I. Spokesperson and Acting Spokesperson Contact …...Lora Ho is Senior Vice President of Taiwan...

-1- Annual Report 2012

I. Spokesperson and Acting Spokesperson Contact Information

Spokesperson

Name: Daniel Chien

Title: Senior Vice President & CFO

Tel: 886-3-5646600

Email: [email protected]

Acting spokesperson

Name: Joanne Chi

Title: Senior Manager, Investor Relations Department

Tel: 886-3-5646600

Email: [email protected]

II. GUC Address and Telephone Number

Address: No. 10, Li-Hsin 6th Rd., Hsinchu Science Park, Taiwan, R.O.C.

Tel: 886-3-5646600

III. Common Share Transfer Agent and Registrar

Company: the Transfer Agency Department of Chinatrust Commercial Bank

Address: 5F, 83, Sec. 1, Chung-Ching S. Rd., Taipei, Taiwan 100, R.O.C.

Website: http://www.chinatrust.com.tw

Tel: 886-2-21811911

IV. Auditors

Auditors: Hung-Peng Lin、Shu-Chieh Huang

Company: Deloitte & Touche

Address: 6F, 2, Prosperity Rd. I, Hsinchu Science Park, Taiwan, R.O.C.

Website: http://www.deloitte.com.tw

Tel: 886-3-5780899

V. Company Website

Website: http://www.guc-asic.com


Table of Content

Letter to Shareholders ····························································· 3

Company Profile ······································································ 6

Corporate Governance ·························································· 17

Operation Report··································································· 24

Consolidated Financial Highlights ······································· 37

Consolidated Financial Statements ···································· 39


Dear Shareholders,

The past year 2013 was a year of customers’ portfolio changed, orders reduced, and

revenues declined for GUC. However, our excellent advanced technology

development and the best design services are able to not only sufficiently support our

customers to launch the leading products but also improve our gross margin reaching

25.9% was the record high since our listing.

Based on the technology development trend analysis in 2013, the applications with

28-nanometer technology were in preposterous demands. GUC successfully achieved

a 28-nanometer System-on-chip (SoC) that combines CPUs and GPUs on single

technology platform. With more than 30 million gates, this test chip is the first “big”

28 nanometer device. Furthermore, GUC successfully taped-out a 20-nanometer test

chip on a TSMC process is a direct result of close collaboration with the major IC

design tooling supplier. This 20-nanometer test chip will be able to reduce risks of

double patterning and process variations that customers are faced with, expand GUC’s

customer base, and secure GUC’s leading position.

Financial Performance

Total revenue for 2013 was NT$6,118 million, down 31 percent compared to

NT$9,014 million in 2012. Net income was NT$289 million, down 53 percent

compared to the previous year. 2013 EPS was NT$2.16, down 53 percent compared to

2012 EPS of NT$4.58. Among other highlights in 2013, GUC achieved gross

margin of 25.9%, operating margin of 5.1% and ROE of 8.4%.

Technology Leadership

In 2013, we continued to pioneer the industry in developing 16-nanometer FinFET

IPs and test chips. We taped-out the first 16-nanometer FinFET IP for DDR4 in

November of the same year. With continued technical breakthrough, completed IPs

portfolio to enable our customers to launch their most advanced products early in the

market and also secured our leading position in the advanced process design service

sector. The advanced process technologies, including 90-nanometer, 65-nanometer,

40-nanometer, and 28-nanometer accounted for 52% of total revenue in 2013.

Moreover, revenue contributed from advanced process technologies accounted for

80% of revenue in NRE segment.

GUC’s remarkable technology breakthrough and innovative achievement in 2013 are

Letter to Shareholders


as follows:

1. Successful unveiled the USB 3.0 IP solution which available on 65/55- nanometer,

40-nanometer, and 28-nanometer process technologies.

2. Successfully taped-out a 20-nanometer SoC test chip.

3. Successfully launched a new family of silicon proven analog-to-digital (ADC) and

digital-to-analog (DAC) converters IP targeting TSMC’s 28-nanometer HPM

process technology.

4. Successfully achieved test chip validation results for a complete 28-nanometer SoC

that combines CPUs, GPUs, DDR, Ethernet, and Video output function on single

technology platform.

Corporate Developments

1. The supply chain’s integrator: We position ourselves as “Flexible ASIC Services”,

in which, with closer collaboration between TSMC’s advanced technology

process and major design tooling services suppliers in order to continuously

provide the best one-stop complete solutions to our customers. This innovative

model not only may reduce the funding investment and advanced technology

barrier of the small and medium scale IC design companies but also fulfills the

system companies pursing to the differentiation, beginning to design their own key

chips, shortening time-to-market, and creating the more value-added to their

products.

2. The advanced technology’s enabler: It is foreseen that the smart phone and tablet

devices will grow rapidly in the next few years. GUC launched the16-nanometer

FinFET technology plat form, aiming to keep our leading position in design

services industry.

The Impact of External Competiveness, Regulatory,

Environment, and Macroeconomics

The increased investment and capital expenditure in advanced technology production,

more and more IDMs (integrated device manufacturers) in Japan and the United

States are focusing on the business and reduce capital expenditure and intend to

transit to the fab-lite trend. Moreover, the ASIC customers are outsourcing their

design services business to fabless ASIC companies; those are the great opportunities

to GUC. GUC’s “Flexible ASIC Services” model may reduce not only the entry

barrier for SoC development, shortening time-to-market but also the risk of migration


to 28-nanometer and 16-nanometer advanced technology. Thanks to the

semiconductor cluster in Taiwan, we are able to provide the complete one-stop IP

solutions, chip implementation, and ASIC manufacturing services, the advantage of

closer collaboration with TSMC aiming to keep our leading position. We will triumph

in competitive environments and endure the challenges of environment factors.

Prospect

Looking ahead, GUC will continue to utilize core competence and strive to run its

operation with honestly and integrity. GUC will persist in strengthening its corporate

governance, corporate social responsibility and sustainable business performance to

maximize the benefit of corporate value to employees, customers, and shareholders.

Global Unichip Corporat ion

F. C. Tseng

Chairman

Jim Lai

President


Company Overview

GLOBAL UNICHIP CORP. (GUC) is the Flexible ASIC LeaderTM whose customers

target IC devices to leading edge computing, communications and consumer

applications. Based in Hsin-chu, Taiwan GUC has developed a global reputation

with a presence in China, Europe, Japan, Korea, and North America. GUC is

publicly traded on the Taiwan Stock Exchange under the symbol 3443.

Organization

Company Profile


Board Member

Dr. F.C. Tseng

Chairman; Vice Chairman of TSMC

Dr. F.C. Tseng is the Vice Chairman of TSMC and Chairman of Global Unichip Corp.

Prior to this post, Dr. Tseng served as Deputy Chief Executive Officer, President, and

Senior Vice President of Operations of TSMC. Dr. Tseng spent two years as President

of Vanguard International Semiconductor Corporation (VIS), which was derived from

the Industrial Technology Research Institute's (ITRI) Sub-micron Process Technology

Development Project and was Taiwan's first eight-inch IC facility.

Dr. Tseng led 110 specialists to spin off from ITRI's Electronics Research & Service

Organization (ERSO), and in 1987 he co-founded TSMC as a pioneer specializing in

the "foundry only" semiconductor manufacturing business. Dr. Tseng established a

solid technical base for TSMC's six-inch and eight-inch fabs.

From 1973 to 1986, Dr. Tseng served at ITRI-ERSO, where in 1976 he was one of the

pioneers in setting up the IC project in Taiwan. He was responsible for installing the

7.5 mm metal-gate CMOS process into the 3-inch line, which later was converted

smoothly to 4-inch under his management. In 1978, Dr. Tseng was promoted to plant

manager of the IC demonstration plant, where he was responsible for the production

and development of silicon-gate CMOS from 5 mm to 1.2. Under his supervision, he

established the capability to develop an advanced CMOS process.

He holds a Ph.D. in Electrical Engineering from National Cheng Kung University in

Taiwan. Dr. Tseng was named as one of the "Outstanding Alumni" by National

Cheng Kung University in 2000, and one of the "Ten Outstanding Engineers" in 1991

and "The Excellent Engineers" in 1982 respectively by the Chinese Institute of

Engineers and by Electronic Buyer's News as one of the Hot 25-Industry Executives

who made a difference in 1999.


Mr. K.C. Shih

Founder

K.C. Shih has more than 30 years of experience working in the high-tech industry. Mr.

Shih observed the emergence of the post-PC era when the demand for IC is migrating

from ASIC to SoC. In 1998, he founded Global Unichip Corp. with Dr. Nicky Lu and

Dr. Steve Lin, to be the world's first dedicated SoC Design Foundry. In recognition of

its leading market position and successful business model, TSMC invested and took

partnership with Global Unichip Corp. in 2003. Global Unichip Corp. has

successfully demonstrated its leadership in advanced SoC designs (i.e. 90nm, 65nm,

40nm and 28nm) and has listed on the Taiwan Stock Exchange in 2006.

In 1990, Mr. Shih was the President of Cadence Design Systems Inc. Mr. Shih then

founded Faraday Technology Corporation in partnership with UMC and served as the

Vice Chairman and CEO. Faraday is the first IC Design Service Company in the

world. Based on its ASIC expertise, Faraday provides ASIC technology and design

service to customers in Taiwan, the USA and other countries. In 1998, Faraday

successfully went public in Taiwan, its stock price was once the highest on the

Taiwan stock-exchange board.

In 1983, Mr. Shih founded Suntek to develop under-$1,000 UNIX PC with NS32000,

targeting college students on the college local area network. Evaluating from revenue

figures, one may say that Suntek did not make the grade; however, it has indeed made

a profound impact on Acer.

While at M.I.T., Mr. Shih was an original member of the MULTICS team. MULTICS

was the first multi-processing, multi-programming, network operating system running

on ARPAnet. It was later re-written to become UNIX at Bell Labs. He then worked at

DEC involving in the design of the famous VAX computer. In 1980, he joined

National Semiconductor as Director of the MESA project, in charge of the NS32000

32bit microprocessor development.


Mr. Shih earned his Bachelor of Science degree in Physics from Chung Yuan

Christian University, Taiwan, his Master of Science degree from University of

Massachusetts, and Ph.D. studies in Electrical Engineering at M.I.T.

Mr. Jim Lai

President

Jim Lai has 27 years of experience in semiconductor and ASIC industries. Jim

currently serves as president of Global Unichip Corp.

Mr. Lai was promoted from TSMC North America to GUC in 2003 when TSMC

became the major shareholder of GUC. From 1992 to 2003, Jim served various

positions at TSMC North America, including director of emerging account, director

of design services and business manager responsible for the ASIC business unit.

Prior to TSMC, Mr. Lai co-founded ASICtronics, one of the earliest design service

companies to provide ASIC design consultation and libraries in the USA. Prior to

ASICtronics, Mr. Lai worked at Toshiba America, Knights Technology and LSI

Logic in various engineering positions in ASIC and CAD groups.

Mr. Lai received his Master of Science degree in Electrical Engineering from

University of California, Santa Barbara in 1984 and his Bachelor of Science degree in

Electrical Engineering from National Taiwan University in 1981.


Ms. Lora Ho

SVP, CFO, and Spokesperson of TSMC

Lora Ho is Senior Vice President of Taiwan Semiconductor Manufacturing Company

Limited (TSMC), Chief Financial Officer and Spokesperson.

Prior to joining TSMC in 1999, Ms. Ho served as Vice President of Finance and Chief

Financial Officer at Acer Semiconductor Manufacturing, Inc. (formerly known as

TI-Acer Inc.) from 1990 to 1999. Before that, Ms. Ho held various positions in the

accounting and finance fields that included Financial Controller at Thomas & Betts

Industries, Deputy Manager of Finance at Wyse Technology Taiwan Ltd., and Cost

Accounting Manager for Cyanamid Taiwan Corporation.

Ms. Ho was awarded "The Outstanding Financial Executive" in1993, in view of her

outstanding contribution to Financial Management during her service at TI- Acer Inc.

Ms. Ho received her EMBA from National Taiwan University in 2003 and her B.A.

degree from National Chengchi University in 1978.

Dr. Cliff Hou

Vice President, Research & Development of TSMC

Dr. Cliff Hou is Vice President and Head of Design and Technology Platform of

TSMC. Prior to this post, he was the Senior Director of Design Technology Division

and Director of Design Methodology Division at TSMC. Dr. Hou established

TSMC’s Technology Design Kits Development Teams and Reference Flow


Development Teams. He also leads Design-for-Manufacturability (DFM) task force at

TSMC.

Dr. Hou received his B. S. degree in 1983 from National Chiao-Tung University, and

his Ph.D. degree in Electrical and Computer Engineering from Syracuse University in

1992.

Prior to joining TSMC in 1997, Dr. Hou was an Associate Professor at Kaohsiung

Polytechnic Institute in 1992, and prior to that, he worked at ITRI/CCL for front-end

design environment development and integration from 1993 to 1995 and at a local

consulting company for 0.5um and 0.35um physical verification methodology and

flow development from 1995 to 1997.

Dr. Hou has 15 U.S. patents and also serves as Technical Committee Member of

VLSI Symposium.

Mr. Benson W. C. Liu

Independent Director; Former Chairman and CEO of Bristol-Myers

Squibb (Taiwan) Ltd

Mr. Benson W.C. Liu, Independent Director, was the Chairman and General Manager

of Bristol-Myers Squibb Taiwan (BMST) from Jan.1999 through March 2005. Mr.

Liu joined BMST in 1978 as Accounting Manager and he progressed within the

Company through Finance Manager, Controller, Finance Director, VP Finance and

Administration and finally Chairman and General Manager.

Mr. Liu retired from BMST in March 2005 after 28 years of dedicated services to this

leading global Pharmaceutical and Health Care Company. Prior to joining BMST, Mr.

Liu was an auditor of Deloitte, Taiwan for 5 years. He holds a bachelor degree in

Accounting from Soochow University, a master degree in International Business

Administration from Northrop University, USA.


Mr. Liu is active in participating public services through NPO organizations like

Chinese Corporate Governance Association and Chinese Professional Manager

Association. In August 2011, He was appointed by the Board of Vanguard

International Semiconductor Corporation as a board member of Compensation

Committee during the period from September 2011 to June 2012. He was awarded

Financial Manager of the Year by the Chinese Professional Manager Association in

1985, Outstanding Alumni of the Accounting Department of Soochow University in

1986 and Financial Manager of The Year of Bristol-Myers Squibb Company

International Group in 1989.

Dr. Chein-Wei Jen

Independent Director; Former Dean of Institute of Electronics at

National Chiao Tung University, Taiwan

Dr. Chein-Wei Jen has retired from the Department of Electronics Engineering,

National Chiao Tung University, Taiwan since 2004. During his academic career he

also served as the Chairman of the Department of Electronics Engineering, from 1989

to 1991 and the Director of the Institute of Electronics from 1991 to 1994 at the same

university.

He has supervised over 25 PhD students and many Master students in the area of

System-on-Chip design, processor architecture, and multimedia signal processing.

Most of his students are now working in the academic and IC Design industry in

Taiwan. He holds seven patents and published over 50 journal papers and 100

conference papers in these areas. He has also received numerous research paper

awards and service awards from technical societies.

From 2004 to 2007 he was invited to join ITRI which is a government-sponsored

R&D organization in Taiwan and served as the Director of SoC Technology Center in

ITRI. From 2002 to 2007 he also served as one of the Coordinators of the National

SoC Program in Taiwan.

Dr. Jen received his B.S. degree from National Chiao Tung University in 1970, his


M.S. degree from Stanford University in 1977, and his Ph. D. degree from National

Chiao Tung University in 1983.

Dr. Wen-Yeu Wang

Independent Director; Ph. D., Stanford Law School, Professor of

College of Law at National Taiwan University

Dr. Wang is professor of law and director, Center for Corporate and Financial Law,

College of Law, National Taiwan University. He received law degrees from NTU,

Columbia (LL.M.) and Stanford (J.S.D.), respectively. During his tenure, he visited

and taught at well known law schools, including National University of Singapore and

PRC’s Peking University. In addition, he was a visiting professor of law at Stanford

from 1995-96, teaching a seminar on financial transactions; in fall 2007 he taught

“Corporate Governance in Greater China” seminar at Columbia. Principal research

subjects include business associations, financial regulations, and law and economics.

Before pursuing an academic career, professor Wang had practiced commercial law at

the international law firms of Lee and Li, Taipei (from 1985-1989), and Sullivan &

Cromwell, a Wall Street firm in New York City (1989-1991), respectively. Areas of

specialty include corporate law and business transactions.

From 2004 to 2006, professor Wang served as a commissioner at the Fair Trade

Commission. In addition, he has served in many important public and private

functions, i.e., as director or supervisor of the Taiwan Stock Exchange, Taiwan

Futures Exchange, and Taiwan Cooperative Bank. He also served as independent

director or reorganization supervisor for Taiwanese public companies; as arbitrators or

mediators in various commercial disputes. He has also participated in the drafting or

amendment of major economic and financial legislation, such as the Company Law

and the Securities and Exchange Law.


Dr. Chung-Yu Wu

Independent Director; Former President of National Chiao Tung

University, Taiwan

Dr. Chung-Yu Wu is Professor of Electronics Engineering Department of National

Chiao Tung University. He has served different roles at National Chiao Tung

University, including President of National Chiao Tung University, Dean of College

of Electric Engineering and Computer Science, Dean and Vice for Research and

Development, Funding Director of Division of Engineering and Applied Science,

Director of Institute of Electronics and Department of Electronics Engineering,

Chairman of Department of Electronics Engineering.

Dr. Wu received his B.S. degree from National Chiao Tung University in 1972, his

M.S. degree from National Chiao Tung University in 1976, and his Ph. D. degree

from National Chiao Tung University in 1980. He did his post-doctor research at

EECS from the University of California, Berkeley in 2002.


Management Team

Mr. CJ Liang

Senior Vice President

CJ currently serves as Senior Vice President in Research and Development.

Prior to joining GUC in 2013, Mr. Liang served as President of Grain-Media and

Executive Vice President of Socle Technology.

Mr. Liang received his Master degree in Department of Electronics Engineering from

National Chiao Tung University.

Mr. Daniel Chien

Senior Vice President & CFO

Daniel currently serves as Senior Vice President and CFO in GUC.

Prior to joining GUC in 2006, Mr. Chien served as CFO in ALi Corp.

Mr. Chien received his MBA degree from the University of Texas at Arlington, USA.

Mr. Chiang Fu

Vice President

C. Fu currently serves as Operations Vice President in GUC.

Prior to joining GUC in 2008, Mr. Fu has over 15 years of experience in TSMC 12

inch Fab Product and Process Engineering.

Mr. Fu received his master degree in Electronics Engineering from National Tsing

Hua University in 1993 and EMBA degree from National Taiwan University in 2008.

Mr. Louis Lin

Vice President

Louis currently serves as Vice President in Design Service.

Louis joined GUC in 1998 and has over 15 years of experience in various ASIC

design fields including design methodology development, low power design, SoC

chip implementation, program management, etc.

Mr. Lin received his Ph. D degree in Electronics Engineering from National Chiao

Tung University in 1998.

Mr. Lung Chu

Vice President

Lung currently serves as Corp VP and President of China Operations at GUC. Prior

to GUC in 2009, Mr. Chu was the President of Cadence Asia Pacific and Corporate


VP of Cadence Design System Inc., responsible for field operations throughout Asia

Pacific. Chu has over 25 years of experience in the semiconductor industry and in

the Asia Pacific and China market. He held various executive management positions,

including VP of Magma Design Automation Inc. in charge of Asia Pacific Operations,

VP/GM at KLA-Tencor Corporations, and which went IPO and later merged into

Avanti! Corporations. Prior to TMA, Lung also worked at Cadence Design System,

Apple Computer, and Philips Semiconductor (Signetics).

Mr. Chu holds a bachelor degree in engineering from National Taiwan University in

Taipei, Taiwan and a master degree in engineering from Case Western Reserve

University, Cleveland, USA. He also holds MSEE and MBA degrees from California

State University.

Mr. Yawlin Hwang

Vice President

Yawlin currently serves as Sales and Marketing Vice President in GUC. Prior to

joining GUC in 2009, he worked for TSMC Marketing and Business Development

Division as Senior Manager.

Dr. Hwang received his doctor degree of Material Science and Engineering from

North Carolina State University, Raleigh, North Carolina, USA, in 1992, majoring in

III-V Compound and solid state devices. Since then, he has been working in

semiconductor related filed for more than 20 years. During the period, he worked for

LSI, Logic, MXIC, and TSMC, mainly in the process technology, manufacturing,

sales, and marketing field.

Ms. Amy Yang

Accounting Director

Amy currently serves as Accounting Director in GUC.

Prior to joining GUC in 2005, Mrs. Yang served as Senior Accounting Manager in

Altek Corp.

Ms. Yang received her Bachelor of Science degree in Accounting from Providence

University, Taiwan.


Global Unichip Corporation Statement of Internal Control System

Date: February 13, 2014

Based on the finding of a self-assessment, Global Unichip Corporation (GUC) states the following with regard to its internal control system during the year of 2013:

1. GUC’s Board of Directors and Management are responsible for

establishing, implementing, and maintaining an adequate internal control

system. Our internal control is a process designed to provide reasonable

assurance over the effectiveness and efficiency of our operations

(including profitability, performance, and safeguarding of assets),

reliability of our financial reporting, and compliance with applicable laws

and regulations.

2. An internal control system has inherent limitations. No matter how

perfectly designed, an effective internal control system can provide only

reasonable assurance of accomplishing its stated objectives. Moreover, the

effectiveness of an internal control system may be subject to changes due to

extenuating circumstances beyond our control. Nevertheless, our internal

control system contains self-monitoring mechanisms, and GUC takes immediate

remedial actions in response to any identified deficiencies. ; It should be noted

that any internal control system has its limits, no matter how well designed.

An effective internal control system serves to provide reasonable

assurance of the above-mentioned three objectives, yet the effectiveness

may be subject to changes of environment or circumstances. To counter

such limits, GUC has adopted an internal control system with

self-surveillance mechanism. Thus GUC is able to rectify as soon as a

deficiency is identified.

3. GUC evaluates the design and operating effectiveness of its internal control

system based on the criteria provided in the Regulations Governing the

Establishment of Internal Control Systems by Public Companies (herein below,

the “Regulations”). The criteria adopted by the Regulations identify five key

components of managerial internal control: (1) control environment, (2) risk

assessment and reaction, (3) control activities, (4) information and

communication, and (5) monitoring.

4. GUC has evaluated the design and operating effectiveness of its internal control

system according to the aforesaid Regulations.

5. Based on the findings of such evaluation, GUC believes that, on December 31,

2012, we have maintained, in all material respects, an effective internal control

system (that includes the supervision and management of our subsidiaries), to

provide reasonable assurance over our operational effectiveness and efficiency,

Corporate Governance


reliability of financial reporting, and compliance with applicable laws and

regulations.

6. This Statement will be an integral part of GUC’s Annual Report for the year

2013 and Prospectus, and will be made public. Any falsehood, concealment, or

other illegality in the content made public will entail legal liability under

Articles 20, 32, 171, and 174 of the Securities and Exchange Law.

7. This Statement has been passed by the Board of Directors in their meeting held

on February 13, 2014, with none of the nine attending directors expressing

dissenting opinions, and the remainder all affirming the content of this

Statement.

Global Unichip Corporat ion

F. C. Tseng

Chairman

Jim Lai

President


Board and Audit Committee Meeting Status

Five regular board meetings were convened in 2013. The status of attendance by

board members was as following:

Four regular audit committee meetings were convened in 2013. The status of

attendance by committee members was as follows:

Title Name Attendance in person By proxy Attendance rate (%)Independent

DirectorBenson Liu 4 0 100%

Independent

DirectorDr. Chein-Wei Jen 4 0 100%

Independent

DirectorDr. Wen-Yeu Wang 4 0 100%

Independent

DirectorDr. Chung-Yu Wu 4 0 100%

Title Name Attendance in person By proxy Attendance rate (%)

ChairmanDr. F.C. Tseng

Representative of TSMC5 0 100%

DirectorJim Lai


DirectorLora Ho


DirectorDr. Cliff Hou


Director

K.C. Shih

Representative of

Global On Investment Corp.

5 0 100%

Independent

DirectorBenson Liu 5 0 100%

Independent

DirectorDr. Chein-Wei Jen 5 0 100%

Independent

DirectorDr. Wen-Yeu Wang 5 0 100%

Independent

DirectorDr. Chung-Yu Wu 5 0 100%


Corporate Social Responsibility As a world-class design and turnkey services company and a good corporate citizen, GUC has always sought to fulfill its corporate social responsibilities (CSR). This is the right thing to do because we believe our success is deeply entwined with our stewardship of the natural environment, efficient use of resources and meeting the expectations of our shareholders.

We would like to share with the public our progress made in social commitment,

employee health enhancement, environment protection, and our environmental awards

over the past few years.

Social Commitment

� Donation to St-Francis Children’s Home.


� Donation to Taiwan Fund for Children and Families.

Safety and Health-related Management

In terms of safety and health-related activities, GUC considers environmental

protection, safety and health agenda as important corporate cornerstone. GUC

continues to enhance quality of service and product to achieve “zero accident” and

“sustainable environmental development” and to become a world-class benchmarking

company of environmental protection, safety and health. To provide a working

environment which can improve welfare of all employees, GUC complies with

Taiwan’s related regulations and is aggressively geared to international standards,

including accident prevention, safety and health improvement for employees and

corporate asset protection. We have implemented the following policies:

1. Offer educational training programs to improve employees’ awareness of safety,

health and environmental protection issues.

2. Continue to improve environment quality to reduce risks of safety and health.

3. Map out every health enhancement plan to ensure employees’ physical and

psychological wellness.

4. Regularly conduct safety and environment educational program to increase


employees’ awareness of safety and health issues.

5. Ensure our operation and service to meet or exceed applicable regulations and

standards of environment protection, safety and health.

6. Conduct our operation in an environmentally-sound way, so as to achieve green

design and provide green products and green services.

7. Establish a safe working environment, prevent occupational injury and illness, and

keep employees healthy.

8. Stay abreast of global issues of environment protection, safety and health,

evaluate risks and take effective risk management measures.

9. Enhance employees’ awareness on issues of environment protection, safety and

health and sense of accountability for these issues, and build a friendly culture of

environment protection, safety and health.

10. Establish a green supply chain and enhance performance of environment

protection, safety and health with suppliers through experience sharing and

collaboration.

11. Aggressively communicate with shareholders, actively disclose and share

experience and information of safety and health, and encourage improvement in

the industry and society.

Environmental protection

GUC believes its environmental protection should not only comply with domestic

legal requirements, but also implement governmental plans for resource recycling,

waste disposal and garbage separation. In addition, GUC reduces the usage of paper

cups and disposable plastic tableware for environmental protection and the best use of

resources. GUC has been committed to prevent pollution, ensure efficient use of

resources, prevent accidents, improve employee safety and health and protect property.

The aim is to create a work environment that upholds the well-beings of our

employees and communities.

GUC was recognized by the “Outstanding Achievement in Environmental Protection”

offered by the Hsinchu Science Park Administrations Bureau, and was certified as

“SONY Green Partner” and QC080000. Our commitments and implementations are

as follows:

1. Execute the standards of “Green Energy-saving Design” and provide

energy-saving products that comply with environmental protection regulations

and customers’ requirements.

2. Use package materials that comply with environmental protection regulations for

waste reduction and resource recycling.

3. Increase employees’ fundamental responsibility and awareness of environmental


protection, source recycling and energy saving through educational training and

propaganda.

4. Continue to execute energy-saving management and resource recycling.

5. Comply with governmental environmental protection regulations and fully assist

the authorities in carrying out environmental protection affairs.


1. Business

1-1. Major Business

1-1.1. Main business activities of GUC:

(A) Engage in research & development, production, testing and sales of: � Embedded memory, logic, and analog components for various application ICs; � Cell libraries for various application ICs; and

� EDA tools for various application ICs.

(B) Provide technological support and consulting services related to the aforementioned products.

1-1.2. Revenues mix

Unit: NT$ Thousand, except %

Sales breakdown 2012 2013

Amount % Amount %

ASIC& Wafers 7,055,314 78.27% 4,577,406 74.11%

NRE 1,870,378 20.75% 1486,868 24.07%

Others 88,068 0.98% 112,467 0.98%

Total 9,013,760 100% 6,176,741 100%

1-1.3. Main products and services:

(A) ASIC & wafers: Provide complete services from design, wafer

manufacturing to packaging and testing.

(B) NRE (Non-Recurring Engineering): Provide circuit design cell library

and various IPs required in the process of product design; provide

circuit layouts needed for mask making; subcontract mask making,

wafer manufacturing, dicing and packaging to vendors; conduct final

testing to get prototype samples for customers.

(C) MPW (Multiple-Project Wafer): MPW integrates multiple design

projects of different customers on one single mask and by one wafer

engineer run. It is an effective and fast time-to-market chip

Operation Report


verification service with cost-sharing in masking and wafer

engineering run. Design engineers, before the phase of mass

production, are able to timely verify their prototype designs with

advanced process technologies and much lower costs.

(D) IP (IP, Intellectual Property): These are silicon-verified reusable IC

designs with specific functions. With the rapid advancement of

semiconductor processing technologies, the design industry is

trending toward multi-functional chips and SoC (System on a Chip).

Reusable IP help customers avoid redundant designs and resources.

1-1.4. New product development plan

For the future demands of high-speed interface IP, GUC keeps develop high-end and high-in-demand IPs in 28nm, 20nm, and 16nm technologies: high speed interface like 10G-KR SerDes, PCIe Gen2/3, USB 3.0, LVDS, DDR3/4 Memory Controller/PHY, Voltage Regulator, Power Management Solution, ADC/DAC Data Converter, Clock Generator, etc. In the mean time, GUC expects to offer complete silicon IPs, SoC integration and design platform solution for applications of networking, mobile devices which include networking and multimedia portable devices, and digital television.

1-2. Industry Brief

1-2.1. Current status of the industry and future development

Taiwan IC design companies’ total sales contribution was ranking in the world No.2 just behind the United States recently. As more and more design houses adopt high-end process technologies to heighten the performance of their design products and the complexity increased has brought about various challenges for design service providers in the fields of IP synthesis and verification, and in DFT/DFM. Furthermore, the fees for their non-recurring engineering services, companies have to focus on their core design competence.

In addition, IDM ASIC customers will adopt fabless ASIC companies while more and more IDMs are going fab-lite and the system companies’ differentiation is becoming a trend, those are design services providers committed to find commercial opportunities from these in the future.

In order to fulfill different customers’ requirements, we position ourselves as “Flexible ASIC Services”, in which, we help customer from concepts, spec definition, product design & development, verification, and to mass production. Depends on different engagement model, we can engage with customers from different stage and help them to time-to-market.


Flexible ASIC Services include three core competences: IP Solution, Chip Implementation, and ASIC Manufacturing. The high-performance IP Solution will be able to reduce customers’ design timeframe and cost and satisfy the customized demands. And in chip implementation, GUC works closely with TSMC for advanced technologies which help customers move to mass production in an efficient timetable and with the competitive yield. Besides, GUC offers ASIC Manufacturing, since we are the best coordinator between customers and foundry/testing/package vendors.

1-2.2. The supply chain of Taiwan semiconductor industry

The top-down supply chain of Taiwan’s semiconductor industry is divided into design, wafer manufacturing, packaging and testing.

The up, mid, and down stream of Taiwan semiconductor industry:

1-2.3. Product development trend and competition

IC design used to be a simple task without the application of complex design methodologies. The picture has been changed along with the industry trending toward miniaturization and the convergence of SoC. To cope with the development of the technology changes, it is important for design service providers to exercise internal Design Reuse and apply abundant external IP to develop SoC.

Thanks to the semiconductor cluster in Taiwan with thorough supply chain of booming IC design houses, foundries, and packaging and testing support, design service providers have expanded significantly. As most Taiwanese IC design companies have alliance either with TSMC or with UMC, however, Global Foundry, Samsung, and even SMIC are gaining market share in recent years. Competition is getting intensively and customers may have more choices.

IC designIC

manufacturingSubstrate Lead frame

IC packaging

IC testingChemical

Materials

IC design services

(IPs ; EDA tools)

: core industry

: related industry

Up stream Mid stream Down stream


Along with the global IC projects migrate from 40nm to 28nm or even more advanced process technology in 20 nm, wafer foundries must place significant emphasis on design services which have evolved from purely providing placement & routing toward Synthesis and executing register transfer level (RTL) and developing synthesis. That trend signals closer collaboration between foundries and design service providers. In the future, it will be the service providers who have the know-how and capabilities to develop IP platform for SoC applications and to synthesize process services, to stand out competition and take the lead.

1-3. Technological Research and Development

1-3.1. R&D expenditures

Unit: NT$ Thousand

Note: 1Q 2014 figures have not been audited.

1-3.2. Latest technologies and new products

2013 � Unveiled the first IPD ASIC services.

� Successfully validated a 28nm GPU/CPU platform.

� Unveiled new 28nm data converter IP family which includes ADC/DAC

and a new thermal sensor macro.

� Cooperated with Cadence, taped out successfully for 20nm SoC test

chip.

� Cooperated with M31 for USB 3.0 controller and PHY total solution in

65/55nm, 40nm, and 28nm.

� Developed DDR3/4 IP in 16nm FinFET process with controller and

PHY.

� Developed EMC (Enterprise Multi-Standard) PHY and tape out

successfully in 28nm.

� Successfully unveiled the 10G-KR IP in 40nm and 28nm.

� Successfully developed in 40nm and 40nmLP+process DDR3 PHY IP.

� Successfully developed PCIe3 PHY IP in 40nm.

1-4. Long Term and Short Term Business Development Plan

1-4.1 Short-term

Year

Item 2013 1Q 2014 (Note)

R&D expenditures 827,450 210,585


(A) Promote advanced technology MPW projects to lower customers’

risk.

(B) Raise entry barriers by developing advanced know-how and

product differentiation. Provide support services for the 40nm and

28nm below process technologies.

(C) Continuously provide quality service to existing customers to retain

long term collaboration.

(D) Enhance cooperation with upstream and downstream partners.

(E) Provide complete IP solutions and SoC development according to

product applications.

1-4.1 Long-term

(A) Establish offices in global market to promote brand name and

worldwide market share.

(B) Enhance new business opportunities when more and more IDMs

are going fab-lite.

(C) Develop leading-edge process flow and products via closer

cooperation with foundries.

(D) Focus on core technologies and seek technological cooperation

with domestic and foreign system integrators.

(E) Strengthen strategic alliance and cooperation with IP suppliers.

(F) Strengthen frontend SoC design capability and develop all kinds of

application platform structures.

(G) Development CoWoS (Chip on Wafer on Substrate), work closely

with TSMC, and expects to offer a completely total solution on

design services.

2. Market and Sales Distribution

2-1. Market Analysis

2-1.1 Sales by region:

Revenues by geographic region are allocated to individual countries based on


the location to which the products are initially billed even if our customers’

revenues attributable to end customers that are located in a different location.

The following table summarized information pertaining to our revenues from

customers based on invoicing address in different geographic regions:

Region 2013

Asia 49%

North America 42%

Europe 9%

Total 100%

2-1.2 Market share and growth potential

(A) Market share

Currently there are around 10 design service firms in Taiwan, creating total

revenue of NT$20.0 billion in 2013. With a revenue of NT$6.2 billion in 2013,

GUC had a market share of 31%.

(B) Future market supply and demand situation

According to forecasts made by IEK, global semiconductor industry will be

slightly increase 2.1% in 2013 and estimated to continue to a upside trend with

the growth rate of 4.7% in 2014.

Figures of 2013 Taiwan IC Industry Revenues (table 1)

Unit: NT$ 100 Million

1Q13 2Q13 3Q13 4Q13 2013 Annual

Growth

Rate

IC Industry

Total Rev.

4,108 4,800 5,075 4,820 18,803 15.1%

IC Design 1,012 1,216 1,291 1,220 4,739 15.2%

IC

Manufacturin

g

2,174 2,538 2,702 2,540 9,954 20.0%

Foundry 1,701 1,973 2,060 1,847 7,581 16.9%

DRAM 473 565 642 693 2,373 31.2%

IC Package 635 724 750 735 2,844 4.6%

IC Test 287 322 332 325 1,266 4.2%

IC Product 1,485 1,781 1,933 1,913 7,112 20.1%

Global Semi

Growth

- - - 2.1%


Rate

Source：TSIA ；IEK(2013/12)

(C) Potential growth

With IP and SoC become the main stream in the IC design industry,

traditional IC manufacturers and designers have been constantly facing the

pressures from the gap between IC design productivity versus process

advancement and long verification time caused by increasing complexity due to

different logic and physical flow related parameter adjustment. These problems

can be overcome via partnership with design service vendors who have the

know-how of integrating different SIP. Furthermore, in an effort to improve

time-to-market efficiency and to maximize cost-saving, some large-scale IC

design firms and IDMs have turned to the option of outsourcing design services,

taking fab-less or fab-lite models. All indicate the growing demand for design

foundry service. The design service providers will play a central role in the

landscape of semiconductor supply chain.

It is foreseen that the industry will keep growth momentum. Our company

has been committed in the research and development of the design flow and

technologies in the advanced 28nm, 20nm, and 16nm process nodes Furthermore,

GUC will focus on providing more complete system application solution for

networking PON, smartphone, tablet and DTV. Besides, the company’s another

focus of research lies on the ultra-high-speed interface IP such as SerDes, PCIe,

SATA, and LVDS which are widely applied in high value-added

telecommunication equipments and will also develop 2.5D/3D/IPD design flow

and assembly & testing technology. By way of developing and launching

above-mentioned new technologies and new applications, GUC is confident of

continuing the leading-edge technologies in the year of 2014.

2-1.3. Competitiveness, strength, weaknesses and counter strategies

(A) Competitive advantages

a. Abundant experience in IPs development and integration

GUC has successfully developed a series of IPs in accordance with

design reuse guidelines. GUC not only licenses its self-developed IP

to IC design houses and system houses at home and abroad, but also

provide services in integrating IPs into customer projects.


b. Mature and complete design and verification flow

GUC’s design and verification flow has been proven by numerous

customer projects. Such flow serves to shorten the time needed for

IC verification, hence reducing risks. Customers are able to complete

product design within the shortest timeframe.

c. Keep hold on advanced process design technology

GUC has been committed in conducting advanced process

technology projects and has successfully completed many 40nm and

28nm projects. This year, we are proud to get several advanced

projects and to work on advance designs together with important

clients and strategic partners. Our abundant hands-on experiences

will support and guarantee the realization of our customers’ advanced

technology projects.

d. Technology-oriented R&D team

GUC has always been putting emphasis on developing its own

technologies. Over the past years, GUC has formed an

experience-rich R&D team with reliable design resources and

know-how. Customers are well-supported by our R&D force to

develop international-standard products.

e. Complete SIP partnership

In order to increase the quantity and types of SIP available for

customers, GUC in addition to developing home-grown SIP, also

collaborates closely with leading worldwide SIP vendors such as

ARM, Synopsys, TCI, AnalogBits, Cadence, and TSMC. GUC

guarantees to provide complete IP solutions for customers’ projects.

f. Multiple service model

GUC provides one-stop shopping service to customers with thorough

SoC solutions, and supports customers from design phase to mass

production phase. GUC has built up all the important service links in

the IC manufacturing flow. Customers are free to choose different

services and deliveries based on their technology capacity and needs.


g. Providing IP trading service through IP Mall

GUC offers a IP trading platform for our IP providers and users.

Customers therefore have accesses to information and services of

certain IP, as well as the verification information and quality

assurance of these IPs through a single contact window.

(B) Strength, weaknesses and counter strategy for long-term

development

a. Strength

a-1. Specialized division of work in the semiconductor industry

Taiwan’s IC industry has a unique infrastructure of vertical

disintegration, characterized by a cluster of IC design, advanced IC

foundry and back-end packaging and testing firms. The infrastructure

creates an extremely favorable environment for the development of

design services. For example, newly developed SIP can be rapidly

verified by the two world-class IC foundries to minimize failures and

risks. With the closely-tied cooperation between IC foundries and

service foundries, Taiwanese design service firms are able to offer

process-verified SIP to foreign customers who are accordingly very

likely to become the clients of the two IC foundries in Taiwan.

Taiwan has a good chance to become the international ISP trading

center.

a-2. Abundant system companies

There are a huge number of Taiwanese system manufacturers

engaged in ICT applications and consumer electronics. Whether these

system manufacturers are OEM vendors or own brand-name

developers, their systems in line with technology trend require

multiple and powerful functions integrated on one single chip. The

cooperation between design service firms and system integrators

plays a critical role in enhancing Taiwan’s SoC industry.

a-3. IDM Fablite

In order to keep core-competence and save large-scale capacity

investment in advanced process nodes, we aware the world-wide

IDMs’ Fablite trend. They start to outsource projects to design

services providers.


b. Weaknesses and counter measures

b-1. The fewer new IC design houses

In order to enhance competitive advantages, there are more and more

merger and acquisition between mid/small IC design houses, it

impacts to our customer base and increase higher competition.

Counter measures:

Due to the merger and acquisition of IC design houses, the chip

solution selection of system houses is also getting more limited,

therefore, it would be more attractive for system house to work with

design services vendor in order to make the differentiation. As a

reuslt, GUC will have more focus in developing system house

customers.

b-2. Growth prospect causes fierce competition

As design service becomes the future to be, the industry has attracted

a great deal of new entries into competition.

Counter measures:

Develop niche and high value-added SIP to differentiate GUC from

competitors and to avoid price-cut competition.

2-2. Product Application and Production Flow

The company’s production flow includes two major steps: front-end design

service and mass production.

Step 1: The process of front end design:

Product specification

evaluation and signoff

Front-end

Design service

Circuit layout and

verification

Customer design

check

Sample

manufacturing

Sample

delivery


Step 2: Once the sample has been verified by customer, mass production process

starts:

2-3. Raw Material Supply

GUC products are mainly based on wafer supplied mainly by TSMC, the world’s

leading silicon foundry as well as GUC’s largest shareholder and long-term

strategic partner. It goes without saying that upstream supply for GUC is solid

and stable.

2-4. Major Customers Contributing More Than 10% of Gross Sales, Years

2011~2012

2-4.1. Major customers contributing more than 10% of gross sales in years 2012

and 2013

Unit: NT$ Thousand

No.

2012 2013

Customer

name

Sales

amount

% of annual

total sales

Connection

with

company

Customer

name

Sales

amount

% of annual

total sales

Connection

with

company

1. AM

(Note) NA NA NA AM 1,364,295 22% None

2. M 3,168,496 35% None M

(Note) NA NA NA

Note: Revenues from significant customers those representing not exceed 10% of gross sales in fiscal year of 2012 and 2013.

2-4.2. Name of suppliers taking 10% or more total purchase share in years 2012

and 2013

Unit: NT$ Thousand

No.

2012 2013

Supplier

name Amount Percentage

Connection with

company

Supplier

name Amount Percentage

Connection with

company

Wafer

manufacturing

Chip Probe IC

Packaging

IC Testing Final

Product


1 TSMC 3,552,778 88.45%

TSMC , prior to

July 2011,

TSMC was a

parent company.

Since July 2011,

TSMC has no

controlling

interest in GUC

and accounts for

its investment in

GUC using the

equity method.

TSMC 1,585,961 50.33%

TSMC , prior to

July 2011, TSMC

was a parent

company. Since

July 2011, TSMC

has no

controlling

interest in GUC

and accounts for

its investment in

GUC using the

equity method.

2 NA (Note) NA NA NA TSMC, NA 1,540,088 48.87%

TSMC’s

ownership

percentage to

TSMC, NA is

100%.

Note: The supplier took less than 10% of total purchase share in 2012.

Explanation: GUC buys mainly silicon wafers and mainly from IC foundries.

2-5. Production Output in 2012 and 2013

Units: Chip/Piece and NT$ Thousand

Major products 2012 2013

Quantity Amount Quantity Amount

ASIC & Wafers 32,695,542 4,703,033 27,311,361 2,874,261

NRE 0 1,145,513 0 851,955

Others 2,820 47,197 4,380 41,736

Total NA. 5,895,743 NA. 3,767,952

2-6. Sales Amount in 2012 and 2013

Units: Chip/piece and NT$ Thousand

Year 2012 2013

Sales Volume

& Value/

Major

Products

Domestic Sales Export Sales Domestic Sales Export Sales

Quantity Amount Quantity Amount Quantity Amount Quantity Amount


ASIC & Wafers 7,590,919 2,627,503 26,188,485 4,427,811 4,320,084 554,465 21,463,588 4,022,941

NRE 0 220,461 0 1,649,917 0 196,840 0 1,290,028

Others 240 28,598 2,580 59,470 800 20,879 3,580 91,588

Total 7,591,159 2,876,562 26,191,065 6,137,198 4,320,884 772,184 21,467,168 5,404,557

3. GUC Worldwide Employees

Period 2012 2013 As of 03/31/2014

Function Managers 6 7 7

Professionals 475 449 442

Total employees 481 456 449

Average age 36.93 37.78 38.04

Average years of seniority 4.19 5.32 5.34

Education level

Ph. D 3% 4% 4%

Master 65% 65% 65%

Bachelor 32% 31% 31%

High School 0% 0% 0%


Note: R.O.C. GAAP (2011 and before); TIFRS (2012 and after).


Consolidated Financial Highlights

- 39 -

Global Unichip Corp. and Subsidiaries Consolidated Financial Statements for the Years Ended December 31, 2013 and 2012 and Independent Auditors’ Report

- 40 -

REPRESENTATION LETTER

The companies required to be included in the consolidated financial statements of affiliates in

accordance with the “Criteria Governing Preparation of Affiliation Reports, Consolidated Business

Reports and Consolidated Financial Statements of Affiliated Enterprises” for the year ended

December 31, 2013 are the same as the companies required to be included in the consolidated

financial statements of parent and subsidiary companies as provided in International Accounting

Standard 27 “Consolidated and Separate Financial Statements.” Relevant information that should

be disclosed in the consolidated financial statements of affiliates has all been disclosed in the

consolidated financial statements of parent and subsidiary companies. Consequently, Global

Unichip Corp. and Subsidiaries do not prepare a separate set of consolidated financial statements.

Very truly yours,

GLOBAL UNICHIP CORP.

By

DR. F. C. TSENG

Chairman

February 13, 2014

- 41 -

INDEPENDENT AUDITORS’ REPORT The Board of Directors and Shareholders Global Unichip Corp. We have audited the accompanying consolidated balance sheets of Global Unichip Corp. and subsidiaries (the “Company”) as of December 31, 2013 and 2012 and January 1, 2012 and the related consolidated statements of comprehensive income, changes in equity and cash flows for the years ended December 31, 2013 and 2012. These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We conducted our audits in accordance with the Rules Governing the Audit of Financial Statements by Certified Public Accountants and auditing standards generally accepted in the Republic of China. Those rules and standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of Global Unichip Corp. and subsidiaries as of December 31, 2013 and 2012, and January 1, 2012, and their consolidated financial performance and their consolidated cash flows for the years ended 2013 and 2012, in conformity with the Guidelines Governing the Preparation of Financial Reports by Securities Issuers, the International Financial Reporting Standards, International Accounting Standards, interpretation as well as related guidance translated by Accounting Research and Development Foundation endorsed by the Financial Supervisory Commission of the Republic of China. We have also audited, in accordance with the Rules Governing the Audit of Financial Statements by Certified Public Accountants and auditing standards generally accepted in the Republic of China, the parent company only financial statements of Global Unichip Corp. as of and for the years ended December 31, 2013 and 2012 on which we have issued an unqualified opinion.

February 13, 2014

Notice to Readers

The accompanying consolidated financial statements are intended only to present the consolidated financial

position, results of operations and cash flows in accordance with accounting principles and practices generally

accepted in the Republic of China and not those of any other jurisdiction. The standards, procedures and

practices to audit such consolidated financial statements are those generally accepted and applied in the

Republic of China.

For the convenience of readers, the auditors’ report and the accompanying consolidated financial statements

have been translated into English from the original Chinese version prepared and used in the Republic of China.

If there is any conflict between the English version and the original Chinese version or any difference in the

interpretation of the two versions, the Chinese-language auditors’ report and consolidated financial statements

shall prevail.

- 42 -

GLOBAL UNICHIP CORP. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(In Thousands of New Taiwan Dollars)

December 31, 2013 December 31, 2012 January 1, 2012 December 31, 2013 December 31, 2012 January 1, 2012

ASSETS Amount % Amount % Amount % LIABILITIES AND EQUITY Amount % Amount % Amount %

CURRENT ASSETS CURRENT LIABILITIES Cash and cash equivalents $ 2,136,080 47 $ 2,384,588 49 $ 1,706,126 35 Accounts payable $ 175,236 4 $ 440,889 9 $ 593,324 12

Notes and accounts receivable, net (Note 6) 787,583 18 1,037,793 21 1,367,608 28 Payables to related parties (Note 24) 174,595 4 273,359 6 157,184 3

Receivables from related parties (Note 24) - - 26,528 1 - - Accrued profit sharing to employees and bonus to Inventories (Note 7) 689,411 15 556,573 11 822,792 17 directors (Note 13) 37,188 1 73,795 2 64,367 1

Other financial assets 2,483 - 941 - 531 - Payable on machinery and equipment 4,909 - 15,450 - 14,726 - Other current assets (Notes 10 and 24) 235,077 5 267,543 5 268,760 5 Current tax liabilities (Note 19) 73,833 1 83,948 2 37,673 1

Customer advances 309,684 7 217,481 4 332,052 7

Total current assets 3,850,634 85 4,273,966 87 4,165,817 85 Accrued expenses and other current liabilities (Note 11) 248,819 5 243,714 5 328,334 7

NONCURRENT ASSETS Total current liabilities 1,024,264 22 1,348,636 28 1,527,660 31

Property, plant and equipment (Note 8) 332,064 7 369,004 8 367,209 8 Intangible assets (Note 9) 241,532 5 172,979 4 264,996 6 NONCURRENT LIABILITIES

Deferred income tax assets (Note 19) 77,794 2 57,027 1 61,507 1 Deferred income tax liabilities (Note 19) 8,095 - 7,071 - 6,214 -

Refundable deposits 10,753 - 9,390 - 11,236 - Other long-term payables (Note 11) 68,407 1 16,981 - 29,872 1 Pledged time deposits (Note 25) 20,000 1 20,000 - 20,000 - Accrued pension liabilities (Note 12) 27,140 1 28,201 1 23,640 1

Guarantee deposits 17,646 1 2,904 - 3,027 -

Total noncurrent assets 682,143 15 628,400 13 724,948 15 Total noncurrent liabilities 121,288 3 55,157 1 62,753 2

Total liabilities 1,145,552 25 1,403,793 29 1,590,413 33

EQUITY (Note 13)

Share capital 1,340,119 30 1,340,119 27 1,340,119 27 Capital surplus 167,587 4 569,623 11 569,623 12

Retained earnings

Appropriated as legal reserve 401,115 9 339,878 7 287,137 6 Appropriated as special reserve 10,338 - 393 - 5,163 -

Unappropriated earnings 1,474,429 32 1,256,364 26 1,098,703 22

Others (6,363 ) - (7,804 ) - (393 ) -

Total equity 3,387,225 75 3,498,573 71 3,300,352 67

TOTAL $ 4,532,777 100 $ 4,902,366 100 $ 4,890,765 100 TOTAL $ 4,532,777 100 $ 4,902,366 100 $ 4,890,765 100

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

- 43 -


CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(In Thousands of New Taiwan Dollars, Except Earnings Per Share)

Years Ended December 31

2013 2012

Amount % Amount %

OPERATING REVENUES (Notes 15 and 24) $ 6,176,741 100 $ 9,013,760 100

OPERATING COSTS (Notes 21 and 24) 4,576,406 74 6,942,459 77

GROSS PROFIT 1,600,335 26 2,071,301 23

OPERATING EXPENSES (Note 21)

Sales and marketing 234,203 4 265,832 3

General and administrative 221,634 4 225,349 2

Research and development 827,450 13 870,368 10

Total operating expenses 1,283,287 21 1,361,549 15

INCOME FROM OPERATIONS 317,048 5 709,752 8

NON-OPERATING INCOME AND EXPENSES

Other income (Note 16) 20,118 1 13,994 -

Other gains and losses (Note 17) 11,497 - (17,351) -

Finance costs (Note 18) (281) - (234) -

Total non-operating income and expenses 31,334 1 (3,591) -

INCOME BEFORE INCOME TAX 348,382 6 706,161 8

INCOME TAX EXPENSE (Note 19) 59,178 1 92,776 1

NET INCOME 289,204 5 613,385 7

OTHER COMPREHENSIVE INCOME

Exchange differences on translation of foreign

operations (Note 13) 1,441 - (7,411) -

Actuarial gains (losses) on defined benefit plans

(Note 12) 43 - (5,717) -

Other Comprehensive income (loss) for the

year, net of income tax 1,484 - (13,128) -

TOTAL COMPREHENSIVE INCOME FOR THE

YEAR $ 290,688 5 $ 600,257 7

Earnings Per Share (Note 20)

Basic earnings per share $ 2.16 $ 4.58

Diluted earnings per share $ 2.15 $ 4.55


- 44 -


CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

(In Thousands of New Taiwan Dollars, Except Dividends Per Share)

Others

Foreign

Share Capital - Common Stock Retained Earnings Currency

Share Legal Special Unappropriated Translation

(In Thousands) Amount Capital Surplus Reserve Reserve Earnings Total Reserve Total Equity

BALANCE, JANUARY 1, 2012 134,011 $ 1,340,119 $ 569,623 $ 287,137 $ 5,163 $ 1,098,703 $ 1,391,003 $ (393) $ 3,300,352

Appropriation and distribution of prior year's earnings

Legal reserve - - - 52,741 - (52,741) - - -

Reversal of special reserve - - - - (4,770) 4,770 - - -

Cash dividends to share holders - NT$3.00 per share - - - - - (402,036) (402,036) - (402,036)

Total - - - 52,741 (4,770) (450,007) (402,036) - (402,036)

Net income in 2012 - - - - - 613,385 613,385 - 613,385

Other comprehensive loss in 2012, net of income tax - - - - - (5,717) (5,717) (7,411) (13,128)

Total comprehensive income in 2012 - - - - - 607,668 607,668 (7,411) 600,257

BALANCE, DECEMBER 31, 2012 134,011 1,340,119 569,623 339,878 393 1,256,364 1,596,635 (7,804) 3,498,573

Appropriation of prior year's earnings

Legal reserve - - - 61,237 - (61,237) - - -

Special reserve - - - - 9,945 (9,945) - - -

Total - - - 61,237 9,945 (71,182) - - -

Cash dividends from capital surplus - NT$3.00 per share - - (402,036) - - - - - (402,036)

Net income in 2013 - - - - - 289,204 289,204 - 289,204

Other comprehensive income in 2013, net of income tax - - - - - 43 43 1,441 1,484

Total comprehensive income in 2013 - - - - - 289,247 289,247 1,441 290,688

BALANCE, DECEMBER 31, 2013 134,011 $ 1,340,119 $ 167,587 $ 401,115 $ 10,338 $ 1,474,429 $ 1,885,882 $ (6,363) $ 3,387,225


- 45 -


CONSOLIDATED STATEMENTS OF CASH FLOWS



2013 2012

CASH FLOWS FROM OPERATING ACTIVITIES

Income before income tax $ 348,382 $ 706,161

Adjustments for:

Depreciation 71,144 80,188

Amortization 153,937 153,393

Provision for doubtful receivables 1,977 19,405

Finance costs 281 234

Interest income (14,446) (11,243)

Loss on foreign exchange, net 1,647 1,305

Loss (gain) on disposal of property, plant and equipment, net 1,182 (363)

Gain on disposal of available-for-sale financial assets (3,279) (3,379)

Changes in operating assets and liabilities:

Notes and accounts receivable 248,233 310,410

Receivables from related parties 26,528 (26,528)

Inventories (132,838) 266,219

Other financial assets (1,696) (8)

Other current assets 28,045 1,217

Accounts payable (265,653) (152,435)

Payables to related parties (98,764) 116,175

Accrued profit sharing to employees and bonus to directors (36,607) 9,428

Customer advances 92,203 (114,571)

Accrued expenses and other current liabilities (34,882) (36,990)

Accrued pension liabilities (1,018) (1,156)

Cash provided by operations 384,376 1,317,462

Income tax paid (84,352) (41,064)

Net cash provided by operating activities 300,024 1,276,398

CASH FLOWS FROM INVESTING ACTIVITIES

Interest received 14,450 10,991

Acquisitions of:

Available-for-sale financial assets (3,170,000) (3,305,000)

Property, plant and equipment (47,385) (81,738)

Intangible assets (132,668) (123,299)

Proceeds from disposal of:

Available-for-sale financial assets 3,173,279 3,308,379

Property, plant and equipment 1,569 286

Refundable deposits paid (3,266) (3,141)

Refundable deposits refunded 1,609 4,460

Net cash used in investing activities (162,412) (189,062)

(Continued)

- 46 -


CONSOLIDATED STATEMENTS OF CASH FLOWS



2013 2012

CASH FLOWS FROM FINANCING ACTIVITIES

Interest paid $ (281) $ (234)

Guarantee deposits received 27,628 24,430

Guarantee deposits refunded (13,273) (24,430)

Cash dividends paid (402,036) (402,036)

Net cash used in financing activities (387,962) (402,270)

EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH

EQUIVALENTS 1,842 (6,604)

NET INCREASE (DECREASE) IN CASH AND CASH

EQUIVALENTS (248,508) 678,462

CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR 2,384,588 1,706,126

CASH AND CASH EQUIVALENTS, END OF YEAR $ 2,136,080 $ 2,384,588

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

- 47 -


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2013 AND 2012

(Amounts in Thousands of New Taiwan Dollars, Unless Specified Otherwise)

1. GENERAL

Global Unichip Corp. (GUC), a Republic of China (R.O.C.) corporation, was incorporated on January 22,

1998. GUC is engaged mainly in researching, developing, producing, testing and selling of embedded

memory and logic components for various application ICs, cell libraries for various application ICs, and

EDA tools for various application ICs. On November 3, 2006, GUC’s shares were listed on the Taiwan

Stock Exchange (TWSE). The address of its registered office and principal place of business is No. 10

Li-Hsin 6th

Rd., Hsinchu Science Park, Taiwan. GUC together with its consolidated subsidiaries are

hereinafter referred to collectively as the “Company”.

2. THE AUTHORIZATION OF FINANCIAL STATEMENTS

The consolidated financial statements were approved by the Audit Committee and authorized by the board

of directors for issue on February 13, 2014.

3. APPLICATION OF NEW AND REVISED INTERNATIONAL FINANCIAL REPORTING

STANDARDS (IFRSs)

As of the date that the accompanying consolidated financial statements were authorized for issue, the new,

revised or amended IFRSs, International Accounting Standards (IASs), interpretations and related guidance

in issue but not yet adopted by the Company as well as the effective dates issued by the International

Accounting Standards Board (IASB) are stated as follows; however, the initial adoption of the following

standards and interpretations is still subject to the effective date to be published by the Financial

Supervisory Commission (FSC) except that the standards and interpretations included in the 2013 IFRSs

version should be adopted by the Company starting 2015.

New, Revised or Amended Standards and Interpretations

Effective Date Issued

by IASB (Note 1)

Included in the 2013 IFRSs version

Amendments to IFRSs Improvements to IFRSs 2009 - Amendment to IAS

39

January 1, 2009 or

January 1, 2010

Amendment to IAS 39 Embedded Derivatives Effective for fiscal years

ended on or after

June 30, 2009

Improvements to IFRSs 2010 July 1, 2010 or January 1,

2011

Annual Improvements to IFRSs 2009 - 2011 Cycle January 1, 2013

Amendments to IFRS 1 Limited Exemption from Comparative IFRS 7

Disclosures for First-time Adopters

July 1, 2010

Amendments to IFRS 1 Severe Hyperinflation and Removal of Fixed Dates

for First-time Adopters

July 1, 2011

(Continued)

- 48 -

New, Revised or Amended Standards and Interpretations

Effective Date Issued

by IASB (Note 1)

Amendments to IFRS 1 Government Loans January 1, 2013

Amendment to IFRS 7 Disclosures - Offsetting Financial Assets and

Financial Liabilities

January 1, 2013

Amendment to IFRS 7 Disclosures - Transfers of Financial Assets July 1, 2011

IFRS 10 Consolidated Financial Statements January 1, 2013

IFRS 11 Joint Arrangements January 1, 2013

IFRS 12 Disclosure of Interests in Other Entities January 1, 2013

Amendments to IFRS 10, IFRS 11 and IFRS 12 Consolidated Financial

Statements, Joint Arrangements, and Disclosure of Interests in Other

Entities: Transition Guidance

January 1, 2013

Amendments to IFRS 10, IFRS 12 and IAS 27 Investment Entities January 1, 2014

IFRS 13 Fair Value Measurement January 1, 2013

Amendment to IAS 1 Presentation of Items of Other Comprehensive

Income

July 1, 2012

Amendment to IAS 12 Deferred Tax: Recovery of Underlying Assets January 1, 2012

Amendment to IAS 19 Employee Benefits January 1, 2013

Amendment to IAS 27 Separate Financial Statements January 1, 2013

Amendment to IAS 28 Investments in Associates and Joint Ventures January 1, 2013

Amendment to IAS 32 Offsetting of Financial Assets and Financial

Liabilities

January 1, 2014

IFRIC 20 Stripping Costs in the Production Phase of A Surface Mine January 1, 2013

Not included in the 2013 IFRSs version

Annual Improvements to IFRSs 2010 - 2012 Cycle July 1, 2014 (Note 2)

Annual Improvements to IFRSs 2011 - 2013 Cycle July 1, 2014

IFRS 9 Financial Instruments Not yet determined

Amendments to IFRS 9 and IFRS 7 Mandatory Effective Date and

Transition Disclosure

Not yet determined

Amendment to IAS 19 Defined Benefit Plans: Employee Contributions July 1, 2014

Amendment to IAS 36 Recoverable Amount Disclosures for Non-Financial

Assets

January 1, 2014

Amendment to IAS 39 Novation of Derivatives and Continuation of Hedge

Accounting

January 1, 2014

IFRIC 21 Levies January 1, 2014

(Concluded)

Note 1: The aforementioned new, revised or amended standards or interpretations are effective after fiscal

year beginning on or after the effective dates, unless specified otherwise.

Note 2: The amendment to IFRS 2 applies to share-based payment transactions for which the grant date is

on or after July 1, 2014; the amendment to IFRS 3 applies to business combinations for which the

acquisition date is on or after July 1, 2014; the amendment to IFRS 13 is effective immediately;

the remaining amendments are effective for annual periods beginning on or after July 1, 2014.

Except for the following items, the Company believes that the adoption of aforementioned new, revised or

amended standards or interpretations will not have a significant effect on the Company’s accounting

policies.

- 49 -

a. IFRS 9 “Financial Instruments”

Under IFRS 9, financial assets will be subsequently measured at either the amortized cost or the fair

value. If the objective of the Company’s business model is to hold the financial asset to collect the

contractual cash flows which are solely for payments of principal and interest on the principal amount

outstanding, such assets are measured at the amortized cost. All other financial assets must be

measured at the fair value through profit or loss as of the balance sheet date.

b. IFRS 12 “Disclosure of Interests in Other Entities”

IFRS 12 is a standard that requires a broader disclosure of an entity’s interests in subsidiaries, joint

arrangements, associates and unconsolidated entities that enables the users of financial statements to

evaluate the nature of, and risks associated with, the interests in other entities and the effects of those

interests on the entity’s financial assets and liabilities, as well as the involvement of the owners of

noncontrolling interests towards the entity. The Company expects the application of IFRS 12 will

result in more extensive disclosures of interests in other entities in the financial statements.

c. IFRS 13 “Fair Value Measurement”

IFRS 13 establishes a single source of guidance for fair value measurements and disclosures about fair

value measurements.

d. Amendments to IAS 1 “Presentation of Items of Other Comprehensive Income”

The amendments to IAS 1 introduce a new disclosure terminology for other comprehensive income,

which require additional disclosures in other comprehensive income. The items of other

comprehensive income will be grouped into two categories: (a) items that will not be reclassified

subsequently to profit or loss; and (b) items that will be reclassified subsequently to profit or loss when

specific conditions are met. In addition, income tax on items of other comprehensive income is also

required to be allocated on the same basis. The Company expects the aforementioned amendments

will change the Company’s presentation on the statement of comprehensive income.

e. Amendments to IAS 19 “Employee Benefits”

The amendments to IAS 19 change the accounting for defined benefit plans, which require the

Company to recognize changes in defined benefit obligations or assets, to disclose the components of

the defined benefit costs, to eliminate the corridor approach and to accelerate the recognition of past

service cost. According to the amendments, all actuarial gains and losses will be recognized

immediately through other comprehensive income; the past service cost, on the other hand, will be

expensed immediately when it is incurred and no longer amortized over the average period before

becoming vested on a straight-line basis. In addition, the amendment also requires a broader

disclosure in defined benefit plans.

f. Amendments to IAS 36 “Recoverable Amount Disclosures for Non-Financial Assets”

The amendments to IAS 36 clarify that the Company is only required to disclose the recoverable

amount in the year of impairment accrual or reversal. Moreover, if the recoverable amount of

impaired assets is based on fair value less costs of disposal, the Company should also disclose the

discount rate used. The Company expects the aforementioned amendments will result in a broader

disclosure of recoverable amount for non-financial assets.

As of the date that the consolidated financial statements were authorized for issue, the Company

continues in evaluating the impact on its financial position and financial performance as a result of the

initial adoption of the above standards or interpretations. The related impact will be disclosed when

the Company completes the evaluation.

- 50 -

4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

On May 14, 2009, the FSC announced the “Framework for the Adoption of IFRSs by Companies in the

ROC.” In this framework, starting 2013, companies with shares listed on the Taiwan Stock Exchange or

traded on the Taiwan GreTai Securities Market or Emerging Stock Market should prepare their

consolidated financial statements in accordance with the Regulations Governing the Preparation of

Financial Reports by Securities Issuers and IFRSs endorsed approved by the FSC. The Company’s

transition to IFRSs was effective on January 1, 2012. Summary for the effect of applying IFRSs to the

consolidated financial statement refers to Note 30.

For the convenience of readers, the accompanying consolidated financial statements have been translated

into English from the original Chinese version prepared and used in the R.O.C. If there is any conflict

between the English version and the original Chinese version or any difference in the interpretation of the

two versions, the Chinese-language consolidated financial statements shall prevail.

Significant accounting policies are summarized as follows:

Statement of Compliance

The accompanying consolidated financial statements have been prepared in conformity with the Guidelines

Governing the Preparation of Financial Reports by Securities Issuers, the IFRSs, IASs, interpretations as

well as related guidance translated by the Accounting Research and Development Foundation (ARDF)

endorsed by the FSC with the effective dates.

Basis of Preparation

The consolidated financial statements have been prepared on the historical cost basis except for financial

instruments that are measured at fair values, as explained in the accounting policies below. Historical cost

is generally based on the fair value of the consideration given in exchange for assets.

The opening balance sheet at the date of transition is prepared in accordance with the recognition and

measurement required by First-time Adoption of International Financial Reporting Standards (IFRS 1).

According to IFRS 1, the Company is required to apply each effective IFRS retrospectively in its opening

balance sheet at the date of transition to IFRSs; except for optional exemptions and mandatory exceptions

to such retrospective application provided under IFRS 1. The main optional exemptions the Company

adopted are described in Note 30.

Basis of Consolidation

The basis for the consolidated financial statements

The consolidated financial statements incorporate the financial statements of GUC and entities controlled

by GUC (its subsidiaries). Control is achieved where the Company has the power to govern the financial

and operating policies of an entity so as to obtain benefits from its activities.

When necessary, adjustments are made to the financial statements of subsidiaries to bring their accounting

policies accord with those used by the Company.

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

- 51 -

The subsidiaries in the consolidated financial statements

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

Name of

Investor

Name of Investee

Main Businesses and Products

Establishment

and Operating

Location

Percentage of Ownership

December 31,

2013

December 31,

2012

January 1,

2012

GUC Global Unichip Corp.-NA (GUC-NA) Products consulting, design and

technical support service

U.S.A. 100% 100% 100%

Global Unichip Japan Co., Ltd.

(GUC-Japan)

Products consulting service Japan 100% 100% 100%

Global Unichip Corp. Europe B.V.

(GUC-Europe)

Products consulting service Netherlands 100% 100% 100%

Global Unichip (BVI) Corp.

(GUC-BVI)

Investing activities British Virgin

Islands

100% 100% 100%

GUC-BVI Global Unichip (Shanghai) Company,

Limited (GUC-Shanghai)

Products consulting service Shanghai, China 100% 100% 100%

Foreign Currencies

The financial statements of each individual consolidated entity were expressed in the currency, which

reflected its primary economic environment (functional currency). The functional currency of GUC and

presentation currency of the consolidated financial statements are both New Taiwan Dollars (NT$). In

preparing the consolidated financial statement, the operating results and financial positions of each

consolidated entity are translated into NT$.

In preparing the financial statements of each individual consolidated entity, transactions in currencies other

than the entity’s functional currency (foreign currencies) are recognized at the rates of exchange prevailing

at the dates of the transactions. At the end of each reporting period, monetary items denominated in

foreign currencies are retranslated at the rates prevailing at that date. Such exchange differences are

recognized in profit or loss in the year in which they arise. Non-monetary items measured at fair value

that are denominated in foreign currencies are retranslated at the rates prevailing at the date when the fair

value was determined. Exchange differences on the retranslation of non-monetary items are included in

profit or loss for the year except for exchange differences on the retranslation of non-monetary items in

respect of which gains and losses are recognized directly in other comprehensive income, in which case, the

exchange differences are also recognized directly in other comprehensive income. Non-monetary items

that are measured in terms of historical cost in a foreign currency are not retranslated.

For the purposes of presenting consolidated financial statements, the assets and liabilities of the Company’s

foreign operations are translated into NT$ using exchange rates prevailing at the end of each reporting

period. Income and expense items are translated at the average exchange rates for the year. Exchange

differences arising, if any, are recognized in other comprehensive income and accumulated in equity.

Classification of Current and Noncurrent Assets and Liabilities

Current assets include cash and assets expected to be converted to cash, sold or consumed within one year

from the balance sheet date. Current liabilities are obligations expected to be settled within one year from

the balance sheet date. Assets and liabilities that are not classified as current are noncurrent assets and

liabilities, respectively.

Cash Equivalents

Cash equivalents consist of highly liquid’s short term investments that are readily convertible to known

amounts of cash and are subjected to an insignificant risk of changes in value.

Financial Instruments

Financial assets and liabilities shall be recognized when the Company becomes a party to the contractual

provisions of the instruments.

- 52 -

Financial assets and liabilities are initially recognized at fair values. Transaction costs that are directly

attributable to the acquisition or issue of financial assets and financial liabilities (other than financial assets

and financial liabilities at fair value through profit or loss) are added to or deducted from the fair value of

the financial assets or financial liabilities, as appropriate, on initial recognition. Transaction costs directly

attributable to the acquisition of financial assets or financial liabilities at fair value through profit or loss are

recognized immediately in profit or loss.

Financial Assets

Financial assets are classified as available-for-sale financial assets and loans and receivables. Thus are

depended at the time of initial recognition’s characteristic and purpose. Convention trading of financial

assets are recognized and derecognized on a settlement date basis. Convention trading purchases or sales

of financial assets require delivery of assets within the time frame established by regulation or convention

in the marketplace.

Available-for-sale financial assets

Available-for-sale financial assets are non-derivatives financial assets that are either designated as

available-for-sale or not classified as (a) loans and receivables, (b) held-to-maturity financial assets or (c)

financial assets at fair value through profit or loss (FVTPL).

Open-end mutual funds held by the Company that are traded in an active market are classified as

available-for-sale financial assets and are stated at fair value at the end of each reporting period. When the

investment is disposed of or is determined to be impaired, the cumulative gain or loss previously recognized

in other comprehensive income is reclassified to profit or loss.

Fair value of open-end mutual funds is determined by the financial institution using the net assets value at

the balance sheet date.

Loans and receivables

Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not

quoted in an active market. Loans and receivables including cash and cash equivalents, notes and

accounts receivable (including related parties) and other receivables are measured at amortized cost using

the effective interest method less any impairment, except for those receivables with immaterial discounted

effect.

Impairment of financial assets

Financial assets, other than those at FVTPL, are assessed for indicators of impairment at the end of each

reporting period. Financial assets are considered to be impaired when there is objective evidence that, as a

result of one or more events that occurred after the initial recognition of the financial asset, the estimated

future cash flows of the investment have been affected.

For financial assets carried at amortized cost, such as trade receivables, assets that are assessed not to be

impaired individually are, in addition, assessed for impairment on a collective basis. The Company

assesses the collectability of receivables by evaluating the current financial condition of customers,

historical experience and by performing account aging analysis. In the aging analysis, poor credit quality

customers with balances past due for over 90 days should all be recognized an allowance for doubtful

receivable.

- 53 -

The carrying amount of the financial asset is reduced by the impairment loss directly for all financial assets

with the exception of trade receivables, where the carrying amount is reduced by using an allowance

account. When a trade receivable is considered uncollectible, it is written off against the allowance

account. Subsequent recoveries of amounts previously written off are credited against the allowance

account.

Derecognition of financial assets

The Company derecognizes a financial asset only when the contractual rights to the cash flows from the

financial asset expire, or when it transfers the financial asset and substantially all the risks and rewards of

ownership of the asset to another entity.

On derecognition of a financial asset in its entirety, the difference between the financial asset’s carrying

amount and the sum of the consideration received and receivable and the cumulative gain or loss that had

been recognized in other comprehensive income and accumulated in equity is recognized in profit or loss.

Inventories

Inventories consist of raw materials, supplies, finished goods and work-in-process. Inventories are stated

at the lower of cost or net realizable value. Inventory write-downs are made on an item-by-item basis,

except where it may be appropriate to group similar or related items. Net realizable value is the estimated

selling price of inventories less all estimated costs of completion and necessary selling costs. Inventories

are recorded at weighted-average cost on the balance sheet date.

Property, Plant and Equipment and Assets Leased to Others

Property, plant and equipment are measured at cost less accumulated depreciation and accumulated

impairment. Costs include any incremental costs that are directly attributable to the construction or

acquisition of the item of property, plant and equipment.

Depreciation is recognized so as to write off the cost of the assets less their residual values over their useful

lives, and it is computed using the straight-line method over the following estimated useful lives:

Buildings 50 years

Machinery and equipment 4 to 7 years

Research and development equipment 3 to 5 years

Transportation equipment 5 years

Office equipment 3 to 5 years

Miscellaneous equipment 2 to 10 years

The estimated useful lives, residual values and depreciation method are reviewed at the end of each

reporting period, with the effect of any changes in estimates accounted for on a prospective basis.

An item of property, plant and equipment is derecognized upon disposal or when no future economic

benefits are expected to arise from the continued use of the assets. Any gain or loss arising on the disposal

or retirement of an item of property, plant and equipment is determined as the difference between the sales

proceeds and the carrying amount of the asset and is recognized in profit or loss.

Leases

Leases are classified as finance lease whenever the terms of the lease transfer substantially all the risks and

rewards of ownership to the lessee, other than finance leases are classified as operating lease.

Rental income from operating lease is recognized on a straight-line basis over the term of the relevant lease.

Operating lease payments are recognized as an expense on a straight-line basis over the lease term.

- 54 -

Intangible Assets

Intangible assets are limited in a certain useful life. The initial book value is recorded on the purchasing

cost itself. After that the subsequent book value is measured by cost less accumulated amortization and

accumulated impairment losses. Amortization is recognized using the straight-line method over the

following estimated useful lives:

Software 2 to 5 years

Technology license fees The term of the technology transfer contract

Patents Economic lives of the patents

The estimated useful life and amortization method are reviewed at the end of each reporting period, with

the effect of any changes in estimate being accounted for on a prospective basis.

Expenditure on research activities is recognized as an expense when incurred. An internally-generated

intangible asset arising from development activities is capitalized and then amortized on a straight-line

basis over its useful life if the recognition criteria for an intangible asset have been met; otherwise, the

development expenditure is recognized as an expense when incurred.

Impairment of Tangible and Intangible Assets

At the end of each reporting period, the Company reviews the carrying amounts of its tangible and

intangible assets to determine whether there is any indication that those assets have suffered an impairment

loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine

the extent of the impairment loss. When it is not possible to estimate the recoverable amount of an

individual asset, the Company estimates the recoverable amount of the cash-generating unit to which the

asset belongs. When a reasonable and consistent basis of allocation can be identified, corporate assets are

also allocated to individual cash-generating units, or otherwise they are allocated to the smallest group of

cash-generating units for which a reasonable and consistent allocation basis can be identified.

Recoverable amount is the higher of fair value less costs to sell or value in use. In assessing value in use,

the estimated future cash flows are discounted to their present value using a pre-tax discount rate that

reflects current market assessments of the time value of money and the risks specific to the asset for which

the estimates of future cash flows have not been adjusted.

If the recoverable amount of an asset or cash-generating unit is estimated to be less than its carrying amount,

the carrying amount of the asset or cash-generating unit is reduced to its recoverable amount. An

impairment loss is recognized immediately in profit or loss.

When an impairment loss subsequently reverses, the carrying amount of the asset or a cash-generating unit

is increased to the revised estimate of its recoverable amount, but so that the increased carrying amount

does not exceed the carrying amount that would have been determined had no impairment loss been

recognized for the asset or cash-generating unit in prior years. A reversal of an impairment loss is

recognized immediately in profit or loss.

Revenue Recognition

Revenue is measured at the fair value of the consideration received or receivable. Revenue is also reduced

for estimated customer returns, rebates and other similar allowances.

- 55 -

Sale of goods

Revenue from the sale of goods is recognized when the goods are delivered and titles have passed, at which

time all the following conditions are satisfied:

The Company has transferred to the buyer the significant risks and rewards of ownership of the goods;

The Company retains neither continuing managerial involvement to the degree usually associated with

ownership nor effective control over the goods sold;

The amount of revenue can be measured reliably;

It is probable that the economic benefits associated with the transaction will flow to the Company; and

The costs incurred or to be incurred in respect of the transaction can be measured reliably.

Rendering of Non-Recurring Engineering (NRE) services

Revenue from a contract to provide NRE services is recognized by reference to the stage of completion of

the contract.

Interest Income

Interest income from a financial asset is recognized when it is probable that the economic benefits will flow

to the Company and the amount of income can be measured reliably. Interest income is accrued on a time

basis, by reference to the principal outstanding and at the effective interest rate applicable.

Retirement Benefits

For defined contribution retirement benefit plans, payments to the benefit plan are recognized as an expense

when the employees have rendered service entitling them to the contribution. For defined benefit

retirement plans, the cost of providing benefit is recognized based on actuarial calculations.

For defined benefit retirement benefit plans, the cost of providing benefits is determined using the projected

unit credit method, with actuarial valuations being carried out at the year end. Actuarial gains and losses

are recognized as other comprehensive income in the year.

Share-based Payment Arrangements

The Company elected to take the optional exemption under IFRS 1 for the share-based payment

transactions granted and vested before the date of transition to IFRSs. There were no stock options

granted prior to but unvested at the date of transition. Please refer to the description in Note 30 b.

Taxation

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

Current tax

Income tax on unappropriated earnings (excluding earnings from foreign consolidated subsidiaries) at a rate

of 10% is expensed in the year the shareholders approved the appropriation of earnings which is the year

subsequent to the year the earnings are generated.

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

- 56 -

Deferred tax

Deferred tax is recognized on temporary differences between the carrying amounts of assets and liabilities

in the consolidated financial statements and the corresponding tax bases used in the computation of taxable

profit. Deferred tax liabilities are generally recognized for all taxable temporary differences. Deferred

tax assets are generally recognized for all deductible temporary differences, net operating loss carry

forwards and unused R&D tax credits to the extent that it is probable that taxable profits will be available

against which those deductible temporary differences can be utilized.

Deferred tax liabilities are recognized for taxable temporary differences in subsidiaries, except where the

Company is able to control the reversal of the temporary difference and it is probable that the temporary

difference will not reverse in the foreseeable future. Deferred tax assets arising from deductible temporary

differences associated with such investments are only recognized to the extent that it is probable that there

will be sufficient taxable profits against which to utilize the benefits of the temporary differences and they

are expected to reverse in the foreseeable future.

The carrying amount of deferred tax assets is reviewed at the end of each reporting period and reduced to

the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of

the asset to be recovered. The deferred tax assets which originally not recognized is also reviewed at the

end of each reporting period and increased to the extent that it is probable that sufficient taxable profits will

be available to allow all or part of the asset to be recovered.

Deferred tax liabilities and assets are measured at the tax rates that are expected to apply in the year in

which the liability is settled or the asset realized, based on tax rates (and tax laws) that have been enacted or

substantively enacted by the end of the reporting period. The measurement of deferred tax liabilities and

assets reflects the tax consequences that would follow from the manner in which the Company expects, at

the end of the reporting period, to recover or settle the carrying amount of its assets and liabilities.

Current and deferred tax for the year

Current and deferred tax are recognized in profit or loss, except when they relate to items that are

recognized in other comprehensive income or directly in equity, in which case, the current and deferred tax

are also recognized in other comprehensive income or directly in equity, respectively.

5. CRITICAL ACCOUNTING JUDGMENTS AND KEY SOURCES OF ESTIMATION AND

UNCERTAINTY

In the application of the Company’s accounting policies, which are described in Note 4, the directors are

required to make judgments, estimates and assumptions about the carrying amounts of assets and liabilities

that are not readily apparent from other sources. The estimates and associated assumptions are based on

historical experience and other factors that are considered to be relevant. Actual results may differ from

these estimates.

The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting

estimates are recognized in the period in which the estimate is revised if the revision affects only that year,

or in the period of the revision and future periods if the revision affects both current and future years.

The following are the critical judgments, apart from those involving estimations, that the directors have

made in the process of applying the Company’s accounting policies and that have the most significant

effect on the amounts recognized in the consolidated financial statements.

- 57 -

Impairment of Account Receivable

Account receivables are considered to be impaired when there is objective evidence of uncollectability; the

Company will consider the estimated future cash flows to determine the impairment. The Company

assesses the collectability of receivables by evaluating the current financial condition of customers,

historical experience and by performing account aging analysis; the amount of impairment loss is the

difference between the assets carrying amount and the present value of estimated future cash flows,

discounted at the financial assets original effective interest rate. It might be a critical impairment loss if

the actual future cash flows are less than estimated future cash flows. In the aging analysis, poor credit

quality customers with balances past due for over 90 days should all be recognized an allowance for

doubtful receivable.

Realization of Deferred Income Tax Assets

Deferred tax assets are recognized to the extent that it is probable that future taxable profits will be

available against which those deferred tax assets can be utilized. Assessment of the realization of the

deferred tax assets requires the Company’s subjective judgment and estimation, including the future

revenue growth and profitability, tax holidays, the amount of tax credits that can be utilized and feasible tax

planning strategies. Any changes in the global economic environment, the industry trends and relevant

laws and regulations could result in significant adjustments to deferred tax assets.

Valuation of Inventory

Inventories are stated at the lower of cost or net realizable value, and the Company has to determine and

estimate to the net realizable value of inventory at the end of each reporting period.

Due to the rapid technological changes, the Company estimates the net realizable value of inventory for

obsolescence and unmarketable items at the end of reporting period and then writes down the cost of

inventories to net realizable value. The net realizable value of the inventory is mainly determined based

on assumptions of future demand within a specific time horizon.

6. NOTES AND ACCOUNTS RECEIVABLE, NET

December 31,

2013

December 31,

2012

January 1,

2012

Notes and accounts receivable $ 808,965 $ 1,057,198 $ 1,367,608

Allowance for doubtful receivables (21,382) (19,405) -

Notes and accounts receivable, net $ 787,583 $ 1,037,793 $ 1,367,608

In principle, the payment term granted to customers is due 30 days from the invoice date or 30 days from

the end of the month the invoice is issued. The Company assesses the collectability of receivables by

evaluating the current financial condition of customers, historical experience and by performing account

aging analysis. In the aging analysis, poor credit quality customers with balances past due for over 90

days, should all be recognized an allowance for doubtful receivable.

Except for those impaired, notes and accounts receivable, aging analysis at the end of the reporting period is

summarized in the following table. Notes and accounts receivable include amounts that are past due but

for which the Company has not recognized an allowance for doubtful receivables after the assessment since

there has not been a significant change in the credit quality of its customers and the amounts are still

considered recoverable.

- 58 -

Aging analysis of notes and accounts receivable, net

December 31,

2013

December 31,

2012

January 1,

2012

Neither past due nor impaired $ 507,885 $ 762,242 $ 1,150,986

Past due but not impaired

Past due within 1-30 days 80,138 197,580 133,742

Past due within 31-60 days 80,832 77,971 71,574

Past due within 61-90 days 9,965 - 9,075

Past due over 91 days 108,763 - 2,231

$ 787,583 $ 1,037,793 $ 1,367,608

Movements of the allowance for doubtful receivables


2013 2012

Balance, beginning of year $ 19,405 $ -

Provision 1,977 19,405

Balance, end of the year $ 21,382 $ 19,405

Aging analysis of accounts receivable that is individually determined to be impaired

December 31,

2013

December 31,

2012

January 1,

2012

Past due 121-150 days $ - $ 2,499 $ -

Past due 151-180 days 4,952 - -

Past due over 181 days 16,430 16,906 -

$ 21,382 $ 19,405 $ -

7. INVENTORIES

December 31,

2013

December 31,

2012

January 1,

2012

Finished goods $ 42,767 $ 77,887 $ 292,693

Work in process 483,493 363,454 376,858

Raw materials 163,151 115,232 153,241

$ 689,411 $ 556,573 $ 822,792

As of December 31, 2013 and 2012 and January 1, 2012, the allowance for loss on inventory was

NT$101,795 thousand and NT$93,349 thousand and NT$32,306 thousand, respectively.

- 59 -

Inventories in related to income and expenses were included in the operating cost as follows:


2013 2012

Write-down of inventory $ (31,617) $ (65,507)

Revenue from sale of scraps $ 2,508 $ 5,244

8. PROPERTY, PLANT AND EQUIPMENT

December 31,

2013

December 31,

2012

January 1,

2012

Buildings $ 198,190 $ 202,956 $ 207,722

Machinery and equipment 1,041 1,306 1,264

Research and development equipment 76,852 87,467 78,975

Transportation equipment 2,010 3,275 4,984

Office equipment 1,737 2,746 2,541

Miscellaneous equipment 52,234 71,254 71,420

Unfinished construction and equipment under

acceptance

- - 303

$ 332,064 $ 369,004 $ 367,209

Year Ended December 31, 2013

Buildings

Machinery and

Equipment

Research and

Development

Equipment

Transportation

Equipment

Office

Equipment

Miscellaneous

Equipment Total

Cost

Balance, beginning of year $ 242,923 $ 19,416 $ 426,761 $ 11,376 $ 20,097 $ 230,235 $ 950,808

Additions - - 28,237 2,180 - 6,370 36,787

Disposals - - (2,233 ) (4,120 ) - (1,735 ) (8,088 )

Effect of exchange rate changes - - 36 - 113 (134 ) 15

Balance, end of year 242,923 19,416 452,801 9,436 20,210 234,736 979,522

Accumulated depreciation

Balance, beginning of year 39,967 18,110 339,294 8,101 17,351 158,981 581,804

Additions 4,766 265 38,881 1,321 1,053 24,858 71,144

Disposals - - (2,233 ) (1,996 ) - (1,258 ) (5,487 )

Effect of exchange rate changes - - 7 - 69 (79 ) (3 )

Balance, end of year 44,733 18,375 375,949 7,426 18,473 182,502 647,458

Net book value, end of year $ 198,190 $ 1,041 $ 76,852 $ 2,010 $ 1,737 $ 52,234 $ 332,064


Buildings

Machinery and

Equipment

Research and

Development

Equipment

Transportation

Equipment

Office

Equipment

Miscellaneous

Equipment

Unfinished

construction

and equipment

under

acceptance Total

Cost

Balance, beginning of

year

$ 242,923

$ 19,113

$ 375,672

$ 11,376

$ 19,776

$ 209,403 $ 303

$ 878,566

Additions - 303 52,236 - 1,246 28,177 387 82,349

Disposals - - (1,513 ) - (1,127 ) (6,690 ) - (9,330 )

Reclassification - - 387 - 296 - (683 ) -

Effect of exchange rate

changes

-

-

(21 )

-

(94 )

(655 ) (7 )

(777 )

Balance, end of year 242,923 19,416 426,761 11,376 20,097 230,235 - 950,808

Accumulated depreciation

Balance, beginning of

year

35,201

17,849

296,697

6,392

17,235

137,983 -

511,357

Additions 4,766 261 44,113 1,709 1,288 28,051 - 80,188

Disposals - - (1,513 ) - (1,124 ) (6,620 ) - (9,257 )

Effect of exchange rate

changes

-

-

(3 )

-

(48 )

(433 ) -

(484 )

Balance, end of year 39,967 18,110 339,294 8,101 17,351 158,981 - 581,804

Net book value, end of year $ 202,956 $ 1,306 $ 87,467 $ 3,275 $ 2,746 $ 71,254 $ - $ 369,004

The significant part of the Company’s buildings includes main plants, mechanical and electrical power

equipment. The related depreciation is calculated using the estimated useful lives of 50 years.

- 60 -

9. INTANGIBLE ASSETS

December 31,

2013

December 31,

2012

January 1,

2012

Software $ 219,004 $ 138,898 $ 208,597

Technology license fees 22,292 33,816 56,106

Patents 236 265 293

$ 241,532 $ 172,979 $ 264,996


Software

Technology

License Fees Patents Total

Cost

Balance, beginning of year $ 478,028 $ 140,876 $ 519 $ 619,423

Additions 212,260 10,230 - 222,490

Disposals (200,191) (6,000) - (206,191)

Balance, end of year 490,097 145,106 519 635,722

Accumulated amortization

Balance, beginning of year 339,130 107,060 254 446,444

Additions 132,154 21,754 29 153,937

Disposals (200,191) (6,000) - (206,191)


$ 219,004 $ 22,292 $ 236 $ 241,532


Software

Technology

License Fees Patents Total

Cost

Balance, beginning of year $ 457,025 $ 234,266 $ 519 $ 691,810

Additions 61,376 - - 61,376

Disposals (40,373) (93,390) - (133,763)


Accumulated amortization

Balance, beginning of year 248,428 178,160 226 426,814

Additions 131,075 22,290 28 153,393

Disposals (40,373) (93,390) - (133,763)


$ 138,898 $ 33,816 $ 265 $ 172,979

- 61 -

10. OTHER CURRENT ASSETS

December 31,

2013

December 31,

2012

January 1,

2012

Prepaid license fees $ 147,643 $ 180,960 $ 195,367

Tax receivable 48,456 40,048 27,414

Prepaid expenses 18,208 27,093 24,968

Temporary payments 12,022 13,867 17,891

Prepaid income tax 8,748 5,575 3,120

$ 235,077 $ 267,543 $ 268,760

11. OTHER LONG-TERM PAYABLES

December 31,

2013

December 31,

2012

January 1,

2012

License fees payable $ 154,075 $ 62,662 $ 123,183

Current portion (classified under accrued

expenses and other current liabilities)

$ 85,668 $ 45,681 $ 93,311

Noncurrent portion 68,407 16,981 29,872

$ 154,075 $ 62,662 $ 123,183

The payables were primarily attributable to several agreements that GUC entered into for certain

technology license and software.

12. RETIREMENT BENEFIT PLANS

a. Defined contribution plans

The pension mechanism under the Labor Pension Act is deemed a defined contribution plan. Pursuant

to the Act, GUC makes monthly contributions equal to 6% of each employee’s monthly salary to

employees’ pension accounts. Furthermore, GUC-Shanghai is required by local regulations to make

monthly contributions at certain percentages of the salary of their employees. GUC-Japan makes

yearly contributions as pension cost. Accordingly, the Company recognized expenses of NT$29,752

thousand and NT$28,961 thousand in the consolidated statements of comprehensive income for the

years ended December 31, 2013 and 2012, respectively.

b. Defined benefit plans

GUC has a defined benefit plan under the Labor Standards Act, which provides benefits based on an

employee’s length of service and average monthly salary of the last six months prior to retirement.

GUC contributes an amount equal to 2% of salaries paid each month to a pension fund (the Fund),

which is administered by the Labor Pension Fund Supervisory Committee (the Committee) and

deposited in the Committee’s name in the Bank of Taiwan.

GUC adopted projected unit credit method to measure the present value of the defined benefit

obligation, current service costs and prior service costs.

- 62 -

GUC adopted the pension cost rate from the actuarial valuation as of December 31, 2012 and January 1,

2012 to determine and recognize pension expenses in General and administrative expenses of NT$823

thousand and NT$710 thousand in the consolidated statements of comprehensive income for the year

ended December 31, 2013 and 2012, respectively.

The principal assumptions of the actuarial valuation were as follows:

December 31,

2013

December 31,

2012

January 1,

2012

Discount rate 2.00% 1.50% 1.75%

Expected rate of future salary increase 3.00% 3.00% 3.00%

Expected rate of return on plan assets 1.75% 1.75% 2.00%

The pension cost of the defined benefit plans recognized in comprehensive income statement of GUC

was as follows:


2013 2012

Recognized in profit or loss

Current service cost $ 487 $ 382

Interest cost 830 851

Expected return on plan assets (494) (523)

$ 823 $ 710

For the years ended December 31, 2013 and 2012, the actuarial gains and losses recognized in other

comprehensive income were NT$43 thousand and losses NT$5,717 thousand, respectively. As of

December 31, 2013 and 2012, the accumulated actuarial losses recognized in other comprehensive

income were NT$5,674 thousand and NT$5,717 thousand, respectively.

The amounts arising from the defined benefit obligation of GUC under GUC’s financial position were

as follows:

December 31,

2013

December 31,

2012

January 1,

2012

Present value of defined benefit obligation $ 55,468 $ 55,402 $ 48,691

Fair value of plan assets (28,328) (27,201) (25,051)

Present value of unfunded defined benefit

obligation

$ 27,140 $ 28,201 $ 23,640

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


2013 2012

Balance, beginning of year $ 55,402 $ 48,691

Current service cost 487 382

Interest cost 830 851

Benefits paid (1,079) -

Actuarial losses (gains) (172) 5,478

Balance, end of year $ 55,468 $ 55,402

- 63 -

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


2013 2012

Balance, beginning of year $ 27,201 $ 25,051

Expected return on plan assets 494 523

Contributions from employer 1,841 1,866

Benefits paid (1,079) -

Actuarial losses (129) (239)

Balance, end of year $ 28,328 $ 27,201

The percentages of the fair value of the plan assets by major categories at the end of reporting period

were as follows:

Fair Value of Plan Assets (%)

December 31,

2013

December 31,

2012

January 1,

2012

Cash 23 25 24

Equity instruments 45 38 41

Debt instruments 32 37 35

100 100 100

The overall expected rate of return on plan assets was based on the historical return trends, analysts’

predictions of the market over the life of related obligation, reference to the performance of the Funds

operated by the Committee and the consideration of the effect of the provision that the minimum return

should not be less than the average interest rate of a two-year time deposit published by the local banks.

GUC elects to disclose the historical information of experience adjustments from the adoption of IFRSs,

which is as follows:

December 31,

2013

December 31,

2012

January 1,

2012

Present value of defined benefit obligation $ 55,468 $ 55,402 $ 48,691

Fair value of plan assets (28,328) (27,201) (25,051)

Present value of unfunded defined benefit

obligation

$ 27,140 $ 28,201 $ 23,640

Experience adjustments on plan liabilities $ (83) $ (1,462) $ -

Experience adjustments on plan assets $ (129) $ (239) $ -

GUC expects to make contributions of NT$1,910 thousand and NT$1,841 thousand to the defined

benefit plans in the next year from December 31, 2013 and 2012, respectively.

- 64 -

13. EQUITY

a. Share capital

December 31,

2013

December 31,

2012

January 1,

2012

Authorized $ 1,500,000 $ 1,500,000 $ 1,500,000

Issued $ 1,340,119 $ 1,340,119 $ 1,340,119

As of December 31, 2013, December 31, 2012 and January 1, 2012, the authorized shares are 150,000

thousand shares, with par value of $10 per share is entitled the right to vote and to receive dividends;

issued and paid shares were 134,011 thousand shares.

b. Capital surplus

December 31,

2013

December 31,

2012

January 1,

2012

Additional paid-in capital $ 101,945 $ 503,981 $ 503,981

Donations 49,021 49,021 49,021

From merger 16,621 16,621 16,621

$ 167,587 $ 569,623 $ 569,623

Under the Company Law, the capital surplus generated from donations and the excess of the issuance

price over the par value of capital stock (including the stock issued for new capital and mergers) may be

used to offset a deficit; in addition, when the Company has no deficit, such capital surplus may be

appropriated as cash dividends or stock dividends, which are limited to a certain percentage of GUC’s

paid-in capital under capital surplus.

c. Retained earnings and dividend policy

GUC’s Articles of Incorporation provide that, when allocating the net profits for each fiscal year, GUC

shall first offset its losses in previous years and then set aside the following items accordingly:

1) Legal reserve at 10% of the remaining profit;

2) Special reserve in accordance with the resolution in the shareholders’ meeting;

3) Bonus to directors of not more than 2% of the remainder after setting aside 1) and 2) above.

Directors who also serve as executive officers of GUC are not entitled to receive the bonus to

directors;

4) Bonus to employees of not less than 2% of the remainder after setting aside 1) and 2) above. GUC

may issue stock bonuses to employees of an affiliated company upon meeting the conditions set by

the Board of Directors;

5) Any balance remaining shall be allocated according to the resolution in the shareholders’ meeting.

GUC at present is in a business growing stage. The proportion of dividends that will be paid in cash

will depend on future expansion plans and cash needs. For profit distribution, the proportion of cash

dividends shall not be lower than 10% of the total dividends.

- 65 -

The profit sharing to employees, which represents both 11.25% of net income, and the bonus to

directors, which represents 0.44% and 0.91% of net income (after deducting the legal reserve and

special reserve) were recognized for the years ended December 31, 2013 and 2012, respectively. If the

actual amounts subsequently resolved by the shareholders differ from the proposed amounts, the

differences are recorded in the year of shareholders’ resolution as a change in accounting estimate. If

bonus shares are resolved to be distributed to employees, the number of shares is determined by

dividing the amount of profit sharing by the closing price (after considering the effect of cash and stock

dividends) of the shares of the day preceding the shareholders’ meeting.

The appropriation for legal reserve shall be made until the reserve equals GUC’s paid-in capital. The

reserve may be used to offset a deficit, or be distributed as dividends and bonuses to the extent of the

portion in excess of 25% of the paid-in capital if GUC incurs no loss.

A special reserve equivalent to the net debit balance of other components of shareholders’ equity such

as exchange differences on translation of foreign operations, shall be made from unappropriated

earnings. Any special reserve appropriated may be reversed to the extent that the net debit balance

reverses.

The appropriations of earnings for 2012 and 2011 had been approved in GUC’s shareholders’ meetings

held on June 20, 2013 and May 17, 2012, respectively. The appropriations and dividends per share

were as follows:

Appropriation of Earnings

Dividends Per Share

(NT$)

For Fiscal For Fiscal For Fiscal For Fiscal

Year 2012 Year 2011 Year 2012 Year 2011

Legal reserve $ 61,237 $ 52,741

Provision (reversal) of special reserve 9,945 (4,770)

Cash dividends to shareholders - 402,036 $ - $3.00

$ 71,182 $ 450,007

GUC’s Board of Directors resolved to appropriate cash dividend of NT$3 per share by using additional

paid-in capital under capital surplus, for a total amount of NT$402,036 thousand on June 20, 2013.

GUC’s profit sharing to employees and bonus to directors that were all paid in cash in the amounts of

NT$68,889 thousand and NT$4,906 thousand, respectively, for 2012, and GUC’s profit sharing to

employees and bonus to directors that were all paid in cash in the amounts of NT$59,328 thousand and

NT$5,039 thousand, respectively, for 2011 had been approved in the shareholders’ meeting held on

June 20, 2013 and May 17, 2012, respectively. The resolved amounts of profit sharing to employees

to be paid in cash and bonus to directors were consistent with the resolutions in the meeting of the

Board of Directors held on February 7, 2013 and February 16, 2012, respectively, and same amounts

had been charged against earnings of 2012 and 2011, respectively.

The appropriations of earnings, payment of profit sharing to employees and bonus to members of the

Board of Directors for the year ended December 31, 2012 approved by Shareholders of GUC were

based on the financial statements for the year ended December 31, 2012 prepared under the R.O.C.

GAAP and in accordance with the Guidelines Governing the Preparation of Financial Reports by

Securities Issuers issued by the FSC before amendment.

- 66 -

GUC’s appropriations of earnings for 2013 had been approved in the meeting of the Board of Directors

held on February 13, 2014. The appropriations and dividends per share were as follows:

Appropriation of

Earnings

For Fiscal Year 2013

Legal reserve $ 28,920

Reversal of special reserve (3,975)

Cash dividends to shareholders (Dividends NT$1.97222 per share) 264,302

$ 289,247

GUC’s Board of Directors resolved to appropriate cash dividends NT$1.02778 per share by using

additional paid-in capital and donations of capital surplus for a total amount of NT$137,734 thousand.

GUC’s Board of Directors also resolved to appropriate profit sharing to employees and bonus to

directors which were all paid in cash in the amounts of NT$32,528 thousand and NT$1,166 thousand

for 2013, respectively. There is no difference between the aforementioned resolved amounts and the

amounts charged against earnings of 2013.

The appropriations of earnings, profit sharing to employees and bonus to directors for 2013 are to be

resolved in the GUC shareholders meeting which is expected to be held on May 29, 2014.

The information about appropriations of GUC’s profit sharing to employees and bonus to directors is

available at the Market Observation Post System website.

Except for non-ROC resident shareholders, all shareholders receiving the dividends are allowed a tax

credit equal to their proportionate share of the income tax paid by the Company.

d. Others

Changes in foreign currency translation reserve were as follows:


2013 2012

Balance, beginning of year $ (7,804) $ (393)

Exchange differences on translation of foreign operations 1,441 (7,411)

Balance, end of period $ (6,363) $ (7,804)

The exchange differences arising from the translation of foreign operation’s net assets from its

functional currency to the Company’s presentation currency are recognized directly in other

comprehensive income and also accumulated in the foreign currency translation reserve.

- 67 -

14. SHARE-BASED PAYMENT

GUC elected to take the optional exemption from applying IFRS 2 retrospectively for shared-based

payment transactions granted and vested before January 1, 2012. The plans are described as follows.

GUC’s 2007 Employee Stock Option Plan was approved by the SFB on November 28, 2007 to grant a

maximum of 1,999 options with each option eligible to subscribe for one thousand common shares when

exercisable. The options may be granted to qualified employees of GUC or any of its subsidiaries. The

options of the GUC 2007 Plan are valid for six years and are exercisable at certain percentages subsequent

to the second anniversary of the grant date. Stock options of the plans that had never been granted or had

been granted but subsequently canceled had expired as of December 31, 2013.

Information about GUC’s outstanding options was as follows:

Weighted-

average

Number of Exercise Price

Options (NT$)

Year ended December 31, 2013

Balance, beginning of year 1,053 $175.00

Options canceled (1,053) 175.00

Balance, end of year - -


Balance, beginning of year 1,124 $175.00

Options canceled (71) 175.00

Balance, end of year 1,053 175.00

The number of outstanding options and the exercise prices had been adjusted to reflect the distribution of

earnings by GUC in accordance with the plans.

Information about GUC’s outstanding and exercisable options was as follows:

December 31, 2013 December 31, 2012 January 1, 2012

Weighted-average Weighted-average Weighted-average

Range of

Exercise Price

Remaining

Contractual Life

Range of

Exercise Price

Remaining

Contractual Life

Range of

Exercise Price

Remaining

Contractual Life

(NT$) (Years) (NT$) (Years) (NT$) (Years)

$175.00 - $175.00 1.00 $175.00 2.00

15. OPERATING REVENUE

The analysis of the Company’s operating revenue was as follows:


2013 2012

Operating revenue from sale of goods $ 4,577,406 $ 7,055,314

Operating revenue from NRE service 1,599,335 1,958,446

$ 6,176,741 $ 9,013,760

- 68 -

16. OTHER INCOME


2013 2012

Interest income

Bank deposits $ 14,446 $ 11,243

Government grants 1,513 727

Past due advance receipts transferred to income 885 648

Tax refunds income 701 -

Income (expenses) of rental assets

Rental income 639 663

Depreciation of rental assets (4) (4)

Insurance claims income 536 -

Other income 1,402 717

$ 20,118 $ 13,994

17. OTHER GAINS AND LOSSES


2013 2012

Foreign exchange gain (loss), net $ 9,400 $ (17,600)

Gain on disposal of available-for-sale financial assets 3,279 3,379

Gain (loss) on disposal of property, plant and equipment, net (1,182) 363

Other losses - (3,493)

$ 11,497 $ (17,351)

18. FINANCE COSTS


2013 2012

Interest expense

Bank loans $ (281) $ (234)

19. INCOME TAX

a. Income tax expense recognized in profit or loss

Income tax expense consisted of the following:

Year Ended December 31

2013 2012

Current income tax

Current tax expense recognized for the current period $ 79,745 $ 86,129

Income tax adjustments on prior years (944) 1,310

78,801 87,439

(Continued)

- 69 -


2013 2012

Temporary differences $ (44,894) $ (19,060)

Income tax credits 25,271 24,397

(19,623) 5,337

Income tax expense recognized in profit or loss $ 59,178 $ 92,776

(Concluded)

A reconciliation of income before income tax and income tax expense recognized in profit or loss was

as follows:


2013 2012

Income before tax $ 348,382 $ 706,161

Income tax expense at the statutory rate $ 62,848 $ 122,958

Tax effect of adjusting items:

Nondeductible items in determining taxable income 2,588 171

Investment tax credits used (46,259) (43,266)

Additional income tax on unappropriated earnings 54,119 7,740

Remeasurement of investment tax credits (12,714) 5,314

Remeasurement of operating loss carry forwards (460) (1,451)

Income tax adjustments on prior years (944) 1,310

Income tax expense recognized in profit or loss $ 59,178 $ 92,776

The Company applied a tax rate of 17% for entities subject to the Income Tax Law of the Republic of

China; for other jurisdictions, the Company measures taxes by using the applicable tax rate for each

individual jurisdiction.

b. Deferred income tax balance

The analysis of deferred income tax assets and liabilities in the consolidated balance sheets was as

follows:

December 31,

2013

December 31,

2012

January 1,

2012

Deferred income tax assets

Investment tax credits $ - $ 25,169 $ 51,017

Temporary differences

Allowance for sales discounts 32,769 470 -

Write-down of inventory 21,244 15,869 5,880

Share of loss of subsidiaries accounted for

using equity method

15,552 6,817 1,729

Unrealized foreign exchange loss (gain) 3,661 4,716 2,245

Allowance for doubtful receivables 1,932 1,452 -

Others 1,195 1,083 636

Operating loss carry forwards 1,441 1,451 -

$ 77,794 $ 57,027 $ 61,507

(Continued)

- 70 -

December 31,

2013

December 31,

2012

January 1,

2012

Deferred income tax liabilities


Share of profit of subsidiaries accounted

for using equity method

$ (8,095) $ (7,071) $ (6,214)

(Concluded)

Movements of deferred income tax assets and deferred tax liabilities were as follows:


Balance,

Beginning

of Year

Recognized in

Profit or Loss

Effect of

Exchange Rate

Changes Balance,

End of Year


Investment tax credits $ 25,169 $ (25,169) $ - $ -


Allowance for sales

discounts

470 32,299 - 32,769

Write-down of inventory 15,869 5,375 - 21,244

Share of loss of subsidiaries

accounted for using equity

method

6,817 8,735 - 15,552

Unrealized foreign exchange

loss (gain)

4,716 (1,055) - 3,661

Allowance for doubtful

receivables

1,452 480 - 1,932

Others 1,083 83 29 1,195

Operating loss carry forwards 1,451 (101) 91 1,441

$ 57,027 $ 20,647 $ 120 $ 77,794


Balance,

Beginning

of Year

Recognized in

Profit or Loss Balance,

End of Year


Investment tax credits $ 51,017 $ (25,848) $ 25,169


Allowance for sales discounts - 470 470

Write-down of inventory 5,880 9,989 15,869

Share of loss of subsidiaries accounted for

using equity method

1,729 5,088 6,817

Unrealized foreign exchange loss (gain) 2,245 2,471 4,716

Allowance for doubtful receivables - 1,452 1,452

Others 636 447 1,083

Operating loss carry forwards - 1,451 1,451

$ 61,507 $ (4,480) $ 57,027

- 71 -


Balance,

Beginning

of Year

Recognized in


End of Year





$ (7,071) $ (1,024) $ (8,095)


Balance,

Beginning

of Year

Recognized in


End of Year





$ (6,214) $ (857) $ (7,071)

c. The information of unrecognized deferred income tax assets

December 31,

2013

December 31,

2012

January 1,

2012

Investment tax credits - Research and

Development expenditures

$ - $ 126,440 $ 263,706

Deductible temporary differences

Related to investments in subsidiaries $ 1,082 $ 1,525 $ 673

d. Information about unused loss carry forwards and tax exemption

As of December 31, 2013, the profits generated from the following projects of GUC are exempt from

income tax for a five-year period:

Tax-exemption Period

Construction and expansion of 2005 and 2006 2013 to 2017

Construction and expansion of 2007 and 2008 2015 to 2019

As of December 31, 2013, operating loss carry forwards of GUC-Shanghai and GUC-Europe have

imputation credits that can be used until 2017 and 2020 (expiry years), respectively.

e. Unrecognized deferred tax liabilities associated with investments

As of December 31, 2013 and 2012 and January 1, 2012, the taxable temporary differences associated

with investments in subsidiaries for which no deferred income tax liabilities have been recognized were

NT$0, NT$198 thousand and NT$606 thousand, respectively.

- 72 -

f. Integrated income tax information

December 31,

2013

December 31,

2012

January 1,

2012

Balance of the Imputation

Credit Account - GUC $ 125,110 $ 52,368 $ 48,013

The estimated and actual creditable ratio for distribution of GUC’s earnings of 2013 and 2012 were

13.17% and 10.44 %, respectively.

Under Rule No.10204562810 issued by the Ministry of Finance, when calculating the creditable ratio in

the year of first-time adoption of IFRSs, GUC has included the adjustments to retained earnings from

the effect of transition to IFRSs in the accumulated unappropriated earnings.

The imputation credit allocated to shareholders is based on its balance as of the date of the dividend

distribution. The estimated creditable ratio of GUC may change when the actual distribution of the

imputation credit is made.

There was no earnings generated prior to December 31, 1997.

g. Income tax examination

The tax authorities have examined income tax returns of GUC through 2010.

20. EARNINGS PER SHARE


2013 2012

Basic EPS $2.16 $4.58

Diluted EPS $2.15 $4.55

EPS is computed as follows:

Number of

Shares

Amounts (Denominator)

(Numerator) (In Thousands) EPS (NT$)


Basic EPS

Income for the year attributable to common

shareholders

$ 289,204 134,011 $2.16

Effect of dilutive potential common stock - 791

Diluted EPS


shareholders (including effect of dilutive

potential common stock)

$ 289,204 134,802 $2.15

(Continued)

- 73 -

Number of

Shares

Amounts (Denominator)

(Numerator) (In Thousands) EPS (NT$)


Basic EPS


shareholders

$ 613,385 134,011 $4.58

Effect of dilutive potential common stock - 922

Diluted EPS


shareholders (including effect of dilutive

potential common stock)

$ 613,385 134,933 $4.55

(Concluded)

If the Company may settle the bonus to employees by cash or shares, the Company should presume that the

entire amount of the bonus will be settled in shares and the resulting potential shares should be included in

the weighted average number of shares outstanding in the calculation of consolidated diluted EPS, if the

shares have a dilutive effect. The number of shares is estimated by dividing the entire amount of the

bonus by the closing price of the shares at the balance sheet date. The dilutive effect of the potential

shares should be considered until the shares of employee bonus are resolved in the shareholders’ meeting in

the following year.

21. ADDITIONAL INFORMATION OF EXPENSES BY NATURE

Net income included the following items:


2013 2012

a. Depreciation of property, plant and equipment

Recognized in operating costs $ 4,005 $ 3,383

Recognized in operating expenses 67,135 76,801

Recognized in other income – depreciation of rental assets 4 4

$ 71,144 $ 80,188

b. Amortization of intangible assets

Recognized in operating costs $ 309 $ 1,921

Recognized in sales and marketing expenses 838 996

Recognized in general and administrative expenses 14,489 12,968

Recognized in research and development expenses 138,301 137,508

$ 153,937 $ 153,393

c. Research and development costs expensed as occurred $ 827,450 $ 870,368

- 74 -


2013 2012

d. Employee benefits expenses

Post-employment benefits (Note 12)

Defined contribution plans $ 29,752 $ 28,961

Defined benefit plans 823 710

30,575 29,671

Other employee benefits 915,766 966,224

$ 946,341 $ 995,895

Employee benefits expense summarized by function

Recognized in operating costs $ 117,807 $ 135,325

Recognized in operating expenses 828,534 860,570

$ 946,341 $ 995,895

22. CAPITAL MANAGEMENT

The Company manages its capital to ensure that entities in the Company are able to operate sustainability

while maximizing the return to stakeholders through the optimization of the debt and equity balance. The

Company engages in the semiconductor design services, which is closely tied with customer demand.

Business is influenced by the cyclical nature of the semiconductor industry but not significantly. In

consideration of the industry dynamics, the Company manages its capital in a manner to ensure that it has

sufficient and necessary financial resources to fund its working capital needs, capital asset purchases,

research and development activities, dividend payments, debt service requirements and other business

requirements associated with its existing operations over the next 12 months. Through capital

management, the Company is capable of coping with changes in the industry, striving for improvement, and

ultimately creating shareholder value.

23. FINANCIAL INSTRUMENTS

a. Categories of financial instruments

December 31,

2013

December 31,

2012

January 1,

2012

Financial assets

Loans and receivables

Cash and cash equivalents $ 2,136,080 $ 2,384,588 $ 1,706,126

Notes and accounts receivable, net

(including related parties)

787,583 1,064,321 1,367,608

Other financial assets 2,483 941 531

Refundable deposits 1,353 701 1,468

Pledged time deposits 20,000 20,000 20,000

$ 2,947,499 $ 3,470,551 $ 3,095,733

(Continued)

- 75 -

December 31,

2013

December 31,

2012

January 1,

2012

Financial liabilities

Measured at Amortized cost

Accounts payable (including related

parties) $ 349,831 $ 714,248 $ 750,508

Payables to contactors and equipment

suppliers 4,909 15,450 14,726

Accrued expenses and other current

liabilities 93,195 107,865 148,098

Other long-term payables 154,075 62,662 123,183

Guarantee deposits 17,646 2,904 3,027

$ 619,656 $ 903,129 $ 1,039,542

(Concluded)

b. Financial risk management objectives and policies

The Company’s objectives of financial risk management are to manage its exposure to market risk,

credit risk and liquidity risk related to the operating activities. To reduce the related financial risks,

the Company engages in identifying, assessing and avoiding the market uncertainties with the objective

to reduce the potentially adverse effects the market uncertainties may have on its financial performance.

The plans for material treasury activities are reviewed by Audit Committees and Board of Directors in

accordance with procedures required by relevant regulations and internal controls. During the

implementation of such plans, the treasury function must comply with certain treasury procedures that

provide guiding principles for overall financial risk management and segregation of duties.

c. Market risk

Foreign currency risk

The Company’s operating activities are mainly denominated in foreign currency and exposed to foreign

exchange risk. To protect the volatility of future cash flows arising from changes in foreign exchange

rates, the Company maintains a balance of net foreign currency assets and liabilities in hedge.

The Company’s sensitivity analysis to foreign currency risk mainly focuses on the foreign currency

monetary items at the end of the reporting period. Assuming an unfavorable 10% movement in the

levels of foreign exchanges against the New Taiwan dollar, the net income for the years ended

December 31, 2013 and 2012 would have decreased by NT$58,714 thousand and NT$53,261 thousand,

respectively.

d. Credit risk management

Credit risk refers to the risk that a counter party will default on its contractual obligations resulting in

financial loss to the Company. The Company is exposed to credit risk from operating activities,

primarily trade receivables, and from investing activities of deposits with banks. Credit risk is

managed separately for business related and financial related exposures. As of the balance sheet date,

the Company’s maximum credit risk exposure is mainly from the carrying amount of financial assets

recognized in the consolidated balance sheet.

- 76 -

Business related credit risk

The Company has considerable trade receivables outstanding with its customers worldwide. A

substantial majority of the Company’s outstanding trade receivables are not covered by collateral or

credit insurance. While the Company has procedures to monitor and limit exposure to credit risk on

trade receivables, there can be no assurance such procedures will effectively limit its credit risk and

avoid losses.

As of December 31, 2013 and 2012, and January 1, 2012, the Company’s ten largest customers

accounted for 75%, 79% and 88% of accounts receivable, respectively. The Company believes the

concentration of credit risk is insignificant for the remaining accounts receivable.

Financial credit risk

The Company monitors and reviews the transaction limit applied to counter parties and adjusts the

concentration limit according to market conditions and the credit standing of the counter parties

regularly. The Company mitigates its exposure by selecting financial institution with well credit.

e. Liquidity risk management

The objective of liquidity risk management is to ensure the Company has sufficient liquidity to fund its

business requirements. The Company manages its liquidity risk by maintaining adequate cash and

banking facilities.

As of December 31, 2013 and 2012, and January 1, 2012, the unused financing facilities of the

Company amounted to NT$1,599,793 thousand, NT$1,298,779 thousand and NT$1,100,000 thousand,

respectively.

The table below summarizes the maturity profile of the Company’s financial liabilities based on

contractual undiscounted payments.

Non-derivative financial liabilities

Less Than

1 Year 2-3 Years 4+ Years

Total

December 31, 2013


parties) $ 349,831 $ - $ - $ 349,831

Payables to contactors and

equipment suppliers 4,909 - - 4,909


liabilities 93,195 - - 93,195

Other long-term payables 85,668 68,407 - 154,075

Guarantee deposits - 14,666 2,980 17,646

$ 533,603 $ 83,073 $ 2,980 $ 619,656

- 77 -

Non-derivative financial liabilities

Less Than

1 Year 2-3 Years 4+ Years

Total

December 31, 2012


parties) $ 714,248 $ - $ - $ 714,248




liabilities 107,865 - - 107,865


Guarantee deposits - - 2,904 2,904

$ 883,244 $ 16,981 $ 2,904 $ 903,129

January 1, 2012


parties) $ 750,508 $ - $ - $ 750,508




liabilities 148,098 - - 148,098


Guarantee deposits - - 3,027 3,027

$1,006,643 $ 29,872 $ 3,027 $1,039,542

f. Fair value of financial instruments

The carrying amounts of the Company’s financial assets and financial liabilities measured at amortized

cost at the end of financial reporting period recognized in the consolidated financial statements

approximate their fair values. Further, the Company did not have any financial assets and financial

liabilities measured at fair values at the end of the reporting period.

24. RELATED PARTY TRANSACTIONS

Intercompany balances and transactions between GUC and its subsidiaries, which are related parties of

GUC, have been eliminated upon consolidation; therefore those items are not disclosed in this note. The

following is a summary of transactions between the Company and other related parties:

a. Operating transactions

Operating revenue

from Sale of Goods Purchases

Years Ended December 31 Years Ended December 31

2013 2012 2013 2012

Investor that have significant

influence over the company $ 21,135 $ 53,355 $ 3,126,049 $ 3,856,583

Other related parties 299 90 12,348 42,759

$ 21,434 $ 53,445 $ 3,138,397 $ 3,899,342

- 78 -

Manufacturing Expenses Operating Expenses

Years Ended December 31 Years Ended December 31

2013 2012 2013 2012

Investor that have significant

influence over the company $ 363,939 $ 690,471 $ 1,070 $ 1,555

Other related parties 147,290 32 - -

$ 511,229 $ 690,503 $ 1,070 $ 1,555

The following balances were outstanding at the end of reporting period:

Receivables from Related Parties

December 31,

2013

December 31,

2012

January 1,

2012

Investor that have significant influence over

the company

$ -

$ 26,528 $ -

Other Current Assets

December 31,

2013

December 31,

2012

January 1,

2012


the company $ - $ - $ 96

Payables to Related Parties

December 31,

2013

December 31,

2012

January 1,

2012


the company $ 157,448 $ 273,256 $ 153,445

Other related parties 17,147 103 3,739

$ 174,595 $ 273,359 $ 157,184

The terms of sales to related parties were not significantly different from those of sales to third parties.

For other related party transactions, the terms of transactions were determined in accordance with

mutual agreement because there were no comparable terms for third-party transactions. The payment

term granted to related parties is due 30 days from the invoice date or 30 days from the end of the

month of when the invoice is issued, while the payment term granted to third parties is due 30 days

from the invoice date or 75 days from the end of the month of when the invoice is issued.

b. Compensation of key management personnel:

The compensation to directors and other key management personnel were as follows:


2013 2012

Short-term employee benefits $ 43,905 $ 50,179

Post-employment benefits 559 585

$ 44,464 $ 50,764

- 79 -

The compensation to directors and other key management personnel were determined by the

Compensation Committee of GUC in accordance with the individual performance and the market

trends.

25. PLEDGED OR MORTGAGED ASSETS

As of December 31, 2013 and 2012, and January 1, 2012, GUC provided pledged time deposits of

NT$20,000 thousand as collateral for customs clearance.

26. OPERATING LEASE ARRANGEMENTS

GUC leases a parcel of land from the Science Park Administration (SPA), and the operating lease

agreement will expire in December 2021. The lease agreement can be renewed upon expiration, and the

SPA can adjust annual rental amounts by lease agreement.

GUC leases office premises located in Taipei, and the lease agreement will expire in March 2017. The

lease agreement can be renewed upon expiration and rental is payable monthly.

GUC-NA leases office premises located in the United States, and the lease agreement will expire in January

2015. The rental is payable monthly. The lease agreement can be renewed and the rental rate can be

adjusted upon expiration.

The Company’s expenses for lease payments were as follows:


2013 2012

Minimum lease payments $ 15,998 $ 10,373

Future minimum lease payments under the above non-cancellable operating leases are as follows:

December 31,

2013

December 31,

2012

January 1,

2012

Not later than 1 year $ 16,341 $ 15,745 $ 10,473

Later than 1 year and not later than 5 years 20,565 34,426 26,887

Later than 5 years 6,344 8,348 10,435

$ 43,250 $ 58,519 $ 47,795

27. SIGNIFICANT CONTINGENT LIABILITIES AND UNRECOGNIZED COMMITMENTS

GUC has entered into license agreements with several companies that own intellectual property rights.

According to the agreements, GUC shall pay specific amounts of money to obtain licenses of their

intellectual property rights or shall pay royalties at specific percentages of sales volume of identified

products. Under the agreements, GUC shall pay at least US$1,600 thousand to the counter party in the

period from September 2013 to September 2016.

- 80 -

28. EXCHANGE RATE INFORMATION OF FOREIGN-CURRENCY FINANCIAL ASSETS AND

LIABILITIES

The significant foreign-currency financial assets and liabilities were as follows:

(Unit: Foreign Currency in Thousands)

Foreign

Currencies

(In Thousands)

Exchange Rate

(Note)

Carrying

Amount

December 31, 2013

Monetary items of financial assets

USD $ 36,976 29.805 $ 1,102,069

JPY 27,204 0.2839 7,723

Monetary items of financial liabilities

USD 17,512 29.805 521,931

JPY 19,507 0.2839 5,538

December 31, 2012


USD 44,665 29.04 1,297,084

JPY 18,095 0.3364 6,087

KRW 122,336 0.02733 3,343


USD 26,581 29.04 771,905

JPY 8,994 0.3364 3,026

January 1, 2012


USD 48,101 30.275 1,456,257

JPY 43,903 0.3906 17,148

RMB 1,191 4.8049 5,724


USD 26,462 30.275 801,128

JPY 12,596 0.3906 4,920

RMB 767 4.8049 3,688

Note: Exchange rate represents the number of N.T. dollars for which one foreign currency could be

exchanged.

29. OPERATING SEGMENT INFORMATION

The Company operates in individual industry on the basis of how the Company’s chief operating decision

maker regularly reviews information in order to allocate resources and assess performance. The basis for

the measurement of the operating segment profit (loss), assets and liabilities is the same as that for the

preparation of financial statements. Please refer to the consolidated financial statements for the related

operating segment information.

- 81 -

a. Geographic information

Operating Revenue from

External Customer Non-current Assets

Years Ended December 31 December 31,

2013

December 31,

2012

January 1,

2012 2013 2012

United States $ 1,685,261 $ 450,963 $ 2,366 $ 1,771 $ 2,205

Japan 926,245 1,163,405 617 930 943

China 824,588 1,356,069 2,865 1,135 1,998

Taiwan 772,184 2,876,562 567,727 538,114 627,013

Cayman 515,843 598,481 - - -

Korea 498,275 1,307,133 - - -

England 349,329 407,772 - - -

India 266,884 447,076 - - -

Others 338,132 406,299 21 33 46

$ 6,176,741 $ 9,013,760 $ 573,596 $ 541,983 $ 632,205

The geographic information is presented by billed regions. Non-current assets include property, plant

and equipment and intangible assets, but exclude financial instrument and deferred income tax assets.

b. Production information


Production 2013 2012

ASIC and wafer product $ 4,577,406 $ 7,055,314

NRE 1,486,868 1,870,378

Multiple-Project Wafer 46,696 26,608

Others 65,771 61,460

$ 6,176,741 $ 9,013,760

c. Major customers representing at least 10% of operating revenue


2013 2012

Amount % Amount %

Customer AM $ 1,364,295 22 (Note) -

Customer M (Note) - $ 3,168,496 35

Note: The customer did not exceed 10% of operating revenue in the current year.

30. FIRST-TIME ADOPTION OF IFRSs

a. Basis of preparation for financial information under IFRSs

The Company prepares the consolidated financial statements for the years ended December 31, 2013

under IFRSs. As the basis of the preparation, the Company not only follows the significant accounting

policies stated in Note 4 but also applies to the regulations under IFRS 1.

- 82 -

b. Exemptions from IFRS 1

IFRS 1 establishes the procedures for the Company’s first consolidated financial statements prepared in

accordance with IFRSs. According to IFRS 1, the Company is required to determine the accounting

policies under IFRSs and retrospectively apply those accounting policies in its opening balance sheet at

the date of transition to IFRSs; except for optional exemptions and mandatory exceptions to such

retrospective application provided under IFRS 1. The main optional exemptions the Company

adopted are summarized as follows:

1) Deemed cost. The Company did not measure the cost of property, plant and equipment or

intangible assets at their fair value as of January 1, 2012. The cost of property, plant and

equipment and intangible assets has been calculated according to the IFRS Cost Model.

2) Employee benefits. The Company elected to recognize all cumulative actuarial gains and losses in

retained earnings as of January 1, 2012. In addition, the Company elected to apply the exemption

disclosure requirement provided by IFRS 1, in which the amounts of present value of defined

benefit obligations, the fair value of plan assets, the surplus or deficit in the plan and the experience

adjustments are determined for each accounting period prospectively from the transition date.

3) Share-based payment. The Company elected to take the optional exemption from applying IFRS 2

“Share-based Payment” retrospectively for the shared-based payment transactions granted and

vested before January 1, 2012.

c. Effect of transition to IFRSs

After transition to IFRSs, the effect on the Company’s consolidated balance sheets as of December 31,

2012 and January 1, 2012 (the transition date) as well as the consolidated statements of comprehensive

income and for the year ended December 31, 2012, is stated as follows:

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

Effect of Transition to IFRSs

Recognition

and

R.O.C. GAAP Measurement Presentation IFRSs

Item Amount Difference Difference Amount Item Note

Current assets

Cash $ 2,384,588 $ - $ - $ 2,384,588 Cash

Notes and accounts

receivable

1,057,198 - - 1,057,198 Notes and accounts

receivable

Receivables from related

parties

26,528 - - 26,528 Receivables from related

parties

Allowance for doubtful

receivables

(19,405 ) - - (19,405 ) Allowance for doubtful

receivables

Other financial assets 941 - - 941 Other financial assets

Inventories 556,573 - - 556,573 Inventories

Deferred income tax

assets

49,357 - (49,357 ) - - 1)

Prepaid expenses and

other current assets

267,543

-

-

267,543

Other current assets

Total current assets 4,323,323 - (49,357 ) 4,273,966 Total current assets

Net property, plant and

equipment

368,832

-

172

369,004

Property, plant and

equipment

2)

Other assets

Deferred pension cost 743 - (743 ) - - 3)

Assets leased to others,

net

172 - (172 ) - - 2)

Refundable deposits 9,390 - - 9,390 Refundable deposits

Deferred charges, net 172,979 - - 172,979 Intangible assets

Deferred income tax

assets

853 - 56,174 57,027 Deferred income tax assets 1)

Pledged time deposits 20,000 - - 20,000 Pledged time deposits

Total other assets 204,137 - 55,259 259,396

Total $ 4,896,292 $ - $ 6,074 $ 4,902,366 Total

(Continued)

- 83 -


Recognition

and



Current liabilities

Accounts payable $ 440,889 $ - $ - $ 440,889 Accounts payable

Payables to related parties 273,359 - - 273,359 Payables to related parties

Income tax payable 83,948 - - 83,948 Current tax liabilities

Accrued profit sharing to

employees and bonus to

directors

73,795 - - 73,795 Accrued profit sharing to


directors

Payables to contractors

and equipment

suppliers

15,450 - - 15,450 Payables on machinery and

equipment

Customer advances 217,481 - - 217,481 Customer advances

Accrued expenses and

other current liabilities

243,968

-

(254 )

243,714

Accrued expenses and other

current liabilities

1)

Total current liabilities 1,348,890 - (254 ) 1,348,636 Total current liabilities

Other long-term payables 16,981 - - 16,981 Other long-term payables

Other liabilities

Accrued pension cost 5,558 25,919 (3,276 ) 28,201 Accrued pension liabilities 3)

Guarantee deposits 2,904 - - 2,904 Guarantee deposits

Deferred income tax

liabilities

-

-

7,071

7,071

Deferred income tax

liabilities

1)

Total other liabilities 8,462 25,919 3,795 38,176

Total liabilities 1,374,333 25,919 3,541 1,403,793 Total liabilities

Capital stock 1,340,119 - - 1,340,119 Share Capital

Capital surplus 569,623 - - 569,623 Capital surplus

Retained earnings 1,622,554 (25,919 ) - 1,596,635 Retained earnings 3)

Others

Cumulative translation

adjustments

(7,804 ) - - (7,804 ) Foreign currency translation

reserve

Net loss not recognized as

pension cost

(2,533 )

-

2,533

-

- 3)

Total shareholders’ equity 3,521,959 (25,919 ) 2,533 3,498,573 Total equity

Total $ 4,896,292 $ - $ 6,074 $ 4,902,366 Total

(Concluded)

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


Recognition

and



Current assets

Cash $ 1,706,126 $ - $ - $ 1,706,126 Cash

Notes and accounts

receivable

1,367,608 - - 1,367,608 Notes and accounts

receivable

Other financial assets 531 - - 531 Other financial assets

Inventories 822,792 - - 822,792 Inventories

Deferred income tax

assets

24,338 - (24,338 ) - - 1)

Prepaid expenses and

other current assets

268,760

-

-

268,760

Other current assets

Total current assets 4,190,155 - (24,338 ) 4,165,817 Total current assets

Net property, plant and

equipment

367,033

-

176

367,209

Property, plant and

equipment

2)

Other assets

Deferred pension cost 903 - (903 ) - - 3)

Assets leased to others,

net

176 - (176 ) - - 2)

Refundable deposits 11,236 - - 11,236 Refundable deposits

Deferred charges, net 264,996 - - 264,996 Intangible assets

Deferred income tax

assets

30,955 - 30,552 61,507 Deferred income tax assets 1)

Pledged time deposits 20,000 - - 20,000 Pledged time deposits

Total other assets 328,266 - 29,473 357,739

Total $ 4,885,454 $ - $ 5,311 $ 4,890,765 Total

(Continued)

- 84 -


Recognition

and



Current liabilities

Accounts payable $ 593,324 $ - $ - $ 593,324 Accounts payable

Payables to related parties 157,184 - - 157,184 Payables to related parties

Income tax payable 37,673 - - 37,673 Current tax liabilities



directors

64,367 - - 64,367



directors

Payables to contractors

and equipment

suppliers

14,726 - - 14,726 Payables on machinery and

equipment

Customer advances 332,052 - - 332,052 Customer advances

Accrued expenses and

other current liabilities

328,334

-

-

328,334

Accrued expenses and other

current liabilities

Total current liabilities 1,527,660 - - 1,527,660 Total current liabilities

Other long-term payables 29,872 - - 29,872 Other long-term payables

Other liabilities

Accrued pension cost 3,325 21,218 (903 ) 23,640 Accrued pension liabilities 3)

Guarantee deposits 3,027 - - 3,027 Guarantee deposits

Deferred income tax

liabilities

-

-

6,214

6,214

Deferred income tax

liabilities

1)

Total other liabilities 6,352 21,218 5,311 32,881

Total liabilities 1,563,884 21,218 5,311 1,590,413 Total liabilities

Capital stock 1,340,119 - - 1,340,119 Share Capital

Capital surplus 569,623 - - 569,623 Capital surplus

Retained earnings 1,412,221 (21,218 ) - 1,391,003 Retained earnings 3)

Others

Cumulative translation

adjustments

(393 )

-

-

(393 )

Foreign currency translation

reserve

Total shareholders’ equity 3,321,570 (21,218 ) - 3,300,352 Total equity

Total $ 4,885,454 $ - $ 5,311 $ 4,890,765 Total

(Concluded)

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

2012


Recognition

and



Net sales $ 9,013,760 $ - $ - $ 9,013,760 Operating revenue

Cost of sales 6,942,459 - - 6,942,459 Operating costs

Gross profit 2,071,301 - - 2,071,301 Gross profit

Operating expenses

Sales and marketing 265,832 - - 265,832 Sales and marketing

General and

administrative

226,365 (1,016 ) - 225,349 General and administrative 3)

Research and

development

870,368

-

-

870,368

Research and development

Total operating expenses 1,362,565 (1,016 ) - 1,361,549

Income from operations 708,736 1,016 - 709,752 Income from operations

Non-operating income and

gains

Interest income 11,243 - (11,243 ) - - 4)

Gain on disposal of

financial instruments

3,379 - (3,379 ) - - 4)

Gain on disposal of

property, plant and

equipment

433 - (433 ) - - 4)

Others 2,756 - (2,756 ) - - 4)

- - - 13,994 13,994 Other income 4)

- - - (17,351 ) (17,351 ) Other gains and losses 4)

Total 17,811 - (21,168 ) (3,357 )

Non-operating expenses and

losses

Foreign exchange loss, net 17,600 - (17,600 ) - - 4)

Interest expense 234 - (234 ) - - 4)

Loss on disposal of

property, plant and

equipment

70 - (70 ) - - 4)

Others 3,498 - (3,498 ) - - 4)

- - - 234 234 Finance cost 4)

Total 21,402 - (21,168 ) 234

(Continued)

- 85 -


Recognition

and



Income before income tax $ 705,145 $ 1,016 $ - $ 706,161 Income before income tax

Income tax expense 92,776 - - 92,776 Income tax expense

Consolidated net income $ 612,369 $ 1,016 $ - 613,385 Net income

(7,411 ) Exchange differences on

translation of foreign

operations

(5,717 )

Actuarial losses on defined

benefit plans

3)

$ 600,257 Total comprehensive income

for the year

(Concluded)

4) Reconciliation of equity

December 31,

2012

January 1,

2012

Note

Equity under R.O.C. GAAP $ 3,521,959 $ 3,321,570

Adjustment item:

Adjustment of defined benefit plans (23,386) (21,218) 3)

Equity under IFRSs $ 3,498,573 $ 3,300,352

5) Significant reconciliation differences in consolidated statements of cash flows for the year ended

December 31, 2012

The Company prepared the statement of cash flows using the indirect method under accounting

principles generally accepted in the Republic of China (R.O.C. GAAP), in which the interest

received is not required to be disclosed separately; instead, the interest received and the interest paid

are included within the operating activities in the statement of cash flows. However, according to

IAS 7 “Statement of Cash Flows” for the year ended December 31, 2012, the interest received of

NT$10,991 thousand should be disclosed separately in the investing activities; and the interest paid

of NT$234 thousand should be disclosed in the financing activities and the loss on foreign

exchange, net of investing and financing activities of NT$1,305 thousand should be disclosed in the

adjustment of income before income tax based on their nature, respectively.

Except for the above differences, there are no other significant differences between R.O.C. GAAP

and IFRSs in the consolidated statement of cash flows.

d. Notes to the reconciliation of the significant differences:

1) Classifications of deferred income tax asset/liability and valuation allowance

Under R.O.C. GAAP, a deferred tax asset and liability is classified as current or non-current in

accordance with the classification of its related asset or liability. Deferred income tax assets and

deferred income tax liabilities fall into the same taxable entity; thus, they should be offset on the

balance sheet. However, if a deferred income tax asset or liability does not relate to an asset or

liability in the financial statements, it is classified as either current or non-current based on the

expected length of time before it is realized or settled. Under IFRSs, a deferred tax asset and

liability is classified as non-current asset or liability and consider the right of offsetting deferred

income tax liabilities and deferred income tax assets based on taxation by law before reclassifying.

- 86 -

In addition, under R.O.C. GAAP, valuation allowances are provided to the extent, if any, that it is

more likely than not that deferred income tax assets will not be realized. In accordance with IAS

12 “Income Taxes,” deferred tax assets are only recognized to the extent that it is probable that

there will be sufficient taxable profits and the valuation allowance account is no longer used.

As of December 31, 2012 and January 1, 2012, the amounts reclassified from deferred income tax

assets to non-current assets were NT$56,174 thousand and NT$30,552 thousand, respectively;

deferred income tax liabilities to non-current liabilities were NT$7,071 thousand and NT$6,214

thousand, respectively.

2) Classification of leased assets

Under R.O.C. GAAP, leased assets are classified under other assets. Under IFRSs, leased assets

are classified as property, plant and equipment according to their nature. Leased assets are mainly

operating leasing, leasing part of the office, which are not considered as investment properties since

they cannot be sold separately and comprise only an insignificant portion of the plant.

As of December 31, 2012 and January 1, 2012, the amounts reclassified from leased assets to

property, plant and equipment were NT$172 thousand and NT$176 thousand, respectively.

3) Employee benefits

The Company had previously applied an actuarial valuation on its defined benefit obligation and

recognized the related pension cost and retirement benefit obligation in conformity with R.O.C.

GAAP. Under IFRSs, the Company should carry out actuarial valuation on defined benefit

obligation in accordance with IAS 19 “Employee Benefits.”

In addition, under R.O.C. GAAP, it is not allowed to recognize actuarial gains and losses on defined

benefit plans directly to equity; instead, actuarial gains and losses should be accounted for under the

corridor approach which resulted in the deferral of gains and losses. When using the corridor

approach, actuarial gains and losses should be amortized over the expected average remaining

working lives of the participating employees.

Under IAS 19 “Employee Benefits,” the Company elects to recognize actuarial gains and losses

immediately in full in the period in which they occur, as other comprehensive income, which is

classified under retained earnings. Subsequent reclassification to earnings is not permitted.

In addition, under R.O.C. GAAP, the minimum pension liabilities should be recognized in the

balance sheet. If the accrued pension liability is less than the minimum amount, the difference

should be recognized as an additional liability. Under IFRSs, there is no aforementioned

requirement of minimum pension liability.

As of December 31, 2012 and January 1, 2012, accrued pension liabilities of the Company were

adjusted for an increase of NT$22,643 thousand and NT$20,315 thousand, respectively; deferred

pension cost was adjusted a decrease for of NT$743 thousand and NT$903 thousand, respectively.

As of December 31, 2012, net loss not recognized as pension cost was adjusted for a decrease of

NT$2,533 thousand. For the year ended December 31, 2012, pension cost was adjusted for a

decrease of NT$1,016 thousand; actuarial losses on defined benefit plans related to components of

other comprehensive income were recognized in the amount of NT$5,717 thousand.

- 87 -

4) Reclassification of line items in the consolidated statement of comprehensive income

Under IFRSs, income from operations in the consolidated statement of comprehensive income is

prepared based on the Guidelines Governing the Preparation of Financial Reports by Securities

Issuers. In addition, the foreign exchange loss, net gain on disposal of financial assets, and

disposal of property, plant and equipment are reclassified as other gains and losses; interest revenue,

rental revenue and depreciation of rental assets are reclassified under other income; interest

expenses are reclassified under finance cost.

31. ADDITIONAL DISCLOSURES

Following are the additional disclosures required by the SFB for GUC and its investees in which all

significant intercompany balances and transactions are eliminated upon consolidation:

a. Significant transactions

1) Financings provided: None;

2) Endorsements/guarantees provided: None;

3) Marketable securities held (excluding investments in subsidiaries, associates and jointly controlled

entities): None;

4) Marketable securities acquired and disposed of at costs or prices of at least NT$300 million or 20%

of the paid-in capital: Please see Table 1 attached;

5) Acquisition of individual real estate at costs of at least NT$300 million or 20% of the paid-in

capital: None;

6) Disposal of individual real estate at prices of at least NT$300 million or 20% of the paid-in capital:

None;

7) Total purchases from or sales to related parties of at least NT$100 million or 20% of the paid-in

capital: Please see Table 2 attached;

8) Receivables from related parties amounting to at least NT$100 million or 20% of the paid-in

capital: None;

9) Information about the derivative instruments transaction: None;

10) Others: Intercompany relationships and significant intercompany transactions: Please see Table

3 attached;

b. Related information of reinvestment

1) Names, locations, and related information of investees over which the Company exercises

significant influence (Not included the investee in Mainland China): Please see Table 4 attached;

2) Financings provided: None;

3) Endorsement/guarantee provided: None;

4) Marketable securities held (excluding investments in subsidiaries, associates and jointly controlled

entities): None;

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5) Marketable securities acquired and disposed of at costs or prices of at least NT$300 million or 20%

of the paid-in capital: None;

6) Acquisition of individual real estate at costs of at least NT$300 million or 20% of the paid-in

capital: None;

7) Disposal of individual real estate at prices of at least NT$300 million or 20% of the paid-in capital:

None;

8) Total purchases from or sales to related parties of at least NT$100 million or 20% of the paid-in

capital: None;

9) Receivables from related parties amounting to at least NT$100 million or 20% of the paid-in

capital: None;

10) Information about the derivative instruments transaction: None;

c. Information on investment in Mainland China

1) The name of the investee in Mainland China, the main businesses and products, its issued capital,

method of investment, information on inflow or outflow of capital, percentage of ownership, net

income (losses) of the investee, investment income (losses), ending balance, amount received as

dividends from the investee, and the limitation on investee: Please see Table 5 attached.

2) Significant direct or indirect transactions with the investee, its prices and terms of payment,

unrealized gain or loss, and other related information which is helpful to understand the impact of

investment in Mainland China on financial reports: Please see Table 3 attached.

- 89 -

TABLE 1


MARKETABLE SECURITIES ACQUIRED AND DISPOSED OF AT COSTS OR PRICES OF AT LEAST NT$300 MILLION OR 20% OF THE PAID-IN CAPITAL

FOR THE YEAR ENDED DECEMBER 31, 2013

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

Holding

Company

Marketable Securities Type

and Name Financial Statement Account

Counter

party

Nature of

Relationship

Beginning Balance Acquisition Disposal Ending Balance

Shares/Units

(In Thousands) Amount

Shares/Units


Shares/Units

(In Thousands) Amount Carrying Value

Gains (Losses)

on Disposal

Shares/Units


GUC Eastspring Investments Well

Pool Money Market Fund

Available-for-sale financial

assets

- - - $ - 41,554,822 $ 550,000 41,554,822 $ 550,657 $ 550,000 $ 657 - $ -

Mega Diamond Money Market

Fund


assets

- - - - 41,042,179 500,000 41,042,179 500,655 500,000 655 - -

Jih Sun Money Market Fund Available-for-sale financial

assets

- - - - 31,254,541 450,000 31,254,541 450,597 450,000 597 - -

Yuanta Wan Tai Money Market

Fund


assets

- - - - 30,525,501 450,000 30,525,501 450,423 450,000 423 - -

Fuh Hwa Money Market Fund Available-for-sale financial

assets

- - - - 29,458,161 415,000 29,458,161 415,339 415,000 339 - -

Taishin 1699 Money Market

Fund


assets

- - - - 22,813,488 300,000 22,813,488 300,296 300,000 296 - -

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TABLE 2


TOTAL PURCHASE FROM OR SALE TO RELATED PARTIES OF AT LEAST NT$100 MILLION OR 20% OF THE PAID-IN CAPITAL



Company Name Related Party Nature of Relationship

Transaction Details Abnormal Transaction Notes/Accounts

Payable or Receivable Note

Purchases/

Sales Amount

% to

Total Payment Terms Unit Price Payment Terms

Ending

Balance

% to

Total

GUC TSMC TSMC is equity method investor of GUC Purchases $ 1,585,961 50% 30 days after monthly closing Note 24 Note 24 $ (85,484) (24%)

TSMC-NA TSMC-NA is a subsidiary of TSMC Purchases 1,540,088 49% 30 days after invoice date and 30

days after monthly closing

Note 24 Note 24 (71,964) (21%)

- 91 -

TABLE 3


INTERCOMPANY RELATIONSHIPS AND SIGNIFICANT INTERCOMPANY TRANSACTIONS



No. Company Name Counter Party Nature of Relationship

(Note 1)

Intercompany Transactions

Financial Statement Account Amount Terms

(Note 2)

Percentage to

Consolidated Operating

Revenue or Total Assets

0 GUC GUC-NA 1 Manufacturing overhead $ 43,424 - 1%

Operating expenses 128,670 - 2%

Accrued expenses 14,064 - -

GUC-Japan 1 Operating expenses 42,788 - 1%


GUC-Europe 1 Operating expenses 2,021 - -

Accrued expenses 246 - -

1 GUC BVI GUC-Shanghai 3 Operating expenses 51,950 - 1%


Note 1: No. 1 represents the transactions from parent company to subsidiary.

No. 3 represents the transactions between subsidiaries.

Note 2: The intercompany transactions, prices and terms are determined in accordance with mutual agreements and no other similar transactions could be compared with.

- 92 -

TABLE 4


NAMES, LOCATIONS, AND RELATED INFORMATION OF INVESTEES OVER WHICH THE COMPANY EXERCISES SIGNIFICANT INFLUENCE



Investor Company Investee

Company Location Main Businesses and Products

Original Investment Amount Balance as of December 31, 2013

Net Income

(Losses) of the

Investee

Investment

Income

(Losses)

Note

December 31,

2013

(Foreign

Currencies in

Thousands)

December 31,

2012

(Foreign

Currencies in

Thousands)

Shares

Percentage of

Ownership

(%)

Carrying

Value

GUC GUC-NA U.S.A. Products consulting, design and technical support

service

$ 40,268

( US$ 1,264)

$ 40,268

( US$ 1,264)

800,000 100 $ 77,386 $ 4,759 $ 4,759

GUC-BVI British Virgin Islands Investing activities 152,603

( US$ 5,050)

92,883

( US$ 3,050)

5,050,000 100 62,575 (51,383) (51,383)

GUC-Japan Japan Products consulting service 8,783

( YEN 30,000)

8,783

( YEN 30,000)

600 100 13,404 722 722

GUC-Europe Netherlands Products consulting service 4,585

( EUR 100)

4,585

( EUR 100)

- 100 2,641 537 537

- 93 -

TABLE 5


INFORMATION OF INVESTMENT IN MAINLAND CHINA



Investee Company Main Businesses and

Products

Total Amount

of Paid-in

Capital

(US$ in

Thousands)

Method of

Investment

Accumulated

Outflow of

Investment

from Taiwan as

of January 1,

2013

(US$ in

Thousands)

Investment Flows Accumulated

Outflow of

Investment

from Taiwan as

of

December 31,

2013 (US$ in

Thousands)

Net Income

(Losses) of the

Investee

Percentage of

Ownership

Investment

Income (Losses)

Carrying Value

as of

December 31,

2013

Accumulated

Inward

Remittance of

Earnings as of

December 31,

2013

Outflow Inflow

GUC-Shanghai Products consulting

service

$ 31,165

(US$ 1,000)

(Note 1) $ 31,165

(US$ 1,000)

$ - $ - $ 31,165

(US$ 1,000)

$ 640 100% $ 640 $ 24,867 $ -

Accumulated Investment in Mainland China

as of December 31, 2013

(US$ in Thousands)

Investment Amounts Authorized by

Investment Commission, MOEA

(US$ in Thousands)

Upper Limit on Investment

(US$ in Thousands)

$ 31,165

(US$ 1,000)

$ 31,165

(US$ 1,000)

$ 2,032,335

(Note 2)

Note 1: The Company’s investee with a controlling financial interest; indirectly invested in GUC-Shanghai through GUC-BVI.

Note 2: Subject to 60% of net asset value of GUC according to the revised “Guidelines Governing the Approval of Investment or Technical Cooperation in Mainland China” issued by the Investment Commission.

I. Spokesperson and Acting Spokesperson Contact …...Lora Ho is Senior Vice President of Taiwan...

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