POLYTRONICS TECHNOLOGY CORP. AND SUBSIDIARIES · POLYTRONICS TECHNOLOGY CORP. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (Expressed in thousands of New Taiwan dollars) (The consolidated

POLYTRONICS TECHNOLOGY CORP. AND

SUBSIDIARIES

CONSOLIDATED FINANCIAL STATEMENTS AND

REVIEW REPORT OF INDEPENDENT

ACCOUNTANTS

JUNE 30, 2015 AND 2014

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For the convenience of readers and for information purpose only, the auditors’ report and the accompanying

financial statements have been translated into English from the original Chinese version prepared and used in

the Republic of China. In the event of any discrepancy between the English version and the original

Chinese version or any differences in the interpretation of the two versions, the Chinese-language auditors’

report and financial statements shall prevail.

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REVIEW REPORT OF INDEPENDENT ACCOUNTANTS TRANSLATED FROM CHINESE

PWCR15000034

To Polytronics Technology Corp.

We have reviewed the accompanying consolidated balance sheets of Polytronics Technology Corp. and

its subsidiaries as of June 30, 2015 and 2014, and the related consolidated statements of

comprehensive income for the three-month and six-month periods then ended, as well as the

consolidated statements of changes in equity and of cash flows for the six-month periods then ended.

These consolidated financial statements are the responsibility of the Company’s management. Our

responsibility is to express a conclusion on these consolidated financial statements based on our

reviews.

We conducted our reviews in accordance with the Statement of Auditing Standards No. 36

“Engagements to Review Financial Statements” in the Republic of China. A review consists primarily

of inquiries of company personnel and analytical procedures applied to financial data. It is

substantially less in scope than an audit conducted in accordance with generally accepted auditing

standards in the Republic of China, the objective of which is the expression of an opinion regarding the

financial statements taken as a whole. Accordingly, we do not express such an opinion.

Based on our reviews, we are not aware of any material modifications that should be made to the

consolidated financial statements referred to above for them to be in conformity with the “Rules

Governing the Preparation of Financial Statements by Securities Issuers” and International Accounting

Standard 34 “Interim Financial Reporting ” as endorsed by the Financial Supervisory Commission.

PricewaterhouseCoopers, Taiwan

August 11, 2015 ------------------------------------------------------------------------------------------------------------------------------------------------- The accompanying financial statements are not intended to present the financial position and results of operations and cash flows in accordance with accounting principles generally accepted in countries and jurisdictions other than the Republic of China. The standards, procedures and practices in the Republic of China governing the audit of such financial statements may differ from those generally accepted in countries and jurisdictions other than the Republic of China. Accordingly, the accompanying financial statements and report of independent accountants are not intended for use by those who are not informed about the accounting principles or auditing standards generally accepted in the Republic of China, and their applications in practice. As the financial statements are the responsibility of the management, PricewaterhouseCoopers cannot accept any liability for the use of, or reliance on, the English translation or for any errors or misunderstandings that may derive from the translation.

POLYTRONICS TECHNOLOGY CORP. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS

(Expressed in thousands of New Taiwan dollars) (The consolidated balance sheets as of June 30, 2015 and 2014 are reviewed, not audited)

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June 30, 2015 December 31, 2014 June 30, 2014 Assets Notes AMOUNT % AMOUNT % AMOUNT %

Current assets

Cash and cash equivalents 6(1) $ 1,021,559 38 $ 797,260 33 $ 912,716 35

Financial assets at fair value through

profit or loss - current

6(2)

- - - - 243 -

Notes receivable, net 98,081 4 111,945 4 93,731 4

Accounts receivable, net 6(4) 357,335 14 310,642 13 376,140 14

Accounts receivable - related parties 6(4) and 7 28,592 1 20,466 1 17,911 1

Other receivables 5,446 - 2,667 - 2,236 -

Inventories, net 6(5) 295,325 11 290,757 12 328,304 12

Prepayments 23,848 1 24,467 1 18,643 1

Other current assets 8 7,867 - 3,286 - 4,890 -

Current Assets 1,838,053 69 1,561,490 64 1,754,814 67

Non-current assets

Non-current financial assets at cost,

net

6(3)

3,000 - - - - -

Property, plant and equipment, net 6(6) 733,882 28 780,428 32 782,706 30

Investment property, net 6(7) 59,601 2 39,607 2 40,008 2

Intangible assets 4,877 - 5,232 - 5,464 -

Deferred income tax assets 10,617 - 9,850 1 10,348 -

Other non-current assets 8 27,197 1 30,978 1 26,859 1

Non-current assets 839,174 31 866,095 36 865,385 33

Total assets $ 2,677,227 100 $ 2,427,585 100 $ 2,620,199 100

(Continued)

POLYTRONICS TECHNOLOGY CORP. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS

(Expressed in thousands of New Taiwan dollars) (The consolidated balance sheets as of June 30, 2015 and 2014 are reviewed, not audited)

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

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June 30, 2015 December 31, 2014 June 30, 2014 Liabilities and Equity Notes AMOUNT % AMOUNT % AMOUNT %

Current liabilities

Short-term borrowings 6(8) $ 7,715 - $ 23,738 1 $ 68,689 2

Financial liabilities at fair value

through profit or loss - current

6(2)

422 - 1,925 - - -

Notes payable 19,378 1 28,492 1 911 -

Accounts payable 6(9) 120,236 5 91,342 4 129,302 5

Other payables 6(10) 549,736 21 207,887 9 566,859 22

Current income tax liabilities 114,088 4 96,324 4 97,510 4

Other current liabilities 4,697 - 2,821 - 3,751 -

Current Liabilities 816,272 31 452,529 19 867,022 33

Non-current liabilities

Other non-current liabilities 30,839 1 29,307 1 29,613 1

Non-current liabilities 30,839 1 29,307 1 29,613 1

Total Liabilities 847,111 32 481,836 20 896,635 34

Equity attributable to owners of

parent

Share capital 6(12)

Share capital - common stock 800,018 30 800,018 33 800,018 30

Capital surplus 6(13)

Capital surplus 235,900 9 235,900 10 235,900 10

Retained earnings 6(14)

Legal reserve 326,834 12 286,766 12 286,766 11

Special reserve 11,982 - 11,982 - 11,982 -

Unappropriated retained earnings 6(22) 438,678 16 582,041 24 387,373 15

Other equity interest 6(15) 16,704 1 29,042 1 1,525 -

Equity attributable to owners

of the parent

1,830,116 68 1,945,749 80 1,723,564 66

Total equity 1,830,116 68 1,945,749 80 1,723,564 66

Significant contingent liabilities and

unrecognised contract commitments

9

Total liabilities and equity $ 2,677,227 100 $ 2,427,585 100 $ 2,620,199 100

POLYTRONICS TECHNOLOGY CORP. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Expressed in thousands of New Taiwan dollars, except earnings per share amount) (UNAUDITED)


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For the three-month periods ended June 30 For the six-month periods ended June 30 2015 2014 2015 2014

Items Notes AMOUNT % AMOUNT % AMOUNT % AMOUNT %

Operating revenue 6(16) $ 444,819 100 $ 456,713 100 $ 826,753 100 $ 821,810 100

Operating costs 6(5)(20)

(21) ( 198,061 ) ( 44 ) ( 219,899 ) ( 48 ) ( 375,112 ) ( 45 ) ( 405,929 ) ( 49 )

Net operating margin 246,758 56 236,814 52 451,641 55 415,881 51

Operating expenses 6(20)(21)

Selling expenses ( 21,444 ) ( 5 ) ( 21,028 ) ( 4 ) ( 40,962 ) ( 5 ) ( 42,401 ) ( 5 )

General & administrative expenses ( 36,232 ) ( 8 ) ( 35,472 ) ( 8 ) ( 71,125 ) ( 9 ) ( 67,607 ) ( 8 )

Research and development expenses ( 29,599 ) ( 7 ) ( 30,306 ) ( 7 ) ( 61,361 ) ( 7 ) ( 60,525 ) ( 8 )

Total operating expenses ( 87,275 ) ( 20 ) ( 86,806 ) ( 19 ) ( 173,448 ) ( 21 ) ( 170,533 ) ( 21 )

Operating profit 159,483 36 150,008 33 278,193 34 245,348 30

Non-operating income and expenses

Other income 6(17) 9,542 2 8,947 2 18,023 2 15,043 2

Other gains and losses 6(18) ( 5,847 ) ( 1 ) ( 9,278 ) ( 2 ) ( 9,465 ) ( 1 ) ( 6,120 ) ( 1 )

Finance costs 6(19) ( 36 ) - ( 429 ) - ( 140 ) - ( 824 ) -

Total non-operating income and

expenses

3,659 1 ( 760 ) - 8,418 1 8,099 1

Profit before tax 163,142 37 149,248 33 286,611 35 253,447 31

Income tax expense 6(22) ( 29,870 ) ( 7 ) ( 29,207 ) ( 7 ) ( 53,898 ) ( 7 ) ( 47,467 ) ( 6 )

Profit for the period $ 133,272 30 $ 120,041 26 $ 232,713 28 $ 205,980 25

Other comprehensive (loss) income

Components of other comprehensive

income that will be reclassified to

profit or loss

Cumulative translation differences of

foreign operations

6(15)

( $ 7,171 ) ( 2 ) ( $ 8,458 ) ( 2 ) ( $ 12,338 ) ( 1 ) ( $ 9,661 ) ( 1 )

Other comprehensive loss for the

period

( $ 7,171 ) ( 2 ) ( $ 8,458 ) ( 2 ) ( $ 12,338 ) ( 1 ) ( $ 9,661 ) ( 1 )

Total comprehensive income for the

period, net of tax

$ 126,101 28 $ 111,583 24 $ 220,375 27 $ 196,319 24

Profit attributable to:

Owners of the parent $ 133,272 30 $ 120,041 26 $ 232,713 28 $ 205,980 25

Comprehensive income attributable to:

Owners of the parent $ 126,101 28 $ 111,583 24 $ 220,375 27 $ 196,319 24

Basic earnings per share 6(23) $ 1.67 $ 1.50 $ 2.91 $ 2.57

Diluted earnings per share 6(23) $ 1.65 $ 1.49 $ 2.87 $ 2.55

POLYTRONICS TECHNOLOGY CORP. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY FOR THE SIX-MONTH PERIODS ENDED JUNE 30, 2015 AND 2014

(Expressed in thousands of New Taiwan dollars) (UNAUDITED)

Equity attributable to owners of the parent

Capital Reserves Retained Earnings

Notes

Share capital

- common stock

Capital surplus

Treasury

stock transactions

Employee stock options

Legal reserve

Special reserve

Unappropriated

retained earnings

Cumulative

translation differences of

foreign operations

Total equity


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For the six-month period ended June 30, 2014

Balance at January 1, 2014 $ 800,018 $ 203,343 $ 14,924 $ 17,633 $ 249,038 $ 11,982 $ 547,129 $ 11,186 $ 1,855,253

Distribution of 2013 earnings

Legal reserve - - - - 37,728 - ( 37,728 ) - -

Cash dividends - - - - - - ( 328,008 ) - ( 328,008 )

Profit for the period - - - - - - 205,980 - 205,980

Other comprehensive loss for the period 6(15) - - - - - - - ( 9,661 ) ( 9,661 )

Balance at June 30, 2014 $ 800,018 $ 203,343 $ 14,924 $ 17,633 $ 286,766 $ 11,982 $ 387,373 $ 1,525 $ 1,723,564


Balance at January 1, 2015 $ 800,018 $ 203,343 $ 14,924 $ 17,633 $ 286,766 $ 11,982 $ 582,041 $ 29,042 $ 1,945,749

Distribution of 2014 earnings

Legal reserve - - - - 40,068 - ( 40,068 ) - -

Cash dividends - - - - - - ( 336,008 ) - ( 336,008 )

Profit for the period - - - - - - 232,713 - 232,713

Other comprehensive loss for the period 6(15) - - - - - - - ( 12,338 ) ( 12,338 )

Balance at June 30, 2015 $ 800,018 $ 203,343 $ 14,924 $ 17,633 $ 326,834 $ 11,982 $ 438,678 $ 16,704 $ 1,830,116

POLYTRONICS TECHNOLOGY CORP. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS


For the six-month periods ended June 30, Notes 2015 2014

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CASH FLOWS FROM OPERATING ACTIVITIES

Consolidated profit before tax for the period $ 286,611 $ 253,447

Adjustments to reconcile profit before tax to net cash

provided by operating activities

Income and expenses having no effect on cash flows

Net loss (gain) on financial assets at fair value through

profit or loss

6(2)

422 ( 243 )

Provision for doubtful accounts 6(4) 388 2,752

Depreciation (including investment property) 6(18)(20) 41,297 41,950

Amortization 6(20) 906 897

Interest expense 6(19) 140 824

Interest income 6(17) ( 5,012 ) ( 4,749 )

Loss on disposal of property, plant and equipment 6(18) ( 86 ) 247

Property, plant and equipment reclassified to expenses - 171

Changes in assets/liabilities relating to operating activities

Net changes in assets relating to operating activities

Financial assets/liabilities at fair value through profit or

loss - current

( 1,925 ) ( 754 )

Notes receivable, net 11,207 ( 28,101 )

Accounts receivable, net ( 49,775 ) ( 82,635 )

Accounts receivable, net - related parties ( 8,126 ) 1,816

Other receivables ( 2,779 ) ( 311 )

Inventories ( 4,568 ) ( 39,579 )

Prepayments 619 227

Other current assets ( 4,581 ) ( 1,578 )

Net changes in liabilities relating to operating activities

Notes payable ( 9,114 ) ( 1,339 )

Accounts payable 28,894 23,132

Other payables 10,177 41,353

Other current liabilities 1,876 1,038

Other non-current liabilities ( 348 ) ( 379 )

Cash generated from operations 296,223 208,186

Interest paid ( 140 ) ( 824 )

Interest received 5,012 4,749

Income tax paid ( 36,901 ) ( 48,963 )

Net cash provided by operating activities 264,194 163,148

(Continued)

POLYTRONICS TECHNOLOGY CORP. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS


For the six-month periods ended June 30, Notes 2015 2014


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CASH FLOWS FROM INVESTING ACTIVITIES

Acquisition of financial assets at cost ( $ 3,000 ) $ -

Decrease (increase) in other non-current assets 3,455 ( 1,953 )

Acquisition of property, plant and equipment 6(25) ( 23,866 ) ( 15,822 )

Proceeds from disposal of property, plant and equipment 205 -

Acquisition of intangible assets ( 588 ) ( 656 )

Increase in deposits - out - ( 657 )

Net cash used in investing activities ( 23,794 ) ( 19,088 )

CASH FLOWS FROM FINANCING ACTIVITIES

Decrease in short-term borrowings ( 15,584 ) ( 9,056 )

Increase in deposits - in 1,880 800

Net cash used in financing activities ( 13,704 ) ( 8,256 )

Effect of exchange rate ( 2,397 ) ( 1,243 )

Increase in cash and cash equivalents 224,299 134,561

Cash and cash equivalents at beginning of period 797,260 778,155

Cash and cash equivalents at end of period 6(1) $ 1,021,559 $ 912,716

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POLYTRONICS TECHNOLOGY CORP. AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

ENDED JUNE 30, 2015 AND 2014

(Expressed in thousands of New Taiwan dollars, except as otherwise indicated)

(Unaudited)

1. HISTORY AND ORGANIZATION

Polytronics Technology Corporation (the “Company”) was incorporated on December 18, 1997 and

started to operate from August 1, 1999. The Company and its subsidiaries (collectively referred herein

as the “Group”) are primarily engaged in research, development, manufacturing and sale of Polymeric

Positive Temperature Coefficent and its production related semi-finished goods, modules, heat

conductive substrate, thermal module, heat dispersing materials, and LED lightings and modules.

2. THE DATE OF AUTHORIZATION FOR ISSUANCE OF THE CONSOLIDATED FINANCIAL

STATEMENTS AND PROCEDURES FOR AUTHORIZATION

These consolidated financial statements were authorized for issuance by the Board of Directors on

August 11, 2015.

3. APPLICATION OF NEW STANDARDS, AMENDMENTS AND INTERPRETATIONS

(1) Effect of the adoption of new issuances of or amendments to International Financial Reporting

Standards (“IFRSs”) as endorsed by the Financial Supervisory Commission (“FSC”)

According to Financial-Supervisory-Securities-Auditing No. 1030010325 issued by FSC on April 3,

2014, commencing 2015, companies with shares listed on the TWSE or traded on the Taipei

Exchange or Emerging Stock Market shall adopt the 2013 version of IFRS (not including IFRS 9,

‘Financial instruments’) as endorsed by the FSC and Regulations Governing the Preparation of

Financial Reports by Securities Issuers effective January 1, 2015 (collectively referred herein as the

“2013 version of IFRS”) in preparing the consolidated financial statements. The impact of adopting

the 2013 version of IFRS is listed below:

A. IAS 1, ‘Presentation of financial statements’

The amendment requires entities to separate items presented in OCI classified by nature into two

groups on the basis of whether they are potentially reclassifiable to profit or loss subsequently

when specific conditions are met. If the items are presented before tax then the tax related to

each of the two groups of OCI items (those that might be reclassified and those that will not be

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

statement of comprehensive income.

B. IFRS 13, ‘Fair value measurement’

The standard defines fair value as the price that would be received to sell an asset or paid to

transfer a liability in an orderly transaction between market participants at the measurement date.

The standard sets out a framework for measuring fair value from market participants’

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perspective, and requires disclosures about fair value measurements. For non-financial assets

only, fair value is determined based on the highest and best use of the asset. Based on the

Group’s assessment, the adoption of the standard has no significant impact on its consolidated

financial statements, and the Group will disclose additional information about fair value

measurements accordingly.

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

the Group

None.

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

New standards, interpretations and amendments issued by IASB but not yet included in the 2013

version of IFRS as endorsed by the FSC:

New Standards, Interpretations and Amendments

Effective date by

International

Accounting

Standards Board

IFRS 9, ‘Financial instruments' January 1, 2018

Sale or contribution of assets between an investor and its associate or

joint venture (amendments to IFRS 10 and IAS 28)

January 1, 2016

Investment entities:applying the consolidation exception (amendments

to IFRS 10, IFRS 12 and IAS 28)

January 1, 2016

Accounting for acquisition of interests in joint operations

(amendments to IFRS 11)

January 1, 2016

IFRS 14, 'Regulatory deferral accounts' January 1, 2016

IFRS 15, ‘Revenue from contracts with customers' January 1, 2018

Disclosure initiative (amendments to IAS 1) January 1, 2016

Clarification of acceptable methods of depreciation and amortisation

(amendments to IAS 16 and IAS 38)

January 1, 2016

Defined benefit plans: employee contributions

(amendments to IAS 19R)

July 1, 2014

Equity method in separate financial statements (amendments to IAS 27) January 1, 2016

Recoverable amount disclosures for non-financial assets

(amendments to IAS 36)

January 1, 2014

Novation of derivatives and continuation of hedge accounting

(amendments to IAS 39)

January 1, 2014

IFRIC 21, ‘Levies’ January 1, 2014

Improvements to IFRSs 2010-2012 July 1, 2014

Improvements to IFRSs 2011-2013 July 1, 2014

Improvements to IFRSs 2012-2014 January 1, 2016

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The Group is assessing the potential impact of the new standards, interpretations and amendments

above. The impact will be disclosed when the assessment it complete.

4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Except for the following, the accounting policies applied in the consolidated financial statements are

consistent with those applied in the consolidated financial statements for the year ended December 31,

2014. These policies have been consistently applied to all the periods presented, unless otherwise

stated.

(1) Compliance statement

A. These consolidated financial statements are prepared by the Group in accordance with the “Rules

Governing the Preparation of Financial Statements by Securities Issuers” and IAS 34, “Interim

Financial Reporting” as endorsed by the FSC.

B. Please refer to the Group’s consolidated financial statements for the year ended December 31,

2014.

(2) Basis of preparation

A.Except for the following items, the consolidated financial statements have been prepared under

the historical cost convention:

(a) Financial assets and financial liabilities (including derivative instruments) at fair value

through profit or loss.

(b) Defined benefit liabilities recognised based on the net amount of pension fund assets less

present value of defined benefit obligation.

B.The preparation of financial statements in conformity with International Financial Reporting

Standards, International Accounting Standards, IFRIC Interpretations, and SIC Interpretations as

endorsed by the FSC (collectively referred herein as the “IFRSs”) requires the use of certain

critical accounting estimates. It also requires management to exercise its judgement in the

process of applying the Group’s accounting policies. The areas involving a higher degree of

judgement or complexity, or areas where assumptions and estimates are significant to the

consolidated financial statements are disclosed in Note 5.

(3) Basis of consolidation

A.Basis for preparation of consolidated financial statements:

The same basis of consolidation have been followed in these consolidated financial statement as

were applied in the preparation of the Group’s consolidated financial statements for the year

ended December 31, 2014.

(Blank below)

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B. Subsidiaries included in the consolidated financial statements:

Name of Investor Name of Subsidiaries Main Business Activities

June 30,

2015

December 31,

2014

June 30,

2014 Note

Polytronics Technology

Corporation

Polytronics (B.V.I)

Corporation

Investments and general

business operations

100 100 100


Corporation

Polycarbide Material Co.,

Ltd.

Manufacturing of electrical

components and wholesale and

retail of chemical raw materials

100 100 100

Polytronics (B.V.I)

Corporation

P-Circuit corporation Investments and general

business operations

100 100 100

P-Circuit Corporation Polystar Electronics Co.,

Ltd.

Production and sale of varistor

and potentiometer

100 100 100

Polystar Electronics Co.,

Ltd.

Hanpu (Kunshan) Trading

Co., Ltd.

Wholesale, import and export

business

100 100 100

Ownership (%)

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

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

E. Significant restrictions: None.

F. Subsidiaries that have non-controlling interests that are material to the Group: None.

(4) Employee benefits

Pension cost for the interim period is calculated on a year-to-date basis by using the pension cost

rate derived from the actuarial valuation at the end of the prior financial year, adjusted for

significant market fluctuations since that time and for significant curtailments, settlements, or other

significant one-off events. And, the related information is disclosed accordingly.

(5) Income tax

The interim period income tax expense is recognised based on the estimated average annual

effective income tax rate expected for the full financial year applied to the pretax income of the

interim period, and the related information is disclosed accordingly.

5. CRITICAL ACCOUNTING JUDGEMENTS, ESTIMATES AND KEY SOURCES OF

ASSUMPTION UNCERTAINTY

There is no significant variation, please refer to the Group’s consolidated financial statements for the

year ended December 31, 2014.

6. DETAILS OF SIGNIFICANT ACCOUNTS

(1) Cash and cash equivalents

A. The Group transacts with a variety of financial institutions all with high credit quality to disperse

credit risk, so it expects that the probability of counterparty default is remote.

B. Details of cash and cash equivalents pledged as collaterals (recorded as ‘other current assets’ and

‘other non-current assets’) are provided in Note 8.

June 30, 2015 December 31, 2014 June 30, 2014

Cash on hand and

revolving funds

$ 581 519$ 601$

Checking accounts and

demand deposits 95,386 82,863 63,344

Time deposits 643,592 564,078 431,131

Cash equivalent

-short-term notes 282,000 149,800 417,640

Total $ 1,021,559 797,260$ 912,716$

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

1. The Group recognized net gain of $941, $1,595, $2,341 and $186 on financial assets (liabilities)

held for trading for the three-month periods ended June 30, 2015 and 2014, and six-month

periods ended June 30, 2015 and 2014, respectively.

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

Note: Expressed in thousands of US dollars.

Items June 30, 2015 December 31, 2014 June 30, 2014

Current items:

Financial assets

(liabilities) held for

trading

Derivative instrument-

forward foreign

exchange contracts

-$ -$ -$

Financial assets

(liabilities) held for

trading valuation

adjustment 422)( 1,925)( 243

Total 422)($ 1,925)($ 243$

Derivative Contract amount Contract Contract amount Contract

instruments (Notional principal) Period (Notional principal) Period

Forward foreign

exchange contracts

500$ 2015/4/30~2015/7/1 500$ 2014/10/31~2015/1/5

Forward foreign

exchange contracts

1,000 2015/5/7~2015/7/1 1,000 2014/11/19~2015/1/5

Forward foreign

exchange contracts

500 2015/5/25~2015/7/29 1,000 2014/12/08~2015/2/5

Forward foreign

exchange contracts

500 2015/5/25~2015/8/3

Forward foreign

exchange contracts

1,000 2015/6/17~2015/8/3

Derivative Contract amount Contract

instruments (Notional principal) Period

Forward foreign

exchange contracts

500$ 2014/6/11~2014/7/15

Forward foreign

exchange contracts

500 2014/6/11~2014/8/1

Forward foreign

exchange contracts

1,000 2014/6/18~2014/8/1

June 30, 2015 December 31, 2014

June 30, 2014

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The Group entered into forward foreign exchange contracts to sell US dollars to hedge exchange

rate risk of export proceeds. However, these forward foreign exchange contracts are not

accounted for under hedge accounting.

(3) Financial assets measured at cost

A.Based on the Group’s intention, its investment in GreenMark Inc. stocks should be classified as

‘available-for-sale financial assets’. However, as GreenMark Inc. stocks are not traded in

active market, and no sufficient industry information of companies similar to GreenMark Inc. or

GreenMark Inc.’s financial information cannot be obtained, the fair value of the investment in

GreenMark Inc. stocks cannot be measured reliably. The Group classified those stocks as

“financial assets measured at cost”.

B.As of June 30, 2015, no financial assets measured at cost held by the Group were pledged to

others.

(4) Accounts receivable

A.The credit quality of accounts receivable that were neither past due nor impaired was in the

following categories based on the Group’s Credit Quality Control Policy:

Group 1: Listed companies or customers who are considered to have good credit conditions.

Group 2:Non-listed companies or customers whose credit conditions are considered to be inferior

than Group 1 customers.

Items June 30, 2015

Non-current items:

Non-listed stocks 3,000$


Accounts receivable 360,089$ 313,116$ 378,819$

Accounts receivable

-related parties 28,592 20,466 17,911

Less: allowance for

bad debts 2,754)( 2,474)( 2,679)(

385,927$ 331,108$ 394,051$


Group 1 192,876$ 167,404$ 191,604$

Group 2 75,078 109,294 100,320

267,954$ 276,698$ 291,924$

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

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

(a) As of June 30, 2015, December 31, 2014 and June 30, 2014, the Group’s accounts receivable

that were impaired amounted to $2,754, $2,474 and $2,679, respectively.

(b) Movement on the Group provision for impairment of accounts receivable are as follows:

D. The Group does not hold any collateral as security.

(5) Inventories


Up to 30 days 57,786$ 40,414$ 55,378$

31 to 90 days 50,305 13,996 46,120

91 to 180 days 9,882 - 629

Over 181 days - - -

117,973$ 54,410$ 102,127$

Individual

provision Group provision Total

At January 1 262$ 2,212$ 2,474$

Provision of impairment 9 379 388

Write-offs during the period - 52)( 52)(

Effects of foreign exchange - 56)( 56)(

At June 30 271$ 2,483$ 2,754$

2015

Individual

provision Group provision Total

At January 1 25$ 6,079$ 6,104$

Provision of impairment 696 2,056 2,752

Write-offs during the period - 6,039)( 6,039)(

Effects of foreign exchange - 138)( 138)(

At June 30 721$ 1,958$ 2,679$

2014


Raw materials 106,330$ 116,646$ 104,574$

Work-in-process 59,960 58,997 82,458

Finished goods 129,035 115,114 141,272

Total 295,325$ 290,757$ 328,304$

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The cost of inventories recognized as expense for the period:

2015 2014

Cost of goods sold 197,777$ 209,017$

Loss on decline in market value 285 10,889

Gain on physical inventory 1)( 7)(

198,061$ 219,899$

For the three-month periods ended June 30

2015 2014

Cost of goods sold 377,905$ 394,936$

(Gain) loss on decline in market value 2,792)( 11,000

Gain on physical inventory 1)( 7)(

375,112$ 405,929$

For the six-month periods ended June 30

~17~

(6) Property, plant and equipment

Buildings Machinery

Office

equipment

Transportation

equipment

Computer and

communication

equipment

Leasehold

improvements

Construction in

progress Others Total

At January 1, 2015

Cost 711,998$ 494,293$ 5,028$ 9,804$ 8,096$ 32,133$ 2,980$ 79,844$ 1,344,176$

Accumulated depreciation

and impairment 143,097)( 324,573)( 2,507)( 7,500)( 6,512)( 30,864)( - 48,695)( 563,748)(

568,901$ 169,720$ 2,521$ 2,304$ 1,584$ 1,269$ 2,980$ 31,149$ 780,428$

For the six-month period

ended June 30, 2015

Opening net book amount 568,901$ 169,720$ 2,521$ 2,304$ 1,584$ 1,269$ 2,980$ 31,149$ 780,428$

Additions - 9,972 780 - 233 - 5,981 1,644 18,610

Disposals - 119)( - - - - - - 119)(

Reclassifications 20,550)( 1,246 - - - - - - 19,304)(

Depreciation charge 14,490)( 18,832)( 338)( 476)( 378)( 321)( - 5,906)( 40,741)(

Net exchange differences 2,295)( 2,249)( 63)( 28)( - - 21)( 336)( 4,992)(

Closing net book amount 531,566$ 159,738$ 2,900$ 1,800$ 1,439$ 948$ 8,940$ 26,551$ 733,882$

At June 30, 2015

Cost 686,802$ 497,332$ 5,706$ 9,676$ 8,256$ 32,133$ 8,940$ 78,227$ 1,327,072$


and impairment 155,236)( 337,594)( 2,806)( 7,876)( 6,817)( 31,185)( - 51,676)( 593,190)(

531,566$ 159,738$ 2,900$ 1,800$ 1,439$ 948$ 8,940$ 26,551$ 733,882$

~18~

1. For the six-month periods ended June 30, 2015 and 2014, there was no capitalization of borrowing interests attributable to the property, plant and

equipment.

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

Buildings Machinery

Office

equipment

Transportation

equipment

Computer and

communication

equipment

Leasehold

improvements

Construction in

progress Others Total

At January 1, 2014

Cost 703,328$ 462,422$ 2,878$ 10,379$ 7,804$ 31,433$ 1,114$ 71,840$ 1,291,198$


and impairment 111,367)( 287,965)( 1,930)( 8,753)( 5,687)( 27,595)( - 39,855)( 483,152)(

591,961$ 174,457$ 948$ 1,626$ 2,117$ 3,838$ 1,114$ 31,985$ 808,046$

For the six-month period

ended June 30, 2014

Opening net book amount 591,961$ 174,457$ 948$ 1,626$ 2,117$ 3,838$ 1,114$ 31,985$ 808,046$

Additions - 10,333 1,670 519 249 700 5,442 2,279 21,192

Disposals - 245)( 2)( - - - - - 247)(

Reclassifications - - - - - - 171)( 880 709

Depreciation charge 14,542)( 18,591)( 204)( 470)( 513)( 2,660)( - 4,568)( 41,548)(

Net exchange differences 2,151)( 2,007)( 40)( 37)( - - 857)( 354)( 5,446)(

Closing net book amount 575,268$ 163,947$ 2,372$ 1,638$ 1,853$ 1,878$ 5,528$ 30,222$ 782,706$

At June 30, 2014

Cost 699,702$ 466,134$ 4,464$ 10,789$ 7,985$ 32,133$ 5,528$ 72,906$ 1,299,641$


and impairment 124,434)( 302,187)( 2,092)( 9,151)( 6,132)( 30,255)( - 42,684)( 516,935)(

575,268$ 163,947$ 2,372$ 1,638$ 1,853$ 1,878$ 5,528$ 30,222$ 782,706$

~19~

(7) Investment property

Buildings

At January 1, 2015

Cost 40,945$

Accumulated depreciation 1,338)(

39,607$


Opening net book amount 39,607$

Reclassifications 20,550

Depreciation charge 556)(

Closing net book amount 59,601$

At June 30, 2015

Cost 62,029$

Accumulated depreciation 2,428)(

59,601$

Buildings

At January 1, 2014

Cost 40,945$

Accumulated depreciation 535)(

40,410$


Opening net book amount 40,410$

Depreciation charge 402)(

Closing net book amount 40,008$

At June 30, 2014

Cost 40,945$

Accumulated depreciation 937)(

40,008$

~20~

A. Rental income from investment property and direct operating expenses arising from investment

property are shown below:

B. The fair value of investment property held by the Company as of June 30, 2015, December 31,

2014 and June 30, 2014 were $118,364, $78,128 and $78,128, respectively. The fair value is

estimated using the valuation method frequently used by market participants. The valuation is

based on evidence of similar trading prices.

C. Amount of borrowing costs capitalized as part of investment property was zero.

D. The investment property was not pledged to others as collaterals.

2015 2014

Rental income from investment property 5,091$ 3,251$

Direct operating expenses arising from the

investment property that generated rental

income during the period 603$ 395$


investment property that did not generate

rental income during the period -$ -$


2015 2014

Rental income from investment property 10,211$ 6,355$


investment property that generated rental

income during the period 855$ 596$


investment property that did not generate

rental income during the period -$ -$


~21~

(8) Short-term borrowings

(9) Accounts payable

(10) Other payables

(11) Pensions

A.(a)The Company and its domestic subsidiaries have a defined benefit pension plan in

accordance with the Labor Standards Law, covering all regular employees’ service years

prior to the enforcement of the Labor Pension Act on July 1, 2005 and service years

thereafter of employees who chose to continue to be subject to the pension mechanism under

the Law. Under the defined benefit pension plan, two units are accrued for each year of

service for the first 15 years and one unit for each additional year thereafter, subject to a

maximum of 45 units. Pension benefits are based on the number of units accrued and the

Type of borrowings June 30, 2015 Interest rate range Collateral

Bank borrowings

Unsecured borrowings 7,715$ 0.90% None

Type of borrowings December 31, 2014 Interest rate range Collateral

Bank borrowings

Unsecured borrowings 23,738$ 0.92% None

Type of borrowings June 30, 2014 Interest rate range Collateral

Bank borrowings

Unsecured borrowings 68,689$ 0.93%~1.55% None


Accounts payable 109,886$ 80,811$ 116,242$

Estimated accounts payable 10,350 10,531 13,060

120,236$ 91,342$ 129,302$


Wages and salaries payable 58,732$ 80,224$ 60,846$

Employee bonus and

directors' remuneration

payable

85,509 54,092 78,742

Payables on machinery and

equipment

4,282 8,618 6,718

Dividends payable 336,008 - 328,008

Other payables, others 65,205 64,953 92,545

549,736$ 207,887$ 566,859$

~22~

average monthly salaries and wages of the last 6 months prior to retirement. The Company

contributes monthly an amount equal to 2.5% of the employees’ monthly salaries and wages

to the retirement fund deposited with Bank of Taiwan, the trustee, under the name of the

independent retirement fund committee.

(b)For the aforementioned pension plan, the Group recognised pension costs of $485, $479,

$968 and $957 for the three-month periods ended June 30, 2015 and 2014, and six-month

periods ended June 30, 2015 and 2014, respectively.

(c)Expected contributions to the defined benefit pension plans of the Group for the year ended

December 31, 2016 amounts to $2,601.

B.(a)Effective July 1, 2005, the Company and its domestic subsidiaries have established a defined

contribution pension plan (the “New Plan”) under the Labor Pension Act (the “Act”),

covering all regular employees with R.O.C. nationality. Under the New Plan, the Company

and its domestic subsidiaries contribute monthly an amount based on 6% of the employees’

monthly salaries and wages to the employees’ individual pension accounts at the Bureau of

Labor Insurance. The benefits accrued are paid monthly or in lump sum upon termination of

employment.

(b)The Company’s Mainland China subsidiaries, Polystar Electronics Co., Ltd. and Hanpu

(Kunshan) Trading Co., Ltd., have a defined contribution plan. Monthly contributions to an

independent fund administered by the government in accordance with the pension

regulations in the People’s Republic of China (PRC) are based on certain percentage of

employees' monthly salaries and wages. Other than the monthly contributions, the Group

has no further obligations.

(c)The pension costs under defined contribution pension plans of the Group for the three-month

periods ended June 30, 2015 and 2014, and six-month periods ended June 30, 2015 and

2014, were $3,423, $2,986, $6,878 and $6,077, respectively.

(12) Share capital

As of June 30, 2015, the Company’s authorized capital was $900,000, consisting of 90,000

thousand shares of ordinary stock (including 5,000 thousand shares reserved for employee stock

options), and the paid-in capital was $800,018 with a par value of $10 (in dollars) per share. All

proceeds from shares issued have been collected.

Movements in the number of the Company’s ordinary shares outstanding are as follows (in

thousands of shares):

(13) Capital surplus

Pursuant to the R.O.C. Company Act, capital surplus arising from paid-in capital in excess of par

value on issuance of common stocks and donations can be used to cover accumulated deficit or to

2015 2014

At January 1 / At June 30 80,002 80,002

~23~

issue new stocks or cash to shareholders in proportion to their share ownership, provided that the

Company has no accumulated deficit. Further, the R.O.C. Securities and Exchange Law requires

that the amount of capital surplus to be capitalised mentioned above should not exceed 10% of the

paid-in capital each year. Capital surplus should not be used to cover accumulated deficit unless

the legal reserve is insufficient.

(14) Retained earnings

A. Under the Company’s Articles of Incorporation, the current year’s earnings, if any, shall first be

used to pay all taxes and offset prior years’ operating losses and then 10% of the remaining

amount shall be set aside as legal reserve and also set aside as special reserve under Securities

and Exchange Act Article 41. The remainder, if any, shall be proposed by the Board of

Directors and approved by the shareholders in the following order:

(a) Remuneration to directors is 2% of the distributable earnings;

(b) Bonus to employees is not less than 8% of the distributable earnings;

(c) All or part of the remainder is to be distributed as bonus to shareholders.

B.Dividend policy: As the Company is in a rapidly changing industry and in the growing stage,

and considering the Company’s long-term financial plans, shareholders’ long-term profit and

stabilizing performance target, cash dividend distribution may not be lower than 10% of the

total dividend distribution.

C.Except for covering accumulated deficit or issuing new stocks or cash to shareholders in

proportion to their share ownership, the legal reserve shall not be used for any other purpose.

The use of legal reserve for the issuance of stocks or cash to shareholders in proportion to their

share ownership is permitted, provided that the balance of the reserve is limited to the portion

in exceeds 25% of the Company’s paid-in capital.

D.(a)In accordance with the regulations, the Company shall set aside special reserve from the

debit balance on other equity items at the balance sheet date before distributing earnings.

When debit balance on other equity items is reversed subsequently, the reversed amount

could be included in the distributable earnings.

(b) The amounts previously set aside by the Company as special reserve on initial application of

IFRSs in accordance with Jin-Guan-Zheng-Fa-Zi Letter No. 1010012865, dated April 6,

2012, shall be reversed proportionately when the relevant assets are used, disposed of or

reclassified subsequently.

~24~

E.The appropriation of 2014 and 2013 had been resolved at the stockholders’ meeting on June 23,

2015 and June 20, 2014, respectively. Details are summarized below:

The appropriation of 2014 earnings was the same as that approved by the Board of Directors on

March 20, 2015. The deficit compensation of 2013 was the same as that approved by the Board

of Directors on March 20, 2014.

F.For information relating to employees’ remuneration (bonuses) and directors’ remuneration,

please refer to Note 6(21).

(15) Other equity items

(16) Operating revenue

(17) Other income

Dividends per share Dividends per share

Amount (in NT dollars) Amount (in NT dollars)

Legal reserve 40,068$ -$ 37,728$ -$

Cash dividends 336,008 4.2 328,008 4.1

Total 376,076$ 4.2$ 365,736$ 4.1$

2014 2013

2015 2014

At January 1 29,042$ 11,186$

Currency translation differences 12,338)( 9,661)(

At June 30 16,704$ 1,525$

2015 2014

Sales revenue $ 444,819 $ 456,713


2015 2014

Sales revenue $ 826,753 $ 821,810


2015 2014

Rental revenue $ 5,091 $ 3,251

Interest income 2,639 3,613

Other income, others 1,812 2,083

Total $ 9,542 $ 8,947


~25~

(18) Other gains and losses

(19) Finance costs

2015 2014

Rental revenue $ 10,211 $ 6,355

Interest income 5,012 4,749

Other income, others 2,800 3,939

Total $ 18,023 $ 15,043


2015 2014

Net gains on financial assets at

fair value through profit or loss 941$ 1,595$

Net currency exchange losses 6,558)( 10,409)(

Depreciation charge -investment

property 304)( 201)(

Gains (losses) on disposal of

property, plant and equipment 86 247)(

Other expenses 12)( 16)(

Total 5,847)($ 9,278)($


2015 2014

Net gains on financial assets at

fair value through profit or loss 2,341$ 186$

Net currency exchange losses 11,307)( 5,669)(

Depreciation charge -investment

property 556)( 402)(

Gains (losses) on disposal of

property, plant and equipment 86 247)(

Other expenses 29)( 12

Total 9,465)($ 6,120)($


2015 2014

Interest expense:

Bank borrowings 36$ 429$


2015 2014

Interest expense:

Bank borrowings 140$ 824$


~26~

(20) Expenses by nature

(21) Employee benefit expenses

2015 2014

Employee benefit expenses 83,990$ 83,851$

Depreciation charges on property,

plant and equipment 18,742 20,037

Amortisation charges on intangible

assets 473 441

Total 103,205$ 104,329$


2015 2014

Employee benefit expenses 166,429$ 164,719$

Depreciation charges on property,

plant and equipment 40,741 41,548

Amortisation charges on intangible

assets 906 897

Total 208,076$ 207,164$


2015 2014

Wages and salaries 69,887$ 69,482$

Labor and health insurance fees 3,035 3,090

Pension costs 3,908 3,465

Other personnel expenses 7,160 7,814

83,990$ 83,851$


2015 2014

Wages and salaries 136,566$ 134,494$

Labor and health insurance fees 6,749 6,675

Pension costs 7,846 7,034

Other personnel expenses 15,268 16,516

166,429$ 164,719$


~27~

A. Under the Company’s Articles of Incorporation, the current year’s earnings, if any, shall first

be used to pay all taxes and offset prior years’ operating losses and then 10% of the remaining

amount shall be set aside as legal reserve and also set aside as special reserve under Securities

and Exchange Act Article 41. The remainder, if any, shall be proposed by the Board of

Directors and approved by the shareholders in the following order:

(a) Remuneration to directors is 2% of the distributable earnings;

(b) Bonus to employees is not less than 8% of the distributable earnings;

(c) All or part of the remainder is to be distributed as bonus to shareholders.

However, in accordance with the Company Act amended on May 20, 2015, a company shall

distribute employee remuneration, based on the current year's profit condition, in a fixed

amount or a proportion of profits. If a company has accumulated deficit, earnings should be

channeled to cover losses.

The Company will propose an amendment to the clause relating to employee remuneration in

the Articles of Incorporation in accordance with the latest amendment of the Company Act at

the shareholders’ meeting before June 30, 2016.

B. For the three-month periods ended June 30, 2015 and 2014, and six-month periods ended June

30, 2015 and 2014, employees’ remuneration (bonus) was accrued at $15,593, $14,045,

$27,228 and $24,100, respectively; directors’ remuneration was accrued at $2,399, $2,161,

$4,189 and $3,708, respectively. The aforementioned amounts were recognized in salary

expenses. The expenses recognised for the year of 2015 were accrued based on the earnings of

current year; the expenses recognised for the year of 2014 were accrued based on the net

income of 2014 and the percentage specified in the Articles of Incorporation of the Company

(13% and 2% for employees and directors, respectively), taking into account other factors such

as legal reserve.

Employees’ bonus and directors’ remuneration of 2014 as resolved by the stockholders were in

agreement with those amounts recognised in the 2014 financial statements.

Information about the appropriation of employees’ bonus and directors’ remuneration by the

Company as proposed by the Board of Directors and resolved by the stockholders will be

posted in the “Market Observation Post System” at the website of the Taiwan Stock Exchange.

~28~

(22) Income tax

A. Income tax expense

(a) Components of income tax expense:

(b) The income tax (charge)/credit relating to components of other comprehensive income:

None.

B. The Company’s income tax returns through 2012 have been assessed and approved by the Tax

Authority.

C. Unappropriated retained earnings:

D. As of June 30, 2015, December 31, 2014 and June 30, 2014, the balance of the imputation tax

credit account was $94,925, $62,498 and $98,261, respectively. The creditable tax rate was

2015 2014

Current tax:

Current tax on profits for the

period 29,903$ 32,225$

Adjustments in respect of

prior years - -

Total current tax 29,903 32,225

Deferred tax:

Origination and reversal of

temporary differences 33)( 3,018)(

Total deferred tax 33)( 3,018)(

Income tax expense 29,870$ 29,207$


2015 2014

Current tax:

Current tax on profits for the

period 54,665$ 50,329$

Adjustments in respect of

prior years - -

Total current tax 54,665 50,329

Deferred tax:

Origination and reversal of

temporary differences 767)( 2,862)(

Total deferred tax 767)( 2,862)(

Income tax expense 53,898$ 47,467$



Earnings generated

in and after 1998 438,678$ 582,041$ 387,373$

~29~

17.96% for 2013 and the estimated creditable tax rate is 16.24% for 2014.

(23) Earnings per share

Weighted average number of

ordinary shares outstanding Earnings per share

Amount after tax (share in thousands) (in dollars)

Basic earnings per share

Profit attributable to ordinary

shareholders of the parent 133,272$ 80,002 1.67$

Diluted earnings per share

Assumed conversion of all

dilutive potential ordinary

shares

Employees’ bonus - 948


shareholders of the parent

plus assumed conversion of

all dilutive potential ordinary

shares 133,272$ 80,950 1.65$

For the three-month period ended June 30, 2015










shares






shares 120,041$ 80,818 1.49$


~30~










shares






shares 232,713$ 80,973 2.87$











shares






shares 205,980$ 80,853 2.55$


~31~

(24) Operating leases

The Group leases land and plants under non-cancellable operating lease agreements. These leases

have expiring terms between 2 and 20 years and have renewable right at the end of the lease

period. Rent will be increased in accordance with lease agreements depending on market rents.

Rents of $3,495, $3,470, $7,017 and $6,936 were recognised for these leases for the three-month

periods ended June 30, 2015 and 2014, and six-month periods ended June 30, 2015 and 2014,

respectively. The future aggregate minimum lease payments under non-cancellable operating

leases are as follows:

(25) Supplemental cash flow information

A.Investing activities with partial cash payments

B.Financial activities with no cash flow effects

7. RELATED PARTY TRANSACTIONS

(1) Significant related party transactions

A.Operating revenue


Not later than one year 10,493$ 10,493$ -$

Later than one year but

not later than five years 37,729 40,060 18,292

Later than five years 43,295 46,210 85,388

91,517$ 96,763$ 103,680$

2015 2014

Acquisitions of property, plant,

and equipment 18,610$ 21,192$

Net change of payable on

machinery and equipment 5,256 5,370)(

Cash paid during the period 23,866$ 15,822$


June 30, 2015 June 30, 2014

Cash dividends declared 336,008$ 328,008$

Less: other payables 336,008)( 328,008)(

-$ -$

2015 2014

Sales of goods:

-Other associates 43,332$ 44,963$


~32~

Goods are sold based on the price lists in force and terms that would be available to third parties.

B.Accounts receivable

The receivables from related parties arise mainly from sale transactions. The receivables are

due 45~60 days after the date of sales. The receivables are unsecured in nature and bear no

interest. There are no provisions held against receivables from related parties.

(2) Key management compensation

8. PLEDGED ASSETS

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

2015 2014

Sales of goods:

-Other associates 83,517$ 84,519$



Accounts receivable

-Other associates 28,592$ 20,466$ 17,911$

2015 2014

Short-term employee benefits 7,514$ 7,118$

Post-employment benefits - -

Total 7,514$ 7,118$


2015 2014

Short-term employee benefits 23,384$ 19,323$

Post-employment benefits - -

Total 23,384$ 19,323$


Pledged asset June 30, 2015 December 31, 2014 June 30, 2014 Purpose

Time deposit (recorded under

‘other current assets’)

3,236$ 3,209$ 3,209$ Guarantee for duty paid

after customs release

Time deposit (recorded under

‘other non-current assets’)

6,704 6,704 6,704 Guarantee for land

leasing in science park

Buildings 121,152 122,974 124,796 Guarantee for long- and

short-term committed

borrowings facility

Book value

~33~

9. SIGNIFICANT CONTINGENT LIABILITIES AND UNRECOGNISED CONTRACT

COMMITMENTS

(1) Contingencies

On March 5, 2015, the Company received a notice of complaint from Taiwan Hsinchu District

Court. It indicated that because the Company’s employee had an accident after being off duty, the

Company’s employee and the Company were jointly sued for compensation for the injury by the

plaintiff. The Company has appointed a legal counsel to handle this case. According to the initial

assessment, this case would not have any significant impact on the Company’s financial condition.

(2) Commitments

A.Capital expenditure contracted for at the balance sheet date but not yet incurred is as follow:

B.Operating lease agreement

Please refer to Note 6(24).

10. SIGNIFICANT DISASTER LOSS

None.

11. SIGNIFICANT EVENTS AFTER THE BALANCE SHEET DATE

None.

12. OTHERS

(1) Capital management

The Group’s objectives when managing capital are to safeguard the Group’s ability to continue as a

going concern in order to provide returns for shareholders and to maintain an optimal capital

structure to reduce the cost of capital. In order to maintain or adjust the capital structure. The

Group may adjust the amount of dividends paid to shareholders, return capital or issue new shares

to achieve the optimal capital structure.

(2) Financial instruments

A. Fair value information of financial instruments

The carrying amounts of financial instruments (including cash and cash equivalents, notes

receivable, accounts receivable, other receivables, other current assets, short-term borrowings,

notes payable, accounts payable, other payables, and guarantee deposits received (shown as

non-current liabilities)) are approximate to their fair value.

B.Financial risk management policies

(a)The Group’s activities expose it to a variety of financial risks: market risk (including foreign

exchange risk and price risk), credit risk and liquidity risk. The Group’s overall risk

management programme focuses on the unpredictability of financial markets and seeks to

minimise potential adverse effects on the Group’s financial position and financial


Property, plant and

equipment25,439$ 10,423$ 11,696$

~34~

performance. The Group uses derivative financial instruments to hedge certain risk

exposures (see Note 6(2)).

(b)Risk management is carried out by a central treasury department (Group treasury) under

policies approved by the Board of Directors. Group treasury identifies, evaluates and hedges

financial risks in close co-operation with the Group’s operating units. The Board provides

written principles for overall risk management, as well as written policies covering specific

areas and matters, such as foreign exchange risk, interest rate risk, credit risk, use of

derivative financial instruments and non-derivative financial instruments, and investment of

excess liquidity.

C.Significant financial risks and degrees of financial risks

(a) Market risk

Foreign exchange risk

i. The Group operates internationally and is exposed to foreign exchange risk arising from

various currency exposures, primarily with respect to the USD and RMB. Foreign

exchange risk arises from future commercial transactions, recognised assets and liabilities

and net investments in foreign operations.

ii. Management has set up a policy to require that group companies manage their foreign

exchange risk against their functional currency. The group companies are required to

hedge their entire foreign exchange risk exposure with the Group treasury. To manage

their foreign exchange risk arising from future commercial transactions and recognized

assets and liabilities, entities in the Group use forward foreign exchange contracts,

transacted with Group treasury. Foreign exchange risk arises when future commercial

transactions or recognized assets or liabilities are denominated in a currency that is not

the entity’s functional currency.

iii. The Group uses derivative financial instruments such as forward exchange transaction to

hedge assets and liabilities denominated in foreign currencies or transactions that are

considered highly probable to occur in order to decrease fair value risk of cash flow

arising from exchange rate fluctuations. The Group monitors changes in exchange rate

and sets stop loss point to decrease exchange rate risk.

~35~

D.The Group’s businesses involve some non-functional currency operations (the Company’s

functional currency: NTD; other certain subsidiaries’ functional currency: USD and RMB).

The information on assets and liabilities denominated in foreign currencies whose values would

be materially affected by the exchange rate fluctuations is as follows:

Foreign currency

amount

(In thousands) Exchange rate

Book value

(NTD)

(Foreign currency: functional

currency)

Financial assets

Monetary items

USD:NTD USD 17,799 30.86 549,272$

JPY:NTD JPY 2,623 0.2524 662

USD:RMB USD 1,645 6.201 10,203

RMB:NTD RMB 83,004 4.973 412,780

Non-monetary items

USD:NTD USD 16,440 30.86 507,346$

Financial liabilities

Monetary items

USD:NTD USD 8,104 30.86 250,083$

RMB:NTD RMB 11,338 4.973 56,386

Non-monetary items: None.

June 30, 2015

~36~

Foreign currency

amount


Book value

(NTD)


currency)

Financial assets

Monetary items

USD:NTD USD 16,600 31.65 525,379$

JPY:NTD JPY 6,357 0.2646 1,682

USD:RMB USD 1,683 6.204 10,438

RMB:NTD RMB 62,770 5.092 319,626

Non-monetary items

USD:NTD USD 16,345 31.65 517,328$


Monetary items

USD:NTD USD 4,002 31.65 126,652$

RMB:NTD RMB 7,143 5.092 36,371


December 31, 2014

Foreign currency

amount


Book value

(NTD)


currency)

Financial assets

Monetary items

USD:NTD USD 20,663 29.865 617,103$

JPY:NTD JPY 4,325 0.2946 1,274

USD:RMB USD 2,353 6.205 14,602

RMB:NTD RMB 63,484 4.811 305,424

Non-monetary items

USD:NTD USD 15,553 29.865 464,483$


Monetary items USD:NTD USD 11,351 29.865 338,993$ RMB:NTD RMB 9,339 4.811 44,931


June 30, 2014

~37~

E. Please refer to the following table for the details of unrealised exchange gain (loss) arising from

significant foreign exchange variation on the monetary items held by the Group.

Foreign currency


currency)

amount


Book value

(NTD)

Financial assets

Monetary items

USD:NTD -$ 30.86 2,694$

JPY:NTD - 0.2524 60

USD:RMB 164 6.201 795

RMB:NTD - 4.973 3,411)(


Monetary items

USD:NTD -$ 30.86 236$

JPY:NTD - 0.2524 55)(

USD:RMB 97)( 6.201 490)(


Unrealised exchange gain (loss)

Foreign currency


currency)

amount


Book value

(NTD)

Financial assets

Monetary items

USD:NTD -$ 29.865 6,952)($

JPY:NTD - 0.2946 26

USD:RMB 239)( 6.205 878)(

RMB:NTD - 4.811 986


Monetary items

USD:NTD -$ 29.865 47)($

USD:RMB 493 6.205 2,397



~38~

Foreign currency


currency)

amount


Book value

(NTD)

Financial assets

Monetary items

USD:NTD -$ 30.86 2,407$

JPY:NTD - 0.2524 126

USD:RMB 57 6.201 256

RMB:NTD - 4.973 1,491)(


Monetary items

USD:NTD -$ 30.86 201$

USD:RMB 13)( 6.201 65)(



Foreign currency


currency)

amount


Book value

(NTD)

Financial assets

Monetary items

USD:NTD -$ 29.865 2,891)($

JPY:NTD - 0.2946 54

USD:RMB 116)( 6.205 585)(

RMB:NTD - 4.811 407


Monetary items

USD:NTD -$ 29.865 590)($

USD:RMB 166 6.205 797



~39~

F. Analysis of foreign currency market risk arising from significant foreign exchange variation:

Degree of

variation

Effect on

profit or loss

Effect on other

comprehensive

income


currency)

Financial assets

Monetary items

USD:NTD 1% 5,493$ -$

JPY:NTD 1% 7 -

USD:RMB 1% 102 -

RMB:NTD 1% 4,128 -

Non-monetary items

USD:NTD 1% -$ 5,073$


Monetary items

USD:NTD 1% 2,501)($ -$

RMB:NTD 1% 564)( -


Six-month period ended June 30, 2015

Sensitivity analysis

~40~

Price risk

The Group is exposed to equity securities price risk because of investments held by the Group

and classified on the consolidated balance sheet at fair value through profit or loss. To

manage its price risk arising from investments in equity securities, the Group diversifies its

portfolio. Diversification of the portfolio is done in accordance with the limits set by the

Group.

(b) Credit risk

i.Credit risk refers to the risk of financial loss to the Group arising from default by the

clients or counterparties of financial instruments on the contract obligations. According

to the Group’s credit policy, each local entity in the Group is responsible for managing and

analyzing the credit risk for each of their new clients before standard payment and delivery

terms and conditions are offered. Internal risk control assesses the credit quality of the

customers, taking into account their financial position, past experience and other factors.

Individual risk limits are set based on internal or external ratings in accordance with limits

set by the Board of Directors. The utilization of credit limits is regularly monitored.

Credit risk arises from cash and cash equivalents, derivative financial instruments and

deposits with banks and financial institutions, as well as credit exposures to customers,

including outstanding receivables and committed transactions.

Degree of

variation

Effect on

profit or loss

Effect on other

comprehensive

income


currency)

Financial assets

Monetary items

USD:NTD 1% 6,171$ -$

JPY:NTD 1% 13 -

USD:RMB 1% 146 -

RMB:NTD 1% 3,054 -

Non-monetary items

USD:NTD 1% -$ 4,645$


Monetary items

USD:NTD 1% 3,390)($ -$

RMB:NTD 1% 449)( -


Six-month period ended June 30, 2014

Sensitivity analysis

~41~

ii.No credit limits were exceeded during the reporting periods, and management does not

expect any significant losses from non-performance by these counterparties.

iii.The credit quality information of financial assets that are neither past due nor impaired is

provided in the statement in Note 6(3).

iv.The credit quality information of financial assets that were past due but not impaired is

provided in the statement in Note 6(3).

(c) Liquidity risk

i.Cash flow forecasting is performed in the operating entities of the Group and aggregated

by Group treasury. Group treasury monitors rolling forecasts of the Group’s liquidity

requirements to ensure it has sufficient cash to meet operational needs while maintaining

sufficient headroom on its undrawn committed borrowing facilities. Such forecasting takes

into consideration the Group’s debt financing plans, and compliance with internal balance

sheet ratio targets.

ii.The table below analyses the Group’s non-derivative financial liabilities and net-settled or

gross-settled derivative financial liabilities into relevant maturity groupings based on the

remaining period at the balance sheet date to the contractual maturity date for

non-derivative financial liabilities and to the expected maturity date for derivative

financial liabilities. The amounts disclosed in the table are the contractual undiscounted

cash flows.

~42~

June 30, 2015

Less than 3

months

Between 3

months

and 1 year

Between 1

and 2 years

Between 2

and 5 years

Over 5

years

Short-term borrowings -$ 7,715$ -$ -$ -$

Notes payable 19,378 - - - -

Accounts payable - 120,236 - - -

Other payable - 549,736 - - -

December 31, 2014

Less than 3

months

Between 3

months

and 1 year

Between 1

and 2 years

Between 2

and 5 years

Over 5

years

Short-term borrowings -$ 23,738$ -$ -$ -$

Notes payable 28,492 - - - -



June 30, 2014

Less than 3

months

Between 3

months

and 1 year

Between 1

and 2 years

Between 2

and 5 years

Over 5

years

Short-term borrowings 68,689$ -$ -$ -$ -$

Notes payable 911 - - - -



Non-derivative financial liabilities:



Derivative financial liabilities:

June 30, 2015

Less than

3 months

Between 3

months

and 1 year

Between 1

and 2 years

Between 2

and 5 years

Over 5

years

Forward exchange contracts $ 422 $ - $ - $ - $ -

~43~

(3) Fair value information

A. Details of the fair value of the Group’s financial assets and financial liabilities not measured at

fair value are provided in Note 12(2)A. Details of the fair value of the Group’s investment

property measured at cost are provided in Note 6(7).

B. The different levels that the inputs to valuation techniques are used to measure fair value of

financial and non-financial instruments have been defined as follows:

Level 1:Quoted prices (unadjusted) in active markets for identical assets or liabilities that the

entity can access at the measurement date. A market is regarded as active where a

market in which transactions for the asset or liability take place with sufficient

frequency and volume to provide pricing information on an ongoing basis.

Level 2: Inputs other than quoted prices included within Level 1 that are observable for the

asset or liability, either directly or indirectly.

Level 3:Unobservable inputs for the asset or liability.


December 31, 2014

Less than

3 months

Between 3

months

and 1 year

Between 1

and 2 years

Between 2

and 5 years

Over 5

years

Forward exchange contracts $ 1,925 $ - $ - $ - $ -


June 30, 2014：None.

~44~

C. The related information of financial and non-financial instruments measured at fair value by

level on the basis of the nature, characteristics and risks of the assets and liabilities at June 30,

2015, December 31, 2014 and June 30, 2014 is as follows:

Level 1 Level 2 Level 3 Total

June 30, 2015

Assets：None.

Liabilities

Recurring fair value

measurements

Financial liabilities at fair

value through profit or

loss-forward exchange

contracts -$ 422$ -$ 422$

Level 1 Level 2 Level 3 Total

December 31, 2014

Assets：None.

Liabilities


measurements

Financial liabilities at fair



contracts -$ 1,925$ -$ 1,925$

June 30, 2014 Level 1 Level 2 Level 3 Total

Assets


measurements

Financial assets at fair



contracts -$ 243$ -$ 243$

Liabilities: None.

~45~

D. The methods and assumptions the Group used to measure fair value are as follows:

(a)The instruments the Group used market quoted prices as their fair values (that is, Level 1)

are listed below by characteristics:

(b)Except for financial instruments with active markets, the fair value of other financial

instruments is measured by using valuation techniques or by reference to counterparty

quotes. The fair value of financial instruments measured by using valuation techniques can

be referred to current fair value of instruments with similar terms and characteristics in

substance, discounted cash flow method or other valuation methods, including calculated by

applying model using market information available at the consolidated balance sheet date

(i.e. yield curves on the Taipei Exchange, average commercial paper interest rates quoted

from Reuters).

(c)The valuation of derivative financial instruments is based on valuation model widely

accepted by market participants, such as present value techniques and option pricing models.

Forward exchange contracts are usually valued based on the current forward exchange rate.

(d)Under “Regulations Governing the Preparation of Financial Reports by Securities Issuers”,

the Group makes self-assessment using the income approach to calculate the fair value of

investment property. Related assumption and information of inputs are as follows:

i.Cash flow: Cash flow shall be valuated on the basis of existing lease contracts, rent at local

market rates, or current market rents for similar comparable properties in the same location

and condition, and overvalued and undervalued comparable properties shall be excluded. If

there is a period-end value, the discounted present period-end value may be added.

ii.Analysis period: When there is no specified period for the income, the analysis period in

principle shall not be longer than 10 years; when there is a specified period for the income,

the income shall be estimated for the remainder of the specified period.

iii.Discount rate: The discount rate shall be determined using the risk premium approach only,

with the calculation based on a certain interest rate, plus the estimate for the individual

characteristics of the investment property. The language "based on a certain interest rate"

means the interest rate may not be lower than the floating interest rate on a 2-year time

deposit of a small amount, as posted by the Chunghwa Post Co. Ltd., plus 0.75 percentage

points.

(e)The output of valuation model is an estimated value and the valuation technique may not be

able to capture all relevant factors of the Group’s financial and non-financial instruments.

Listed

shares

Closed-end

fund

Open-end

fund

Government

bond

Corporate

bond

Convertible

(exchangeable

bond)

Market quoted price

Closing

price

Closing

price

Net asset

value

Transaction

price

Weighted

average

quoted price Closing price

~46~

Therefore, the estimated value derived using valuation model is adjusted accordingly with

additional inputs, for example, model risk or liquidity risk and etc. In accordance with the

Group’s management policies and relevant control procedures relating to the valuation

models used for fair value measurement, management believes adjustment to valuation is

necessary in order to reasonably represent the fair value of financial and non-financial

instruments at the consolidated balance sheet. The inputs and pricing information used

during valuation are carefully assessed and adjusted based on current market conditions.

(f)The Group takes into account adjustments for credit risks to measure the fair value of

financial and non-financial instruments to reflect credit risk of the counterparty and the

Group’s credit quality.

E.For the six-month periods ended June 30, 2015 and 2014, there was no transfer between Level 1

and Level 2.

~47~

13. SUPPLEMENTARY DISCLOSURES

(1) Significant transactions information

A. Loans to others: Please refer to table 1.

B. Provision of endorsements and guarantees to others: Please refer to table 2.

C. Holding of marketable securities at the end of the period (not including subsidiaries, associates

and joint ventures): Please refer to table 3.

D. Acquisition or sale of the same security with the accumulated cost exceeding $300 million or

20% of the Company’s paid-in capital: None.

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

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

G. Purchases or sales of goods from or to related parties reaching NT$100 million or 20% of

paid-in capital or more: Please refer to table 4.

H. Receivables from related parties reaching NT$100 million or 20% of paid-in capital or more:

None.

I. Trading in derivative instruments undertaken during the reporting periods: Please refer to Notes

6(2) and 12.

J. Significant inter-company transactions during the reporting periods: Please refer to table 5.

(2) Information on investees

Names, locations and other information of investee companies (not including investees in Mainland

China)：Please refer to table 6.

(3) Information on investments in Mainland China

A.Basic information: Please refer to table 7.

B.Significant transactions, either directly or indirectly through a third area, with investee companies

in the Mainland Area: Please refer to table 8.

~48~

14. SEGMENT INFORMATION

(1) General information

The Group mainly operates in a single industry. The chief operating decision-maker reviews the

Group’s reporting to assess performance and allocate resources. The Group mainly has a single

reportable segment.

(2) Segment information

The Group’s operating decision-maker evaluates the performance of operating segments based on

the consolidated financial statements. The accounting policies of the operating segments are in

accordance with the significant accounting policies summarized in Note 4.

(3) Information about segment profit or loss, assets and liabilities

(4) Reconciliation for segment income (loss), assets and liabilities：

None.

Six-month period ended

June 30, 2015

Six-month period ended

June 30, 2014

Revenue from external customers 826,753$ 821,810$

Inter-segment revenue -$ -$

Segment income 286,611$ 253,447$

Segment assets 2,677,227$ 2,620,199$

Item Value

0 Polytronics

Technology

Corp.

Polytronics

(B.V.I)

Corporation

Other

receivables -

related party

Y $ 126,600 $ 123,440 $ - 3.5% Reason for

short-term

financings

$ - Operational need $ - $ - $ - $ 366,023 $ 732,046

1 Polytronics

(B.V.I)

Corporation

Polystar

Electronics

Co., Ltd.

Inter-company

transactions

Y 126,600 123,440 13,887 3.9% Reason for

short-term

financings

- Operational need - - - 366,023 366,023

2 Polystar

Electronics

Co., Ltd.

Hanpu

(Kunshan)

Trading Co.,

Ltd.

Other

receivables

Y 25,460 24,865 9,946 5.1% Reason for

short-term

financings

- Operational need - - - 366,023 366,023

Note: Follow the group policy “Procedure for provision of loans”.

Table 1 Expressed in thousands of NTD

Amount of

transactions

with the

borrower

Maximum

outstanding

balance during

the six-month

period ended

June 30, 2015

Balance at June

30, 2015

Actual amount

drawn down

Interest

rate

Nature of

loan

Collateral

(Except as otherwise indicated)

Allowance

for

doubtful

accounts

Limit on loans

granted to

a single party

(Note)

Ceiling on

total loans

granted

(Note) Footnote

Polytronics Technology Corp. and Subsidiaries

Loans to others


Reason

for short-term

financingNo. Creditor Borrower

General

ledger

account

Is a

related

party

Table 1

Company

name

Relationship

with the

endorser/

guarantor

0 Polytronics

Technology

Corp.

Polytronics

(B.V.I)

Corporation

100%

owned

subsidiary

$ 457,529 $ 206,000 $ 164,000 $ 7,715 $ - 8.96 $ 915,058 Y N N

Note: Follow the Group policy “Procedure for Provision of endorsements and guarantees to others”.

Outstanding

endorsement/

guarantee

amount at

June 30, 2015Number

Endorser/

guarantor

Limit on

endorsements/

guarantees

provided for a

single party

Maximum

outstanding

endorsement/

guarantee

amount as of

June 30, 2015

Party being

endorsed/guaranteedProvision of

endorsements/

guarantees to

the party in

Mainland

China (Note) Footnote

Actual amount

drawn down

Amount of

endorsements/

guarantees

secured with

collateral

Ratio of

accumulated

endorsement/

guarantee

amount to net

asset value of

the endorser/

guarantor

company

Ceiling on

total amount of

endorsements/

guarantees

provided (Note)

Provision of

endorsements/

guarantees by

parent

company to

subsidiary

(Note)

Provision of

endorsements/

guarantees by

subsidiary to parent

company (Note)

Expressed in thousands of NTD


Table 2


Provision of endorsements and guarantees to others


Table 2

Table 3

Number of shares Book value Ownership (%) Fair value

Polytronics Technology Corp. GreenMark Inc. common

stock

None Non-current financial assets

at cost, net

300,000 $ 3,000 10 $ -

FootnoteSecurities held by Marketable securities

Relationship with the

securities issuer

General

ledger account

As of June 30, 2015


Holding of marketable securities at the end of the period (not including subsidiaries, associates and joint ventures)

June 30, 2015



Table 3

Table 4

Purchases

(sales) Amount

Percentage of

total purchases

(sales) Credit term Unit price Credit term Balance

Percentage of

total notes/accounts

receivable (payable)


Corp.

Polytronics (B.V.I)

Corporation

Subsidiary Sales 121,518)($ 18% Net 60 days Note Note 77,334$ 22%

Polytronics (B.V.I)

Corporation


Corp.

Ultimate parent

company

Purchases 121,518 94% Net 60 days Note Note 77,334)( 65%

Note: With the general payment term.

FootnotePurchaser/seller Counterparty

Relationship with the

counterparty

Transaction

Differences in transaction terms

compared to third party

transactions

Notes/accounts receivable (payable)


Purchases or sales of goods from or to related parties reaching NT$100 million or 20% of paid-in capital or more




Table 4

Table 5

General ledger account Amount Transaction terms

Percentage of consolidated total operating

revenues or total assets (Note 3)

0 Polytronics Technology Corp. Polytronics (B.V.I) Corporation 1 Processing charges 38,332$ Net 45 days 5%

0 " " 1 Purchases 8,220 " 1%

0 " " 1 Accounts payable 40,805 " 2%

0 " " 1 Sales 121,518 Net 60 days 15%

0 " " 1 Accounts receivable 77,334 " 3%

0 " " 1 Endorsements and guarantees 164,000 Note 6 6%

0 " Polystar Electronics Co., Ltd. 1 Other receivables 193 " 0%

0 " Polycarbide Material Co., Ltd. 1 Rent revenue 11 Net 60 days 0%

1 Polytronics (B.V.I) Corporation P-Circuit Corp. 3 Other receivables 732 Note 5 0%

1 " Polystar Electronics Co., Ltd. 3 Inter-company transactions 13,887 Note 4 1%

1 " " 3 Other receivables 137 Note 7 0%

1 " " 3 Interest revenue 520 Note 4 0%

1 " " 3 Processing charges 38,332 Net 45 days 5%

1 " " 3 Purchases 7,492 " 1%

1 " " 3 Accounts payable 40,506 " 2%

1 " " 3 Sales 73,591 Net 60 days 9%


1 " Hanpu (Kunshan) Trading Co., Ltd. 3 Purchases 727 Net 45 days 0%

1 " " 3 Accounts payable 299 " 0%

1 " " 3 Sales 47,927 Net 60 days 6%


2 Polystar Electronics Co., Ltd. Hanpu (Kunshan) Trading Co., Ltd. 3 Purchases 32,332 Spot 4%

2 " " 3 Accounts payable 11,621 T/T in advance 0%

2 " " 3 Other receivables 9,946 Note 4 0%

2 " " 3 Sales 40 Spot 0%

2 " " 3 Interest revenue 254 Note 4 0%

2 " " 3 Notes receivable 10,002 " 0%

Note 1: The numbers filled in for the transaction company in respect of inter-company transactions are as follows:

(1)Parent company is ‘0’.

(2)The subsidiaries are numbered in order starting from ‘1’.

Note 2: Relationship between transaction company and counterparty is classified into the following three categories; fill in the number of category each case belongs to (If transactions between parent company and subsidiaries or between

subsidiaries refer to the same transaction, it is not required to disclose twice. For example, if the parent company has already disclosed its transaction with a subsidiary, then the subsidiary is not required to disclose the transaction;

for transactions between two subsidiaries, if one of the subsidiaries has disclosed the transaction, then the other is not required to disclose the transaction.):

(1)Parent company to subsidiary.

(2)Subsidiary to parent company.

(3)Subsidiary to subsidiary.

Note 3: Regarding percentage of transaction amount to consolidated total operating revenues or total assets, it is computed based on period-end balance of transaction to consolidated total assets for balance sheet accounts and based on

accumulated transaction amount for the period to consolidated total operating revenues for income statement accounts.

Note 4: Loan to subsidiary and count interst revenue.

Note 5: Pay temporary debits for subsidiary.

Note 6: Follow the policy “Procedure for Provision of endorsements and guarentees to others”.

Note 7: Interesst payable of parent loan to subsidiary.

Number

(Note 1) Company name Counterparty

Relationship

(Note 2)

Transaction


Significant inter-company transactions during the reporting periods




Table 5

Table 6

Balance

as at June 30, 2015

Balance

as at December 31,

2014 Number of shares Ownership (%) Book value

Polytronics

Technolgy

Corp.

Polytronics (B.V.I)

Corporation

British

Virgin

Islands

Investment and

general business

operations

$ 211,431 $ 211,431 2,644 100 $ 506,896 $ 22,162 $ 22,162 Subsidiary

Polytronics

Technolgy

Corp.

Polycarbide

Material Co., Ltd.

Taiwan Manufacturing of

electrical

components and

wholesale and

retail of chemical

raw materials

6,000 6,000 200 100 7,088 ( 90) ( 90) Subsidiary

Polytronics

(B.V.I)

Corporation

P-Circuit Corp. America Investment and

general business

operations

219,106 224,715 2 100 486,106 21,881 21,881 Subsidiary

Initial investment amount Shares held as at June 30, 2015

Net profit (loss)

of the investee for the six-

month period ended June

30, 2015

Investment income(loss)

recognised by the Company

for the six-month period

ended June 30, 2015


Information on investees




Footnote Investor Investee Location

Main business

activities

Table 6

Table 7

Remitted to

Mainland China

Remitted back

to Taiwan

Polystar

Electronics Co.,

Ltd.

Production and

sale of varistor

and

potentiometer

219,106$ Through investing

in an existing

company in the

third area, which

then invested in

the investee in

Mainland China.

199,356$ -$ -$ 199,356$ 21,881$ 100 21,881$ 486,805$ -$

Hanpu

(Kunshan)

Trading Co., Ltd.

Wholesale,

import and

export business

5,008 Other ways to

invest in

Mainland China.

- - - - 1,048 100 1,048 23,684 -

Accumulated

amount of

remittance from

Taiwan to

Mainland China

as of January 1,

2015 (Note 1)

Polytronics Technology Corp. and Subsidiary

Information on investments in Mainland China




Accumulated

amount

of investment

income

remitted back to

Taiwan as of

June 30, 2015 Footnote

Amount remitted from Taiwan to

Mainland China/

Amount remitted back

to Taiwan for the Six-month

period ended June 30, 2015

Accumulated

amount

of remittance

from Taiwan to

Mainland China

as of June 30,

2015

Net income of

investee as of

June 30, 2015

Ownership

held by

the

Company

(direct or

indirect)

Investment income

(loss) recognised

by the Company

for the Six-month

period ended June

30, 2015 (Note 2)

Book value of

investments in

Mainland China

as of June 30,

2015

Investee in

Mainland China

Main business

activities Paid-in capital

Investment

method

Table 7, Page 1

Company name

Accumulated

amount of

remittance

from Taiwan to

Mainland

China

as of June 30,

2015

Investment

amount approved

by the Investment

Commission of

the Ministry of

Economic Affairs

(MOEA)

Ceiling on

investments in

Mainland China

imposed by the

Investment

Commission of

MOEA

Polytronics

Technology

Corp.

$ 199,356 $ 219,106 $ 1,098,069

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

Note 4: Mainland China’s investees information are translated using the exchange rates of USD:NTD = 1:31.168 for recognised investment income (loss) and remaining using the exchange rates of USD:NTD = 1:30.86.

Note 1: During 2001~2002, the Company remitted US$360,000 for investment in Polytronics (B.V.I) Corporation in British Virgin Islands. In 1991, Polytronics (B.V.I) Corporation took this ammount along with its own

US$640,000, totalling US$1,000,000 to invest in P-Circuit Corp. in U.S. P-Circuit Corp. then used this US$1,000,000 to invest in Polystar Electronics Co., Ltd. in Mainland China. During 2003~2010, the Company

remitted US$1,500,000, US$150,000, US$1,000,000, US$1,000,000 and US$2,100,000, respectively, to Polytronics (B.V.I) Corporation for investment. The cumulative investment amount was US$6,470,000. Then

Polytronics (B.V.I) Corporation’s remitted US$1,500,000, US$510,000, US$1,000,000, US$990,000 and US$2,100,000, respectively to P-Circuit Corp. for investment. P-Circuit Corp. then remitted this amount to Polystar

Electronics Co., Ltd.in Mainland China. The cumulative investment amount in Polystar Electonics Co., Ltd. through P-Circuit Corp. was US$6,460,000.

Note 3: Under ‘Regulations Governing the Permission of Investment or Technical Cooperation in Mainland Area’, amendment to Jing-Shen-Zi No. 09704604680 of Ministry of Economic Affairs, effective August 2008, ceiling

of accumulated investment in Mainland China may not exceed 60% of the net assets and the ceiling is effective from August 1.

Table 7, Page 2

Table 8

Amount %

Balance at June

30, 2015 %

Maximum balance during

the Six-month period

ended June 30, 2015

Balance at June

30, 2015 Interest rate

Interest during the

Six-month period

ended June 30, 2015

Balance at

June 30, 2015 %

Polystar

Electronics

Co., Ltd.

$ 73,591 10.84% $ 59,710 16.74% $ 126,600 $ 123,440 3.90% $ 520 $ 38,332 66.07%

Polystar

Electronics

Co., Ltd.

( 7,492) 4.64% ( 40,506) 29.02%

Hanpu

(Kunshan)

Trading Co.,

Ltd.

47,927 7.06% 17,623 4.94%

Hanpu

(Kunshan)

Trading Co.,

Ltd.

727)( 0.45% 299)( 0.21%

Others-processing charges



Polytronics Technology Corp. and Subsidiary

Significant transactions conducted with investees in Mainland China directly or indirectly through other companies in the third areas


Investee in

Mainland

China

Sale (purchase)

Accounts receivable

(payable) Financing

Table 8

Documents

POLYTRONICS TECHNOLOGY CORP. AND SUBSIDIARIES · POLYTRONICS TECHNOLOGY CORP. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (Expressed in thousands of New Taiwan dollars) (The consolidated