Vanguard International Semiconductor : Consolidated Financial Report - 2Q23

Vanguard International Semiconductor Corporation and Subsidiaries

Consolidated Financial Statements for the

Six Months Ended June 30, 2023 and 2022 and Independent Auditors' Review Report

INDEPENDENT AUDITORS' REVIEW REPORT

The Board of Directors and Shareholders

Vanguard International Semiconductor Corporation

Introduction

We have reviewed the accompanying consolidated balance sheets of Vanguard International Semiconductor Corporation and its subsidiaries (collectively, the "Group") as of June 30, 2023 and 2022, the related consolidated statements of comprehensive income for the three months ended June 30, 2023 and 2022 and for the six months ended June 30, 2023 and 2022, the consolidated statements of changes in equity and cash flows for the six months ended June 30, 2023 and 2022, and the related notes to the consolidated financial statements, including a summary of significant accounting policies (collectively referred to as the "consolidated financial statements"). Management is responsible for the preparation and fair presentation of the consolidated financial statements in accordance with the Regulations Governing the Preparation of Financial Reports by Securities Issuers, and International Accounting Standard 34 "Interim Financial Reporting" endorsed and issued into effect by the Financial Supervisory Commission of the Republic of China. Our responsibility is to express a conclusion on the consolidated financial statements based on our reviews.

Scope of Review

We conducted our reviews in accordance with the Standards on Review Engagements of the Republic of China 2410 " Review of Interim Financial Information Performed by the Independent Auditor of the Entity". A review of consolidated financial statements consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

Conclusion

Based on our reviews, nothing has come to our attention that caused us to believe that the accompanying consolidated financial statements do not present fairly, in all material respects, the consolidated financial position of the Group as of June 30, 2023 and 2022, and of its consolidated financial performance for the three months ended June 30, 2023 and 2022, and its consolidated financial performance and its consolidated cash flows for the six months ended June 30, 2023 and 2022 in accordance with the Regulations Governing the Preparation of Financial Reports by Securities Issuers, and International Accounting Standard 34 "Interim Financial Reporting" endorsed and issued into effect by the Financial Supervisory Commission of the Republic of China.

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The engagement partners on the reviews resulting in this independent auditors' review report are Tung-Hui Yeh and Yu-Feng Huang.

Deloitte & Touche

Taipei, Taiwan

Republic of China

July 31, 2023

Notice to Readers

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

For the convenience of readers, the independent auditors' review 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 independent auditors' review report and consolidated financial statements shall prevail.

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VANGUARD INTERNATIONAL SEMICONDUCTOR CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS (In Thousands of New Taiwan Dollars)

		June 30, 2023					December 31, 2022			June 30, 2022					June 30, 2023					December 31, 2022			June 30, 2022
ASSETS		Amount	%				Amount	%				Amount	%		LIABILITIES AND EQUITY		Amount	%				Amount	%				Amount	%
CURRENT ASSETS																		CURRENT LIABILITIES
Cash and cash equivalents (Notes 6 and 32)	$	24,556,796	24	$	28,667,875	29	$	35,161,034	34	Financial liabilities at fair value through profit or loss
Financial assets at fair value through profit or loss (Notes																		(Notes 7 and 32)	$	6,122	-	$	2,070	-	$	14,176	-
7 and 32)		-	-				901,040	1			604,389	1	Contract liabilities (Notes 25 and 33)		5,822,822		6			4,116,402	4			3,520,349	4
Financial assets at amortized cost (Notes 9, 10 and 32)		6,181,515		6			3,084,490	3			1,469,267	2	Notes and accounts payable (Note 32)		1,200,970		1			1,376,812	1			1,702,869	2
Hedging financial assets (Notes 11 and 32)		2,319,460	3			2,189,408	2			2,351,391	2	Accrued compensation of employees and remuneration of
Notes and accounts receivable, net (Notes 12, 25 and 32)		6,135,271		6			4,625,288	5			10,058,151	10	directors (Notes 26 and 32)		4,221,784		4			3,397,775	4			4,181,747	4
Receivables from related parties (Notes 25, 32 and 33)		249,381	-				336,705	-			260,156	-	Payables to contractors and equipment suppliers (Note 32)		1,302,496		1			2,221,296	2			3,190,045	3
Other receivables (Note 32)		684,278	1			403,883	-			391,951	-	Dividends payable (Notes 24 and 32)		7,375,420		7			-	-			7,375,420	7
Inventories (Note 13)		6,354,297		6			5,880,152	6			4,635,020	5	Other payables (Notes 20 and 32)		3,515,380		4			5,022,949	5			4,543,012	5
Prepayments		238,586	-				161,534	-			230,498	-	Other payables to related parties (Notes 32 and 33)		11,315	-			959	-			8,461	-
Other current assets (Note 19)		4,651	-				5,112	-			4,518	-	Current income tax liabilities (Notes 4 and 27)		1,087,500		1			2,818,351	3			2,448,845	2
																		Lease liabilities (Notes 17, 30 and 32)		224,073		-			219,137	-			221,973	-
Total current assets		46,724,235	46			46,255,487	46			55,166,375	54	Other current liabilities (Notes 21, 30 and 32)		3,165,545		3			1,917,727	2			1,284,423	1
NON-CURRENT ASSETS																		Total current liabilities		27,933,427		27			21,093,478	21			28,491,320	28
Financial assets at fair value through other comprehensive
income (Notes 8 and 32)		693,043	1			878,631	1			736,590	1	NON-CURRENT LIABILITIES
Financial assets at amortized cost (Notes 9, 10 and 32)		9,190,309		9			8,701,741	9			5,914,989	6	Contract liabilities (Note 25)		11,881,427		12			13,133,211	13			14,143,393	14
Investments accounted for using equity method (Note 15)		218,176	-				217,893	-			216,854	-	Bonds payable (Notes 22, 30 and 32)		11,988,905		12			11,987,369	12			11,985,813	12
Property, plant and equipment (Note 16)		38,547,731	38			38,504,205	38			35,351,924	35	Deferred income tax liabilities (Notes 4 and 27)		943,453		1			604,135	1			479,455	-
Right-of-use assets (Note 17)		2,915,459		3			3,002,982	3			3,016,201	3	Lease liabilities (Notes 17, 30 and 32)		2,278,055		2			2,341,724	2			2,359,316	2
Intangible assets (Note 18)		229,117	-				267,914	-			265,262	-	Net defined benefit liabilities (Notes 4 and 23)		342,921		-			372,898	-			500,880	1
Deferred income tax assets (Notes 4 and 27)		1,298,324		1			890,112	1			392,431	-	Guarantee deposits (Notes 30, 32 and 33)		5,156,569		5			6,000,939	6			6,543,101	6
Refundable deposits (Note 32)		4,195	-				4,923	-			3,643	-	Other non-current liabilities (Note 21)		57,305	-			55,661	-			50,824	-
Other non-current assets (Notes 19, 32 and 34)		2,128,954		2			2,216,031	2			1,398,377	1
																		Total non-current liabilities		32,648,635		32			34,495,937	34			36,062,782	35
Total non-current assets		55,225,308	54			54,684,432	54			47,296,271	46
																		Total liabilities		60,582,062		59			55,589,415	55			64,554,102	63
																		EQUITY (Notes 8, 11 and 24)
																		Share capital		16,389,823		16			16,389,823	16			16,389,823	16
																		Capital surplus		917,438		1			914,062	1			903,731	1
																		Retained earnings
																		Legal reserve		9,041,949		9			7,501,254	8			7,501,254	7
																		Special reserve		-		-			1,987,531	2			1,987,531	2
																		Unappropriated earnings		14,838,148		15			18,407,787	18			11,979,049	12
																		Total retained earnings		23,880,097		24			27,896,572	28			21,467,834	21
																		Other equity		180,123	-			150,047	-			(852,844)	(1)
																		Total equity		41,367,481		41			45,350,504	45			37,908,544	37
TOTAL ASSETS	$	101,949,543	100		$	100,939,919	100	$	102,462,646	100	TOTAL LIABILITIES AND EQUITY	$	101,949,543		100	$	100,939,919	100	$	102,462,646	100

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

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VANGUARD INTERNATIONAL SEMICONDUCTOR CORPORATION AND SUBSIDIARIES

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

		For the Three Months Ended June 30					For the Six Months Ended June 30
	2023			2022			2023			2022
		Amount	%				Amount	%				Amount	%				Amount	%
NET REVENUE (Notes 17,
25 and 33)	$ 9,854,345		100	$ 15,300,862	100	$ 18,041,234	100	$ 28,792,953	100
COST OF REVENUE (Notes
13, 26 and 33)		6,894,992		70	7,655,670		50	12,623,227	70	14,621,683	51
GROSS PROFIT		2,959,353		30	7,645,192		50	5,418,007	30	14,171,270	49
OPERATING EXPENSES
(Notes 26 and 33)
Marketing	105,830	1	198,518	1	192,408	1	339,841	1
General and administrative	511,882	5	788,678	5	956,375	5	1,522,770	5
Research and development	535,903	6	746,488	5	1,098,192	6	1,409,282	5
Total operating
expenses		1,153,615		12	1,733,684		11	2,246,975	12	3,271,893	11
OPERATING INCOME		1,805,738		18	5,911,508		39	3,171,032	18	10,899,377	38
NON-OPERATING INCOME
AND EXPENSES
Interest income (Note 26)	426,283	4	103,958	1	812,254	5	142,823	1
Dividend income (Notes 8
and 26)	28,873	-	32,385	-	28,873	-	32,385	-
Other income (Note 33)	3,097	-	31,183	-	4,667	-	60,799	-
Gain on disposal of
property, plant and
equipment	186	-	-	-	201	-	-	-
Net foreign exchange gain	20,085	-	29,155	-	48,846	-	51,249	-
(Loss) gain on financial
assets and liabilities at
fair value through profit
or loss (Note 26)	(21,829)	-	48,512	-	(54,931)	-	67,070	-
Share of profit or loss of
associates and joint
ventures accounted for
using equity method	(1,808)	-	2,062	-	(4,572)	-	4,594	-
Interest expense (Note 26)	(52,620)	-	(49,953)	-	(98,422)	(1)	(78,397)	-
Total non-operating
income and
expenses	402,267	4	197,302	1	736,916	4	280,523	1
INCOME BEFORE INCOME
TAX	2,208,005	22	6,108,810		40	3,907,948	22	11,179,900	39
INCOME TAX EXPENSE
(Notes 4 and 27)		(212,879)	(2)	(1,222,215)	(8)	(549,003)	(3)	(2,201,692)	(8)
NET INCOME		1,995,126		20	4,886,595		32	3,358,945	19	8,978,208	31
																					(Continued)

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