TAIWAN SEMICONDUCTOR CO., LTD. AND ...SEMICONDUCTOR CO., LTD. and its subsidiaries as of December...

TAIWAN SEMICONDUCTOR CO., LTD. AND SUBSIDIARIES

Consolidated Financial Statements December 31, 2015 and 2014

(With Independent Auditors’ Report Thereon)

Independent Auditors’ Report

The Board of Directors TAIWAN SEMICONDUCTOR CO., LTD.: We have audited the accompanying consolidated balance sheets of TAIWAN SEMICONDUCTOR CO., LTD. and its subsidiaries as of December 31, 2015 and 2014(restated), and the related consolidated statements of comprehensive income, changes in stockholders’ equity, and cash flows for the years ended December 31, 2015 and 2014(restated). These consolidated financial statements are the responsibility of the Group’s management. Our responsibility is to issue an opinion on these consolidated financial statements based on our audits. We did not audit the financial statements of TSC Auto ID Technology Co., Ltd.; and our opinion on the amounts presented in the financial statements of TSC Auto ID Technology Co., Ltd is based on the reports of other Certified Public Accountants. The total assets of the subsidiaries constituted 38.00% of the consolidated total assets as of December 31, 2015, and the net operating revenues of the subsidiaries constituted 34.33% of the consolidated net operating revenues for the year ended December 31, 2015. We conducted our audits in accordance with the “Regulations Governing Auditing and Certification of Financial Statements by Certified Public Accountants” and auditing standards generally accepted in the Republic of China. Those regulations 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 financial statement presentation. We believe that our audits and the report of other auditors provide a reasonable basis for our opinion. In our opinion, base on our audits and the reports of other auditors, the consolidated financial statements referred to in the first paragraph present fairly, in all material respects, the financial position of TAIWAN SEMICONDUCTOR CO., LTD. and its subsidiaries as of December 31, 2015 and 2014(restated), and its financial performance and cash flows for the years ended December 31, 2015 and 2014(restated), in conformity with the “Regulations Governing the Preparation of Financial Reports by Securities Issuers” and the International Financial Reporting Standards, International Accounting Standards, IFRIC Interpretations and SIC Interpretations endorsed by the R.O.C. Financial Supervisory Commission.

The accompanying financial statements are intended only to present the financial position, results of operations, and cash flows in accordance with the International Financial Reporting Standards, International Accounting Standards and interpretations endorsed by the Financial Supervisory Commissions in the Republic of China and not those of any other jurisdictions. The standards, procedures and practices to review such financial statements are those generally accepted and applied in the Republic of China. The auditors’ report and the accompanying financial statements are the English translation of the Chinese version prepared and used in the Republic of China. If there is any conflict between, or any difference in the interpretation of, the English and Chinese language versions of the auditors’ report and financial statements, the Chinese version shall prevail.

TAIWAN SEMICONDUCTOR CO., LTD. has prepared its parent-company-only financial statements as of and for the years ended December 31, 2015 and 2014(restated), on which we have expressed a modified unqualified opinion.

KPMG CPA: Gau, Wey-Chuan

Chou, Pao-Lian Taipei, Taiwan, R.O.C March 28, 2016

See accompanying notes to consolidated financial statements.


Consolidated Balance Sheets

December 31, 2015, and 2014 (expressed in thousands of New Taiwan dollars)

December 31, 2015 December 31, 2014

Assets Amount % Amount (restatement)

%

Current assets: Cash and cash equivalents (note 6(a)) $ 3,723,343 35 2,554,950 29 Financial assets at fair value through profit or loss – current (note 6(b)) 343,982 3 140,928 2 Notes receivable, net (note 6(c)) 22,997 - 20,418 - Accounts receivable, net (note 6(c)) 1,671,938 16 1,506,946 17 Other receivables 45,578

- 75,975 1

Current tax assets 1,582 - 5,510 - Inventories (note 6(d)) 1,180,325 11 1,107,596 12 Prepaid expenses 204,269 2 188,594 2 Other financial assets-current(note 8) 164,838 2 - - 7,358,852 69 5,600,917 63 Non-current assets: Financial assets at cost-non-current (note 6(b)) 956 - - - Property, plant and equipment (note 6(f)) 3,009,403 28 3,080,700 35 Intangible assets 16,043 - 19,695 - Deferred tax assets (note 6(k)) 45,569 - 36,826 - Other financial assets – non-current 20,010 - 17,433 - Other non-current assets 295,931 3 156,235 2 3,388,912 31 3,310,889 37

Total assets $ 10,747,764 100 8,911,806 100

December 31, 2015 December 31, 2015 Liabilities and Stockholders’ Equity

Amount % Amount

(restatement) % Current liabilities: Short-term borrowings (note 6(g)) $ 460,313 4 284,850 4 Financial liabilities at fair value through profit or loss – current

(note 6(b)) 9,521 - 2,867 - Notes payable 14,134 - 8,419 - Accounts payable 1,031,264 10 945,388 12 Other payables 519,695 5 534,152 6 Current tax liabilities 209,375 2 132,777 1 Long-term borrowings due within one year (note 6(g)) - - 16,400 - Capital lease liabilities – current (note 6(h)) 18,933 - 18,226 - Other current liabilities 36,866 - 20,450 - 2,300,161 21 1,963,529 23 Non-current liabilities: Bonds payable (note 6(i)) 1,152,134 11 - - Long-term borrowings (note 6(g)) - - 77,900 1 Employee benefits (note 6(j)) 46,740 - 41,849 - Deferred tax liabilities (note 6(k)) 299,084 3 262,545 3 Capital lease liabilities – non-current (note 6(h)) 301,195 3 311,548 3 Deposits received 2,098 - - - 1,801,251 37 693,842 7 Total liabilities 4,101,412 38 2,657,371 30 Stockholders’ equity attributable to parent (note 6(l)): Common stock 2,400,143 22 2,436,143 27 Capital surplus 883,908 8 962,403 11 Retained earnings: Legal reserve 456,213 4 396,505 4 Special reserve 302,150 3 302,150 3 Unappropriated earnings 1,505,547 15 1,292,929 15 2,263,910 22 1,991,584 22 Other stockholders’ equity 100,866 1 140,319 2 Treasury stock (194,289) (2) (247,383) (3) Total stockholders’ equity attributable to parent 5,454,538 51 5,283,066 59 Non-controlling interests 1,191,814 11 971,369 11 Total stockholders’ equity 6,646,352 62 6,254,435 70 Total liabilities and stockholders’ equity $ 10,747,764 100 8,911,806 100



Consolidated Statements of Comprehensive Income

For the years ended December 31, 2015 and 2014 (expressed in thousands of New Taiwan dollars, except for earnings per common share)

2015 2014 Amount % Amount % (restatement) Sales revenue $ 7,793,772 101 7,738,870 101 Less: Sales returns and allowances 48,912 1 98,483 1 Net sales revenue (note 6(d)) 7,744,860 100 7,640,387 100 Cost of goods sold 5,066,135 66 5,187,530 69 Gross profit 2,678,725 34 2,452,857 31 Operating expenses: Selling 666,893 9 653,552 9 Administrative 398,503 5 346,897 5 Research and development 164,686 2 148,579 2 1,230,082 16 1,149,028 16

Operating income 1,448,643 18 1,303,829 15 Non-operating income and expenses: Finance expense (21,103) - (22,783) - Interest revenue 22,444 - 16,252 - Other income 59,666 1 30,738 - Gains on disposal of investments 996 - 841 - Foreign exchange gains 44,465 1 52,764 1 Losses on disposal of property, plant and equipment (11,865) - (6,922) - Losses on financial assets (liabilities) at fair value through profit (loss) (13,013) - (2,349) - Reversal of impairment gain 197 - 1,534 Miscellaneous disbursements (5,305) - (3,975) - 76,482 2 66,100 1 Income before income tax 1,525,125 20 1,369,929 16 Income tax expense (note 6(k)) 394,604 5 454,263 6

Consolidated net income 1,130,521 15 915,666 10 Other comprehensive income: Items that may not be reclassified subsequently to profit or loss

Remeasurements of the defined benefit plans (3,804) - 76 - Income tax relating to components that may not be reclassified - - - -

(3,804) - 76 - Items that may be reclassified subsequently to profit or loss

Exchange differences on translation of foreign subsidiaries before income tax (44,122) (1) 108,302 1

Income tax relating to components that may be reclassified to profit or loss in subsequent periods 1,142 - 2,265 -

(42,980) (1) 106,037 1 Other comprehensive income, net of tax (46,784) (1) 106,113 1 Comprehensive income $ 1,083,737 14 1,021,779 11 Net income attributable to: Owners of the parent $ 766,004 10 597,115 6 Non-controlling interests 364,517 5 318,551 4 $ 1,130,521 15 915,666 10 Comprehensive income attributable to: Owners of the parent $ 722,917 9 697,020 8 Non-controlling interests 360,820 5 324,759 3 $ 1,083,737 14 1,021,779 11 Basic earnings per common share (note 6(n)) $ 3.31 2.51 Diluted earnings per common share (note 6(n)) $ 3.26 2.48



Consolidated Statements of Changes in Stockholders’ Equity

For the years ended December 31, 2015 and 2014 (expressed in thousands of New Taiwan dollars)

Stockholders’ equity attributable to Owners of the parent Retained earnings Total equity

Common stock

Capital surplus

Legal reserve

Special reserve

Unappropriated earnings

Accumulated translation adjustment Treasury stock

attributable to Owners of the

parent Non-controlling

interests

Total stockholders’

equity Balance on January 1, 2014 $ 2,442,818 963,292 357,749 302,150 1,029,812 41,256 (151,065) 4,986,012 855,011 5,841,023 Retrospective application and retrospective restatement effects - - - - (4,098) - - (4,098) (1,791) (5,889) Balance after restatement 2,442,818 963,292 357,749 302,150 1,025,714 41,256 (151,065) 4,981,914 853,220 5,835,134 Net income - - - - 597,115 - - 597,115 318,551 915,666 Other comprehensive income - - - - 842 99,063 - 99,905 6,208 106,113 Total comprehensive income - - - - 597,957 99,063 - 697,020 324,759 1,021,641 Retirement of treasury share (10,000) (13,310) - - - - 23,310 - - - Appropriation of earnings: Provision of legal reserve - - 38,756 - (38,756) - - - - - Cash dividends - - - - (291,986) - - (291,986) - (291,986) Adjustments of capital surplus for company's cash

dividends received by subsidiaries - 6,836 - - - - - 6,836 - 6,836 Purchase of treasury stock - - - - - - (119,628) (119,628) - (119,628) Share-based payment – employee stock options - 3,027 - - - - - 3,027 - 3,027 Employee stock options exercised 3,325 1,054 - - - - - 4,379 - 4,379 Changes in the number of affiliates using equity method - 1,504 - - - - - 1,504 - 1,504 Changes in non-controlling interests - - - - - - - - (206,610) (206,610) Balance on December 31, 2014 2,436,143 962,403 396,505 302,150 1,292,929 140,319 (247,383) 5,283,066 971,369 6,254,435 Net income - - - - 766,004 - - 766,004 364,517 1,130,521 Other comprehensive income - - - - (3,634) (39,453) - (43,087) (3,697) (46,784) Total comprehensive income - - - - 762,370 (39,453) - 722,917 360,820 1,083,737 Purchase of treasury stock - - - - - - (42,009) (42,009) - (42,009) Retirement of treasury share (50,000) (99,215) - - (12,422) - 161,637 - - - Subsidiaries’ purchase of treasury stock - - - - - - (66,534) (66,534) - (66,534) Appropriation of earnings: Provision of legal reserve - - 59,708 - (59,708) - - - - - Cash dividends - - - - (477,622) - - (477,622) - (477,622) Adjustments of capital surplus for company's cash

dividends received by subsidiaries - 15,400 - - - - - 15,400 - 15,400 Share-based payment – employee stock options - 1,129 - - - - - 1,129 - 1,129 Employee stock options exercised 14,000 2,863 - - - - - 16,863 - 16,863 Changes in the number of affiliates using equity method - 1,328 - - - - - 1,328 - 1,328 Changes in non-controlling interests - - - - - - - - (140,375) (140,375) Balance on December 31, 2015 $ 2,400,143 883,908 456,213 302,150 1,505,547 100,866 (194,289) 5,454,538 1,191,814 6,646,352



Consolidated Statements of Cash Flows

For the years ended December 31, 2015 and 2014 (expressed in thousands of New Taiwan dollars)

2015

2014 (restatement)

Cash flows from operating activities: Income before income tax $ 1,525,125 1,369,929 Adjustments: Adjustments for the non-cash effects of items of income and expenses: Depreciation expense 303,786 313,027 Amortization expense 6,257 6,259 Bad debt expense 2,766 3,962 Net losses on financial assets or liabilities at fair value through profit or loss 13,013 2,349 Interest expenses 19,170 20,721 Interest income (22,444) (16,252) Share-based payments 1,129 3,027 Losses on disposal of property, plant and equipment 11,865 6,922 Disposal gains on financial assets (996) (841) Impairment losses on non-financial assets (197) (1,534) Others 1,328 1,419 Total adjustments for the non-cash effects of items of income and expenses 335,677 339,059 Net change in operating assets and liabilities: Net change in operating assets:

Increase in financial assets at fair value through profit or loss (207,698) (139,342) Increase in notes receivable (2,579) (2,742) Increase in accounts receivable (167,758) (27,841) Increase in other receivables 45,135 48,137 Decrease (increase) in inventories (72,729) 17,756 Decrease (increase) in prepayments (41,494) 133,807 Decrease (increase) in other financial assets (2,577) 4 Total net change in operating assets (449,700) 29,779 Net change in operating liabilities: Increase(decrease) in notes payable 5,715 (3,929) Increase (decrease) in accounts payable 85,876 (6,844) Increase (decrease) in other payables (35,137) 101,015 Increase in other current liabilities 16,416 940 Increase in provisions – non-current 1,087 784 Total net change in operating liabilities 73,957 91,966 Total net change in operating assets and liabilities (375,743) 121,745 Total adjustments (40,066) 460,804 Cash inflows from operating activities 1,485,059 1,830,733 Interest received 23,106 16,247 Income taxes paid (286,384) (290,239) Net cash provided by operating activities 1,221,781 1,556,741 Cash flows from investing activities: Acquisition of financial assets carried at cost (956) - Disposal of financial assets carried at cost - 434 Acquisition of property, plant and equipment (121,851) (210,912)

Disposal of property, plant and equipment 4,278 3,213 Increase in other financial assets (164,838) - Acquisition of intangible assets (2,773) (9,620) Increase in other non-current assets (240,284) (114,413)

Increase in prepayment for equipment (19,970) (205,840) Net cash used in investing activities (546,394) (537,138) Cash flows from financing activities: Increase (decrease) in short-term loans 171,544 (133,348) Issuance of Convertible bonds 1,202,400 - Repayments in long-term loans (94,300) (16,400) Increase in deposits received 2,105 - Decrease in capital lease liabilities (22,696) (25,272) Payments of cash dividends (462,222) (285,150) Employee stock options exercised 16,863 4,379 Purchase of treasury stock (108,543) (119,628) Interest paid (6,060) (4,806) Change in non-controlling interests (186,978) (206,610) Net cash used in financing activities 512,113 (786,835) Effect of exchange rate changes (19,107) 72,737 Net increase in cash and cash equivalents 1,168,393 305,505 Cash and cash equivalents, beginning of period 2,554,950 2,249,445 Cash and cash equivalents, end of period $ 3,723,343 2,554,950

(Continued)


Notes to Consolidated Financial Statements

December 31, 2015 and 2014 (amounts expressed in thousands of New Taiwan dollars, unless otherwise specified)

1. Organization and principal activities TAIWAN SEMICONDUCTOR CO., LTD. (the Company) was incorporated in January 1979 under the Company Act of the Republic of China. Its major business activities are the manufacture and sale of rectifiers and bar code printers. The Company’s common stock has been officially listed and traded on the GreTai Securities Market starting from February 2000. In order to improve operating efficiency and industry competitiveness from specialization, the Company restructured its business and organization. The Company separated its bar code printer business unit from itself and transferred it to establish TSC Auto ID Technology Co., Ltd. (TSC Auto ID). The board of directors’ meeting approved August 1, 2007, as the date of record of the split. The Company and its subsidiaries are referred to as the Group. The Group primarily is involved in the manufacture and sale of rectifiers and bar code printers.

2. Approval date and procedures of the consolidated financial statements

These consolidated financial statements were authorized for issuance by the board of directors on March 28, 2016.

3. New standards and interpretations not yet adopted (a) Impact of the 2013 version of the International Financial Reporting Standard (“IFRS”) endorsed by

the Financial Supervisory Commissions R.O.C. (“FSC”) but not yet in effect. The Company adopted the 2013 version of the IFRS endorsed by the FSC (IFRS 9 Financial instruments is excluded) in preparing its 2015 financial statements. The new standards and amendments issued by the International Accounting Standards Board (“IASB”) are as follows:

New standards and amendments Effective date per IASB Limited exemption from comparative IFRS 7

disclosures for first-time adopters (amendment to IFRS 1) 2010.7.1

Severe hyperinflation and removal of fixed dates for first-time adopters (amendment to IFRS 1)

2011.7.1

Government loans (amendment to IFRS 1) 2013.1.1 Disclosures – Transfer of financial assets (amendment to IFRS

7) 2011.7.1

Disclosures – Offsetting financial assets and financial liabilities (amendment to IFRS 7)

2013.1.1

IFRS 10 Consolidated Financial Statements 2013.1.1(Investment entities: January 1, 2014)

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Notes to Financial Statements

(Continued)

New standards and amendments Effective date per IASB

IFRS 12 Disclosure of Interests in Other Entities 2013.1.1 IFRS 13 Fair Value Measurement 2013.1.1 Presentation of items of other comprehensive income

(amendment to IAS 1) 2012.7.1

Deferred tax: recovery of underlying assets (amendment to IAS 12)

2012.1.1

Amended IAS 19 Employee Benefits 2013.1.1 Amended IAS 27 Separate Financial Statements 2013.1.1 Amended IAS 32 Offsetting financial assets and financial liabilities

2014.1.1

IFRIC 20 Stripping costs in the production phase of a surface mine

2013.1.1

The Group assessed that the 2013 version of the IFRS will not have any significant impact on its consolidated financial statements except for the following:

i) IFRS 12 Disclosure of Interests in Other Entities

IFRS 12 requires a broader disclosure of an entity’s interests in subsidiaries, joint arrangements, associates and unconsolidated entities. The objective of IFRS 12 is to specify the disclosure information provided. The Group expects the application of IFRS 12 will result in more extensive disclosures of interests in other entities in its financial statements.

ii) IFRS 13 Fair Value Measurement

IFRS 13 establishes a single source of guidance for fair value measurements and disclosures about fair value measurement. It defines fair value, establishes a framework for measuring fair value, and requires disclosures about fair value measurements. The Group assessed that the adoption of IFRS 13 will have no significant impact on its financial position and results of operation. The Group will include the required disclosures.

iii) AS 1 Presentation of Financial Statements

The other comprehensive income section is required to present line items which are classified by their nature, and are grouped between those items that will or will not be reclassified to profit and loss in subsequent periods. Allocation of income tax to two groups of items of other comprehensive is also required. The Group is expecting to change the presentation of comprehensive income statements in accordance with the standard.

3



(Continued)

iv) IAS 19 Employee Benefits

The amendments to IAS 19 require companies to calculate a “net interest” amount by applying the discount rate to the net defined benefit liability or asset to replace the interest cost and expected return on plan assets used in the previous IAS 19. In addition, the amendments eliminate the accounting treatment of either the corridor approach or the immediate recognition of actuarial gains and losses in profit or loss when they occur, and instead to recognize all actuarial gains and losses immediately through other comprehensive income. The past service cost, on the other hand, will be expensed immediately when it is incurred and will no longer be amortized over the average period before meeting vesting conditions on a straight-line basis. In addition, an entity can no longer withdraw an offer of termination benefits or recognize the related restructuring costs of early termination as termination benefits. All termination benefits are recognized in liabilities and expenses. In addition, the amendments also require a broader disclosure of defined benefit plans. The group has changed its valuation and presentation of accrued pension liabilities, pension cost and actuarial gains of losses in accordance with this standard. In compliance with the standard above, non-controlling interests decreased by $1,791, accrued pension liabilities increased by $5,889, and retained earnings decreased by $4,098 on January 1, 2014; non-controlling interests decreased by $765, accrued pension liabilities decreased by $138, and retained earnings increased by $842 on December 31, 2014; operating expenses decreased by $34 and non-controlling interests increased by $27 for the twelve months ended December 31, 2014.

(b) New standards and interpretations not yet endorsed by the FSC

The version of the IFRS issued by the IASB but not yet endorsed by the FSC were as follows:

New standards and amendments

Effective date per IASB

IFRS 9 Financial Instruments 2018.1.1 Amendments to IFRS 10 and IAS 28 – Sales or

Contributions of Assets between an Investor and its Associate or Joint Venture

Not yet approved by the IASB

Amendments to IFRS 10, IFRS 12 and IAS 28 –The application of the investment entities exceptions

2016.1.1

Amendments to IFRS 11 Accounting for Acquisitions of Interests in Joint Operations

2016.1.1

IFRS 14 Regulatory Deferral Accounts 2016.1.1 IFRS 15 Revenue from Contracts with Customers 2018.1.1 IFRS 16 Lease 2019.1.1 Amendments to IAS 1 – Disclosure-Initiative 2016.1.1 Amendments to IAS 7 – Disclosure-Initiative 2017.1.1

http://cdict.net/q/accordant

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(Continued)

New standards and amendments

Effective date per IASB

Amendments to IAS 12 – Recognition of Deferred tax

assets for Unrealized Losses 2017.1.1

Amendments to IAS 16 and IAS 38 – Clarification of acceptable methods of depreciation and amortization

2016.1.1

Amendments to IAS 16 and IAS 41 – Agriculture: bearer plants

2016.1.1

Amendments to IAS 19 –Defined Benefit Plans: Employee Contributions

2014.7.1

Amendments to IAS 27 – Equity Method in Separate Financial Statements

2016.1.1

Amendments to IAS 36 – Recoverable Amount Disclosures for Non-Financial Assets

2014.1.1

Amendments to IAS 39 –Novation of Derivatives and Continuation of Hedge Accounting

2014.1.1

Annual Improvements: 2010-2012 and 2011-2013 cycles 2014.7.1 Annual Improvements to IFRS: 2012-2014 cycles 2016.1.1 IFRIC 21 Levies 2014.1.1

The Group is assessing the influence on financial condition and performance of the above standards and interpretations. The Group will disclose the related influence when the assessment is finished.

4. Significant accounting policies

The significant accounting policies presented in the consolidated financial statements are summarized as follows. The significant accounting policies have been applied consistently to all periods presented in these consolidated financial statements. The financial statements have been translated into English. The translated information is consistent with the Chinese language financial statements from which it is derived.

(a) Statement of compliance

These consolidated financial statements have been prepared in accordance with the “Regulations Governing the Preparation of Financial Reports by Securities Issuers” (hereinafter referred to the Regulations), and the International Financial Reporting Standards, International Accounting Standards, IFRIC Interpretations and SIC Interpretations endorsed by the FSC (hereinafter referred to as the IFRSs endorsed by the FSC).

https://portal.ema.kworld.kpmg.com/grm/depts/isg/Pages/TIncomeTaxes.aspx

https://portal.ema.kworld.kpmg.com/grm/depts/isg/Pages/TIncomeTaxes.aspx

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(Continued)

(b) Basis of preparation

i) Basis of measurement

The consolidated financial statements have been prepared on a historical cost basis except for the following material items in the statement of financial position:

1) Financial instruments measured at fair value through profit or loss are measured at fair

value; 2) Available-for-sale financial assets are measured at fair value; 3) Liabilities for cash-settled share-based payment arrangements are measured at fair value; 4) Inventories are measured at the lower of cost and net realizable value; 5) The defined benefit asset is recognized as plan assets, plus unrecognized past service cost,

less the present value of the defined benefit obligation.

ii) Functional and presentation currency The functional currency of each entity is determined based on the primary economic environment in which the entity operates. The Company’s consolidated financial statements are presented in New Taiwan dollars, which is the Company’s functional currency. All financial information presented in New Taiwan dollars has been rounded to the nearest thousand.

(c) Basis of consolidation

i) Principle of preparation of the consolidated financial statements The consolidated financial statements comprise the Company and its subsidiaries. The financial statements of the subsidiaries are included in the consolidated financial statements from the date that control commences until the date that control ceases. Intra-group balances and transactions, and any unrealized income and expenses arising from intra-group transactions, are eliminated in preparing the consolidated financial statements. Losses applicable to the non-controlling interests in a subsidiary are allocated to the non-controlling interests even if doing so causes the non-controlling interests to have a deficit balance. Accounting policies of subsidiaries have been adjusted to ensure consistency with the policies adopted by the Group.

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(Continued)

Changes in the Group’s ownership interest in a subsidiary that do not result in a loss of control are accounted for as equity transactions. Any differences between the Group’s share of net assets before and after the change, and any considerations received or paid, are adjusted to or against the Group reserves.

ii) List of subsidiaries in the consolidated financial statements

Shareholding

Name of Investor Name of subsidiary Principal activity December 31,

2015 December 31,

2014 The Company Ever Energetic Int'l Ltd. (Ever

Energetic) Holding company and general import and export business

100.00% 100.00%

The Company Ever Winner Int'l Co., Ltd. (Ever Winner)

Holding company and general import and export business

100.00% 100.00%

The Company Skyrise Int'l Ltd. (Skyrise) Holding company and general import and export business

100.00% 100.00%

The Company Taiwan Semiconductor Europe GmbH (TSCE)

General import and export business 100.00% 100.00%

The Company Taiwan Semiconductor Japan Ltd. (TSCJ)

Trading of rectifiers 100.00% 100.00%

The Company Taiwan Semiconductor (H.K.) Co., Ltd. (TSCH)

Holding company and trading of rectifiers

25.22% 25.22%

The Company TSC Auto ID Technology Co., Ltd. (TSC Auto ID)

Manufacture and sale of bar code printers

36.78% 36.94%

Ever Energetic Taiwan Semiconductor (H.K.) Co., Ltd. (TSCH)

Holding company and trading of rectifiers

36.96% 36.96%

Ever Energetic TSC America, Inc. (TSCA) Trading of rectifiers 75.00% 75.00% Ever Winner Taiwan Semiconductor (H.K.) Co.,

Ltd. (TSCH) Trading of rectifiers 37.82% 37.82%

Ever Winner TSC America, Inc. (TSCA) Trading of rectifiers 25.00% 25.00% Ever Winner Shanghai Great Technology Trading

Co., Ltd. (TSCC) Trading of rectifiers 100.00% 100.00%

TSCH Yangxin Everwell Electronic Co., Ltd. (Yangxin Everwell)

Manufacture and sale of rectifiers

100.00% 100.00%

TSCH Tianjin Everwell Technology Co., Ltd. (Tianjin Everwell)

Manufacture and sale of wafers

100.00% 100.00%

TSC Auto ID TSC Auto ID Technology EMEA GmbH (TSCAE)

Trading of bar code printers and other parts

100.00% 100.00%

TSC Auto ID TSC Auto ID (H.K.) Ltd. (TSC HK) Holding company and general import and export business

100.00% 100.00%

TSC Auto ID TSC Auto Technology America Inc. (TSCAA)


100.00% 100.00%

TSC Auto ID Printronix Auto ID Technology Co., Ltd.(Printronix AD)


100.00% -

TSCAE TSC Auto ID Technology ME, Ltd. FZE (TSCAD)


100.00% 100.00%

TSCAE TSC Auto ID Technology Spain, S.L. (TSCAS)


100.00% 100.00%

TSC HK Tianjin TSC Auto ID Technology Co., Ltd. (TTSC)

Manufacture and sale of bar code printers and other parts

100.00% 100.00%

iii) Unlisted subsidiaries in the consolidated financial statements: None.

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(Continued)

(d) Foreign currency

i) Foreign currency transactions Transactions in foreign currencies are translated to the respective functional currencies of the Group’s entities at the exchange rates at the dates of the transactions. Monetary assets and liabilities denominated in foreign currencies at the reporting date are retranslated to the functional currency at the exchange rate at that date. The foreign currency gain or loss on monetary items is the difference between amortized cost in the functional currency at the beginning of the year adjusted for the effective interest and payments during the year, and the amortized cost in foreign currency translated at the exchange rate at the end of the year. Non-monetary assets and liabilities denominated in foreign currencies that are measured at fair value are retranslated to the functional currency at the exchange rate at the date that the fair value was determined. Non-monetary items in a foreign currency that are measured based on historical cost are translated using the exchange rate at the date of translation. Foreign currency differences arising on retranslation are recognized in profit or loss except for differences in available-for-sale equity investment, which are recognized in other comprehensive income arising on the retranslation.

ii) Foreign operations

The assets and liabilities of foreign operations are translated to the Group’s functional currency at the exchange rates at the reporting date. The income and expenses of foreign operations are translated to the Group’s functional currency at the average rate. Foreign currency differences are recognized in other comprehensive income and presented in the foreign currency translation reserve (translation reserve) in equity.

(e) Classification of current and non-current assets and liabilities

An entity shall classify an asset as current when: i) It expects to realize the asset, or intends to sell or consume it, in its normal operating cycle; ii) It holds the asset primarily for the purpose of trading; iii) It expects to realize the asset within twelve months after the reporting period; or iv) The asset is cash or a cash equivalent unless the asset is restricted from being exchanged or

used to settle a liability for at least twelve months after the reporting period. An entity shall classify all other assets as non-current.

8



(Continued)

An entity shall classify a liability as current when: i) It expects to settle the liability in its normal operating cycle; ii) It holds the liability primarily for the purpose of trading; iii) The liability is due to be settled within twelve months after the reporting period; or iv) The asset is cash or a cash equivalent (as defined in IAS 7) unless the asset is restricted from

being exchanged or used to settle a liability for at least twelve months after the reporting period.

An entity shall classify all other liabilities as non-current.

(f) Cash and cash equivalents

Cash comprises cash on hand and demand deposits. Cash equivalents are short-term, highly liquid investments that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value. The time deposits which meet the above definition and are held for the purpose of meeting short-term cash commitments rather than for investment or other purposes are reclassified as cash equivalents. Bank overdrafts that are repayable on demand and form an integral part of the Group’s cash management are included as a component of cash and cash equivalents for the purpose of the consolidated statement of cash flows.

(g) Financial instruments

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

i) Financial assets

The Group classifies financial assets into the following categories: financial assets at fair value through profit or loss, receivables, and available-for-sale financial assets. 1) Financial assets at fair value through profit or loss

Financial assets (liabilities) are classified as held for trading if they have been acquired principally for the purpose of selling or repurchasing in the near term. The derivative financial instruments held by the Group, except for those designated as effective hedging derivative instruments, are classified into this category.

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(Continued)

This type of financial asset is measured at fair value at the time of initial recognition, and attributable transaction costs are recognized in profit or loss as incurred. Financial assets at fair value through profit or loss are measured at fair value, and changes therein, which take into account any dividend and interest income, are recognized in profit or loss. A regular way purchase or sale of financial assets shall be recognized and derecognized, as applicable, using trade-date accounting.

2) Receivables Receivables are financial assets with fixed or determinable payments that are not quoted in an active market. Loans and receivables comprise trade receivables and other receivables. Such assets are recognized initially at fair value, plus any directly attributable transaction costs. Subsequent to initial recognition, receivables are measured at amortized cost using the effective interest method, less any impairment losses other than insignificant interest on short-term receivables. A regular way purchase or sale of financial assets shall be recognized and derecognized, as applicable, using trade-date accounting.

3) Impairment of financial assets The financial assets which are not measured at fair value through profit or loss shall be assessed for impairment at each reporting date. A financial asset is impaired if, and only if, there is objective evidence of impairment as a result of one or more events that occurred after the initial recognition of the asset (a ‘loss event’) and that loss event (or events) has an impact on the estimated future cash flows of the financial asset that can be estimated reliably. Objective evidence that financial assets are impaired includes default or delinquency by a debtor, restructuring of an amount due to the Group on terms that the Group would not consider otherwise, indications that a debtor or issuer will enter bankruptcy, adverse changes in the payment status of borrowers or issuers, economic conditions that correlate with defaults, or the disappearance of an active market for a security. In addition, for an investment in an equity security, a significant or prolonged decline in its fair value below its cost is accounted for as objective evidence of impairment. All individually significant receivables are assessed for specific impairment. Receivables that are not individually significant are collectively assessed for impairment by grouping together assets with similar risk characteristics. In assessing collective impairment, the Group uses historical trends of the probability of default, the timing of recoveries, and the amount of loss incurred, adjusted for management’s judgment as to whether current economic and credit conditions are such that the actual losses are likely to be greater or less than those suggested by historical trends.

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(Continued)

An impairment loss in respect of a financial asset measured at cost is calculated as the difference between its 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 is not reversible in subsequent periods. An impairment loss in respect of a financial asset is deducted from the carrying amount except for trade receivables, for which an impairment loss is reflected in an allowance account against the receivables. When it is determined a receivable is uncollectible, it is written off from the allowance account. Any subsequent recovery of a receivable written off is recorded in the allowance account. Changes in the amount of the allowance account are recognized in profit or loss.

ii) Financial liabilities and equity instruments 1) Financial liabilities measured at fair value through profit or loss

This type of financial liabilities is classified as held-for-trading financial liabilities or financial liabilities designated as at fair value through profit or loss. These liabilities are recognized initially at fair value, with transaction costs taken directly to the income statement, and are subsequently remeasured at fair value. Gains and losses from changes in the fair value of such liabilities (including interest expenses) are reported in profit or loss of financial assets and liabilities measured at fair value through profit or loss in the comprehensive income statement.

2) Other financial liabilities Financial liabilities not classified as held for trading or designated as at fair value through profit or loss, which comprise loans and borrowings, and trade and other payables, are measured at fair value plus any directly attributable transaction cost at the time of initial recognition. Subsequent to initial recognition, they are measured at amortized cost calculated using the effective interest method.

3) Offsetting of financial assets and liabilities The Group presents financial assets and liabilities on a net basis when the Group has the legally enforceable right to offset and intends to settle such financial assets and liabilities on a net basis or to realize the assets and settle the liabilities simultaneously.

iii) Convertible bonds

The component parts of compound instruments (convertible bonds) issued by the Corporation and its subsidiaries 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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(Continued)

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 recognized as a liability based on amortized cost using the effective interest method until the conversion rights have been exercised or the instrument has reached its maturity date.

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 the maturity date of the convertible bonds, the balance recognized in equity will be transferred to capital surplus - share premium. Transaction costs that relate to the issue of the convertible bonds are allocated to the liability components (included in the carrying amount of liabilities) and equity components (included in equity) in proportion to the allocation of the gross proceeds.

(h) Inventories The cost of inventories includes all necessary costs of purchase, costs of conversion, and other costs in bringing the inventories to a salable and useable location and condition. The fixed production overhead is allocated to the finished goods and work in progress based on the normal capacity of production facilities. Variable production overheads are allocated to each unit of production on the basis of the actual use of the production facilities. At each period-end, inventories are measured at the lower of cost or net realizable value. The cost of inventories is based on the weighted-average-cost formula. Net realizable value is calculated based on the estimated selling price in the ordinary course of business, less the estimated costs of completion and selling expenses at the end of the period.

(i) Property, plant and equipment i) Recognition and measurement

Items of property, plant and equipment are measured at cost less accumulated depreciation and accumulated impairment losses. Cost includes expenditure that is directly attributed to the acquisition of the asset. Each part of an item of property, plant and equipment with a cost that is significant in relation to the total cost of the item shall be depreciated separately, unless the useful life and the depreciation method of a significant part of an item of property, plant and equipment are the same as those of another significant part of that same item.

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(Continued)

The gain or loss arising from the derecognition of an item of property, plant and equipment shall be determined as the difference between the net disposal proceeds, if any, and the carrying amount of the item, and it shall be recognized as other gains and losses.

ii) Subsequent cost

Subsequent expenditure is capitalized only when it is probable that the future economic benefits associated with the expenditure will flow to the Company. The carrying amount of those parts that are replaced is derecognized. Ongoing repairs and maintenance are expensed as incurred.

iii) Depreciation

The depreciable amount of an asset is determined after deducting the asset’s residual amount, and it shall be allocated on a systematic basis over the asset’s useful life. Items of property, plant and equipment with the same useful life may be grouped in determining the depreciation charge. The remainder of the items may be depreciated separately. The depreciation charge for each period shall be recognized in profit or loss. The depreciable amount of a leased asset is allocated to each accounting period during the period of expected use on a systematic basis consistent with the depreciation policy the lessee adopts for depreciable assets that are owned. If there is reasonable certainty that the lessee will obtain ownership by the end of the lease term, the period of expected use is the useful life of the asset; otherwise, the asset is depreciated over the shorter of the lease term and its useful life. Land has an unlimited useful life and therefore is not depreciated. The estimated useful lives for the current and comparative years of significant items of property, plant and equipment are as follows: 1) Buildings and improvements: 3~55 years. 2) Machinery and equipment: 2~15 years. 3) Transportation equipment: 3~6 years. 4) Office equipment and others: 3~15 years. Depreciation methods, useful lives, and residual values are reviewed at each reporting date. If expectations differ from the previous estimates, the change(s) is accounted for as a change in accounting estimate.

13



(Continued)

(j) Leases Leases in which the Group assumes substantially all of the risks and rewards of ownership are classified as finance leases. On initial recognition, the lease asset is measured at an amount equal to the lower of its fair value or the present of the minimum lease payments. Subsequent to initial recognition, the asset is accounted for in accordance with the accounting policy applicable to the asset. Other leases are operating leases and are not recognized in the Group’s statement of financial position. Payments made under an operating lease (excluding insurance and maintenance expenses) are recognized in profit or loss on a straight-line basis over the term of the lease. Lease incentives received are recognized as an integral part of the total lease expense, over the term of the lease. Minimum lease payments made under finance leases are apportioned between the finance expense and the reduction of the outstanding liability. The finance expense is allocated to each period during the lease term so as to produce a constant periodic rate of interest on the remaining balance of the liability.

(k) Intangible assets Other intangible assets that are acquired by the Group are measured at cost less accumulated amortization and any accumulated impairment losses. Subsequent expenditure is capitalized only when it increases the future economic benefits embodied in the specific asset to which it relates. The amortizable amount is the cost of an asset, or other amount substituted for cost, less its residual value. Amortization is recognized in profit or loss on a straight-line basis over the estimated useful lives (6 years) of intangible assets from the date that they are available for use. The residual value, amortization period, and amortization method for an intangible asset with a finite useful life shall be reviewed at least annually at each fiscal year-end. Any change shall be accounted for as a change in accounting estimate.

(l) Deferred expense The cost of purchased computer software will be deferred and amortized accordingly over the estimated useful life based on its future economic benefits.

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(Continued)

(m) Impairment – Non-derivative financial assets The Group assesses at each balance sheet date whether there is any indication that an asset (individual asset or cash-generating unit) may have been impaired. If any such indication exists, the Group estimates the recoverable amount of the asset. The Group recognizes impairment loss for an asset whose carrying value is higher than the recoverable amount. The Group reverses impairment losses recognized in prior periods for assets if there is any indication that the impairment loss recognized no longer exists or has decreased. The carrying value after the reversal should not exceed the recoverable amount or the depreciated or amortized balance of the assets assuming no impairment loss was recognized in prior periods.

(n) Product warranty obligations A provision for warranties is recognized when the underlying products or services are sold. The provision is based on historical warranty data and a weighting of all possible outcomes against their associated probabilities.

(o) Treasury stock The outstanding shares of the Company purchased back by it should be recorded as treasury stock at the purchasing cost before such shares are disposed of or retired. If treasury stock is disposed of afterward, the difference is recorded as capital surplus when the disposal price is higher than the carrying amount; when the situation is reversed, the difference is recorded as a reduction of capital surplus generated from treasury stock transactions, and any insufficiency is applied to retained earnings. The carrying amount of the treasury stock is calculated by using the weighted-average method, and determined individually by each repurchasing reason. When retiring treasury stock, common stock and capital surplus derived from paid-in capital in excess of par value should be eliminated proportionally. If the carrying amount of retired treasury stock is higher than the eliminated amount of common stock and capital surplus, then the difference is recorded as a reduction of capital surplus derived from treasury stock, with any insufficiency applied to retained earnings; when the situation is reversed, the difference is recorded as capital surplus.

(p) Revenue recognition Revenue is recognized when titles to the products and the risks and rewards of ownership are transferred to the customers. Related costs and expenses matching the revenues are recognized as incurred. Allowances for estimated sales returns and discounts are provided in the period the related revenue is recognized based on historical experience.

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(Continued)

(q) Employee benefits i) Defined contribution plans

Obligations for contributions to defined contribution pension plans are recognized as an employee benefit expense in profit or loss in the periods during which services are rendered by employees.

ii) Defined benefit plans

A defined benefit plan is a post-employment benefit plan other than a defined contribution plan. The Group’s net obligation in respect of the defined benefit pension plans is calculated separately for each plan by estimating the amount of future benefit that employees have earned in return for their service in the current and prior periods; that benefit is discounted to determine its present value. The fair value of plan assets are deducted. The discount rate is the yield at the reporting date on government bonds that have maturity dates approximating the terms of the Group’s obligations and that are denominated in the same currency in which the benefits are expected to be paid. The calculation is performed annually by a qualified actuary using the projected unit credit method. When the calculation results in a benefit to the Group, the recognized asset is limited to the total of the present value of the economic benefits available in the form of any future refunds from the plan or reductions in the future contributions to the plan. In order to calculate the present value of the economic benefits, consideration is given to any minimum funding requirements that apply to any plan in the Group. An economic benefit is available to the Group if it is realizable during the life of the plan, or on the settlement of the plan liabilities. When the benefits of a plan are improved, the expense of the increased benefit relating to past service by employees is recognized immediately in profit or loss. Remeasurements of the net defined benefit liability (asset), which comprise (1) actuarial gains and losses, (2) the return on plan assets (excluding interest) and (3) the effect of the asset ceiling (if any, excluding interest), are recognized immediately in other comprehensive income. The Group can reclassify the amounts recognized in other comprehensive income to retained earnings or other equity. If the amounts recognized in other comprehensive income are transferred to other equity, they shall not be reclassified to profit or loss or recognized in retained earnings in a subsequent period. Net interest expense and other expenses related to the defined benefit plans are recognized in retained earnings.

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(Continued)

The Group recognizes gains or losses on the curtailment or settlement of a defined benefit plan when the curtailment or settlement occurs. The gain or loss on curtailment comprises any resulting change in the fair value of plan assets and the change in the present value of the defined benefit obligation.

iii) Short-term employee benefits

Short-term employee benefit obligations are measured on an undiscounted basis and are expensed as the related service is provided. A liability is recognized for the amount expected to be paid under short-term cash bonus or profit-sharing plans if the Company has a present legal or constructive obligation to pay this amount as a result of past service provided by the employee, and the obligation can be estimated reliably.

(r) Share-based payments The grant-date fair value of share-based payment awards granted to employees is recognized as employee expenses, with a corresponding increase in equity, over the period that the employees become unconditionally entitled to the awards. The amount recognized as an expense is adjusted to reflect the number of awards whose related service and non-market performance conditions are expected to be met, such that the amount ultimately recognized as an expense is based on the number of awards that meet the related service and non-market performance conditions at the vesting date. For share-based payment awards with non-vesting conditions, the grant-date fair value of the share-based payment is measured to reflect such conditions, and there is no true-up for differences between expected and actual outcomes.

(s) Income taxes Income tax expenses include both current taxes and deferred taxes. Except for expenses related to business combinations or recognized directly in equity or other comprehensive income, all current and deferred taxes shall be recognized in profit or loss. Current taxes include tax payables and tax deduction receivables on taxable gains (losses) for the year calculated using the statutory tax rate on the reporting date or the actual legislative tax rate, as well as tax adjustments related to prior years. Deferred taxes arise due to temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and their respective tax bases. Deferred taxes shall not be recognized for the exceptions below:

17



(Continued)

i) Assets and liabilities that are initially recognized but are not related to the business combination and have no effect on net income or taxable gains (losses) at the time of the transaction.

ii) Temporary differences arising from equity investments in subsidiaries or joint ventures where

there is a high probability that such temporary differences will not reverse. iii) Initial recognition of goodwill. Deferred tax assets and liabilities shall be measured at the tax rates that are expected to apply to the period when the asset is realized or the liability is settled, based on tax rates that have been enacted or substantively enacted by the end of the reporting period. Deferred tax assets and liabilities may be offset against each other if the following criteria are met: i) The entity has the legal right to settle tax assets and liabilities on a net basis; and ii) The taxing of deferred tax assets and liabilities fulfills one of the scenarios below:

1) Levied by the same taxing authority; or 2) Levied by different taxing authorities, but where each such authority intends to settle tax

assets and liabilities (where such amounts are significant) on a net basis every year of the period of expected asset realization or debt liquidation, or where the timing of asset realization and debt liquidation is matched.

A deferred tax asset should be recognized for the carry forward of unused tax losses, unused tax credits, and deductible temporary differences to the extent that it is probable that future taxable profit will be available against which the unused tax losses, unused tax credits, and deductible temporary differences can be utilized. Such unused tax losses, unused tax credits, and deductible temporary differences shall also be re-evaluated every year on the financial reporting date, and adjusted based on the probability that future taxable profit will be available against which the unused tax losses, unused tax credits, and deductible temporary differences can be utilized.

(t) Earnings per share The Group discloses the Company’s basic and diluted earnings per share attributable to ordinary shareholders of the Company. The basic earnings per share are calculated as the profit attributable to the ordinary shareholders of the Company divided by the weighted-average number of ordinary shares outstanding. The diluted earnings per share are calculated as the profit attributable to ordinary shareholders of the Company divided by the weighted-average number of ordinary shares outstanding after adjustment for the effects of all dilutive potential ordinary shares.

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(Continued)

(u) Operating segments An operating segment is a component of the Company that engages in business activities from which it may earn revenues and incur expenses. The segment’s operating results are reviewed regularly by the Group’s chief operating decision maker to make decisions pertaining to the allocation of resources to the segment and to assess its performance for which discrete financial information is available.

5. Significant accounting assumptions and judgments, and major sources of estimation uncertainty The preparation of the consolidated financial statements in conformity with IFRSs requires management to make judgments, estimates and assumptions that affect the application of the accounting policies and the reported amount of assets, liabilities, income and expenses. Actual results may differ from these estimates. Management continued to monitor the accounting assumptions, estimates and judgments. Management recognized the changes in the accounting estimates during the period and the impact of the changes in the accounting estimates in the next period.

Information about assumptions and estimation uncertainties that have a significant risk of resulting in a material adjustment within the next financial year is included in the following notes:

i) Valuation of inventory

Inventories are stated at the lower of cost or net realizable value, and the Group uses judgment and estimate to determine the net realizable value of inventory at the end of each reporting period.

Due to rapid technological change, the Group estimates the net realizable value of inventory for obsolescence and unmarketable items at the end of the reporting period and then writes down the cost of inventories to net realizable value.

ii) Income tax expense and deferred tax assets and liabilities

The Group is subjected to income taxes in the Republic of China. The income tax is reported by the Company, and some differences in transactions and calculations between the tax authorities and the Group resulted in uncertainty in income tax. The Group recognized the related income tax and deferred income tax pursuant to the assessment of transactions and calculations with the possibility of additional tax. If the final tax outcomes are different from the original amount recognized, such differences will have an impact on the income tax and deferred income tax.

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(Continued)

6. Significant account disclosures

(a) Cash and cash equivalents

December 31, 2015

December 31, 2014

Cash on hand $ 893 583 Checking and savings accounts 2,847,642 2,011,239 Time deposits 534,808 303,128 Guaranteed deposit with short-term rate 340,000 240,000 $ 3,723,343 2,554,950

Refer to note 6(p) for the fair value sensitivity analysis and interest rate risk of the financial assets and liabilities of the Group.

(b) Financial instruments

i) The financial instruments held by the Company were as follows:

December 31, 2015

December 31, 2014

Financial assets at fair value through profit or loss –

current:

Beneficiary certificates $ 340,592 140,321 Forward exchange contracts 2,671 607 Convertible bonds embedded derivative 761 -

$ 343,982 140,928 Financial assets at cost – non-current:

Shares of unlisted companies $ 956 Financial liabilities at fair value through profit or

loss – current:

Forward exchange contracts $ 9,521 2,867

Refer to note 6(p) for the disclosures of credit risk exposures, currency risk exposures, and interest rate risk exposures. As of December 31, 2015 and 2014, there was no pledged financial asset.

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(Continued)

ii) The Company uses derivative financial instruments to hedge certain foreign exchange exposures arising from its operating activities. The Company held the following derivative financial instruments presented as held-for-trading financial assets (liabilities):

December 31, 2015 Contract amount Currency Contract period

Selling/buying forward USD 9,000 /CNY 58,311 USD to CNY 2016.02~2016.05

Selling/buying forward EUR 2,600 /USD 2,850 EUR to USD 2016.01~2016.07

Selling/buying forward EUR 3,839 /NTD 138,865 EUR to TWD 2016.01~2016.04

Selling/buying forward USD 200 /USD 229 EUR to USD 2016.01

December 31, 2014 Contract amount Currency Contract period

Selling/buying forward USD 10,000 /CNY 61,897 USD to CNY 2015.01~2015.03

Selling/buying forward EUR 500 /USD 627 EUR to USD 2015.01

iii) Financial assets carried at cost held by the Company are those that do not have a quoted

market price in an active market and whose fair value cannot be reliably measured and, as a result, are measured at cost.

iv) Sensitivity analysis – equity market price risk

If security prices had changed and if the analysis is performed on the same basis for both years, assuming that all other variables remain the same, the impact on other comprehensive income would have been as follows: 2015 2014

Security price on the reporting date

Other consolidated profit or loss

after tax Net income

Other consolidated profit or loss after

tax Net income Rise 1% $ - 2,770 - 1,146 Drop 1% $ - (2,770) - (1,146)

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(Continued)

(c) Notes and accounts receivable, net

December 31, 2015

December 31, 2014

Notes receivable $ 23,395 20,816 Accounts receivable 1,718,678 1,568,710 Less: allowance for doubtful accounts (25,717) (22,917)

allowance for sales returns and discounts (21,421) (39,245) $ 1,694,935 1,527,364 The Group’s overdue, but not yet impaired, notes and accounts receivable aging analysis is as follows: December 31,

2015 December 31,

2014 1~3 months overdue $ 188,125 337,920 4~6 months overdue 7,395 27,283 7~9 months overdue 586 79 10~12 months overdue 1,185 253 Over a year overdue 2,104 1,724 $ 199,395 367,259 The movement in the provision for impairment with respect to notes and accounts receivable during the years 2015 and 2014 was as follows: Collectively

assessed impairment

As of January 1, 2015 $ 22,917 Impairment loss recognized 2,766 Effect of movement in exchange rates 34 As of December 31, 2015 $ 25,717

Collectively

assessed impairment

As of January 1, 2014 $ 20,102 Impairment loss recognized 3,962 Effect of movement in exchange rates (1,147) As of December 31, 2014 $ 22,917

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(Continued)

The recognition of allowance for doubtful accounts is based on current economic circumstances, customers’ historical payment behavior, and extensive analysis of the customers’ creditability. The allowance for doubtful accounts should be recognized under expense, unless the Company believes that the doubtful account is uncollectable. Once the doubtful account is recognized as uncollectable, it should be written off and reclassified under financial assets. As of December 31, 2015, none of the Group’s collectable receivables had any significant impairment.

(d) Inventories

December 31, 2015

December 31, 2014

Finished goods $ 650,784 609,131 Less: provision for obsolescence and devaluation (43,309) (46,706) 607,475 562,425 Work in process 224,462 176,445 Less: provision for obsolescence and devaluation (20,010) (14,936) 204,452 161,509 Raw material and supplies 343,567 279,844 Less: provision for obsolescence and devaluation (11,454) (17,538) 332,113 262,306 Inventories in transit 36,285 121,356 $ 1,180,325 1,107,596

During the years 2015and 2014 raw material, consumables, and changes in the finished goods and work in progress recognized as cost of sales amounted to $5,069,582 and $5,248,609, respectively. In 2015and 2014, the write-down of inventories increased (decreased) the cost of sales by $(3,447) and $2,273, respectively.

As of December 31, 2015 and 2014, none of the inventories of the Group were pledged as collateral.

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(Continued)

(e) The significant non-controlling interests of subsidiaries The subsidiaries’ non-controlling interests that have significant effect on the Group were as follows:

Percentage of non-controlling interests on ownership

interests and voting rights

Name of subsidiary Country December 31,

2015 December 31,

2014 TSC Auto ID Taiwan 63.22% 63.06% The financial statement of TSC Auto ID has been prepared in accordance with the IFRSs endorsed by the FSC. The summary of financial information for TSC Auto ID was as follows. This financial information is disclosed in the amounts before the elimination on transactions between the Group. The summary of financial information: December 31,

2015 December 31,

2014 Current assets $ 2,890,300 1,525,880 Non-current assets 1,194,102 853,246 Current liabilities (815,550) (549,472) Non-current liabilities (1,347,954) (243,819) Net assets $ 1,920,898 1,585,835 Non-controlling interests $ 1,191,814 971,369

For the year Ended

December 31 2015 2014 Sales revenue $ 2,658,833 2,440,687 Net income $ 577,042 505,696 Other comprehensive income 12,008 26,945 Comprehensive income $ 589,050 532,641 Net income attributable to non-controlling interests $ 364,517 318,551 Comprehensive income attributable to non-controlling interests $ 360,820 324,759 Cash flows from operating activities $ 615,967 432,363 Cash flows from investing activities (511,606) (128,310) Cash flows from financing activities 961,566 (359,773) Effect of exchange rate changes 222 9,199 Net increase(decrease) in cash and cash equivalents $ 1,066,149 (46,521)

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(Continued)

(f) Property, plant and equipment

During the years 2015 and 2014, the cost, depreciation, and impairment of the property, plant and equipment of the Group were as follows:

Land Building and construction

Machinery and equipment

Lease property

Under construction Total

Cost or deemed cost: Balance on 1 January, 2015 $ 478,532 1,378,200 3,684,535 319,789 1,904 5,862,900 Additions - 22,817 97,891 - 1,143 121,851 Sales of assets - - (43,000) - - (43,000) Disposals - (360) (86,353) - - (86,713) Others - 101,645 47,779 - (3,047) 146,377 Effect of movement in exchange rates - (8,229) (42,182) - - (50,411) Balance on December 31, 2015 $ 478,532 1,494,073 3,658,670 319,789 - 5,951,064 Balance on January 1, 2014 $ 478,532 1,284,433 3,440,205 319,789 - 5,522,959 Additions - 36,417 172,543 - 1,952 210,912 Sales of assets - - (23,486) - - (23,486) Disposals - - (57,366) - - (57,366) Others - 44,396 78,742 - (48) 123,090 Effect of movement in exchange rates - 12,954 73,897 - - 86,851 Balance on December 31, 2014 $ 478,532 1,378,200 3,684,535 319,789 1,904 5,862,960 Accumulated depreciation and impairment loss:

Balance on January 1, 2015 $ - 279,157 2,503,103 - - 2,782,260 Depreciation for the year - 41,623 262,163 - - 303,786 Impairment loss - - (197) - - (197) Sales of assets - - (40,309)) - - (40,309) Disposals - (327) (73,468) - - (73,795) Effect of movement in exchange rates - (1,999) (28,085) - - (30,084) Balance on December 31, 2015 $ - 318,454 2,623,207 - - 2,941,661 Balance on January 1, 2014 $ - 238,481 2,249,553 - - 2,448,034 Depreciation for the year - 37,245 275,782 - - 313,027 Impairment loss - - (1,534) - - (1,534) Sales of assets - - (19,338) - - (19,338) Disposals - - (49,462) - - (49,462) Others - - (411) - - (411) Effect of movement in exchange rates - 3,431 48,513 - - 51,944 Balance on December 31, 2014 $ - 279,157 2,503,103 - - 2,782,260 Carrying amount: Balance on December 31, 2015 $ 478,532 1,175,619 1,035,463 319,789 3,009,403 Balance on December 31, 2014 $ 478,532 1,099,043 1,181,432 319,789 1,904 3,080,700 Balance on January 1, 2014 $ 478,532 1,045,952 1,190,652 319,789 3,034,925

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(Continued)

i) Leased assets

The Group signed land lease agreements with the Ministry of Economic Affairs in Taiwan to lease land in the Letzer Industrial Park for the construction of plants. The leases are over a period of 20 years, and rent is paid every 3 months. Rent is calculated as the land’s assessed price multiplied by its annual rent rate. The assessed price is adjusted yearly according to the consumer price index, and the annual rental rate is based on the mid/long-term capital loan interest rate as prescribed by the Executive Yuan and recalculated every half-year. The lease deposit is equivalent to 3-6 times the monthly rent at the inception of the lease. At any time during the lease, the Group may purchase the leased land at the pre-determined price. The rent already paid during the lease may be used to offset the purchase price; therefore, the Group classifies the lease under capital lease. The Group provided bank certificates of deposit and security deposits as lease guarantee. The land valuation and annual lease rate should be adjusted periodically. As of December 31, 2015 and 2014, the leasehold land cost was revised as $319,789.

ii) Pledged as collateral

Please refer to note 8 for disclosures on property, plant and equipment pledged as collateral.

iii) Interest capitalized

Interest capitalized for purchasing property, plant, and equipment for the year ended December 31, 2015 and 2014, amounted to $ 831, and $2,134, respectively. The interest capitalization rates were 3.00%.

(g) Long- and short-term borrowings

i) Short-term borrowings:

December 31, 2015

December 31, 2014

Secured loans $ 114,888 - Credit loans 50,000 - Import loans 295,425 284,850 $ 460,313 284,850 Interest rate range (%) 1.00%~1.44% 0.83%~0.93% Please refer to notes 8 and 9 for disclosures on mortgaged and pledged assets.

26



(Continued)

ii) Long-term borrowings:

Creditor Interest rate

range Expiry date December 31,

2015 December 31,

2014 KGI Bank 1.72% 2020.09.21 $ - 94,300 Less: Current portion of long-term

borrowings

- (16,400) $ - 77,900

Please refer to note 6(o) for the disclosures of liquidity risk exposures, currency risk exposures, and interest rate risk exposures.

iii) Please refer to note 8 for details on time deposit, and land and buildings pledged as collateral.

(h) Lease i) Operating lease rentals payable

Non-cancellable operating lease rentals are payable as follows: December 31,

2015 December 31,

2014 Less than one year $ 44,852 47,039 Between one and five years 91,777 93,719 More than five years 177,067 206,453 $ 313,696 347,211 The Group leases land and other equipment under operating leases. The leases typically run for a period of 1 to 20 years, with an option to renew the lease after that date. During the years 2015 and 2014, the amounts of $20,081, and $28,389, respectively, were recognized as an expense in profit or loss in respect of operating leases.

27



(Continued)

ii) Financial lease liabilities The Group’s finance lease liabilities are payable as follows:

December 31, 2015 December 31, 2014

Future minimum

lease payments Interest

Present value of minimum

lease payments

Future minimum

lease payments Interest

Present value of minimum

lease payments

Less than one year $ 31,180 12,188 18,992 30,827 12,601 18,226 Between one and five years 130,363 47,062 83,301 128,921 49,063 79,858 More than five years 267,149 49,254 217,895 301,244 69,554 231,690 $ 428,692 108,504 320,188 460,992 131,218 329,774

(i) Bonds payable

December 31,

2015 December 31,

2014 Unsecured Convertible bonds $ 1,152,134 -

On December 31, 2015, TSC Auto ID issued three-year unsecured bonds (the first tranche) with no interest. The bonds had an aggregate face value of $1,200,000 thousand, with each unit having a face value of NT$100 thousand, the offering price was 100.2% of the face value, and its conversion period is from December 31, 2015 to December 31, 2018. The conversion price was $342.8 per share on issuance date, therefore; the conversion price have to be adjusted according to the Anti-dilution policy after the issuance date.

Within the period between one month after the issuance date and 40 days before the last convertible date, if (i) the closing price of TSC Auto IDs common shares on the TWSE for a period of 30 consecutive trading days before redemption has been at least 30% of the conversion price in effect on each such trading day, or (ii) in the event that at least 90% of the principal amount of the bonds originally outstanding has been redeemed, TSC Auto ID may redeem all bonds at face value by cash.

The convertible bonds include assets, liabilities and equity. The equity components were accounted for by TSC Auto ID as paid-in capital – redemption right. The effective interest rate is 1.36%.

28



(Continued)

December 31,

2015

Convertible bonds issued (deduct transaction costs of

$5,280) $ 1,197,120 Equity components( deduct the net of income tax effects of

$35 and transaction costs of $205) (46,603) Asset components (deduct the net of income tax effects of

$1 and transaction costs of $3) 719 Deferred tax assets 898 Balance on December 31,2015, liability components

(deduct the net of income tax effects of $864 and transaction costs of $5,078) $ 1,152,134

(j) Employee benefits

i) Defined benefit plans

The Group determined the movement in the present value of the defined benefit obligations and the fair value of plan assets as follows: December 31,

2015 December 31,

2014 Total present value of obligations $ (92,880) (85,912) Fair value of plan assets 46,140 44,063 Recognized liabilities for defined benefit obligations $ (46,740) (41,849) 1) Composition of plan assets

The Company and TSC Auto ID contribute pension funds to the Bank of Taiwan labor pension reserve account. Under the Labor Standards Act, each employee’s retirement payment is calculated based on the number of years of service and the average salary for the six months before retirement. The Group allocates pension funds in accordance with the “Regulations for Revenues, Expenditures, Safeguard and Utilization of the Labor Retirement Fund”, and such funds are managed by the Labor Pension Fund Supervisory Committee. With regard to the utilization of the funds, minimum earnings shall be no less than the earnings attainable from two-year time deposits with interest rates offered by local banks. As of December 31, 2015, the pension fund account balance at Bank of Taiwan amounted to $46,140, For information on the utilization of the labor pension fund assets including the asset allocation and yield of the fund, please refer to the website of the Labor Pension Fund Supervisory Committee.

29



(Continued)

2) Movements in the present value of the defined benefit obligations

The movements in the present value of defined benefit obligations for the Company and TSC Auto ID in 2015 and 2014 were as follows:

2015 2014 Defined benefit obligation on January 1 $ (85,912) (83,082) Current service cost and interest (2,875) (2,771) Remeasurement in net defined benefit liability - Return on plan assets (excluding current interest) (3,785) 1,167 - Actuarial gains and losses arising from changes in

financial assumption (686) - - Actuarial gains and losses arising from experience

adjustment 378 (1,226) Defined benefit obligation on December 31 $ (92,880) (85,912)

3) Movement in the fair value of the defined benefit plan assets The movements in the fair value of the defined benefit plan assets for the Company and TSC Auto ID in 2015 and 2014 were as follows: 2015 2014 Fair value of plan assets on January 1 $ 44,063 41,941 Interest revenue 886 853 Defined benefit liability Remeasurement in net defined benefit liability - Return on plan assets (excluding current interest) 289 135 Contributions made 902 1,134 Fair value of plan assets on December 31 $ 46,140 44,063

4) Expenses recognized in profit or loss

Expenses recognized in profit or loss of the Company and TSC Auto ID in 2015 and 2014 were as follows: 2015 2014 Current service costs $ 1,341 1,287 Net interest on the net defined benefit liability 648 631 $ 1,989 1,918

30



(Continued)

2015 2014 Cost of goods sold $ 624 672 Sales expense 203 202 Administration expense 964 856 Research and development expense 198 188 Defined benefit obligation on December 31 $ 1,989 1,918

5) Remeasurement of the net defined benefit liability (asset) recognized in other comprehensive income

The Company and TSC Auto ID’s remeasurement of the net defined benefit liability recognized in other comprehensive income for the years ended December 31, 2015 and 2014 were as follows:

December 31, 2015

December 31, 2014

Cumulative amounts at January 1 $ (5,813) (5,889) Recognized during the period (3,804) 76 Cumulative amounts at December 31 $ (9,617) (5,813)

6) Actuarial assumptions

The following are the Company and TSC Auto ID’s principal actuarial assumptions: :

The expected allocation payment made by the Company and TSC Auto ID to the defined benefit plans for the one year period after the reporting date was $1,312. The defined benefited obligation weight-average duration of the Company is between 5.26 years and 18.86 years. The defined benefited obligation weight-average duration of TSC Auto ID is from 5.26 years to 18.86 years.

2015 2014 Discount rate 1.375%~1.875% 1.50%~2.00% Rate of increase in future compensation levels 3.00% 3.00%

31



(Continued)

7) Sensitivity analysis

When computing the present value of the defined benefit obligations, the Company and TSC Auto ID use judgments and estimations to determine the actuarial assumptions, including employee turnover rates and future salary changes, as of the financial statement date. Any changes in the actuarial assumptions may significantly impact the amount of the defined benefit obligations. If the actuarial assumptions had changed, the impact on the present value of the defined benefit obligation shall be as follows: The impact on the present value of the defined benefit obligation Increased 0.25% Decreased 0.25% December 31, 2015 Discount rate (2,617) 2,321 Future salary increasing rate 2,264 (2,233) December 31, 2014 Discount rate (2,515) 2,634 Future salary increasing rate 2,586 (2,585) Reasonably possible changes at the reporting date to one of the relevant actuarial assumptions, holding other assumptions constant, would have affected the defined benefit obligation by the amounts shown above. The method used in the sensitivity analysis is consistent with the calculation of pension liabilities in the balance sheets.

There is no change in the method and assumptions used in the preparation of sensitivity analysis for 2015 and 2014.

ii) Defined contribution plans

The Company and TSC Auto ID allocate 6% of each employee’s monthly wages to the labor pension personal account at the Bureau of Labor Insurance in accordance with the provisions of the Labor Pension Act. Under this defined contribution plan, the Group contributes a fixed amount to the Bureau of Labor Insurance without additional legal or constructive obligations. For the years 2015 and 2014, the Group’s pension costs under the defined contribution method were $16,473 and $16,636, respectively. Payment was made to the Bureau of Labor Insurance. The pension cost of foreign subsidiaries recognized in accordance with the local defined contribution method amounted to $65,129 and $51,622 for the years 2015 and 2014, respectively.

32



(Continued)

(k) Income tax

i) Income tax expense 1) The amount of income tax expense for the years 2015 and 2014 was as follows:

2015 2014 Current tax expense

Current period $ 365,732 306,352 Adjustment for prior periods (52) (4,912)

365,680 301,440 Deferred tax expense

Recognition and reversal of temporary differences 28,924 152,823 Total income tax expense $ 394,604 454,263

2) The amount of income tax recognized in equity for the year 2015 was as follow. There was

no income tax recognized directly in equity for the year 2014:

2015 Convertible bonds $ 35

3) The amount of income tax recognized in other comprehensive income for the years 2015

and 2014 was as follows:

2015 2014 Items that may be reclassified subsequently to profit or

loss

Foreign currency translation differences of foreign operations

$ (1,142)

2,265

4) The Group’s reconciliation of income tax and profit before tax for 2015 and 2014 is as

follows:

2015 2014 Profit excluding income tax $ 270,466 237,510 Net gains on securities trading (169) (143) 10% surtax on undistributed retained earnings 16,855 11,238 Income tax expense of subsidiaries 146,675 161,235 Change in unrecognized temporary difference and others (39,223) 44,423 Total $ 394,604 454,263

33



(Continued)

ii) Deferred tax assets and liabilities 1) Unrecognized deferred tax assets

The Group’s deferred tax assets have not been recognized in respect of the following items: December 31,

2015 December 31,

2014 Deductible temporary differences $ 47,144 97,694

2) Recognized deferred tax assets and liabilities Changes in the amount of deferred tax assets and liabilities for 2015 and 2014 were as follows: Deferred tax assets:

Inventory

obsolescence

Allowance for doubtful

debts Unrealized gross profit Others Total

Balance on January 1, 2015 $ 2,954 3,830 18,076 11,966 36,826 Recognized in profit or loss 2,177 (58) 6,435 195 8,749 Recognized in equity

35 35

Other

863 863 Effect of movement in exchange rate - - - 96 96 Balance on December 31, 2015 $ 5,131 3,772 24,511 13,115 45,569 Balance on January 1, 2014 $ 9,168 3,647 16,136 7,896 36,847 Recognized in profit or loss (6,214) 183 1,940 3,930 (161) Effect of movement in exchange rate - - - 140 140 Balance on December 31, 2014 $ 2,954 3,830 18,076 11,966 36,826

34



(Continued)

Deferred tax liabilities: Recognized

income under equity method Others Total

Balance on January 1, 2015 $ (247,026) (15,519) (262,545) Recognized in profit or loss (37,497) (176) (37,673) Recognized in other comprehensive

income - 1,142 1,142 Effect of movement in exchange rate - (8) (8) Balance on December 31, 2015 $ (284,523) (14,561) (299,084) Balance on January 1, 2014 $ (96,122) (11,484) (107,606) Recognized in profit or loss (150,904) (1,758) (152,662) Recognized in other comprehensive

income - (2,265) (2,265) Effect of movement in exchange rate - (12) (12) Balance on December 31, 2014 $ (247,026) (15,519) (262,545)

iii) Related information about the integrated income tax system is as follows:

December 31, 2015

December 31, 2014

Unappropriated earnings of 1997 and before $ 150,283 150,283 Unappropriated earnings of 1998 and after 1,355,264 1,142,640 $ 1,505,547 1,292,929 Balance of deductible tax account $ 93,136 65,841

2015 (estimated)

2014 (actual)

Creditable ratio for earnings distribution to ROC residents 14.28% 10.61% The above information on the integrated income tax system is in accordance with the provision of Tai-Tsai-Shui No. 10204562810 issued by the Ministry of Finance on October 17, 2013.

v) As of December 31, 2015, the income tax returns of the Company through the year 2012 have been approved by the Tax Authority. The income tax returns of TSC Auto ID through the year 2013 have been approved by the Tax Authority.

35



(Continued)

vi) Since funds are needed for expanding the overseas operations, the earnings of the Company’s overseas subsidiaries will not be transferred back in the short run. In accordance with paragraph A39 of IAS 12 “Income Taxes”, the earnings’ book-tax difference should be considered permanent.

(l) Stockholders’ equity

i) Common stock

In March 2015 and January 2014, the Company retired treasury stocks, and $50,000 and $10,000 of common stock, $99,215 and $13,310 of capital surplus, and $12,422 and $0 unappropriated earnings were eliminated, respectively. The related registration processes were completed. The Company issued employee stock options. A total of 1,400 and 332.5 applications for stock options were submitted and a total of 1,400 thousand and 332.5 thousand ordinary shares were issued for the six months ended December 31, 2015 and 2014, respectively, with a face value of $10 (dollars) per share. This action resulted in a premium of $2,863 and $1,054 when the price exceeds the ordinary share price, and this premium should be recognized as employee stock option premium under retained earnings. The related registration processes were completed. As of December 31, 2015 and 2014, the authorized capital amounted to $3,600,000 (including the amount of $100,000 authorized for the issuance of the employee stock options); the Company’s outstanding capital amounted to $2,400,143 and $2,436,143, respectively, with a par value of $10 (dollars) per share.

ii) Capital surplus

December 31, 2015

December 31, 2014

Premium on shares issued above par value $ 407,294 415,829 Conversion premium of convertible corporate bonds 409,712 409,712 Treasury stock transactions 15,400 90,680 Employee stock options premium 19,532 11,541 Interest compensation payable on convertible corporate

bonds 17,020 17,020 Employee stock options (note 6(l)) 4,770 8,769 Change in affiliates recognized under equity method 10,180 8,852 $ 883,908 962,403

36



(Continued)

According to the ROC Company Act, the realized capital surplus may be used to offset a deficit or distributed as cash or stock by the original ownership percentage if there is no accumulated deficit. Capital surplus includes the income derived from the issuance of new shares at a premium and income from donations received by a company. According to the current Securities and Futures Bureau regulations, capitalization of capital surplus cannot exceed a rate of ten percent.

iii) Legal reserve According to the ROC Company Act, the Company must retain 10% of its annual income as a legal reserve until such retention equals the amount of authorized common stock. Legal reserve can only be used to offset an accumulated deficit. If there are earnings at year-end, where legal reserve is distributed by issuing new shares or by cash, only the portion of legal reserve which exceeds 25% of the paid-in capital may be distributed, subject to the approval of the Company’s stockholders.

iv) Special reserve According to ROC SFB regulations, an ROC publicly listed company should retain its special reserve equal to any deductions from stockholders’ equity before distribution of earnings. If the aforementioned deduction from stockholders’ equity is reversed, the same amount could be removed from special reserve and transferred to unappropriated earnings. The remaining earnings may be distributed as stockholders’ dividends. The increase in retained earnings occurring before the adoption date due to the first-time adoption of IFRSs amounted to $302,150. In accordance with Ruling No. 1010012865 issued by the Financial Supervisory Commission, an increase in retained earnings due to the first-time adoption of IFRSs shall be reclassified as a special earnings reserve during earnings distribution. When the relevant assets are used, disposed of, or reclassified, this special earnings reserve shall be reversed as distributable earnings proportionately. The carrying amount of special earnings reserve amounted to $302,150 on December 31, 2015 and 2014. In accordance with the guidelines of the above Ruling, a portion of current-period earnings and undistributed prior-period earnings shall be reclassified as a special earnings reserve during earnings distribution. The amount to be reclassified should be equal to the difference between the total net current-period reduction of special earnings reserve resulting from the first-time adoption of IFRSs and the carrying amount of other shareholders’ equity as stated above. Similarly, a portion of undistributed prior-period earnings shall be reclassified as a special earnings reserve (which does not qualify for earnings distribution) to account for cumulative changes to other shareholders’ equity pertaining to prior periods due to the first-time adoption of IFRSs. Amounts of subsequent reversals pertaining to the net reduction of other shareholders’ equity shall qualify for additional distributions.

37



(Continued)

v) Distribution of earnings and dividend policy Based on the Corporation’s articles of incorporation, 10% of the annual net income after offsetting prior years’ deficits is to be set aside as a legal reserve. The remaining, if any, after special reserves are appropriated in accordance with the SFB regulations, shall be distributed as follows: (i) Bonus to employees including employees of subsidiaries should between 4% to 15%;

(ii) Remuneration to the directors should be set aside 2%;

(iii) Any balance left over shall be allocated according to the resolution of the shareholders’

meeting. In accordance with the Company’s articles of incorporation, if there are earnings at year-end, 10 percent should be set aside as legal reserve. In addition, a special earnings reserve should be set aside or reversed in accordance with SFB regulations after the payment of income tax and the offsetting of accumulated losses from prior years. If there is a balance remaining, 1 percent should be set aside for directors’ and supervisors’ remuneration and 4 to 10 percent for employees’ bonus. The remaining portion will be combined with earnings from prior years, and the board of directors shall make a distribution proposal to be approved by the shareholders’ meeting. However, certain earnings may be retained depending on business conditions. The Company is in the growth stage of the industry life cycle. In consideration of future capital needs and operational development, cash dividends cannot be lower than 10% of total stock dividends. However, stock dividends instead of cash dividends are distributed if the cash dividends per share are less than $0.2 (dollars). According to the ROC Company Act amended in May 2015, the year-end earnings should no longer to be distributed as employee bonuses and directors’ and supervisors’ remuneration. The Company will revise the Company’s articles of incorporation before the date specified by the ROC SFB regulations. The employee bonuses and directors’ remuneration were estimated as the net income (net of tax and 10% legal reserve) for the year ended December 31, 2014, multiplied by the expected ratio by taking into consideration the Company’s experience in the past. The Company recognized the employee bonuses of $42,990 and directors’ remuneration of $5,374 for the year ended December 31, 2014. Differences between the amount approved in the stockholders’ meeting and that recognized in the financial statements, if any, will be accounted for as changes in accounting estimates and recognized as profit or loss in the year in which the shareholders’ meeting is held.

38



(Continued)

The annual shareholders’ meeting on June 18, 2015 and 2014, resolved to distribute earnings as dividends and as employee bonuses and directors’ remuneration for 2014 and 2013 as follows: 2015 2014 Amount

per share Total

amount Amount

per share Total

amount (dollars) (dollars) Dividends distributed to common

shareholders: Cash $ 2.00 477,622 1.20 219,986

Employees’ bonuses – cash $ 42,990 20,929 Directors’ remuneration 5,374 3,488 $ 48,364 24,417 The above distributions were consistent with the Company’s financial reports. Related information is available on the Market Observation Post System website.

vi) Treasury stocks

In the years 2010 and 2011, in accordance with Article 28-2 of the Securities and Exchange Act, the Company bought back 1,000,000 common shares for transferring to its employees, and the cost amounted to $23,310. As of January 2013, the Company had cancelled this treasury stock, and the Company has registered the change with the relevant authorities. Please refer to the common stock description. During the months of December 2014 and January 2015, in accordance with Article 28-2 of the Securities and Exchange Act, the Company repurchased 5,000 thousand common shares of stock, with a total value of $161,637, in order to protect the Company’s integrity and shareholders’ equity. As of March 2015, the Company had cancelled this treasury stock, and the Company has registered the change with the relevant authorities. Please refer to the Common stocks description. In accordance with the Securities and Exchange Act, the number of shares of treasury stock shall not exceed 10% of the total shares of common stock issued by the Company. The total carrying amount of treasury stock shall not exceed the total amount of retained earnings plus additional paid-in capital and realized capital surplus. Treasury stock bought back for transfer to employees shall be transferred within three years from the date of buyback. Treasury stock not transferred within the above time limit shall be cancelled and deemed as not issued by the Company. As of December 31, 2015, the Company could repurchase no more than 24,001 thousand shares, with a total value of no more than $2,830,718.

39



(Continued)

In accordance with Securities and Exchange Act requirements, treasury shares held by the Company should not be pledged, and do not hold shareholder rights before their transfer. As of December 31, 2015, a subsidiary of the Company, TSC Auto ID, held 7,700 thousand shares of the Company with a total value of $194,289, recognized under treasury stock. For the years end 2015 and 2014, the Company had recognized the dividend income received from its subsidiary, TSC Auto ID, amounting to $15,400 and 6,836, respectively; and the total amount was transferred to capital surplus – treasury stock under the equity method.

vii) Other equity

Foreign exchange differences arising from

foreign operation Balance as of January 1, 2015 $ 140,319 Foreign exchange differences (39,453) Balance as of December 31, 2015 $ 100,866 Balance as of January 1, 2014 $ 41,256 Foreign exchange differences 99,063 Balance as of December 31, 2014 $ 140,319

(m) The employee bonuses and directors’ remuneration

The employee bonuses and directors’ remuneration were estimated as the income before income tax for each period, multiplied by the expected ratio stated in the Company’s articles of incorporation. The Company recognized the employee bonuses of $57,174, and the directors’ remuneration of $9,529 in 2015. The differences between the amounts approved in the stockholders’ meeting and those recognized in the financial statements, if any, will be accounted for as changes in accounting estimates and recognized as profit or loss in following year.

40



(Continued)

(m) Share-based payment

As of December 31, 2015, the Group’s share-based payment arrangements were as follows:

Type

The second exercise of

employee stock options in the year

2012

The first exercise of employee stock options in the year

2012

The first exercise of employee stock options in the year

2011

TSC Auto ID’s first exercise of employee stock options in the

year 2011 Grant date 102.3.25 101.12.25 100.8.26 100.8.26 Number of shares granted

310 units 1,690 units 2,000 units 800 units

Contract term

5 years 5 years 5 years 5 years

Recipients Employees Employees Employees Employees Vesting period

Provide future service of 2 years




i) Determining the fair value of equity instruments granted

The Group used the Black Scholes method in measuring the fair value of the share-based payment at the grant date. The measurement inputs were as follows: The Company Year 2012

Second employee

stock options

Year 2012 First

employee stock options

Year 2011 First


Exercise price ($) 14.55 13.10 14.75 Term of the stock option (years) 2.17 1.92 0.58 Exercise price ($) 12.81 11.53 12.09 Expected volatility (%) 29.33% 31.05% 39.23% Risk-free interest rate (%) 1.192% 0.881% 1.123%

41



(Continued)

TSC Auto ID Year 2011 First


Exercise price ($) 81.30 Term of the stock option (years) 0.65 Exercise price ($) 60.10 Expected volatility (%) 38.71% Risk-free interest rate (%) 1.123%

ii) The details of the Group’s employee stock options were as follows:

2015 2014

The Company Year 2011’s first stock options

Number of stock options

Weighted-average

exercise price ($)


Weighted-average

exercise price ($)

Outstanding stock options as of

January 1 917.50 12.94 1,350.00 13.36 Options cancelled - (100.00) - Options exercised (817.50) 12.09 (332.50) 13.36 Outstanding stock options as of

December 31 100.00 12.09 917.50 12.94 Closing exercisable stock options 100.00 - 533.75 - Weighted average of remaining

contractual period 0.58 1.58 2015 2014

The Company Year 2012’s first stock options


Weighted-average

exercise price ($)


Weighted-average

exercise price ($)


January 1 1,570.00 12.34 1,570.00 12.74 Options exercised (505.00) 11.53~12.34- - Outstanding stock options as of

December 31 1,065.00 11.53 1,570.00 12.34 Closing exercisable stock options 672.50 - 785.00 - Weighted average of remaining

contractual period 1.92 2.92

42



(Continued)

2015 2014

The Company Year 2012’s second stock

options Number of

stock options

Weighted-average

exercised price ($)


Weighted-average

exercised price ($)


January 1 310.00 13.71 310.00 14.15 Option exercised (77.50) 12.81~13.71

Outstanding stock options as of December 31 232.50 12.81 310.00 13.71

Closing exercisable stock options 77.50 - - - Weighted average of remaining

contractual period 2.17 3.71

2015 2014

TSC Auto ID Year 2011’s stock options


Weighted-average

exercised price ($)


Weighted-average

exercised price ($)


January 1 253 68.30 397 70.90 Options exercised (166) 60.10~68.30 (144) 68.30~70.90 Options forfeited (25)

Outstanding stock options as of December 31 62 60.10 253 68.30

Exercisable as of December 31 55 60.10 66 68.30 Weighted average of remaining

contractual period

0.65

1.65 In the years 2015 and 2014, the Company and TSC Auto ID’s share-based payments due to equity settlement amounted to $1,752, and $4,925, respectively, and were recognized under operating cost and operating expense.

(n) Earnings per share

i) Basic earnings per share

2015 2014 Net income $ 766,004 597,115 Weighted-average number of outstanding shares

(thousands) 231,497 237,469 Basic earnings per share ($) $ 3.31 2.51

43



(Continued)

ii) Diluted earnings per share

2015 2014 Net income $ 766,004 597,115 Weighted-average number of outstanding shares

(thousands) $ 231,497 237,469 Employee stock options 1,340 1,782 Employee bonuses - 1,602 Employees’ remuneration 2,331 - Diluted weighted-average number of common shares

outstanding (thousands) 235,168 240,853 Diluted earnings per share ($) $ 3.26 2.48

(o) Financial instruments

i) Exposure to credit risk The maximum exposure to credit risk is equal to the carrying amount of the consolidated financial assets. As of December 31, 2015 and 2014, the consolidated maximum exposure to credit risk amounted to $5,993,642 and $4,316,650, respectively.

ii) Liquidity risk

The following table shows the contractual maturities of financial liabilities, including estimated interest payments but excluding the impact of netting agreements.

Carrying amount

Contractual cash flow 1 year 1-2 years 2-5 years

More than 5 years

December 31, 2015 Non-derivative financial

liabilities Short-term borrowings $ 460,313 461,245 461,245 - - - Notes and accounts payable 1,045,398 1,045,398 1,045,398 - - - Other payables 519,695 519,695 519,695 - - - Current tax liabilities 209,375 209,375 209,375 - - - Bonds payable 1,152,134 1,200,000 - - 1,200,000 - Capital lease liabilities

(current/non-current) 320,188 363,336 30,916 31,701 74,519 226,200

$ 3,707,103 3,799,049 2,266,629 31,701 1,274,519 226,200

44



(Continued)

Carrying amount

Contractual cash flow 1 year 1-2 years 2-5 years

More than 5 years

December 31, 2014 Non-derivative financial

liabilities Short-term borrowings $ 284,850 285,333 285,333 - - - Notes and accounts payable 953,807 953,807 953,807 - - - Other payables 534,152 534,152 534,152 - - - Current tax liabilities 132,777 132,777 132,777 - - - Long-term borrowings due

within one year 16,400 17,916 17,916 - - - Long-term borrowing 77,900 81,250 - 17,634 51,210 12,406 Capital lease liabilities

(current/non-current) 329,774 400,784 30,567 31,349 73,699 265,167 $ 2,329,600 2,406,017 1,954,552 48,983 124,909 277,573

The Group does not expect that the cash flows included in the maturity analysis could occur significantly earlier or at significantly different amounts.

iii) Currency risk

1) Currency risk exposure

The Group’s significant exposure to foreign currency risk was as follows:

December 31, 2015 December 31, 2014 Exchange

rate Amount (TWD)

Exchange rate

Amount (TWD)

Financial assets Monetary Items

USD $ 32.825 1,583,754 31.650 1,182,980 EUR 35.88 408,138 38.47 377,021 JPY 0.2727 124,521 0.2646 102,989 HKD 4.235 493,114 4.080 477,591 RMB 4.995 1,217,690 5.092 1,255,206 KRW 0.0280 2,193 0.0291 2,500

$ 3,829,410 3,398,287 Derivative financial instruments

USD $ 32.825 90 - - EUR 35.88 2,581 38.47 607

$ 2,671 607 Non-monetary items

USD $ 32.825 956 - -

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(Continued)

December 31, 2015 December 31, 2014 Exchange

rate Amount (TWD)

Exchange rate

Amount (TWD)

Financial liabilities Monetary items

USD $ 32.825 519,529 31.650 493,108 EUR 35.88 10,732 38.47 26,122 JPY 0.2727 38,675 0.2646 23,005 HKD 4.235 4,550 4.080 2,939 RMB 4.995 446,114 5.092 548,803 KRW 0.0280 2,317 0.0291 2,493

$ 1,021,917 1,096,470 Derivative financial instruments

USD $ 32.825 7,377 31.650 2,867 EUR 35.88 2,144 - -

$ 9,521 2,867

2) Sensitivity analysis The Group’s exposure to foreign currency risk arises from the translation of the foreign currency exchange gains and losses on financial assets and financial liabilities that are denominated in foreign currency. If other variables were held constant, a 3% of appreciation (depreciation) of the TWD against other currencies as of December 31, 2015 and 2014 would have increased or decreased the net profit before tax by $84,048, and $68,987, respectively.

3) Exchange gains and losses of monetary items As the Group deals in diverse foreign currencies, gains or losses on foreign exchange were summarized as a single amount. In 2015 and 2014, the foreign exchange gain or loss, including both realized and unrealized, amounted to $44,465 and $52,764, respectively.

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(Continued)

iv) Interest analysis

The interest rate risk exposure of financial assets and liabilities is disclosed in the note on liquidity risk management. The following sensitivity analysis is based on the exposure to interest rate risk of derivative and non derivative financial instruments on the reporting date. Regarding the liabilities with variable interest rates, the analysis is on the basis of the assumption that the amount of liabilities outstanding at the reporting date was outstanding throughout the year. The rate of change is expressed as the interest rate increases or decreases by 1% when reporting to management internally, which also represents the Group management’s assessment of the reasonably possible interval of interest rate change. With other variable held constant, if the interest rate had increased or decreased by 1%, the net profit before tax would have increased or decreased by $4,603 and $3,792 for the years ended December 31, 2015 and 2014, respectively.

vi) Fair value and carrying amount

1) Book value and fair value

The Group’s financial assets and liabilities measured at fair value were as follows:

December 31, 2015 Carrying

amount

Level 1

Level 2

Level 3

total Financial assets at fair value through profit or loss

Derivative financial assets $ 3,390 - 3,390 - 3,390 Non derivative financial assets for

trading 340,952

340,952

-

-

340,592

Subtotal 340,952 340,952 3,390 - 343,982 Loans and receivables

Cash and cash equivalents 3,723,343 - - - - Financial assets at cost 956 - - - - Notes and accounts receivable 1,694,935 - - - - Other receivables 45,578 - - - - Other financial assets 184,848 - - - -

Subtotal 5,649,660 - - - - Total $ 5,993,642 340,592 3,390 - 343,982

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(Continued)


amount

Level 1

Level 2

Level 3

total Financial liabilities at fair value through profit or loss

Derivative financial liabilities $ 9,521 - 9,521 - 9,521 Financial liabilities at amortized cost through profit or loss

Short-term borrowings 460,313 - - - - Notes and accounts payable 1,045,398 - - - - Other payables 519,695 - - - - Bonds payable 1,152,134 - - - - Current tax liabilities 132,777 - - - - Capital lease liabilities (including

current and non-current) 320,188 - - - - Deposits received 2,098 - - - - Subtotal 3,449,826 - - - - Total $ 3,509,347 - 9,521 - 9,521


amount

Level 1

Level 2

Level 3

total Financial assets at fair value through profit or loss

Derivative financial assets $ 607 - 607 - 607 Non derivative financial assets for

trading 140,321

140,321 - -

140,321

Subtotal 140,928 140,321 607 - 140,928 Loans and receivables

Cash and cash equivalents 2,554,950 - - - - Notes and accounts receivable 1,527,364 - - - - Other receivables 75,975 - - - - Other financial assets 17,433 - - - -

Subtotal 4,175,722 - - - - Total $ 4,316,650 140,321 607 - 140,928

Financial liabilities at fair value through profit or loss

Derivative financial liabilities $ 2,867 - 2,867 - 2,867 Financial liabilities at amortized cost through profit or loss

Short-term borrowings 284,850 - - - - Notes and accounts payable 953,807 - - - - Other payables 534,152 - - - - Long-term borrowings (including due

within one year) 94,300 - - - -

Capital lease liabilities (including current and non-current)

329,774 - - - -

Subtotal 2,196,883 - - - - Total $ 2,199,750 - 2,867 - 2,867

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(Continued)

2) Fair value valuation technique of financial instruments not measured at fair value

The Group uses the following methods in determining the fair value A) The fair value of short-term financial instruments is determined using the

carrying amount on the balance sheet. The carrying amount is a reasonable approximation of fair value since these instruments will mature soon. This method shall apply to cash and cash equivalents, trade and other receivables/payables, current tax assets, and refundable deposits/deposit received.

B) The fair value of financial assets with standard terms and conditions and

traded in active liquid markets is determined with reference to quoted market prices. If the market for a financial instrument is not active, the fair value of derivative financial instruments is determined using a valuation technique, with estimates and assumptions consistent with those used by market participants, which are readily available to the Group.

C) The fair value of financial assets at cost was investments in non-public

stocks, which cannot be reliably measured and whose fair value cannot be estimated as there is no quoted price in the market.

D) Long-term borrowings and capital lease liabilities were interest-bearing and

carried fixed or floating interest rates. Therefore, the borrowed amount was the fair value.

3) Fair value hierarchy transfer

The table below analyzes financial instruments carried at fair value by the levels in the fair value hierarchy. The different levels have been defined as follows:

A) Level 1: quoted prices (unadjusted) in active markets for identified assets or

liabilities. B) Level 2: 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).

C) Level 3: inputs for the asset or liability that are not based on observable

market data (unobservable inputs).

There were no transfer from one level to another in 2015 and 2014.

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(Continued)

(p) Financial risk management

The Group is exposed to the following risks arising from financial instruments: i) Market risk

The Group holds securities classified as available-for-sale financial assets, excluding financial assets carried at cost, which are valued at fair value. Therefore, the Group is exposed to market risk from changes in market prices of the underlying securities.

ii) Credit risk Credit risk is the risk of financial loss to the Group if a customer or counterparty to a financial instrument fails to meet its contractual obligations. The Group recognized a provision for losses based on credit risk of financial assets.

iii) Liquidity risk The Group controls liquidity risk by monitoring cash demand and maintaining adequate cash and banking facilities. The working capital of the Group is sufficient to fulfill all short- or long-term contractual loan obligations; therefore, there is no significant liquidity risk related to default on loans.

(q) Capital management

The Board’s policy is to maintain a strong capital base so as to maintain investor, creditor and market confidence and to sustain future development of the business. The Group sets objectives for managing capital to safeguard the capacity to continue to operate, to continue to provide a return on shareholders, to maintain the interests of related parties, 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 dividend payment to the shareholders, reduce the capital for redistribution to shareholders, issue new shares, or sell assets to settle any liabilities. The Group uses the debt-to-equity ratio to manage capital. This ratio is the total net debt divided by the total capital. The net debt from the balance sheet is the total liabilities less cash and cash equivalents. The total capital and equity include share capital, capital surplus, retained earnings, other equity, and non-controlling interests plus net debt. The Group’s capital management strategy is consistent with the prior year, and the gearing ratio is maintained within 60% so as to ensure financing at reasonable cost. The gearing ratios on the reporting date were as follows:

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(Continued)

December 31, 2015

December 31, 2014

Total liabilities $ 4,101,412 2,657,371 Less: cash and cash equivalents 3,723,343 2,554,950 Net liabilities $ 378,069 102,421 Total stockholders’ equity $ 7,024,421 6,356,856 Debt-to-equity ratio $ 5.38% 1.61%

7. Related-party transactions

(a) Parent company and ultimate controlling company

The Company is the ultimate controlling party of the Consolidated Company.

(b) Remuneration of key management personnel

The remuneration paid to the key management personnel was as follows: 2015 2014 Short-term employment benefits $ 115,373 92,342 Post-employment benefits 2,802 2,026 Share-based payment 353 1,018 $ 118,528 95,386 Please refer to note 6(m) for explanation related to share-based payment.

8. Pledged assets

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

Pledged assets Pledged to secure December 31, 2015

December 31, 2014

Land Collateral for bank borrowings and

syndicated loan $ 127,283

Buildings and improvements " 68,882 Time deposits (recorded in other

financial assets- noncurrent) Collateral for rental land

9,698 11,680

Pledged deposits(recorded in other financial assets-current)

Collateral for bank borrowings and syndicated loan

116,894

-

$ 126,592 207,845

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(Continued)

9. Significant contingent liabilities and unrecognized contractual commitments

The guarantee notes provided by the Group to the banks were as follows: December 31,

2015 December 31,

2014 TWD $ 520,000 880,000 USD 9,500 15,500 As of December 31, 2015 and 2014, the Company has unused letters of credit issued by the Group.

10. Major casualty losses: None. 11. Significant subsequent events:

In order to enhance competitiveness, actual demands and market trends, on November 9, 2015, the board of directors of TSC Auto ID decided to acquire, through TSC Auto ID and TSCAA, 100% ownership of the bar code labeling printer’s segment of Printronix, Inc, wherein Pioneer Holding Corp. owns 100% of its shares. TSC Auto ID expects to pay US $4,400 to buy the intellectual property rights and inventories from Pioneer Holding Corp. and its subsidiaries. Share acquisition consideration included cash amount of US$16,820, which was paid by TSCAA (the subsidiaries of TSC Auto ID), and 300,000 shares in TSC Auto ID common stock. This equity- settled was completed on January 23, 2016. As of the date of the authorized for issuance of the consolidated financial statements, the process of the above acquisition has yet to be completed, and the 300,000 shares of TSC Auto ID common stock has not yet been issued. As a result, this matter can not disclose the related information under IFRS3.

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(Continued)

12. Other information

The information on employee benefits, depreciation, and amortization expenses, by function, is summarized as follows:

By function

By item

2015 2014

Cost of goods sold

Operating expenses Total

Cost of goods sold

Operating expenses Total

Employee benefits Salary 537,737 587,644 1,125,381 502,266 519,602 1,021,868 Labor and health

insurance 57,245 45,611 102,856 49,592 44,597 94,189 Pension 57,071 26,520 83,591 51,434 18,742 70,176 Others 63,041 13,328 76,369 58,863 12,735 71,598

Depreciation 271,202 32,584 303,786 286,386 26,641 313,027 Amortization 84 6,173 6,257 358 5,901 6,259

13. Segment financial information

(a) General information

Operating segments required to be disclosed are categorized as Rectifiers (rectifier trading) and Bar Code Printers (manufacture and sale of bar code printers). The Group is required to disclose individual strategic business units which offer different products and services. Since the business units require different skills and marketing strategies, they need to be managed separately.

(b) Information about reporting segments The Group uses the internal management report that the chief operating decision maker reviews as the basis to determine resource allocation and to make a performance evaluation. The internal management report includes profit before taxation, but not including any extraordinary activity and foreign exchange gains or losses. Due to taxation, extraordinary activity and foreign exchange gains or losses are managed on a group basis, and hence, they are not able to be allocated to each reportable segment. In addition, not all reportable segments include depreciation and amortization of significant non-cash items. The reportable amount is similar to that of the report used by the chief operating decision maker. The operating segment accounting policies are similar to the ones described in note 4 “Significant accounting policies” except for the recognition and measurement of pension cost, which is on a cash basis.

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(Continued)

The Group treated intersegment sales and transfers as third-party transactions. They are measured at market price.

The information on operating departments is as follows: 2015

Rectifiers Bar Code Printers

Adjustments and

eliminations Total Area revenue:

Third-party customers $ 5,086,027 2,658,833 - 7,744,860 Inter-company 5,154,851 - (5,154,851) - Interest 13,033 9,411 - 22,444

Total revenue $ 10,253,911 2,668,244 (5,154,851) 7,667,304 Interest expense $ 13,127 6,043 - 19,170 Depreciation and amortization 270,550 39,493 - 310,043 Reported segment profit and loss $ 1,745,417 767,754 (988,046) 1,525,125 Reported segment assets $ 16,168,822 4,084,402 (9,505,460) 10,747,764 Reported segment liabilities $ 3,564,692 2,163,504 (1,626,784) 4,101,412

2014

Rectifiers Bar Code Printers

Adjustments and

eliminations Total Area revenue:

Third-party customers $ 5,199,700 2,440,687 - 7,640,387 Inter-company 5,488,983 - (5,488,983) - Interest 9,598 6,654 - 16,252

Total revenue $ 10,698,281 2,447,341 (5,488,983) 7,656,639 Interest expense $ 14,308 6,413 - 20,721 Depreciation and amortization 285,222 34,064 - 319,286 Reported segment profit and loss $ 1,667,891 664,101 (962,063) 1,369,929 Reported segment assets $ 15,867,880 2,379,126 (9,335,200) 8,911,806 Reported segment liabilities $ 3,660,881 793,291 (1,796,801) 2,657,371

(c) Information about the product

Revenue from external customers of the Group was as follows:

Products 2015 2014 Rectifiers $ 5,086,027 5,199,700 Bar code printers 2,658,833 2,440,687 Total $ 7,744,860 7,640,387

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(d) Geographical information In presenting the information on the basis of geography, segment revenue is based on the geographical location of customers, and segment assets are based on the geographical location of the assets.

Geographical information 2015 2014 Revenue from external customers:

Asia $ 5,021,375 4,813,180 Americas 827,734 862,122 Europe 1,863,044 1,940,752 Other countries 32,707 6,333

Total $ 7,744,860 7,640,387

Geographical information December 31,

2015 December 31,

2014 Non-current assets:

Asia $ 3,317,003 3,252,556 Europe 2,873 2,217 Americas 1,501 1,857

Total $ 3,321,377 3,256,630 Non-current assets include property, plant and equipment, intangible assets, and other assets, not including financial instruments and deferred tax assets.

(e) Information about major customers Because the Group has a broad customer base, there is no significant transaction focus on a single customer, and there is no sales revenue from a single customer constituting over 10% of the total operating revenue.

TAIWAN SEMICONDUCTOR CO., LTD. AND ...SEMICONDUCTOR CO., LTD. and its subsidiaries as of December...

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