509)	(64) 4 - 3 (35) (24)

Note: The terms of purchases from related parties were not significantly different from those with third parties.

226 -

TABLE 4

TXC CORPORATION

RECEIVABLES FROM RELATED PARTIES AMOUNTING TO AT LEAST NT$100 MILLION OR 20% OF THE PAID-IN CAPITAL DECEMBER 31, 2013

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

Company Name	Related Party	Nature of Relationship	Balance of Accounts Receivable - Related Party	Turnover Rate		Overdue	Amount Received in Subsequent Period	Allowance for Bad Debt
					Amount	Action Taken
TXC Corporation TXC (Ningbo) Corporation Growing Profits Trading Ltd TXC (Chongqing) Corporation	TXC (Ningbo) Corporation TXC Corporation TXC (Ningbo) Corporation TXC (Ningbo) Corporation	Subsidiary Subsidiary Subsidiary Subsidiary	$ 102,319 807,860 260,504 177,509	2.35 3.13 2.42 1.28	$ - - - -	- - - -	$ 58,154 554,012 118,270 44,382	$ - - - -

227 -

TABLE 5

TXC CORPORATION

TRADING IN DERIVATIVE INSTRUMENTS DECEMBER 31, 2013 (In Thousands of New Taiwan Dollars or U.S. Dollars)

TXC (Ningbo) Corporation entered into the trading derivative instruments to manage its exposure to interest rate risks of foreign bonds and borrowings.

As of December 31, 2013, unexpired forward contract was below:

Contract Amount (In Thousand of Currency Expired Period New Taiwan Dollar) December 31, 2013 Sell the forward contract USD/RMB 2014.01.10-2014.06.26 USD20,100/RMB122,736

228 -

TABLE 6

TXC CORPORATION

NAMES, LOCATIONS, AND RELATED INFORMATION OF INVESTEES ON WHICH THE COMPANY EXERCISES SIGNIFICANT INFLUENCE DECEMBER 31, 2013

(In Thousands of New Taiwan Dollars or U.S. Dollars)

Investor Company	Investee Company	Location	Main Businesses and Products	Original Investment Amount	Original Investment Amount	Balance	as of December 31, 2013	as of December 31, 2013	Net Income (Losses) of the Investee	Equity in the Earnings (Losses)	Note
				December 31, 2013	December 31, 2012	Shares (In Thousands)	Percentage of Ownership	Carrying Value
TXC Corporation Taiwan Crystal Technology International Ltd. TXC (Ningbo) Corporation Taiwan Crystal Technology (HK) Limited	Taiwan Crystal Technology International Ltd. TXC Technology Inc. TXC Japan Corporation Taiwan Crystal Technology (HK) Limited Growing Profit Trading Ltd. TXC (Ningbo) Corporation TXC (HK) Limited TXC (Chongqing) Corporation Chongqing All Sun Company Limited Ningbo Jingyu Company Limited TXC (Chongqing) Limited	Western Samoa U.S.A. Japan Hong Kong B.V.I. Ningbo Hong Kong Chongqing Chongqing Ningbo Chongqing	Investment Marketing activities Marketing activities Investment International trading Manufacture and sales of electronics products International trading Manufacture and sales of electronics products Market activities International trading Manufacture and sales of electronics products	$ 1,390,461 9,879 6,172 298,362 1,691 1,487,211 - 396,903 312,644 4,807 298,362	$ 1,390,461 9,879 6,172 298,776 1,691 1,487,211 846 201,823 312,644 4,807 298,362	42,835 300 2 10,080 50 45,835 - 82,710 66,000 1,000 10,080	100.00 100.00 100.00 100.00 100.00 100.00 - 56.73 100.00 100.00 43.27	$ 3,943,223 13,491 12,013 294,776 245,108 3,737,510 - 385,928 322,685 7,216 294,361	$ 320,342 1,963 2,556 (5,214) 46,901 271,167 - (15,435) 549 432 (15,435)	$ 316,118 1,963 2,556 (5,214) 46,901 271,167 - (9,673) 549 432 (5,762)	Difference from upstream transactions $4,560 thousand Note

Note: TXC (HK) Limited was liquidation and change of registration in 2013.

229 -

TABLE 7

TXC CORPORATION

INFORMATION ON INVESTMENT IN MAINLAND CHINA FOR THE YEAR ENDED DECEMBER 31, 2013 (In Thousands of New Taiwan Dollars or U.S. Dollars)

Name of the investees in Mainland China, main businesses and products, paid-in capital, method of investment, information on inflow or outflow of capital, percentage of ownership, investment income or loss, ending balance of investment, dividends remitted by the investee, and the limit of investment in Mainland China:

Investee Company	Main Businesses and Products	Total Amount of Paid-in Capital	Method of Investment	Accumulated Outflow of Investment from Taiwan as of January 1, 2013 (US$ in Thousand)	Investment Flows	Investment Flows	Accumulated Outflow of Investment from Taiwan as of December 31, 2013 (US$ in Thousand)	Investee Company Current Net Income	Percentage of Ownership	Investment Income (Loss) Recognized (Note)	Carrying Amount as of December 31, 2013	Accumulated Inward Remittance of Earnings as of December 31, 2013
					Outflow	Inflow
TXC (Ningbo) Corporation Guandong Failong Crystal Technology Co., Ltd. TSE Technology (Ningbo) Co., Ltd. TXC (Chongqing) Corporation Chongqing All Suns Company Limited Ningbo Jingyu Company Limited	Manufacturing and sales of crystal and crystal oscillator Manufacturing and sales of new electronic components Manufacturing and sales of electronic devices and hardware components Manufacturing and sales of electronic devices and hardware components Real estate intermediary service, real estate management and electronic product wholesale Purchasing and selling electronic component	$ 1,487,211 580,947 139,177 695,265 312,644 4,807	Indirect investment of the Corporation in Mainland China through the Corporation’s subsidiary in a third region Direct investment of the Corporation in Mainland China Other investment of the Corporation Mainland China Indirect investment of the Corporation in Mainland China through the Corporation’s subsidiary in a third region Other investment of the Corporation Mainland China Other investment of the Corporation Mainland China	$ 1,427,630 46,478 - 298,362 - -	$ - - - - - -	$ - - - - - -	$ 1,427,630 46,478 - 298,362 - -	$ 271,167 - 58,460 (15,435) 549 432	100.00 8.00 23.00 100.00 100.00 100.00	$ 271,167 - 13,446 (15,435) 549 432	$ 3,737,510 46,478 61,747 680,289 322,685 7,216	$ 256,146 - - - - -
					(Continued)

230 -
The limited amounts of the investment in Mainland China

(Concluded)

Accumulated Investment in Mainland China as of December 31, 2013 (US$ in Thousand)	Investment Amounts Authorized by Investment Commission, MOEA (US$ in Thousand)	Upper Limit on Investment
$ 1,772,470	$ 1,832,878	$ 4,994,930

Note: The investment in Mainland China is limited to 60% of stockholders’ equity or stockholders’ equity whichever is higher.

231 -

TABLE 8

TXC CORPORATION

SIGNIFICAN TRANSACTIONS WITH INVESTEE COPANIES IN MAINLAND CHINA, EITHER DIRECTLY OR INDIRECTLY THROUGH A THIRD AREA, AND THEIR PRICES, PAYMENT TERMS, AND UNREALIZED GAINS OR LOSSES FOR THE YEAR ENDED DECEMBER 31, 2013

(In Thousands of New Taiwan Dollars)

Significant direct or indirect transactions with the investees, prices and terms of payment, unrealized gain or loss:

Company Name	Related Party	Nature of Relationship	Transaction Details	Transaction Details	Transaction Details	Transaction Details	Transaction Details	Accounts/Notes Receivable/Payable	Accounts/Notes Receivable/Payable	Unrealized Gain or Loss
			Purchase/Sale	Percentage (%)	Price	Payment Term	Compared with Terms of Third Parties	Balance	%
TXC Corporation GPT	NGB CKG NGB	Subsidiary Subsidiary Subsidiary	Purchase $2,338,090 Sale 240,664 Purchase 124,454 Sale 629,240	38 3 2 48	Its trading price depends on its function within the Company. 〃〃〃	Similar with third parties Similar with third parties Similar with third parties Similar with third parties	Its trading price depends on its function within the Company. 〃〃〃	$ (807,860) 102,319 (612) 260,504	64 4 - 68	$ 38,101 1,546 - -

Endorsements guarantees or collateral directly or indirectly provided to the investees: None
Financings directly or indirectly provided to the investees: None
Other transactions that significantly impacted current year’s profit or loss or financial position: None
232 -

AI assistant

TXC — Annual Report 2013

52274_rns_2014-08-21_d477b180-4382-47df-ba39-4148422ed755.pdf

Annual Report 2013 Table of Contents

Enterprise Vision

Vision Statement

Mission Statement

Corporate Culture

I. Business Report

A. Operational achievements in 2013

2. Revenue income and expenditure and profitability:

4. R&D Status

5. Other Project Implementation Results

(3) System Certification

(4) Technology Upgrading

(5) Corporate Governance and Responsibility

(5) Corporate Governance

II.Company Overview

A.Company Introduction

1. Date of the company´s incorporation

2. Company History

B 、 Company Structure and the Subsidiaries

2. The basic data of the subsidiaries

III. Corporate governance

A. Directors

B. Personnel data of the general manager, vice general manager, assistant vice general manager, chief of divisions

C. Corporate governance and variations with management principles of publicly-listed companies and reasons

IV.Capitals and Stocks

A. Source of Capitals

B. Shareholders structures

C. Data on share price, net value, profit, and dividend of the past two years

D. Company’s dividend policy and its current implementation status

1.Dividend policy as defined in the articles of incorporation ：

2.Suggested dividend appropriate in this shareholders’ meeting ：

Profit distribution for 2013

E. Employee bonus and rewards for directors and auditors

F. Buying back company stocks: None

G. Convertible Corporate Bond:

Convertible Corporate bond data

、 V Business Information

A 、 Business Contents

(1). The Major Business Contents

(2). Business Proportions

(4). Scheduled new products development

2 、 The Industry

Potential entrants

Upstream suppliers

3. Development Trend of Crystal Industry

(3). Production trend ：

(a). Slim down and usage of SMD

(b). High frequency modularized 、 high precision ：

(4). Competitions

3. Technology and Recent Research and Development

(2). Research and Development Results

B 、 Marketing & Sales Situation

1 、 Market Analysis

(b) Markets

A. Tablets

B. Smartphones

(3) Booming Internet of Things market

C. Smallcell

SWOT analysis

Advantages Disadvantages

Opportunities

Threatens

Respond Strategies

(2). Manufacturing Process

－ (a). Pre-manufacturing process quartz crystal.

(d) Sapphire substrate process

(e) Light Sensor manufacturing process

、 (4) The suppliers and customers over than 10% of the past two years:

(b). Ten largest clients

、 (5) Production and monetary values for the past two years

、 (6) Volumes of sales and monetary values of the past two years

、 C Employees’ average years in service, age, and educational background distribution of the past two years

D 、 Data on our environmental protection expense

3. Safety and Health Implementation Status

E 、 Employer/Employee Relation

2. Employee education and training:

a. PCF Factory

TXC Annual Report 2013