UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington,

WASHINGTON, D.C. 20549

FORM 20-F

¨

oREGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934
OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934

xANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 for the fiscal year ended December 31, 2014
OR

xANNUAL

oTRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 for the fiscal year ended December 31, 2011

OR

¨TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

OR

¨SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

oSHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Commission file number 1-14542

ASIA PACIFIC WIRE & CABLE
CORPORATION LIMITED

(Exact name of Registrant as specified in its charter)

Bermuda

(Jurisdiction of incorporation or organization)

7/Fl. B, No. 132, Sec. 3
Min-Sheng East Road
Taipei, 105, Taiwan
Republic of China

(Address of principal executive offices)

Securities registered or to be registered pursuant to Section 12(b) of the Act.

Title of each class

Name of each exchange on which registered

Common Shares, par value 0.01 per share

NASDAQ CapitalGlobal Market

Securities registered or to be registered pursuant to Section 12(g) of the Act.

None

Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act.

None

Indicate the number of outstanding shares of each of the issuer’s classes of capital or common stock as of the close of the period covered by the annual report.

13,830,769

13,819,669 Common Shares

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
Yes¨Nox

 

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If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.    Yes¨Nox

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    YesxNo¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    YesxNo¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer.  See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act.  Large accelerated Filer¨Accelerated filer¨  Non-accelerated filerx

Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:  U.S. GAAP¨x  International Financial Reporting Standards as issued by the International Accounting Standards Boardx  Other ¨  Other¨ 

If “Other” has been checked in response to the previous question, indicate by check mark which financial statement item the registrant has elected to follow.     Item 17¨Item 18¨

If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes¨Nox

 

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FORWARD-LOOKING STATEMENTS

Our disclosure and analysis in this Annual Report on Form 20-F contain some forward-looking statements.  Forward-looking statements give our current beliefs or expectations or forecasts of future events.  You can identify these statements by the fact that they do not relate strictly to historical or current facts.  Such statements may include words such as “anticipate,” “estimate,” “expect,” “intend,” “plan,” “believe” and other words and terms of similar meaning in connection with any discussion of future operating or financial performance.

Such statements are not promises or guarantees and are subject to a number of known and unknown risks and uncertainties that could cause our future results, performance or achievements to differ significantly from the results, performance or achievements expressed or implied by such forward-looking statements.  Important factors that could cause or contribute to such differences include our ability to maintain and develop market share for our products; global, regional or national economic and financial conditions including events such as the financial crisis that commencedrecent global drop in 2008demand for and the consequent economic recession,pricing of commodities, including copper, our principal raw material, and their individual or collective impact on demand for our products and services; the introduction of competing products or technologies; our inability to successfully identify, consummate and integrate acquisitions; our potential exposure to liability claims; the uncertainty and volatility of the markets in which we operate; changes in laws or regulations applicable to the Company in the markets in which we conduct business; the availability and price of copper, our principal raw material; our ability to negotiate extensions of labor agreements on acceptable terms and to successfully deal with any labor disputes; our ability to service and meet all requirements under our debt, and to maintain adequate credit facilities and credit lines;lines, in certain markets, our ability to compete effectively with state-owned enterprises (“SOEs”), which may receive governmental subsidies to enhance results or receive preferred vendor status in state controlled projects, our ability to make payments of interest and principal under our existing and future indebtedness; our ability to increase manufacturing capacity and productivity; the fact that we have operations outside the United States that may be materially and adversely affected by acts of terrorism, war and political and social unrest, or major hostilities; increased exposure to political and economic developments, crises, instability, terrorism, civil strife, expropriation and other risks of doing business in foreign markets; economic consequences arising from natural disasters and other similar catastrophes, such as floods, earthquakes, hurricanes and tsunamis; the fact that Asia Pacific Wire & Cable Corporation Limited (“APWC” or the “Company”) is a holding company that depends for income upon distributions from operating subsidiaries, most of which are not wholly-owned and for which there may be restrictions on the timing and amount of distributions; price competition and other competitive pressures; the impact of climate change on our business and operations and on or customers; tax inefficiencies associated with our cross-border operations, including without limitation, limitations on our ability to avoid limitations on utilizationutilize net losses within our group of net lossesCompanies for income tax purposes; fluctuations in currency, exchange and interest rates, operating results and the impact of technological changes and other factors that are discussed in this report and in our other filings made with the Securities and Exchange Commission (the “SEC” or the “Commission”).

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In particular, these statements include, among other things, statements relating to:

•    

our business strategy;

•    

our prospects for future revenues and profits in the markets in which we operate;

•    

the impact of political, legal or regulatory changes or developments in the markets in which we do business;

•    

our dependence upon the level of business activity and investment by our customers for the generation of our sales revenue;

•    

our reliance on our majority shareholder for research and development relating to our product lines
the fact that our Common Shares are now traded on a national exchange in the United States;

•    

our dependence on a limited number of suppliers for our raw materials and our vulnerability to fluctuations in the cost of our raw materials; and

•    

our liquidity.

- 5 -
We undertake no obligation to update any forward-looking statements or other information contained in this Annual Report, whether as a result of new information, future events or otherwise, except as required by law.  You are advised, however, to consult any additional disclosures we make in our filings with the SEC.  Also note that we provide a cautionary discussion of risks and uncertainties under the “Risk Factors” section of this Annual Report.  These are factors that we thinkcouldthink could cause our actual results to differ materially from expected results.  Other factors besides those listed there could also adversely affect us.

This discussion is permitted by the Private Securities Litigation Reform Act of 1995.

 


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OTHER CONVENTIONS

Unless otherwise specified, all references in this Annual Report to “Thailand” are to the Kingdom of Thailand, all references to “Singapore” are to The Republic of Singapore, all references to “Taiwan” are to Taiwan, The Republic of China, all references to “China” and to the “PRC” are to The People’s Republic of China (for the purpose of this Annual Report, excluding Hong Kong and Macau), all references to “Australia” are to the Commonwealth of Australia and all references to the “U.S.” are to the United States of America.

Most measurements in this Annual Report are given according to the metric system.  Standard abbreviations of metric units (e.g.(e.g., “mm” for millimeter) have been employed without definitions.  All references in this Annual Report to “tons” are to metric tons, which are equivalent in weight to 2,204.6 pounds.

With respect to measurements relating to the manufacture of wire and cable products, references to “pkm” are to kilometers of twisted pairs of copper wire.

Dollar amounts in this Annual Report are expressed in thousands ($000), except where otherwise indicated or with respect to earnings per share.


- 7 -
Part I

Item 1: Identity of Directors, Senior Management and Advisers

Item 1:Identity of Directors, Senior Management and Advisers
(Not applicable)

Item 2: Offer Statistics and Expected Timetable

Item 2:Offer Statistics and Expected Timetable
(Not applicable)

Item 3: Key Information

Item 3:Key Information
3.1         Selected Consolidated Financial Data

The following selected consolidated financial data is derived from the consolidated financial statements of the Company for the years ended December 31, 2007, 2008, 2009, 201031,2012, 2013 and 2011,2014, prepared in accordance with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”).
Until and including our consolidated financial statements included in our annual report on Form 20-F for the year ended December 31, 2012, we prepared our consolidated financial statements in accordance with generally accepted accounting principles accepted in the United States (“U.S. GAAP.

GAAP”). As required by First Time Adoption of International Financial Reporting Standards, or IFRS 1, financial results for the year ended December 31, 2012 were adjusted in our annual report for the fiscal year ended December 31, 2013 (the “2013 Annual Report”) in accordance with IFRS and differ from the results reported in the annual reports filed with the Commission prior to the 2013 Annual Report.

The selected data set forth below should be read in conjunction with, and is qualified in its entirety by, the discussion in “Item 5:  Operating and Financial Review and Prospects” and the consolidated financial statements and the notes thereto included in “Item 18:  Financial Statements.”

(Figures in 2007, 2008, 2009, and 2010 were restated to reflect the results of discontinued operations of Shandong Pacific Fiber Optics Co. Ltd. (“SPFO”). For details, see “Item 5.3: Operating Results”)

 

For the Year Ended December 31,

 

2007

2008

2009

2010

2011

 

(in US$ thousands)

Income Statement Data:

 

 

 

 

 

Net sales

$497,848

$484,218

$326,238

$446,594

$471,946

Cost of sales

(453,734)

(473,911)

(285,595)

(389,571)

(428,051)

Gross profit

44,114

10,307

40,643

57,023

43,895

Operating expenses

(28,351)

(26,586)

(24,151)

(28,371)

(33,220)

Impairment loss

—

—

(77)

—

—

Impairment of goodwill

—

—

—

—

(8,791)

Operating profit (loss)

15,763

(16,279)

16,415

28,652

1,884

Exchange gain (loss)

864

(1,712)

507

3,041

(1,346)

Net interest expense

(5,715)

(4,107)

(1,139)

(872)

(808)

Share of net income (loss) of equity investees

124

(142)

(40)

(21)

(58)

Gain on liquidation of subsidiary

—

—

568

—

—

Gain (loss) on sale of investment

35

—

—

—

(68)

Impairment of investment

(95)

—

—

—

—

Others

2,066

2,861

2,111

1,032

1,032

Income (loss) from continuing operations before income taxes

13,042

(19,379)

18,422

31,832

636

Income taxes

(6,298)

(2,132)

(4,647)

(6,441)

(4,566)

Net income (loss) from continuing operations

6,744

(21,511)

13,775

25,391

(3,930)

Income (loss) from operations of discontinued SPFO

118

(689)

1,150

446

1,075

Income tax expenses

0

0

(697)

(450)

(229)

Income (loss) from discontinued operations

118

(689)

453

(4)

846

Net income (loss)

6,862

(22,200)

14,228

25,387

(3,084)

Net income (loss) attributable to non-controlling interests

2,029

(8,551)

4,139

11,247

2,355

Net income (loss) attributable to APWC

$4,833

$(13,649)

$10,089

$14,140

$(5,439)

Basic and diluted earnings (loss) per share from continuing operations(1)

$0.35

$(0.96)

$0.71

$1.02

$(0.49)

Basic and diluted earnings (loss) per share from discontinued operations(1)

$0.00

$(0.03)

$0.02

$(0.00)

$0.10

Basic and diluted earnings (loss) per share(1)

$0.35

$(0.99)

$0.73

$1.02

$(0.39)

      

- 1 -
  
For the Year Ended December 31,
 
  
2014
  
2013
  
2012
 
  (in US$ thousands) 
Income Statement Data:         
Net sales $451,327  $460,676  $462,265 
Costs of sales  (414,583)  (408,860)  (411,786)
Gross profit  36,744   51,816   50,479 
Other operating income  89   181   5,825 
Selling general & administrative expenses  (29,479)  (34,559)  (34,593)
Other operating expenses  (2,168)  (196)  (888)
Operating profit  5,186   17,242   20,823 
Finance cost  (1,697)  (1,734)  (2,195)
Finance income  1,167   1,306   1,322 
Share of profit of an associate  (338)  (211)  (21)
Gain on disposal of investment  —   232  ­­­­­­— 
Loss on disposal of a subsidiary  (178)  —   — 
Gain on liquidation of subsidiaries ­­­­­­—  ­­­­­­—   279 
Exchange gain (loss)  (206)  (1,245)  2,411 
Other income  1,150   1,454   1,933 
Other expenses  (49)  (260) 
­­­­­­—
 
Income from continuing operations before income taxes  5,035   16,784   24,552 
Income taxes expenses  (2,274)  (5,518)  (7,578)
Net income $2,761  $11,266  $16,974 
Net income attributable to non-controlling interests $2,189  $5,419  $7,280 
Net income attributable to APWC  572   5,847   9,694 
Basic and diluted earnings per share(1)
 $0.04  $0.42  $0.70 
- 2 -
___________
(1)The calculation of the earnings per share is based on 13,830,751, 13,820,200 and 13,819,669 basic and diluted weighted common shares issued and outstanding for the year ended December 31, 2012, 2013 and 2014, respectively.

(1)    The calculation of the earnings (loss) per share is based on 13,830,769 basic and diluted weighted Common Shares issued and outstanding for the years ended December 31, 2007, 2008, 2009, 2010, and 2011.

As of December 31,

 
As of December 31,
 

2007

2008

2009

2010

2011

 
2014
  
2013
  
2012
 

(in thousands)

 (in US$ thousands) 

Balance Sheet Data:

 

 

 

         

Cash and cash equivalents

$29,127

$37,510

$41,534

$63,217

$76,672

 $68,863  $62,509  $72,816 

Working capital

132,409

100,428

127,139

170,653

170,956

  169,533   174,124   181,805 

Total assets

396,116

309,798

296,052

386,923

337,289

  378,672   364,635   391,751 

Total debt

104,146

59,694

38,917

69,083

54,545

  55,400   43,521   59,577 

Total APWC shareholders’ equity.

136,783

114,129

127,392

153,194

146,510

 
Net assets  221,211   228,127   237,160 
Capital stock  138   138   138 
Total APWC shareholders’ equity  153,032   157,248   162,102 

3.2 Exchange Rates

- 3 -
3.2Exchange Rates
Unless otherwise specified, all references in this Annual Report to “$,” “U.S. dollars” or “US$” are to United States dollars; all references to “Bt,” “Thai Baht” or “Baht” are to Baht, the legal tender currency of Thailand; all references to “S$” are to Singapore dollars, the legal tender currency of Singapore; all references to “A$” are to Australian dollars, the legal tender currency of Australia; and all references to “RMB” are to Chinese Renminbi, the legal tender currency of China.

Unless otherwise noted, for the convenience of the reader, translations of amounts from Baht, Singapore dollars, Renminbi and Australian dollars to U.S. dollars have been made at the respective noon buying rates in New York City for cable transfers in those currencies as certified for customs purposes by the Federal Reserve Bank of New York (the “Noon Buying Rate”) on December 31, 2011.2014.  The respective Noon Buying Rates on December 30, 201131, 2014 were US$ 1.00 = Bt 31.51;32.90; S$ 1.295;1.324; RMB 6.294;6.205; and A$0.976.1.224.  The respective Noon Buying Rates on April 13, 2012,3, 2015, the latest practicable date before publication of this Annual Report, were US$1.00 = Bt 30.730; Bt32.38; S$1.3491.247; RMB6.1936.302 and A$1.3080.964.  No representation is made that the foreign currency amounts could have been or could be converted into U.S. dollars on these dates at these rates or at any other rates.

Sources:  Federal Reserve Bulletin, Board of Governors of the Federal Reserve System.  Federal Reserve Statistical Release H.10(512), from the website of the Board of Governors of the Federal Reserve System athttp://www.federalreserve.gov.www.federalreserve.gov

.

Thailand


The Thai Baht is convertible into foreign currencies and is subject to a managed float against a basket of foreign currencies, the most significant of which is the U.S. dollar.  The composition of the basket for determining the value of the Baht is not made public by the Bank of Thailand.  The following tables set forth, for the periods indicated, certain information concerning the Noon Buying Rate of the Thai Baht.  No representation is made that the Baht or U.S. dollar amounts referred to herein could have been or could be converted into U.S. dollars or Baht, as the case may be, at any particular rate or at all.

Year Ended December 31,

At Period End

Average(1)

High

Low

 

(Bt per $1.00)

 

 

 

 

 

2007

29.50

32.02

35.96

29.28

2008

34.72

33.13

35.72

29.36

2009

33.33

34.30

36.25

33.10

2010

30.16

31.66

33.18

29.49

2011

31.51

30.46

31.76

29.68

(1)    Average means the average of the Noon Buying Rates on the last day of each month during a year.

- 4 -
Year Ended December 31, At Period End  
Average(1)
  High  Low 
  
(Bt per $1.00)
 
             
2010  30.16   31.66   33.18   29.49 
2011  31.51   30.46   31.76   29.68 
2012  30.59   30.99   31.87   30.29 
2013  32.68   30.85   32.85   28.60 
2014  32.90   32.54   33.08   31.74 

(1)Average means the average of the Noon Buying Rates on the last day of each month during a year.
The high and low exchange rates for the six months preceding the date of this Annual Report were:

Month

High

Low

October 2011

31.24

30.48

November 2011 

31.38

30.65

December 2011

31.76

30.75

January 2012

31.81

30.97

February 2012

30.93

30.29

March 2012

30.91

30.50

 

 

 

Month 
High
  
Low
 
October 2014  32.62   32.24 
November 2014  32.85   32.67 
December 2014  33.02   32.75 
January 2015  32.95   32.51 
February 2015  32.66   32.34 
March 2015  32.94   32.34 
Sources:  Federal Reserve Bulletin, Board of Governors of the Federal Reserve System.  Federal Reserve Statistical Release H.10(12), from the website of the Board of Governors of the Federal Reserve System at http://www.federalreserve.gov.
- 5 -
Singapore

The Singapore dollar is convertible into foreign currencies and floats against a trade-weighted basket of foreign currencies, the composition of which is not made public by Singapore’s central bank, the Monetary Authority of Singapore, but of which the U.S. dollar is a component.  The following tables set forth, for the periods indicated, certain information concerning the Noon Buying Rate of the Singapore dollar.  No representation is made that the Singapore dollar or U.S. dollar amounts referred to herein could have been or could be converted into U.S. dollars or Singapore dollars, as the case may be, at any particular rate or at all.

Year Ended December 31,

At Period
End 

Average(1)

High

Low

 

(S$ per $1.00)

 

 

 

 

 

2007

1.436

1.501

1.543

1.436

2008

1.438

1.410

1.529

1.347

2009

1.404

1.452

1.557

1.380

2010

1.289

1.359

1.423

1.282

2011

1.295

1.260

1.314

1.202

 

 

 

 

 

(1)    Average means the average of the Noon Buying Rates on the last day of each month during a year.

  At Period End  
Average(1)
  High  Low 
  
(S$ per $1.00)
 
             
2010  1.289   1.359   1.423   1.282 
2011  1.295   1.260   1.314   1.202 
2012  1.221   1.245   1.294   1.216 
2013  1.262   1.253   1.283   1.220 
2014  1.324   1.270   1.324   1.238 
______________

(1)Average means the average of the Noon Buying Rates on the last day of each month during a year.

The high and low exchange rates for the six months preceding the date of this Annual Report were:

Month

High

Low

October 2011

1.314

1.242

November 2011

1.312

1.268

December 2011

1.309

1.278

January 2012

1.297

1.253

February 2012

1.265

1.242

March 2012

1.269

1.251

 

 

 

Month 
High
  
Low
 
October 2014  1.285   1.271 
November 2014  1.306   1.289 
December 2014  1.324   1.305 
January 2015  1.353   1.326 
February 2015  1.361   1.345 
March 2015  1.391   1.362 

- 6 -
Sources:  Federal Reserve Bulletin, Board of Governors of the Federal Reserve System.  Federal Reserve Statistical Release H.10(512)H.10(12), from the website of the Board of Governors of the Federal Reserve System at http://www.federalreserve.gov.

China

The PRC government imposes control over its foreign currency reserves in part through direct regulation of the conversion of Renminbi into foreign currencies, including the conversion rate limitations on capital transfers and through restrictions on foreign trade.trade and other regulatory impediments to the free transferability of capital.  The following tables set forth, for the periods indicated, certain information concerning the Noon Buying Rate of the Renminbi.  No representation is made that the Renminbi or U.S. dollar amounts referred to herein could have been or could be converted into U.S. dollars or Renmimbi,Renminbi, as the case may be, at any particular rate or at all.

Year Ended December 31,

At Period End

Average(1)

High

Low

 

(RMB per $1.00)

 

 

 

 

 

2007

7.295

7.581

7.813

7.295

2008

6.823

6.919

7.295

6.780

2009

6.826

6.830

6.847

6.818

2010

6.600

6.760

6.833

6.600

2011

6.294

6.460

6.636

6.294

 

 

 

 

 

(1)    Average means the average of the Noon Buying Rates on the last day of each month during a year.

Year Ended December 31, At Period End  
Average(1)
  High  Low 
  
(RMB per $1.00)
 
             
2010  6.600   6.760   6.833   6.600 
2011  6.294   6.460   6.636   6.294 
2012  6.230   6.299   6.338   6.222 
2013  6.054   6.141   6.244   6.054 
2014  6.205   6.170   6.259   6.040 
_____________

(1)Average means the average of the Noon Buying Rates on the last day of each month during a year.

The high and low exchange rates for the six months preceding the date of this Annual Report were:

Month

High

Low

October 2011

6.383

6.353

November 2011

6.384

6.340

December 2011

6.373

6.294

January 2011

6.333

6.294

February 2012

6.312

6.294

March 2012

6.332

6.298

 

 

 

Month 
High
  
Low
 
October 2014  6.138   6.111 
November 2014  6.143   6.112 
December 2014  6.226   6.149 
January 2015  6.254   6.187 
February 2015  6.270   6.250 
March 2015  6.274   6.196 
- 7 -
Sources:  Federal Reserve Bulletin, Board of Governors of the Federal Reserve System.  Federal Reserve Statistical Release H.10 (512), from the website of the Board of Governors of the Federal Reserve System at http://www.federalreserve.gov.

Australia

The following tables set forth, for the periods indicated, certain information concerning the Noon Buying Rate of the Australian dollar.  No representation is made that the Australian dollar or U.S. dollar amounts referred to herein could have been or could be converted into U.S. dollars or Australian dollars, as the case may be, at any particular rate or at all.

Year Ended December 31,

At Period End

Average(1)

High

Low

 

(A$ per $1.00)

 

 

 

 

 

2007

1.139

1.184

1.295

1.067

2008

1.141

1.177

1.647

1.021

2009

1.114

1.252

1.587

1.067

2010

0.988

1.087

1.224

0.985

2011

0.976

0.968

1.058

0.907

 

 

 

 

 

(1)    Average means the average of the Noon Buying Rates on the last day of each month during a year.

Year Ended December 31, At Period End  
Average(1)
  High  Low 
  
(A$ per $1.00)
 
             
2010  0.988   1.087   1.224   0.985 
2011  0.976   0.968   1.058   0.907 
2012  0.962   0.964   1.032   0.925 
2013  1.120   1.048   1.129   0.945 
2014  1.224   1.115   1.235   1.054 
________________
(1)Average means the average of the Noon Buying Rates on the last day of each month during a year.
The high and low exchange rates for the six months preceding the date of this Annual Report were:

Month

High

Low

October 2011

1.071

0.945

November 2011 

1.032

1.037

December 2011

1.010

1.030

January 2012

0.979

0.939

February 2012

0.941

0.925

March 2012

1.080

1.033


Month 
High
  
Low
 
October 2014  1.153   1.123 
November 2014  1.174   1.145 
December 2014  1.235   1.174 
January 2015  1.289   1.218 
February 2015  1.297   1.266 
March 2015  1.319   1.271 

Sources:  Federal Reserve Bulletin, Board of Governors of the Federal Reserve System.  Federal Reserve Statistical Release H.10 (512), from the website of the Board of Governors of the Federal Reserve System at  http://www.federalreserve.gov.

www.federalreserve.gov3.3 Risk Factors.

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3.3Risk Factors
You should carefully consider the following risks before you decide to buy our Common Shares.  If any one of these risks or uncertainties were to occur, our business, financial condition, results and performance could be seriously harmed and/or the price of our Common Shares might significantly decrease.  The risks and uncertainties described in this Annual Report on Form 20-F are not the only ones facing us.  Additional risks and uncertainties that currently are not known to us or that we currently believe are immaterial also may adversely affect our businesses, results of operations, condition (financial or otherwise) and operations.

3.3.1     Risks Related to PCAOB Inspection

Our auditor, like otherthe value of any investment in our common shares.

3.3.1The auditors’ reports included in this annual report are prepared by relying on audit work which is not inspected by the Public Company Accounting Oversight Board and, as such, investors may be deprived of the benefits of such inspection
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Auditors of companies that are registered with the SEC and traded publicly in the United States, including our independent registered public accounting firms operating in Hong Kong, is not permitted tofirm, must be subject to inspection byregistered with the U.S. Public Company Accounting Oversight Board (“PCAOB”), and as such, investors may be deprived of the benefits of such inspection.

Our independent registered public accounting firm that issues the audit reports included in our annual reports filed with the SEC, as an auditor of companies that are traded publicly in the United States and a firm registered with the PCAOB, is required by the laws of the United States to undergo regular inspections by the PCAOB to assess itstheir compliance with the laws of the United States and applicable professional standards.  Because the Company has substantial operations within China, our auditor is locatedrelied on its China affiliates to perform the audit on the Company’s consolidated financial statements in Hong Kong,so far as they relate to the condition (financial and otherwise) or results of operations of the Company in China and its overall impact on the consolidated financial statements of the Company as a jurisdiction wherewhole.  The PCAOB is currently unable to conduct inspections without the approval of the relevant local authority,work of our auditor, like other independent registered public accounting firms operatingauditor’s affiliates in Hong Kong,China as it is prohibited by the China authorities.  Investors should be mindful that our auditor’s work related to our operations in China is not currently not inspected by the PCAOB.

Inspections

The lack of other firmsPCAOB’s inspection of the audit work performed in China prevents the PCAOB from regularly evaluating the audit work of any auditor that PCAOB has conducted outside of Hong Kong have identified deficienciesis performed in those firms’China including the audit procedures and quality control procedures, whichwork performed by our auditor.  As a result, investors may be addressed as partdeprived of the inspection process to improve future audit quality. full benefits of PCAOB inspections.
The inability of the PCAOB to conduct inspections of independent registered public accounting firms operatingaudit work performed in Hong KongChina makes it more difficult to evaluate the effectiveness of our auditor’sauditor’s audit procedures or quality control procedures. As a result, investorsas compared to auditors in other jurisdictions that are subject to PCAOB inspections on all of their work.  Investors may be deprived of the benefits of PCAOB inspections.

3.3.2     Risks Related toFailure to Comply with Loan Covenants

Our credit facility agreement with Bangkok Bank Hong Kong Branch (the “Bank”) was entered into on March 17, 2011 with a total cash loan of $14 million and a trade facility of $8 million. The cash loan carries an interest rate of Singapore Inter-bank Borrowing Rate (“SIBOR”) plus 2.5%, with a term of 5.5 years. This agreement requires us to maintain at all times certain financial covenants and non-financial covenants for both the guarantor, APWC, and borrower, Crown Century Holdings Ltd. (“CCH HK”).  As of December 31, 2011, CCH HK was not in compliance with certain financial covenant ratios and APWC was not in compliance with a certain non-financial covenant relating to its disposal of a certain subsidiary when the Company failed to provide formal notification and to obtain the Bank’s consent.  As such, the cash loan would become callable on demand if the bank were to declare an event of default (which it has not to date).  The outstanding loan balance was therefore classified as current liability as of December 31, 2011. The Company started negotiations with the Bank on revision of the loan agreement and possibility of issuance of waivers with regard to those covenants.  Up to date of this annual report, the negotiation is still on going.

However, in addition to certain financial covenants relating to our financial position, operating performance and liquidity, the restrictions containedlose confidence in our loan agreement may limit our ability to, among other things:

Ÿincur additional indebtedness for CCH HK for factory expansions, if any;


Ÿcreate liens on CCH HK’s assets

Ÿenter into business combinations (if it would be interpreted as major change in our business) or disposal of subsidiaries under CCH HKreported financial information and under APWC; and

Our ability to comply with the requirements of the loan agreement is subject to certain risks, including:

Ÿviolation of a covenant that stipulates that we must maintain our listing on the NASDAQ Stock Market, Inc. (“NASDAQ”) and cannot be suspended for more than ten days, in the remote likelihood that APWC’s stock price falls under $1 for consecutive thirty 30 days on NASDAQ;

Ÿ            our ability to sustain the net worth requirements for CCH HK and APWC, if our organic growth in future years for CCH HK and for APWC is not sufficient;

Ÿ            our ability to meet the proposed waivers which are still under negotiation with the Bank if our actual operational performance is not sufficient; and

Ÿ            future covenant compliance issues, in the event of a rise in copper prices that leads to an increase in the Company’s indebtedness

Our ability to comply with the loan covenants may also be affected by economic, financial and industry conditions, commodity prices such as copper and other factors beyond our control.

3.3.3     Risks Related to the Global Economic and Financial Crisis

            A number of economists forecast global growth to average 3.4% in 2012, with the performance differential between the generally weaker developed economies and the generally stronger developing economies continuing. The downward revision (0.2 percentage points) from the January 2012 forecast reflects the deepening recessions in the southern peripheral nations of the euro zone.  Advances in the faster-growing emerging nations are being constrained by both the trade shocks rippling around the world and by prior tightening moves to contain domestic inflationary pressures.  This is most notable in the Asia-Pacific region where growth forecasts for China, South Korea, and Australia have moved to a lower trajectory.  India too has recently experienced a diminished rate of growth, although this largely reflects past tightening moves to contain domestically generated inflationary pressures.  A more moderate pace of rebuilding in Japan has also contributed to the reduced growth momentum in the Asia-Pacific region.

            There is still considerable risk of further downward revisions to the forecast, in particular due to the euro zone’s festering sovereign debt problem. Although the European Central Bank has extended an important financial lifeline to the region’s ailing banking institutions, the delay in implementing the much-needed structural and fiscal reforms risks further contagion and financial market shocks.  Such developments would aggravate already unsustainable debt burdens in many of the affected countries, and exacerbate existing economic strains.  Also of concern is the potential for a sharp reversal in historically low government bond yields, driven by increasing investor angst if the expected improvement in the quality of government balance sheets fails to materialize.  A sharply rising debt burden would force many governments amongour consolidated financial statements.

3.3.2Risks Related to the Continuing Impacts of the Global Economic and Financial Crisis
Shortly after the developed nations to implement further reductions in government expenditures that could eventually result in much weaker2008 global financial and economic performances.  The decline in China’s speed of growth could also accelerate, with a bigger slide in exports triggering broader production and employment cuts that would undermine consumer spending,crises, the country’s buoyant real estate market,U.S. Federal Reserve Bank (the “U.S. Fed”) and the demandcentral banks of most of the leading industrialized nations lowered their short-term interest rates to near zero in an effort to stimulate borrowing and increase economic activity.  The U.S. Fed and certain other of those central banks also undertook a series of government bond repurchase programs to enhance market liquidity and to maintain a very low interest rate environment.  The extremely low cost of borrowing, which has continued for commodities. Recurring geopolitical problems remain an important threatextremely long period of time, has enhanced liquidity and facilitated borrowing to global stability as well.  Any disruptionstimulate investment. Some economists and policymakers have expressed concern that this artificially low interest rate environment will have negative repercussions once interest rates start to rise.  Recently, the world’s oil supply chainU.S. Fed and certain other central banks have curtailed their bond repurchase programs and indicated that one or more increases in short-term borrowing rates may be implemented in 2015 or shortly thereafter.  An increase in U.S dollar borrowing costs could adversely affect our business in the Middle or Far East could send gas pump prices sharply higherfour Asian markets where we have operating plants (Thailand, China, Singapore and global growth sharply lower.

ActualAustralia).  Our financial statements for our operating subsidiaries in those markets are reported and Possible Impactsdenominated in local currencies and when translated into US dollars, our reporting currency, these operating subsidiaries would suffer a decrease in reported revenue and operating profits due to foreign currency translation if one takes into account only increased U.S. dollar borrowing costs.  Moreover, our copper purchases are based on U.S. dollar quotations, which means the Company

operating subsidiaries would have to pay more in local currency in order to meet their trade payable obligations.

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Price Volatility for our Principal Raw Material
The fluctuationA comparison of copper prices in 2011on the London Metals Exchange (the “LME”), between year-end 2013 and year-end 2014 shows that the average price for copper fell from $7,326 per metric ton to $6,860 per metric ton by year-end 2014, representing an 6.4% price decline.  The effect of that decrease has further impacted the Company’s ability to improve its overall financial performance, particularlyperformance.  The decrease in the latter part of 2011. The increase in average London Metal Exchange (“LME”) LME copper price over 20102014 was higher than the increaseprincipal contributing factor to the drop in 2014 of our prevailingASP (average selling price for manufactured products, resulting in a gross margin lower than in 2010 for operations in China. Elsewhere in Thailand, the net sales were slightly lower than that of last year as our production and our ability to ship our products was curtailed by the nationwide flooding that affected Thailand and severely disrupted many business operations in that country.  In Australia and Singapore, we witnessed an increase in net sales, as the copper price rose during the first three quarters of 2011 and production volume also increased by 29.8% and 31.2%, respectively.price) compared with 2013.


Copper prices on the LME dropped atduring the endcourse of last quarter 2011the year 2014 to $7,500.lower than $6,400 per ton. Consistent with industry practice, customers would expect that the selling prices of our products, particularly of copper based wires, would therefore be lower than that in 2010.our product prices at the end of 2013.  The decrease in copper prices and other commodity prices also resulted in a decreased turnover for the last part of theentire year, as customers delayed placing orders with the Company or reduced the quantity of such orders in anticipation of a possible further reduction in copper prices.  A further decrease in copper prices would likely have an adverse effect on the revenues of the Company.  In such a case, the Company could find itself with overvalued inventory that requires a valuation write-down.

When compared with 2010 sales, sales in 2011 increased by 5.7%, boosted by an increase in sales in the power wire category by 35.3%, which was partially offset by decreases in sales of enameled wire and fiber optic out of Thailand by 10.9% and 36.4%, respectively. Sales of supply, delivery and installation project services decreased by 28.1%, while sales of distributed wire and cable products decreased by 5.9%.

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The Company is unable to determine the precise impact of the Euro zone fiscal crises,volatility of copper prices, and the fragile state of the global recovery, on its operations and cash flow, since its operating results are also affected by factors that are, or may be, unrelated to the economic turmoil,volatility and the downward pressures on commodity prices, such as the completion of routine purchase cycles by customers and the completion,expansion or contraction of large infrastructure projects.  However, the Company has concludedis of the opinion that thecurrent economic instability has falling copper prices have negatively affected the Company’s operations and cash flow.  The Company believes that any efforts to forecast likely future performance with any degree of specificity would be fraught with uncertainty.  Accordingly, the Company cautions against placing reliance on any efforts to identify trends for the foreseeable future.

Macroeconomic events and conditions may have a material adverse impact on the Company’s business operations until such time as the global financial crisis has substantially abated and financial and economic conditions have materially improved.  The Company notes, however, that the foregoing is subject to a number of unknown variables, including the impact of actions taken or that may be taken in the future by governmental entities to address the capital needs of banks and other financial institutions and to increase the flow of credit to businesses.

3.3.4     Risks Related to the Common Shares and Corporate Governance

3.3.3Risks Related to the Common Shares and the Company
Consolidation of Charoong Thai Group Accounts

As of December 31, 2011,2014, the Company effectively owned 50.93% of the issued and outstanding shares of Charoong Thai Wire and Cable Public Company Limited (“Charoong Thai” or “CTW”), a decrease from the Company’s initial ownership percentage which iswas attributable to the exercise of warrants or conversion of convertible securities by third parties.  The Company’s present intention is to maintain majority ownership of the voting securities of Charoong Thai.  However, there may be circumstances under which the Company cannot maintain majority ownership of Charoong Thai.  In the event Charoong Thai were to make a further offering of voting securities, or securities convertible into or exchangeable for voting securities, and the Company was not in a position to fund or finance its participation in the offering, the ownership interest of the Company in Charoong Thai could fall below 50%.  Ifa level necessary for consolidated treatment, and the Company’s ownership percentageCompany may lose the controlling interest in Charoong ThaiThai.  If that were to fall below 50%,the case, the accounts of the Charoong Thai group, which includes all of the Company’s Thailand operations, would not be consolidated under IFRS, but instead would be accounted for under the equity method.  In such an event, the Company’s accounts would show a significant decrease in revenue and most categories of assets and liabilities, which events could have a material adverse effect on the value of the Common Shares.


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Potential Illiquidity of Common Shares

Approximately 75.4%75.5% of our Common Shares are either unregistered securities or registered securities held by affiliates (or were repurchased by the Company), which are subject to restrictions on trading.  Accordingly, approximately 75%75.5% of our Common Shares are not fully liquid investments.  Since April 2011, when APWC washas been listed on NASDAQ since April 2011, the volume of trading in our Common Shares has picked up fractionally.  However, the value of our Common Shares may be impacted negatively by their relative illiquidity when compared to the publicly-traded shares of many other issuers.

Control of the Company Rests with Majority Shareholder; Controlled Company Exemption; Risks Related to PEWC

Control of the Company Rests with Majority Shareholder; Controlled Company Exemption; Risks Related to PEWC
As the majority shareholder, Pacific Electric Wire & Cable Co., Ltd. (“PEWC”), a Taiwanese company, has sufficient votes to control the outcome of any matters presented for a shareholder vote, including the election of the membersa member of the Board of Directors.  PEWC may vote its shares in the Company in the manner that it sees fit.  In addition, subject to compliance with applicable securities laws, PEWC may sell, convey or encumber all or a portion of its ownership interest in the Company without regard to the best interests of the other shareholders of the Company except to the extent that it is:  (i) prohibited from engaging in conduct oppressive to minoritynon-controlling interests under applicable law and (ii) required to comply with the terms of the Amended and Restated Shareholders’ Agreement dated March 27, 2009 among the Company, PEWC andMSD CREDIT OPPORTUNITYCredit Opportunity Master Fund, L.P.L.P. (“COF”MSDC” (and sometimes referred to as “COF”)) (as the assignee ofSOF Investments, L.P. (“SOF”) ineffective July 2011) (the “Amended and Restated Shareholders Agreement”), a Delaware limited partnership which ownsowned, as of April 25, 2015, beneficially approximately 9.8% of the issued and outstanding Common Shares (the “Amended and Restated Shareholders Agreement”).

Shares.

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The Common Shares of the Company are traded on the NASDAQ Capital MarketsGlobal Market tier.  However, as the Company has a more than fifty percent (50%) shareholder, the Company is entitled to rely upon a “controlled company exemption” to the requirement that a company have a board of directors comprised of a majority of independent directors in order to be listed on NASDAQ.  At present, a majority of the board of directors of the Company is affiliated with PEWC.

PEWC was delisted from the Taipei Stock Exchange in 2003 following the disclosure of a major corporate scandal involving fraud and embezzlement by certain former executives of PEWC, one or more of whom are now serving prison sentences for their actions.  Commencing in 2004, PEWC brought a number of actions in different jurisdictions against those former executives and others seeking to recover substantial assets that had been misappropriated.  Some of those actions are ongoing.  PEWC is still seeking to recover financially, and in terms of its market reputation, from the malfeasance of those former executives.  The financial and governance problems experienced by PEWC increase the uncertainty regarding its ability to perform under the Composite Services Agreement between PEWC and the Company, although to date PEWC has met its obligations under that agreement.  (See---section 10.3 Material Contracts).

Limited Trading Volume

Although our Common Shares are traded on the NASDAQ Capital MarketsGlobal Market tier, the trading in, and demand for our Common Shares has been limited.  As a consequence, shareholders may find that their ability to sell their Common Shares quickly or in substantial amounts is adversely affected by the limited public trading market.  Thinly-traded equity can be more volatile than equity securities traded in an active trading market.  The high and low daily closing priceprices for our Common Shares during the past 24 months (March 20102013 – March 2012) has been $7.852015) were $4.25 and $1.92,$2.27, respectively.  In the future, our Common Shares may experience significant price fluctuations which could adversely affect the value of your ownership interest in the Company.

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Disclosure Controls and Procedures and Internal Control over Financial Reporting

Our management is responsible for establishing and maintaining adequate

We identified a material weakness in our internal control over financial reporting as defined under Rule 13a-15(f)and cannot assure you that such material weakness will be remediated or any additional material weakness will not be identified in the future.  Our failure to maintain an effective system of internal control over financial reporting could result in a material misstatement in our financial statement reports or cause the Company to fail to provide material financial information in a timely manner, which may cause our investors to lose confidence in our reported financial information, and the market price of our Common Shares may be adversely affected.
We are subject to reporting obligations under the Securities ExchangeU.S. securities laws. Among other things, the SEC, as required by Section 404 of the Sarbanes-Oxley Act of 1934.

Based2002, adopted rules requiring every public company, including us, to include a report from management on the Company’s evaluation under the applicable framework issued by the Committeeeffectiveness of Sponsoring Organizationsits internal control over financial reporting in its annual report.

In connection with management’s assessment of the Treadway Commission (“COSO”),effectiveness of our internal control over financial reporting for the period covered by this annual report, our management concluded thathas identified a material weakness in the Company’sour internal controlscontrol over financial reporting was identified.


In connection with the audit of our consolidated financial statementsand has concluded that as of and for the year ended December 31, 2011,2014, our independent registered public accounting firm determined also the existence of a material weakness.disclosure controls and procedures and our internal control over financial reporting were not effective. See “Item 15 — Disclosure Controls and Procedures.” A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the registrant’scompany’s annual or interim financial statements will not be prevented or detected on a timely basis bybasis. In 2014, our material weakness was related to the company’s internal controls. 

Deficiencies were notedaggregation of design deficiencies in our controls over complexthe accounting and non-routinereporting of derivative transactions as well as the recurring lack of oversight by our personnel with satisfactory knowledge in SEC financial reporting requirements.


Despite our ongoing efforts to remediate the material weaknesses and ensure the integrity of our financial statement closingreporting process, includingwe cannot assure you when the accounting of revenue recognition under bill-and-hold arrangements and consignment arrangement whereby the revenue was inappropriately recognized; the calculation and recording of income tax, deferred tax assets (and the related valuation allowance), inventory and related impairment accounts, and the misclassification of a number of intercompany balances. These deficiencies were attributable tomaterial weakness identified in our decentralized reporting structure, our complex and manual consolidation process and inadequate reviews over account balances at the reporting date. The aggregate effect of these deficiencies represented a material weakness. Based on this assessment, the Company’s management, including its CEO and CFO, concluded that the Company’s internal control over financial reporting was ineffectivewill be successfully remediated. Further, we cannot assure you that additional weaknesses in our internal control over financial reporting will not be identified in the future. Any repeated failure to maintain satisfactory controls or implement new controls, as necessary, could result in additional material weaknesses which could reasonably be expected to have a material adverse effect on the value of December 31, 2011.

Delinquencyour Common Shares and could adversely impact the Company’s ability to remain current in Reporting Obligations; its periodic report reporting under the Exchange Act. In those circumstances, the Company may be exposed to shareholder or regulatory actions. Further, any such failure could result in material misstatements and adversely affect the results of annual management evaluations regarding the effectiveness of our internal control over financial reporting. In addition, we may require more resources and incur more costs than currently expected to remediate our identified material weakness or any additional material weakness that may be identified in the future, which may adversely affect our results of operations.

Reporting of Financial Results

The Company is currently compliant with its reporting obligations under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and believes that it has addressed certain corporate governance obstacles that led to its delinquency in filing its annual report five years ago.Act.  As a foreign private issuer, the Company is not required by the rules of the Commission to provide financial results on a quarterly or semi-annual basis.  In addition, Bermuda law does not require the Company to provide interim financial information to its shareholders, whether on a quarterly or semi-annual basis.  As such, investors may not have the same access to financial information of the Company as they customarily receive in the case of a domestic issuer disclosing quarterly results on a Form 10-Q.  Under the NASDAQ rules; however, listed issuers are required to report semi‑semi-annual unaudited financial results, which the Company has donebeen doing since its listing on NASDAQ.

Potential Conflict of Certain Officers and Directors

In March 2011, the Company appointed a third independent director as required by NASDAQ.  Other than our three independent directors, all of the members of the Board of Directors are also directors or officers or otherwise affiliated with PEWC, the majority shareholder.  Certain of our officers are also affiliated with PEWC.  In each case, they may be subject to potential conflicts of interest.  In addition, certain of our officers and directors who are also officers and/or directors of PEWC may be subject to conflicts of interest in connection with, for example, pursuing corporate opportunities in which we and PEWC or one of its affiliates have competing interests, and in the performance by us and PEWC of our respective obligations under existing agreements, including the Composite Services Agreement (discussed in section 10.3).  In addition, some of these persons will devote time to the business and affairs of PEWC and its affiliates as is appropriate under the circumstances, which could reduce the amount of time available for overseeing or managing our business and affairs.  Notwithstanding any such potential conflicts, however, such individuals, in their capacities as our directors and officers, are subject to fiduciary duties to our shareholders.

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The Bermuda Companies Act 1981, as amended (the “Companies Act”), subjects our officers and directors to certain fiduciary standards in the exercise of their executive and management duties on behalf of the Company.  Under the Companies Act, an officer of ours (which term includes our directors) is subject to a duty of care requiring him to act honestly, in good faith and in the best interests of the Company in the discharge of his duties and to, among other things, give notice to the Board of Directors at the first opportunity of any interest he has in any material contract or proposed material contract with us or any of our subsidiaries.  The Companies Act also prohibits us, subject to certain exceptions, from making loans to any directors without first obtaining the consent of shareholders holding in the aggregate not less than nine-tenths of the total voting rights of all the shareholders having the right to vote at any shareholders meeting.  We do not make any loans to our directors or executive officers in accordance with the provisions of Thethe Sarbanes-Oxley Act of 2002.

Obligations under the Amended and Restated Shareholders Agreement


Pursuant to the original shareholders agreement dated June 28, 2007 (the “Shareholders Agreement”), the Company granted to SOF certain rights and protections (now held by COF,MSDC, as successor-in-interest to SOF, as explained below).  Under the Shareholders Agreement, the Company agreed to indemnify SOF and its partners and certain of its affiliates (the “SOF Indemnified Persons”), for any additional taxes, interest, penalties and other costs that might be imposed upon or incurred by the SOF Indemnified Persons in the event that the Company is determined by the Internal Revenue Service (the “IRS”) to be a “controlled foreign corporation” (a “CFC”) or a “passive foreign investment company” (a “PFIC”), as such terms are interpreted and defined under IRS rules and regulations.  The Company has determined that it was not a CFC or PFIC at any time during the 20112014 fiscal year and does not believe that it is likely to become a CFC or a PFIC; however, the Company cannot provide any assurances that it will not become a CFC or a PFIC in the future.

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In addition, the Company granted certain registration rights to SOF with respect to its Common Shares (the “Registrable Securities”) in the Shareholders Agreement.  In particular, the Company agreed to use its reasonable best efforts to prepare and file, and cause to go effective, as soon as practicable, a shelf registration statement covering the resale of the Registrable Securities on a delayed or continuous basis.  The Company also agreed to use its reasonable best efforts to keep its shelf registration statement effective until all Registrable Securities have been sold or until all Registrable Securities may be sold without restriction pursuant to Rule 144 promulgated pursuant to the U.S. Securities Act of 1933, as amended.amended (the “Securities Act”).  In addition, the Company granted to SOF two demand registration rights for underwritten offerings and customary piggyback registration rights with regard to the Registrable Securities.  Moreover, the Company agreed to use its reasonable best efforts to cause the Common Shares to be listed on a national “Securities Market,” which means any of the NASDAQ Stock Market, Inc. (Global Market or Global Select Market), the American Stock Exchange LLC (now known as NYSE Amex Equities) or the New York Stock Exchange LLC, not later than January 31, 2009, subject to notice and a sixty (60) day cure period.  All of the costs and expenses of the Company in connection with the fulfillment of its obligations under the Shareholders Agreement were to be paid by the Company, other than underwriting fees, discounts and commissions attributable to the sale of Common Shares held by SOF.

Under the Shareholders Agreement, if the Company failed to fulfill its obligations thereunder, SOF would have a claim for damages against the Company.  No such claim has been made.  In addition, if the Company fulfilled its reasonable best efforts undertakings but failed to meet one or more of the stated goals, SOF would have a put right of their Common Shares to PEWC.  In accordance with those terms, on February 2, 2009, SOF delivered to PEWC notice of its exercise of the put right under the Shareholders Agreement due to the fact that the Common Shares were not listed on a national Securities Market as of January 31, 2009.  On March 27, 2009, SOF sold 51% of its Common Shares to PEWC pursuant to the terms of a share purchase agreement between those parties.  Upon the consummation of that share purchase agreement, SOF held 1,355,415 registered Common Shares of the Company and PEWC held 1,410,739 registered Common Shares, respectively, representing 9.8% and 10.2% of the outstanding Common Shares, with PEWC holding an additional 7,664,615 unregistered Common Shares, giving it an aggregate of 65.6% of the total issued and outstanding Common Shares.  In connection with this transaction, the Company, PEWC and SOF entered into the Amended and Restated Shareholders Agreement, which among other things, granted to the Company an extension for listing the Common Shares on a national Securities Market until February 2011 and maintained for SOF the right to sell its remaining Common Shares to PEWC in the event the Company did not list its Common Shares on a national Securities Market by such time.  In April 2011, the Common Shares of the Company were approved for trading on the NASDAQ Capital Markets tier, which tier does not fit within the definition of a national “Securities Market”, as provided in the Amended and Restated Shareholders Agreement.  As of July 1, 2011, SOF transferred its Common Shares to COF,MSDC, at which time COFMSDC executed a joinder agreement and became a party to the Amended and Restated Shareholders Agreement and succeeded to the rights and interests of SOF thereunder.  The Company is not aware that COFMSDC has taken any action with respect to the Common Shares held by it.The Amended and Restated Shareholders Agreement also provides for those put, registration and indemnification rights set forth above in the description of the Shareholders Agreement and such rights now apply to COFMSDC in place of SOF.  While the sale of Common Shares by SOFMSDC to PEWC resulted in PEWC holding a higher concentration of Common Shares which may impact liquidity for the other shareholders, the Company does not believe that any definitive impact can be determined.

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In addition, sales of Common Shares held by COFMSDC and registered under the shelf registration statement, or any registration statement that goes effective following an exercise of demand registration rights, will increasetheincrease the number of Common Shares available for purchase in the public market and may adversely affect the value of the Common Shares held by other shareholders.  Even without substantial sales by COFMSDC or PEWC of their respective Registrable Securities, the possibility of such sales may create a “market overhang” that has the effect of depressing the trading price of the Common Shares.


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The Company has also granted to COFMSDC preemptive rights in the event of any issuance of additional equity securities (or securities convertible into or exchangeable for equity securities) by the Company, such that COFMSDC may subscribe for additional securities in order to maintain its then percentage ownership interest in the issued and outstanding equity securities of the Company.

Holding Company Structure; Potential Restrictions on the Payment of Dividends

We have no direct business operations other than our ownership of the capital stock of our subsidiaries and joint ventureassociate holdings.  While we have no present intention to pay dividends, should we decide in the future to do so, as a holding company our ability to pay dividends and meet our other obligations will depend upon the amount of distributions, if any, received from our operating subsidiaries and other holdings and investments.  Our operating subsidiaries and other holdings and investments, from time to time, may be subject to restrictions on their ability to make distributions to us, including as a result of restrictive covenants contained in loan agreements, restrictions on the conversion of local currency earnings into U.S. dollars or other hard currency and other regulatory restrictions.  For example, PRC legal restrictions permit payments of dividends by our business entities in the PRC only out of their retained earnings, if any, determined in accordance with relevant PRC accounting standards and regulations.  Under PRC law, such entities are also required to set aside a portion of their net income each year to fund certain reserve funds.  These reserves are not distributable as cash dividends.  The foregoing restrictions may also affect our ability to fund operations of one subsidiary with dividends and other payments received from another subsidiary.

Requirement to Maintain Effectiveness of the Registration Statement and to List on a National Securities Exchange; Effect of the Put of the COF Shares to PEWC

Requirement to Maintain Effectiveness of the Registration Statement and to List on a National Securities Exchange; Effect of the Put of the MSDC Shares to PEWC
Under the Amended and Restated Shareholders Agreement, COFMSDC has retained the right to sell its remaining Common Shares (the “COF“MSDC Shares”) to PEWC if the Company does not achieve a listing on a national Securities Market within the time frame provided in the agreement.agreement or the Company fails to maintain a listing on a national Securities Market after it has been attained.  The Company’s Common Shares are currently listed on the NASDAQ Capital MarketsGlobal Market tier. The Company intends to apply to list the Common Shares on the Global Markets tier after the Company is satisfied that it qualifies in all respects for that tier. However, there are no assurances that the Common Shares will qualify for the Global Markets tier or that the Company’s application, when filed, will be approved. In addition, the Company has agreed to maintain the effectiveness of the registration statement on Form F-3, for the benefit of COF,MSDC, and if the Company fails to do so for any period of thirty (30) consecutive trading days or an aggregate of sixty (60) trading days during any twelve month period, then COFMSDC may, subject to compliance with notice and other procedural requirements, exercise a right to sell its remaining Common Shares to PEWC.  At all times, the Company must exercise its reasonable best efforts to comply with its covenants under the Amended and Restated Shareholders Agreement.  Otherwise, the Company could be subject to a damages claim by COF. 

MSDC.

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Corporate Matters; Limited Recourse; Limited Enforceability

We are incorporated in and organized pursuant to the laws of Bermuda.  In addition, all of our directors and officers reside outside the United States and our material assets are located outside the United States.  As a result, it may be difficult for investors to effect service of process within the United States upon such persons or to realize against them in courts of the United States upon judgments predicated upon civil liabilities under the United States federal securities laws.  Even if investors are successful in realizing against such persons in courts of the United States, the laws of Taiwan may render such investors unable to enforce the judgment against the Company’s assets or the assets of its officers and directors.  Also, investors may have difficulty in bringing an original action based upon the United States federal securities law against such persons in the Taiwan courts.  Additionally, we have been advised by our legal counsel in Bermuda, Appleby (Bermuda) Limited, that there is doubt as to the enforcement in Bermuda, in original actions or in actions for enforcement of judgments of United States courts, of liabilities predicated upon U.S. federal securities laws, althoughBermudaalthough Bermuda Courts will enforce foreign judgments for liquidated amounts in civil matters subject to certain conditions and exceptions.  As a result, shareholders may encounter more difficulties in enforcing their rights and protecting their interests in the face of actions taken by management, the Board of Directors or controlling shareholders than they would if the Company were organized under the laws of the United States or one of the states therein, or if the Company had material assets located within the United States or some of the directors and officers were resident within the United States.  See “Enforceability of Certain Civil Liabilities” for additional information.


3.3.5     Risks Relating to Our Business

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3.3.4Risks Relating to Our Business
Risks Relating to Copper

Copper is the principal raw material we use, accounting for a majority of the cost of sales.  We purchase copper at prices based on the average prevailing international spot market prices on the LME for copper for the one month prior to purchase.purchase, or the first five days of the current average copper price.  The price of copper is affected by numerous factors beyond our control, including international economic and political conditions, supply and demand, inventory levels maintained by suppliers, actions of participants in the commodities markets and currency exchange rates.  As with other costs of production, changes in the price of copper may affect the Company’s cost of sales.  Whether this has a material impact on our operating margins and financial results depends primarily on the Company’s ability to adjust selling prices to its customers, such that increases and decreases in the price of copper are fully reflected in those selling prices.  Most of our sales of manufactured products reflect the cost of copper used to manufacture those products at the time the products are ordered.  In the ordinary course of business we maintain inventories of raw materials and finished products reasonably necessary for the conduct of our business.  These inventories typically reflect the cost of copper prevailing in the market at the time of purchase.  A long-term decrease in the price of copper would require the Company to revalue its inventory at periodic intervals to the then net realizable value, which could be below cost.  Copper prices have been subject to considerable volatility and it is not always possible to manage our copper purchases and inventory so as to neutralize the impact of copper price volatility.  Accordingly, significant volatility in copper prices could have an adverse effect on our operations.  In the fourth quarter of 2011, there was a dramatic decline in the price of copper on global markets.  This decline impacted adversely on the Company’s fourth quarter and year-end results, as much of the Company’s copper inventory was procured prior to the fourth quarter price decline.  No assurance can be given that such volatility will not recur.

Risks related to our Customer Base and our Geographic Markets

Our sales of manufactured and distributed products are made primarily to customers that use our products as components in their own products or in construction or infrastructure projects in which they participate.  The volume of our sales is dependent largely on generalsignificantly correlated with overall economic conditions in the markets in which we compete, including how much our customers invest in their own product manufacturing or project development.  Increases or decreases in economic activity and investment in the markets where we operate generally will result in higher or lower sales volume and higher or lower net income for the Company.

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Risks relating to Force Majeure Events

Operations and other business conducted at our plants and other facilities are at risk to acts of god consisting of uncontrollable natural and climatic events (often referred to as force majeure events), such as the 2011 flooding in much of Thailand that severely disrupted our manufacturing operations at our Thaithe Siam Pacific Electric Wire and Cable Ltd. (“Siam Pacific”) plant, a subsidiary 100% controlled by our subsidiary, Charoong Thai.  The severe flooding affected much of our Thai operations and forced the suspension of operations of Siam Pacific for a period of 5 months. The temporary suspension of operations at Siam Pacific Electric Wire & Cable Company Limited (“Siam Pacific”), which is 100% owned by Charoong Thai impacted adversely on its 2011 sales, which experiencedfive months resulting in a 20% reduction in product sales in 2011 compared with that2011.  The adverse impact of 2010. With the help of  its affiliated companies such asPacific Electric Wire & Cable (Shenzhen) Co., Ltd. (“PEWS”)andShanghai Yayang Electric Co., Ltd. (“Shanghai Yayang” or “SYE”), together with our parent company, PEWC, Siam Pacific partially restored its operationsflooding carried over into 2012.  Since then in January and February with shipments of 281 tons and 588 tons, respectively. Full production is expected to resume inThailand the second quarterof 2012.  The insurance coverage includes flood, fire and theft, but does not include flood nor losses due to business interruption.


Risks Relating to China

We conduct substantial business operations in China.  Accordingly, our results of operations and prospects are likely to be materially impacted by economic, legal and other developments in China.

North Asia Region

Economic Reform Measures in the PRC May Adversely Affect the Company’s Operations or Financial Condition

The PRC government has gradually moved away from a planned economic model and implemented economic reform measures emphasizing decentralization, utilization of market forces in the development of the economy and a high level of management autonomy.  While such economic reform measures are generally viewed asWhen General Secretary Xi Jinping took office in December 2012, the government decreased its focus on export-oriented activities and placed greater emphasis on building up rural areas in China, including integrating a positive development for foreign businesses investing or establishing operations in China,number of primitive, largely inaccessible agricultural areas into the national economy.  However, many of the reforms are unprecedented and may be subject to revision, modification or termination based on the outcomeoutcomes of such economic changesthe reform efforts and other considerations, such asincluding their social impact.impact on societal stability.  There is not sufficient administrative or judicial precedent to permitallow the Company to determine with any degree of certainty how the reforms will impact our business in China. In year 2011,
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Any Decrease in Real Estate Development and Construction Activities in China May Affect the government began to curtailCompany’s Operations or Financial Condition
Our wire and cable products are manufactured and sold in China and are used in the commercial and residential real estate industry and in infrastructure development.  Therefore, the demand for our wire and cable products is affected by the pace of modernization and the growth of the real estate industry in China, which could in turn be affected by a number of factors, such as the level of governmental investment in infrastructure development, the strength of the commercial and residential real estate markets, the level of disposable income, consumer confidence, unemployment rate, interest rates, credit availability and volatility in order tothe stock markets.
To dampen an over-heated real estate market, includingthe PRC government implemented a series of measures in the real estate market.  Beginning in 2011, the PRC government began to curtail real estate credit and the credit curtailment policy remains ongoing for the present. The real estate market in China may also be negatively affected by the reform of the real estate tax system in respect of levying real estate tax on individually owned real estate which is not used for a business purpose, which has already been implemented by certain local government authorities and may be expanded nationwide sometime in the future.
Any decrease in commercial and residential areas. While the extent of the impact is unknown at this time, any contraction in thereal estate development and construction sectoractivities would certainly affect the demand for building wires, oneour manufactured products and may affect the Company’s results of the products that the Company manufactures and sells in the southeastern Asia.

operations or financial condition.

The PRC Civil LawLegal System May Limit the Company’s Remedies

The ChinesePRC legal system is a civil law system based on written statutes.  Prior court decisions may be cited for reference but have limited precedential value.  Since the late 1970s, the PRC central government has promulgated a large volume of laws and regulations dealing withgoverning economic matters such as foreign investment, corporate organization and governance, commerce, taxation and trade.  In particular, since reforms were first introduced in 1979, the PRC legislation and regulations have significantly enhanced the protections affordedprovided to various forms of foreign investment in China.  Foreign investment laws and regulations in China are evolving and the interpretations of many laws, regulations and rules are not always uniform.  Accordingly, enforcement of these laws, regulations and rules involves uncertainties, which may limit the remedies available to us in the event of any claims or disputes with third parties.  In addition, any litigation in China may be protracted and could result in substantial costs and diversion of resources and management attention.

  As the PRC Control overlegal system continues to evolve, we cannot predict future developments in the ConvertibilityPRC legal system, including promulgation of Currency May Restrictnew laws, changes to existing laws or the Paymentinterpretation and enforcement thereof.

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Uncertainties Exist with respect to the Enactment Timetable, Interpretation and Implementation of Dividends

Draft PRC Foreign Investment Law and how it may affect the Company’s Corporate Governance

On January 19, 2015, the PRC Ministry of Commerce published a discussion draft of the proposed PRC Foreign Investment Law, aiming to, upon its enactment, replace the trio of existing laws regulating foreign investment in China, namely, the Sino-foreign Equity Joint Venture Enterprise Law, the Sino-foreign Cooperative Joint Venture Enterprise Law and the Wholly Foreign-invested Enterprise Law, together with their implementation rules.  The draft Foreign Investment Law embodies an expected PRC regulatory trend to rationalize its foreign investment regulatory regime in line with prevailing international practice and the legislative efforts to unify the corporate legal requirements for both foreign and domestic investments.  The PRC governmentMinistry of Commerce is currently soliciting comments on this draft and uncertainties exist with respect to its enactment timetable, interpretation and implementation.  The draft Foreign Investment Law, if enacted as proposed, may materially affect our corporate governance practice and increase our compliance costs.  For instance, the draft Foreign Investment Law imposes controlsperiodic information reporting requirements on foreign investors.  Aside from investment implementation report and investment amendment report that are required for each investment and alteration of investment specifics, an annual report is mandatory, and large foreign investors meeting certain criteria are required to report on a quarterly basis.  Any company found to be non-compliant with these information reporting obligations may potentially be subject to fines and/or administrative or criminal liabilities, and the convertibilitypersons directly responsible may be subject to criminal liabilities.
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PRC Regulations of the Renminbi into foreign currenciesLoans to and Direct Investment in certain cases, the remittancePRC Entities by Offshore Holding Companies may delay or prevent us from making Loans or additional Capital Contributions to our PRC Subsidiaries, which could adversely affect our ability to fund and expand our business
We conduct substantial business operations in China.  We may make loans to our PRC subsidiaries, or we may make additional capital contributions to our PRC subsidiaries.  Loans by APWC or any of currency out of China. Under existingour offshore subsidiaries to our PRC subsidiaries, which are treated as foreign-invested enterprises under PRC law, are subject to PRC regulations and foreign exchange regulations, paymentsloan registrations.  Such loans to any of current account items, including profit distributions, interest paymentsour PRC subsidiaries to finance their activities cannot exceed statutory limits and expenditures from trade related transactions, canmust be made in foreign currencies without prior approval fromregistered with the local counterpart of the State Administration of Foreign Exchange (“SAFE”).  The statutory limit for the total amount of foreign debts of a foreign-invested enterprise is the difference between the amount of total investment as approved by complying with certain procedural requirements. However, approval from SAFEthe PRC Ministry of Commerce or its local branch is required where foreign currency is remitted outcounterpart and the amount of China to payregistered capital expensesof such as the repayment of loans denominated in foreign currencies unless SAFE has pre-approved the amortization schedule of the foreign currency loan in question. The PRC governmentforeign-invested enterprise.  We may also at its discretion put restrictions on access in the futuredecide to foreign currencies for current account transactions. 

Pursuant to the Foreign Exchange Administration Regulation promulgated on January 29, 1996, as amended on January 14, 1997 and August 5, 2008, and various regulations issuedfinance our PRC subsidiaries by means of capital contributions.  These capital contributions must be approved by the SAFE and other relevant PRC government authorities, the Renminbi is freely convertible only with respect to current account items, such as trade-related receipts and payments, interest and dividends. Capital account items, such as direct equity investments, loans and repatriationsMinistry of investments, require the prior approval of the SAFECommerce or its local branches for conversion of Renminbi into foreign currency, such as U.S. dollars, and remittance of the foreign currency outside the PRC. Payments for transactions that take place within the PRC must be made inRenminbi. Foreign exchange transactions under the capital account are still subject to limitations and require approvals from, or registration with, the SAFE and other relevant PRC governmental authorities, or their competent local branches.

counterpart.

On August 29, 2008, the SAFE promulgated SAFE Circular No. 142, a notice regulating the conversion by a foreign-invested company of foreign currency into Renminbi by restricting how converted Renminbi may be used.  This notice requires that the Renminbi capital converted from the foreign currency-denominated capital of a foreign-invested companyenterprise only be used for purposes within the business scope approved by the applicable governmental authority and may not be used for equity investments within the PRC unless specifically provided for otherwise in its business scope.  In addition, the SAFE strengthened its oversight of the flow and use of the Renminbi fundscapital converted from the foreign currency-denominated capital of a foreign-invested company.enterprise.  The use of such Renminbi capital may not be changed without SAFE’s approval and may not be used to repay Renminbi loans if the proceeds of such loans have not yet been used for purposes within the Company’s approved business scope. Violations of SAFE Circular No. 142 may result in severe penalties, including substantial fines as set forth in the Foreign Exchange Administration Regulation.  As a result, SAFE Circular No. 142 may impose an additional layer of bureaucratic compliance and could, under certain circumstances, limit our ability to transfer the proceeds from our non-RMB denominated borrowing arrangements outside of the PRC to our PRC subsidiaries, which may, absent the requisite approvals from SAFE, adversely affect the continued growth of our business.

Pursuant to

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Furthermore, the SAFE promulgated a SAFE Circular No. 75, (i)45 on November 9, 2011, which, among other things, restricted a PRC resident must register with the local SAFE branch before establishing or controlling an overseas special purpose vehicle(“SPV”), for the purpose of obtaining overseas equity financingforeign-invested enterprise from using the assetsRenminbi capital converted from its registered capital to provide entrusted loans or repay loans between non-financial companies.  Violations of or equity intereststhese circulars may result in a domestic enterprise; (ii) when a PRC resident contributes the assets of or its equity interests in a domestic enterprise into an SPV, or engages in overseas financing after contributing assets or equity interests into an SPV, such PRC resident must register his or her interestsevere penalties, including substantial fines as set forth in the SPVForeign Exchange Administration Regulation.
In light of the various requirements imposed by PRC regulations on loans to and any subsequent change theretodirect investment in PRC entities by offshore holding companies, including SAFE Circulars referred to above, we cannot assure you that we will be able to complete the necessary government registrations or obtain the necessary government approvals on a timely basis, if at all, with the local SAFE branch;respect to future loans or capital contributions by us to our PRC subsidiaries and (iii) when the SPV experiences a material event, such as a change in share capital, merger or acquisition, share transfer or exchange, spin-off or long-term equity or debt investment, the PRC resident must, within 30 days after the occurrenceconversion of such event, registerloans or capital contributions into Renminbi.  If we fail to complete such event with the local SAFE branch. On May 29, 2007, the SAFE issued guidanceregistrations or obtain such approvals, our ability to its local branches for the implementation of the SAFE Circular No. 75,capitalize or otherwise fund our PRC operations may be negatively affected, which guidance provides for more standardized, specificcould adversely affect our ability to fund and stringent supervision regarding such registration requirements and requires PRC residents holding any equity interests or options in SPVs, directly or indirectly, controlling or nominal, to register with the SAFE.

expand our business.

Political or Social Instability in the PRC May Adversely Affect the Company’s Operations or Financial Condition

Political or social instability in China could also adversely affect our business operations or financial condition.  In particular,addition, adverse public health epidemics or pandemics in China could not only interfere with our ability to operate our PRC subsidiaries, but could also affect the country’s overall economic growth, which could in turn affect the sales of our products in China.  Growing environmental awareness and concern over the deterioration of the quality of the environment in China, including air and water quality, could dampen domestic industrial growth and reduce foreign investor interest in PRC investment.  In addition, as our corporate headquarters are located in Taipei, any escalation in political tensions between the PRC and the government of Taiwan could impact adversely our ability to manage our Chinese operations efficiently or without third party interference.

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Inflation in the PRC May Adversely Affect the Company’s Operations or Financial Condition

The rapid growth of the PRC economy has historically resulted in high levels of inflation, coupled with a rise in the value of RMB against the U.S. dollars.dollar.  The PRC government has publicly announced its commitment to control inflation, and the anti-inflation policies of the PRC government may have an adverse effect on the business climate and growth of private enterprise in the PRC.  An economic slowdown may increase our costs.  If inflation is significant, our costs would likely increase, and there can be no assurance that we would be able to increase our prices to an extent that would offset the increase in our expenses.

PRC Power Shortages and Lack of Insurance May Adversely Affect the Company’s Operations or Financial Condition


We consume substantial amounts of electricity in our manufacturing processes at our production facilities in China.  Certain parts of China have been subject to power shortages in recent years.  We have experienced a number of power shortages at our production facilities in China to date, particularly in Shenzhen where numerous clusters of factories are situated.  We are sometimes given advance notice of power shortages, and in relation to this webut often power shortages or outages occur unexpectedly for various periods of time.  We currently have a backup power system at certain of our production facilities in China.  However, there can be no assurance that in the future our backup power system will be completely effective in the event of a power shortage, particularly if that power shortage is over a sustained period of time and/or we are not given advance notice thereof.  Any power shortage, brownout or blackout for a significant period of time may disrupt our manufacturing, and as a result, may have an adverse impact on our business.

The insurance industry in China is still at an early stage of development and foreign insurance companies are limitedpermitted to operate only in a certain number of biglarge cities.  In particular,  PRC insurance companies do not offer extensive business insurance products.  As a result, we have limited business liability and disruption insurance coverage for our operations in China.  Any business disruption, litigation or natural disaster might result in our incurring substantial costs and the diversion of resources.

resources, which could have a material adverse effect on our business and operations.

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PRC Tax Treatments May Affect the Company’s Operations or Financial Condition

On March 16, 2007, the National People’s Congress of the PRC, passed the new PRC Enterprise Income Tax Law (the “New EIT Law”). 

Under the New EIT Law, effective January 1, 2008,current tax law in China, adoptedforeign-invested enterprises no longer receive more favorable tax treatment than domestic enterprises. China has in place a uniform tax rate of 25% for all enterprises (including foreign-invested enterprises) and has revoked the then currentprior tax exemption, reductionexemptions, reductions and preferential treatments applicable to foreign-invested enterprises.  However, there is
Dividends Payable by Our PRC Subsidiaries to Their Respective Offshore Investors May Be Subject to PRC Withholding Taxes
Under Chinese tax law and related regulations, dividends, interests, rent or royalties payable by a transition period for enterprises, whether foreign-invested or domestic, that were receiving preferential tax treatments granted by relevant tax authorities atenterprise, such as our PRC subsidiaries, to any of its foreign non-resident enterprise investors, and proceeds from any such foreign enterprise investor’s disposition of assets (after deducting the time the New EIT Law became effective.  Enterprises thatnet value of such assets) are subject to ana 10% withholding tax, unless the foreign enterprise incomeinvestor’s jurisdiction of incorporation has a tax treaty with China that provides for a reduced rate of withholding tax.  Undistributed profits earned by foreign-invested enterprises prior to January 1, 2008 are exempted from any withholding tax.  Bermuda, where APWC, the ultimate owner of our PRC subsidiaries and investments, is incorporated, does not have such a tax treaty with China.  Hong Kong, where Crown Century Holdings Limited (“CCH HK”), the sole shareholder in Pacific Electric Wire and Cable (Shenzhen) (“PEWS”), is incorporated, has a tax arrangement with China that provides for a 5% withholding tax, or EIT, rate lower than10% for 2013 and onwards, on dividends subject to certain conditions and requirements, such as the requirement that the Hong Kong resident enterprise own at least 25% may continue to enjoy the lower rate and gradually transition to the new tax rate within five years after the effective date of the New EIT Law.  Enterprises that are currently entitled to exemptions or reductions fromPRC enterprise distributing the standard income tax rate fordividend at all times within the 12-month period immediately preceding the distribution of dividends and be a fixed term may continue to enjoy such treatment until the fixed term expires. PEWS is the only subsidiary“beneficial owner” of the Companydividends.  If our PRC subsidiaries declare and distribute profits earned after January 1, 2008 to their respective offshore investors in the PRC that still enjoys a reduced tax rate under the transitional period.  The preferential income tax rate of PEWS under the revised tax incentive regulations was 22% in 2010 and 24% in 2011, and is 25% in 2012.  In the beginning of 2012, the Chinese government announced that it was contemplating a conversion of its sales tax system into a value added tax system (“VAT”).  While a changefuture, such payments will be subject to a VAT system would help alleviate sales taxes to some extent, the details of the proposed changes are still unknown to industries and trading enterprises.  Accordingly, the Company cannot say what impact, if any, a conversion to a VAT system of taxation might have on the Company’s financial results.

withholding tax.

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Labor Law Legislation in the PRC May Adversely Affect the Company’s Operations or Financial Condition

The PRC Labor Contract Law became effective on January 1, 2008.  It formalizes workers’ rights concerning overtime hours, pensions, layoffs, employment contracts and the role of trade unions.  Considered one of the strictest labor laws in the world, among other things, this new law requires an employer to conclude an “open-ended employment contract” with any employee who either has worked for the employer for ten years or more or has had two consecutive fixed-term contracts.  An “open-ended employment contract” is in effect a lifetime, permanent contract, which is terminable only in specified circumstances, such as a material breach of the employer’s rules and regulations, or for a serious dereliction of duty.  Such employment contracts with qualifying workers would not be terminable if, for example, the Company determined to downsize its workforce in the event of an economic downturn.  Under the newcurrent law, downsizing by 10% or more (or more than 20 persons) may occur only under specified circumstances, such as a restructuring undertaken pursuant China’sto the PRC Enterprise Bankruptcy Law, or where a company suffers serious difficulties in production and/or business operations.  Any of the Company’s staff employed to work exclusively within the PRC are covered by the new law and thus, the Company’s ability to adjust the size of its operations when necessary in periods of recession or less severe economic downturns has been curtailed.  Accordingly, if the Company faces future periods of decline in business activity generally or adverse economic periods specific to the Company’s business, this new law can be expected to exacerbate the adverse effect of the economic environment on the Company’s results of operations and financial condition.  Additionally, this new law has affected labor costs ofourof our customers which maycould result in a decrease in such customers’ production and a corresponding decrease in their purchase of our products.


Exposure to Foreign Exchange Risks

Changes

Fluctuations in foreign exchange rates influence our results of operations.  Our principal operations are located in the three geographic regions that have now been designated as our revised business segments; namely, the North Asia region, the Thailand Australia, Singaporeregion and China, and athe Rest of the World (“ROW”) region.  See---section 4.1.1---Certain Recent Events.  A substantial portion of our aggregate revenues is denominated in the following currencies:  Baht, Australian dollars, Singapore dollars or Renminbi.  Nearly all of the raw materials for these operations are imported and paid for in U.S. dollars and a substantial portion of our future capital expenditures are expected to be in U.S. dollars.  We require a significant amount of U.S. dollars for our ongoing equipment upgrade and maintenance programs.  Any devaluation of any of the Baht, the Australian dollar, the Singapore dollar or the Renminbi against the U.S. dollar would increase the effective cost of foreign manufacturing equipment and the amount of our foreign currency denominated expenses and liabilities and would have an adverse impact on our operations.

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Although our reporting currency is U.S. dollars, the functional currency of our Thai operations,Thailand region, which accounted for 42.0%37.0% of our sales in 2011,2014, is the Thai Baht.  The functional currencycurrencies of our Singapore operations,ROW region, which accounted for 15.7%37.6% of our sales in 2011, is2014, are the Singapore dollar. The functional currency of our Australian operations, which accounted for 13.0% of our sales in 2011, isAustralia dollar and the AustralianSingapore dollar.  The functional currencies for our ChinaNorth Asia operations, which, in total accounted for 29.3%25.4% of our sales in 2011,2014, are divided into two groups: for Shandong Pacific Rubber Cable Company, Ltd. (“SPRC”, equity investee with 25% equity owned by APWC, accounting under equity method for consolidation purpose)method),SPFO (which was disposed of on December 1, 2011) and SYE,Shanghai Asia Pacific Electric Co., Ltd. (“Shanghai Yayang”), their functional currency is Renminbi, while for CCH HK PEWS and Epan Industries Pte. Ltd (“Epan Industries”) in Singapore,PEWS their functional currency is U.S. dollars.  Accordingly, the functional currency accounts of these operations are all translated into U.S. dollars utilizing for the year, the balance sheetreporting date exchange rate for balance sheet accounts, and an average exchange rate for the year for the income statement accounts.  Such translation ofaccounts for the functional currency accounts is recognized as a separate component of shareholders’ equity.reporting purposes.  Any devaluation of the Baht, the Australian dollar, the Singapore dollar, or the Renminbi against the U.S. dollar would adversely affect our financial performance measured in U.S. dollars.

Competition

The wire and cable industry in the Asia Pacific region is highly competitive.competitive, and if we fail to successfully invest in and maintain product development, productivity improvements and customer service and support, sales of our products could be adversely affected.  Our competitors include a large number of independent domestic and foreign suppliers.  Certain competitors in each of our markets have substantially greater manufacturing, sales, research and financial resources than we do.  We and other wire and cable producers increasingly compete primarily on the basis of product quality and performance, reliability of supply, customer service and price.  To the extent that one or more of our competitors isare more successful with respect to the primary competitive factors, our business could be adversely affected.

  In addition, the Company’s profit could be adversely impacted if low margin wire and cable manufacturers in China enter into the markets where we operate.  With respect to certain of our products, they are made to common specifications and may be interchangeable with the products of certain of our competitors.  Since customers could potentially substitute our products with those of our competitors, customer loyalty is an important pillar of our business’s competitive position.

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Highly Concentrated Markets
Failure to properly execute customer projects in certain highly concentrated markets may adversely impact our ability to obtain similar contracts from other customers in the market and may result in material financial penalties.  In certain markets, sales of manufactured products are highly concentrated in large state-controlled entities or large private infrastructure developers.  As those markets are often highly concentrated, the loss of individual customers in such markets may have a material adverse impact on our position in that market as a whole.
Risks associated with Required Productivity Increases

Our business strategy includes a focus on increasing profitability through increased efficiency and productivity.  In the event we are not able to implement measures to increase efficiencies and productivity, we may be limited in achieving increased profitability or may become less profitable.  Moreover, productivity increases are linked to capacity utilization rates.  A drop in the utilization rate of our manufacturing capacity would adversely impact productivity.

Employees’ Unions
Some of the operating subsidiaries of the Company have a large number of employees that are members of employees’ unions.  Failure to successfully negotiate and/or renew collective agreements, strikes, or other labor disputes could result in a disruption of our operations.  The Company believes that approximately 100% and 99% of the employees of PEWS and Shanghai Yayang, respectively, are members of their respective Company Workers’ Unions.  Approximately 16% of the employees of APEC are members of the Australian Workers’ Union.  While the Company has never experienced a strike or other disruption due to labor disputes, the possibility exists that a labor dispute could lead to a disruption of our operations, hindering our ability to serve our customers, and ultimately having a material adverse impact on the Company’s results of operations.
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Information Systems
Failure or disruptions of our information systems could have a material impact on our business and operations.  The Company heavily relies on information systems and technology for, amongst other tasks, processing customer orders, shipment of products, billing our customers, tracking inventory, supporting accounting functions and financial statement preparation, paying our employees, and otherwise running our business.  Disruptions in our system, whether from external or internal causes, could have a significant material adverse impact on our business.  Specifically, a disruption in our systems could adversely affect our ability to properly serve our customers and as a result, could affect our customer loyalty and ultimately, have an adverse impact on our business.  The Company is actively engaged in the monitoring of our information systems to manage the risk of security threats and sophisticated computer crime and to reduce the risk of disruption to the integrity of our data.
Employees and Personnel
If we fail to retain our key employees and attract qualified personnel, our business may be harmed.  The loss of any of our executive officers or other key employees, without a properly implemented transition plan, could have an adverse affect on operations.  The loss of executive officers or key employees could impair customer relationships and result in the loss of vital industry knowledge, expertise, and experience.  There is also a risk of losing key employees to our competitors, which can lead to the theft of trade secrets as well as competitors gaining valuable information about our manufacturing process. The Company’s future success depends on its continued ability to attract and retain talented and qualified personnel.
Indebtedness
Indebtedness

AsAs of December 31, 2011,2014, the Company had a total of $316.4$278.4 million in credit available to itself, or one or more of its operating subsidiaries.  The available credit is provided by a total of 1416 banks in the various regions/territories in which we operate.  Out of total available credit, $224.6$168.2 million was unused.unused and available for borrowing.  The Company, collectively and on an individual basis is not highly leveraged and management does not consider it to be likely that the Company will become highly leveraged.  WeightedThe weighted average borrowing rate, for all theoutstandingthe outstanding loans combined, would sum up to be 3.71%,was 3.57% for 2014, which runs, at this point in time, slightly higher than like-kind borrowing rates that might be available to us in the marketplace, i.e., three month LIBOR (data of April 24, 2012)7, 2015) of 0.47%0.27% plus 2.5%.


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Impairment Charges
As a result of market and industry conditions or in the event we close any of our manufacturing facilities, we may be required to recognize impairment charges for our long-lived assets, including goodwill.  To the extent the Company must incur goodwill impairment on our long-lived assets, there may be an adverse effect on our financial condition, including earnings per share and other financial results.
As of December 31, 2014, the Company performed impairment testing for SPRC, equity investee with 25% equity owned by APWC, accounting under equity method, as SPRC had been reporting losses in the past few years owning to slower economy growth and sluggish mining business in China in recent years. The Company determined that no impairment loss was recognized against SPRC. Nevertheless, the Company cannot guarantee that no impairment loss will incur in the future for various reasons including, but not limited to, strategic decisions made in response to changes in economic and competitive conditions, the impact of the economic environment to our business or a material adverse change in our relationship with our clients. If we recognize significant impairment charges, our results of operations may be materially and adversely affected.
Composite Services Agreement with PEWC

We engage in transactions in the ordinary course of business with PEWC, including the purchase of certain raw materials and the distribution of PEWC products in various countries in the Asia Pacific region.  We and PEWC have entered into a composite services agreement dated November 7, 1996, as amended and supplemented (the “Composite Services Agreement”), which contains provisions that define our relationship and the conduct of our respective businesses and confers certain preferential benefits on us.  The Composite Services Agreement is renewable at our option and is currently in force.  However, we are unable to predict whether PEWC would, at some future date, seek to limit, or be unable to perform in whole or in part, the business it conducts with the Company pursuant to the terms of the Composite Services Agreement.

Risks Relating to Thailand

Region

A substantial portion of our Thai operations, which accounted for approximately 42.0%37.0% of our total net sales in 2011,2014, consists of the manufacture of telecommunications and power cable and sales of those products for use in large-scale telecommunications projects and various construction projects in Thailand.  As a result, our future results will depend in part on the political situation in Thailand and the general state of the Thai economy.  Recent floodingWith the political tension remaining high in Thailand, particularly in the greater Bangkok area, has caused a tremendous amount of damage to all industries, including one of our factories belonging to Siam Pacific.  APWC immediately organized an emergency rescue team comprising of engineers, technicians, and electricians to help restore the factory back to its operational mode. So far 90% of the machinery is restored and shipment to customers resumed with 281 tons in January 2012 and 588 tons shipped out in February.  However at the moment, Siam Pacific has experienced a slight delay in renewing its insurance policy in 2012, as most of insurance companies covering the Thai market are reluctant to bear the risk of providing companies with flood insurance coverage.

While the political turmoil in Thailand has subsided since 2010, the continuing political uncertainty and the risk of further social unrest lessenstends to lessen the attractiveness of the local market for foreign investment, and diminishes the focus of the government on infrastructure development, both of which considerations may adversely impact on the volume of business of the Company’s actual and potential customers in the Thai market.

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The Company’s Thai operations remain vulnerable to uncertainties with regard to payment for current sales and the award of future contracts in view of the ongoing political instability in Thailand.  Additionally, in recent years the Thai economy has been highly cyclical and volatile, depending for economic growth in substantial part on a number of government initiatives for economic expansion.  Moreover, the Baht remains volatile and subject to significant fluctuations in relation to the U.S. dollar.  Such fluctuations in the value of the Baht may negatively impact our performance.

Environmental Liabilities

We are subject to certain environmental protection laws and regulations governing our operations and the use, handling, disposal and remediation of hazardous substances used by us.  A risk of environmental liability could arise from our manufacturing activities in the event of a release or discharge by us of a hazardous substance.  Under certain environmental laws, we could be held responsible for the remediation of any hazardous substance contamination at our facilities and at third party waste disposal sites and could also be held liable for any consequences arising out of human exposure to such substances or other environmental damage.  There can be no assurance that the costs of complying with environmental, health and safety laws and requirements in our current operations or the liabilities arising from past releases of, or exposure to, hazardous substances, will not result in future expenditures by us that could materially and adversely affect our financial results, cash flows or financial condition.


Alternative Transmission Technologies

Our fiber optic and copper-based telecommunications business is subject to competition from other transmission technologies, principally wireless-based technologies.  Fiber optic cable is presently being used in telecommunications trunks and feeder cable businesses and minimally in the access cable business.  In November 2011 we sold our entire 51% equity interest in SPFOShandong Pacific Fiber Optic Cable Co., Ltd. (“SPFO”)to a group of buyers in China for a cash consideration of $2.9 million, due to its low profit margin generation and fierce competition in the local fiber optic cable market.  In January 2013 we completely disposed of another 49% ownership associate in Shangdong China:  Shangdong Huayu Pacific Fiber Optics, thus we entirely pulled out of the Asia Pacific markets where we compete, wirelessfiber optics business in China.  Wireless telecommunications businesses have sometimes made substantial inroads in early emerging markets where sufficient funding may not then be available to install the infrastructure necessary for market-wide fixed line telecommunications.  In addition, the ease of use of wireless telecommunications may make that medium an attractive alternative in circumstances where access to fixed line telecommunications is limited.  While these technologies do present significant competition in the markets in which we conduct or plan to conduct business, the Company believes that demand for its fixed wire products will remain strong.  However, no assurance can be given that the future development and use of such alternative technologies will not adversely affect our results of operations.

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International Business Risks

We are subject to risks specific to our international business operations, including:  the risk of supply disruption; production disruption or other disruption arising from events of force majeure, such as the severe weather and climatic events that caused the 2011 floods in Thailand; the outbreak of highly infectious or communicable diseases such as Severe Acute Respiratory Syndrome, swine influenza or pandemics of a similar nature; the risk of potential conflict and further instability in the relationship between Taiwan and the PRC; risks related to national and international political instability, such as disruptions to business activities and investment arising out of the political unrest and turmoil in Thailand; risks related to the recent global economic turbulence and adverse economic developments in a number of Asian markets; risks related to changes in governmental or private sector policies and priorities with respect to infrastructure investment and development; unpredictable consequences on the economic conditions in the U.S. and the rest of the world arising from terrorist attacks, and other military or security operations; unexpected changes in regulatory requirements or legal uncertainties regarding tax regimes; tariffs and other trade barriers, including current and future import and export restrictions; difficulties in staffing and managing international operations in countries such as Australia, Singapore, the PRC, Thailand and Taiwan; risks that changes in foreign currency exchange rates will make our products comparatively more expensive; limited ability to enforce agreements and other rights in foreign countries; changes in labor conditions; longer payment cycles and greater difficulty in collecting accounts receivable; burdens and costs of compliance with a variety of foreign laws; limitation on imports or exports and the possible expropriation of private enterprises; and reversal of the current policies (including favorable tax and lending policies) encouraging foreign investment or foreign trade by our host countries.  Although we have not experienced any serious harm, except for the flooding situation in Thailand in 2011, in connection with our international operations, we cannot assure you that such problems will not ariserise in the future.

Item 4 Information on the Company

4.1 History and Development of the Company

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Item 4:Information on the Company
4.1History and Development of the Company
General

Asia Pacific Wire & Cable Corporation Limited was formed on September 19, 1996 as a Bermuda exempted limited liability companyCompany under the Companies Act.  The address of the Company’s principal place of business is 7/Fl. B, No. 132, Sec. 3, Min-Sheng East Road, Taipei, 105, Taiwan, Republic of China, and its telephone number is (886) 2-2712-2558.  Puglisi & Associates, located at 850 Library Avenue, Suite 204, Newark, Delaware 19711, is the Company’s agent for service of process in the United States.

The Company is principally engaged in the manufacture and distribution of telecommunications (copper and fiber optic) and power cable, enameled wire and enameledelectronic wire products in the Asia Pacific region, primarily in Thailand, China, Singapore and Australia.  The Company manufactures and distributes its own wire and cable products (“Manufactured Products”) and also distributes wire and cable products (“Distributed Products”) manufacturedbymanufactured by its principal shareholder, PEWC.PEWC, and other third party suppliers.  The Company also provides project engineering services in the supply, delivery and installation (“SDI”) of power cables to certain of its customers.


Principal Capital Expenditures and Divestitures

Total purchases of property, plant and equipment amounted to $3.3$10.9 million in 2009, $3.72012, $9.5 million in 2010,2013 and $8.9$6.0 million in 2011,2014, mostly for old machinery replacements for Australia Pacific Electric Cable Pty Limited (“APEC”) and Sigma Cable Company (Private) Limited (“Sigma Cable”), and for newly purchased production machinery and equipment for the CTW group in Thailand and Ningbo Pacific Cable Co., Ltd. (“NPC” or “Ningbo”).

4.2.1 Certain Recent Events

On April 30, in China and for a new plant at Shenzhen for the Chinese domestic market.

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4.1.1Certain Recent Events
In 2012, the Company determined to convert its financial accounting principles from US GAAP to IFRS.  The Company made this change to align the accounting principles used at its public holding company level with those employed for some years by its principal operating subsidiaries and because of the increasing acceptance and usage of IFRS by foreign private issuers.  Accordingly, the financial data contained in this report for the fiscal years ended December 31, 2014, 2013 and 2012 are reported in accordance with IFRS.
As part of the Company’s evaluation of its financial reporting, the Company examined its historical business reporting segments, consisting of manufactured products, distribution and SDI project engineering.  The Company noted that in some years manufactured products represented 90% or more of total revenues, that SDI project engineering to date has been limited to the Singapore market and that distribution has traditionally been viewed as an ancillary component of the Company’s overall business plan.  After careful deliberation, management decided in 2013 to reorganize the Company’s business segments along regional lines, which it believes better reflects the organizational structure, deployment of its assets, cost allocations and information gathering and reporting of the consolidated group.  In addition, in 2013 the Company appointed Mr. William Gong Wei as it chief operating officer (“COO”) and Mr. Gong Wei undertook, at the Company’s request, a reorganization of the lines of reporting among the Company’s operating subsidiaries to reflect the determination of management to emphasize regional reporting.
The Company now has three operating segments, consisting of the North Asia region, the Thailand region and the Rest of the World (“ROW”) region.
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Each segment engages in business activities generating revenues and incurring expenses.  Each segment generates a management report which contains its own financial information and submits to the Company’s chief operating decision maker (“CODM”) for review on a monthly basis.  The Company’s CEO and COO are the ones who review all the management reports provided by each segment, make the decisions on how the resources are to be allocated and assesses the operating performances based on the reports.  Each reporting segment has a segment manager who is in charge of the business operations in such region and regularly contacts the Company’s CEO and COO to discuss operational-related matters.
On December 31, 2014, the Company announced certain of its financial results for the fiscal year ended December 31, 2011, which included gross revenuefirst nine months of $471.9 million, net loss from continuing operations2014. On October 8, 2014, APWC announced its financial results for the first six months of $3.9 million and loss per share from continuing operations of $0.49.

2014. On March 21, 2012,August 13, 2014, the Company announced its financial results for the first three months of 2014. At that it has been awarded three new supply contracts in Singapore valued at approximately $87 million.

On February 9, 2012,time, the Company announced also that its Board of Directors had authorized the appointmentfuture implementation of MZ-HCI as APWC’s new investor relations firm.  The contract with MZ-HCI would providea share repurchase program of up to $1 million worth of its Common Shares. APWC with total solution in terms of investor relations work, investor relations website design, press releasesdid not announce a commencement date for that future share repurchase program and, XBRL report printing with reduced costs.

On October 7, 2011,to date, it has not yet been implemented.  In addition, Mr. Yuan Chun Tang, CEO, and Mr. Ivan Hsia, CFO, were authorized to take all actions necessary to organize and implement the Company’s 2014 annual general meeting of shareholders passed(the “2014 AGM”).

The Company conducted its 2014 AGM in Taipei on October 9, 2014, where all matters put to a resolution at the Annual General Meeting (“AGM”) adopting the third amended and restated bye-lawsvote of the Company (the “Bye-Laws”), which allowthe Company to purchase its own shares for cancellation or acquire them to be held as treasury shares, as provided for in Section 42B of the Companies Act, and to be applied or allotted for any of the purposes permitted by said Section 42B. At the AGM, the shareholders also elected to the Board each of the Directors named in Item 6 of this Annual Report.

On September 7, 2011, the Commission declared effective the Company’s Post‑Effective Amendment No. 8 to a registration statement on Form F‑1 reporting on and converting to Form F‑3, covering 2,766,154 Common Shares, of which 1,410,739 Common Shares are held by PEWC and 1,355,415 Common Shares are held by COF.

On April 29, 2011, the Common Shares of the Company commenced trading on the NASDAQ Capital Markets tier.

On March 17, 2011, the Board passed resolutions whereby 1) it accepted the resignation of an existing director, Mr. Lee Gai Poo, 2) it appointed a new member to the Board, Dr. Lambert Ding, as an independent director, who also serves as a member of the Audit Committee, and 3) it passed on amendment to the Audit Committee charter, to clarify that the appointment of the independent auditors is subject to shareholder approval.

4.2.2 Managing Our Business in Current Market Conditions

were approved.

4.1.2Managing Our Business in Current Market Conditions
In order to address the continuing market challenges facing our business, the Company has taken and plans to continue to implement a number of measures in order to maintain efficient operations.

Specifically, the Company has continued to focus on increased efforts to collect its receivables on a timely basis.  The days of sales outstanding in 2011 have improved from 1022014 was 85 days compared to 92 days.98 days in 2013.  The Company continues to focus on working actively with all of its significant customers to reduce collection times and minimize write-offs.  The Company has also reduced its inventory levels through planned reductions in raw material purchases while negotiating with suppliers to reduce costs of raw materials and supplies.  The Company has focused also on reducing operating costs where practicable.  Overall the Company has decreasedits headcount by 92 since the beginning of 2011, which reflected management’s view that the business of APWC would experience some slowness in 2011, which would also cause an erosion on net income for the fiscal year. ��Accordingly, headcount reduction became one of the cost containment measures taken by the Company.  The Company has entered into certain copper futures contracts in Singapore and at CTW in several instances in order to reduce the effect of the current volatility in copper prices on its operations.  The Company has also negotiated and finalized arrangements with banks for additional loans and credit facilities to be applied against construction of NPC’s plant.


We believe that the successful implementation of these actions has had a positive effect on our cash resources, and we intend to continue these measures in order to preserve our liquidity and maintain a strong cash position.  As of December 31, 2011,2014, the Company had available and unused lines of credits from suppliers, banks and other lenders totaling, in the aggregate, approximately $224.6$168.2 million, an increasea decrease of $38.6$3.5 million from athat date one year ago.prior.  We believe however that available and unused amounts of credit are sufficient to support our current working capital needs.  The total bank loans and trust receipts outstanding as of year-end 2011December 31, 2014 were also reduced to$12.1 million higher than that as of December 31, 2013.  Trust receipts represent debt were incurred by the lowest levelCompany for goods then in some time, from $67.4 million in 2010 to $52.8 million in 2011, reflecting the downward trend of copper price at end of fourth quarter 2011 and also our effort in controlling the raw material stock level.

4.2.3 its possession.Recent Business Trends

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4.1.3Recent Business Trends
APWC experienced a 5.7% growth2% reduction in overall 2014 revenues in 2011 over 2010, but sufferedagainst revenue of 2013 and a decrease in gross margins of 3.5% in 2011 when compared withprofit by 29.1% against that of 2010.2013.  Operating profit was down from $28.7$17.2 million in 20102013 to $1.9$5.2 million in 2011,2014, due primarily to the fact that the Company wrote off goodwill in the amount of $8.8 million and Siam Pacific incurred flood damage of $3.9 million. The gross margin erosion in 2011 can be attributed primarily to two factors: 1) the copper price per tonnage in 2011 increased by 17% whereas our average selling price only increased by 11.7% and 2) our factory machinery utilization rate was below the optimal level.  The cost of sales increased as a result of the 2011lower drop in our factory utilization rate.  The material decline in gross margin of the Thailand region which was caused, in part, by the continuous political unrest in Thailand and more intense competition with the other factors that impacted adversely onCompany’s business in Australia as well as the provision of $2.2 million provided for the delinquent accounts of our results,customers in China.  The Company's gross margin yielded lossearnings per share of $0.49 per share$0.04 in 20112014, compared to earnings per share of $1.02$0.42 in 2010.

4.3 Business Overview

2013 and $0.70 in 2012.

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4.2Business Overview
The Company is a holding company that operates its business through operating subsidiaries and joint ventures,associates, principally located in Thailand, China, Singapore and Australia.

The following chart shows the organizational structure of the Company as of December 31, 2014 and its principal operating subsidiaries, including joint ventureaffiliate ownerships, and the percentage of ownership interest and voting power in each case.  The location of the headquarters of each company is indicated in parentheses under the company’s name (“S” for Singapore, “T” for Thailand, “A” for Australia and “C” for China or Hong Kong).


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Thailand

Region

The Company’s Thai operations are conducted through Charoong Thai, Siam Pacific, Double D Cable Company Ltd. (“DD”) and Pacific-Thai Electric Wire & CableSiam Fiber Optics Co. Ltd. (“Pacific Thai”). Pacific Thai was transferred into Siam Pacific in March 2011.

Optics”)

Charoong Thai is a publicly-traded Thai corporation, the shares of which are listed on the Stock Exchange of Thailand (“SET”).  It manufactures aluminum and copper electric wire, medium and high voltage power cable and telecommunications cable.  It has subsidiaries and affiliates in the businesses of optic fiber cable manufacturing and telecommunication and network services.  Charoong Thai was established in Thailand in 1967 as a limited public company.  As of December 31, 2011,2014, the Company effectively owned 50.93% of the issued and outstanding shares of Charoong Thai.  The Company’s present intention is to maintain majority ownership of the voting securities of Charoong Thai.  The board of directors of Charoong Thai may authorize the issuance of additional shares of common stock of Charoong Thai.  The Company has preemptive rights to purchase its pro rata share of any additional authorized shares, less amounts reserved for directors, officers and employees.  In the event the board of Charoong Thai decides to cause it to issue additional shares, the Company may decide not to exercise its preemptive rights, in which case the Company’s interest may be diluted.

  In May 2013, rather than producing premium products, a new subsidiary – named “DD” was formed by Charoong Thai in order to produce cable products that were just on par with, or exceeded, national standards.

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Siam Pacific was established in 1988 as a joint venture between PEWC and Italian-Thai Development Plc (“Ital-Thai”), a third party, which at the time was the largest diversified construction company in Thailand, principally engagedengaging in the design, engineering, construction and project management of large-scale civil engineering and telecommunications projects in Thailand.  Capitalizing on PEWC’s wire and cable manufacturing expertise and Ital-Thai’s significant presence in the local market, Siam Pacific was able to establish its presence in this market and gain knowledge of business opportunities in Thailand.  Siam-PacificSiam Pacific is now a 100%-owned subsidiary of Charoong Thai and it focuses on the manufacture of telecommunications cable, and enameled wire for the domestic Thailand market.  As stated above,we have reported previously, the Siam Pacific operationsuffered aoperation suffered significant flooding damage in September and October of 2011 but with the support from affiliated companies in Taiwan and in China, Siam Pacific is expected to resumeresumed full operations byduring the endcourse of the second quarter 2012.

  During 2013 and 2014, Siam Pacific conducted its operations without any material disruptions.

Pacific Thai (now transferred into Siam Pacific) was established in 1989 as a wholly-owned subsidiary of Siam Pacific.  Pacific Thai produced enameled wire for export only.

Based on information published by the Thai Ministry of Commerce on sales by dollar value, the Company believes that Siam Pacific and Charoong Thai are two of the leading telecommunications and power cable and wire manufacturers in Thailand and are two of a very limited number of the government-approved suppliers of telecommunications cables for major public telecommunications projects in Thailand.

In a restructuring that included

North Asia Region
During 2014, the transfer of the business of Pacific Thai into Siam Pacific, the Company achieved a reorganization, which has generated cost savings while improving overall efficiency.  The Company believes the synergistic effect of merging these operations will continue to produce significant savings in overhead cost as it facilitates the centralization of decision making and resource allocation for the Thai operations. Management of Pacific Thai and Siam Pacific was consolidated into Charoong Thai in order to enhance synergies and provide greater sharing of expertise. For example, each of Charoong Thai and Siam Pacific manufactures and distributes enameled wire and they are now in a better position to share technical expertise and resources. Under the restructuring, APWC owns 50.93% of Charoong Thai, which owns 100% of Siam Pacific. However, Siam Pacific continues to report its results separately to APWC headquarters.

China

The Company’s China (and North Asia) operations arewere conducted through sevensix business entities – Shanghai Yayang, CCH HK, PEWS, NPC, SPFO (which was disposed of in December 2011),Ningbo, SPRC (equity investee), and SHP (equity investee).PEWC Hong Kong.  The operating entities include Shanghai Yayang, formerly known as Shanghai Pacific Electric Co., Ltd., a joint venturesubsidiary in Shanghai incorporated in June 1998 to manufacture enameled wires.  The Company’s effective holding in Shanghai Yayang is 54.41%66.35%.  Shanghai Yayang manufactures enameled wires with a diameter between 0.05mm and 2.5mm for sale and distribution in the eastern part of China, including to local and Taiwanese based end-users.  Sitting on theThe board areconsist of six directors, each of whom is either membersa member of management of Shanghai Yayang who are expatriated from Taiwan or Thai representatives, also expatriated or designated by APWC or PEWC.

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The Company owns 100% of CCH HK, a Hong Kong registered company, and its wholly-owned subsidiary company, PEWS.  PEWS manufactures enameled wires for electric, video and audio products primarily for both domestic and export and with a little portion sold domestically. Since a restructuringsales.
A new subsidiary - PEWC Hong Kong was created by CCH in August 2013 for the first quarterpurpose of 2010, CCH HK is no longerbecoming the trading arm offor PEWS, as it transferred its distribution role toreplacing Epan Industries Pte Ltd. (“Epan”) in Singapore.Singapore, an indirect, wholly-owned subsidiary of APWC, which originally acted as the distributor for PEWS products.  The Company believes that PEWS is one of the major manufacturersof enameled wire products in the southern Chinese market.  

Until 2006,In August 2014, PEWC Hong Kong was sold to Dragon Conqueror Ltd., which is a subsidiary of PEWC. The Company received $0.2 million in sale proceeds and realized a loss of $0.2 million from the Company’s Chinasale of PEWC Hong Kong. The sale benefited the Company because it was not in a position to continue to support PEWC Hong Kong. As a subsidiary of PEWC, PEWC Hong Kong can call on the resources of PEWC and it continues to act as the distributor of PEWS products.

In January 2014, Epan was sold to Sigma Cable Company (Private) Limited (“Sigma Cable”), an indirect, 98.3%-owned subsidiary of the Company in Singapore.  Currently, Epan is acting as the distributor of Sigma Cable and other third party suppliers.
Throughout 2013 and 2014, the Company engaged in the development of new, and the refurbishment of existing, manufacturing facilities and operations included NPC, a telecommunications cable manufacturing joint venture located in Ningbo, Yin County, Zhejiang ProvinceChina.  After ceasing operations at Ningbo in eastern China.  The other owner of NPC is China Ningbo City Yin Jiang County Yin Jiang Town Industrial Corporation. NPC used to manufacture a range of telecommunications cable and local area network (“LAN”) electronic cables for sale and distribution in the Chinese domestic market and export market.  In 2006, the Company decided to cease operations at NPC, as it concluded that the prospects for reversing the lossesmaintained its interests in land and achieving profitability were too remote. Thereafter, the Company liquidated certain machineryplant and equipment through sales to third parties.  The land, buildinglocated at the Ningbo site.  APWC also bought out the interest from its partner and some leftover machinerynow owns 100% of the property, plant and equipment remained with NPC.  In December 2009, the Company started a series of discussions with Bangkok Bank Hong Kong branch on a possible loan which would provide a cash infusion and a trade finance facility, each aimed at re-building NPC to be a viable operation focusing on producing electronic wiring. The new business draws upon the experience of, and technology from, our parent company, PEWC. The loan facility agreement was finalized in March 2011, thereby allowing for a total cash contribution of $14 million and a trade credit line of $8 million, with the first tranche of capital funding of $5 million infused to NPC at the end of May 2011, increasing APWC’s ownership to 95.80%. Theconstruction of NPC’s factory is divided in two phases with the existing plant finished in October 2011 and the new plant targeted to be completed by the end of 2012.

Ningbo.

In November 2011, the Company sold its 51% interest in SPFO, a joint venture company in Yanggu County, Shandong Province, China.  SPFO was established to manufacture fiber optic cables for the China market.  The Company determined that its resources in the China market are better deployed in further developing its core wire and cable business, rather than seeking to establish itself in the fiber optic business.

The Company holds a 25.0% interest in SPRC, which manufactures rubber cable for the China market.  The remaining 75% is owned by Shandong Yanggu Wire & Cable Corp. Ltd. (“Shandong Yanggu”), an established cable manufacturer in Shandong Province that produces a wide range of cable products and is considered one of the major cable producers in China.

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The Company holdsheld a 49% interest in a joint venture called SHP,Shandong Huayu Pacific Fiber Optics Communication, Co., Ltd. (“SHP”), which engages in the manufacture of optic fibers.  The remaining 51%In January 2013, the Company completed the sale of its 49% interest in SHP to its partner, Shandong Pacific Fiber Optics Cable Co. Ltd., which acquired 100% of SHP is owned by Hebei Huayu Co. Ltd. (asas of the successor in interest to Shandong Yanggu).closing of that sale.  Due to a severe downturn in the market for fiber optic cable after the SHP joint venture was established, the plant intended to be constructed for manufacturing fiber optic cable has yet to bewas not completed and a production date for commencing operations hashad not been determined.  The actual commencementCompany received RMB 9.5 million for its 49% interest in SHP, which yielded a gain for the Company of operations, if it occurs at all, will depend on our ongoing assessmentover $0.2 million in 2013.  The management considered disposing of market conditions.  The carrying valueits interest in SHP for some time because this equity investee has been in a loss position for several years and because fiber optic cable in Shandong Province is not an element of the Company’s investment in SHP was $1.2 million ascore business plan.
Rest of December 31, 2011.  In the event that the commencement of operations continues to be delayed indefinitely or the joint venture determines to forego planned operations, due to continued depressed conditions in the fiber optic cable market, or other factors are determined to have a direct impact on the assessed value of SHP, the Company will recognize impairment losses in the foreseeable future that could result in the full write-off ofWorld (“ROW”) Region
The Company’s ROW region currently includes its investment in SHP. SHP is currently seeking out potential buyers to take over the business.

Singapore

and Australian operations.

The Company’s Singapore operations are principally conducted through its 98.3%-owned subsidiary, Sigma Cable.  The Company believes that Sigma Cable is one of the major suppliers of power cable products in Singapore.  Sigma Cable manufactures and sells a range of low voltage power cable products, used mainly in infrastructure projects and commercial and residential developments.  Sigma Cable is also the exclusive distributor in Singapore of medium and high voltage wire and cable products manufactured by PEWC.

  It is also the distributor for general wire manufactured by a third party supplier.

Sigma Cable also has project engineering operations in Singapore to supply, deliver and install primarily medium and high voltage cable to power transmission projects.  While the Company currently obtains its supply of medium and high voltage power cable for its SDI operations from PEWC, other suppliers are also available if necessary.  The Company anticipates that there will be modest demand for medium and high voltage power cable projects sponsored by the Singapore government.

government in the fairly near future.

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Australia
The Company also holds a 100% interestCompany’s business in Sigma-Epan Industries, Pte.Australia is conducted by Australia Pacific Electric Cable Pty. Ltd. (“Sigma-Epan”APEC”), a group of companies with its headquarters and limited operations in Singapore. Prior to ceasing manufacturing operations in May of 2007, Sigma-Epan manufactured specialty cables and assembled cable harnesses for the electronics, computer, building automation, audio and communication industries. Sigma-Epan continues to trade specialty electronic and other types of cables. After the Company’s restructuring, which was completed in April 2010, Epan Industries, one of the subsidiaries of Sigma-Epan, became the trading arm for PEWS products in the South China market.


Australia

.  The Company went through a group restructuringrestructurings in March 2010.2010 and in June 2012. CCH HK, in total, acquired 51%64.79% of the shares of APEC shares from Sigma Cable, thereby increasing theCable.  The Company’s effective interestsinterest in APEC from 98.53% tois now 99.4%.  APEC is located near Brisbane and is one of three major wire and cable manufacturers in Australia.  APEC produces a range of power cables supplemented by imports from overseas sister companies.  APEC possesses a substantial marketing and distribution infrastructure with a network of sales offices and warehouses in the major capital cities of Brisbane, Sydney, Melbourne and Perth.

4.3.1     Products and Services

4.2.1Products and Services
The Company engages in three principal business lines consisting of the manufacture of wire and cable products, the distribution of certain wire and cable products manufactured by PEWC, as well as some third party products, and the provision of project engineering services to certain of its customers.  The Company manufactures and sells a wide variety of wire and cable products primarily in threefour general categories:  telecommunications cable, power transmission cable, enameled wire, and enameled wires.electronic wire.  The Company’s telecommunications and power cables are used in a range of infrastructure projects and in commercial and residential developments.  The Company’s enameled wire is used in the manufacturing of components and sub-components of a number of household appliances and various small machinery.  The electronic cables,wire products, which include cable harnesses, are used in the electronics, computer, building automation, audio and communication industries.  In addition, the Company acts as the Singaporea distributor of wire and cable products in Singapore manufactured by PEWC.PEWC and other third party suppliers.  The Company also offers SDI (Supply, Deliver and Install) project engineering services of medium and high voltage cable for power transmission projects in Singapore.

Distribution Products

The Company has a sales and marketing force for the distribution of its Manufactured Products in the markets where it has manufacturing facilities and in certain other Asian markets.  In addition, the Company is a distributor of wire and cable products manufactured by PEWC.PEWC and other third party suppliers.  The leading PEWC products sold by the Company are medium and high voltage power cable (with capacities ranging from 3.3 kilovolts to 69 kilovolts), with the vast majority of such sales made in Singapore.  The PEWC products sold by the Company do not compete with the Company’s Manufactured Products.  In addition, from time to time, certain subsidiaries also sell distributed products from other suppliers in Thailand and Australia during 2011.

Australia.

- 45 -
SDI Project Engineering Services

Based upon the needs of government and the private sector with regard to residential and commercial buildings and infrastructure projects in Singapore, the Company anticipates modest demand for medium and high voltage power and for value added services in the power supply industry.  To take advantage of these opportunities, the Company has developed its SDI project engineering capability.  The SDI project engineering involves supply, delivery and installation primarily of medium and high voltage cable to power transmission projects in Singapore. After entering into a contract to supply, deliver and install cable for a power transmission project, the Company delivers medium and high voltage cables and enters into subcontracting agreements with local companies to install the cable as required by the project.  As reported in a Company press release on March 20, 2012, Sigma cable has additionally won three new SDI projects totaling US$87 million with duration spreading out over three years.

4.3.2     Manufacturing

4.2.2Manufacturing
Copper rod is the base component for most of the Company’s products.  The manufacturing processes for these products require that the rod be “drawn” and insulated.  In the “drawing” process, copper rod is drawn through a series of dies to reduce the copper to a specific diameter.  For certain applications, the drawn copper conductor is then plated with tin.  Copper used in cable is covered with various insulating materials that are applied in an extrusion process.  The insulated wires are then combined, or “cabled” to produce the desired electrical properties and transmission capabilities.  Then, depending upon the cable, some form of protectivecoverprotective cover is placed over the cabled wires.  A summary of the manufacturing process used for the Company’s primary wire and cable products is set forth below.


Telecommunications Cable

The Company produces a wide range of bundled telecommunications cable for telephone and data transmissions with different capacities and insulations designed for use in various internal and external environments principally as access cable to connect buildings and residents to trunk cables.  Telecommunications cables produced by the Company include copper-based and fiber optic cables.

- 46 -
Production of copper-based telecommunications cable begins by drawing a copper rod until it has reached the desired diameter, after which the drawn wires are subjected to a process called “annealing” in which the wires are heated in order to make the wires softer and more pliable.  Utilizing an extrusion process, which involves the feeding, melting and pumping of a compound through a die to shape it in final form as it is applied to insulate the wire, the wires are then covered by a polyethylene (“PE”) or polyvinyl chloride (“PVC”) compound and foam skin, suitable for different installations and environmental conditions.  In order to reduce the cross-talk between pairs of communication wires, the insulated wires are then “twinned” or twisted so that two insulated single wires are combined to create a color-coded twisted pair.  The twisted pairs of wire are then “cabled” or “stranded” into units of 25 twisted pairs for combination with other 25 pair units to form cable of various widths and capacities.  The appropriate number of units is cabled together after stranding to form a round cable core.  Depending upon the planned environment, a petroleum jelly compound may then be added to fill the cable core to seal out moisture and water vapor.  Aluminum or copper tape is used to “shield” the cable and, finally, the shielded cable core is covered by plastic outer sheathing.  The Company manufactures telecommunications cable with capacities and sizes ranging from 25 to 3,000 pairs of 0.4 mm-diameter wire to 10 to 600 pairs of 0.9 mm-diameter wire.

Power Cable

The Company produces a range of armored and unarmored low voltage power transmission cable.  Low voltage power cable, generally considered to be cable with a capacity of 1 to 3.3 kilovolts, is typically used to transmit electricity to and within commercial and residential buildings, as well as to outdoor installations such as street lights, traffic signals and other signs.  Armored low-voltage power cable is usually used for public lighting and power transmission running to buildings and installed either above or below ground.  Unarmored low voltage cable is mainly used as lighting and power supply cable inside and outside of buildings. The voltage capacity of the Company’s power cables range from 300 volts to one kilovolt.

- 47 -
Production of unarmored cable begins by drawing and annealing of copper rods. The drawn copper wires are then stranded or “bunched” into round or sector-shaped conductors in sizes ranging from 1.5 square millimeters to 1000 square millimeters.  The copper conductors are then covered in an extrusion process with a plastic insulator such as PVC, after which 2-5 conductors are twisted into a circular cable core in a cabling process and covered by a plastic outer cover.

Unarmored cable is composed of one or more cores of copper wire, insulated by substances such as PVC.  Armored cable is produced in the same manner and the same range of configurations as unarmored cable, but with the addition of an outer layer of galvanized steel or iron wires to protect the cable from damage.

Enameled Wire

The Company also produces several varieties of enameled wire.  Enameled wire is copper wire varnished, in an enameling process, by insulating materials.  The enameling process makes the wire more resistant to oil, heat, friction and fusion, and therefore suitable for use in machinery and components and sub-components of manufactured goods.  The Company manufactures enameled wire in sizes that range from 0.02 mm to 4.00 mm in diameter, varnished by various types of petroleum insulation materials including polyvinyl formal, polyurethane wire and polyester, among others.  Enameled wire products are used in the assembly of a wide range of electrical products, including oil-filled transformers, refrigerator motors, telephones, radios, televisions, fan motors, air conditioner compressors and other electric appliances.


4.3.3     Raw Materials

Electronic Wire

The Company produces electronic wire with its major production facilities in Ningbo, China.  The electronic wire is predominately used for heat resistant applications in consumer electronics and in the automotive industry.  The factory concluded production testing in 2013 and is currently locating potential buyers.
- 48 -
4.2.3Raw Materials
Copper is the principal raw material used by the Company for copper-based products.  The Company purchases copper at prices based on the average prevailing international spot market prices on the LME for copper for the one month prior to purchase.  The price of copper is influenced heavily by global supply and demand as well as speculative trading.  As with other costs of production, changes in the price of copper may affect the Company’s cost of sales.  Whether this has a material impact on the Company’s operating margins and financial results depends primarily on the Company’s ability to adjust selling prices to its customers, such that increases and decreases in the price of copper are reflected in those selling prices.  Most sales of the Company’s Manufactured Products reflect copper prices prevailing at the time the products are ordered.  A long-term decrease in the price of copper would require the Company to revalue the value of its inventory at periodic intervals to the then net realizable value, which could be below cost.

The Company purchases copper in the form of rods and cathodes.  Copper cathodes are thin sheets of copper purified from copper ore.  Copper purchased by the Company in the form of cathodes must be sent to subcontractors to be melted and cast into the copper rods necessary for the manufacturing processes, for a processing fee equal to approximately 3.5% (based on the Company’s past experience) of the copper cathode purchase price.  The Company presently relies onutilizes the services of Thai Metal Processing Co., Ltd., the Company’s long term equity investment, to process its copper cathodes into copper rods in Thailand, although the Company has a variety of processing companies from which toit may obtain these services.  Construction of such a copper processing facility could also be an additional source of revenues and profit, to the extent that sales are made to unaffiliated parties.  However, the Company does not have any present plans to establish or acquire a copper processing facility.  Copper rods are drawn into copper wire for the production of telecommunications cable, power cable and enameled wire.

The Company has historically purchased a substantial portion of its copper rods from PEWC.  Under the Composite Services Agreement between the Company and PEWC, PEWC agreed to supply to the Company on a priority basis its copper rod requirements at prices at least as favorable as prices charged to other purchasers in the same markets purchasing similar quantities.  PEWC continues to be the principala leading supplier of copper rods to the Company’s operations in other Asian countries.operations.  Under the Company’s copper rod supply arrangements, orders will beare typically placed between eight to ten weeks before the desired delivery date, with prices “pegged” to the average spot price of copper on the LME for the one month prior to delivery plus a premium.

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The Company purchases both copper cathodes which are subjected to a 1.0% import tariff, and copper rods which normally are subject to a 5.0% import tariff for its Thailand operations.  The key suppliers are Sterlite Industries (India) Ltd - India, PEWC-Taiwan, Prime Global Corp.-Korea, Lanexang Mineral Ltd.-Laos and the Mitsubishi Corporation Unimetal Ltd.-Japan, Mitsubishi Corporation,Corporation-Japan, Glencore International AG.,AG.-Switzerland, and Marubeni Corporation.Corporation-Japan.  The Company has regularly signed one-year contracts with each of the copper suppliers, pursuant to which the Company agrees to purchase a set quantity of copper each month.  Under the terms of such contracts, the price of copper is usually pegged to the monthly average of the spot price of copper on the LME for the delivery month (M-0), or 1 month before delivery month (M-1) plus a premium.  The Company has almost two decades of good relationships with many copper suppliers, and currently believes that the copper suppliers will be capable of providing an adequate supply of copper for the Company’s requirements.  The Company does not anticipate any change in relations with its copper suppliers in the near term.

The Company attempts to maintain approximately a three to five week supply of copper rods and cathodes for its Thai operations and approximately a two to four week supply in Singapore.  In PEWS, the Company generally maintains one to two weeks of supply of copper rods and cathodes.  In APEC, the copper supply wasis generally maintained at one to two weeks during 2011. In Epan Industries whose copper is purchased through CCH HK, approximately three weeks of copper supply is preserved for manufacturing purposes.anticipated requirements.  The Company has never experienced a material supply interruption or difficulty obtaining a sufficient supply of copper rod or cathode.

Other raw materials used by the Company include aluminum used as a conductor in power cable and petroleum-based insulation materials such as PE, PVC and jelly compounds for insulating covers on cables and varnishes on enameled wire; aluminum foils for sheathing of communication cable; and galvanized steel wire for the production of armored wire.  The Company has not had any difficulty in maintaining adequate suppliesofsupplies of these raw materials and expects to continue to be able to purchase such raw materials at prevailing market prices.


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Other than import tariffs in Thailand, the Company does not face any restriction or control on the purchase or import of its raw materials.  The Company may freely choose its suppliers and negotiate the price and quantity of material with its suppliers.  The Company formulates consumption plans for raw materials regularly and continually monitors market conditions in respect of the supply, price and quality of raw materials.

Inflation would increase the cost of raw materials and operating expenses for the Company.  The Company would try to maintain its gross margins by increasing the prices of its products.

4.3.4     Quality Control

4.2.4Quality Control
The Company places a significant emphasis on product quality.  The Company has implemented a range of quality control procedures with stringent quality standards under the supervision of dedicated quality control staff.  Quality control procedures are implemented from the raw material to the finished product stages at each of the Company’s major production facilities.  Raw materials are inspected to ensure they meet the necessary level of quality before production begins.  During the manufacturing process, quality control procedures are performed at several stages of production.  Upon completion, finished goods are brought to quality control centers set up in the factory for inspection and testing of different electrical and physical properties.

Depending on the requirements of its customers, the Company has the capability to manufacture its products to meet a variety of different quality and production standards.  These include local standards and certifications, such as the Singapore Institute of Standards and Industrial Research Quality Mark and the Thailand Industrial Standard, as well as other standards including the National Electrical Manufacturers Association Standard, the British Standard, the Japan Industrial Standard and Underwriters Laboratories Inc. Standard, as applicable.

All the major companies in the APWC group have attained International Standards Organization (“ISO”) 9002 certification for quality management and assurance standards in the manufacture of electric wire and cable and have maintained that certification for at least the last ten years.  The certifications mean that the companies have in place quality assurance systems and the capability to consistently manufacture products of quality.

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4.2.5Sales and Marketing
4.3.5          Sales and Marketing

The Company’s telecommunications cable and power cable products are primarily sold in the domestic markets of the countries where they are manufactured, whereas most of the enameled wire manufactured by the Company in Thailand is exported.  Enameled wire sold by Epan Industries in Singapore is manufactured by PEWS in Shenzhen, China.  The enameled wire is also exported to the customers throughout Southeast Asia.  The following table sets forth the Company’s sales revenues for the periods indicated amongin its three businessreporting segments — – North Asia region, Thailand region and ROW region for its three principal product lines, i.e., Manufactured Products, Distributed Products, and SDI and, within the Manufactured Products segment, by geographic locations of manufacturing, together with their respective percentage share of total sales by reporting segment for such periods.


(Figures in 2009 and 2010 were restated to reflect the results of discontinued operations of SPFO. For details, see “Item 5.3: Operating Results”)

 

 

Years ended December 31,

 

 

2009

 

2010

 

2011

 

 

$

%

 

$

%

 

$

%

Manufactured Products:

 

 

 

 

 

 

 

 

 

Thailand

 

117,954

36.2%

 

190,364

42.6%

 

186,034

39.4%

Singapore

 

34,583

10.6%

 

34,248

7.7%

 

52,353

11.1%

Australia

 

33,935

10.4%

 

45,053

10.1%

 

58,932

12.5%

China

 

77,656

23.8%

 

126,394

28.3%

 

132,155

28.0%

Total

 

264,128

81.0%

 

396,059

88.7%

 

429,475

91.0%

Distributed Products (1)

 

28,102

8.6%

 

26,935

6.0%

 

25,500

5.4%

SDI Project Engineering (2)

34,008

10.4%

 

23,600

5.3%

 

16,972

3.6%

Total Net Sales

 

326,238

100.0%

 

446,594

100.0%

 

471,946

100.0%

 

 

 

 

 

 

 

 

 

 

(1) Distributed products are sold in Singapore, Thailand, and Australia.

(2) All SDI project Engineering is supplied in Singapore.

Sales within Thailand and Singapore are made directly by the sales department of the Company’s local subsidiaries in accordance with terms and pricing set by the local subsidiaries.  The local

  For the year ended December 31,
(figures in US$ are in thousands)
 
  2014  2013  2012 
  $   %  $   %  $   % 
Regions:                     
North Asia $114,836   25.40% $69,347   15.00% $55,633   12.00%
Thailand  166,864   37.00%  175,347   38.10%  190,379   41.20%
ROW  169,627   37.60%  215,982   46.90%  216,253   46.80%
Total Net Sales $  451,327   100.00%  $ 460,676   100.00% $ 462,265   100.00%
Our operating subsidiaries are also responsible for sales planning, marketing strategy and customer liaison.  The Company’s sales staff is knowledgeable about the Company’s products and frequently must render technical assistance, consulting services and repair and maintenance services to the Company’s customers.  In order to ensure quality service and maintain sensitivity to market conditions, the Company does not conduct sales through independent sales agents on a commission basis but uses its own sales employees located at the operating subsidiaries.

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As copper constitutes the most significant component of the Company’s wire and cable products, the price of the Company’s products depends primarily upon the price of copper.  In order to minimize the impact of copper price fluctuations, the Company attempts to determine the prices of its products based on the prevailing market price of copper.  The Company may be affected, to a degree, in the short term by significant fluctuations in the price of copper.  In 2011, a $ 2.3 million forward purchase contract was entered into by Siam Pacific, Sigma Cable, and Charoong Thai to reduce the impact of fluctuations in the copper sale price.

Payment methods for the Company’s products vary with markets and customers.  The majority of sales by the Company of its Manufactured Products requires payment within 90 days, but may vary depending on the customer and payment record.  Sales pursuant to a successful project tender or sales to governmental or public utilities are conducted in accordance with the tender or other applicable regulations.  In connection with the distribution of medium and high voltage power cable manufactured by PEWC, the Company is required to pay PEWC 90% of the cost of the products either within 30 days of receipt of the product or, in the case of SDI products, upon installation, with the remaining 10% in either case to be paid within one year.  In connection with the purchase of copper rod, the Company is required to pay PEWC the cost of the copper rod within 30 days from obtaining the products from PEWC.  For the export market, payment is usually made by prior delivery of an irrevocable letter of credit.  Neither the Company nor its local subsidiaries offers financing for purchases of the Company’s products.  Except for PEWS, CCH HK and Epan Industries, the Company’s subsidiaries sell their products in the local currency of the country of sale.  Company employees engaged in sales and marketing are paid a salary and may also receive a bonus based on performance.


Products are marketed under the respective names of each company.  For instance, products manufactured by Siam Pacific are marketed under the “Siam Pacific”.  Products manufactured by Sigma Cable are sold under the “Sigma Cable” brand.

Thailand

The Company produces and sells telecommunication cable, enameled wire and power cable in Thailand. Charoong Thai is one of the leading cable manufacturers in Thailand.  Our distribution channels areinclude both direct sell and agenciessales to the government entities and private sectors.sector participants in the infrastructure sector, and sales to agents for governmental entities.  Sales within Thailand region are made directly by the sales department of the Company’s local subsidiaries in accordance with terms and pricing set by the local subsidiaries.  The major customers of the Company areinclude many prominent clients working with the government and its contractors (True(True Corporation Plc (“True”), TT&T (“Triple T”), etc.), subcontractors, and distributors for the private sector.  Charoong Thai has successfully concludedparticipated in many major projects, for instance,which included, Suwannabhumi International Airport, Government Center, PTT Maptaput, and BRT (Bus Rapid Transit).

Singapore

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ROW
The Company produces and sells low voltage power cable in Singapore.Singapore and Australia.  In addition, the Company sells a wide range of wire and cable products produced by PEWC.  The Company also offers SDI project engineering services for the SDI of medium and high voltage power cable to power transmission projects in Singapore.

In Singapore alone, sales of Manufactured Products in 20112014 accounted for3270.6%% of the total net sales in Singapore; sales of Distributed Products in 20112014 accounted for 7.8%50%, the remaining 21.6%18% representing SDI project engineering services.  In 2011, sales of SDI project engineering services to SP PowerassetsPower Assets Ltd. accountedhas historically been far and away the leading customer for 100% of the Company’s SDI sales. Such salesservices.  Sales to the customer are under a comprehensive contract, with purchase orders placed from time to time with the Company by SP PowerassetsPower Assets Ltd.Sales of Manufactured Products, i.e., power cable since 2009 have been as follows:

 

Years ended December 31,
(figures are in thousands of US$)

 

2009

2010

2011

Manufactured Product:

 

 

 

Power Cable

34,583

34,248

52,353

Total

34,583

34,248

52,353

China

The Company produces and sells copper-based telecommunication cable and enameled wire in China.  The Company’s China operations are now conducted through fivesix business entities.entities; following the sale in early 2013 of the Company’s interest in SHP as described earlier.  Copper-based telecommunication cables are generally sold to the national, provincialprovidential or local offices of the fixed-line and mobile telecommunications network operators or sub-contractors of such agencies.  The Company generally sells enameled wire directly to manufacturers of electric motors for use in various consumer appliances.

4.3.6        Competition

4.2.6Competition
The wire and cable industry in the Asia Pacific region is highly competitive.  The Company’s competitors include a large number of independent domestic and foreign suppliers.  Certain competitors in each of the Company’s markets have substantially greater manufacturing, sales, research and financial resources than the Company.  The Company and other wire and cable producers increasingly compete on the basis of product quality and performance, reliability of supply, customer service and price.  To the extent that one or more of the Company’s competitors is more successful with respect to the primary competitive factors, the Company’s business could be adversely affected.


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Thailand

The wire and cable industry in Thailand is highly competitive.  In its various product lines, the Company competes with a total of approximately thirty local wire and cable manufacturers and, to a lesser extent, with foreign producers for sales in Thailand of telecommunications cable, power cable and enameled wire.  The Company is one of the five largest producers in the Thai market.  These five largest producers are the only producers of telecommunications cable approved by the Thai Industrial Standards Institute and, therefore, the only cable producers whose products may be used in government-commissioned projects.  Stringent governmental approval processes, tariffs and other import restrictions have limited competition in the Thailand market from foreign wire and cable producers.  The Company also experiences significant competition from a number of smaller producers with regard to sales of enameled wire products.

Singapore

The Company believes that Sigma Cable is one of the major suppliers of power cable products in Singapore,Singapore; however, it experiences significant competition from other local producers.  There is no tariff or other barrier against foreign competition in the local Singapore market and potential competitors are free to enter the industry.  However, because of high capital costs, the Company believesdoes not presently anticipate that it is unlikely thatlikely there will be new domestic entrants to the wire and cable industry in Singapore in the near future.

Australia

Currently, besides APEC, there are two major wire and cable producers with operations located in Australia:  Olex Cables (owned by Nexans) and Prysmian Cables, with factories in the states of Victoria and New South Wales, respectively.  Also, Advance Cable, a cable producer with a factory in Victoria, has recently obtained a bigger market share. In addition, a significant portion of the Australian market is serviced by two importers:  (i) General Cables Australia, which imports cables from its parent company General Cables, which manufactures cables in New Zealand and (ii) Electra Cables, which imports cables from factories in China.  These companies are APEC’s principal competitors.  APEC however is the only power cable producer in Queensland and therefore seeks to take advantage of its comparative proximity to Queensland-based customers in contrast to competitors that are required to transport their products into Queensland from other states in Australia.APEC has also opened sales offices with warehousing facilities in Sydney, Melbourne, Brisbane, and Perth in order to attract and service the customers in those regions.  In February 2011, APEC entered intoalso has a distribution agreement with one of the regional suppliers with the hope that this collaboration will bring extragoal of generating additional business tofor the Australia operations.  Foreign competition barriers exist with import duties and the more stringent Australian cable specifications standards.  Asean (Association of South East Asian Nations) Free Trade Area (AFTA) Agreements are in effect with Singapore and Thailand, among other Asian countries.

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China

PEWS manufactures enameled wires in the Shenzhen Special Economic Zone in Guangdong Province for electronic, video and audio products for the South China market and for export.  After a restructuring, Epan Industries,PEWC Hong Kong, one of the subsidiaries of Sigma-Epan, becamePEWC, is the trading arm of PEWS.  It supplies mainly to overseas transformer, motor and coil manufacturers.  It faces competition principally from overseas imports and local manufacturers.

Shanghai Yayang is the only major enameled wire producer in Shanghai and it supplies mainly to transformer, motor and coil manufacturers in the eastern part of China.  It faces competition principally from overseas imports and manufacturers from other provinces in China.

In 2011, the Company made a strategic decision to exit the fiber optic cable market in Shandong Province by disposing of our 51% equity interest in SPFO. We observed increasing consolidation, and competition, in the fiber optic cable business in Shandong and concluded that our resources were better deployed by concentrating on our principal lines of copper-based Manufactured Products in that market.


4.3.7        Regional Considerations

4.2.7Regional Considerations

The principal Asian markets in which we do business have displayed exceptional overall economic growth in recent years compared to the United States and a number of other more developed markets, subject to occasional episodes of economic and currency exchange volatility attributable to various factors including the increased risks of emerging market investment, actual or potential political instability and pandemics such as the SARS health crisis several years ago.occasional pandemics.  In some countries, the International Monetary Fund (the “IMF”) exerts considerable influence over economic policy and provides support to stabilize the domestic economy.  In general, the Asian markets in which we do business have been export-driven in recent years and have in the case of China and Singapore, for example, accumulated considerable capital reserves, which contributes to a more stable business environment.

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Thailand

Region

A substantial portion of the Company’s Thai operations, whose Manufactured Productssales accounted for approximately 39.4%37.0% of the Company’s net sales in 2011,2014, consists of the manufacture of telecommunications and power cable and sales of those products for use in large-scale telecommunications projects and various construction projects in Thailand.  The volume of sales of these products tends to correlate with the general level of economic activity in Thailand.  As a result, the performance of the Company’s Thai operations depends in significant part on the general state of the Thai economy.  Infrastructure development and related construction projects in Thailand depend significantly upon government sponsored initiatives.  In recent years, the level of government involvement in infrastructure development has tended to track increases or contractions in Thailand’s gross domestic product (“GDP”).  Overall, the construction industry and infrastructure projects have slowed considerably, thereby affecting local sales, placing competitive pressure on prices and prompting the Company to rationalize Thai operations and actively seek overseas export markets.

Telecommunications

Sales of the Company’s telecommunication products in Thailand have depended to a significant degree on the substantial investment in and development of the telecommunications sector by the Thai government.  In particular, the Company’s sales of Manufactured Products are affected by the dollar value of contracts awarded by the government for telecommunications and other infrastructure projects.

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The Company produces and sells copper core telecommunications cable, enameled copper wire and enameled aluminum wire to Thailandthe Thai market, and also exportexports enameled wire to overseas markets. Sales of telecommunications cable, one of the Company’s leading productproducts in Thailand, are conducted either by tender for participation in large scale telecommunications projectprojects of theTelephonethe Telephone Organization of ThailandCorporationThailand Corporation Plc. (“TOT”), or directby sales directly to subcontractors of Triple T and True, the two private telephone line contractors which would be licensed by TOT with regard to particular projects.  The Company generally sells enameled wire directly to electrical appliance manufacturers or an OEM (original equipment manufacturers) for both the local and export market,markets, and in smaller units that are sold to local dealers.

Power

In Thailand, the prevailing historical trend has been that economic growth would stimulate rapid growth in the demand for electric power, and annual rates of growth in electricity demand would outpace annual economic growth rates.  Despite the rapid growth in electricity demand, electricity consumption in Thailand remains low by international standards.  The Company believes that, in the medium to longer term, there will be an increased demand for power supply which will lead to increased demand for the Company’s power cable products from both developers of power production facilities and contractors installing power supply lines.

Singapore

The Company’s distribution and project engineering business segments are concentrated in the Singapore market.  In 2011,2014, the Company realized$17.0 $21.6 millionin revenues from SDI projects, compared to$23.6 

$18.6 millionin 2010. 2013 and $6.4 million in 2012.  Revenue in Singapore from Distributed Products in 20112014 was $4.9 million, increased by $1$61.0 million, compared to the results$54.8 million in 2010.

2013 and $45.2 million in 2012.

The Singapore government has established targets to increase the population from 4.6 million in 2007 to approximately 6 million by the end of 2020.  This planned growth in population is expected to result in an increase in demand for residential property and construction.  The Company continues to seek ways to increase its business volume in its project engineering business segment. In the first quarter of 2012, Sigma Cable has entered into three new SDI projects in Singapore valued at approximately $87 million.

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China

The economy of China differs from that of most developed free-market economies in a number of respects, including structure, degree of government involvement, level of development, growth rate, capital reinvestment, allocation of resources, rate of inflation and balance of payments position.  In recent years, the PRC government has implemented economic reform measures which emphasize decentralization, expansion of consumption in the domestic market, utilization of market forces and the development of foreign investment projectsof which Shanghai Yayang is an example.

4.4Property, Plant and Equipment

4.3Organization Structure
Please refer to Business Overview in section 4.2
4.4Property, Plant and Equipment
The Company’s Manufactured Products are produced at facilities located on premises owned or leased by Siam Pacific, Charoong Thai, Sigma Cable, APEC, Shanghai Yayang, PEWS NPC and through November 2011, SPFO.  As of December 1, 2011, the Company disposed of its 51% equity interest in SPFO.NPC.  The following is a summary of the Company’s material facilities and operations as of December 31, 2011.

2014.

Siam Pacific owns a 7.45 acre production facility near Bangkok, Thailand, located on a 26.79 acre site that it also owns.  Telecommunications cable and enameled wire are manufactured here.at this facility.  The production facility constitutes a portion of certain property and assets which are pledged to a financial institution.

Charoong Thai owns a 24.7 acre production facility in Chachoengsao province, near Bangkok, Thailand, where telecommunications cable and power cable are manufactured.  The production facility is located on a 57.9 acre site which Charoong Thai also owns.  Neither the production facility nor the land is mortgaged.

Sigma Cable produces power cable on a 19,373 square meter site in Singapore leased from the Jurong Town Corporation (“JTC”) for 30 years from September 16, 2000 to September 16, 2030.  JTC is a government-linked corporation and is Singapore’s largest industrial landlord.  Building assets with a total loan value of $16.6 million are pledged to United Overseas Bank.

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APEC owns a 6,735 square meter power cable manufacturing facility on a 39,000 square meter land parcel in Brisbane, Australia.  TheNeither the production facility nor the land and building therein is mortgaged to Westpac Banking Corporation of Australia as security for a bank facility of approximately A$10.0 million (equivalent to $10.2 million).

mortgaged.

Shanghai Yayang operates a factory that produces enameled wires, located in an area of approximately 27,839 square meters of state-owned land in an industrial district in Fengxian, Shanghai.  Assets consisting of buildings with a value of $0.8approximately $1 million are pledged to the AgriculturalIndustrial and Commercial Bank of China.

PEWS manufactures enameled wire in a facility on 36,000 square meters of state-owned land with a built-up area of 20,367 square meters in Long Gang, Shenzhen, China.  A leasehold right of industrial land use for the land has been granted for 49 years.  The land and building of $0.8 million is pledged to Agricultural Bank of China as security for a $7.9$3.7 million bank loan granted in 2003 and extended through May 2011. This facility is now further extended for one year to the end of May 2012.

Sigma-Epan leasesan office space from Sigma Cable in Singapore where it employs nine individuals in its trading operations.

loan.

NPC ceased to be operational in 2006 due to unsatisfactory results and incompetent management team. The Board passed a resolution in October 2009 to re-construct NPC’s facilities to be used for production of electronic wires. The factory now occupies 44,000 total square meters, with a land usage right expiring July, 2044. NPC is situated in Ing-Chiang Township in Ningbo City inZhè JiāJiāng Province, China.

  NPC manufactures electronic wire in a facility that occupies 44,000 total square meters, with a land use right expiring July, 2044.  The factory and the land use right are pledged to the local financing institute for a $7.5 million loan.

All of the Company’s facilities in Thailand, Singapore, Australia and China use production processes and equipment of international standard imported from Europe, the United States, Taiwan, and Japan.

The production capacity and extent of utilization of the Company’s facilities varies from time to time and such information is considered to be commercially sensitive and proprietary information.

4.5 Insurance

4.5Insurance
The Company maintains insurance policies covering certain buildings, machinery and equipment against specified amounts of damage or loss caused by fire, flooding, other natural disasters and burglary and theft.  The Company does not carry insurance for consequential loss arising from business interruptions or political disturbances and does not carry product liability insurance.  In addition, the availability of insurance in China is limited, and the Company does not have business liability or disruption insurance for our operations in China.  The Company believes that it maintains insurance coverage commensurate with the nature of and risks associated with its business, to the extent that appropriate insurance is available in the markets in which we conduct business.  Siam Pacific however, encountered a slight delay when it was trying to securerenewed its insurance policy in 2013 which covers fire and theft but does not provide coverage for year 2012flood damage or business interruption, as thein Thailand insurance companies operating in the Thai market fear the flooding may re-occur this year. Siam Pacific is reasonably confident that ultimately it will find a suitable insurance companyare generally unwilling to cover fire,issue policies covering flood and theft.

4.6 Environmental Matters

or business interruption.

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4.6Environmental Matters
The Company is subject to a variety of laws and regulations covering the storage, handling, emission and discharge of materials into the environment.  The Company believes that all of its operations are in compliance with, and in certain circumstances exceed, all applicable environmental laws and regulations.  The Company’s operations in Thailand have recovered fully from the property damage and cessation of operations that occurred there in 2011 by reason of the nationwide flooding crisis.  The Company has not been subject to any legal, regulatory or other action alleging violations or breaches of environmental standards.  While it is difficult to accurately estimate future environmental compliance costs and potential liabilities, if any, accurately, the Company does not currently anticipate any material adverse effect on its consolidated results of operations, financial position or cash flows as a result of compliance with these laws.

Item 5: Operating and Financial Review and Prospects

Item 4A:Unresolved Staff Comments
(Not applicable)
Item 5:Operating and Financial Review and Prospects
The following discussion should be read in conjunction with the information contained in our audited consolidated financial statements and notes thereto (the “Financial Statements”) presented in Item 18 of this Annual Report.  Because around 91.0%
5.1Disclosures of Critical Accounting Policies
Summarized below are our accounting policies that we believe are important to the portrayal of our financial results and also involve the Company’s revenues were derived from its Manufactured Products segmentneed for the year ended December 31, 2011, the following discussion is not presented on a segment basis.

5.1 Disclosures of Critical Accounting Policies

Management’s discussion and analysis of financial condition and results of operations discusses the Company’s consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States.  The preparation of these financial statements requires management to make estimates and assumptions that affectabout the reported amountseffect of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period.  On an ongoing basis, management evaluates its estimates and judgments.  Management bases its estimates and judgments on historical experience and on various other factorsmatters that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources.uncertain in nature. Actual results may differ from these estimates, under different assumptions or conditions.


Management believes the following criticaljudgments and assumptions. Certain accounting policies among others, affect its more significant judgmentsare particularly critical because of their significance to our reported financial results and the possibility that future events may differ significantly from the conditions and assumptions underlying the estimates used and judgments made by our management in the preparation of its consolidatedpreparing our financial statements.

Principles of Consolidation

The consolidated financial statements include the accounts of the Company and its subsidiaries.  All intercompany accounts and transactions have been eliminated on consolidation.  The Company’s investments for which its ownership exceeds 20%, but which are not majority-owned or controlled, are accounted for using the equity method if the Company has the ability to exercise significant influence over the companies’ operating and financial policies. When the Company’s carrying valuefollowing discussion should be read in an equity investee company is reduced to zero, no further losses are recorded in the Company’s consolidated financial statements unless the Company has guaranteed obligations of the investee company or has committed additional funding. When the investee company subsequently reports income, the Company will not record its share of such income until it equals the amount of its share of losses not previously recognized.

Use of Estimates

The preparation of the consolidated financial statements in conformityconjunction with generally accepted accounting principles accepted in the United States requires management to make estimates, judgements, and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Significant estimates reflectedrelated notes, which are included in this annual report.

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Fair Value Measurement
The Company measures financial instruments at fair value at each balance sheet date.
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.  The fair value measurement is based on the presumption that the transaction to sell the asset or transfer the liability takes place either:
}In the principal market for the asset or liability, or
}In the absence of a principal market, in the most advantageous market for the asset or liability.
The principal or the most advantageous market must be accessible to the Company.
The fair value of an asset or a liability is measured using the assumptions that market participants would use when pricing the asset or liability, assuming that market participants act in their economic best interest.
A fair value measurement of a non-financial asset takes into account a market participant's ability to generate economic benefits by using the asset in its highest and best use or by selling it to another market participant that would use the asset in its highest and best use.
The Company uses valuation techniques that are appropriate in the Company’s consolidatedcircumstances and for which sufficient data are available to measure fair value, maximizing the use of relevant observable inputs and minimizing the use of unobservable inputs.
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All assets and liabilities for which fair value is measured or disclosed in the financial statements include, but are not limitedcategorized within the fair value hierarchy, described as follows, based on the lowest level input that is significant to useful lives and residual values of long-lived assets, impairment assessment of long-livedthe fair value measurement as a whole:
}Level 1: Quoted (unadjusted) market prices in active markets for identical assets or liabilities
}Level 2: Valuation techniques for which the lowest level input that is significant to the fair value measurement is directly or indirectly observable
}Level 3: Valuation techniques for which the lowest level input that is significant to the fair value measurement is unobservable
For assets and goodwill, allowance for accountsliabilities that are recognized in the financial statements on a recurring basis, the Company determines whether transfers have occurred between Levels in the hierarchy by re-assessing categorization (based on the lowest level input that is significant to the fair value measurement as a whole) at the end of each reporting period.
For the purpose of fair value disclosures, the Company has determined classes of assets and other receivable, accounting for deferred income tax, income tax position, inventory valuation, valuation allowanceliabilities on the basis of deferred tax assets. Actual results could differ from those estimates.

Cashthe nature, characteristics and Cash Equivalents

Cashrisks of the asset or liability and cash equivalents includes cash on hand, bank deposits and all short-term highly liquid investments with an original maturitythe level of three months and are readily convertible to known amounts of cash.

the fair value hierarchy as explained above.

Inventories

Inventories are valuedstated at the lower of cost or market.and net realizable value.  Cost is determined on the weighted average basis and, in the case of work in progress and finished goods, comprises direct materials, direct labor and an appropriate proportion of overheads.  Net realizable value is based on estimated selling prices less any estimated costs to be incurred to completion and the estimated cost necessary to make the sale.
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Financial Instruments
(i)Financial assets
Initial recognition and measurement
Financial assets within the scope of IAS 39 are classified as financial assets at fair value through profit or loss, loans and receivables, held-to-maturity investments, available-for-sale financial assets, or as derivatives designated as hedging instruments in an effective hedge, as appropriate.  The Company determines the classification of its financial assets at initial recognition.
All financial assets are recognized initially at fair value plus transaction costs, except in the case of financial assets recorded at fair value through profit or loss.
Purchases or sales of financial assets that require delivery of assets within a time frame established by regulation or convention in the market place (regular way trades) are recognized on the trade date, i.e., the date that the Company commits to purchase or sell the asset.
Subsequent measurement
The subsequent measurement of financial assets depends on their classification as described below:
Financial assets at fair value through profit or loss
Financial assets at fair value through profit or loss include financial assets held for trading and financial assets designated upon initial recognition at fair value through profit or loss.  Financial assets are classified as held for trading if they are acquired for the purpose of selling or repurchasing in the near term.
Financial assets at fair value through profit or loss are carried in the balance sheet at fair value with net changes in fair value presented as finance costs (negative net changes in fair value) or finance income (positive net changes in fair value) in the income statement.
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Derivatives not designated as hedging instruments
A derivative is a financial instrument or other contract within the scope of IAS 39 with all of the following characteristics:
(a)its value changes in response to the change in a specified interest rate, financial instrument price, commodity price, foreign exchange rate, index of prices or rates, a credit rating or credit index, or other variable, provided in the case of a non-financial variable that the variable is not specific to a party to the contract (sometimes called the 'underlying');
(b)it requires no initial net investment, or an initial net investment that is smaller than would be required for other types of contracts that would be expected to have a similar response to changes in market factors; and
(c)it is settled at a future date.
Fair value is the measurement basis for all financial instruments meeting the definition of a derivative.  Change in fair value of non-hedged item is recorded in profit and loss.
Loans and receivables
Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market.  After initial measurement, such financial assets are subsequently measured at amortized cost using the first-in, first-outeffective interest rate (“EIR”) method, less impairment.  Amortized cost is calculated by taking into account any discount or weighted averagepremium on acquisition and fees or costs that are an integral part of the EIR.  The EIR amortization is included in finance income in the income statement.  The losses arising from impairment are recognized in the other operating expenses for receivables.
Held-to-maturity investments
Non-derivative financial assets with fixed or determinable payments and fixed maturities are classified as held to maturity when the Company has the positive intention and ability to hold them to maturity.  After initial measurement, held to maturity investments are measured at amortized cost using the EIR, less impairment.  Amortized cost is calculated by taking into account any discount or premium on acquisition and fees or costs that are an integral part of the EIR.  The EIR amortization is included as finance income or finance cost in the income statement.  The losses arising from impairment are recognized in the income statement in finance costs.
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Available-for-sale financial assets
Available-for-sale financial assets include equity investments and debt securities.  Equity investments classified as available for sale are those that are neither classified as held for trading nor designated at fair value through profit or loss.  Debt securities in this category are those that are intended to be held for an indefinite period of time and that may be sold in response to needs for liquidity or in response to changes in the market conditions.
After initial measurement, available-for-sale financial assets are subsequently measured at fair value with unrealized gains or losses recognized as other comprehensive income in the available-for-sale reserve until the investment is derecognized, at which time the cumulative gain or loss is recognized in other operating income, or the investment is determined to be impaired, when the cumulative loss is reclassified from the available-for-sale reserve to the income statement in finance costs.  Interest earned whilst holding available-for-sale financial investments is reported as finance income using the EIR method.

For a financial asset  reclassified out of from the available-for-sale category, the fair value carrying amount at the date of reclassification becomes its new amortized cost and any previous gain or loss on the asset that has been recognized in equity is amortized to profit or loss over the remaining life of the investment using the EIR.  Any difference between the new amortized cost and the maturity amount is also amortized over the remaining life of the asset using the EIR. If the expected selling price less completion costsasset is subsequently determined to be impaired, then the amount recorded in equity is reclassified to the income statement.
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(ii)Impairment of financial assets
The Company assesses, at each reporting date, whether there is objective evidence that a financial asset or a group of financial assets is impaired.  A financial asset or a group of financial assets is deemed to be impaired if there is objective evidence of impairment as a result of one or more events that has occurred since the initial recognition of the asset (an incurred ‘loss event’) and coststhat loss event has an impact on the estimated future cash flows of the financial asset or the group of financial assets that can be reliably estimated.  Evidence of impairment may include indications that the debtors or a group of debtors is experiencing significant financial difficulty, default or delinquency in interest or principal payments, the probability that they will enter bankruptcy or other financial reorganization and observable data indicating that there is a measurable decrease in the estimated future cash flows, such as changes in arrears or economic conditions that correlate with defaults.
Financial assets carried at amortized cost
For financial assets carried at amortized cost, the Company first assesses whether objective evidence of impairment exists individually for financial assets that are individually significant, or collectively for financial assets that are not individually significant.  If the Company determines that no objective evidence of impairment exists for an individually assessed financial asset, whether significant or not, it includes the asset in a group of financial assets with similar credit risk characteristics and collectively assesses them for impairment.  Assets that are individually assessed for impairment and for which an impairment loss is, or continues to execute sales (market)be, recognized are not included in a collective assessment of impairment.
If there is lower thanobjective evidence that an impairment loss has been incurred, the amount of the loss is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows (excluding future expected credit losses that have not yet been incurred).  The present value of the estimated future cash flows is discounted at the financial asset’s original effective interest rate.  If a write-downloan has a variable interest rate, the discount rate for measuring any impairment loss is chargedthe current EIR.
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The carrying amount of the asset is reduced through the use of an allowance account and the loss is recognized in profit or loss. Interest income continues to expenses in costbe accrued on the reduced carrying amount and is accrued using the rate of salesinterest used to discount the future cash flows for the purpose of measuring the impairment loss.  The interest income is recorded as finance income in the income statement.  Loans together with the associated allowance are written off when there is no realistic prospect of future recovery and all collateral has been realized or has been transferred to the Company.  If, in a subsequent year, the amount of the estimated impairment loss increases or decreases because of an event occurring after the impairment was recognized, the previously recognized impairment loss is increased or reduced by whichadjusting the carrying amount exceeds its market. Whenallowance account.  If a write-off is later recovered, the finished goods that were previously written down to market are subsequently sold at above market, a recovery is credited to finance costs in the income statement.
Trade Receivables Impairment:
For a trade receivable, impairment assessment is performed on an individual basis:
A financial asset is impaired (and impairment losses are determined) if, and only if, there is objective evidence of impairment as a result of one or more events that occurred after initial recognition (a 'loss event') and that loss event (or events) has an impact on the estimated future cash flows of the financial asset that can be reliably estimated.
Objective evidence that a financial asset or group of assets is impaired includes observable data that comes to the attention of the holder about the following loss events:
}significant financial difficulty of the issuer or obligor;
}breach of contract, such as a default or delinquency in interest or principal payments;
}the lender, for economic or legal reasons relating to the borrower's financial difficulty, granting to the borrower a concession that would not otherwise be considered;
}it becoming probable that the borrower will enter bankruptcy or other financial reorganization;
}the disappearance of an active market for that asset because of financial difficulties (but not simply because the asset is no longer publicly traded ; or
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}observable data indicating that there is a measurable decrease in the estimated future cash flows from a Company of financial assets since initial recognition, although the decrease cannot yet be identified with the individual assets in the Company, including:
}adverse changes in the payment status of borrowers in the Company (e.g. an increased number of delayed payments); or
}national or local economic conditions that correlate with defaults on the assets in the Company.
For trade receivables that have been individually assessed, but for which there is no objective evidence of impairment, the review for impairment is performed on a group basis, based on similar credit risk characteristics.
Available for sale financial assets
For available-for-sale financial assets, the Company assesses at each reporting date whether there is objective evidence that an investment or a group of investments is impaired.
In the case of equity investments classified as available-for-sale, objective evidence would include a significant or prolonged decline in the fair value of the investment below its cost.  ‘Significant’ is evaluated against the original cost of sales.

Income Taxes

the investment and ‘prolonged’ against the period in which the fair value has been below its original cost.  The Company followsCompany's policy considers a significant decline to be one in which the liability methodfair value is below the weighted average original cost by more than 20%.  A prolonged decline is considered to be one in which the fair value is below the weighted average original cost for a period of accounting for income taxes in accordance with ASC 740, “Income Taxes” (“ASC 740”). Under this method, deferred tax assets and liabilities are determined based onmore than 12 months.  When there is evidence of impairment, the cumulative loss – measured as the difference between the acquisition cost and the current fair value, less any impairment loss on that investment previously recognized in the income statement – is removed from other comprehensive income and recognized in the income statement.  Impairment losses on equity investments are not reversed through profit or loss; increases in their fair value after impairment are recognized directly in other comprehensive income.

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In the case of debt instruments classified as available for sale, impairment is assessed based on the same criteria as financial assets carried at amortized cost.  However, the amount recorded for impairment is the cumulative loss measured as the difference between the amortized cost and the current fair value, less any impairment loss on that investment previously recognized in the income statement.
Future interest income continues to be accrued based on the reduced carrying amount of the asset, using the rate of interest used to discount the future cash flows for the purpose of measuring the impairment loss.  The interest income is recorded as part of finance income.  If, in a subsequent year, the fair value of a debt instrument increases and the increase can be objectively related to an event occurring after the impairment loss was recognized in the income statement, the impairment loss is reversed through the income statement.
(iii)Financial Liabilities
Financial liabilities initial recognition and measurement
Financial liabilities within the scope of IAS 39 are classified as financial liabilities at fair value through profit or loss, loans and borrowings, or as derivatives designated as hedging instruments in an effective hedge, as appropriate.  The Company determines the classification of its financial liabilities at initial recognition.
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All financial liabilities are recognized initially at fair value and, in the case of loans and borrowings, net of directly attributable transaction costs.
The Company’s financial liabilities include trade and other payables, bank overdrafts and interest bearing loans and borrowings.
Subsequent measurement
After initial recognition, interest bearing loans and borrowings are subsequently measured at amortized cost using the EIR method.  Gains and losses are recognized in profit or loss when the liabilities are derecognized as well as through the EIR amortization process.
Amortized cost is calculated by taking into account any discount or premium on acquisition and fees or costs that are an integral part of the EIR.  The EIR amortization is included as finance costs in the income statement.
Impairment of non-financial assets
The Company assesses, at each reporting date, whether there is an indication that an asset may be impaired.  If any indication exists, or when annual impairment testing for an asset is required, the Company estimates the asset’s recoverable amount.  An asset’s recoverable amount is the higher of an asset’s or cash-generating unit’s (“CGU”) fair value less costs to sell and its value in use.  A CGU is the smallest group of assets that generates cash inflows that are largely independent of the cash flows from other assets or groups of assets. Recoverable amount is determined for an individual asset, unless the asset does not generate cash inflows that are largely independent of those from other assets or group of assets.  When the carrying amount of an asset or CGU exceeds its recoverable amount, the asset is considered impaired and is written down to its recoverable amount.
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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.  In determining fair value less costs to sell, recent market transactions are taken into account. If no such transactions can be identified, an appropriate valuation model is used.  These calculations are corroborated by valuation multiples, quoted share prices for publicly traded companies or other available fair value indicators.
The Company bases its impairment calculation on detailed budgets and forecast calculations, which are prepared separately for each of the Company’s CGUs to which the individual assets are allocated.  These budgets and forecast calculations generally cover a period of five years.  For longer periods, a long-term growth rate is calculated and applied to project future cash flows after the fifth year.
Impairment losses of continuing operations, including impairment on inventories, are recognized in the income statement in expense categories consistent with the function of the impaired asset.
For assets excluding goodwill, an assessment is made at each reporting date to determine whether there is an indication that previously recognized impairment losses no longer exist or have decreased.  If such indication exists, the Company estimates the asset’s or CGU’s recoverable amount.  A previously recognized impairment loss is reversed only if there has been a change in the assumptions used to determine the asset’s recoverable amount since the last impairment loss was recognized.  The reversal is limited so that the carrying amount of the asset does not exceed its recoverable amount, nor exceed the carrying amount that would have been determined, net of depreciation, had no impairment loss been recognized for the asset in prior years.  Such reversal is recognized in the income statement.
Taxes
Deferred tax
Deferred tax is provided using the liability method on temporary differences between the tax bases of assets and liabilities using enactedand their carrying amounts for financial reporting purposes at the reporting date.
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Deferred tax liabilities are recognized for all taxable temporary differences, except:
}When the deferred tax liability arises from the initial recognition of goodwill or an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss; or
}In respect of taxable temporary differences associated with investments in subsidiaries, associates and interests in joint ventures, when the timing of the reversal of the temporary differences can be controlled and it is probable that the temporary differences will not reverse in the foreseeable future.
Deferred tax assets are recognized for all deductible temporary differences, the carry forward of unused tax credits and any unused tax losses.  Deferred tax assets are recognized to the extent that it is probable that taxable profit will be available against which the deductible temporary differences, and the carry forward of unused tax credits and unused tax losses can be utilized, except:
}When the deferred tax asset relating to the deductible temporary difference arises from the initial recognition of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss; or
}In respect of deductible temporary differences associated with investments in subsidiaries, associates and interests in joint ventures, deferred tax assets are recognized only to the extent that it is probable that the temporary differences will reverse in the foreseeable future and taxable profit will be available against which the temporary differences can be utilized.
The carrying amount of deferred tax assets is reviewed at each reporting date and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred tax asset to be utilized.  Unrecognized deferred tax assets are reassessed at each reporting date and are recognized to the extent that it has become probable that future taxable profits will allow the deferred tax asset to be recovered.
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Deferred tax assets and liabilities are measured at the tax rates that will be in effect in the period in which the differences are expected to reverse.

Currentapply in the year when the asset is realized or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted at the reporting date.

Deferred tax relating to items recognized outside profit or loss is recognized outside profit or loss.  Deferred tax items are recognized in correlation to the underlying transaction either in other comprehensive income or directly in equity.
Deferred tax assets and deferred tax liabilities are offset if a legally enforceable right exists to set off current tax assets against current income tax liabilities and the deferred taxes relate to the same taxable entity and the same taxation authority.
Uncertain tax position
An entity’s tax position might be uncertain; for example, where the tax treatment of an item of expense or structured transaction may be challenged by the tax authorities.
Local management should consider each uncertain tax positions individually, by first consider whether each position taken in the tax return is probable of being sustained on examination by the amounttaxing authority.  It should recognize a liability for each item that is not probable of income taxes expected to be payable forbeing sustained.  The liability then is measured using a single best estimate of the most likely outcome.  The uncertain tax positions are presented in the current year. Deferred income tax balances reflect the effects of temporary differences between the carrying amounts of assets and liabilities and their tax basis and are stated at enacted tax rates expected to be in effect when taxes are actually paid or recovered. ASC 740, requires that deferred tax assets be evaluated for future realization and reduced by a valuation allowance to the extent the Company believes a portion will not be realized.  The Company considers many factors when assessing the likelihood of future realization of its deferred tax assets, including its recent cumulative earnings experience and expectations of future taxable income by taxing jurisdiction, the carry-forward  periods available to the Company for tax reporting purposes, and other relevantfactors. Deferred income tax expense (benefit) is the net change during the year in the deferred income tax asset or liability.

liabilities.

The Company adopted the provisions of ASC 740 to account for uncertainties in income taxes.  ASC 740 contains a two-step approach to recognizing and measuring uncertain tax positions.  The first step is to evaluate the tax position for recognition by determining if the weight of available evidence indicates it is more likely than not that the position will be sustained on audit, including resolution of related appeals or litigation processes, if any.  The second step is to measure the tax benefit as the largest amount, which is more than 50% likely of being realized upon ultimate settlement.  The Company considers many factors when evaluating and estimating its tax positions and tax benefits, which may require periodic adjustments and which may not accurately anticipate actual outcomes. The Company’s policy is to recognize interest expense and penalties related to income tax matters as a component of income tax expense.

Property, Plant and Equipment

Property, plant and equipment are stated at cost less depreciation and any impairment losses. Asset leases qualifying as capital leases are also included in property, plant and equipment. Major renewals and improvements are capitalized and minor replacements, maintenance, and repair expenses are charged to current operations as incurred. Depreciation is computed using the straight-line method over the estimated useful lives of the assets or the respective lease term, whichever is shorter, as follows:

Land

Land use rights

Buildings

Machinery and equipment

Motor vehicles

Office equipment

Nil

15 - 50 years

5 - 30 years

5 - 10 years

3 - 10 years

3 - 10 years

No depreciation expense is charged for construction in progress and machinery and equipment under installation.

Capitalized interest on construction in progress is added to the cost of the underlying asset and is depreciated over the estimated useful life of the asset in the same manner as the underlying asset. Interest capitalized for 2010 and 2011 amounted to $nil and $9, respectively. The capitalized interest was related to and has been included as part of the cost of Ningbo Pacific’s construction in progress. 

When property and equipment are retired, sold or otherwise disposed of, the asset’s carrying amount and related accumulated depreciation are removed from the accounts and any gain or loss is included in operations.

In 2006, the Company terminated the Ningbo Pacific joint venture and liquidated its major equipment at the Ningbo Pacific facility. In October 2009, the Company has made a resolution to acquire additional 5.42% shareholding of Ningbo Pacific from the Republic of China (“PRC”) joint venture partner. The Company plans to resume manufacturing operation with new constructed facilities at the Ningbo Pacific site.  The acquisition of additional shareholding is expected to be completed in early 2013.

Goodwill

Goodwill represents the excess of the cost of purchased business over the fair value of the underlying net assets acquired. Goodwill, is not amortized, but tested for impairment at least annually or more frequently if circumstances indicate that impairment may exist.  The Company determined it has three reporting units in which the entire goodwill was allocated to manufactured product segment.

In accordance with ASC 350 “Intangible – Goodwill and Others”, (“ASC 350”), the Company performed a two-step test to assess goodwill impairment as of December 31, 2011. First, the Company identifies potential goodwill impairment by comparing the fair value of a reporting unit with its carrying amount, including goodwill. The Company determines fair value using a discounted cash flow approach and makes reference tothe market capitalization of the Company. If the carrying amount of a reporting unit exceeds its fair value, the second step of the goodwill impairment test is performed to measure the amount of goodwill impairment loss.


Based on the Company’s assessment conducted as of December 31, 2011, the Company recognized goodwill impairment charges of $8.8 million, and the carrying amount was $nil as of December 31, 2011.

Investments

Management determines the appropriate classification of its investments at the time of purchase and re-evaluates such designation as of each balance sheet date. 

The Company accounts for its investments in equity securities of privately-held companies as cost method investment in accordance to ASC 325, “Investments – Others” as these securities do not have readily determinable fair value. Investments in which the Company does not have a controlling interest or an ownership voting interest to exert significant influence, and which are not publicly traded are accounted for at cost                                 

The Company accounts for its investments in equity securities that have readily determinable fair value using ASC 320, “Investments – Debt and Equity Securities”. Equity securities are classified as available-for-sale, as the Company does not trade in these securities, but rather they are held as longer term investments due to business relationships with the entities. Available-for-sale securities are carried at fair value, with the unrealized gains and losses, net of tax, reported in a separate component of shareholders’ equity.  Realized gains and losses and declines in values judged to be other-than-temporary on available-for-sale securities are included in investment income.  The cost of securities sold is based on the specific identification method.  Interest and dividends on securities classified as available-for-sale are included in investment income.

Investments in entities in which the Company can exercise significant influence but does not own a majority equity interest or control are accounted for using the equity method of accounting under ASC sub-topic 323-10, (“ASC 323-10”), Investments—Equity Method and Joint Ventures: Overall, and included as investment in equity investees in the balance sheets. Under the equity method, the Company’s proportionate share of each equity investee’s net income or loss is included as share of income (losses) in equity investees in the consolidated statements of operations. An investor shall record its proportionate share of the investee’s equity adjustments for other comprehensive income (e.g. foreign currency items, etc) as increase or decrease to the investment account with corresponding adjustment in equity. The Company evaluated the investment in equity investee for impairment under ASC 323-10. An impairment loss on the investment in equity investee is recognized in the consolidated statements of operations when the decline in value is determined to be other-than-temporary.

A judgmental aspect of accounting for investments (including investments in equity investees) involves determining whether an other-than-temporary decline in value of the investment has been sustained.  If it has been determined that an investment has sustained an other-than-temporary decline in its value, the investment is written down to its fair value, by a charge to earnings.  Such evaluation is dependent on the specific facts and circumstances.  Factors that are considered by the Company in determining whether an other-than-temporary decline in value has occurred include: the market value of the security in relation to its cost basis; the financial condition of the investee; and the intent and ability to retain the investment for a sufficient period of time to allow for recovery in the market value of the investment.

In 2009, 2010 and 2011, the Company recorded an impairment charge of $nil, $346 and $nil, respectively, related to certain available-for-sale investment. 

Impairment of Long-Lived Assets

  The Company accounts for impairment of long-lived assets in accordance with ASC 360, “Property, Plant and Equipment”.  Long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.  In such instances, the Company estimates the undiscounted future cash flows that result from the use of the asset and its ultimate disposition.  If the sum of the undiscounted cash flows is less than the carrying value, the Company recognizes animpairment loss, measured as the amount by which the carrying value exceeds the fair value of the asset group, determined principally using discounted cash flows. 


In 2009, the Company recorded an impairment charge of $77 related to the impairment of a factory in Thailand (included in the manufactured products segment) that is not being used for operation.  The impairment charge was recorded to reduce the carrying value of the identified assets to fair values. Fair values were derived using a variety of methodologies, including cash flow analysis, estimates of sales proceeds and independent appraisals. Where cash flow analyses were used to estimate fair values, key assumptions employed, included estimates of future growth, estimates of gross margins and estimates of the impact of inflation. The charges were primarily the result of management’s revised outlook due to the prolonged unfavorable market conditions.

There was no impairment charge in 2010. In 2011, the Company recorded an impairment charge of $25 related to the damage to Siam Pacific’s machinery due to the flooding in Thailand. The impairment is stated as a line item, “Charges related to flooding” within operating expenses.

Account Receivables and allowance for doubtful accounts

Accounts receivables are stated at face value less any allowance for doubtful accounts. The Company maintains allowance for doubtful accounts for estimated losses resulting from the inability of its customers to make required payments. Management considers the following factors when determining the collectability of specific customer accounts: customer credit-worthiness, customer financial condition, past transaction history with the customer, current economic industry trends, and changes in customer payment terms.

Lease obligations

In accordance with ASC 840, Leases, leases for a lessee are classified at the inception date as either a capital lease or an operating lease. The Company assesses a lease to be a capital lease if any of the following conditions exist: a) ownership is transferred to the lessee by the end of the lease term, b) there is a bargain purchase option, c) the lease term is at least 75% of the property’s estimated remaining economic life or d) the present value of the minimum lease payments at the beginning of the lease term is 90% or more of the fair value of the leased property to the lessor at the inception date. A capital lease is accounted for as if there was an acquisition of an asset and an incurrence of an obligation at the inception of the lease. The capitalized lease obligation reflects the present value of future rental payments, discounted at the appropriate interest rates. The cost of the asset is amortized over the lease term. However, if ownership is transferred at the end of the lease term, the cost of the asset is amortized as set out below under property, plant and equipment.

Operating lease expenses are recognized on a straight-line basis over the applicable lease term.

Revenue Recognition

Revenue represents the invoiced value of goods sold, net of value added tax and returns, invoiced value on distribution activities, and service fee income on installation activities.  recognition

Revenue is recognized to the extent that it is probable that the economic benefits will flow to the Company and the revenue can be reliably measured.measured, regardless of when the payment is being made.  Revenue is measured at the fair value of the consideration received or receivable, taking into account contractually defined terms of payment  and excluding taxes or duty.  The followingCompany assesses its revenue arrangements against specific criteria to determine if it is acting as principal or agent.  The specific recognition criteria described below must also be met before revenue is recognized.

Sales of manufactured goods and distributed products

The Company recognizes revenue from the sale of manufactured goods and distributed products upon passage of title to the customer that coincides with their delivery and acceptance. These revenue recognition are recognized in accordance with SEC Staff Accounting Bulletin (SAB) No. 104. The Company recognizes its revenue of sale of distributed products at gross as the Company is the primary obligor in the transaction.

The Company classifies shipping and handling costs incurred within cost of sales.

Supply, Delivery and Installation


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SDI
The Company’s supply, delivery and installation services are considered as multiple elements arrangements and are accounted for in accordance with ASC subtopic 605-25, Revenue Recognition: Multiple-Element Arrangements (“ASC 605-25”). Elements such as installation service andIAS 18.  The sale of cables and the installation service are considered as separate elements contained in aone single arrangement, or in related arrangements with the same customer. The Company allocates revenue to each element based on its relative fair value. The allocationarrangement.
Revenue of the fair value to the delivered elementsSDI is limited to the amount that is not contingent on future delivery of services or subject to customer-specified return or refund privileges.  The Company prospectively adopted Accounting Standards Update (“ASU”) No. 2009-13, Multiple-Deliverable Revenue Arrangements (“ASU 2009-13”), a consensus of the FASB Emerging Issues Task Force that amends ASC 605-25, on January 1, 2011.

In accordance with ASU 2009-13, certain delivered items in multiple-element arrangements, which previously would not qualify for separate units of accounting due to the lack of vendor-specific objective evidence or third-party evidence of selling price, are accounted for as separate units of accounting, to which the total consideration of the arrangements is allocated based on management’s best estimate of the selling price (“BESP”). We consider all reasonably available information in determining the BESP, including both market and entity-specific factors. The adoption of ASU 2009-13 does not have a material effect on our financial statements, the units of accounting and the pattern and timing of revenue recognition is not changed materially.

The Company recognizes revenue from installation activities using the percentage-of-completion method, based on the customer certification of the distancelength of cable laid with respect to the estimated total length of cable under the contracts in accordance with IAS 11.

When the current estimates of total contract revenue and in accordance with ASC 605-35, “Revenue Recognition-Construction-Type and Production-Type Contracts”.contract cost indicate a loss, a provision for the entire loss on the contract shall be made.  The timing of revenue recognition of cable sales and installation services are substantially identical.

Bill-and-hold arrangements

     The Company recognizes revenue of sale of cables under bill-and-hold arrangements requested by certain customersprovision for losses shall be in Thailand,the period in accordance with SAB 104.

As at December 31, 2009, 2010 and 2011, the revenue recognized under bill-and-hold arrangements where the cables were not yet delivered was $8.6 million, $17.9 million and $5.8 million, respectively.

Customers’ incentive

The Company offers sales incentives in connection with power cable sales to wholesalers and distributors. These incentives include both rebates offered to customers for purchasingwhich they become evident.  On a certain volume of product during the year and settlement discounts for early payment of sales invoices. Both forms of incentives are recognized as a reduction to gross sales.

Foreign Currency Translation and Transactions

The functional currency of the Company’s international subsidiaries is generally the local currency or U.S. Dollars.  For these subsidiaries,quarterly basis, the Company translatesshould review the assetsbudget and liabilities at exchange rates in effect at the balance sheet date and income and expense accounts at average exchange rates during the year.  Resulting currency translation adjustments are recorded directly to accumulated other comprehensive income within stockholders’ equity. 

Foreign currency transactions are recorded at the applicable rates of exchange in effect at the transaction dates.  Monetary assets and liabilities denominated in foreign currencies at the balance sheet date are translated at the applicable rates of exchange in effect at that date.  Gains and losses from foreign currency transactions are recorded in the consolidated statements of operations.

Foreign Currency Forward Contracts

forecast whether a loss provision should be recorded.

The Company recognizes derivative financial instruments in the consolidated financial statements at fair value regardless of the purposes or intent for holding the instrument. Changes in the fair value of derivative financial instruments are either recognized periodically in income or in shareholders’ equity as a component of comprehensive income depending on whether the derivative financial instruments qualify for hedge accounting, and if so, whether they qualify as a fair value or cash flow hedge.

Generally, changes in fair values of derivatives accounted for as fair value hedges are recorded in income along with the portions of the changes in the fair value of the hedged items that relate to the hedged risks. Changes in fair value of derivatives accounted for as cash flow hedges, to the extent they are effective as hedges, are recorded in other comprehensive income net of deferred taxes. Changes in fair value of derivatives used as hedges of the net investment in foreign operations are reported in other comprehensive income as part of the cumulative translation adjustment. Changes in fair values of derivatives not qualifying as hedges are reported in the consolidated statements of operations.

The Company’s subsidiaries use forward foreign exchange contracts to reduce their exposure to foreign currency risk for liabilities denominated in foreign currency. A forward foreign exchange contract obligates the Company to exchange predetermined amounts of specified foreign currencies at specified exchange rates on specified dates or to make an equivalent U.S. dollar payment equal to the value of such exchange.  Realized and unrealized gains and losses on foreign exchange contracts are included as foreign exchange gains or losses in the consolidated statements of operations as such contracts do not qualify for hedge accounting.

As of December 31, 2010 and 2011, the Company had outstanding forward exchange purchase contracts with notional values of $nil and $2,317, respectively. The outstanding forward exchange contracts as of December 31, 2011 matured in January 2012. The Company records these contracts at fair value with the related gains and losses of $nil, $nil and $64, for the years ended December 31, 2009, 2010 and 2011, respectively in the consolidated statements of operations.

Copper Future Contracts

Copper future contracts are designed to manage the Company’s consolidated exposure to change in inventory value due to fluctuations in market prices for selected operating units. Within the ordinary course of business the Company routinely enters into purchase transactions for copper. The majority of these transactions take the form of contracts that were entered into and continue to be held for the purpose of receipt or delivery of the copper in accordance with the Company’s expected sales or production timing or usage requirements. Such contracts are not within the scope of hedging accounting, or derivatives. To date, these contract positions have not had a material effect on the Company’s financial position, results of operations or cash flow.

Earnings (Loss) Per Share

Basic and diluted earnings (loss) per share are calculated in accordance with ASC 260, “Earnings Per Share”.  There are no dilutive equity instruments for all periods presented.

Fair Value Measurements

Effective from January 1, 2008, the Company adopted the provisions of ASC 820, “Fair Value Measurements and Disclosures” for financial assets and liabilities. Under ASC 820, fair value is defined as the price that would have been received to sell an asset or paid to transfer a liability (i.e., the “exit price”) in an orderly transaction between market participants at the measurement date.

In determining fair value, the Company uses various valuation approaches. ASC 820 establishes a hierarchy for inputs used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the most observable inputs be used when available. Observable inputs are inputs that market participants would use in pricing the asset or liability developed based on market data obtained from sources independent of the Company. Unobservable inputs are inputs that reflect the Company’s assumptions about the assumptions market participants would use in pricing the asset or liability developed based on the best information available in the circumstances. The hierarchy is broken down into three levels based on the observability of inputs as follows:


•     Level 1 - Valuations based on quoted prices in active markets for identical assets that the Company has the ability to access. Valuation adjustments and block discounts are not applied to Level 1 instruments. Since valuations are based on quoted prices that are readily and regularly available in an active market, valuation of these products does not entail a significant degree of judgment.

•     Level 2 - Valuations based on one or more quoted prices in markets that are not active or for which all significant inputs are observable, either directly or indirectly.

•     Level 3 - Valuations based on unobservable inputs which are supported by little or no market activity and significant to the overall fair value measurement.

The availability of observable inputs can vary from investment to investment and is affected by a wide variety of factors, including, for example, the type of investment, the liquidity of markets and other characteristics particular to the transaction. To the extent that valuation is based on models or inputs that are less observable or unobservable in the market, the determination of fair value requires more judgment and the investments are categorizes as Level 3.

The carrying amounts of financial instruments, including cash and cash equivalents, bank deposits, trade receivables, other current assets, trade payables, related party balances and other liabilities approximate their fair value due to the short-term maturities of such instruments.

Recent Pronouncements

In May 2011, the FASB issued an additional guidance ASU 2011-04  “Fair Value Measurement (Topic 820): Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs” which clarifies the application of existing fair value measurement and disclosure requirements, changes certain fair value measurement principles and requires additional disclosures about fair value measurements. The updated guidance is effective on a prospective basis for financial statements issued for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2011. The adoption of this guidance will not have a material impact on the Company’s consolidated financial statements.

In June 2011, the FASB issued an ASU 2011-05“Presentation of Comprehensive Income” which amended guidance for the presentation of comprehensive income. The amended guidance requires the presentation of comprehensive income, the components of net income and the components of other comprehensive income either in a single continuous statement of comprehensive income or in two separate but consecutive statements. The amended guidance also requires presentation of adjustments for items that are reclassified from other comprehensive income to net income in the statement where the components of net income and the components of other comprehensive income are presented. The amended guidance is effective on a retrospective basis for financial statements issued for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2011. The Company believes the adoption of this update will change the order in which certain financial statements are presented and provide additional detail on those financial statements when applicable, but will not have any other impact on its financial statements or results of operations. The Company plans to adopt this standard with effect during and from the interim period ended March 31, 2012.

In December 2011, ASU No. 2011-12, “Comprehensive Income (Topic 220): Deferral of the  Effective Date for Amendments to the Presentation of Reclassifications of Items Out of Accumulated Other Comprehensive Income in Accounting Standards Update No. 2011-05”. This ASU defers the changes in ASU 2011-05 that relate to the presentation of reclassification adjustments and supersedes certain pending paragraphs. ASU 2011-12 will be applied retrospectively. ASU 2011-12 is effective for fiscal years, and interim periods within those years, beginning after December 15, 2011. Early adoption is permitted. The Company believes the adoption of this update will change the order in which certain financial statements are presented and provide additional detail on those financial statements when applicable, but will not have any other impact on its financial statements or results of operations. The Company plans to adopt this standard during the interim period ended March 31, 2012.

5.2Selected Gross Margin Data

5.2 Selected Gross Margin Data

This discussion should be read in conjunction with the information contained in our Consolidated Financial Statements presented in Item 18 of this Annual Report.

Results are analyzed and reported along the lines of our three principal business segments, consisting of Manufactured Products, SDI project engineering,the North Asia region, the Thailand region, and Distributed Products.  The operating data that senior management collects and analyzes from our operating subsidiaries include, in certain cases, certain limited information regarding results along product lines that are components within our Manufactured Products segment.the ROW region.  For the benefit of our shareholders, included in the summary table below are certain results for product lines within our Manufactured Products segment3 business segments with regard to net sales, gross profit and gross profit margin for the periods covered.  The following table sets forth selected summary data for the periods indicated (dollar ($) amounts in thousands of US$)

(Figures in 2009 and 2010 were restated to reflect the results of discontinued operations of SPFO. For details, see “Item 5.3: Operating Results”)

 

2009

2010

2011

Net Sales:

 

 

 

Manufactured Products:

 

 

 

Telecommunications wire and cable

$26,011

$44,917

28,580

Power cable

102,972

148,300

200,673

Enameled wire

135,145

202,842

200,221

 

 

 

 

Total Manufactured Products

264,128

396,059

429,474

Supply, delivery and installation of wires and

 

 

 

cables

34,008

23,600

16,972

Distributed Products

28,102

26,935

25,500

Total net sales

326,238

446,594

471,946

Gross profit:

 

 

 

Manufactured Products:

 

 

 

Telecommunications wire and cable

3,593

13,417

6,529

Power cable

8,602

25,233

26,487

Enameled wire

2,093

14,778

9,860

 

 

 

 

Total Manufactured Products

14,288

53,428

42,876

Supply, delivery and installation of wires and

 

 

 

cables

889

242

57

Distributed Products

1,517

1,379

2,955

Inventory Impairment

23,949

1,974

(1,993)

Total gross profit

40,643

57,023

43,895

Gross profit margin:

 

 

 

Manufactured Products:

 

 

 

Telecommunications wire and cable

13.8%

29.9%

22.8%

Power cable

8.4%

17.0%

13.2%

Enameled wire

1.5%

7.3%

4.9%

 

 

 

 

Total Manufactured Products

5.4%

13.5%

10.0%

SDI Project engineering

2.6%

1.0%

0.3%

Distributed Products

5.4%

5.1%

11.6%

Total gross margin

12.5%

12.8%

9.3%

Note: Inventory impairment is separated from calculation of total manufactured gross margin but included in the total gross profit. 

.

5.3 Operating Results

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  For the year ended December 31, 
  2014  2013  
2012
 
  (in thousands except for percentage) 
Net Sales:         
North Asia region $114,836  $69,347  $55,633 
Thailand region  166,864   175,347   190,379 
ROW region  169,627   215,982   216,253 
Total $451,327  $460,676  $462,265 
Gross profit:            
North Asia region $4,441  $3,096  $4,274 
Thailand region  15,882   26,385   25,063 
ROW region  16,421   22,335   21,142 
Total gross profit $36,744  $ 51,816  $50,479 
Gross profit margin:            
North Asia region  3.87%  4.47%  7.68%
Thailand region  9.52%  15.05%  13.16%
ROW region  9.68%  10.34%  9.78%
Total gross profit margin  8.14%  11.25%  10.92%
5.3Operating Results
The Company is 65.6% owned and controlled by PEWC, a Taiwanese company.  An additional 9.8% of the Common Shares are owned and controlled by a U.S.-based private equity fund.  The remaining 24.6% of the outstanding Common Shares are publicly-traded in the United Statesand listed on NASDAQ.NASDAQ.  Based upon a review of Schedule 13D and 13G filings made with the Commission by shareholders, and a review of the share register maintained by the Company’s transfer agents in Bermuda and the U.S., the Company is not aware that it has any shareholders resident in the jurisdictions where the Company has business operations.  While the Company’s operations and results are impacted by economic, fiscal, monetary and political policies of the respective governments in the countries where the Company operates, that impact is not a function of the shareholder base of the Company.

5.3.1Year Ended December 31, 2011 Compared with Year Ended December 31, 2010

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5.3.1Year Ended December 31, 2014 Compared with Year Ended December 31, 2013
  For the Year Ended December 31,       
  2014  2013  Changes in $  Changes in % 
  (in thousands)       
Income Statement Data:            
Net sales $451,327  $460,676   (9,349)  (2.0)
Costs of sales  (414,583)  (408,860)  (5,273)   (1.3) 
Gross profit  36,744   51,816   (15,072)  (29.1)
Other operating income  89   181   (92)  (50.8)
Selling general & administrative expenses  (29,479)  (34,559)  5,080   14.7 
Other operating expenses  (2,168)  (196)  (1,972)  (1,006.1)
Operating profit  5,186   17,242   (12,056)  (69.9)
Finance cost  (1,697)  (1,734)  37   2.1 
Finance income  1,167   1,306   (139)  (10.6)
Share of loss of an associate  (338)  (211)  (127)  (60.2)
Gain on disposal of investment  —   232   (232)  (100.0)
Loss on sale of a subsidiary  (178)  —   (178)  (100.0) 
Exchange loss  (206)  (1,245)  1,039   83.5 
Other income  1,150   1,454   (304)  (20.9)
Other expenses  (49)  (260)  211   81.2 
Income from continuing operations before income taxes  5,035   16,784   (11,749)  (70.0)
Income taxes expenses  (2,274)  (5,518)  3,244   58.7 
Net income $2,761  $11,266   (8,505)  (75.5)
Net income attributable to non-controlling interests  2,189   5,419   (3,230)  (59.6)
Net income attributable to APWC  572   5,847   (5,275)  (90.2)
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General

Results of operations are determined primarily by market demand and government infrastructure projects, market selling prices of our products, our ability to manufacture high quality products efficiently in quantities sufficient to meet demand and to control production and operating costs.  Our results are also influenced by a number of factors, including currency stability in the countries in which our operations are located, competition and the cost of raw materials, especially copper, which accounted for majority of the cost of sales in 2011.

2014 and 2013.

In order to minimize the impact of copper price fluctuations, we attempt to “peg” the prices of our products to the prevailing market price of copper and pass changes in the cost of copper through to customers as much as possible.  In certain circumstances, however, we remain affected by fluctuations in the price of copper.  A recent rise or decline in copper prices may not be fully reflected under this pricing scheme for several months.

Average copper prices per metric ton have increaseddecreased by 17%6.4% from $7,534$7,326 in 20102013 to $8,826$6,860 in 2011 (four quarters2014 (annual average). Gross profit margins for Manufactured Products in 2010 were on average at 13.5% compared to 10.0% in 2011.

Copper prices indicated in this report are quoted from the LME index.  The 20102014 and 20112013 copper prices arewere as follows:

 

 

2011

2010

Average LME copper price ($/Ton)

1Q

9,641

7,232

 

2Q

9,314

7,027

 

3Q

8,710

7,242

 

4Q

7,641

8,636

 

Year

8,826

7,534

     2014  2013 
Average LME copper price ($/Ton) Q1   7,038   7,928 
  Q2   6,787   7,146 
  Q3   6,992   7,079 
  Q4   6,621   7,153 
  Year   6,860   7,326 
The average copper price in February 2012March 2015 on the LME was $8,591$5,926 per metric ton.

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Net Sales

Total sales in the North Asia region increased by $45.5 million, or 65.6%, from $69.3 million in 2013 to $114.8 million in 2014. The increase in sales was primarily due to the fact that starting November 2013, the region's export sales were no longer made through EPAN, and as a result, a substantial portion of the export sales was moved to the North Asia region. The increase in sales was also contributed by the increase in the sales of manufactured productproducts due to a different sales strategy, which increased both domestic and export sales.

Revenue from the Thailand region decreased by $33.4$8.4 million or 8.4%, from $396.1$175.3 million in 20102013 to $429.5$166.9 million in 2011. Sales of power cable increased by $52.4 million in 2011,2014, or 35.3%, due to an increasing demand in Thailand and Australia as a result of expanded government and private construction contracts. Sales of enameled wire on the other hand decreased by $2.6 million, due to reduced customer demand in all of the enameled wire manufacturing sites, i.e., Charoong Thai, Siam Pacific, PEWS, and Shanghai Yayang. Sales of telecommunication cable were reduced by $16.3 million, as the government projects in Thailand shrank.


Revenue from supply, delivery and installation of wires and products in Singapore decreased in 2011 by $6.6 million, or 28.1% due to reduced Singapore government budget.  However, we do perceive some positive signs that the government’s spending is getting back on track and more tenders are expected in 2012 and beyond.

Revenue from Distributed Products was at $25.5 million in 2011, down from $26.9 million in 2010.  An overall strategy to boost sales and gross margin is underway beginning the second quarter 2012.

The following table shows the percentage share and dollar value (in thousands) of net sales of the respective geographical locations of manufacturing plant of Manufactured Products only and all products and services with respect to our total sales in 2011:

 

Manufactured
products only

All products
and services

Thailand

43.3%

$186,034

42.0%

$198,077

Singapore

12.2%

$52,353

17.6%

$74,227

Australia

13.7%

$58,932

13.0%

$61,457

China

30.8%

$132,155

27.4%

$138,185

Total

100.0%

$429,474

100.0%

$471,946

Gross Profit

Gross profit for 2011 was $43.9 million, representing a decrease of $13.1 million, or 23.0% down compared to $57.0 million in 2010.4.8%. The decrease was primarily attributable to the raw material (copper) costfact that we were unable to pass on fully tothe volatile political situation adversely impacted the level of infrastructure investment and customer demand for our customers. In addition, our factory utilization was less than that of 2010, and thus we were unable to pass on the increased cost to our customers.

Apartproducts.


Revenue decreased by $46.4 million, or 21.5%, from the inventory impairment of $2.0 million, gross profit contributed by sales of manufactured products was $42.9$216.0 million in 2011 compared2013 to $53.4$169.6 million in 2010,2014 in the ROW region. The decrease was primarily because starting November 2013, a substantial portion of the export business was transferred to the North Asia region rather than being conducted through the ROW region. The decrease was also attributable to the decrease in sales in APEC due to stronger competition in the Australia market and the depreciation of the Australian dollar.
Gross Profit
Gross profit for 2014 was $36.7 million, representing a decrease of 19.7%, for$15.1 million, or 29.1% down compared to $51.8 million in 2013. The decrease was primarily attributable to the reason given above. lower margin in the Thailand region and the Company’s business in Australia in the ROW region.
The relative contribution to gross profit margin of the North Asia region was down from Manufactured Products4.47% in 2013 to 3.87% in 2014. The Company’s main product in this region is enameled wire, as the technology required to manufacture the product is low and the manufacturing process is not sophisticated, the Company’s business in the region was adversely affected by competition in the local market. In order to maintain the market share without sacrificing the product quality, the Company lowered the selling price to match competitors’ prices.
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The gross margin of the Thailand region was 9.52% in 2014, down from 15.05% in 2013, a decrease of 36.7%.  Our major clients in this region included government entities, private sector participants in the infrastructure sector and agents for 2010 and 2011 is as follows:

 

2010

2011

Manufactured Products:

 

 

Telecommunications wire and cable

25.1%

15.2%

Power cable

47.2%

61.8%

Enameled wire

27.7%

23.0%

 

 

 

Total

100.0%

100.0%

governmental entities.  The contributionunstable political environment adversely affected Thai government’s spending on infrastructure.  The gross margin of the Thailand region was eroded by the decrease in sales to the public sector, from which our subsidiaries in the Thailand region enjoyed a higher profit margin.

The gross profit from each segment line (andmargin of the components within the manufactured products segment) for 2010 and 2011 is as follows:

 

2010

2011

Manufactured Products:

 

 

Telecommunications wire and cable

23.5%

14.9%

Power cable

44.3%

60.3%

Enameled wire

25.9%

22.5%

Total

93.7%

97.7%

Supply, delivery and installation of wires and cables

0.4%

0.1%

Distributed Products

2.4%

6.7%

Inventory impairment

3.5%

(4.5%)

Total

100.0%

100.0%


Overall gross profit marginsROW region decreased from 12.8%10.34% in 20102013 to 9.3%9.68% in 2011 (reason as given above).  Gross profit margins for Manufactured Products also decreased from 13.5% in 2010 to 10.0% in 2011.  Manufactured Products and SDI project segments posted lower gross margin (reason as given before), as the competition from four Korean contractors, i.e., ILJIN Electric Co. Singapore Branch, LS Cable & System Ltd. Singapore Branch, Taihan Electric Wire Co., Ltd., and Hi Power Pte. Ltd., are bidding at the lowest price possible, thus driving down2014.  The decrease of the gross margin generationwas primarily due to the competition in the Australia market, where the Company’s Australia subsidiary lowered the selling price to compete with similar products imported from China by other competitors.

Operating Profit
SG&A expenses were $29.5 million in 2014, decreased by $5.1 million, or 14.7%, from $34.6 million in 2013.   The decrease in SG&A was primarily attributable to the decrease in sales-related commissions and remuneration.  The decrease was partially due to the depreciation of the Thai Baht and Australian dollar.  For the years ended 2014 and 2013, SG&A expenses accounted for this sector. Gross profit from telecommunication cables posted a lower margin, as6.5% and 7.5% of the price competition has become more and more intense.

Operating Profitnet sales, respectively.

In 2011,2014, we recorded a reversalnet provision of allowance for doubtful accounts of $1.5$2.2 million, owing to the fact that onesome of the major customers of Siam Pacific, A.S. Associated Engineering (1964) Co., Ltd. continuedthe Company were not able to settle the long outstanding trade receivables.their overdue payments.  Our internal controls provide that we perform a detailed review of our outstanding receivables, and make adjustments to our estimate to reflect significant delinquent accounts receivable.  The Company is not aware of anyother significant delinquent accounts receivable that have not already been adequately reserved.  In addition, we believe that our periodic allowance for doubtful accountsThe Company has brought actions against some customers who failed to settle their delinquent accounts.  The outcome of those actions will continue to not have a material impact on our liquidity.

Overall Selling, General and Administrative (“SG&A”) expenses increasedresults of operations or financial condition.

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Finance Income
The finance income was interest earned from bank deposits.  Interest income decreased from $1.3 million in 2013 to $1.2 million in 2014 by $1.8$0.1 million, mainlyor 10.6%, primarily due to tighter cash position in the North Asia region and the depreciation of the Thai Baht and Australian dollar against the U.S. dollar.
Share of Loss of an Associate
The increase in transportation chargesthe share of loss of an associate by $0.1 million in APEC by $0.8 million resulted from the increase in fuel cost. The remaining variance was owing to currency translation adjustment.

Accounts receivable, net of allowance for doubtful accounts, decreased by $46.1 million from December 31, 2010 of $144.5 million to $98.3 millionas of December 31, 2011.  The decrease in accounts receivable reflects our continuous effort in collecting outstanding debt in a time of global economic uncertainty. The overall Day of Sales Outstanding stands at approximately 92 days, improved2014, as compared to that of 2010 where2013, was primarily due to the number showed 102 daysloss that the Company recognized of $0.3 million according to getits shareholding in SPRC.

Gain on Disposal of Investment
In 2013, a gain of $0.2 million was recognized from the sales proceeds collected.

disposal of the Company’s equity investment in Shandong Huayu Pacific Fiber Optics.

Loss on Disposal of a Subsidiary
In August 2014, the Company recognized a loss of $0.2 million from the disposal of PEWC Hong Kong, a wholly-owned subsidiary of the Company.
Exchange Gain/Loss

(Loss)

The exchange rates at end of December 31, 20102014 and 20112013 are listed below, based on the Noon Buying Rate.  However, they do not actually reflect the ongoing rates during the year when transactions actually took place.

 

December 31,
2010

December 31,
2011

Foreign currency to US$1:

 

 

Thai Baht

30.16

31.51

Singapore $

1.29

1.295

Australian $

1.00

0.976

Chinese RMB

6.60

6.294

Based on the above rates, the revaluation of assets and liabilities denominated in U.S. dollars or other foreign currencies in the Company resulted in unrealized and realized foreign exchange loss of $1.3 million in 2011. 

Impairment of Investment

There have been no investment impairment losses recorded in 2011.

  As of December 31, 
  2014  2013 
Foreign currency to US$1:      
Thai Baht  32.90   32.68 
Singapore $  1.324   1.262 
Australian $  1.224   1.120 
Chinese RMB  6.205   6.054 
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Other Income

Other income refers to scrap sales of copper as a result of testing and quality control process and dividend income received.

Bill-and Hold Transactions


 During 2011, Charoong Thai entered into bill-and-hold arrangements with certain customers in Thailand. The Company recognized the revenue under such bill-and-hold arrangements in accordance withSAB Topic 13A.3.a,“Bill-and-hold Arrangements”. As of December 31, 2011, the revenue recognized under bill-and-hold arrangements where the cables were yet delivered was $8.6decreased by $0.3 million compared to $17.9 million as of December 31, 2011.

Discontinued Operations

The divesture of Shandong Pacific Fiber Optics Co. Ltd (“SPFO”) was an important goal, and accomplishment, of the Company’s board of directors and management to enable the Company to focus on its core wire and cable businesses that are more profitable and thereby increase shareholder value.

While SPFO has been one of the larger manufacturers of fiber optic cable in Shangdong Province, the Company believes that an oversupply of fiber-optic cable products limits the opportunities for sustained development of what is a non-core product line for the Company. In addition, the fiber-optic cable sector throughout China has been dominated by a few large players, who together account for more than 80% of sales of fiber-optic cable products. This market concentration has made competition difficult for companies, such as the Company, that have not committed substantial resources to the fiber optic industry, and SPFO faces additional challenges, such as obtaining raw materials like optical fiber at prices that are competitive in the market place. Moreover, the Chinese government is encouraging further consolidation of fiber and cable manufacturers, and it is not part of the Company’s current business strategies to put substantial investment in this market sector.                    

The Company successfully entered into an agreement to sell its 51% interest in the SPFO joint venture2013 primarily due to a group of third party investorsnon-recurring income in exchange for a total cash consideration of RMB 18.52013.

Other Expense
Other expenses decreased by $0.2 million (approximately $2.9 million), effective upon the directors approval on September 7, 2011. The share transfer was completed on December 1, 2011. Consequently, the Company’s deconsolidated SPFO effective December 2011. The Company recognized $2.0 million gain on disposal of a subsidiary in the consolidated of operations.

Goodwill Impairment

Goodwill of $8.8 million as of December 31, 2010 relatingcompared to the manufactured products segment and the changes in the carrying amount of goodwill are as follows:

Balance, December 31, 2010

$ 8,801

Disposal of a subsidiary

(10)

Impairment

(8,791)

Balance, December 31, 2011

$ –

In accordance with ASC 350, the Company assessed the fair value of the reporting unit as of December 31, 2011. The Company adopted the discounted cash flow approach and, considering that the reporting unit constituted the majority of the overall consolidated group, by reference to the closing price of its Common Shares on that date as well as an assumed control premium. From January 2011 to December 2011, the stock market downturn caused a decline in the Company’s stock price by 54.8%, which resulted in a significant reduction in the Company’s market capitalization. As of December 31, 2011, the assessed fair value was below the carrying value of the reporting unit. The Company then performed a hypothetical purchase price allocation using the fair value of reporting unit and determined that the goodwill was fully impaired. As a result, the Company recognized a goodwill impairment charge of $8.8 million for the year ended December 31, 2011 as a separate item in the consolidated statements of operations.

Thailand Flood Losses


       Siam Pacific suspended operations temporarily in the fourth quarter of 2011 due to damage sustained from the region’s recent flooding. The Siam Pacific facility, located 30 kilometers (18.6 miles) north of Bangkok, manufactures enameled wire and communication wire.  The facility sustained water damage, as the water level reached approximately 1.5 meters which damaged some of the machinery and equipment in the plant, as well as some of the inventory in the warehouse. As a result, the Company recorded $3.9 million of flood-related charges, including fixed asset impairments, recovery charges and a write-down of damaged inventory and recognized $0.9 million of deferred tax asset related to the charges in 2011. These charges are separately stated as a line item, “Charges related to flooding” within operating expense on the consolidated statements of operations.

The Company’s insurance policy covers the flood damage to the building, machinery, and inventory; however, it does not cover losses2013 primarily due to the business disruption.  The process of submitting claims to the Company’s insurers isnet loss on financial instruments in its early stages and the Company is unable to determine how much of its losses will be covered by insurance.

2013.

Income Taxes

Income tax expense was $4.6$2.3 million in 20112014 compared to $6.4$5.5 million in 2010.2013.  The fluctuationchange was mainly due to the decrease in pre-tax income and non-deductible expense of goodwill impairment.

5.3.2Year Ended December 31, 2010 Compared with Year Ended December 31, 2009

income.  The increase in effective tax rate from 32.88% in 2013 to 45.16% in 2014 was owning to the fact that our future tax benefits resulting from loss carry forwards could not be recognized.

5.3.2Year Ended December 31, 2013 Compared with Year Ended December 31, 2012
  For the Year Ended December 31,       
  2013  2012  Changes in $  Changes in % 
  (in thousands)       
Income Statement Data:            
Net sales $460,676  $462,265   (1,589)  (0.34)
Costs of sales  (408,860)  (411,786)  2,926   0.71 
Gross profit  51,816   50,479   1,337   2.65 
Other operating income  181   5,825   (5,644)  (96.89)
Selling general & administrative expenses  (34,559)  (34,593)  34   0.10 
Other operating expenses  (196)  (888)  692   77.93 
Operating profit  17,242   20,823   (3,581)  (17.20)
Finance cost  (1,734)  (2,195)  461   21.00 
Finance income  1,306   1,322   (16)  (1.21)
Share of loss of an associate  (211)  (21)  (190)   (904.76) 
Gain on disposal of investment  232   —   232   100.00 
Gain on liquidation of subsidiaries  —   279   (279)  (100.00)
Exchange gain (loss)  (1,245)  2,411   (3,656)  (151.64)
Other income  1,454   1,933   (479)  (24.78)
Other expenses  (260)  —   (260)   (100.00) 
Income from continuing operations before income taxes  16,784   24,552   (7,768)  (31.64)
Income taxes expenses  (5,518)  (7,578)  (2,060)  (27.18)
Net income $11,266  $16,974   (5,708)  (33.63)
Net income attributable to non-controlling interests  5,419   7,280   (1,861)  (25.56)
Net income attributable to APWC  5,847   9,694   (3,847)  (39.68)
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General

Results of operations are determined primarily by market demand and government infrastructure projects, market selling prices of our products, our ability to manufacture high quality products efficiently in quantities sufficient to meet demand and to control production and operating costs.  Our results are also influenced by a number of factors, including currency stability in the countries in which our operations are located, competition and the cost of raw materials, especially copper, which accounted for majority of the cost of sales in 2010.

2013 and 2012.

In order to minimize the impact of copper price fluctuations, we attempt to “peg” the prices of our products to the prevailing market price of copper and pass changes in the cost of copper through to customers as much as possible.  In certain circumstances, however, we remain affected by fluctuations in the price of copper.  For example, the price of telecommunications cable sold for use in public projects in Thailand is determined semi-annually and is based upon the average spot market price of copper on the LME during the six-month period commencing on January 1 and July 1 prior to the month of order.  Thus, aA recent rise or decline in copper prices may not be fully reflected under this pricing scheme for several months.

Average copper prices per metric ton have increaseddecreased by 48.9%7.8% from $5,150$7,950 in 20092012 to $7,534$7,326 in 2010 (four quarters2013 (annual average). Gross profit margins for manufactured products in 2009 were on average at 12.8% compared to 13.1% in 2010.

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Copper prices indicated in this report are quoted from the London Metals Exchange (LME)LME index.  The 20102013 and 20092012 copper prices are as follows:

 

 

2010

2009

Average LME copper price ($/Ton)

1Q

7,232

3,428

 

2Q

7,027

4,663

 

3Q

7,242

5,859

 

4Q

8,636

6,648

 

Year

7,534

5,150

The average copper price

     2013  2012 
Average LME copper price ($/Ton) 1Q   7.928   8,308 
  2Q   7,146   7,867 
  3Q   7,079   7,717 
  4Q   7,153   7,909 
  Year   7,326   7,950 
Net Sales
Total sales in April 2011 on the LME was $9,483 per metric ton.


Net Sales

Sales of manufactured productNorth Asia region increased by $131.9$13.7 million, or 50.0%24.7%, from $264.1$55.6 million in 20092012 to $396.1$69.3 million in 2010. Sales of power cable increased by $45.3 million in 2010, or 44%, due to an increasing demand in Thailand as a result of expanded government and private construction contracts, coupled with2013. The increase in Australia due to much higher sales prices. Sales of enameled wire also increased, by 50.1% to $202.8 million.  In Thailand, enameled wire sales increased by $28.9 million due to much more demand locally. Elsewhere enameled wire sales in CCH HK also increased to produce over $86.8 million in 2010 compared to $64.3 million in 2009. Shanghai Yayang even increase its sales of enameled wire up to nearly $40.0 million in 2010 compared to $23.3 million in 2009was primarily due to the heavy demandincrease of domestic sales in 2013 comparing to that of 2012 and starting November 2013, a portion of export sales was conducted through the North Asia region rather than the ROW region.


Revenue from eastern part of China customers. Sales of telecommunication cable, however inthe Thailand the fiber optic business (i.e. telecommunication cable) picked up to $44.9region decreased by $15.0 million from $190.4 million in 2010 from $26.02012 to $175.3 million in 2009.

2013, or 7.9%.  The decrease was primarily attributable to the fact that the volatile political situation adversely impacted the level of infrastructure investment and customer demand for our products.

Revenue from SDI project engineering in Singapore decreased in 2010 by $9.2$0.3 million, or 28.1% down as phase I0.1%, from $216.3 million in 2012 to $216.0 million in 2013 in the ROW region. The decrease in sales in this region was primarily because starting November 2013, a portion of the government sponsored casino projects cameexport business was transferred to an end in mid-2010.

Revenue from Distributed Productsthe North Asia region, and no longer conducted by the ROW region. The decrease of EPAN's revenue was at $27.1 million in 2010, down from $28.1 million in 2009.

The following table showspartially offset by the percentage share and dollar value (in thousands)increase of net sales of the respective geographical locations of manufacturing plant of Manufactured Products and provision of Distributed Products and SDI services with respect to our total sales in 2010:

SDI.

 

Manufactured
products only *

All products
and services *

Thailand

48.0%

$190,364

45.6%

$203,758

Singapore

8.7%

$34,248

14.5%

$64,783

Australia

11.4%

$45,053

10.4%

$46,289

China

31.9%

$126,394

29.5%

$131,764

Total

100.0%

$396,059

100.0%

$446,594

* Figures in 2010 were restated to exclude revenue of SPFO which was presented as discontinued operations. See ”Item 5.3.1.”

Gross Profit

Gross profit for 20102013 was $57.0$51.8 million, representing an increase of $16.4$1.3 million, or 40.3%2.7% up compared to $40.6$50.5 million in 2009.2012.  The increase was primarily attributable to the raw material cost increases and which we were able to passhigher margin on to our customers, while somepower cables in the Thailand region, despite the margin erosion on enameled wires.
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The gross profit margin of the fixed costs would stay atNorth Asia region was down from 7.68% in 2012 to 4.47% in 2013. The decrease was primarily caused by the same level. The upward adjustmentdecrease in the copper price and weak demand in this market. In addition, the Company’s main product in this region is enameled wire, as the technology required to manufacture the product is low and the manufacturing process is not sophisticated, the margin was eroded by competition in the local market.
Notwithstanding the drop of copper prices wassales in line with the general increase over the course of 2010 in commodity prices.

Apart from the write-back of inventory impairment of $2.0 million,Thailand region by 7.9% as mentioned above, gross profit contributed by salesmargin of Manufactured Productsthe region was $53.4 million15.05% in 2010 compared to $14.3 million2013, up from 13.16% in 2009,2012, an increase of 273.4%14%. Our major clients in this region included government entities, private sector participants in the infrastructure sector and agents for governmental entities. As the selling price was set at a predetermined amount based on the sales agreements signed with these customers, the region enjoyed a higher profit margin as the copper price decreased leading to products manufactured at a lower cost.

The increase in gross profit margin of the ROW region increased slightly from sale of Manufactured Products is due9.78% in 2012 to the higher sales price chargeable to customers across various markets10.34% in which the Company operates.2013. The relative contribution to gross profit from Manufactured Products for 2009 and 2010 is as follows:

 

2009

2010

Manufactured Products:

 

 

Telecommunications wire and cable

25.1%

25.1%

Power cable

60.2%

47.2%

Enameled wire

14.7%

27.7%

 

 

 

Total

100.0%

100.0%

The contributionmargin of the region in 2013 remained stable compared to gross profit from each segment line (and the components within the manufactured products segment) for 2009 and 2010 is as follows:

 

2009

2010

Manufactured Products:

 

 

Telecommunications wire and cable

8.8%

23.5%

Power cable

21.2%

44.3%

Enameled wire

5.2%

25.9% 

Total

35.2%

93.7%

Supply, delivery and installation of wires and cables

 2.2%

0.4%

Distributed Products

3.7%

2.4%

Recovery of inventory impairment

58.9%

3.5%

Total

100.0%

100.0%


Overall gross profit margins slightly increased from 12.5% in 2009 to 12.8% in 2010.  Gross profit margins for Manufactured Products greatly increased from 5.4% in 2009 to 13.5% in 2010. Both CTW and PEWS all suffered setback in terms of losing gross margins when compared with that of last year’s due to pricing issues. Gross margin2012.

Operating Profit
SG&A expenses were $34,559 in 2013, slightly decreased by $34, or 0.1%, from $34,593 in 2012.  For the years ended 2013 and 2012, SG&A expenses accounted for 7.5% of power cable increased to 17.0% in 2010 from 8.4% in 2009.

Operating Profit

the net sales for both years.

In addition to estimating an2013, we recorded a provision of allowance for doubtful accounts based on historical sales and collection data,of $0.2 million, owing to the fact that some of the major customers of the Company were not able to settle their outstanding trade receivables.  Our internal controls provide that we perform a detailed review of our outstanding receivables, and make adjustments to our estimate to reflect significant delinquent accounts receivable.  The Company is not aware of any significant delinquent accounts receivable that have not already been adequately reserved.  In addition, we believe that our periodic allowance for doubtful accounts will continue to not have a material impact on our liquidity.

Other than allowance

The decrease in the operating income in 2013, as compared to 2012, was attributable to the insurance proceeds in 2012 in the amount of $4.8 million (Baht 149 million) due to the suspended operations temporarily in the fourth quarter of 2011 because of damage sustained from the flooding in Thailand.  The decrease in operating expenses in 2013 was also for doubtful accounts, overall SG&A expenses increased by $4.7 million,the same reason as a portion of the corporate expenditure went to attending the road showsthere was no flooding related spending in 2013.
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Finance Cost
The finance cost included interest from debts and investor relationship related activities in 2010. In addition, when business picks up, the headcount inevitably will increase, headcount number has increased by 102, up from 1,602 from beginning of 2010. Total SG&A expenses, when compared with that of 2009, increased by 19.4%.  Recovery for doubtful accounts in 2010 was amounted to $0.9 million, mostly relating to a trade receivable in Thailandborrowings.  The interest decreased as the repayment progress has exceeded management’s expectations. 

Accounts receivable, net of allowance for doubtful accounts, increasedCompany’s interest-bearing loans and borrowings decreased from $57.8 million at December 31, 2012 to $41.8 million at December 31, 2013.

Finance Income
The finance income was interest earned from bank deposits.  The total long-term and short-term bank deposits decreased by $42.7$7.1 million, from $17.4 million at December 31, 2009 of $101.82012 to $10.3 million to $144.5 millionas ofat December 31, 2010.  2013, which led to the decrease in interest income in 2013.
Share of Profit of an Associate
The increase in accounts receivable was attributablethe share of loss of an associate by $0.2 million in 2013, as compared to more sales have been generated. The overall Day of Sales Outstanding stands at approximately 91 days, down from that of 2009 where2012, was primarily due to the number showed 89 daysCompany recognized $0.2 million loss according to getits shareholding in SPRC in 2013.
Gain on Disposal of Investment
The gain was from the sales collected.

disposal of the Company’s equity investment in Shandong Huayu Pacific Fiber Optics in 2013.

Gain on Liquidation of Subsidiaries
The gain was generated from the liquidation of the subsidiary, Myanmar Sigma Cable Co. Ltd.
Exchange Gain/Loss

(Loss)

The exchange rates at end of December 31, 20092013 and 20102012 are listed below, based on the Noon Buying Rate.  However, they do not actually reflect the ongoing rates during the year when transactions actually took place.

 

December 31,
2009 

December 31,
2010

Foreign currency to US$1:

 

 

Thai Baht

33.33

30.16

Singapore $

1.40

1.29

Australian $

1.11

1.00

Chinese RMB

6.83

6.60

Based on the above rates, the foreign currency transactions which took place

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  As of December 31, 
  2013  2012 
Foreign currency to US$1:      
Thai Baht  32.68   30.59 
Singapore $  1.262   1.221 
Australian $  1.120   0.962 
Chinese RMB  6.054   6.230 
Other Income
Other income decreased by $0.5 million from $1.9 million in 20102012 to $1.5 million in all of all operating units reported a realized foreign exchange gains of $3.0 million.  The realized exchange gains, mainly arising from Thailand operations, was2013 primarily due to 1) the appreciation of Thai Baht during 2010 and 2) the early settlement of trust receipts denominatednet gain from financial instruments recognized in Thai Baht, when the trust receipts were bought in at a lower exchange rate.

2012.

Impairment of Investment

The impairment of investment in 2010 represents the impairment loss in TT&T securities in Thailand, ownedOther Expense

Other expenses increased by Siam Pacific. In the past, the unrealized loss, net of tax, was reported in separate component of shareholders’ equity. In 2010, the Company considered the continuing decrease in fair value was other-than-temporary and recognized such impairment loss in theconsolidated statements of operations.

Other Income

Other income in 2010 decreased by $1.08$0.3 million compared with that of 2009 at $2.1 million.  The decreaseto 2012 primarily due to the net loss on financial instruments in 2010 consisted of less scrap sales, and less dividend from other long-term investment when compared with that of 2009.

2013.

Income Taxes

Income tax expense was $6.4$5.5 million in 20102013 compared to $4.6$7.6 million in 2009.2012.  The fluctuationchange was mainly due to the net effect of the increasedecrease in pre-tax income and utilization of prior year tax losses.

5.4 Liquidity and Capital Resources

income.

5.4Liquidity and Capital Resources
As of December 31, 20112014 we had $76.7$68.9 million in cash and cash equivalents, primarily in bank accounts and cash on hand, and none of which was in unrestricted or restricted short-term bank deposits.hand.  Our current sources of cash are our cash on hand, cash generated by our operations and our credit facilities.  Our primary financing needs will continue to be available tofocused on the purchase and replacement of property, plant and equipment, future acquisitions and future acquisitions. 

expenditures for ongoing operations.

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We have no direct business operations other than our ownership of the capital stock of our subsidiaries and joint venture holdings.equity investees.  Consequently, our subsidiaries have been and will continue to be the primary source of funds generated by operations.  Corporate needs are funded primarily through distributions from our subsidiaries.  Although we have no current intention to pay dividends, we would rely upon distributions of dividends from our subsidiaries in order to do so.  As noted in our risk factors, our operating subsidiaries and other holdings and investments, from time to time, may be subject to restrictions on their ability to make distributions to us.  Such restrictions could result from restrictive covenants contained in our loan agreements, restrictions on the conversion of local currency earnings into U.S. dollars or other currency and other regulatory restrictions.  For example, PRC legal restrictions permit payments of dividends by our business entities in the PRC only out of their retained earnings, if any, determined in accordance with relevant PRC accounting standards and regulations.  Under PRC law, such entities are also required to set aside a portion of their net income each year to fund certain reserve funds.  These reserves are not distributable as cash dividends.  The foregoing restrictions may also affect our ability to fund operations of one subsidiary with dividends and other payments received from another subsidiary.  We are not aware of any other restrictions in other countries in which we do business other than those discussed in the “Risk Factors” section.  Distributions may also be restricted aslimited from time to time by reason of restrictions protective of the resultrights of objections by minority shareholders of our subsidiaries and by reason of the current cash requirements of the operating subsidiaries.  Consequently, we periodically need to manage our corporate cash needs to align with the permitted timing of distributions.

We maintain several working capital and overdraft credit facilities with various commercial bank groups and financial institutions.  Under our line of credit arrangements for short-term debt with our banks, we may borrow up to approximately $316.4$278.4 million, including letters of credit for commodity purchases, on such terms as we and the banks mutually agreed upon.  These arrangements do not have termination dates but are reviewed annually for renewal.  As of December 31, 2011,2014, the unused portion of the credit lines was approximately $224.6$168.2 million.  Letters of credit are issued on our behalf in the ordinary course of business by our banks as required by certain supplier contracts.  As of December 31, 2011,2014, the Company had openobligations in respect of amounts callable under issued, but undrawn letters of credit totaling $49.6$49.0 million.  Liabilities relating to the letters of credit are included in current liabilities.  There is no seasonality to the company’s borrowing, nor is there any restriction on the use of suchCompany’s borrowing.


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Net cash provided by operating activities in the fiscal year ended December 31, 20112014 was $22.6$8.1 million, as compared to $2.6$20.6 million of net cash usedprovided by operating activities in the fiscal year ended December 31, 2010.  2013. The decrease was primarily the result of a decrease in net income in 2014.
In 2013, net cash provided by operations was $20.6 million compared to $10.7 million in 2012. The increase in net cash provided by operating activities was primarily attributable to a decrease in trade and other receivable in 2013 compared to an increase from 2011 to 2012
Days of sales outstanding (“DSO”) is a measure of the average collection period of accounts receivable, and although the calculation is influenced by the period used and the timing of sales within that period, it canprovide insight into the variances in collections from period to period.  Our days of sales outstanding as of December 31, 2011 were 922014 was 85 days, as compared to 10298 days as of December 31, 2010.  The improvement2013.  We have in DSO as of December 31, 2011 is due to re-enforcing collection efforts based on various companyplace rigorous policies across the group. Also contributing toCompany that emphasize the net cash provided by operations in 2011 were two non-cash items 1) Impairmentimportance of goodwill of $8.8 million and 2) depreciation of $6.5 million, and one cash item: reduction in accounts receivable of $34.1 million.  Netcontinuous focus on collection efforts.
In 2014, cash used in investing activities amounted $13.9was $6.3 million incurred forcompared to $5.5 million in 2013. The increase in net cash used in investing activities was primarily due to the proceeds from disposal of available-for-sale financial assets and held-for-sale assets in 2013 which was partially offset by the decrease in cash used to purchase property, plant and equipment in 2014 comparing to 2013.
In 2013, net cash used in investing activities was $5.5 million compared to $13.3 million in 2012. The decrease in net cash used in investing activities was primarily due to the proceeds from disposal of  available-for-sale financial assets and held-for-sale assets in 2013 as compared to the purchase of machinery and equipment at APEC, CTW, and NPC sites of $8.9 million. Proceeds fromavailable-for-sale financial assets in 2012.
Net cash provided by financing activities amounted to $5.6was $7.7 million mostlyin 2014.  In 2014, net cash provided by financing activities reflected primarily proceeds from a loan to re-constructborrowings and the NPC plant.repayment of borrowings.

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Net cash used in financing activities was $19.4 million and $0.9 million in 2013 and 2012, respectively. Net cash used in financing activities reflected primarily the repayment of borrowings and proceeds from borrowings.
We engage in various transactions with PEWC, including the purchase of certain raw materials and the distribution of PEWC, products, mainly in Singapore.  The Composite Services Agreement contains provisions that define our relationship and the conduct of our respective businesses and confersconfer certain preferential benefits on us.  Under the Composite Services Agreement, the material terms of which are summarized in the “Material Contracts” section, there are no obligations binding on the Company in favor of PEWC, nor are there any pre-established purchase commitments for copper.  As such, the Composite Services Agreement should not impact cash flows or liquidity until such time as actual purchases are made in the ordinary course of business such as for the purchase of raw materials.  The Composite Service Agreement may, however, impact operations to the extent that PEWC is not able to fulfill its obligations, such as supplying copper, and copper is not otherwise readily available on comparable terms from other market sources.  Cash generated by operations and borrowings, when needed, from our credit facilities have been the primary sources of funding purchases under the Composite Services Agreement, and we believe these sources will continue to provide sufficient funds for future purchases under this agreement.

On December 1, 2011, the Company exited from a non-core business in Shandong Province, China with the sale for approximately $2.9 million of its 51% interest in SPFO, a fiber optic cable joint venture. The Company had previously invested a total of $2.5 million to start up and develop the business at SPFO.

We believe funds generated by our operating activities, our cash on hand and amounts available to us under our credit facilities will provide adequate cash to fund our requirements through at least the next twelve months.  We continue to have sufficient liquidity to meet our anticipated working capital, capital expenditures, general corporate requirements, and other short-term and long-term obligations as they come due.  We may further enhance our liquidity in the future, as needs arise, by establishing additional lines of credit, with the support of one or more of our principal shareholders if necessary and available.  We currently anticipate that we will retain all of our earnings to fund our operations and do not anticipate paying any cash dividends in the foreseeable future.

5.5 Research and Development

5.5Research and Development
The Company does not currently engage in its own research and development.  Under the Composite Services Agreement with PEWC described herein, the Company benefits from research and development conducted by PEWC at little or no cost to the Company.  Most recently,In 2014, the Company utilized technology from its parent company, PEWC, to assist in developing the Company’s new business line of electronic wire being manufactured in NPC’s facility.  Accordingly, the Company has not made material expenditures on or commitments to research and development since formation.

5.6 Trend Information

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5.6Trend Information
We are not aware of any trend, commitment, event or uncertainty that can reasonably be expected to have a material effect on our current or future business other than the following, each of which has materially impacted our financial results in the past and may do so in the future:

·Uncertainty arising from the volatility in the cost of copper, our principal raw material.  In 2011, the copper prices have gone from $9,555 per metric ton in the beginning of the year to less than $7,600 per metric ton at end of year. This decrease caused the Company to provide more of its inventory impairment, which amounted $2 million in year 2011. The copper price however bounced back in the beginning of 2012 and reached over $8,400 per metric ton. Our impairment will be completely consumed if the price remains stable for first half year of 2012.


·Fluctuations in the demand for our products in the markets in which we do business, based upon variations in the level of governmental and private investments in communications, power and industrial projects and programs that utilize our products.

·
Uncertainty arising from the volatility in the cost of copper, our principal raw material.  In 2014, the copper price went down from $7,326 (yearly average for 2013) per metric ton to $6,860 per metric ton (yearly average for 2014).  Under our business model, the Company, like other companies in the industry, remains subject to movements in the price of copper, our principal raw material.

·
Fluctuations in the demand for our products in the markets in which we do business, based upon variations in the level of governmental and private investments in communications, power and industrial projects and programs that utilize our products.  We are not an end-user of our products and, therefore, we depend upon the requirements of our customers to generate sales.
See “Quantitative and Qualitative Disclosures About Market Risk.”

5.7 

5.7Off-Balance Sheet Arrangements

There have been no off-Balance Sheet Arrangements

The Company has not entered into any transactions with unconsolidated entities whereby the Company has financial guarantees, subordinated retained interests, derivative instruments, or other contingent arrangements forthat expose the year ended December 31, 2011 and upCompany to material continuing risks, contingent liabilities, or any other obligation in an unconsolidated entity that provides financing, liquidity, market risk, or credit risk support to the date of this annual report.

5.8 Contractual Obligations

Company.

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5.8Contractual Obligations
The following table sets forth our obligations and commitments to make future payments under contracts and other commitments as of December 31, 2011:

2014:

 

Payments due by period

Contractual obligations
(In thousands of US$)

Total

Less than 1 year

1-3 years

3-5 years

More than 5 years

Bank loans and overdrafts

$67,351

$67,351

-

-

-

Capital lease obligations (principal amount only)

$1,135

$882

$253

-

-

Finance charges on capital lease obligations

$57

$40

$17

-

-

Operating lease obligations

$4,662

$866

$1,093

$349

$2,354

Capital commitment relating to installation of equipment and acquisition of machinery

$1,000

$1,000

 

 

 

Capital commitment relating to repair and maintenance consulting service

$3,200

$3,200

 

 

 

Purchase obligations for copper cathodes

$242,958

$242,958

-

-

-

 

$320,363

$316,297

$1,363

$349

$2,354

     

  Payments due by period 
Contractual obligations
(In thousands of US$)
 Total  Less than 1 year  2-3 years  4-5 years  More than 5 years 
Bank loans and overdrafts $53,863  $53,863  $
­–­
  $–  $– 
Finance lease obligations (principal amount only)  69   31   38   –   – 
Finance charges on finance lease obligations  7   4   3   –   – 
Operating lease obligations  4,785   1,680   903   538   1,664 
Capital commitment relating to installation of equipment and acquisition of machinery  4,591   4,591   –   –   – 
Capital commitment relating to repair and maintenance consulting service  62   62   –   –   – 
Purchase obligations for copper cathodes  159,995   159,995   –   –   – 
  $223,372  $220,226  $944  $538  $1,664 
The contractual obligation for the purchase of coper cathodes disclosed in the table above was the minimum purchase commitment.  For more details on financial commitments and contingencies, please refer to our audited consolidated financial statements and the notes thereto in Item 18:  “Financial Statements.”

Item 6: Directors, Senior Management and Employees

6.1 Directors and Senior Management

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Item 6:Directors, Senior Management and Employees
6.1Directors and Senior Management
There is only one class of directorships and no one or more directors possesses any veto power over matters presented to the Board or any other special or enhanced voting rights.  The Bye-Laws provide that a quorum consists of a majority of the directors then in office.  As of December 31, 2011,2014, there were a total of 9nine (9) directors on the Board, including three independent directors, Mr. Anson Chan, Dr. Yichin Lee, and Dr. Lambert Ding.  On October 7, 2011,By a resolution passed at the Annual General Meeting,Company’s most recent annual general meeting of shareholders (the “2014 AGM”) held on October 9, 2014, the shareholders passed a resolution wherebydetermined that the minimum number of directors shall be fixed at two (2), the maximum number of directors be fixed at ten (10) and that one (1) vacancy shall exist on the Board of Directors, which shall be deemed to be a casual vacancy, which may be filled from time to time by the Board of Directors in accordance with the provisions of the Bye-Laws.Each director is entitled to one vote, and approval of any matter requires a simple majority assuming a quorum is present.  The following table sets forth certain information concerning the current directors and certain other officers of the Company.  All directors are subject to annual election by the shareholders of the Company.  Each of the directors was reelected at the Company’s annual general meeting of the shareholders held on October 7, 2011.2014 AGM.  Officers generally hold office for such period and upon such terms as the Board may determine.


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Name

Date of Birth

Position

Appleby Services (Bermuda) Ltd.

N/A

Assistant Resident Secretary

Anson Chan

November 3, 1963

Independent director, Audit Committee Chairman

Andy C.C. Cheng

April 29, 1958

Director and Non-Executive Chairman of the Board

Fang Hsiung Cheng

May 31, 1942

Director

Alex Erskine

September 7, 1963

Resident Secretary in Bermuda

Daphne Hsu

August 12, 1962

Financial Controller

Lambert L. Ding

October 12, 1959

Independent director, Audit Committee Member

Michael C. Lee

September 28, 1951

Director

Yichin Lee

January 4, 1961

Independent director, Audit Committee Member

Ching Rong Shue

March 4, 1950

Director

David Sun

December 22, 1953

Director

Yuan Chun Tang

November 26, 1960

Director, Chief Executive Officer

Carson Tien

William Gong Wei

May 16, 1945

October 31, 1961

Chief Operating Officer

Frank Tseng

Ivan Hsia

March 17, 1957

August 14, 1973

Chief Financial Officer; Non-Resident Secretary

Officer

Certain officers and directors of the Company are or were also officers and directors of PEWC and/or PEWC affiliates, as described below.  A brief professional summary for each member of the Board of Directors and senior management is as follows:

Mr. Anson Chan has been an independent member of the Company’s Board of Directors and a member and Chairman of the Audit Committee and compensation committee since 2007.  Mr. Chan is also a Managing Director of the Bonds Group of Companies and was a Senior Advisor to Elliott Associates from 2005 to 2008.

Mr. Andy C.C. Cheng was a member of the Company’s Board of Directors from 2004 to 2005 and was re-elected in 2007.  Mr. Cheng was appointed as Chairman of the Board in 2009.  From 1987 to 2003, Mr. Cheng served as Vice President in charge of procurement at PEWC.  Mr. Cheng has been an Executive Vice President at PEWC since 2004 and Chairman of each of the investment divisions of PEWC, Tai Ho Investment Co., Ltd. and You Chi Investment Co., Ltd., since June 2008.  Mr. Andy C.C. Cheng is not related to Mr. Fang Hsiung Cheng.

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Mr. Fang Hsiung Cheng has been a member of the Company’s Board of Directors since 2006.  He also serves as Assistant Vice President of PEWC.  Mr. Fang Hsiung Cheng is not related to Mr. Andy C.C. Cheng.

Mr. Alex Erskine was appointed as resident Secretary in Bermuda in October 2008.  Mr. Erskine is a partner in the Bermuda law firm of Appleby, where he is the local team leader of the funds and investment services practice group, which groupfirm he joined in 1999.  From March 2007 until October 2008, Mr. Erskine was the managing partner of the British Virgin Islands office of Appleby.  Prior to joining Appleby, Mr. Erskine was Deputy Legal and Compliance Director of the Asset Management Division of UBS AG.

Ms. Daphne Hsu has been Financial Controller of the Company since March 2005, prior to which she served as Financial Controller for ten years in Taiwan and China at a Thomson SA joint venture.

Dr. Lambert Ding was appointed March 17, 2011 as an independent member of the Board of Directors. Dr. Ding is the president and CEO of Union Environmental Engineering Services and before that, he was an associate professor at Yuan Ze University.Dr. Ding holds a Doctor of Philosophy degree from the University of Southern California, awarded in 1989.  He is also a Registered Environment Assessor and holds several patents. Dr. Ding serves as a member of the audit committee and compensation committee.

Mr. Michael C. Lee has been a member of the Company’s Board of Directors since 2004 and is also Chief Executive Officer of PEWC and Chairman of Pacific USA Holdings, Ltd.  Mr. Michael C. Lee is not related to Dr. Yichin Lee.


Dr. Yichin Lee has been an independent member of the Company’s Board of Directors and served on the Audit Committee since 2007.  He is also a member of the compensation committee.  Dr. Lee is the Managing Director of FCC partners, Inc. and CEO of Giga Media Limited.partners. Dr. Yichin Lee holds a doctorate degree in Resource Planning and Management from Stanford University.  Dr. Yichin Lee is not related to Mr. Michael C. Lee.

Mr. Ching Rong Shue has been a member of the Company’s Board of Directors since 2006.  He also serves as Vice President of PEWC.

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Mr. David Sun has been a member of the Company’s Board of Directors since 2007.  He also serves as President of PEWC and Managing Director of Charoong Thai Wire and Cable Public Company Limited.

Mr. Yuan Chun Tang has been a member of the Company’s Board of Directors since 2004 and Chief Executive Officer since 2005.  Mr. Yuan served as the Company’s Chairman from 2005 to 2009.  He has also served as Chairman of PEWC since 2004 and has been the Director of Pacific Construction Corp. Ltd since 2002.  Mr. Yuan served as the Director of the Taiwan Co-generation Corp from 2005 to 2008.  Mr. Yuan has also been the Chairman of the Taiwan Electric Wire & Cable Industries Association since 2004.  He has served as the Supervisor to the Taipei Importers/Exporters Association as well as the Director of Chinese National Federation of Industries in Taiwan since 1998 and 2004, respectively.

Mr. Carson TienWilliam Gong Wei has been with PEWC or one of its affiliates suchappointed Chief Operating Officer effective April 1, 2013.  He was first assigned to Charoong Thai Wire and Cable Pte. Co. Ltd. as APWC for his entire career.  He started out as engineer in PEWC’s Tao Yuan, Taiwan plant in 1969Engineer, Assistant Plant Manager, and later was promotedconsultant to plant managerthe high voltage cable division from 1991 to 2000.  Thereafter, Mr. Gong left Charoong Thai to pursue other professional activities until he rejoined the Company in 1977.2009.  In 1990 Carson again was promoted to Assistant VP responsible for Engineering and Manufacturing in PEWC.  He then in 1996 was transferred from PEWC to APWC to head the Shenzhen, China plant as President of PEWS.  In 2005,April 2009 he was appointed as Chief Operating Officer at APWC headquarters.

General Manager of Sigma Cable in Singapore.  Mr. Frank TsengGong Wei holds a master’s degree from the Asian Institute of Technology in Bangkok, Thailand.

Mr. Ivan Hsia was appointed as Chief Financial Officer and Non-Resident Company Secretary effective October 22, 2009.August 1, 2013.  Mr. TsengHsia previously served as the Deputy CFO for ABB Taiwan.of the Company.  Prior to that, he served as the Financial ControllerSenior Internal Audit Manager of the Asia Pacific regionCompany.  Before joining APWC, Mr. Hsia was the head of Phoenix Technologies Co., a NASDAQ-listed California Silicon Valley-based high-tech company.

On March 15, 2011, Mr. Gai Po Lee resigned from the Board of Directors from the Board of Directors.

internal audit at Newegg.com in Los Angeles, CA, USA.

The Company’s Common Shares are traded on the Global Markets tier of NASDAQ.  Notwithstanding that, the Board of Directors is not composed of a majority of independent directors.  The Company is relying upon the “controlled company exemption” that is available to issuers under the rules of NASDAQ.  In effect, the “controlled company exemption” provides that an issuer is not required to have its Board of Directors consist of a majority of independent directors if a shareholder, or two or more shareholders who constitute a group, have beneficial ownership of more than 50% of the issued and outstanding voting securities of the issuer.  PEWC owns and controls, directly or indirectly, 65.6% of the issued and outstanding Common Shares of the Company.

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No service contract exists between any director and the Company or any of its subsidiaries providing for benefits upon termination of employment.

The Company has no arrangements or understandings with any major shareholders, customers, suppliers or others, pursuant to which any person referred to above was selected as a director or member of senior management.

6.2 Audit Committee

6.2Audit Committee
The Audit Committee of the Board of Directors primarily functions to assist the Board in its oversight of: (i) the reliability and integrity of accounting policies and financial reporting and disclosure practices and (ii) the establishment and maintenance of processes to ensure that there is compliance with all applicable laws, regulations and company policy and an adequate system of internal control, management of business risks and safeguard of assets.


The Audit Committee is composed of Mr. Anson Chan, Dr. Yichin Lee and Dr. Lambert Ding, with Mr. Chan serving as the chairman of the Audit Committee.

The Audit Committee, as currently constituted, complies with the requirements of Regulation 10A-3 of the Exchange Act and the corporate governance requirements of NASDAQ.

6.3Compensation Committee
The Compensation Committee

On June 13, 2008, the Board authorized the formation of a Compensation Committee primarily functions to assist the Company in determining the compensation to be paid to the executive directors and certain members of the senior management of the Company.  According to the terms of referencecharter under which it operates, the Compensation Committee is authorized to:  (i) review and recommend to the Board, or determine, the annual salary, bonus, stock options, and other benefits, direct and indirect, of the senior management of the Company and its principal operating subsidiaries; (ii) review new executive compensation programs, review on a periodic basis the operations of the Company’s executive compensation programs to determine whether they are properly coordinated, establish and periodically review policies for the administration of executive compensation programs, and take steps to modify any executive compensation programs that yield payments and benefits that are not reasonably related to executive performance; (iii) engage outside auditors and consultants to advise on market compensation; and (iv) establish and periodically review policies in the area of management perquisites.

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The Compensation Committee is comprised of three independent directors, Mr. Anson Chan, Dr. Yichin Lee, and Dr. Lambert Ding.Ding. Mr. Andy Cheng and Mr. Yuan Chun Tang, the Company’s Chairman and Chief Executive Officer, servesrespectively, serve in a non-voting advisory capacity to the Compensation Committee.

6.4 Compensation

6.4Compensation
The aggregate amount of compensation paid by the Company to all of the Company’s directors and executive officers, as a group, for services in all capacities during 20112014 was approximately $1.70$2.2 million.   As ofMarch 31, 2012,2015, our directors and executive officers beneficially owned approximately 50,000103,000 Common Shares representing approximately0.4% 0.7% of the issued and outstanding Common Shares.  The annual compensation of its executive officers and directors on an individual basis is not a disclosure item under the laws of Bermuda or Taiwan.

Theapplicable to the Company.

In 2014, the fee payable to each independent directors is $20,000director was $30,000 per year and the fee payable to directorseach director who areis an executive officersofficer of the Company or PEWC is $10,000was $20,000 per year, together with, in each case, reimbursement of reasonable travel expenses for attendance ofat meetings of the Board of Directors.

No funds or provisions have been set aside for providing compensation to directors or management except for government mandated programs.

6.5Employees
6.5 Employees 

The Company employed a total of 1,3691,448 employees as of December 31, 2011 (the headcount number of SPFO is excluded as it was disposed of in December 2011),2014, of which about 18.2%18.4% were administrative and management personnel.  Approximately 49%56.7% of employees were located in the Thailand 36%region, 27.7% in China, 9%the North Asia region and 15.6% in Singapore and 4.8% in Australia.the ROW region.    Production workers are usually organized into two 12-hour shifts or three 8-hour shifts to allow continuous factory operations.

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The Company offers a range of employee benefits, which it believes are comparable to industry practice in its local markets.  Such benefits include performance-based pay incentives, medical benefits, vacation, pension, housing for a small number of workers in Singapore and in Thailand, and a small housing supplement to other workers.  The Company also provides training programs for its personnel designed to improve worker productivity and occupational safety.

Presently, there is no group bonus, profit-sharing or stock option plan.  However, some of the Company’s subsidiaries have bonus or profit-sharing plans based on individual performance and the profitability of the

particular subsidiary for the fiscal year, which plans are generally in accordance with the industry practice and market conditions in the respective countries.
 

The Company has several defined benefit and defined contribution plans covering its employees in Thailand, Australia, the PRC and Singapore.  Contributions to the plans are made on an annual basis and totaled $1.1$1.3 million in 2011.2014.  Additionally, the Company has several defined benefit plans in accordance with Thailand labor law.  In its Thai subsidiaries, the Company must pay a retiring employee from one to tentwenty-nine times such employee’s salary rate during his or her final month, depending on the length of service.  During 2011,2014, the Company’s total expenses under this labor law were $0.3$0.5 million.  These plans are not funded and the amount is recognized and included in Other CurrentEmployee Benefit Liabilities in the Company’s balance sheet.  The Company settles it obligations as and when employees retire.  The accumulated benefit obligations under this plan amounted to $2.9$6.7 million as at December 31, 2011.

2014.

Approximately 27%21% of the employees of Sigma Cable are members of the United Workers of Electronics & Electrical Industries, an employees’ union in Singapore.  Under the terms of a collective agreement signed in June 2003, the Company is required to negotiate salary and wage increases yearly.  All other worker benefits and employment terms are included in the collective agreement.  The Company believes that approximately 100% and 99% of the employees of PEWS and Shanghai Yayang, respectively, are members of their respective Company Workers’ Unions.  These unions generally operate in accordance with related labor regulations in China.  Approximately 15%16% of the employees of APEC are members of the Australian Workers’ Union.  None of the employees of the other operating subsidiaries of the Company are members of a union.

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The Company has never experienced a strike or other disruption due to labor disputes.  The Company considers its employee relations to be satisfactory and has not experienced difficulties attracting and retaining qualified employees.  In Singapore, employee turnover is approximately 27%24.4% of total employees annually.  In Thailand, average employee turnover is approximately 8.7%5% of total employees annually.

Item 7: Major Shareholders and Related Party Transactions

7.1 Major Shareholders

Item 7:Major Shareholders and Related Party Transactions
7.1Major Shareholders
On March 27, 2009, PEWC acquired 1,410,739 Common Shares of the Company from SOF, which amount represented 51% of the Common Shares then held by SOF. Following that transaction, PEWC and SOF held 65.6% and 9.8% of the issued and outstanding Common Shares of the Company, respectively.  As of July 1, 2011, SOF transferred and conveyed its ownership interest in the 1,355,415 Common Shares held by it to COF.MSDC.  Pursuant to a 2012 Share Buy-back Plan, the Company re-purchased 9,300 Common Shares, which are now held by the Company and booked as treasury shares.  In a subsequent private transaction in June 2013, the Company repurchased a further 1,800 Common Shares, such that a total of 11,100 Common Shares are now issued but not outstanding and are booked as treasury shares.  The remaining 24.6%approximately 24.5% of the issuesissued and outstanding Common Shares are publicly traded in the U.S. on the NASDAQ CapitalGlobal Markets tier.

The following table sets forth certain information regarding beneficial ownership of the Company’s Common Shares as of March 31, 20122015 by (i) all persons who are known to the Company to own beneficially more than five percent of the Common Shares of the Company and (ii) the officers and directors of the Company as a group.  The information set forth in the following table is derived from public filings made by holders and information obtained from directors and officers.  The voting rights attaching to the Common Shares below are the same as those attaching to all other Common Shares.

Identity of Person or Group

Number of
Shares 

Percent of Class

Pacific Electric Wire & Cable Co., Ltd.(1)

9,075,354

65.617%

MSD Credit Opportunity Master Fund, L.P.(2)

1,355,415

9.800%

Directors and Officers of the Company

50,000

0.362%

(1) PEWC owns 1,410,739 shares directly and owns its remaining shares indirectly, as a result of PEWC’s control of its direct wholly‑owned subsidiary, Moon View Ventures Limited, a BVI company, which beneficially owns 7,307,948 Common Shares, and as a result of PEWC’s control of its indirect wholly‑owned subsidiary, Pacific Holdings Group, a Nevada corporation, which beneficially owns 356,667 Common Shares.

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Identity of Person or Group 
Number of
Shares
  Percent of Class 
Pacific Electric Wire & Cable Co., Ltd.(1)
  9,075,354   65.617%
MSD Credit Opportunity Master Fund, L.P.(2)
  1,355,415   9.800%
Directors and Officers of the Company  102,954   0.744%

 (1)
PEWC owns 1,410,739 shares directly and owns its remaining shares indirectly, as a result of PEWC’s control of its direct wholly-owned subsidiary, Moon View Ventures Limited, a BVI company, which beneficially owns 7,007,948 Common Shares, and as a result of PEWC’s control of its indirect wholly-owned subsidiary, Pacific Holdings Group, a Nevada corporation, which beneficially owns 656,667 Common Shares.
(2)MSD Credit Opportunity Master Fund, L.P. is the record and direct beneficial owner of the Common Shares.  MSDC Management, L.P. is the investment manager of, and may be deemed to have or share voting and dispositive power over, and/or beneficially own Common Shares owned by, MSD Credit Opportunity Master Fund, L.P..  MSDC Management (GP), LLC is the general partner of, and may be deemed to have or share voting and dispositive power over, and/or beneficially own Common Shares owned by, MSDC Management, L.P.  Each of Glenn R. Fuhrman and Marc R. Lisker is a manager of MSDC Management (GP), LLC and may be deemed to have or share voting and/or dispositive power over, and beneficially own, the Common Shares beneficially owned by MSDC Management (GP), LLC.  Each of Mr. Fuhrman and Mr. Lisker disclaims beneficial ownership of such common shares, except to the extent of the pecuniary interest of such person in such shares.

(2)  MSD Credit Opportunity Master Fund, L.P. is the record and direct beneficial owner of the securities.  MSDC Management, L.P. is the investment manager of, and may be deemed to have or share voting and dispositive power over, and/or beneficially own securities owned by, MSD Credit Opportunity Master Fund.  MSDC Management (GP), LLC is the general partner of, and may be deemed to have or share voting and dispositive power over, and/or beneficially own securities owned by, MSDC Management, L.P.  Each of Glenn R. Fuhrman, John C. Phelan and Marc R. Lisker is a manager of MSDC Management (GP) and may be deemed to have or share voting and/or dispositive power over, and beneficially own, the common shares beneficially owned by MSDC Management.  Each of Mr. Fuhrman, Mr. Phelan and Mr. Lisker disclaim beneficial ownership of such common shares, except to the extent of the pecuniary interest of such person in such shares.

The Company has 6,166,154 Common Shares that are registered securities, of which 3,400,0003,388,900 Common Shares are publicly-traded on theNASDAQ CapitalGlobal Markets tier,, which represents 24.6%approximately 24.5% of the issued and outstanding Common Shares.  TheWith regard to the remaining 2,777,254 registered securities, 2,766,154 Common Shares, are held by PEWC and COF,MSDC, and 11,100 Common Shares are held by the Company in treasury, and all of those shares are subject to trading restrictions under Rule 144 promulgated under the Securities Act.  Other than the approximately 50,000103,000 Common Shares held by directors or officers who are not resident in the United States and the 1,410,739 registered securities held indirectly by PEWC, the Company believes that substantially all of its registered securities are held by U.S. residents.residents (other than the 11,100 Common Shares held by the Company in treasury).  The Company has no means to definitively confirm that belief, however, which is based upon a review of the share registers maintained by the Company’s Bermuda transfer agent and U.S. transfer agent and the addresses provided by the record holders.  Based upon a review of the records of the Company’s U.S. transfer agent, including a list of non-objecting beneficial holders (“NOBOs”), the Company believes there are substantially more than 400 beneficial holders that are resident in the United States, although that constitutes only the Company’s best estimate of the number of U.S. beneficial holders.

7.2 Related Party Transactions

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7.2Related Party Transactions
The Company incurs ordinary course trade payables with PEWC in connection with copper purchases under the Composite Services Agreement and the sale by the Company of Distributed Products on behalf ofthat are manufactured by PEWC.

As of December 31, 2011 and the latest practicable date,2014 the Company, including its subsidiaries, had a net principal balance outstanding of $10.4$20.2 million borrowed from PEWC and subsidiaries of PEWC.  This short-term indebtedness is payable on a demand basis and does not accrue interest.

The Company used the proceeds from each of the related party loans described above for working capital and purchases of capital equipment.The terms of borrowing by APWC or any of its subsidiaries from PEWC are on terms at least no less favorable than terms available in arms-length transactions with unaffiliated parties.

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Other than the Amended and Restated Shareholders Agreement, the Company is not a party to any agreements, and has not engaged in any other transactions, with COF or SOF, or to the Company’s knowledge, their owners.  For a more detailed description of the Company’s obligations under the Shareholders Agreement, see the risk factor entitled “Obligations under the Amended and Restated Shareholders Agreement.”

Under the terms of the Composite Services Agreement, APWC pays a management fee to PEWC in connection with the secondment, or temporary assignment and relocation, of certain PEWC managers to APWC facilities in ShenzhenThailand and Thailand.Shanghai.  The assigned managers assist APWC in implementing the results of certain research and development conducted by PEWC and made available by PEWC to the Company under the terms of the Composite Services Agreement.  The assigned managers also assist APWC in the procurement of raw materials, primarily copper, which is also provided for under the Composite Services Agreement.  The amount of such annual management fee was $239,000approximately $256 thousand as of December 31, 2011.

2014.

From time to time we have engaged in a variety of transactions with our affiliates. We generally conduct transactions with our affiliates on an arm’s-length basis. The sales and purchase prices with related parties are determined through negotiation, generally based on the quoted copper price on LME plus a certain premium.
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Additional details regarding related party balances as of December 31, 20112014 and related party transactions, including copper purchases from PEWC, are disclosed in Note 17 of our audited consolidated financial statements in Item 18:  Financial Statements.


There have been no other related party transactions or contracts entered into between PEWC and APWC in 2011.

Item 8: Financial Information

8.1 Legal Proceedings

Item 8:Financial Information

8.1Legal Proceedings
There are currently no material proceedings in which any director, senior manager, or affiliate is adverse to the Company or has an adverse material interest.  There are no actual or pending legal proceedings to which the Company is, or is likely to become, a party which may reasonably be expected to have, or have had in the recent past, significant effectsa material effect on the Company’s financial positioncondition (financial or profitability.

8.2 Dividend Policy

otherwise) or results of operations.

8.2Dividend Policy
To date, the Company, a Bermuda company formed in 1996, has not paid any dividends.  While the Company has no present intention to pay dividends, should it decide in the future to do so, as a holding company the Company’s ability to pay dividends, as well as to meet its other obligations, will depend upon the amount of distributions, if any, received from the Company’s operating subsidiaries and other holdings and investments.  The Company’s operating subsidiaries and other holdings and investments, from time to time, may be subject to restrictions on their ability to make distributions to the Company.  Those restrictions may also affect the Company’s ability to fund operations of one subsidiary with dividends and other payments received from another subsidiary.

 8.3 Significant Changes

8.3Significant Changes
There have been no material or significant changes in the Company’s affairs since the end of the fiscal year ended December 31, 20112014 that have not been described herein.

Item 9: The Offer and Listing

9.1 Historical Trading Information

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Item 9:The Offer and Listing
9.1Historical Trading Information
The high and low market prices for Common Shares on the Pink Sheets (from January 2007 until April 2008), and on the over-the-counter bulletin board (the “OTC BB”) (from April 2008 until April 2011), and on the NASDAQ since April 29, 2011, for each period specified are as follows:

 

Price per Share ($)

 

High

Low

Five most recent full financial years:

 

 

2007

7.19

2.50

2008

6.45

0.80

2009

3.39

0.50

2010

7.85

2.20

2011

7.05

1.92

 

 

 

Two most recent full financial years:

 

 

2010

 

 

First Quarter

3.00

2.20

Second quarter

3.40

2.46

Third quarter

5.25

2.94

Fourth quarter

7.85

4.70

2011

First quarter

7.05

4.50

Second quarter

6.85

3.50

Third quarter

4.98

2.62

Fourth quarter

3.30

1.92

Most recent six months:

 

 

October 2011

3.30

1.92

November 2011

3.25

2.60

December 2011

3.05

2.54

January 2012

3.99

2.85

February 2012

3.55

2.47

March 2012

3.60

2.97


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9.2 Markets

  Price per Share ($) 
  High  Low 
Five most recent full financial years:      
       
2010  7.85   2.20 
2011  7.05   1.92 
2012  3.99   2.25 
2013  4.34   3.00 
2014  3.38   2.27 
         
Two most recent full financial years:        
2013        
First quarter  4.34   3.35 
Second quarter  4.25   3.26 
Third quarter  3.96   3.25 
Fourth quarter  3.84   3.00 
2014        
First quarter  3.38   2.73 
Second quarter  2.8   2.46 
Third quarter  2.78   2.27 
Fourth quarter  2.61   2.49 
2015        
First quarter  2.6   2.35 
         
Most recent six months:        
October 2014  2.57   2.49 
November 2014  2.58   2.50 
December 2014  2.61   2.50 
January 2015  2.6   2.47 
February 2015  2.57   2.40 
March 2015  2.6   2.35 
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9.2Markets
The Company’s Common Shares have beenwere listed on NASDAQ Capital Markets tier sinceon April 29, 2011 under the symbol “APWC”.  On February 15, 2013, the Company’s Common Shares were elevated to NASDAQ Global Markets tier.  Prior to that,its NASDAQ listing, the Company was listedCommon Shares were traded on the OTC BB since April 2008 under the symbol “AWRCF,” immediately prior to which the Common Shares were traded on the Pink Sheets.“AWRCF”.  See the risk factor entitled “Potential Illiquidity of Common Shares.”  The Common Shares are not listed on any other exchanges or otherwise publicly traded within or outside the United StatesStates.  The elevation of the Common Shares to NASDAQ’s Global Markets tier was achieved due primarily to an improved trading price of the Common Shares.

10.1 Share Capital

Item 10:Additional Information
10.1Share Capital
As of December 31, 20112014 and as of the date of the filing of this Annual Report, the Company has an authorized share capital of 50,000,000 Common Shares, par value $0.01 per share.  During 2012, the Company repurchased 1,900 Common Shares.  On December 31, 2012 there were 13,830,769 Common Shares issued and 13,828,869 Common Shares outstanding.  During 2013, the Company repurchased a further 7,400 Common Shares, for a total of 9,300 Common Shares that were repurchased under the Company’s Share Buy-back Plan during 2012 and 2013, until the Company suspended the Share Buy-back Plan effective as of April 25, 2013.  Subsequently in 2013, in a private transaction, the Company purchased a further 1,800 Common Shares that were also booked as treasury shares and are classified as issued but not outstanding.  No Common Shares have been purchased by or on behalf of the Company under the share buy-back program that was announced by the Company in 2014, but not yet implemented.  As of December 31, 2014, and as of the date of the filing of this Annual Report, there were and there are 13,830,769 Common Shares issued and 13,819,669 Common Shares issued outstanding.  No capital of the Company is under option or agreed conditionally or unconditionally to be put under option.  The Company does not have any classes of capital stock other than its Common Shares.

10.2 Memorandum of Association and Bye-Laws

10.2.1   General

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10.2Memorandum of Association and Bye-Laws
10.2.1General
For a detailed description of the Company’s principal activities, see Section 4.1:  “History and Development of the Business.”  Pursuant to the Company’s Bye-Laws the Board of Directors consists of a single class of directors, each director has one vote on all matters put to the Board, and a quorum consists of a majority of the members of the Board of Directors then in office.  The Company’s Bye-Laws were amended on October 7, 2011 to allow theCompany to purchase its own shares for cancellation or acquire them to be held as treasury shares.
In 2012, the Company commenced a Share Buy-back Plan, pursuant to which the Company repurchased, in the aggregate, 9,300 issued and outstanding Common Shares, with the most recent purchase under the Share Buy-back Plan having been made on January 10, 2013.  Subsequently in 2013, in a private transaction, the Company purchased a further 1,800 Common Shares that were also booked a treasury shares.  Such amended Bye-Laws and are filed hereinclassified as Exhibit 1.2.

10.2.2   Descriptionissued but not outstanding.  Those repurchased Common Shares are booked as treasury shares and may be re-sold to third parties by the Company in the future.  In April 2013, the Company announced the suspension of Shareholder Rights Attachingthe Share Buy-back Plan, although the Board of Directors may re-implement it in the future if it so determines.

In August 2014, the Company announced that the Board of Directors had authorized a further share buy-back plan of up to Our$1 million in Common Shares. The Company has not announced a commencement date for that further buy-back plan and it has not yet determined a commencement date, which will depend upon a number of factors including the trading price of the Common Shares

and general market conditions.

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10.2.2Description of Shareholder Rights Attaching to Our Common Shares
The Company was incorporated in Bermuda on September 19, 1996 under the Companies Act. The rights of our shareholders are governed by Bermuda law and our memorandum of association and Bye-Laws.

The following discussion of our Common Shares and the laws governing the rights of our shareholders is based upon the advice of Appleby (Bermuda) Limited, our Bermuda counsel.

Our authorized share capital as of December 31, 20112014 was $500,000 consisting of 50,000,000 Common Shares, par value $0.01 per share, of which, as of December 31, 20112014, and as of the date of the filing of this Annual Report, there were and are 13,830,769 Common Shares issued and outstanding.

•     Holders of thewhich 13,819,669 Common Shares have no preemptive, redemption, conversion or sinking fund rights.

•     Holders of theoutstanding.  There are 11,100 Common Shares that are entitled to one vote per share on all matters submitted to a poll vote of holders of Common Sharesissued (but not outstanding) and do not have any cumulative voting rights.


•     In the event of our liquidation, dissolution or winding-up and subject to any alternative resolution that may be pursued by our shareholders, the holders of Common Shares are entitled to share ratably in our assets, if any, remaining after the payment of all our debts and liabilities.

•     Our outstanding Common Shares are fully paid and non-assessable.

•     Additional authorized but unissued Common Shares may be issuedheld as treasury shares by the Board without the approval of the shareholders.

Company.

·
Holders of the Common Shares have no preemptive, redemption, conversion or sinking fund rights, except by contract in the case of MSDC pursuant to the Amended and Restated Shareholders Agreement.
·Holders of the Common Shares are entitled to one vote per share on all matters submitted to a poll vote of holders of Common Shares and do not have any cumulative voting rights.
·In the event of our liquidation, dissolution or winding-up and subject to any alternative resolution that may be pursued by our shareholders, the holders of Common Shares are entitled to share ratably in our assets, if any, remaining after the payment of all our debts and liabilities.
·Our outstanding Common Shares are fully paid and non-assessable.
·Additional authorized but unissued Common Shares, and issued shares held in treasury, may be issued or conveyed by the Board without the approval of the shareholders.
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The holders of Common Shares will receive such dividends, if any, as may be declared by the Board of Directors out of funds legally available for such purposes.  We may not declare or pay a dividend, or make a distribution out of contributed surplus, if there are reasonable grounds for believing that:

•     we are, or after the payment would be, unable to pay our liabilities as they become due; or

•     the realizable value of our assets after such payment or distribution would be less than the aggregate amount of our liabilities and our issued share capital and share premium accounts.

·we are, or after the payment would be, unable to pay our liabilities as they become due; or
·the realizable value of our assets after such payment or distribution would be less than the aggregate amount of our liabilities and our issued share capital and share premium accounts.
The following is a summary of provisions of Bermuda law and our organizational documents, including our memorandum of association and Bye-Laws.  We refer you to our memorandum of association a copyand our Bye-Laws, copies of which hashave been filed with the SEC and our Bye-Laws, a copy of which is filed herein.SEC.  You are urged to read these documents in their entirety for a complete understanding of the terms thereof.

10.2.3      Share Capital

10.2.3Share Capital
Our authorized capital consists of one class of Common Shares.  Under our Bye-Laws, our Board of Directors has the power to issue any authorized and unissued shares on such terms and conditions as it may determine.  Any shares or class of shares may be issued with such preferred, deferred, qualified or other special rights or any restrictions with regard to such matters, whether in regard to dividend, voting, return of capital or otherwise, as we may from time to time by resolution of the shareholders prescribe, or in the absence of such shareholder direction, as the Board of Directors may determine.  This provision in the Bye-Laws could be used to prevent a takeover attempt, or to make a takeover attempt prohibitively expensive, and thereby preclude shareholders from realizing a potential premium over the market value of their shares.

10.2.4      Voting Rights

10.2.4Voting Rights
Generally, under Bermuda law and our Bye-Laws, questions brought before a general meeting are decided by a simple majority vote of shareholders present or represented by proxy, with no provision for cumulative voting.  Matters will be decided by way of votes cast by way of voting cards, proxy cards or a show of hands unless a poll is demanded.

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If a poll is demanded, each shareholder who is entitled to vote and who is present in person or by proxy has one vote for each Common Share entitled to vote on such question.  A poll may only be demanded under the Bye-Laws by:

•     the chairman of the meeting;

•     at least three shareholders present in person or represented by proxy;

•     any shareholder or shareholders present in person or represented by proxy and holding between them not less than one-tenth of the total voting rights of all shareholders having voting rights; or

•     a shareholder or shareholders present in person or represented by proxy holding Common Shares conferring the right to vote on which an aggregate sum has been paid up equal to not less than one-tenth of the total sum paid up on all Common Shares.


·the chairman of the meeting;

·at least three shareholders present in person or represented by proxy;
·any shareholder or shareholders present in person or represented by proxy and holding between them not less than one-tenth of the total voting rights of all shareholders having voting rights; or
·a shareholder or shareholders present in person or represented by proxy holding Common Shares conferring the right to vote on which an aggregate sum has been paid up equal to not less than one-tenth of the total sum paid up on all Common Shares.
Unless the Board of Directors otherwise determines, no shareholder shall be entitled to vote at any general meeting unless all calls or other sums presently payable by that shareholder in respect of all shares held by such shareholder have been paid.

10.2.5      Dividend Rights

10.2.5Dividend Rights
Under Bermuda law, a company may declare and pay dividends unless there are reasonable grounds for believing that the company is, or would, after the payment, be unable to pay its liabilities as they become due or that the realizable value of the company’s assets would thereby be less than the aggregate of its liabilities and issued share capital and share premium accounts.

Under our Bye-Laws, the Board may from time to time declare dividends or distributions out of contributed surplus to be paid to the shareholders according to their rights and interests.  With the sanction of a shareholders resolution, the Board of Directors may determine that any dividend may be paid by distribution of specific assets, including paid-up shares or debentures of any other company.  The Board of Directors may also pay any fixed cash dividend which is payable on any of our Common Shares half-yearly or on other dates, whenever our position, in the opinion of the Board of Directors, justifies such payment.

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Dividends, if any, on our Common Shares will be at the discretion of our Board of Directors, and will depend on our future operations and earnings, capital requirements, surplus and general financial condition as our Board of Directors may deem relevant.

10.2.6      Purchases by the Company of its own Common Shares

10.2.6Purchases by the Company of its own Common Shares
Under Bermuda law and as authorized by the Company’s memorandum of association, we may purchase our own Common Shares out of the capital paid up on the Common Shares in question or out of funds that would otherwise be available for dividend or distribution or out of the proceeds of a fresh issue of Common Shares made for the purposes of the purchase.  We may not purchase our shares if, on the date on which the purchase is to be effected, there are reasonable grounds for believing that the Company is, or after the purchase would be, unable to pay its liabilities as they become due.

However, to the extent that any premium is payable on the purchase, the premium must be provided out of the funds of the Company that would otherwise be available for dividend or distribution or out of the Company’s share premium account.  Any Common Shares purchased by the Company are treated as cancelled and the amount of the Company’s issued capital is diminished by the nominal value of the shares accordingly but shall not be taken as reducing the amount of the Company’s authorized share capital.

10.2.7      Preemptive Rights

10.2.7Preemptive Rights
Our Bye-Laws generally do not provide the holders of our Common Shares preemptive rights in relation to any issues of Common Shares by us or any transfer of our shares.

However, the Company has in the Amended and Restated Shareholders Agreement granted to COFMSDC preemptive rights in the event of any issuance of additional equity securities (or securities convertible into or exchangeable for equity securities) by the Company, such that COFMSDC may subscribe for additional securities in order to maintain its then percentage ownership interest in the issued and outstanding equity securities of the Company.  See the risk factor entitled “Obligations under the Amended and Restated Shareholders Agreement.”

10.2.8      Variation of Rights

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10.2.8Variation of Rights
We may issue more than one class of shares and more than one series of shares in each class.  The rights attached to any class of shares may be altered or abrogated either:

•     with the consent in writing of the holders of more than fifty percent of the issued shares of that class; or


•     pursuant to a resolution of the holders of such shares.

·with the consent in writing of the holders of more than fifty percent of the issued shares of that class; or

·pursuant to a resolution of the holders of such shares.
The Bye-Laws provide that the necessary quorum shall be two or more persons present in person or by proxy holding shares of the relevant class.  The Bye-Laws specify that the creation or issuance of shares ranking pari passu with existing shares will not, subject to any statement to the contrary in the terms of issuance of those shares or rights attached to those shares, vary the special rights attached to existing shares.

10.2.9      Transfer of Common Shares

10.2.9Transfer of Common Shares
Subject to the “Transfer Restrictions” section below, a shareholder may transfer title to all or any of his shares by completing an instrument of transfer in the usual common form or in such other form as the Board of Directors may approve.  The form of transfer is required to be signed by or on behalf of the transferor and also the transferee where any share is not fully paid.  The transferor shall be deemed to remain the holder of the shares until the name of the transferee is entered in the Register of Members.

10.2.10    Transfer Restrictions

10.2.10Transfer Restrictions
The Board of Directors may, in its absolute discretion and without assigning any reason therefore,therefor, decline to register any transfer of any share which is not a fully paid share.  The Board of Directors may also refuse to register an instrument of transfer of a share unless the instrument of transfer:

•     is duly stamped, if required by law, and lodged with us;

•     is accompanied by the relevant share certificate and such other evidence of the transferor’s right to make the transfer as the Board of Directors shall reasonably require;

•     is in respect of one class of shares; and

•     has obtained, where applicable, permission of the Bermuda Monetary Authority.

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·is duly stamped, if required by law, and lodged with us;
·is accompanied by the relevant share certificate and such other evidence of the transferor’s right to make the transfer as the Board of Directors shall reasonably require;
·is in respect of one class of shares; and
·has obtained, where applicable, permission of the Bermuda Monetary Authority.
Our Common Shares are traded on theNASDAQ Stock Market, Inc. as of April 2011, which qualifies as an “appointed stock exchange” for purposes of the Companies Act and the Bermuda Exchange Control Act and regulations made thereunder, in particular a notice to the public dated 1 June 2005.  Accordingly, our Common Shares benefit from a general permission for free transferability for all transfers between persons who are not resident in Bermuda for exchange control purposes, for as long as such Common Shares remain listed on an appointed stock exchange.

The Company, PEWC and COFMSDC (as successor-in-interest to SOF), are parties to the Amended and Restated Shareholders Agreement which provides, among other things, for certain transfer restrictions, notice requirements and tag-along rights in the event PEWC wishes to transfer any of its Common Shares in certain types of transactions.  Under the Amended and Restated Shareholders Agreement, the Company was granted an extension until February 2011 to achieve a listing of the Common Shares on a national Securities Market. Due to market conditions, the Company’s price per Common Share has not yet risen to the level necessary for a listing on NASDAQ (Global).  Accordingly, COF retains its right to sell its remaining Common Shares to PEWCunder the put option provided in the Amended and Restated Shareholders Agreement. 

10.2.11    Transmission of Shares

10.2.11Transmission of Shares
In the event of the death of a shareholder, the survivor or survivors, where the deceased shareholder was a joint holder, and the estate representative, where the deceased shareholder was sole holder, shall be the only persons recognized by us as having any title to the shares of the deceased.  “Estate representative” means the person to whom probate or letters of administration has or have been granted in Bermuda, or failing any such person, such other person as the Board of Directors may in its absolute discretion determine to be the person recognized by us for this purpose.


10.2.12    Disclosure of Interests

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10.2.12Disclosure of Interests
Under the Companies Act, a director who has an interest in a material contract or a proposed material contract, or a 10% or more interest (directly or indirectly) in an entity that is interested in a contract or proposed contract or arrangement with us, is obligated to declare the nature of such interest at the first opportunity at a meeting of the Board of Directors, or by writing to the Board of Directors.  If the director has complied with the relevant sections of the Companies Act and the Bye-Laws with respect to the disclosure of his interest, the director may vote at a meeting of the Board of Directors or a committee thereof on a contract, transaction or arrangement in which that director is interested, in which case his vote shall be counted and he shall be taken into account in ascertaining whether a quorum is present.

10.2.13    Rights in Liquidation

10.2.13Rights in Liquidation
Under Bermuda law, in the event of liquidation or winding-up of a company, after satisfaction in full of all claims of creditors and subject to the preferential rights accorded to any series of preferred stock, the proceeds of such liquidation or winding-up are distributed among the holders of shares in accordance with a company’s bye-laws.

Under our Bye-Laws, if we are wound up, the liquidator may, pursuant to a resolution of the shareholders and any approval required by the Companies Act, divide among the shareholders in cash or other assets the whole or part of our assets, whether such assets shall consist of property of the same kind or not, and may for such purposes set such values as such liquidator deems fair upon any property to be divided and may determine how such division shall be carried out as between the shareholders.

10.2.14    Meetings of Shareholders

10.2.14Meetings of Shareholders
Under Bermuda law, a company, unless it elects to dispense with the holding of annual general meetings, is required to convene at least one general meeting per calendar year.  The directors of a company, notwithstanding anything in such company’s bye-laws, shall, on the requisition of the shareholders holding at the date of the deposit of the requisition not less than one-tenth of the paid-up capital of the company carrying the right of vote, duly convene a special general meeting.  Our Bye-Laws provide that the Board of Directors may, whenever it thinks fit, convene a special general meeting.

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Bermuda law requires that shareholders be given at least five days’ notice of a meeting of the Company.  Our Bye-Laws extend this period to provide that not less than 20 days’ written notice of a general meeting must be given to those shareholders entitled to receive such notice.  The accidental omission to give notice to or non-receipt of a notice of a meeting by any person does not invalidate the proceedings of a meeting.

Our Bye-Laws state that no business can be transacted at a general meeting unless a quorum of at least two shareholders representing a majority of the issued shares of the Company are present in person or by proxy and entitled to vote.

Under our Bye-Laws, notice to any shareholders may be delivered either personally or by sending it through the post, by airmail where applicable, in a pre-paid letter addressed to the shareholder at his address as appearing in the share register or by delivering it to, or leaving it at, such registered address.  Any notice sent by post shall be deemed to have been served seven (7) days after dispatch.  A notice of a general meeting is deemed to be duly given to the shareholder if it is sent to him by cable, telex or tele-copier or other mode of representing or reproducing words in a legible and non-transitory form and such notice shall be deemed to have been served twenty-four (24) hours after its dispatch.


10.2.15    Access to Books and Records and Dissemination of Information

10.2.15Access to Books and Records and Dissemination of Information

Under Bermuda law, members of the general public have the right to inspect the public documents of a company available at the office of the Bermuda Registrar of Companies.  These documents include the memorandum of association and any amendment to the memorandum of association.

Under Bermuda law, the minutes of shareholder meetings will be open for inspection by any shareholder or director without charge for not less than two hours during business hours each day, subject to any reasonable restrictions that we may impose.  The shareholders shall be entitled to receive a copy of every balance sheet and statement of income and expenditure before a general meeting as required under the Bye-Laws.

Under our Bye-Laws, unless the Board otherwise determines, the register of shareholders of the Company is required to be open for inspection between 10:00 a.m. and 12:00 noon each working day without charge to members of the general public.  A company is required to maintain its share register in Bermuda but may, subject to the provisions of the Companies Act, establish a branch register outside of Bermuda.  We have established a branch register with our transfer agent, Computershare Limited, which is based in Jersey City, New Jersey.

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Under Bermuda Law, a company is required to keep at its registered office a register of its directors and officers that is open for inspection for not less than two hours in each day by members of the public without charge.  Under our Bye-Laws, the register of directors and officers is available for inspection by the public between 10:00 a.m. and 12:00 noon every working day.

Bermuda law does not provide a general right for shareholders to inspect or obtain copies of any other corporate records, except for the Bye-Laws of the Company.

10.2.16    Election or Removal of Directors

10.2.16Election or Removal of Directors
The Bye-Laws provide that the number of directors will be such number, not less than two, as our shareholders by resolution may from time to time determine.  A director will serve until re-elected or his successor is appointed at the next annual general meeting or his prior removal in the manner provided by the Companies Act or the Bye-Laws.  There is no requirement under Bermuda law, the Company’s memorandum of association or its Bye-Laws that a majority of the Company’s directors be independent.

The Bye-Laws provide that each director shall have one vote on all matters presented to the Board for a vote.  At the Annual General Meeting held on October 7, 2011,9, 2014, all nine directors then in office were re-elected.

The shareholders may by resolution determine that one or more vacancies in the Board of Directors shall be deemed casual vacancies for the purposes of the Bye-Laws.  The Board, so long as a quorum of directors remains in office, shall have the power at any time and from time to time to appoint any individual to be a director so as to fill a casual vacancy.  The shareholders may approve the appointment of alternate directors or may authorize the Board to appoint them.  Directors may also appoint and remove their own alternates.  At the Annual General Meeting held on October 7, 2011,9, 2014, the shareholders approved the reservation of one directorship as a casual vacancy.

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We may, in a special general meeting called for this purpose, remove a director, provided notice of such meeting is served upon the director concerned not less than fourteen days before the meeting and he shall be entitled to be heard at that meeting.

The office of a director will be vacated in the event of any of the following:

•     if he resigns his office by notice in writing to be delivered to our registered office or tendered at a meeting of the Board of Directors;


•     if he becomes of unsound mind or a patient for any purpose under any statute or applicable law relating to mental health and the Board of Directors resolves that his office is vacated;

•     if he becomes bankrupt or enters into a general settlement with his creditors;

•     if he is prohibited by law from being a director; or

•     if he ceases to be a director by virtue of the Companies Act or is removed from office pursuant to the Bye-Laws.

10.2.17    Amendment of Memorandum of Association and Bye-Laws

·if he resigns his office by notice in writing to be delivered to our registered office or tendered at a meeting of the Board of Directors;

·if he becomes of unsound mind or a patient for any purpose under any statute or applicable law relating to mental health and the Board of Directors resolves that his office is vacated;
·if he becomes bankrupt or enters into a general settlement with his creditors;
·if he is prohibited by law from being a director; or
·if he ceases to be a director by virtue of the Companies Act or is removed from office pursuant to the Bye-Laws.
10.2.17Amendment of Memorandum of Association and Bye-Laws
Bermuda law provides that the memorandum of association of a company may be amended by resolution passed at a general meeting of which due notice has been given.  An amendment to a memorandum of association does not require the consent of the Minister of Finance save for specific circumstances, for example, the adopting of any authority to carry on restricted business activities.

Under Bermuda law, the holders of:

•     an aggregate of not less than twenty percent in par value of a company’s issued share capital or any class thereof; or

•     not less in the aggregate than twenty percent of the company’s debentures entitled to object to amendments to its memorandum of association,

       have the right to apply to the Supreme Court of Bermuda for an annulment of any amendment of the memorandum of association.  Where such an application is made, the amendment becomes effective only to the extent that it is confirmed by the Bermuda Supreme Court.  An application for an annulment of an amendment of the memorandum of association must be made within twenty-one days after the date on which the resolution amending the memorandum of association is passed and may be made on behalf of the persons entitled to make the application by one or more of their number as they may appoint in writing for the purpose.

·an aggregate of not less than twenty percent in par value of a company’s issued share capital or any class thereof; or
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·not less in the aggregate than twenty percent of the company’s debentures entitled to object to amendments to its memorandum of association,
·have the right to apply to the Supreme Court of Bermuda for an annulment of any amendment of the memorandum of association.  Where such an application is made, the amendment becomes effective only to the extent that it is confirmed by the Bermuda Supreme Court.  An application for an annulment of an amendment of the memorandum of association must be made within twenty-one days after the date on which the resolution amending the memorandum of association is passed and may be made on behalf of the persons entitled to make the application by one or more of their number as they may appoint in writing for the purpose.
Our Bye-Laws may be amended in the manner provided for in the Companies Act, which provides that the directors may amend the Bye-Laws, provided that any such amendment shall be effective only to the extent approved by the shareholders.

10.2.18    Merger or Amalgamation

10.2.18Merger or Amalgamation
The Companies Act provides that two or more Bermuda companies may merge and their undertaking, property and liabilities shall bestvest in one of such companies as the surviving company (referred to as a “merger” under Bermuda law).  The Companies Act also provides that a Bermuda company may amalgamate with another company and continue as an amalgamated company (referred to as an “amalgamation” under Bermuda law).  A merger or amalgamation requires ana merger or amalgamation agreement which must be approved by the board of directors and at a meeting of the shareholders by seventy-five percent of the shareholders present and entitled to vote at such meeting in respect of which the quorum shall be two persons holding or representing by proxy more than one-third of the issued shares of the company.  These provisions do not apply where a holding company is merging or amalgamating with one or more of its wholly-owned subsidiaries or where two or more wholly-owned companies of the same holding company are merging or amalgamating.

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Under Bermuda law, in the event of a merger or an amalgamation of a Bermuda company, a shareholder who did not vote in favor of the transaction and who is not satisfied that fair value has been offered for the shares, may apply to the Supreme Court of Bermuda within one month of notice of the meeting of shareholders to appraise the fair value of those shares.


10.2.19    Class Actions and Derivative Actions

10.2.19Class Actions and Derivative Actions

Class actions, as they are commonly understood in the United States, are not available to shareholders under Bermuda law.  Derivative actions are generally only available to shareholders under Bermuda law in very limited circumstances.  A shareholder may commence an action in the name of a company to remedy a wrong done to the company where the wrongdoers are in control of the company and the act complained of is of a fraudulent character, oppressive, beyond the corporate power of the company, illegal or would have required the approval of a greater percentage of the company’s shareholders than those that actually approved it.  A shareholder may not commence such an action where the wrong complained of is capable of ratification by the company in a general meeting by ordinary resolution.

When one or more shareholders believes the affairs of a company are being conducted in a manner which is oppressive or prejudicial to the interest of some of the shareholders, the Supreme Court of Bermuda, upon petition, may make such order as it sees fit, including an order regulating the conduct of the company’s affairs in the future or ordering the purchase of the shares of any shareholders by other shareholders or by the company, and in the case of a purchase of the shares by the company, for the reduction accordingly of the company’s capital or otherwise.

10.2.20    Personal Liability of Directors and Indemnity

10.2.20Personal Liability of Directors and Indemnity
The Companies Act requires every officer, including directors, of a company in exercising powers and discharging duties, to act honestly in good faith with a view to the best interests of the company, and to exercise the care, diligence and skill that a reasonably prudent person would exercise in comparable circumstances.  The Companies Act further provides that any provision, whether in the bye-laws of a company or in any contract between the company and any officer or any person employed by the company as auditor, exempting such officer or person from liability, or indemnifying him against any liability which by virtue of any rule of law would otherwise attach to him, in respect of any fraud or dishonesty of which he may be guilty in relation to the company, shall be void.

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Every director, officer and committee member shall be indemnified out of our funds against all civil liabilities, loss, damage or expense including liabilities under contract, tort and statute or any applicable foreign law or regulation and all reasonable legal and other costs and expenses properly payable, incurred or suffered by him as director, officer or committee member; provided that the indemnity contained in the Bye-Laws will not extend to any matter which would render it void under the Companies Act as discussed above.

10.2.21    Exchange Controls

10.2.21Exchange Controls
We have been designated by the Bermuda Monetary Authority as a non-resident under the Exchange Control Act of 1972 (the “Exchange Control Act”).  This designation allows us to engage in transactions in currencies other than the Bermuda dollar.

The transfer of Common Shares between persons regarded as resident outside Bermuda for exchange control purposes and the issue of Common Shares to such persons may be effected without specific consent under the Exchange Control Act and regulations thereunder, provided the Common Shares are listed on an appointed stock exchange.

Notwithstanding the recording of any special capacity, we are not bound to investigate or incur any responsibility in respect of the proper administration of any estate or trust.

We will take no notice of any trust applicable to any of our Common Shares whether or not we had notice of such trust.

As an “exempted company,” we are exempt from Bermuda laws which restrict the percentage of share capital that may be held by non-Bermudians.  However, as an exempted company we may not participate in certain designated business transactions, which we do not consider relevant to our present or planned business activities.


10.3 Material Contracts

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10.3Material Contracts
Composite Services Agreement (“CSA”)

The Company engages in transactions in the ordinary course of business with PEWC, including the purchase of certain raw materials and the distribution of PEWC products in various countries in the Asia Pacific region.  The Company and PEWC are parties to a composite services agreement dated November 7, 1996 (the “Composite Services Agreement” or “CSA”), which the Company has renewed annually, at its option.  The Composite Services Agreement contains provisions that define the relationship and the conduct of the respective businesses of the Company and PEWC and confers certain preferential benefits on the Company.  In 20112014 there were no material changes to the CSA between APWC and PEWC.  Pursuant to the Composite Services Agreement,

•    PEWC agrees to (a) sell copper rod to the Company, upon the Company’s request, (i) at a price consisting of the spot price of copper on the LME plus an agreed upon premium and (ii) at prices and on terms at least as favorable as PEWC provides copper rod to other purchasers of similar amounts of copper rod in the same markets, and (b) give priority in the supply of copper rod to the Company over other purchasers of copper rod from PEWC.

•    The Company has the right to distribute any wire or cable product manufactured by PEWC in all markets in which the Company presently distributes or develops the capability to distribute in the future such products on such terms as have historically been in effect or on terms at least as favorable as PEWC grants to third parties that distribute such products in such markets.  However, PEWC is not required to grant to the Company the right to distribute products manufactured by PEWC in the future in markets where the Company does not currently have the capability to distribute unless and until PEWC has no pre-existing contractual rights which would conflict with the grant of such right to the Company.

•    Each of PEWC and the Company will notify the other party prior to entering into any negotiations with a third party concerning the establishment of any facility or similar venture to manufacture or distribute any wire or cable product outside of the markets where the Company currently manufactures or distributes, or intends to develop the capability to manufacture or distribute, any wire or cable product.  Unless the Company and PEWC mutually agree otherwise, the Company has the right of first refusal to enter into any definitive agreement with such third party.  If, however, such third party would not agree to the substitution of the Company for PEWC or such substitution would prevent the successful completion of the facility or venture, PEWC has agreed to arrange for the Company to participate to the extent possible.

•    PEWC agrees to make available to the Company, upon the Company’s request and on terms to be mutually agreed between PEWC and the Company from time to time, certain services with respect to the design and manufacture of wire and cable products, computerization, inventory control, purchasing, internal auditing, quality control, emergency back-up services, and recruitment and training of personnel; such services may include the training of the Company’s employees and managers at PEWC facilities and the secondment of PEWC employees and managers to the Company.

•    Without the consent of the Company, PEWC will not compete with respect to the manufacture or distribution of wire and cable products in any market in which the Company is manufacturing or has taken significant steps to commence manufacturing.

•     For purposes of the Composite Services Agreement, each province in China is considered the equivalent of a country.

·PEWC agrees to (a) sell copper rod to the Company, upon the Company’s request, (i) at a price consisting of the spot price of copper on the LME plus an agreed upon premium and (ii) at prices and on terms at least as favorable as PEWC provides copper rod to other purchasers of similar amounts of copper rod in the same markets, and (b) give priority in the supply of copper rod to the Company over other purchasers of copper rod from PEWC.
·The Company has the right to distribute any wire or cable product manufactured by PEWC in all markets in which the Company presently distributes or develops the capability to distribute in the future such products on such terms as have historically been in effect or on terms at least as favorable as PEWC grants to third parties that distribute such products in such markets.  However, PEWC is not required to grant to the Company the right to distribute products manufactured by PEWC in the future in markets where the Company does not currently have the capability to distribute unless and until PEWC has no pre-existing contractual rights which would conflict with the grant of such right to the Company.
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·Each of PEWC and the Company will notify the other party prior to entering into any negotiations with a third party concerning the establishment of any facility or similar venture to manufacture or distribute any wire or cable product outside of the markets where the Company currently manufactures or distributes, or intends to develop the capability to manufacture or distribute, any wire or cable product.  Unless the Company and PEWC mutually agree otherwise, the Company has the right of first refusal to enter into any definitive agreement with such third party.  If, however, such third party would not agree to the substitution of the Company for PEWC or such substitution would prevent the successful completion of the facility or venture, PEWC has agreed to arrange for the Company to participate to the extent possible.
·PEWC agrees to make available to the Company, upon the Company’s request and on terms to be mutually agreed between PEWC and the Company from time to time, certain services with respect to the design and manufacture of wire and cable products, computerization, inventory control, purchasing, internal auditing, quality control, emergency back-up services, and recruitment and training of personnel; such services may include the training of the Company’s employees and managers at PEWC facilities and the secondment of PEWC employees and managers to the Company.
·Without the consent of the Company, PEWC will not compete with respect to the manufacture or distribution of wire and cable products in any market in which the Company is manufacturing or has taken significant steps to commence manufacturing.
·For purposes of the Composite Services Agreement, each province in China is considered the equivalent of a country.
To the extent that transactions occur in the future between the Company and PEWC or affiliates of PEWC other than under the Composite Services Agreement, such transactions will be entered into on an arm’s length basis on terms no less favorable than those available from unaffiliated third parties.


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Amended and Restated Shareholders Agreement

In connection with the 2007 acquisition by SOF of twenty percent (20%) of the Company’s issued and outstanding Common Shares, the Company, PEWC and SOF entered into Shareholders Agreement, pursuant to which the Company granted to SOF certain rights and protections.  Under the Shareholders Agreement, the Company agreed to indemnify the SOF Indemnified Persons (as defined in the Shareholders Agreement) for any additional taxes, interest, penalties and other costs that might be imposed upon or incurred by the SOF Indemnified Persons in the event that the Company is determined by the IRS to be a CFC“controlled foreign corporation” (a “CFC”) or a PFIC“passive foreign investment company” (a “PFIC”) as such terms are interpreted and defined under IRS rules or regulations.regulations  In addition, under the Shareholders Agreement, the Company granted to SOF certain registration rights with respect to the Common Shares owned by it, including the undertaking by the Company to prepare and file a shelf registration statement, and the further right of SOF to exercise two demand registration rights with regard to its Common Shares and to further exercise certain piggyback registration rights in connection with its Common Shares.Shares  The Shareholders Agreement was amended and restated on March 27, 2009 in connection with the sale by SOF to PEWC of 51% of the Common Shares held by SOF.  However, the foregoing rights of SOF have been preserved in the Amended and Restated Shareholders Agreement notwithstanding its sale of 51% of its original interest in APWC.  As of July 1, 2011, COFMSDC succeeded to all of the right, title and interest in the Common Shares then held by SOF.  Each of the rights of SOF under the Shareholders Agreement was conveyed to, and is now held by, COF.MSDC.  For a more detailedfurther description of the Company’s obligations under the Shareholders Agreement, see the risk factor entitled “ “ObligationsObligations under the Amended and Restated Shareholders Agreement.”

10.4 Taxation

10.4Taxation
The following is a summary of the material tax consequences of the acquisition, ownership and disposition of Common Shares based on the tax laws of the United States and Bermuda, subject to the assumptions, qualifications and limitations in our discussion below.  Such summary is subject to changes in United States and Bermuda law, including changes that could have retroactive effect.  The following summary does not take into account the individual circumstances of an investor, nor does it purport to be a complete technical analysis or examination of all potential tax effects relevant to a decision to purchase Common Shares, including without limitation, the tax laws of the various states or localities within the United States.

10.4.1 United States Taxation

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10.4.1      United States Taxation
The following is a summary of the material United States federal income tax consequences of the acquisition, ownership and disposition of Common Shares by a U.S. Holder (as defined below) and a Non-U.S. Holder (as defined below), in each case, subject to the assumptions, qualifications and limitations in our discussion below.  Such summary is subject to changes in United States law, including changes that could have retroactive effect.  The summary does not purport to be a comprehensive description of all possible tax considerations that may be relevant to a decision to purchase Common Shares.  This summary is based upon the Internal Revenue Code of 1986, as amended (the “Code”), regulations promulgated under the Code by the U.S. Treasury Department (the “Treasury”) (including proposed and temporary regulations), rulings, current administrative interpretations and official pronouncements of the IRS, and judicial decisions, all as currently in effect and all of which are subject to differing interpretations or to change, possibly with retroactive effect.  Such change could materially and adversely affect the tax consequences described below.  No assurance can be given that the IRS would not assert, or that a court would not sustain, a position contrary to any of the tax consequences described below.  Further, this summary does not discuss any foreign, state or local tax consequences.

In particular, this summary deals only with Common Shares held as capital assets and does not address the United States tax treatment of U.S. Holders and Non-U.S. Holders that are subject to special treatment under the Code, such as dealers in stocks, securities, or currencies, traders in securities that elect to use a mark-to-market method of accounting for their securities holdings, financial institutions, insurance companies, tax-exempt entities, real estate investment trusts, regulated investment companies, qualified retirement plans, individual retirement accounts, and other tax deferred accounts, expatriates of the United States, persons subject to the alternative minimum tax, persons holding shares as part of a hedging or conversion transaction or a straddle, or other integrated transaction, persons who acquired Common Shares pursuant to the exercise of any employee stock option or otherwise as compensation for services, or persons whose functional currency isnotis not the United States dollar or who own (directly, indirectly or by attribution) 10% or more of the stock of the Company.  This discussion is limited to investors who hold their shares as capital assets.  No ruling has been or will be sought from the IRS regarding any matter discussed herein.  Counsel to the Company has not rendered any legal opinion regarding any tax consequences to the Company or others of an investment in the Company.  Consequently, prospective purchasers who are U.S. Holders or Non-U.S. Holders are advised to satisfy themselves as to the overall United States federal, state, local and foreign tax consequences of their acquisition, ownership and disposition of Common Shares by consulting their own tax advisors.


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As used herein, the term “U.S. Holder” means a beneficial owner of Common Shares that is (i) a citizen or resident of the United States, (ii) a corporation (including any entity treated as a corporation for U.S. federal income tax purposes) created or organized in the United States or under the laws of the United States or any state (or the District of Columbia), (iii) an estate, the income of which is subject to United States federal income tax regardless of its source, or (iv) a trust, if a court within the United States is able to exercise primary supervision over the administration of the trust and one or more “United States persons” (as defined in Section 7701(a)(30) of the Code) has the authority to control all substantial decisions of the trust, or, to the extent provided in the Regulations, certain trusts in existence on August 20, 1996, and treated as U.S. Persons prior to such date, that elect to be treated as U.S. Persons.

The term “Non-U.S. Holder” means a beneficial owner of Common Shares that is not a U.S. Holder.  As described in “Taxation of Non-U.S. Holders” below, the consequences to a Non-U.S. Holder may differ substantially from the tax consequences to a U.S. Holder.

If a partnership (including for this purpose any entity treated as a partnership for U.S. federal income tax purposes) is a beneficial owner of Common Shares, the U.S. federal income tax consequences to a partner in the partnership will generally depend on the status of the partner and the activities of the partnership.  A holder of Common Shares that is a partnership and the partners in such partnership should consult their own tax advisors regarding the U.S. federal income tax consequences of the ownership and disposition of Common Shares.

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U.S. Federal Income Taxation of the Company

The Company expects that it will be treated as a foreign corporation for U.S. federal income tax purposes, and it will make no election to the contrary.  As a foreign corporation, subject to the rules discussed below, the income, gains, losses, deductions and expenses of the Company will not be passed through to the investors, and all distributions by the Company to the investors will be treated as dividends, return of capital, and/or capital gains.

The Company currently does not conduct activities in the United States and expects that it will continue to conduct activities in a manner so as not to constitute the conduct of a trade or business in the United States or, invest in securities the income from which is treated, for U.S. federal income tax purposes, as arising from a U.S. trade or business.  As a result, the income of the Company generally should not be subject to U.S. federal income tax on a net income basis.  However, gains realized from certain investments in United States real property interests by foreign persons, such as the Company, may be subject to U.S. federal income tax on a net basis, withholding tax and a branch profits tax.  Debt instruments with an equity component linked to a United States real property interest and stock in certain United States corporations holding significant real property interests may be considered United States real property interests taxable as described above.

Taxation of U.S. Holders

The discussion in “Taxation of Dividends” and “Taxation of Capital Gains” below assumes that the Company will not be treated as a PFIC for U.S. federal income tax purposes.  For a discussion of the rules that apply if the Company is treated as a PFIC, see the discussion in “Passive Foreign Investment Company” below.

Taxation of Dividends


The Company has never declared or paid any cash dividends and does not presently anticipate paying dividends.  A U.S. Holder receiving a distribution with respect to Common Shares generally will be required to include such distribution in gross income (as ordinary income subject to regular, and not reduced, tax rates) on the day received as foreign-source dividend income to the extent such distribution is paid from the Company’s current or accumulated earnings and profits (as determined under United States federal income tax   principles).  Such dividends will not be eligible for the dividends received deduction (generally allowed to certain United States corporations in respect of dividends received from United States corporations).  U.S. Holders that are corporations and directly own 10% or more of the voting stock of the Company may be entitled to claim a foreign tax credit for United States federal income tax purposes in respect of foreign taxes paid by the Company and certain subsidiaries.  However, if a U.S. Holder claims the foreign tax credit, it must “gross-up” the deemed tax payment and treat the grossed-up amount as part of the dividend distribution, so that the amount included in income is equal to the dividend received plus the amount of the foreign tax deemed paid by such U.S. Holder.

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Under U.S. federal income tax laws, for taxable years beginning before January 1, 2013,a dividend paid to an individual U.S. shareholder from either a domestic corporation or a “qualified foreign corporation” is subject to tax at the reduced rates applicable to certain capital gains.  A qualified foreign corporation includes certain foreign corporations that are eligible for benefits of a comprehensive income tax treaty with the United States which the Secretary of the Treasury determines is satisfactory for purposes of this provision and which includes an exchange of information program.  In addition, a foreign corporation not otherwise treated as a qualified foreign corporation is so treated with respect to any dividend it pays if the stock with respect to which it pays such dividend is readily tradable on an established securities market in the United States.

In the absence of a comprehensive income tax treaty between the United States and Bermuda, the Company will not be treated as a “qualified foreign corporation” under the treaty test.  So long as the Company is not a PFIC (as discussed below), dividends paid by the Company to individual shareholders would qualify for these reduced rates if its stock was treated as readily tradable on an established securities market in the United States.

In Notice 2003-71, 2003-2 C.B. 922, the IRS determined that common or ordinary stock, or an American depositary receipt in respect of such stock, is considered readily tradable on an established securities market in the United States if it is listed on a national securities exchange that is registered under Section 6 of the Securities Exchange Act of 1934 (15 U.S.C. 78f) or on the Nasdaq Stock Market.  As stated in the SEC’s Annual Report for 2002, registered national exchanges as of September 30, 2002 include the American Stock Exchange (now known asNYSE Amex Equities)Equities), the Boston Stock Exchange, the Cincinnati Stock Exchange, the Chicago Stock Exchange, the NYSE, the Philadelphia Stock Exchange, and the Pacific Exchange, Inc.

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For so long as the Common Shares continue to be traded on NASDAQ, or are readily tradable on any other established securities market in the United States, any dividends paid by the Company should qualify for the reduced rates referred to above so long as they remain in effect.

To the extent any distribution exceeds the current and accumulated earnings and profits of the Company for a taxable year, the distribution will be treated as a non-taxable return of capital to the extent of the U.S. Holder’s adjusted tax basis in the Common Shares with respect to which the distribution is made, causing a reduction in the adjusted basis of the Common Shares (thereby increasing the amount of gain, or decreasing the amount of loss, to be recognized by the U.S. Holder on a subsequent disposition of the Common Shares).  To the extent such distribution exceeds the U.S. Holder’s adjusted tax basis in the Common Shares, such excess will be treated as capital gain.

Taxation of Capital Gains

A U.S. Holder will recognize taxable gain or loss on any sale, exchange or other disposition of Common Shares (including a liquidation, dissolution or as a result of a non-pro rata redemption of Common Shares that qualified for treatment as a sale or exchange for United States federal income tax purposes) in an amount equal to the difference between the amount realized for the Common Shares and the U.S. Holder’s adjusted tax basis in the Common Shares.  Such gain or loss generally will be treated as capital gain or loss and will be long-term capital gain or loss if the Common Shares have been held for more than one year on the date of the sale, exchange or other disposition thereof, and will be short-term capital gain or loss if the Common Shares   have been held for one year or less on the date of the sale or exchange thereof.  Any gain recognized by a U.S. Holder generally will be treated as United States source income.  In general, an individual’s short-term capital gains are taxable as ordinary income and an individual’s long-term capital gains are subject to U.S. federal income tax at preferential rates.


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Long-term capital gains of corporations generally are subject to the U.S. federal income tax at a current maximum marginal rate of 35%.  Short-term capital gain generally is taxable at ordinary income rates.  Although capital gains of corporations currently are taxed at the same rates as ordinary income, the distinction between capital gain and ordinary income or loss is relevant for purposes of, among other things, limitations on the deductibility of capital losses.  Corporations may deduct capital losses only to the extent of capital gains and generally may carry back capital losses to each of the preceding three years and carry forward capital losses to each of the succeeding five years.  Individuals may deduct capital losses to the extent of capital gains plus up to $3,000 ($1,500 for married individuals filing separate returns) and may carry forward capital losses indefinitely.

Backup Withholding

In general, information reporting requirements may be applicable to dividend payments (or other taxable distributions) made in respect of Common Shares to non-corporate U.S. Holders, and “backup withholding” at the rate of 28% (which rate is scheduled to increase to 31% after 2012) will apply to such payments (i) if the holder or beneficial owner fails to provide a taxpayer identification number in the manner required by U.S. law and applicable regulations, (ii) if the IRS notifies the payor that the taxpayer identification number furnished by the holder or beneficial owner is incorrect, (iii) if there has been notification from the IRS of a failure by the holder or beneficial owner to report all interest or dividends required to be shown on its United States federal income tax returns or (iv) in certain circumstances, if the holder or beneficial owner fails to comply with applicable certification requirements.  In general, payment of the proceeds from a sale of Common Shares to or through a United States office of a broker is subject to both United States backup withholding and information reporting unless the holder or beneficial owner establishes an exemption.  U.S. Holders who are required to establish their exempt status generally must provide such certification on IRS Form W-9.  Amounts withheld under the backup withholding rules may be credited against a holder’s tax liability, and a holder may obtain a refund of any excess amounts withheld under the backup withholding rules by timely filing the appropriate claim for refund with the IRS.  Payment of the proceeds from the sale of Common Shares effected outside the United States by a foreign office of certain United States connected brokers will not be subject to backup withholding tax but will be subject to information reporting requirements unless the broker has documentary evidence in its records that the beneficial owner is a non-U.S. Holder and has no actual knowledge to the contrary, or the beneficial owner otherwise establishes an exemption.

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Passive Foreign Investment Company

In general, the Company will be treated as a PFIC for United States federal income tax purposes for any taxable year if either (i) at least 75% of the gross income of the Company is passive income or (ii) at least 50% of the value (determined on the basis of a quarterly average) of the Company’s assets is attributable to assets that produce or are held for the production of passive income.  The Company believes, based on its current operations and assets, that it is not a PFIC and does not expect to become a PFIC in the future.  This conclusion is a factual determination based on, among other things, a valuation of the Company’s assets, which will likely change from time to time.

If the Company were a PFIC for any taxable year during which a U.S. Holder held Common Shares, the U.S. Holder would be subject to special tax rules with respect to (i) any “excess distribution” by the Company to the U.S. Holder (generally any distribution received by the U.S. Holder in a taxable year that is greater than 125% of the average annual distribution received by the U.S. Holder in the three preceding taxable years, or the U.S. Holder’s holding period for the Common Shares, if shorter) and (ii) any gain realized on the sale or other disposition (including a pledge) of Common Shares.


Under these special tax rules, (i) the excess distribution or gain would be allocated ratably over the U.S. Holder’s holding period for the Common Shares, (ii) the amount allocated to the U.S. Holder’s current taxable year and to any period prior to the first taxable year in which the Company was a PFIC would be includible as ordinary income in the U.S. Holder’s current taxable year and (iii) the amount allocated to a prior year during which the Company was a PFIC would be subject to tax at the highest tax rate in effect for that year, and an interest charge would also be imposed with respect to the resulting tax attributable to each such prior year.  The interest charge is computed using the applicable rates imposed on underpayments of United States federal income tax for the relevant periods.

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The above rules will not apply if a “mark-to-market” election is available and a U.S. Holder validly makes such an election by filing a properly completed IRS Form 8621.  If such election were made, a U.S. Holder generally would be required to take into account the difference, if any, between the fair market value and its adjusted tax basis in the Common Shares at the end of each taxable year as ordinary income or ordinary loss (to the extent of any net mark-to-market gains previously included in income).  Thus, the U.S. Holder may recognize taxable income without receiving any cash to pay its tax liability with respect to such income.  A U.S. Holder’s tax basis in the Common Shares would be adjusted to reflect any such income or loss amount.  In addition, any gain from a sale, exchange or other disposition of the Common Shares would be treated as ordinary income, and any loss would be treated as ordinary loss (to the extent of any net mark-to-market gains previously included in income).  A mark-to-market election is available to a U.S. Holder only if the Common Shares are considered “marketable stock” for these purposes.  Generally, shares of a PFIC will be considered marketable stock if they are “regularly traded” on a “qualified exchange” within the meaning of applicable U.S. Treasury regulations.  A class of shares is regularly traded during any calendar year during which such class of shares is traded, other than in de minimis quantities, on at least 15 days during each calendar quarter.  A “qualified exchange” is defined to include a national securities exchange registered with the SEC or certain foreign exchanges.  As the Common Shares of the Company commenced trading on the NASDAQ beginning on April 29, 2011, the mark-to-market election under the rules discussed above is available if the Company were otherwise classified as a PFIC,, for so long as the Common Shares continue to be regularly traded on NASDAQ or another qualified exchange. 

exchange.

The special tax rules described above will also not apply to a U.S. Holder if the U.S. Holder elects to have the Company treated as a “qualified electing fund” (a “QEF election”) and the Company provides certain information to U.S. Holders.  If the Company is treated as a PFIC, it will notify the U.S. Holders and provide such holders with the information necessary to make an effective QEF election, including information as to the procedures for making such an election.  The QEF election is made on a shareholder-by-shareholder basis and can ordinarily be revoked only with the consent of the IRS.

A U.S. Holder that makes a valid QEF election will be currently taxable on its pro rata share of the Company’s ordinary earnings and net capital gain (at ordinary income and capital gains rates, respectively) for each taxable year that the Company is classified as a PFIC, regardless of whether distributions are received.  Thus, the U.S. Holder may recognize taxable income without receiving any cash to pay its tax liability with respect to such income.  The U.S. Holder’s basis in the Common Shares will be increased to reflect taxed but undistributed income.  Distributions of income that have been previously taxed will result in a corresponding reduction of basis in the Common Shares and will not be taxed again as a distribution to the U.S. Holder.

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A U.S. Holder owning Common Shares during any year that the Company is a PFIC must file IRS Form 8621.  U.S. Holders should consult their tax advisors concerning the United States federal income tax consequences of holding Common Shares and of making a mark-to-market or QEF election if the Company is treated as a PFIC in the future.

Controlled Foreign Corporation

A non-U.S. corporation generally will be a CFC for U.S. tax purposes if United States shareholders collectively own more than 50 percent of the total combined voting power or total value of the corporation’s   stock on any day during any taxable year.  For this purpose, United States shareholders are limited to those U.S. persons who own, directly, indirectly or constructively, 10 percent or more of the total combined voting power of all classes of stock of the non-U.S. corporation.  If a corporation is a CFC for an uninterrupted period of 30-days in any tax year, every United States shareholder that owns stock on the last day of the CFC’s taxyear,tax year, must include in gross income such shareholder’s pro rata share of the CFC’s “subpart F income” and income from investments in certain types of U.S. property (i.e., tangible personal property located in the United States, stock of a United States corporation, an obligation of a United States person, or a right to use patents, copyrights, and other similar property in the United States) even if the income has not been distributed to the shareholders in the form of dividends or otherwise.  Subpart F income consists of certain specified categories of income including, among others, dividends, interest, rents, royalties, net gains from the sale of property giving rise to such income and income from certain types of transactions involving “related persons” as defined for U.S. federal income tax purposes.


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Taxation of Non-U.S. Holders

Taxation of Dividends

Subject to the discussion in “Backup Withholding” below, Non-U.S. Holders generally will not be subject to U.S. federal income tax, including withholding tax, on distributions received on Common Shares, unless the distributions are effectively connected with a trade or business conducted in the United States (and, if an applicable income tax treaty so requires, attributable to a permanent establishment maintained in the United States).

If distributions are effectively connected with a U.S. trade or business (and, if applicable, attributable to a U.S. permanent establishment), Non-U.S. Holders generally will be subject to tax on such distributions in the same manner as U.S. Holders, as described in “Taxation of U.S. Holders — Taxation of Dividends” above.  In addition, any such distributions received by a corporate Non-U.S. Holder may also, under certain circumstances, be subject to an additional “branch profits tax” at a 30% rate or such lower rate as may be specified by an applicable income tax treaty.

Taxation of Capital Gains

Gain realized by Non-U.S. Holders upon the sale or exchange or complete redemption of Common Shares held as a capital asset generally should not be subject to United States federal income tax provided that the gain is not effectively connected with a trade or business conducted in the United States (and, if an applicable tax treaty so requires, attributable to a permanent establishment maintained in the United States).  However, in the case of nonresident alien individuals, such gain will be subject to the 30% (or lower tax treaty rate) U.S. flat tax if (i) such person is present in the United States for 183 days or more during the taxable year (on a calendar year basis unless the nonresident alien individual has previously established a different taxable year) and certain other conditions are met; and (ii) such gain is derived from U.S. sources.

Generally, the source of gain upon the sale or exchange or complete redemption of Common Shares is determined by the place of residence of the shareholder.  For purposes of determining the source of gain, the Code defines residency in a manner that may result in an individual who is otherwise a nonresident alien with respect to the United States being treated as a United States resident for purposes of determining the source of income only.  Each potential individual investor who anticipates being present in the United States for 183 days or more (in any taxable year) should consult a separate, outside tax advisor with respect to the possible application of this rule.

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Special rules may apply in the case of shareholders (i) that have an office or fixed place of business in the United States to which a distribution or gain in respect of the Common Shares is attributable; or (ii) that are former citizens or residents of the United States, CFCs, foreign personal holding companies or corporations   that accumulate earnings to avoid United States federal income tax.  Such persons in particular are urged to consult their United States tax advisors before investing in the Company.

Backup Withholding

In the case of Common Shares held by a Non-U.S. Holder, or held in the United States by a custodian or nominee for a Non-U.S. Holder, U.S. back-up withholding taxes may apply to distributions in respect of such Common Shares unless such Non-U.S. Holder properly certifies as to its non-U.S. status using IRS Form W-8.


Backup withholding is not an additional tax.  Amounts withheld as backup withholding from a payment to a Non-U.S. Holder may be credited against his U.S. federal income tax liability and a Non-U.S. Holder may obtain a refund of any excess amounts withheld by filing the appropriate claim for refund with the IRS and furnishing any required information in a timely manner.

Future Tax Legislation

Future amendments to the Code, other legislation, new or amended U. S. Treasury Regulations, administrative rulings or guidance by the IRS, or judicial decisions may adversely affect the federal income tax aspects of an investment in the Company, with or without advance notice, and retroactively or prospectively.

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U.S. Treasury Circular 230 Notice

Any United States federal tax advice included in this communicationAnnual Report (a) was not intended to be used, and cannot be used, for the purpose of avoiding United States federal tax penalties, and (b) was not written to support the promotion or marketing of the Company, its Common Shares or any transaction(s) or matter(s) addressed in the written advice.  The taxpayer should seek advice based upon the taxpayer’s particular circumstances from an independent tax adviser.

10.4.2 Bermuda Taxation

10.4.2Bermuda Taxation
In the opinion of Appleby, the following discussion correctly describes the material tax consequences of the ownership of Common Shares under Bermuda law, subject to the assumptions, qualifications and limitations in the discussion below.  Such summary is subject to changes in Bermuda law, including changes that could have retroactive effect.

Under current Bermuda law, there are no taxes on profits, income or dividends nor is there any capital gains tax.  Furthermore, the Company has received from the Minister of Finance of Bermuda under the Exempted Undertakings Tax Protection Act of 1966, as amended, an undertaking that, in the event that Bermuda enacts any legislation imposing tax computed on profits or income, or computed on any capital asset, gain or appreciation, or any tax in the nature of estate duty or inheritance tax, then the imposition of any such tax shall not be applicable to the Company or to any of its operations, or the shares, debentures or other obligations of the Company, until March 28, 2016.31, 2035.  This undertaking does not, however, prevent the imposition of any such tax or duty on such persons as are ordinarily resident in Bermuda and holding such shares, debentures or obligations of the Company or of property taxes on Company-owned real property or leasehold interests in Bermuda.

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As an exempted company, the Company must pay to the Bermuda government an annual government fee calculated on a sliding-scale basis by reference to its assessable capital, that is, its authorized share capital plus any share premium.

There is no stamp duty or other transfer tax payable upon the transfer of shares in the Company by shareholders.

The United States does not have a comprehensive income tax treaty with Bermuda.

10.5 Documents on Display

10.5Documents on Display
We are required to comply with the reporting requirements of the Exchange Act, applicable to a foreign private issuer.  We are currently required to file annually a Form 20-F no later than four months after the close of our fiscal year, which is December 31.  Any time the Company is delinquent in filing timely any periodic reports, including an Annual Report on Form 20‑20-F, with the SEC, that delinquency may adversely affect the Company’s status on any exchange or quotation service on which its shares are listed or quoted and the Company may not be entitled to use certain abbreviated registration statements with the SEC in connection with the registration of any of its securities.  We have previouslynot been delinquent in filing our annual reports.  As a result, the Company was delisted from the OTC BB and traded on the Pink Sheets.  On April 9, 2008,tradingreports in the Common Sharesany of the Company was restored to the OTC BB under the trading symbol “AWRCF”.On April 29, 2011, the Common Shares of the Company commenced trading on the NASDAQ Capital Market tier under the trading symbol “APWC”.past five years.


As a foreign private issuer, we are exempt from the rules under the Exchange Act prescribing the furnishing and content of proxy statements, and our officers, directors and principal shareholders are exempt from the reporting and short-swing profit recovery provisions contained in Section 16 of the Exchange Act.

Our reports and other information, when so filed, may be inspected and copied (at prescribed rates) at the public reference facilities maintained by the SEC at Judiciary Plaza, 100 F Street, N.E., Washington D.C. 20549.  Please call the SEC at 1-800-SEC-0330 for further information.  In addition, the SEC maintains a web site that contains information filed electronically with the SEC, which can be accessed over the Internet athttp://www.sec.gov.  We have filed all our reports electronically since November 4, 2002.  Such reports can be accessed over the Internet at http://www.sec.gov.www.sec.gov

.

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In addition, we post certain information regarding the Company and its operations on our website located at www.apwcc.com.www.apwcc.com.  Summary information regarding the Company posted on our website should not be considered to be a substitute for, or a restatement of, the more complete information regarding the Company, its results of operations and financial condition set forth in this Annual Report or other documents or information which we may file with the SEC.

Item 11: Quantitative and Qualitative Disclosures About Market Risks

Item 11:Quantitative and Qualitative Disclosures About Market Risks
The Company has exposure to several quantitative market risks, including fluctuations in interest rates, foreign currency exchange rates and the pricing of commodities, principally copper, the Company’s main raw material.  Risk management measures undertaken by the Company include entering into derivative agreements covering foreign exchange rates and copper pricing, as well as copper forward pricing agreements.  The Company does not purchase or sell derivative instruments for trading purposes.  The Company does not engage in trading activities involving copper contracts for which a lack of marketplace quotations would necessitate the use of fair value estimation techniques.

11.1 Interest Rate Risk

11.1Interest Rate Risk
The Company is not currently a party to any derivative instruments to manage interest rate exposure.  As in our lineIn the current interest rate environment, the Company does not believe that the limited potential loss limitation protection available through the purchase of business,interest rate swaps or other derivative instruments against its exposure under floating rate finance facilities merits the cost that would more commonly be employed to hedge the price of commodities, copperincurred in our case.

11.2 Foreign Currency Risk

those transactions.

11.2Foreign Currency Risk
The Company has exposure to fluctuations in currency exchange rates.  The Company’s revenues are generated primarily in the local currency or currencies in its principal operating jurisdictions; namelyregions, North Asia, Thailand, China, Singapore and Australia.the ROW, which are also its reporting segments.  However, nearly all of the costs associated with the purchase of the Company’s raw materials, including copper, and its capital expenditures, including ongoing equipment upgrade and maintenance programs, are in U.S. dollars.  In order to limit the risks that would otherwise result from changes in currency exchange rates, the Company enters into derivative financial instruments on a selective basis from time to time which are foreign exchange forward contracts that are cash flow hedges intended to hedge the currency fluctuations that impact the dollar value of sales revenues generated in the local markets of our operating subsidiaries.  The fair value of foreign currency contracts represents the amount required to enter into offsetting contracts with similar remaining maturities based upon quoted market prices.  As of December 31, 2011, the Company had outstanding forward exchange purchase contracts with notional values of $2.3 million.


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As the Company’s operating subsidiaries incur operating costs in the local currency where they operate, the Company believes it is prudent that those operating subsidiaries incur indebtedness in the local currency when debt financing is necessary.  The amount of indebtedness incurred by our operating subsidiaries from time to time is a function of our business strategy, the attractiveness of borrowing as opposed to other methods of financing operations and tax implications, among other considerations.  The Company has exposure to currency exchange risk when the results of its operating subsidiaries are translated from the local currency into the U.S. dollar.  At December 31, 20102013 and 2011,2014, the cumulative other comprehensive gain (loss) accountincome in the total equity section of the consolidated balance sheetsheets included a cumulative currency translation adjustments of $1.8$(11.2) million and $0.9$(4.3) million, respectively. This sensitivity analysis is inherently limited in that it assumes that multiple foreign currencies will always move in the same direction and to the same degree relative to the U.S. dollar.

In 2011, we entered into derivative financial instruments on a selective basis throughout the year to mitigate foreign currency fluctuation risks arising from operating activities.  The application of these instruments was primarily for currency hedging purposes and not for trading purposes.  The Company uses Thai Baht forward foreign exchange contracts to reduce its exposure to foreign currency risk for liabilities denominated in foreign currency.  A forward foreign exchange contract obligates the Company to exchange predetermined amounts of specified foreign currencies at specified exchange rates on specified dates or to make an equivalent U.S. dollar payment equal to the value of such exchange.  Realized and unrealized gains and losses on foreign exchange contracts are included in consolidated statements of operations as foreign exchange gains or losses.

11.3 Market Risks Relating to Copper

11.3Market Risks Relating to Copper
Copper is the principal raw material we use, accounting for a majority portion of the cost of sales in 2011.2014.  We purchase copper at prices based on the average prevailing international spot market prices on the LME for copper for the one month prior to purchase.  The price of copper is influenced heavily by global supply and demand as well as speculative trading.  As with other costs of production, changes in the price of copper may affect our cost of sales.  Whether this has a material impact on our operating margins and financial results depends primarily on our ability to adjust our selling prices to our customers, such that increases and decreases in the price of copper are reflected in those selling prices.  The purchase price of our products is based in part on the cost of copper used to manufacture those products.  In addition, in the ordinary course of business we maintain inventories of raw materials and finished products reasonably necessary for the conduct of our business.  These inventories typically reflect the cost of copper prevailing in the market at the time we purchase.  Most of our sales of Manufactured Products reflect copper prices prevailing at the time the products are ordered.  A long-term decrease in the price of copper would require the Company to revalue the value of its inventory at periodic intervals to the then net realizablemarket value, which could be below cost.  Copper prices have been subject to considerable volatility and it is not always possible to manage our copper purchases and inventory so as to neutralize the impact of copper price volatility.  Accordingly, significant volatility in copper prices could have an adverse effect on our operations.  No assurance can be given that such volatility will not recur.

In an effort to mitigate the market risks associated with volatility in copper pricing, from time to time the Company enters into copper purchase contracts in order to minimize fluctuations of its cost of copper.  These instruments permit the Company to hedge its cost of copper for periods from 10 months to 12 months.  These purchase contracts were entered into with the purpose of securing the source of the copper. 

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11.4Equity Price Risk
The Company entered into certain copper purchase contracts with copper suppliersis exposed to equity price risk as a result of our unlisted available-for-sale equity securities.  The carrying value of these investments in 2011.  All ofprivate companies is subject to fluctuations and their fair market value may be significantly different from the purchase contracts are still open as of the reporting date and with a latest due date of July 2012.

11.4 Fair Value of Designated Market-Sensitive Derivative Contracts

carrying value.

11.5Fair Value of Designated Market-Sensitive Derivative Contracts
(Not applicable)

Item 12: Description of Securities Other Than Equity Securities

Item 12:Description of Securities Other Than Equity Securities
(Not applicable)


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Part II

Item 13: Defaults, Dividend Arrearages and Delinquencies

Item 13:Defaults, Dividend Arrearages and Delinquencies
The Company has not experienced noany material default in the payment of principal, interest, a sinking or purchase fund installment, or incurred any other material default, not cured within 30 days relating to the Company’s or any of its consolidated subsidiaries’ indebtedness.

Item 14: Material Modifications to the Rights of Security Holders and Use of Proceeds

Item 14:Material Modifications to the Rights of Security Holders and Use of Proceeds
(Not applicable)

Item 15: Controls and Procedures

Item 15:Controls and Procedures
Disclosure Controls and Procedures

An evaluation was carried out under the supervision and with the participation of our management, including theour Chief Executive Officer (“CEO”) and our Chief Financial Officer (“CFO”), of the effectiveness of our disclosure controls and procedures in accordance with the provisions of Rule 13a-15 promulgated under the Securities Exchange Act of 1934, as amended.Basedamended (the “Exchange Act”).  Based upon that evaluation and for the reasons stated in the management’s report on internal control over financial reporting below, our management concluded that our existing disclosure controls and procedures were ineffective as of December 31, 2011.2014.

Management’s report on Internal Control over Financial Reporting


Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as defined under Rule 13a-15(f) under the Securities Exchange Act of 1934.

Act.  


Based on the Company’s evaluation under the applicable framework set forth in Internal Control — Integrated Framework issued in 1992 by COSO,the Committee of Sponsoring Organizations (“COSO”) of the Treadway Commission, our management, including our CEO and CFO, concluded that a material weakness in the Company’s internal controls over financial reporting was identified.

In connection with the audit of our consolidated financial statements as of and for the year ended December 31, 2011, our independent registered public accounting firm also determined the existence of a material weakness. A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of the registrant’s annual or interim financial statements will not be prevented or detected on a timely basis by the company’s internal controls.

 Deficiencies

Design deficiencies were noted in our controls over complexthe accounting and non-routinereporting of derivative transactions. At one of our subsidiaries, derivative transactions were not identified and properly accounted for due to the lack of experience and knowledge of our accounting personnel at the subsidiary in relevant financial accounting and reporting requirements for financial instruments. In addition, inadequate guidelines on communications and on internal control monitoring of certain types of transactions in our decentralized reporting structure resulted in certain derivative transactions not being reported to the senior management at headquarters for required approvals.

Design deficiencies were also noted in our controls over the financial statement closing process includingdue to the accountingrecurring lack of revenue recognition under bill-and-hold arrangements and consignment arrangement whereby the revenue was inappropriately recognized; the calculation and recordingoversight by senior qualified personnel possessing satisfactory knowledge of income tax, deferred tax assets (and the related valuation allowance), inventory and related impairment accounts, and the misclassification of a number of intercompany balances. These deficiencies were attributable to our decentralizedSEC financial reporting structure, our complex and manual consolidation process and inadequate reviews over account balances at the reporting date. requirements.
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The aggregate effect of these deficiencies represented a material weakness. Based on this assessment, the Company’s management, including its CEO and CFO, concluded that the Company’s internal control over financial reporting was ineffective as of December 31, 2011.

Management is in the process of implementing2014.


Senior management commenced to implement remedial measures to address this material weakness in 2012,2015, including:

1) engaging qualified accounting professionals with in-depth experience in U.S. GAAP and SEC reporting requirements as well as local GAAP at subsidiary level to ensure local financial information on the reporting package is compliant with US GAAP;

2) improving communications between local subsidiaries’ finance team and local external auditors on existing and new U.S. GAAP issues before submitting U.S. GAAP package to headquarters; and

1)  arranging regular constructive training sessions on an ongoing basis for the accounting personnel at our subsidiaries with an emphasis on the identification of and accounting for financial derivative instruments;

3) arranging regular constructive training sessions on an ongoing basis for the accounting personnel of headquarters’ finance team that cover a broad range of accounting and financial reporting topics and tightening the operation of internal controls in the financial statement closing process to ensure account balances are timely and adequately reviewed.

2)  having the accounting personnel at headquarters attend the training with regard to the SEC reporting requirements on a regular basis, and assign individuals including qualified personnel designated to provide  a financial reporting oversight role, and designating personnel at headquarters, with satisfactory knowledge of accounting and financial reporting, to actively participate in the supervision and review of SEC reporting;


3)  strengthening the application of internal controls in the financial transaction approval process by implementing procedures to ensure that material financial transactions are reviewed and approved in advance by the senior management at headquarters; and

4)  coordinating the internal audit department’s audit effort to focus on financial transactions review.

Changes in internal controlInternal Control over Financial Reporting
As required by Rule 13a-15(d), under the Exchange Act, our management, including our chief executive officer, president and our chief financial reporting

Except for the remedial measures described above, there were no changes inofficer, also has conducted an evaluation of our internal control over financial reporting identified in connection with the evaluation of such internal control thatto determine whether any changes occurred during the last fiscal year, thatperiod covered by this report, which changes could reasonably be expected to have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Item 16A. Audit Committee Financial Expert

Based on that evaluation, it has been determined that there have been no such changes during the period covered by this annual report.

Item 16A.Audit Committee Financial Expert
During 2010 and until April 29, 2011, the Common Shares of the Company were traded on the over-the-counter bulletin board (“OTCBB”).  As of April 29, 2011, the Common Shares of the Company tradebegan trading on NASDAQ Capital market tier.NASDAQ.  While the Company’s Common Shares were traded on the OTCBB, the Company was not required to have an audit committee that met the requirements of, nor was it required to have an audit committee financial expert as contemplated by, Regulation 10A-3 under the Exchange Act.  During those periods of time when the Company did not have any independent directors, our full Board of Directors fulfilled the functions of an audit committee pursuant to Section 3(a)(58)(B) of the Exchange Act.  On September 28, 2007,For all of 2013 and 2014, our Board appointedaudit committee has consisted of our three independent directors, Mr. Anson Chan, and Dr. Yichin Lee as independent directors to fill the two casual vacancies on the Board, and on March 17, 2011, a third independent Director – Dr. Lambert L. Ding, was appointed, to constitute the members of the Audit Committee, with Mr. Chan serving as the Audit Committee’s chairman and financial expert.  The Audit Committee of the Company’s Board of Directors now meets the requirements set forth in Regulation 10A-3 under the Exchange Act and under the rules of NASDAQ.

Item 16B. Code of Ethics

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Item 16B.Code of Ethics
On April 26, 2005, the Company adopted a code of ethics applicable to its Chief Executive Officer and senior financial officers.  A copy of the Company’s code of ethics for senior executives is on file with the SEC.

Item 16C. Principal Accountant Fees and Services

Item 16C.Principal Accountant Fees and Services
Audit Fees

The aggregate fees billed for fiscal years 20112014 and 20102013 for professional services rendered by the principal accountant for the audit of the Company’s annual financial statements totaled $0.9$0.8 million and $0.9 million, respectively.

Audit-Related Fees

No fees were billed for fiscal year 2011 or 2010 for assurance and audit-related services by the principal accountant other than as included in the figures provided in the preceding paragraph.

Tax Fees

The aggregate fees billed for fiscal years 20112014 and 20102013 for professional services rendered by the principal accountant for tax compliance, tax advice and tax planning totaled approximately $34,000$95 thousand and $121,000$131 thousand, respectively.


All Other Fees

There were no other fees billed for fiscal year 2011 or 2010 for products and services provided by the principal accountant, or other than those services described in the preceding paragraphs of this Item 16C.

(None)
Audit Committee Approval

The engagement of the accountant to render audit, audit-related and non-audit services is entered into pursuant to pre-approval policies and procedures established in the Charter of the Audit Committee of the Company.  Each of the services described in this Item 16C was approved by the Audit Committee.

Item 16D. Exemptions from the Listing Standards for the Audit Committees

Item 16D.Exemptions from the Listing Standards for the Audit Committees
The Audit Committee of the Company’s Board of Directors consists of three directors, each of whom is independent, as such term is defined in Regulation 10A-3 promulgated under the Exchange Act, and one of whom is a financial expert.

Item 16E. 

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Item 16E.Purchases of Equity Securities by the Issuer and Affiliated Purchasers
During 2014, neither the Company nor an “affiliated purchaser” engaged in any purchase of Equity Securities by the Issuer and Affiliated Purchasers

During 2011, there were no purchases of equityCommon Shares or any other securities made by or on behalf of the Company or any “affiliated purchaser” for the purposes of this Item 16E.

Item 16F. Change in Registrant’s Certifying Accountant

Company.

Item 16F.Change in Registrant’s Certifying Accountant
(Not applicable)

Item 16G.    Corporate Governance

Item 16G.Corporate Governance
The Common Shares of the Company are traded on the NASDAQ CapitalGlobal Markets tier.  However, as the Company has a more than fifty percent (50%) shareholder, the Company is entitled to rely upon a “controlled company exemption” that exempts it from having a board of directors comprised of a majority of independent directors.  At present, a majority of the board of directors of the Company is affiliated with PEWC.  The Company also relies on the NASDAQ’s allowance for Foreign Private Issuersforeign private issuers to follow home country practices in lieu of the requirement that listed companies have regularly scheduled meetings at which only independent directors are present (“executive sessions”).  The independent directors of the Company meet periodically in executive session in their capacity as members of the Audit Committee of the Board of Directors of the Company without other Directors present, but on occasion meet with the independent auditors of the Company present in such executive session.session, and on occasion meet with members of management present in order to understand more fully management’s analysis of the Company’s financial performance and compliance with relevant corporate governance requirements.  These are the only material differences between the Company’s corporate governance practices and the corporate governance practices set forth for domestic companies under the NASDAQ rules on the subject matter.

Item 16H.    Mine Safety Disclosure

       (Not

Item 16H.Mine Safety Disclosure
(Not applicable)


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Part III

Item 17: Financial Statements

Item 17:Financial Statements
The Company has elected to provide the financial statements and related information specified in  Item 18 in lieu of Item 17.

Item 18: Financial Statements

Item 18:Financial Statements
See pages F-1 – F-50. 

Item 19: Exhibits

F-91.

19.1 

Item 19:

Exhibits

19.1Index to Audited Financial Statements

Reports of independent registered accounting firms

Consolidated income statements for the years ended December 31, 2014 and 2013

Consolidated statements of comprehensive income for the years ended December 31, 2014 and 2013
Consolidated balance sheets as of December 31, 20102014, December 31, 2013 and 2011

December 31, 2012

Consolidated  statements of operations for the years ended December 31, 2009, 2010 and 2011

Consolidated statements of shareholders’shareholder´s equity for the years ended December 31, 2009, 20102014 and 2011

2013

Consolidated statements of cash flows for the years ended December 31, 2009, 20102014 and 2011

2013

Notes to consolidated financial statements

19.2

19.2

Index to Exhibits

3.1 

1.1

Memorandum of Association of Asia Pacific Wire & Cable Corporation Limited (incorporated by reference to Exhibit 1.1 of the Company’s annual report on Form 20-F filed with the Securities and Exchange Commission on June 21, 2001).

3.2 

1.2

Third Amended and Restated Bye-Laws of Asia Pacific Wire & Cable Corporation Limited (filed herein)(incorporated by reference to Exhibit 3.2 of the Company’s annual report on Form 20-F filed with the Securities and Exchange Commission on April 30, 2012).

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4.1

Amended and Restated Shareholders’ Agreement dated March 27, 2009 (incorporated by reference to Exhibit 3.4 of the Company’s Post-Effective Amendment No. 1 to Form F-1 filed with the Securities and Exchange Commission on April 2, 2009).

4.2

Shareholders’ Agreement Joinder dated as of July 1, 2011(2011(incorporated by reference to Exhibit 3.5 of the Company’s Post-Effective Amendment No. 8 to Form F-1 on Form F-3 filed with the Securities and Exchange Commission on August 31, 2011).

4.3

Agreement for the Sale and Purchase of (i) Shares in Crown Century Holdings Limited and (ii) Shareholder’s Loan (incorporated by reference to Exhibit 5.1 of the Company’s annual report on Form 20-F filed with the Securities and Exchange Commission on July 1, 2002).

4.4

Settlement Agreement between Asia Pacific Wire & Cable Corporation, Ltd. and Sino-JP Fund Co., Ltd. (incorporated by reference to Exhibit 4.5 of the Company’s annual report on Form 20-F filed with the Securities and Exchange Commission on November 9, 2007).

10.1

Composite Services Agreement (incorporated by reference to Exhibit 10.1 of the Company’s Form F-1 filed with the Securities and Exchange Commission on November 13, 1996).

10.2

4.4

SummariesAmended and Restated summaries of Joint Venture Agreements (incorporated by reference to Exhibit 10.74.6 of the Company’s Amendment No. 1 toannual report on Form F-120-F filed with the Securities and Exchange Commission on November 26, 2008)April 30, 2013).

10.3

4.5

Loan Facility Agreement between Crown Century Holdings Limited and Bangkok Bank Public Company Limited dated March 17, 2011(incorporated (incorporated by reference to Exhibit 10.8 of the Company’s Post-Effective Amendment No. 8 to Form F-1 on Form F-3 filed with the Securities and Exchange Commission on August 31, 2011).

14

4.6

Rule 10b5-1 Issuer Purchase Plan (incorporated by reference to the Company’s report on Form 6-K filed with the Securities and Exchange Commission on April 25, 2013).

8List of significant subsidiaries (see Note 1 to the consolidated financial statements).
11Code of Ethics(incorporatedEthics (incorporated by reference to Exhibit 11 of the Company’s annual report on Form 20-F filed with the Securities and Exchange Commission on November 9, 2007).

15(a)

12.1

Amended and Restated Audit Committee Charter(incorporated by reference to Exhibit 16.G of the Form 20-F filed on May 13, 2011.

21

List of significant subsidiaries (see Note 1 to the consolidated financial statements).

31.1

Certification of Chief Executive Officer of the Company, pursuant to Section 302 of the Sarbanes-Oxley Act.

31.2

12.2

Certification of Chief Financial Officer of the Company, pursuant to Section 302 of the Sarbanes-Oxley Act.

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32.1

13.1

Certification by Chief Executive Officer of periodic financial report pursuant to 18 U.S.C. Section 1350, as mandated by Section 906 of the Sarbanes-Oxley Act.

32.2

13.2

Certification by Chief Financial Officer of periodic financial report pursuant to 18 U.S.C. Section 1350, as mandated by Section 906 of the Sarbanes-Oxley Act.

101

15(a)

Interactive Data Files submitted pursuantAmended and Restated Audit Committee Charter (incorporated by reference to Rule 405 under Regulation S-T.

Exhibit 16.G of the Company’s Annual Report on Form 20-F filed with the Securities and Exchange Commission on May 13, 2011).

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SIGNATURE

Pursuant to the requirements of Section 12 of the Securities Exchange Act of 1934, the registrant certifies that it meets all of the requirements for filing on Form 20-F and has duly caused this Annual Report to be signed on its behalf by the undersigned, thereunto duly authorized.

ASIA PACIFIC WIRE & CABLE
CORPORATION LIMITED

Date: April 30, 2012

2015

/s/ Yuan Chun Tang

Yuan Chun Tang

Chief Executive Officer


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Audited Financial Statements

Asia Pacific Wire & Cable Corporation Limited

As of December 31, 2010 and 2011

Years ended December 31, 2009, 2010 and 2011


 


Audited Consolidated Financial Statements


As of December 31, 2014 and 2013
Years ended December 31, 2014, 2013 and 2012
INDEX TO FINANCIAL STATEMENTS


CONTENTS

Page

Report of independent registered public accounting firms

firm

F-2

2

Consolidated balance sheets as of December 31, 2010 and 2011

income statements

F-3

3

Consolidated statements of operations for the years endedDecember 31, 2009, 2010 and 2011

comprehensive income

F-5

4

Consolidated balance sheets

5
Consolidated statements of shareholders’changes in equity for the years endedDecember 31, 2009, 2010 and 2011

F-7

7

Consolidated statements of cash flows for the years endedDecember 31, 2009, 2010 and 2011

F-8

8

Notes to the consolidated financial statements

F-9

9


1.  Principal activities and corporate information

2.  Basis of preparation

2.1  Basis of preparation
2.2  Basis of consolidation
3.  Summary of significant accounting policies
4.  Standards issued but not yet effective
5.  Segment information
6.  Material partly-owned subsidiaries
7.  Other income/expenses and adjustments
7.1  Other operating income
7.2  Other operating expenses
7.3  Finance costs
7.4  Finance income
7.5  Other income
7.6  Other expense
7.7  Depreciation, amortization and lease expense included in the consolidated income statements
7.8  Employee benefits expense
8.  Income tax
9.  Earnings per share
10.  Cash and cash equivalents
11.  Other financial assets and financial liabilities
11.1  Other financial assets
11.2  Interest-bearing loans and borrowings
11.3  Hedging activities and derivatives
11.4  Fair values
12.  Trade and other receivables
13.  Inventories
14.  Gross amounts due from customers for contract work-in-progress
15.  Property, plant and equipment
16.  Prepaid land lease payments
17.  Investment properties
18.  Intangible assets
19.  Investment in associates
20.  Trade and other payables
21.  Employee benefit
22.  Equity
23.  Related party transactions
24.  Commitments and contingencies
25.  Fair value measurement
26.  Financial risk management objectives
27.  Subsequent event
28.  Approval of the financial statements
F-1
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM


The Board of Directors and Shareholders of Asia Pacific Wire & Cable Corporation Limited:

We have audited the accompanying consolidated balance sheets of Asia Pacific Wire & Cable Corporation Limited (the “Company”) and subsidiaries as of December 31, 20112014 and 2010,2013, and the related consolidated income statements, statements of operations, shareholders’comprehensive income, changes in equity, and cash flows for each of the three years in the period ended December 31, 2011.2014. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits. 

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. We were not engaged to perform an audit of the Company’s internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and 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 Asia Pacific Wire & Cable Corporation Limited and subsidiaries at December 31, 20112014 and 2010,2013, and the consolidated results of theirits operations and theirits cash flows for each of the three years in the period ended December 31, 2011,2014, in conformity with U.S. generally accepted accounting principles.

International Financial Reporting Standards as issued by the International Accounting Standards Board.

/s/ Ernst & Young

Hong Kong SAR

Taipei, Taiwan
April 30, 2012

2015
 

F-2

ASIA PACIFIC WIRE & CABLE CORPORATION LIMITED AND SUBSIDIARIES


CONSOLIDATED BALANCE SHEETS

(In thousands of US Dollars, except share data)

INCOME STATEMENTS

 

As of December 31

 

2010

2011

 

 

 

ASSETS

 

 

 

 

 

Current assets:

 

 

Cash and cash equivalents

$ 63,217

$ 76,672

Unrestricted short-term bank deposits (note 5)

−

2,529

Restricted short-term bank deposits (note 5)

17,422

12,024

Accounts receivable, net of allowance for doubtful accounts of $6,886 and $4,614 at December 31, 2010 and 2011, respectively (note 10)

144,454

98,329

Amounts due from related parties (note 17)

8,246

5,227

Inventories (note 10)

 

 

Distributed products

639

2,243

Finished products

32,781

35,786

Consignment inventory

3,051

−

Work-in-progress

19,108

16,434

Raw materials and supplies

30,401

24,552

 

85,980

79,015

 

 

 

Deferred tax assets (note 11)

3,320

5,185

Prepaid expenses

5,514

7,157

Other current assets

1,308

2,559

Total current assets

329,461

288,697

 

 

 

Property, plant and equipment:

 

 

Land

6,291

5,964

Land use rights

2,999

2,900

Buildings

50,199

49,749

Machinery and equipment

126,906

118,984

Motor vehicles

4,431

4,203

Office equipment

6,915

6,675

Construction in progress

212

2,547

 

197,953

191,022

Accumulated depreciation and amortization

(154,052)

(148,108)

 

43,901

42,914

 

 

 

Investments (note 7)

744

618

Investments in equity investees (note 21)

3,242

4,435

Goodwill (note 6)

8,801

−

Other assets

97

108

Deferred tax assets (note 11)

677

517

 

13,561

5,678

 

 

 

 

 

 

Total assets

$ 386,923

$ 337,289

For the years ended December 31, 2014, 2013 and 2012

     2014  2013  2012 
  Note  US$’000  US$’000  US$’000 
             
Sales of goods / services 3.14   451,327   460,676   462,265 
                
Cost of sales 7,13   (414,583)  (408,860)  (411,786)
                
Gross profit     36,744   51,816   50,479 
                
Other operating income 7   89   181   5,825 
Selling, general and administrative expenses 7   (29,479)  (34,559)  (34,593)
Other operating expenses 7   (2,168)  (196)  (888)
                
Operating profit     5,186   17,242   20,823 
                
Finance costs 7   (1,697)  (1,734)  (2,195)
Finance income 7   1,167   1,306   1,322 
Share of loss of associates 19   (338)  (211)  (21)
Gain on disposal of investment – held for sale     -   232   - 
Loss on disposal of a subsidiary     (178)  -   - 
Gain on liquidation of subsidiaries     -   -   279 
Exchange gain (loss)     (206)  (1,245)  2,411 
Other income 7   1,150   1,454   1,933 
Other expense 7   (49)  (260)  - 
                
Profit before tax     5,035   16,784   24,552 
                
Income tax expense 8   (2,274)  (5,518)  (7,578)
                
Profit for the year     2,761   11,266   16,974 
                
Attributable to:               
Equity holders of the parent     572   5,847   9,694 
Non-controlling interests     2,189   5,419   7,280 
      2,761   11,266   16,974 
Earnings per share            
 
} Basic and diluted profit for the year attributable to equity holders of the parent
 9  $0.04  $0.42  $0.70 


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


F-3
ASIA PACIFIC WIRE & CABLE CORPORATION LIMITED AND SUBSIDIARIES


CONSOLIDATED BALANCE SHEETS (continued)

(In thousands of US Dollars, except share data)

STATEMENTS OF COMPREHENSIVE INCOME

 

December 31,

 

2010

2011

 

 

 

LIABILITIES AND SHAREHOLDERS’ EQUITY

 

 

 

 

 

Current liabilities:

 

 

Bank loans and overdrafts (note 8)

$ 67,351

$ 52,813

Accounts payable

41,989

22,148

Accrued expenses

13,197

10,737

Amounts due to related parties (note 17)

17,140

14,693

Short-term loans from the immediate holding company (note 17)

1,732

1,732

Income tax liabilities (note 11)

10,627

9,835

Other current liabilities

6,772

5,783

Total current liabilities

158,808 

117,741 

Non-current liabilities:

 

 

 

 

 

Other non-current liabilities

822 

3,678 

Deferred tax liabilities (note 11) 

1,581

1,181

Total non-current liabilities

2,403

4,859

Total liabilities

161,211

122,600

 

 

 

Commitments and contingencies (notes 13)  

 

 

 

 

 

APWC shareholders’ equity:

 

 

Common stock, $0.01 par value:

 

 

Authorized shares of 50,000,000 shares at December 31, 2010 and 2011

 

 

Issued and outstanding shares – 13,830,769 shares (note 9)

138

138

Additional paid-in capital

111,541

111,541

Retained earnings

40,229

34,545

Accumulated other comprehensive income

1,286

286

Total APWC shareholders’ equity

153,194

146,510

Non-controlling interests

72,518

68,179

Total shareholders’ equity

225,712

214,689

Total liabilities and shareholders’ equity

$ 386,923

$ 337,289


For the years ended December 31, 2014, 2013 and 2012
     2014  2013  2012 
  Note  US$’000  US$’000  US$’000 
             
Profit for the year     2,761   11,266   16,974 
Other comprehensive income               
Other comprehensive income to be reclassified to profit or loss in subsequent periods:               
                
Exchange differences on translation of foreign operations, net of tax of $0 22   (4,521)  (15,418)  6,113 
                
Net gain (loss) on available-for-sale financial assets     (713)  (1,338)  572 
Income tax effect 8   214   402   (172)
                
  22   (499)  (936)  400 
                
                
                
Other comprehensive income not to be reclassified to profit or loss in subsequent periods:               
                
Re-measuring losses on defined benefit plans 21   (712)  (51)  (153)
Income tax effect 8   213   15   46 
                
Defined benefit pension plan, net of tax 22   (499)  (36)  (107)
                
Other comprehensive (loss) income for the year, net of tax     (5,519)  (16,390)  6,406 
                
Total comprehensive (loss) income for the year, net of tax     (2,758)  (5,124)  23,380 
                
Attributable to:               
Equity holders of the parent     (4,216)  (5,822)  14,938 
Non-controlling interests     1,458   698   8,442 
                
      (2,758)  (5,124)  23,380 

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


 

F-4

ASIA PACIFIC WIRE & CABLE CORPORATION LIMITED AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands of US Dollars, except share data)

 

Year ended December 31,

 

2009

2010

2011

 

 

 

 

Net sales

 

 

 

Manufactured products (including sales to related parties amounting to $4,144, $3,806 and $3,663 for the years ended December 31, 2009, 2010 and 2011, respectively (note 17))

$ 264,128

$ 396,059

$ 429,474

Distributed products

28,102

26,935

25,500

Supply, delivery and installation of wires and cables

34,008

23,600

16,972

 

326,238

446,594

471,946

Costs of sales

 

 

 

Manufactured products(including purchases from related parties amounting to $36,327, $45,925 and $46,953 for the years ended December 31,2009, 2010 and 2011, respectively (note 17))

(249,840)

(342,630)

(386,598)

Distributed products (including purchases from related parties amounting to $23,458, $4,056 and $7,484 for the years ended December 31, 2009, 2010 and 2011, respectively (note 17))

(26,585)

(25,557)

(22,545)

Supply, delivery and installation of wires and cables

(33,119)

(23,358)

(16,915)

Inventory impairment

23,949

1,974

(1,993)

 

(285,595)

(389,571)

(428,051)

Gross profit

40,643

57,023

43,895

 

 

 

 

Selling, general and administrative expenses

(24,259)

(28,965)

(30,760)

Recovery for doubtful accounts

108

940

1,487

Impairment of long-lived assets

(77)

−

−

Impairment of investments

−

(346)

−

Impairment of goodwill (note 6)

−

−

(8,791)

Charges related to flooding (note 14)

−

−

(3,947)

Income from operations

16,415

28,652

1,884

 

 

 

 

Exchange gain (loss), net

507

3,041

(1,346)

Interest income

458

492

1,409

Interest expenses

(1,597)

(1,364)

(2,217)

Share of net loss of equity investees

(40)

(21)

(58)

Gain on liquidation of subsidiaries

568

−

−

Loss on disposal of available-for-sale securities (note 7)

−

−

(68)

Other income, net

2,111

1,032

1,032

Income from continuing operations before income taxes

18,422

31,832

636

Income taxes (note 11)

(4,647)

(6,441)

(4,566)

Net income (loss) from continuing operations

13,775

25,391

(3,930)

Discontinued operations (note 19)

 

 

 

 

 

 

 

Income from operations of discontinued SPFO (including gain on disposal of $1,962 for the year ended December 31, 2011, purchases from related parties amounting to $nil, $4 and $317, and sales to related parties amounting to $nil, $54 and $693 for the years ended December 31, 2009, 2010 and 2011, respectively (note 17))

 

1,150

 

446

 

1,075

Income taxes

(697)

(450)

(229)

(Loss) Income from discontinued operations

453

(4)

846

Net income (loss)

14,228

25,387

(3,084)

 

Net income attributable to non-controlling interests

4,139

11,247

2,355

Income (loss) attributable to APWC

$ 10,089

$ 14,140

$ (5,439)

BALANCE SHEETS

     As of December 31,
     2014  2013 
  Note  US$’000  US$’000 
Assets         
Current assets         
Cash and cash equivalents 10   68,863   62,509 
Trade receivables 12   88,194   122,893 
Other receivables 12   23,024   11,139 
Due from related parties 23   24,711   3,842 
Inventories 13   107,408   95,945 
Gross amounts due from customers for contract work-in-progress 14   1,931   2,249 
Prepayments     1,279   1,559 
Other current assets     2,582   2,113 
            
      317,992   302,249 
Non-current assets           
Other non-current financial assets – available for sale 11,25   2,479   3,189 
Other non-current financial assets – held to maturity 11   336   335 
Property, plant and equipment 15   47,929   48,709 
Prepaid land lease payments 16   1,859   1,939 
Investment properties 17,25   757   746 
Intangible assets 18   110   104 
Investments in associates 19   2,571   2,937 
Other non-current assets     88   449 
Deferred tax assets 8   4,551   3,978 
            
      60,680   62,386 
            
Total assets     378,672   364,635 
 

F-5

ASIA PACIFIC WIRE & CABLE CORPORATION LIMITED AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS (continued)

(In thousands of US Dollars, except share data)

BALANCE SHEETS
 

 

 

 

 

 

Year ended December 31,

 

2009

2010

2011

 

 

 

 

Basic and diluted earnings (loss) per share from continuing operations

$ 0.71

$ 1.02

$ (0.49)

Basic and diluted earnings (loss) per share from discontinued operations

0.02

(0.00)

0.10

Basic and diluted earnings (loss) per share

$ 0.73

$ 1.02

$ (0.39)

 

 

 

 

Basic and diluted weighted average common shares outstanding

13,830,769

13,830,769

13,830,769

     As of December 31,
     2014  2013 
  Note  US$’000  US$’000 
Current liabilities           
Interest-bearing loans and borrowings 11   53,863   41,789 
Trade and other payables 20   36,467   41,369 
Due to related parties 23   22,208   11,126 
Due to immediate holding company 23   1,537   1,732 
Accruals     12,060   13,336 
Current tax liabilities 8   7,752   9,874 
Employee benefit liability 21   665   419 
Financial lease liabilities 24   31   37 
Provisions for employee benefit 21   413   353 
Onerous contracts provisions 3.14   41   125 
Dividend payable     428   348 
Other current liabilities     12,994   7,617 
            
      148,459   128,125 
            
Non-current liabilities           
Employee benefit liability 21   6,073   5,455 
Financial lease liabilities 24   38   28 
Provisions for employee benefit 21   171   224 
Deferred tax liabilities 8   2,720   2,676 
      9,002   8,383 
Total liabilities     157,461   136,508 
            
Equity 22         
Issued capital     138   138 
Additional paid-in capital     110,608   110,608 
Treasury shares     (38)  (38)
Retained earnings     52,338   51,766 
Other components of equity     (10,014)  (5,226)
            
Equity attributable to equity holders of the parent     153,032   157,248 
Non-controlling interests 6   68,179   70,879 
            
Total equity     221,211   228,127 
            
Total liabilities and equity     378,672   364,635 


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


F-6
ASIA PACIFIC WIRE & CABLE CORPORATION LIMITED AND SUBSIDIARIES


CONSOLIDATED STATEMENTS OF SHAREHOLDERS’CHANGES IN EQUITY

(In thousands of US Dollars, except share data)


 

Common

Stock

Additional

paid-in capital

 

Retained

earnings

Accumulated other

comprehensive

(loss) income

Total

APWC shareholders’ equity

Non-controlling

interests

Total

Shareholders’

equity

 

 

 

 

 

 

 

 

Balance at January 1, 2009

$ 138

$ 111,541

$ 15,819

$ (13,369)

$ 114,129

$ 48,578

$ 162,707

Comprehensive income

 

 

 

 

 

 

 

Net income

–

–

10,089

−

10,089

4,139

14,228

Currency translation adjustment

–

–

–

3,177

3,177

2,483

5,660

Pension liability adjustments (note 18)

–

–

–

(4)

(4)

–

(4)

Unrealized loss on sale of available-for- sale securities – net of income tax expense of $18

–

–

–

1

1

–

1

Comprehensive income

 

 

 

 

13,263

6,622

19,885

 

 

 

 

 

 

 

 

Balance at December 31, 2009

138

111,541

25,908

(10,195)

127,392

55,200

182,592

Comprehensive income

 

 

 

 

 

 

 

Net income

–

–

14,140

−

14,140

11,247

25,387

Currency translation adjustment

 

–

 

–

 

–

 

12,027

 

12,027

 

6,064

 

18,091

Pension liability adjustments (note 18)

 

–

–

 

–

(472)

(472)

–

(472)

Increase in shareholding in a subsidiary

–

–

181

−

181

(181)

–

Transfer to impairment of investment – unrealized loss on sale of available-for-sales securities, net of income tax of $84

–

–

–

(74)

(74)

188

114

Comprehensive income

 

 

25,802

17,318

43,120

 

 

 

 

 

 

 

 

Balance at December 31, 2010

138

111,541

40,229

1,286

153,194

72,518

225,712

Comprehensive loss

 

 

 

 

 

 

 

Net loss

–

–

(5,439)

−

(5,439)  

2,355

(3,084)

Currency translation adjustment

 

–

 

–

 

–

 

(931)

 

(931)

 

(2,795)

 

(3,726)

Pension liability adjustments(note 18)

–

–

–

(69)

(69)

–

(69)

Unrealized loss of available-for-sale securities

 

 

 

(68)

(68)

–

(68)

Reclassification of unrealized loss of available-for-sale securities upon disposal

 

 

 

68

68

–

68

Increase in shareholding in a subsidiary

–

–

(245)

−

(245)

245

–

Dividend paid to non-controlling shareholders of subsidiaries

 

 

 

−

−

(3,195)

(3,195)

Disposal of a subsidiary

 

 

 

−

−

(949)

(949)

Comprehensive loss

 

 

(6,684)

(4,339)

(11,023)

 

 

 

 

 

 

 

Balance at December 31, 2011

$ 138

$ 111,541

$ 34,545

$ 286

$ 146,510

$ 68,179

$ 214,689

        
For the years ended December 31, 2014, 2013 and 2012


  Attributable to the equity holders of the parent       
  Issued capital  Additional paid-in capital  Treasury shares  Retained earnings  Actuarial losses on defined benefit plans  Available-for-sale reserve  Foreign currency translation reserve  Total  
Non-controlling
interests
  
Total
equity
 
  US$’000  US$’000  US$’000  US$’000  US$’000  US$’000  US$’000  US$’000  US$’000  US$’000 
                               
Balance at January 1, 2012  138   111,541   -   36,166   -   1,199   -   149,044   68,686   217,730 
Purchase of treasury shares  -   -   (6)  -   -   -   -   (6)  -   (6)
Net income  -   -   -   9,694   -   -   -   9,694   7,280   16,974 
Other comprehensive (loss) income  -   -   -   -   (54)  203   5,095   5,244   1,162   6,406 
Increase in shareholding in a subsidiary (Note 22)  -   (933)  -   59   -   -   -   (874)  (3)  (877)
Dividend paid to non-controlling shareholders of subsidiaries  -   -   -   -   -   -   -   -   (3,067)  (3,067)
Balance at December 31, 2012  138   110,608   (6)  45,919   (54)  1,402   5,095   163,102   74,058   237,160 
Purchase of treasury shares  -   -   (32)  -   -   -   -   (32)  -   (32)
Net income  -   -   -   5,847   -   -   -   5,847   5,419   11,266 
Other comprehensive loss  -   -   -   -   (19)  (476)  (11,174)  (11,669)  (4,721)  (16,390)
Dividend paid to non-controlling shareholders of subsidiaries  -   -   -   -   -   -   -   -   (3,877)  (3,877)
Balance at December 31, 2013  138   110,608   (38)  51,766   (73)  926   (6,079)  157,248   70,879   228,127 
Net income  -   -   -   572   -   -   -   572   2,189   2,761 
Other comprehensive loss  -   -   -   -   (254)  (254)  (4,280)  (4,788)  (731)  (5,519)
Dividend paid to non-controlling shareholders of subsidiaries  -   -   -   -   -   -   -   -   (4,158)  (4,158)
Balance at December 31, 2014  138   110,608   (38)  52,338   (327)  672   (10,359)  153,032   68,179   221,211 

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

 

F-7

ASIA PACIFIC WIRE & CABLE CORPORATION LIMITED AND SUBSIDIARIES


CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands of US Dollars, except share data)


For the years ended December 31, 2014, 2013 and 2012
 

 

Year ended December 31,

 

2009

2010

2011

Operating activities:

 

 

 

Net income (loss)

$ 14,228

$ 25,387

$ (3,084)

Adjustments to reconcile net income (loss) to net

 

 

 

cash provided (used in) by operating activities: 

 

 

 

Loss (gain) on disposal of property, plant and equipment

6

(93)

(158)

Loss on disposal of available-for-sale securities

–

–

68

Depreciation

8,941

6,857

6,462

Deferred income taxes

1,196

(213)

(2,273)

Recovery for doubtful accounts

(860)

(1,317)

(1,555)

Inventory impairment

(23,949)

(1,974)

1,993

Share of net loss of equity investees

40

21

58

Impairment of long-lived assets

77

–

–

Impairment of investments

–

346

–

Impairment of goodwill

–

–

8,791

Gain on liquidation of subsidiaries

(568)

–

–

Gain on disposal of a subsidiary

–

–

(1,962)

Pension liability adjustments

(4)

14

1

Unrealized foreign exchange difference, net

623

(284)

974

Changes in operating assets and liabilities

 

 

 

Accounts receivable

(552)

(31,779)

34,052

Inventories

30,069

(8,595)

(5,539)

Other current assets

2,470

(1,510)

(7,508)

Amounts due to related parties

(7,303)

(4,026)

580

Other long term assets

740

1,165

(343)

Accounts payable, accrued expenses and other liabilities

(6,747)

13,365

(7,933)

Net cash provided by (used in) operating activities

18,407

(2,636)

22,624

Investing activities:

 

 

 

Placement of unrestricted short-term bank deposits to financial

institutions

 

–

 

–

 

(2,625)

Maturity of unrestricted short-term bank deposits from financial

institutions

 

7,786

 

−

 

−

Placement of restricted short-term bank deposits to financial

institutions

 

(2,251)

 

(12,638)

 

(13,906)

Maturity of restricted short-term bank deposits from financial

institutions

 

4,656

 

9,696

 

11,326

Purchases of property, plant and equipment

(3,260)

(3,653)

(8,888)

Proceed from disposal of an available-for-sale securities

–

–

24

Proceeds from disposal of property, plant and equipment

153

147

165

Decrease in investment in equity investees

800

−

−

Net cash provided by (used in) investing activities

7,884

(6,448)

(13,904)

Financing activities:

 

 

 

Dividend paid during the year

−

−

(3,195)

Repayments of bank loans

(30,733)

(19,608)

(22,503)

Proceeds from bank loans

9,023

46,021

31,319

Net cash (used in) provided by financing activities

(21,710)

26,413

5,621

Effect of exchange rate changes on cash and cash equivalents

(557)

4,354

(886)

 

 

 

 

Net increase in cash and cash equivalents

4,024

21,683

13,455

Cash and cash equivalents at beginning of year

37,510

41,534

63,217

Cash and cash equivalents at end of year

$ 41,534

$ 63,217

$ 76,672

Supplemental disclosure of cash flow information:

Cash paid for interest

$2,918 

$ 2,056

$ 1,861

Cash paid for income taxes

1,900 

3,547

7,412

  
2014
  
2013
  
2012
 
  US$’000  US$’000  US$’000 
Operating activities:         
Profit before tax  5,035   16,784   24,552 
Adjustments to reconcile profit before tax to net            
cash provided by operating activities:            
Depreciation  6,015   5,590   5,341 
Reversal of impairment loss of investment properties  (26)  (68)  - 
Amortization of prepaid land lease payments  59   59   59 
Amortization of intangible assets  31   69   80 
Gain on disposal of property, plant and equipment  (63)  (113)  (354)
Gain on disposal of investment - held for sale  -   (232)  - 
Loss on disposal of a subsidiary  178   -   - 
Noncash other income  -   (324)  - 
Dividend income  (104)  (110)  (109)
Finance income  (1,167)  (1,306)  (1,322)
Finance costs  1,697   1,734   2,195 
Share of loss of associates  338   211   21 
Impairment (reversal of impairment) for trade receivables  2,168   196   (709)
Impairment (write-back of impairment) of inventories  2,394   (1,046)  (5,161)
Unrealized foreign exchange difference, net  405   687   26 
Gain on liquidation of subsidiaries  -   -   (279)
Changes in operating assets and liabilities            
Trade and other receivable, net  7,589   2,999   (23,473)
Inventories  (15,521)  (5,350)  (12,022)
Prepayment and other current assets  (1,788)  877   1,451 
Amounts due to/from related parties  4,305   1,696   (2,102)
Other non-current assets  363   349   497 
Trade and other payables, accruals, other current liabilities and other non-current liabilities  178   3,704   27,100 
Cash flows provided by operating activities  12,086   26,406   15,791 
Dividend received  104   110   109 
Interest received  1,249   1,334   1,305 
Interest paid  (699)  (1,420)  (1,704)
Income tax paid  (4,598)  (5,818)  (4,829)
Net cash provided by operating activities  8,142   20,612   10,672 
Investing activities:            
Purchase of available-for-sale financial assets  -   -   (2,378)
Proceeds from disposal of available-for-sale financial assets  -   2,378   - 
Purchases of held-to-maturity securities  -   -   (360)
Purchases of property, plant and equipment  (5,951)  (9,494)  (10,892)
Purchases of intangible assets  (39)  (15)  (105)
Proceeds from disposal of  held for sale assets  -   1,512   - 
Net cash outflow on disposal of subsidiaries  (327)  -   - 
Proceeds from disposal of property, plant and equipment  65   157   413 
Net cash used in investing activities  (6,252)  (5,462)  (13,322)
Financing activities:            
Dividend paid to non-controlling shareholders of subsidiaries  (4,158)  (3,877)  (3,067)
Repayments of borrowings  (14,535)  (40,818)  (6,000)
Proceeds from borrowings  26,392   25,521   9,888 
Share buy-back  -   (32)  (6)
Acquisition of non-controlling interest  -   -   (877)
Change in financial lease liabilities  (41)  (165)  (870)
Net cash provided by (used in) financing activities  7,658   (19,371)  (932)
Effect of exchange rate changes on cash and cash equivalents  (3,194)  (6,086)  (274)
Net increase (decrease) in cash and cash equivalents  6,354   (10,307)  (3,856)
Cash and cash equivalents at beginning of year  62,509   72,816   76,672 
Cash and cash equivalents at end of year  68,863   62,509   72,816 


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


F-8
ASIA PACIFIC WIRE & CABLE CORPORATION LIMITED AND SUBSIDIARIES                           


NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(In thousands of U.S. Dollars, except share data)

1.         ORGANIZATION AND PRINCIPAL ACTIVITIES

1.  
PRINCIPAL ACTIVITIES AND CORPORATE INFORMATION

Asia Pacific Wire & Cable Corporation Limited (“APWC” or the “Company”), which is a subsidiary of Pacific Electric Wire & Cable Co., Ltd. (“PEWC”), a Taiwanese company, was incorporated as an exempted company in Bermuda on September 19, 1996 under the Companies Act 1981 of Bermuda (as amended) for the purpose of acting as a holding company. The Company is principally engaged in owning operating companies engaged in the power cable, telecommunication cable, enameled wire and electronic cable industry.

The Company’s registered office is located at Canon’s Court, 22 Victoria Street, Hamilton HM EX, Bermuda. The Company’s executive business office is presently located in Taipei, Taiwan.


The Company’s operating subsidiaries (the “Operating Subsidiaries”) are engaged in the manufacturing and distribution of telecommunications, power cable and enameled wire products in Singapore, Thailand, Australia, the People’s Republic of China (“PRC”) and other markets in the Asia Pacific region. Major customers of the Operating Subsidiaries include government organizations, electric contracting firms, electrical dealers, and wire and cable factories. The Company’s Operating Subsidiaries also engage in the distribution of certain wire and cable products manufactured by PEWC and third parties. In certain markets, theThe Company also provides project engineering services in supply, delivery and installation (the “SDI”) of power cable to customers throughcertain of its SDI (Supply, Delivery and Installation) business segment.

customers.


The Company was listed on the New York Stock Exchange in March 1997. On December 24, 2001, the staff of the New York Stock Exchange (“NYSE”) announced that it had determined that the trading of the common stockshares of APWC should be suspended prior to December 31, 2001. The decision was reached in view of the fact that the Company’s stockshare price had fallen below NYSE’s continued listing standards. Following the delisting of the Company’s common stockshares on the NYSE, the Company’s common stock wasshares were traded under the ticker AWRCF, on the Over-the-Counter Bulletin Board (“OTC BB”), operated by the National Association of Securities Dealers, Inc. (“NASD”). After the Company failed to timely file its annual report on Form 20-F for the 2004 fiscal year, the Company was delisted from the OTC BB in August 2005 and thereafter time its shares of common stockshares were quoted on the “pink sheets” market by Pink Sheets LLC, a privately owned company that provides pricing and financial information for over-the-counter securities.


On June 28, 2007, SOF Investment, L.P. (“SOF”), a Delaware limited partnership controlled by MSD Capital, L.P. acquired 20% of the issued and outstanding shares of the Company from a private equity investor and entered into a shareholders’ agreement with the Company and PEWC.


On April 9, 2008, the Company was listed again and began trading its common stockshares on the OTC BB after completing all reporting requirements and filing all outstanding financial reports with the US Securities and Exchange Commission (“SEC”). The Company wasis subject to the reporting requirements under the Securities Exchange Act of 1934.


On March 30,27, 2009, SOF sold 10.2% of the issued and outstanding shares of the Company to PEWC. PEWC is currently holding 65.6% of the equity of the Company and COFMSD Credit Opportunity Master Fund, L.P. (“COF”) (as successor-in-interest to SOF) is holding 9.8%. The remaining 24.6% of the issued and outstanding common stockshares were publicly traded on the Over-the-Counter Bulletin Board (“OTC BB”) prior to that date.


On April 29, 2011, the Company’s common stockshares commenced trading on NASDAQ (Capital Markets).

Capital Market tier.


As of  July 1, 2011, SOF transferred its 9.8% interest in the Company to MSD Credit Opportunity Master Fund, L.P. (“COF”),COF, which became a party to the shareholders agreement, as amended and restated on March 27, 2009 (“Amended(the “Amended Shareholders Agreement”), and succeeded to all of the right, title, and interest in the common stockshares previously held by SOF.


On February 15, 2013, the Company’s common shares started trading on the NASDAQ Global Markets tier.

Share Capital


On September 8, 2008, the Company’s shareholders approved an increase to the authorized share capital from 20,000,000 common shares, par value $0.01 per share, to 50,000,000 common shares, par value $0.01 per share.


Share Capital Repurchase Program


The Company’s board of directors authorized a share capital repurchase program for its common shares on August 28, 2012, up to $2 million worth of its common shares over the next twelve months. As of December 31, 2014 and 2013 the Company had repurchased nil and 11,100 shares with total considerations of $nil and $38, respectively.  The Company records the value of its common shares held in the treasury at cost.

On August 13, 2014, the Company announced that its Board of Directors had authorized the future implementation of a share repurchase program of up to $1 million worth of its Common Shares. The Company did not announce a commencement date for that future share repurchase program and, to date, it has not yet been implemented.

F-9
ASIA PACIFIC WIRE & CABLE CORPORATION LIMITED AND SUBSIDIARIES                           


NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(In thousands of U.S. Dollars, except share data)

1.         ORGANIZATION AND PRINCIPAL ACTIVITIES(continued) 

The subsidiaries of the Company are set out below:

 

Place of incorporation and operations

Percentage of

equity interest

As of December 31,

 

2010

2011

The British Virgin Islands

 

 

 

 

 

Asia Pacific Wire & Cable General Holdings Ltd

100%

100%

 

 

 

PRC (APWC) Holding Ltd.

100%

100%

 

 

 

Samray Inc.

100%

100%

 

 

 

Siam (APWC) Holdings Ltd.

100%

100%

 

 

 

Moon View Ltd.

100%

100%

 

 

 

Trigent Investment Holdings Limited

100%

100%

 

 

 

Crown Century Holdings Ltd.

100%

100%

 

 

 

Singapore

 

 

 

 

 

Sigma Cable Company (Private) Limited (“Sigma Cable”)

98.3%

98.3%

 

 

 

Sigma-Epan International Pte Ltd. (“Sigma-Epan”)

100%

100%

 

 

 

Epan Industries Pte Ltd.

100%

100%

 

 

 

Epan Data-Comm System Pte Ltd

100%

100%

 

 

 

Singvale Pte Ltd (“Singvale”)

100%

100%

 

 

 

Malaysia

 

 

 

 

 

Elecain Industry Sdn. Bhd.

92.6%

92.6%

 

 

 

Sigma-Epan Malaysia Sdn. Bhd.

100%

100%

 

 

 

The People’s Republic of China

 

 

 

 

 

Ningbo Pacific Cable Co., Ltd. (“Ningbo Pacific”)

94.31%

95.80%

 

 

 

Shanghai Yayang Electric Co., Ltd. (“Shanghai Yayang”)

54.41%

54.41%

 

 

 

Shandong Pacific Fiber Optics Co. Ltd (“SPFO”)**

51%

0%

 

 

 

Pacific Electric Wire & Cable (Shenzhen) Co., Ltd (“PEWS”)

100%

100%

 

 

 

Hong Kong  

 

 

 

 

 

Crown Century Holdings Limited (“CCH (HK)”)

100%

100%

 

 

 

1.  PRINCIPAL ACTIVITIES AND CORPORATE INFORMATION (continued)

ASIA PACIFIC WIRE & CABLE CORPORATION LIMITED AND SUBSIDIARIES                           

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In thousands of U.S. Dollars, except share data)

1.         ORGANIZATION AND PRINCIPAL ACTIVITIES (continued)

 

Place of incorporation and operations

Percentage of

equity interest

As of December 31,

 

2010

2011

Australia  

 

 

 

 

 

Australia Pacific Electric Cable Pty Limited (“APEC”)

99.40%

99.40%

 

 

 

Thailand

 

 

 

 

 

Charoong Thai Wire and Cable Public Company Limited(“Charoong Thai”)*

50.93%

50.93%

 

 

 

Siam Pacific Electric Wire & Cable Company Limited(“Siam-Pacific”)

50.93%

50.93%

 

 

 

Pacific-Thai Electric Wire & Cable Company Limited(“Pacific-Thai”)***

50.93%

0%

 

 

 

Hard Lek Limited (“Hard Lek”)

73.98%

73.98%

 

 

 

APWC (Thailand) Co., Ltd

99.48%

99.48%

 

 

 

Thailand

 

 

 

 

 

PEWC (Thailand) Co., Ltd

99.48%

99.48%

 

 

 

CTW Beta Co. Ltd.

50.89%

50.89%

 

 

 

Siam Fiber Optics Co. Ltd

30.56%

30.56%

 

 

 

Myanmar

 

 

 

 

 

Myanmar Sigma Cable Co., Ltd.(inactive) 

78.59%

78.59%

* Charoong Thai is listed on the Stock Exchange of Thailand and is engaged in the manufacturing of wire and cable products for the power and telecommunications industries in Thailand. 

** SPFO was disposed of to independent third parties on December 1, 2011. See note 1(d) and 19.

*** Pacific-Thai transferred its business into its parent company, Siam-Pacific, on January 5, 2011 and registered its dissolution with the Ministry of Commerce on January 5, 2011. The Company anticipates the dissolution will be completed in 2012. 


ASIA PACIFIC WIRE & CABLE CORPORATION LIMITED AND SUBSIDIARIES                           

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In thousands of U.S. Dollars, except share data)

1.   ORGANIZATION AND PRINCIPAL ACTIVITIES (continued)

ii)  The equity investees of the Company are set out below:

 

Place of incorporation and operations

Percentage of

equity interest

As of December 31,

 

2010

2011

The People’s Republic of China  

 

 

 

 

 

Shandong Huayu Pacific Fiber Optics Communications Co., Ltd. (“Shandong Huayu”)

48.73%

48.73%

 

 

 

Shandong Pacific Rubber Cable Co., Ltd. (“SPRC”)

25.00%

25.00%

 

 

 

Thailand

 

 

 

 

 

Siam Pacific Holding Company Limited (“SPHC”)

49.00%

49.00%

 

 

 

Loxley Pacific Co., Ltd. (“Lox Pac”)

21.39%

21.39%

Acquisitions accounted for as purchases and disposals undertaken by the Company during the years ended December 31, 2009, 2010 and 2011 included the following:

(a)In 2002, three wholly owned subsidiaries of Sigma-Epan were placed into liquidation. In April 2009, the liquidator received the clearance letters from government authorities of Singapore relating to the dissolution of three subsidiaries of Sigma-Epan. On May 22, 2009, Sigma-Epan conducted a final meeting to dissolve the subsidiaries. As at December 31, 2002, the Company’s balance sheet includes liabilities of $568 resulting from these subsidiaries which was recognized as gain on liquidation of subsidiaries in 2009.

(b)On March 31, 2010, CCH acquired 51% of APEC shares from Sigma Cable, thereby increasing the Company’s interest in APEC from 98.53% to 99.40%. On April 14, 2010, CCH acquired 100% of Sigma Epan from Samray, the Company’s interest in Sigma-Epan has not changed and Sigma-Epan remains as a wholly owned subsidiary of the Company. 

(c)On May 31, 2011, the Company contributed additional capital in Ningbo Pacific in the form of a cash injection of $5 million. The Company’s interest in Ningbo Pacific increased from 94.31% to 95.80%.

(d)On December 1, 2011, the Company disposed its entire 51% equity interest in SPFO. Proceeds from the disposal of SPFO were $2.9 million (RMB18.5 million). The Company recorded a gain on disposal amounting to $1.96 million in thestatement of operations.  

Put Right and Option


Under the terms of the Amended Shareholders’Shareholders Agreement, COF has the right and option (but not the obligation) to sell to PEWC upon the occurrence of a Put Event (defined below), and PEWC agreed to purchase from COF upon the occurrence of a Put Event, all Registrable Securitiesregistrable securities then owned by COF (the “ Put Shares ”), for an amount equal to the Put Price (defined below) together with interest (calculated on the basis of a 360 day year) on the Put Price, computed (x) from June 28, 2007 through May 31, 2010 at a rate per annum that shall be equal to the Libor Raterate plus fifty (50) basis points (compounded annually), and (y) from June 1, 2010 until the Put Closing (defined below) at a rate per annum that shall be equal to the Libor Raterate plus one hundred and fifty (150) basis points (compoundedcompounded annually) (the “ Put Right ”).

If the Put Event terminates prior to the closing of such Put Right, the exercise of the Put Right is deemed rescinded and the transaction relating to the Put


ASIA PACIFIC WIRE & CABLE CORPORATION LIMITED AND SUBSIDIARIES                           

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In thousands of U.S. Dollars, except share data)

1.ORGANIZATION AND PRINCIPAL ACTIVITIES (continued)

Right is deemed cancelled, but this will not terminate the existence of a future Put Right upon the triggering of a future Put Event.


A “Put Event” means any date (i) after March 11, 2009 whereby an Eventevent has occurred and continues to occur, or (ii) after February 1, 2011 whereby the shares are not listed on a US Securities Market, which means any of the NASDAQ Stock Market, Inc. (Global Market or Global Select Market), Alternext U.S. (f/k/a the American Stock Exchange LLC), the New York Stock Exchange LLC or in conjunction with a dual listing on, or a transfer from, a US Securities Market to one or more of the principal or secondary exchanges for the public trading of equity securities in any of Hong Kong, Tokyo or Singapore. The “Put Price” means for (i) shares purchased pursuant to the Purchase Agreement, an aggregate amount equal to the product of (a) the number of shares being sold and (b) US$4.35 and (ii) Sharesshares purchased under preemptive right provisions of the Amended Shareholders’ Agreement,amended shareholders agreement (the “Shareholders Agreement”), and aggregate amount equal to the purchase price thereof.

thereof.


The Shareholders’Shareholders Agreement does not contain any provisions that impose any purchase, reimbursement or financing obligations on the Company in the event that SOF exercises the Put Right. The Put Right is an obligation solely of PEWC and not of the Company. However, for the avoidance of doubt and as a re-affirmation that the financial and  other obligation to SOF in the event

of an exercise of the Put Right rest exclusively with PEWC, the Company has, on March 27, 2009, entered into a Non-Recoursenon-recourse confirmation agreement (the “Non-recourse Confirmation AgreementAgreement”) with PEWC whereby PEWC (i) covenants that it has no put right against the Company relating to the Put Shares and that PEWC’s obligations to SOF are without recourse to the Company, (ii) waives any such right should it arise in the future, and (iii) agrees that it shall not cause the Company, directly or indirectly, to incur any costs associated with the exercise of the Put Right.

Right.


The Shareholders’Shareholders Agreement provides, and the Non-recourse Confirmation Agreement confirms, that the Put Right is solely the obligation of PEWC. The Company has no purchase, reimbursement or financing obligations in the event that SOF exercises the Put Right. As such, the Company has classified the Put Shares as equity in the accompanying financial statements.

statements.


The Company received an approval letter from Nasdaq on April 13, 2011 for the listing of its common stockshares on Nasdaq,NASDAQ, with “APWC” as the trading symbol and, as noted, on April 29, 2011, the Company’s common stockshares commenced trading on NASDAQ (Capital Markets),Capital Markets, which tier does not fit within the definition of a national “Securities Market”, as provided in the Shareholders’Shareholders Agreement. The Company intends to applyapplied to list the common stockshares on the NADAQ Global Markets tier after the Company fulfilled NASDAQ’s requirement for the migration, which included trading price per shares, liquidity requirements, operating history and a diversified shareholder list. The Company’s common shares began trading on the NASDAQ Global Markets effective February 15, 2013. There is satisfied that it qualifiesno impact on existing shareholders from this change in all respect for that tier. The Company is not aware of that COF has taken any action with respect to the common stock held by it up to date.

2.         BASIS OF PRESENTATIONtrading tiers

.


F-10
ASIA PACIFIC WIRE & CABLE CORPORATION LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

2.  BASIS OF PREPARATION

2.1  The consolidated financial statements are prepared in accordance with International Financial Reporting Standard (IFRS) as issued by the International Accounting Standards Board (IASB).

These financial statements are prepared in accordance with accounting principles generally accepted in the United States of America (“US GAAP”).  The basis of accounting differs from that used in the statutory financial statements of the Company’s subsidiaries and equity investee companies, which are prepared in accordance with the accounting principles generally accepted in their respective countries of incorporation. 

            All dollar amounts in the financial statements and in the notes herein are U.S. Dollars (“US$”) unless otherwise designated.

3.         CHANGES IN PRESENTATION OF COMPARATIVE FINANCIAL STATEMENTS

SPFO was consolidated prior to its disposal and it met the criteria for reporting as discontinued operations. Therefore, the results of operations of SPFO and the gain of the disposal have been classified as “Income from operations of discontinued SPFO” in the consolidated statements of operations for the year ended December 31, 2011 and prior periods amounts2013 were the first the Company has prepared in accordance with IFRS as issued by IASB.

The financial statements have been reclassified accordingly.

prepared on a historical basis except where otherwise disclosed in the accounting policies. The consolidated financial statements are presented in U.S. Dollars and all values are rounded to the nearest thousand (US$’000), except when otherwise indicated.
2.2  Basis of consolidation

The consolidated financial statements comprise the financial statements of the Company and its subsidiaries as of December 31, 2014 and 2013, and the results of all subsidiaries for the years ended December 31, 2014, 2013 and 2012.


Subsidiaries are fully consolidated from the date of acquisition (the date on which the Company obtains control), and continue to be consolidated until the date that such control ceases. The Company controls an entity when the Company is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. The financial statements of the subsidiaries are prepared for the same reporting period as the parent company, using consistent accounting policies. All intra-group balances, transactions, unrealized gains and losses and dividends resulting from intra-group transactions are eliminated in full.

Non-controlling interests in the results and equity of subsidiaries are shown separately in the consolidated income statements, statements of comprehensive income, statements of changes in equity and balance sheets respectively. Total comprehensive income (loss) within a subsidiary is attributed to the non-controlling interest even if it results in a deficit balance.

A change in the ownership interest of a subsidiary, without a loss of control, is accounted for as an equity transaction. If the Company loses control over a subsidiary, it:
uDerecognizes the assets (including goodwill) and liabilities of the subsidiary
uDerecognizes the carrying amount of any non-controlling interest
uDerecognizes the cumulative transaction differences recorded in equity
uRecognizes the fair value of the consideration received
uRecognizes the fair value of any investment retained
uRecognizes any surplus or deficit in profit or loss
uReclassifies the parent’s share of components previously recognized in other comprehensive income to profit or loss or retained earnings, as appropriate, as would be required if the Company had directly disposed of the related assets or liability.
F-11
ASIA PACIFIC WIRE & CABLE CORPORATION LIMITED AND SUBSIDIARIES                           


NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(In thousands of U.S. Dollars, except share data)

4.SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Principles of Consolidation



2.  BASIS OF PREPARATION (continued)

2.2  Basis of consolidation (continued)

The consolidated financial statements include the accountssubsidiaries of the Company are set out below:
  Percentage of equity interest 
  As of December 31, 
Place of incorporation and operations 2014  2013 
The British Virgin Islands      
       
APWC General Holdings Limited  100%  100%
PRC (APWC) Holding Ltd.  100%  100%
Samray Inc.  100%  100%
Siam (APWC) Holdings Ltd.  100%  100%
Moon View Ltd.  100%  100%
Trigent Investment Holdings Limited  100%  100%
Crown Century Holdings Ltd.  100%  100%
Singapore        
Sigma Cable Company (Private) Limited (“Sigma Cable”)  98.30%  98.30%
Sigma-Epan International Pte Ltd. (“Sigma-Epan”) (under liquidation)  100%  100%
Epan Industries Pte Ltd.  98.30%  100%
Epan Data-Comm System Pte Ltd.(liquidated)  -   100%
Singvale Pte Ltd.  100%  100%
Malaysia        
Elecain Industry Sdn. Bhd. (liquidated)  -   92.60%
Sigma-Epan Malaysia Sdn. Bhd. (under liquidation)  100%  100%
The People’s Republic of China (“PRC”)        
Ningbo Pacific Cable Co., Ltd. (“Ningbo Pacific”).  100%  100%
Shanghai Yayang Electric Co., Ltd. (“SYE”)  66.35%  66.35%
Pacific Electric Wire & Cable (Shenzhen) Co., Ltd. (“PEWS”).  100%  100%
Hong Kong        
Crown Century Holdings Limited (“CCH (HK)”)  100%  100%
Pacific Electric Wire & Cable (Hong Kong) Limited (“PEWC (HK)”) (disposed)  -   100%
         
Australia        
Australia Pacific Electric Cable Pty Limited (“APEC”)  99.40%  99.40%
F-12
ASIA PACIFIC WIRE & CABLE CORPORATION LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
2.  BASIS OF PREPARATION (continued)

2.2  Basis of consolidation (continued)

  Percentage of equity interest 
  As of December 31, 
Place of incorporation and operations 2014  2013 
Thailand      
       
Charoong Thai Wire and Cable Public Company Limited (“Charoong Thai”)  50.93%  50.93%
Siam Pacific Electric Wire & Cable Company Limited (“Siam Pacific”)  50.93%  50.93%
Double D Cable Company Limited (“Double D”)  50.93%  50.93%
Hard Lek Limited.  73.98%  73.98%
APWC (Thailand) Co., Ltd.  99.48%  99.48%
PEWC (Thailand) Co., Ltd.  99.48%  99.48%
CTW Beta Co. Ltd.  50.89%  50.89%
Siam Fiber Optics Co. Ltd.  30.56%  30.56%
*   Charoong Thai is listed on the Stock Exchange of Thailand and is engaged in the manufacturing of wire and cable products for the power and telecommunications industries in Thailand.

Changes in ownerships in subsidiaries during the years ended December 31, 2014 and 2013 included the following:

(a)  On August 19, 2013, the CCH (HK)’s board of directors resolved to acquire a wholly owned Hong Kong company with limited liability (“subsidiary”) and the principal activities of the subsidiary is to carry out trading for PEWSC. On October 25, 2013, CCH (HK) acquired 1 million shares of HK$1 each representing 100% of the issued share capital in "PEWC (HK)".

(b)  
On January 13, 2014, Sigma-Epan sold its 100% interest in the Epan Industries to Sigma Cable for a total cash consideration of S$1. APWC effective interest in Epan Industreis decreased from 100% to 98.30%.

Sigma-Epan has gone into voluntary liquidation process after disposal of Epan Industries.

(c)  On August 5, 2014, CCH (HK) sold its 100% interest of PEWC (HK) to Dragon Conqueror Ltd. (a PEWC’s subsidiary) for a total consideration of US$220,154. PEWC (HK) became an affiliated company.

F-13
ASIA PACIFIC WIRE & CABLE CORPORATION LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
3.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

3.1  Current versus non-current classification

The Company presents assets and liabilities in the balance sheets based on current and non-current classification. An asset as current when it is:
uExpected to be realized or intended to be sold or consumed in the normal operating cycle;
uHeld primarily for the purpose of trading;
uExpected to be realized within twelve months after the reporting period; or
uCash or cash equivalent unless restricted from being exchanged or used to settle a liability for at least twelve months after the reporting period.

All other assets are classified as non-current.
A liability is current when:
uIt is expected to be settled in normal operating cycle;
uIt is held primarily for the purpose of trading;
uIt is due to be settled within twelve months after the reporting period; or
uThere is no unconditional right to defer the settlement of the liability for at least twelve months after the reporting period.

The Company classifies all other liabilities as non-current.

Deferred tax assets and liabilities are classified as non-current assets and liabilities.

3.2  Operating profit

The operating profit is the profit earned from core business operations, and does not include any profit earned from investment and the effects of interest and taxes.

3.3  Fair value measurement

The Company measures financial instruments at fair value at each balance sheet date. In addition, fair values of financial instruments measured at amortized cost are disclosed in Note 11.4.

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value measurement is based on the presumption that the transaction to sell the asset or transfer the liability takes place either:
uIn the principal market for the asset or liability, or
uIn the absence of a principal market, in the most advantageous market for the asset or liability.

The principal or the most advantageous market must be accessible to by the Company.

The fair value of an asset or a liability is measured using the assumptions that market participants would use when pricing the asset or liability, assuming that market participants act in their economic best interest.

A fair value measurement of a non-financial asset takes into account a market participant's ability to generate economic benefits by using the asset in its subsidiaries.  All intercompany accountshighest and transactions have been eliminated on consolidation.  best use or by selling it to another market participant that would use the asset in its highest and best use.

The Company’s investmentsCompany uses valuation techniques that are appropriate in the circumstances and for which its ownership exceeds 20%, butsufficient data are available to measure fair value, maximizing the use of relevant observable inputs and minimizing the use of unobservable inputs.

All assets and liabilities for which fair value is measured or disclosed in the financial statements are not majority-owned or controlled,categorized within the fair value hierarchy, described as follows, based on the lowest level input that is significant to the fair value measurement as a whole:
uLevel 1 — Quoted (unadjusted) market prices in active markets for identical assets or liabilities
uLevel 2 — Valuation techniques for which the lowest level input that is significant to the fair value measurement is directly or indirectly observable
uLevel 3 — Valuation techniques for which the lowest level input that is significant to the fair value measurement is unobservable
F-14
ASIA PACIFIC WIRE & CABLE CORPORATION LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
3.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

3.3  Fair value measurement (continued)
For assets and liabilities that are accounted for usingrecognized in the equity method iffinancial statements on a recurring basis, the Company has the ability to exercise significant influence over the companies’ operating and financial policies. When the Company’s carrying value in an equity investee company is reduced to zero, no further losses are recordeddetermines whether transfers have occurred between levels in the Company’s consolidated financial statements unlesshierarchy by re-assessing categorization (based on the Company has guaranteed obligationslowest level input that is significant to the fair value measurement as a whole) at the end of the investee company or has committed additional funding. When the investee company subsequently reports income, the Company will not record its share of such income until it equals the amount of its share of losses not previously recognized.

Use of Estimates

The preparation of the consolidated financial statements in conformity with generally accepted accounting principles accepted in the United States requires management to make estimates, judgements, and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Significant estimates reflected in the Company’s consolidated financial statements include, but are not limited to, useful lives and residual values of long-lived assets, impairment assessment of long-lived assets and goodwill, allowance for accounts and other receivable, accounting for deferred income tax, income tax position, inventory valuation, valuation allowance of deferred tax assets. Actual results could differ from those estimates.

Cash and Cash Equivalents

each reporting period.


For the purpose of fair value disclosures, the Company has determined classes of assets and liabilities on the basis of the nature, characteristics and risks of the asset or liability and the level of the fair value hierarchy as explained above.
3.4  Cash and Cash Equivalents

Cash and cash equivalents includesin the consolidated balance sheet comprise of cash on hand, bank depositsat banks and all short-term highly liquid investments with an original maturitypurchased maturities of three months or less, which are subject to an insignificant risk of change in value.
For the purpose of the consolidated statements of cash flows, cash and cash equivalents are readily convertible to known amountsnet of cash.

Inventories outstanding bank overdrafts as they are considered an integral part of the Company’s cash management

.


3.5  Inventories

Inventories are valuedstated at the lower of cost or market.and net realizable value. Cost is determined usingon the first-in, first-out or weighted average method.

Ifbasis and, in the expectedcase of work in progress and finished goods, comprises direct materials, direct labor and an appropriate proportion of overheads based on the normal operating capacity. Net realizable value is based on estimated selling priceprices less completion costs andany estimated costs to execute sales (market)be incurred to completion and the estimated cost necessary to make the sale.

3.6Property, Plant and Equipment

Property, plant and equipment is lower thanstated at cost, net of accumulated depreciation and any accumulated impairment losses. Such cost includes the cost of replacing part of the property, plant and equipment and borrowing costs for long-term construction projects if the recognition criteria are met.

Expenditure incurred after items of property, plant and equipment have been put into operation, such as repairs and maintenance, is normally charged to profit or loss in the period in which it is incurred. In situations where the recognition criteria are satisfied, the expenditure for a major inspection is capitalized in the carrying amount of the asset as a write-downreplacement. When significant parts of property, plant and equipment are required to be replaced at intervals, the Company recognizes such parts as individual assets with specific useful lives and depreciates them accordingly.

Spare parts and servicing equipment are usually carried as inventory and recognized in profit or loss as consumed. However, major spare parts and stand-by equipment qualify as property, plant and equipment when an entity expects to use them for more than one year.

The present value of the expected cost for the decommissioning of an asset after its use is charged to expensesincluded in the cost of salesthe respective asset if the recognition criteria for a provision are met. A provision shall be recognized when:
(a)  an entity has a present obligation (legal or constructive) as a result of a past event;
(b)  it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation; and
(c)  a reliable estimate can be made of the amount of the obligation.
If these conditions are not met, no provision shall be recognized.

F-15
ASIA PACIFIC WIRE & CABLE CORPORATION LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
3.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

3.6  Property, Plant and Equipment (continued)

Depreciation
Depreciation is calculated on a straight-line basis over the amount by whichestimated useful lives of the assets as follows:

}Buildings
  20-30 years
}Building improvement
  5-20 years
}Machinery and equipment
  5-15 years
}Motor vehicles
  3-10 years
}Office equipment
  3-10 years

An item of property, plant and equipment and any significant part initially recognized is derecognized upon disposal or when no future economic benefits are expected from its use or disposal. Any gain or loss arising on derecognition of the asset (calculated as the difference between the net disposal proceeds and the carrying amount exceedsof the asset) is included in the income statement when the asset is derecognized.

The assets’ residual values (presumably nil), useful lives and methods of depreciation are reviewed at each financial year end, and adjusted prospectively, if appropriate.

Impairment
If circumstances arise which indicate assets might be impaired, a review should be undertaken of their cash generating abilities through either use or sales. This review will produce an amount, which should be compared with the asset’s carrying value, and if the carrying value is higher, the difference must be written off as an impairment adjustment in the income statement. Further detailed methodology used for an impairment test is given in Note 3.11 - Impairment of non-financial assets.

3.7  Leases

The determination of whether an arrangement is, or contains, a lease is based on the substance of the arrangement at the inception date. The arrangement is assessed for whether fulfillment of the arrangement is dependent on the use of a specific asset or assets or the arrangement conveys a right to use the asset or assets, even if that right is not explicitly specified in an arrangement.

Finance leases
Finance leases that transfer substantially all the risks and benefits incidental to ownership of the leased item to the Company, are capitalized at the commencement of the lease at the fair value of the leased property or, if lower, at the present value of the minimum lease payments. Lease payments are apportioned between the finance charges and reduction of the lease liability to achieve a constant rate of interest on the remaining balance of the liability. Finance charges are recognized in finance costs in the income statement.

A leased asset is depreciated over the useful life of the asset. However, if there is no reasonable certainty that the Company will obtain ownership by the end of the lease term, the asset is depreciated over the shorter of the estimated useful life of the asset and the lease term.

Operating leases
Operating lease payments are recognized as an operating expense in the income statement on a straight-line basis over the lease term.

Prepaid land lease payments under operating leases are initially stated at cost and subsequently recognized on the straight-line basis over the lease terms. The prepaid land lease payments are presented as current or non-current assets on the face of balance sheet, depending on the amount to be recognized less or more than twelve months after the reporting period.
F-16
ASIA PACIFIC WIRE & CABLE CORPORATION LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
3.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

3.8  Borrowing Costs

Borrowing costs are required to be capitalized as part of the cost of the asset if they are directly attributable to the acquisition, construction or productions of a qualifying asset (whether or not the funds have been borrowed specifically). All other borrowing costs are recognized as an expense in the period in which they are incurred.

A qualifying asset is an asset that necessarily takes a substantial period to get ready for its intended use or sale.

Borrowing costs consist of interest and other costs that an entity incurs in connection with the borrowing of funds.

Borrowing costs include:
}interest expense calculated using the effective interest method;
}finance charges in respect of finance leases; and
}exchange differences arising from foreign currency borrowings to the extent that they are regarded as an adjustment to interest costs. Exchange differences are generally regarded as borrowing costs only to the extent that the combined borrowing costs, including exchange differences, approximate the amount of borrowing costs on functional currency equivalent borrowings.

For specific borrowings, the borrowing costs eligible for capitalization are the actual borrowing costs incurred related to funds that are borrowed specifically to obtain a qualifying asset less any investment income earned on the temporary investment of those borrowings.

For general borrowings, the capitalization rate applied to borrowing costs on the consolidation level will be based on cash management strategy, which might be the weighted average of the group borrowings outstanding during the period.

3.9  Investment Properties

Investment properties are properties held to earn rentals and/or for capital appreciation (including property under construction for such purposes). Investment properties are measured initially at cost, including transaction costs. Subsequent to initial recognition, investment properties are carried at historical cost less provisions for depreciation and impairment. Additional costs incurred subsequent to the acquisition of an asset increase the carrying amount of the asset or recognized as a separate asset if it is probable that future economic benefits associated with the assets will flow into the Company and the cost of an asset can be measured reliably. Routine maintenance and repairs are expensed as incurred. While land is not depreciated, all other investment property is depreciated based on the respective assets estimated useful lives ranging from 20 to 30 years using the straight-line method.

The estimated useful lives, residual values and depreciation method are reviewed at the end of each reporting period, with the effect of any changes in estimate accounted for on a prospective basis. An investment property is derecognized upon disposal or when the investment property is permanently withdrawn from use and no future economic benefits are expected from the disposal. Any gain or loss arising on derecognition of the property (calculated as the difference between the net disposal proceeds and the carrying amount of the asset) is included in income or loss in the period in which the property is derecognized.

International Accounting Standards (“IAS”) 40 requires disclosures about the fair value of any investment property recorded at cost. See Note 17 – Investment Properties.
F-17
ASIA PACIFIC WIRE & CABLE CORPORATION LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
3.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

3.10  Financial Instruments

(i)  Financial assets

Initial recognition and measurement
Financial assets within the scope of IAS 39 are classified as financial assets at fair value through profit or loss, loans and receivables, held-to-maturity investments, available-for-sale financial assets, or as derivatives designated as hedging instruments in an effective hedge, as appropriate. The Company determines the classification of its financial assets at initial recognition.

All financial assets are recognized initially at fair value plus transaction costs, except in the case of financial assets recorded at fair value through profit or loss. Purchases or sales of financial assets that require delivery of assets within a time frame established by regulation or convention in the market place (regular way trades) are recognized on the trade date, i.e., the date that the Company commits to purchase or sell the asset.

Subsequent measurement
The subsequent measurement of financial assets depends on their classification as described below:

Financial assets at fair value through profit or loss
Financial assets at fair value through profit or loss include financial assets held for trading and financial assets designated upon initial recognition at fair value through profit or loss. Financial assets are classified as held for trading if they are acquired for the purpose of selling or repurchasing in the near term.

Financial assets at fair value through profit or loss are carried in the balance sheet at fair value with net changes in fair value presented as finance costs (negative net changes in fair value) or finance income (positive net changes in fair value) in the income statement.

Derivatives not designated as hedging instruments
A derivative is a financial instrument or other contract within the scope of IAS 39 with all of the following characteristics:

(a)  its value changes in response to the change in a specified interest rate, financial instrument price, commodity price, foreign exchange rate, index of prices or rates, a credit rating or credit index, or other variable, provided in the case of a non-financial variable that the variable is not specific to a party to the contract (sometimes called the 'underlying');
(b)  it requires no initial net investment, or an initial net investment that is smaller than would be required for other types of contracts that would be expected to have a similar response to changes in market factors; and
(c)  it is settled at a future date.

Fair value is the measurement basis for all financial instruments meeting the definition of a derivative.  Change in fair value of non-hedged item is recorded in profit and loss.
F-18
ASIA PACIFIC WIRE & CABLE CORPORATION LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

3.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

3.10  Financial Instruments  (continued)

Loans and receivables
Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. After initial measurement, such financial assets are subsequently measured at amortized cost using the effective interest rate (“EIR”) method, less impairment. Amortized cost is calculated by taking into account any discount or premium on acquisition and fees or costs that are an integral part of the EIR. The EIR amortization is included in finance income in the income statement. The losses arising from impairment are recognized in the other operating expenses for receivables.

Held-to-maturity investments
Non-derivative financial assets with fixed or determinable payments and fixed maturities are classified as held to maturity when the Company has the positive intention and ability to hold them to maturity. After initial measurement, held to maturity investments are measured at amortized cost using the EIR, less impairment. Amortized cost is calculated by taking into account any discount or premium on acquisition and fees or costs that are an integral part of the EIR. The EIR amortization is included as finance income or finance cost in the income statement. The losses arising from impairment are recognized in the income statement as finance costs.

Available-for-sale financial assets
Available-for-sale financial assets include equity investments and debt securities. Equity investments classified as available for sale are those that are neither classified as held for trading nor designated at fair value through profit or loss. Debt securities in this category are those that are intended to be held for an indefinite period of time and that may be sold in response to needs for liquidity or in response to changes in the market conditions.

After initial measurement, available-for-sale financial assets are subsequently measured at fair value with unrealized gains or losses recognized as other comprehensive income in the available-for-sale reserve until the investment is derecognized, at which time the cumulative gain or loss is recognized in other income, or the investment is determined to be impaired, when the cumulative loss is reclassified from the available-for-sale reserve to the income statement in finance costs. Interest earned whilst holding available-for-sale financial investments is reported as finance income using the EIR method.

For a financial asset reclassified out of the available-for-sale category, the fair value carrying amount at the date of reclassification becomes its new amortized cost and any previous gain or loss on the asset that has been recognized in equity is amortized to profit or loss over the remaining life of the investment using the EIR. Any difference between the new amortized cost and the maturity amount is also amortized over the remaining life of the asset using the EIR. If the asset is subsequently determined to be impaired, then the amount recorded in equity is recognized in the income statement.

Derecognition
A financial asset (or, where applicable, a part of a financial asset or part of a group of similar financial assets) is derecognized when:

}The rights to receive cash flows from the asset have expired, or
}The Company has transferred its rights to receive cash flows from the asset or has assumed an obligation to pay the received cash flows in full without material delay to a third party under a ‘pass-through’ arrangement; and either (a) the Company has transferred substantially all the risks and rewards of the asset, or (b) the Company has neither transferred nor retained substantially all the risks and rewards of the asset, but has transferred control of the asset.

F-19
ASIA PACIFIC WIRE & CABLE CORPORATION LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

3.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

3.10  Financial Instruments (continued)

Derecognition (continued)
When the finished goodsCompany has transferred its rights to receive cash flows from an asset or has entered into a pass-through arrangement, it evaluates if and to what extent it has retained the risks and rewards of ownership. When it has neither transferred nor retained substantially all of the risks and rewards of the asset, nor transferred control of the asset, the asset is recognized to the extent of the Company’s continuing involvement in the asset. In that werecase, the Company also recognizes an associated liability. The transferred asset and the associated liability are measured on a basis that reflects the rights and obligations that the Company has retained.
(ii)    Impairment of financial assets

The Company assesses, at each reporting date, whether there is objective evidence that a financial asset or a group of financial assets is impaired. A financial asset or a group of financial assets is deemed to be impaired if there is objective evidence of impairment as a result of one or more events that has occurred since the initial recognition of the asset (an incurred ‘loss event’) and that loss event has an impact on the estimated future cash flows of the financial asset or the group of financial assets that can be reliably estimated. Evidence of impairment may include indications that the debtors or a group of debtors is experiencing significant financial difficulty, default or delinquency in interest or principal payments, the probability that they will enter bankruptcy or other financial reorganization and observable data indicating that there is a measurable decrease in the estimated future cash flows, such as changes in arrears or economic conditions that correlate with defaults.

Financial assets carried at amortized cost
For financial assets carried at amortized cost, the Company first assesses whether objective evidence of impairment exists individually for financial assets that are individually significant, or collectively for financial assets that are not individually significant. If the Company determines that no objective evidence of impairment exists for an individually assessed financial asset, whether significant or not, it includes the asset in a group of financial assets with similar credit risk characteristics and collectively assesses them for impairment. Assets that are individually assessed for impairment and for which an impairment loss is, or continues to be, recognized are not included in a collective assessment of impairment.

If there is objective evidence that an impairment loss has been incurred, the amount of the loss is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows (excluding future expected credit losses that have not yet been incurred). The present value of the estimated future cash flows is discounted at the financial asset’s original effective interest rate. If a loan has a variable interest rate, the discount rate for measuring any impairment loss is the current EIR.

The carrying amount of the asset is reduced through the use of an allowance account and the loss is recognized in profit or loss. Interest income continues to be accrued on the reduced carrying amount and is accrued using the rate of interest used to discount the future cash flows for the purpose of measuring the impairment loss. The interest income is recorded as finance income in the income statement. Loans together with the associated allowance are written off when there is no realistic prospect of future recovery and all collateral has been realized or has been transferred to the Company. If, in a subsequent year, the amount of the estimated impairment loss increases or decreases because of an event occurring after the impairment was recognized, the previously written down to market are subsequently sold at above market,recognized impairment loss is increased or reduced by adjusting the allowance account. If a write-off is later recovered, the recovery is credited to finance costs in the income statement.
F-20
ASIA PACIFIC WIRE & CABLE CORPORATION LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
3.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

3.10  Financial Instruments (continued)

(ii)  Impairment of financial assets (continued)

Trade receivables impairment
For trade receivables, impairment assessment is performed firstly on an individual basis:

A financial asset is impaired (and impairment losses are determined) if, and only if, there is objective evidence of impairment as a result of one or more events that occurred after initial recognition (a 'loss event') and that loss event (or events) has an impact on the estimated future cash flows of the financial asset that can be reliably estimated.

Objective evidence that a financial asset or group of assets is impaired includes observable data that comes to the attention of the holder about the following loss events:
}significant financial difficulty of the issuer or obligor;
}breach of contract, such as a default or delinquency in interest or principal payments;
}the lender, for economic or legal reasons relating to the borrower's financial difficulty, granting to the borrower a concession that would not otherwise be considered;
}it becoming probable that the borrower will enter bankruptcy or other financial reorganization;
}the disappearance of an active market for that asset because of financial difficulties (but not simply because the asset is no longer publicly traded ; or
}observable data indicating that there is a measurable decrease in the estimated future cash flows from a Company of financial assets since initial recognition, although the decrease cannot yet be identified with the individual assets in the Company, including:
ladverse changes in the payment status of borrowers in the Company (e.g. an increased number of delayed payments); or
lnational or local economic conditions that correlate with defaults on the assets in the Company.

For trade receivables that have been individually assessed, but for which there is no objective evidence of impairment, the review for impairment is performed on a group basis, based on similar credit risk characteristics.

Available-for-sale financial assets
For available-for-sale financial assets, the Company assesses at each reporting date whether there is objective evidence that an investment or a group of investments is impaired.

In the case of equity investments classified as available-for-sale, objective evidence would include a significant or prolonged decline in the fair value of the investment below its cost. ‘Significant’ is evaluated against the original cost of sales. See note 10the investment and ‘prolonged’ against the period in which the fair value has been below its original cost. The Company's policy considers a significant decline to be one in which the fair value is below the weighted average original cost by more than 20%. A prolonged decline is considered to be one in which the fair value is below the weighted average original cost for a period of more than 12 months. When there is evidence of impairment, the cumulative loss – Valuationmeasured as the difference between the acquisition cost and Qualifying Accounts.

the current fair value, less any impairment loss on that investment previously recognized in the income statement – is removed from other comprehensive income and recognized in the income statement. Impairment losses on equity investments are not reversed through profit or loss; increases in their fair value after impairment are recognized directly in other comprehensive income.

F-21
ASIA PACIFIC WIRE & CABLE CORPORATION LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
3.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

3.10  Financial Instruments (continued)

Income TaxesAvailable for sale financial assets

(continued)

In the case of debt instruments classified as available for sale, impairment is assessed based on the same criteria as financial assets carried at amortized cost. However, the amount recorded for impairment is the cumulative loss measured as the difference between the amortized cost and the current fair value, less any impairment loss on that investment previously recognized in the income statement.

Future interest income continues to be accrued based on the reduced carrying amount of the asset, using the rate of interest used to discount the future cash flows for the purpose of measuring the impairment loss. The interest income is recorded as part of finance income. If, in a subsequent year, the fair value of a debt instrument increases and the increase can be objectively related to an event occurring after the impairment loss was recognized in the income statement, the impairment loss is reversed through the income statement.

(iii)  Financial liabilities

Financial liabilities initial recognition and measurement
Financial liabilities within the scope of IAS 39 are classified as financial liabilities at fair value through profit or loss, loans and borrowings, or as derivatives designated as hedging instruments in an effective hedge, as appropriate. The Company followsdetermines the classification of its financial liabilities at initial recognition.

All financial liabilities are recognized initially at fair value and, in the case of loans and borrowings, net of directly attributable transaction costs.

The Company’s financial liabilities include trade and other payables, bank overdrafts and interest-bearing loans and borrowings.

Subsequent measurement
After initial recognition, interest-bearing loans and borrowings are subsequently measured at amortized cost using the EIR method. Gains and losses are recognized in profit or loss when the liabilities are derecognized as well as through the EIR amortization process.

Amortized cost is calculated by taking into account any discount or premium on acquisition and fees or costs that are an integral part of the EIR. The EIR amortization is included as finance costs in the income statement.

Derecognition
A financial liability is derecognized when the obligation under the liability methodis discharged or cancelled, or expires. When an existing financial liability is replaced by another from the same lender on substantially different  terms, or the terms of accountingan existing liability are substantially modified, such an exchange or modification is treated as the derecognition of the original liability and the recognition of a new liability. The difference in the respective carrying amounts is recognized in the income statement.

(iv)  Offsetting of financial instruments

Financial assets and financial liabilities are offset and the net amount is reported in the consolidated balance sheet if there is a currently enforceable legal right to offset the recognized amounts and there is an intention to settle on a net basis, to realize the assets and settle the liabilities simultaneously.
F-22
ASIA PACIFIC WIRE & CABLE CORPORATION LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
3.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

3.10  Financial Instruments (continued)

(v)    Fair value of financial instruments

The fair value of financial instruments that are traded in active markets at each reporting date is determined by reference to quoted market prices or dealer price quotations (bid price for long positions and ask price for short positions), without any deduction for transaction costs.

For financial instruments not traded in an active market, the fair value is determined using appropriate valuation techniques. Such techniques may include:

} Using recent arm’s length market transactions
} Reference to the current fair value of another instrument that is substantially the same
} A discounted cash flow analysis or other valuation models

3.11  Impairment of non-financial assets

The Company assesses, at each reporting date, whether there is an indication that an asset may be impaired. If any indication exists, or when annual impairment testing for an asset is required, the Company estimates the asset’s recoverable amount. An asset’s recoverable amount is the higher of an asset’s or cash-generating unit’s (“CGU”) fair value less costs to sell and its value in use. A CGU is the smallest group of assets that generates cash inflows that are largely independent of the cash flows from other assets or groups of assets. Recoverable amount is determined for an individual asset, unless the asset does not generate cash inflows that are largely independent of those from other assets or Company of assets. When the carrying amount of an asset or CGU exceeds its recoverable amount, the asset is considered impaired and is written down to its recoverable amount.

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. In determining fair value less costs to sell, recent market transactions are taken into account. If no such transactions can be identified, an appropriate valuation model is used. These calculations are corroborated by valuation multiples, quoted share prices for publicly traded companies or other available fair value indicators.

The Company bases its impairment calculation on detailed budgets and forecast calculations, which are prepared separately for each of the Company’s CGUs to which the individual assets are allocated. These budgets and forecast calculations generally cover a period of five years. For longer periods, a long-term growth rate is calculated and applied to project future cash flows after the fifth year.

Impairment losses of continuing operations, including impairment on inventories, are recognized in the income taxesstatement in accordanceexpense categories consistent with ASC 740, “Income Taxes” (“ASC 740”). Under this method, deferredthe function of the impaired asset.

For assets excluding goodwill, an assessment is made at each reporting date to determine whether there is an indication that previously recognized impairment losses no longer exist or have decreased. If such indication exists, the Company estimates the asset’s or CGU’s recoverable amount. A previously recognized impairment loss is reversed only if there has been a change in the assumptions used to determine the asset’s recoverable amount since the last impairment loss was recognized. The reversal is limited so that the carrying amount of the asset does not exceed its recoverable amount, nor exceed the carrying amount that would have been determined, net of depreciation, had no impairment loss been recognized for the asset in prior years. Such reversal is recognized in the income statement.
F-23
ASIA PACIFIC WIRE & CABLE CORPORATION LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
3.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

3.12  Intangible assets

Computer software
The costs of acquiring software is capitalized separately as an intangible asset on the basis of the costs incurred to acquire and bring to use the specific software. Acquired software (licenses) is stated at cost less accumulated amortization and impairment losses.

Amortization of software applications is charged to operating expenses and/or cost on a straight-line basis over their estimated useful lives, from the date they are available for use.

The residual values and useful lives are reviewed at each balance sheet date and adjusted, if appropriate.

3.13  Taxes

Current income tax
Current income tax assets and liabilities for the current period are determined basedmeasured at the amount expected to be recovered from or paid to the taxation authorities.  The tax rates and tax laws used to compute the amount are those that are enacted or substantively enacted, at the reporting date in the countries where the Company operates.

Current income tax relating to items recognized directly in equity is recognized in equity and not in the income statement. Management periodically evaluates positions taken in the tax returns with respect to situations in which applicable tax regulations are subject to interpretation and establishes provisions where appropriate.

Deferred tax
Deferred tax is provided using the liability method on the differencetemporary differences between the financial reporting and tax bases of assets and liabilities using enactedand their carrying amounts for financial reporting purposes at the reporting date.

Deferred tax ratesliabilities are recognized for all taxable temporary differences, except:

}When the deferred tax liability arises from the initial recognition of goodwill or an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss; or
}In respect of taxable temporary differences associated with investments in subsidiaries, associates and interests in joint ventures, when the timing of the reversal of the temporary differences can be controlled and it is probable that the temporary differences will not reverse in the foreseeable future.

Deferred tax assets are recognized for all deductible temporary differences, the carry forward of unused tax credits and any unused tax losses. Deferred tax assets are recognized to the extent that it is probable that taxable profit will be in effect in the period inavailable against which the deductible temporary differences, are expected to reverse.

Current incomeand the carry forward of unused tax expense iscredits and unused tax losses can be utilized, except:


}When the deferred tax asset relating to the deductible temporary difference arises from the initial recognition of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss; or
}In respect of deductible temporary differences associated with investments in subsidiaries, associates and interests in joint ventures, deferred tax assets are recognized only to the extent that it is probable that the temporary differences will reverse in the foreseeable future and taxable profit will be available against which the temporary differences can be utilized.

The carrying amount of income taxes expected to be payable for the current year. Deferred income tax balances reflect the effects of temporary differences between the carrying amounts of assets and liabilities and their tax basis and are stated at enacted tax rates expected to be in effect when taxes are actually paid or recovered. ASC 740, requires that deferred tax assets be evaluated for future realizationis reviewed at each reporting date and reduced by a valuation allowance to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the Company believes a portion will notdeferred tax asset to be realized.  The Company considers many factors when assessing the likelihood of future realization of itsutilized. Unrecognized deferred tax assets including its recent cumulative earnings experienceare reassessed at each reporting date and expectations ofare recognized to the extent that it has become probable that future taxable income by taxing jurisdiction,profits will allow the carry-forward

deferred tax asset to be recovered.

F-24
ASIA PACIFIC WIRE & CABLE CORPORATION LIMITED AND SUBSIDIARIES                           


NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(In thousands of U.S. Dollars, except share data)

4.SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

Income Taxes (cont’d)

periods available

3.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

3.13  Taxes (continued)

Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the year when the asset is realized or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted at the reporting date.

Deferred tax relating to items recognized outside profit or loss is recognized outside profit or loss. Deferred tax items are recognized in correlation to the Company forunderlying transaction either in other comprehensive income or directly in equity.

Deferred tax reporting purposes,assets and other relevant factors. Deferreddeferred tax liabilities are offset if a legally enforceable right exists to set off current tax assets against current income tax expense (benefit) is the net change during the year inliabilities and the deferred incometaxes relate to the same taxable entity and the same taxation authority.

Uncertain tax asset or liability.

The Company adopted the provisions of ASC 740 toaccountposition

An entity’s tax position might be uncertain; for uncertainties in income taxes.  ASC 740 contains a two-step approach to recognizing and measuring uncertain tax positions.  The first step is to evaluateexample, where the tax position for recognitiontreatment of an item of expense or structured transaction may be challenged by determining if the weight of available evidence indicates it is more likely than not that the position will be sustained on audit, including resolution of related appeals or litigation processes, if any.  The second step is to measure the tax benefit as the largest amount, which is more than 50% likely of being realized upon ultimate settlement.  authorities.

The Company considers many factors when evaluating and estimating itseach uncertain tax positions individually, by first considering whether each position taken in the tax return is probable of being sustained on examination by the taxing authority, and recognizing a liability for each item that is not probable of being sustained. The liability then is measured using a single best estimate of the most likely outcome. The uncertain tax benefits, which may require periodic adjustments and which may not accurately anticipate actual outcomes. positions are presented in the current tax liabilities.

The Company’s policy is to recognize interest expense and penalties related to income tax matters as a component of income tax expense.

Property, Plant and Equipment

Property, plant and equipment are stated at cost less depreciation and any impairment losses. Asset leases qualifying as capital leases are also included in property, plant and equipment. Major renewals and improvements are capitalized and minor replacements, maintenance, and repair expenses are charged to current operations as incurred. Depreciation is computed using the straight-line method over the estimated useful lives of the assets or the respective lease term, whichever is shorter, as follows:

Land

3.14  

Nil

Land use rights

15 - 50 years

Buildings

5 - 30 years

Machinery and equipment

5 - 10 years

Motor vehicles

3 - 10 years

Office equipment

3 - 10 years

Revenue recognition

No depreciation expense is charged for construction in progress and machinery and equipment under installation.

Capitalized interest on construction in progress is added to the cost of the underlying asset and is depreciated over the estimated useful life of the asset in the same manner as the underlying asset. Interest capitalized for 2010 and 2011 amounted to $nil and $9, respectively. The capitalized interest was related to and has been included as part of the cost of Ningbo Pacific’s construction in progress. 

When property and equipment are retired, sold or otherwise disposed of, the asset’s carrying amount and related accumulated depreciation are removed from the accounts and any gain or loss is included in operations.

In 2006, the Company terminated the Ningbo Pacific joint venture and liquidated its major equipment at the Ningbo Pacific facility. In October 2009, the Company has made a resolution to acquire an additional 5.42% shareholding of Ningbo Pacific from the Republic of China (“PRC”) joint venture partner. The Company plans to resume manufacturing operation with new constructed facilities at the Ningbo Pacific site.  The acquisition of additional shareholding is expected to be completed in early 2013.


ASIA PACIFIC WIRE & CABLE CORPORATION LIMITED AND SUBSIDIARIES                           

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In thousands of U.S. Dollars, except share data)

4.SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES(continued) 

Goodwill

            Goodwill represents the excess of the cost of purchased business over the fair value of the underlying net assets acquired. Goodwill, is not amortized, but tested for impairment at least annually or more frequently if circumstances indicate that impairment may exist.  The Company determined it has three reporting units in which the entire goodwill was allocated to manufactured product segment.

            In accordance with ASC 350“Intangible – Goodwill and Others”, (“ASC 350”), the Company performed a two-step test to assess goodwill impairment as of December 31, 2011. First, the Company identifies potential goodwill impairment by comparing the fair value of a reporting unit with its carrying amount, including goodwill. The Company determines fair value using a discounted cash flow approach and makes reference to the market capitalization of the Company. If the carrying amount of a reporting unit exceeds its fair value, the second step of the goodwill impairment test is performed to measure the amount of goodwill impairment loss.

Based on the Company’s assessment conducted as of December 31, 2011, the Company recognized goodwill impairment charges of $8,791, and the carrying amount was $nil as of December 31, 2011. See note 6 – Goodwill.

Investments 

            Management determines the appropriate classification of its investments at the time of purchase and re-evaluates such designation as of each balance sheet date. 

            The Company accounts for its investments in equity securities of privately-held companies as cost method investment in accordance to ASC 325, “Investments – Others” as these securities do not have readily determinable fair value. Investments in which the Company does not have a controlling interest or an ownership voting interest to exert significant influence, and which are not publicly traded are accounted for at cost.                                                                            

            The Company accounts for its investments in equity securities that have readily determinable fair value using ASC 320, “Investments – Debt and Equity Securities”. Equity securities are classified as available-for-sale, as the Company does not trade in these securities, but rather they are held as longer term investments due to business relationships with the entities. Available-for-sale securities are carried at fair value, with the unrealized gains and losses, net of tax, reported in a separate component of shareholders’ equity.  Realized gains and losses and declines in values judged to be other-than-temporary on available-for-sale securities are included in investment income.  The cost of securities sold is based on the specific identification method.  Interest and dividends on securities classified as available-for-sale are included in investment income.

Investments in entities in which the Company can exercise significant influence but does not own a majority equity interest or control are accounted for using the equity method of accounting under ASC sub-topic 323-10,“Investments—Equity Method and Joint Ventures: Overall”(“ASC 323-10”), and included as investment in equity investees in the balance sheets. Under the equity method, the Company’s proportionate share of each equity investee’s net income or loss is included as share of income (losses) in equity investees in the statements of operations. An investor shall record its proportionate share of the investee’s equity adjustments for other comprehensive income (e.g. foreign currency items, etc) as increase or decrease to the investment account with corresponding adjustment in equity. The Company evaluated the investment in equity investee for impairment under ASC 323-10. An impairment loss on the investment in equity investee is recognized in the statements of operations when the decline in value is determined to be other-than-temporary.


ASIA PACIFIC WIRE & CABLE CORPORATION LIMITED AND SUBSIDIARIES                           

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In thousands of U.S. Dollars, except share data)

4.SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES(continued) 

Investments (cont’d)

            A judgmental aspect of accounting for investments (including investments in equity investees) involves determining whether an other-than-temporary decline in value of the investment has been sustained.  If it has been determined that an investment has sustained an other-than-temporary decline in its value, the investment is written down to its fair value, by a charge to earnings.  Such evaluation is dependent on the specific facts and circumstances.  Factors that are considered by the Company in determining whether an other-than-temporary decline in value has occurred include: the market value of the security in relation to its cost basis; the financial condition of the investee; and the intent and ability to retain the investment for a sufficient period of time to allow for recovery in the market value of the investment.

In 2009, 2010 and 2011, the Company recorded an impairment charge of $nil, $346 and $nil, respectively, related to certain available-for-sale investment. 

Impairment of Long-Lived Assets

The Company accounts for impairment of long-lived assets in accordance with ASC 360, “Property, Plant and Equipment”.  Long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.  In such instances, the Company estimates the undiscounted future cash flows that result from the use of the asset and its ultimate disposition.  If the sum of the undiscounted cash flows is less than the carrying value, the Company recognizes an impairment loss, measured as the amount by which the carrying value exceeds the fair value of the asset group, determined principally using discounted cash flows. 

In 2009, the Company recorded an impairment charge of $77 related to the impairment of a factory in Thailand (included in the manufactured products segment) that is not being used for operation.  The impairment charge was recorded to reduce the carrying value of the identified assets to fair values. Fair values were derived using a variety of methodologies, including cash flow analysis, estimates of sales proceeds and independent appraisals. Where cash flow analyses were used to estimate fair values, key assumptions employed, included estimates of future growth, estimates of gross margins and estimates of the impact of inflation. The charges were primarily the result of management’s revised outlook due to the prolonged unfavorable market conditions.

There was no impairment charge in 2010. In 2011, the Company recorded an impairment charge of $25 related to the damage to Siam Pacific’s machinery due to the flooding in Thailand. The impairment is stated as a line item, “Charges related to flooding” within operating expenses. See note 14.

Account Receivables and allowance for doubtful accounts

Accounts receivables are stated at face value less any allowance for doubtful accounts. The Company maintains allowance for doubtful accounts for estimated losses resulting from the inability of its customers to make required payments. Management considers the following factors when determining the collectability of specific customer accounts: customer credit-worthiness, customer financial condition, past transaction history with the customer, current economic industry trends, and changes in customer payment terms.


ASIA PACIFIC WIRE & CABLE CORPORATION LIMITED AND SUBSIDIARIES                           

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In thousands of U.S. Dollars, except share data)

4.SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES(continued) 

Lease obligations

In accordance with ASC 840, Leases, leases for a lessee are classified at the inception date as either a capital lease or an operating lease. The Company assesses a lease to be a capital lease if any of the following conditions exist: a) ownership is transferred to the lessee by the end of the lease term, b) there is a bargain purchase option, c) the lease term is at least 75% of the property’s estimated remaining economic life or d) the present value of the minimum lease payments at the beginning of the lease term is 90% or more of the fair value of the leased property to the lessor at the inception date. A capital lease is accounted for as if there was an acquisition of an asset and an incurrence of an obligation at the inception of the lease. The capitalized lease obligation reflects the present value of future rental payments, discounted at the appropriate interest rates. The cost of the asset is amortized over the lease term. However, if ownership is transferred at the end of the lease term, the cost of the asset is amortized as set out below under property, plant and equipment.

Operating lease expenses are recognized on a straight-line basis over the applicable lease term.

Revenue Recognition

            Revenue represents the invoiced value of goods sold, net of value added tax and returns, invoiced value on distribution activities, and service fee income on installation activities.  Revenue is recognized to the extent that it is probable that the economic benefits will flow to the Company and the revenue can be reliably measured.measured, regardless of when the payment is being made. Revenue is measured at the fair value of the consideration received or receivable, taking into account contractually defined terms of payment and excluding taxes or duty. The followingCompany assesses its revenue arrangements against specific criteria to determine if it is acting as principal or agent. The specific recognition criteria described below must also be met before revenue is recognized.

Sales


Sale of manufactured goods and distributed products

            The Company recognizes revenue

Revenue from the sale of manufactured goods is recognized when the significant risks and distributed products upon passagerewards of titleownership of the goods have passed to the customer that coincides with theirbuyer, usually on delivery and acceptance. These revenue recognition are recognized in accordance withSEC Staff Accounting Bulletin (SAB) No. 104. The Company recognizes its revenue of sale of distributed products at gross as the Company is the primary obligor in the transaction.

The Company classifies shipping and handling costs incurred within cost of sales.

            Supply, Delivery and Installation

goods.


SDI
The Company’s supply, delivery and installation services are considered as multiple elements arrangements and are accounted for in accordance with ASC subtopic 605-25,“Revenue Recognition: Multiple-Element Arrangements”(“ASC 605-25”). Elements such as installation service andIAS 18. The sale of cables and the installation service are considered as separate elements contained in aone single arrangement, or in related arrangements with the same customer. The Company allocates revenue to each element based on its relative fair value. The allocation of the fair value to the delivered elements is limited to the amount that is not contingent on future delivery of services or subject to customer-specified return or refund privileges.  The Company prospectively adopted Accounting Standards Update (“ASU”) No. 2009-13, Multiple-Deliverable Revenue Arrangements (“ASU 2009-13”), a consensus of the FASB Emerging Issues Task Force that amends ASC 605-25, on January 1, 2011.

In accordance with ASU 2009-13, certain delivered items in multiple-element arrangements, which previously would not qualify for separate units of accounting due to the lack of vendor-specific objective evidence or third-party evidence of selling price, are accounted for as separate units of accounting, to which the total consideration of the arrangements is allocated based on management’s best estimate of the selling price (“BESP”). We consider all reasonably available information in determining the BESP, including both market and entity-specific factors. The adoption of ASU 2009-13 does not have a material effect on our financial statements, the units of accounting and the pattern and timing of revenue recognition is not changed materially.

arrangement.

ASIA PACIFIC WIRE & CABLE CORPORATION LIMITED AND SUBSIDIARIES                           

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In thousands

Revenue of U.S. Dollars, except share data)

4.SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES(continued) 

Revenue Recognition (cont’d)

The Company recognizes revenue from installation activitiesSDI is accounted for using the percentage-of-completion method, based on the customer certification of the distancelength of cable laid with respect to the estimated total length of cable under the contract in accordance with IAS 11.

F-25
ASIA PACIFIC WIRE & CABLE CORPORATION LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
3.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

3.14  Revenue recognition (continued)

When the current estimates of total contract revenue and contract cost indicate a loss, a provision for the entire loss on the contract is made. Provision for losses is recognized in accordance with ASC 605-35, “Revenue Recognition-Construction-Typethe period in which they become evident. On a quarterly basis, the Company reviews the budget and Production-Type Contracts”. forecast whether a loss provision should be recorded.

Onerous operating contracts
Onerous contract is a type of contract in which the costs of meeting the obligations under the contract are higher than the economic benefits received under the contract.

The timingCompany has contracts to supply products that cost more to produce than originally determined in the contracts due to a rise in raw material costs. The Company established the unavoidable costs of meeting the obligations under the contract as a liability for the contractual responsibilities. The liability has been calculated based on the difference between the copper price on the London Metal Exchange (the “LME”) at reporting date and the prices determined in the contracts.  As of December 31, 2014 and 2013 the amount of onerous contracts were $41 and $125, respectively.

Bill and hold transaction
For a 'bill and hold' sales transaction, where delivery is delayed at the buyer's request, but the buyer takes title and accepts billing, the Company’s policy is not to recognize revenue until the delivery is made.

Payment received on the revenue of undelivered goods under bill and hold arrangements are recorded on the balance sheet as other current liabilities, as of December 31, 2014 and 2013 amounted to $11,202 and $5,297, respectively.

Rebates
Based on IAS 18, the amount of revenue recognitionarising on a transaction is usually determined by agreement between the entity and the buyer or user of cablethe asset. It is measured at the fair value of the consideration received or receivable taking into account the amount of any trade discounts and volume rebates allowed by the entity. Consequently, where an entity provides sales incentives to a customer when entering into a contract these are usually treated as rebates and installationwill be included in the measurement of (i.e. deducted from) revenue when the goods are delivered or services provided.

Provisions for rebates based on attainment of sales targets are substantially identical.

Bill-and-hold arrangements

            The Company recognizes revenueestimated and accrued as each of sale of cables under bill-and-hold arrangements requested by certain customers in Thailand, in accordance with SAB 104.

As at December 31, 2009, 2010 and 2011,the underlying sales transactions is recognized.


Provision for rebate should only be recorded when there is a contractually formal signed rebate contract exists.

At interim dates, if no reliable estimate can be made, the revenue recognized under bill-and-hold arrangements whereon the cablestransaction should not exceed the consideration that would be received if the maximum rebates were yet delivered was $8.6 million, $17.9 million and $5.8 million, respectively.

Customers’ incentive

The Company offers sales incentives in connection with power cable sales to wholesalers and distributors. These incentives include both rebates offered to customers for purchasing a certain volume of product during the year and settlement discounts for early payment of sales invoices. Both forms of incentives are recognized as a reduction to gross sales.

Foreign Currency Translation and Transactions

The functional currency of the Company’s international subsidiaries is generally the local currency or U.S. Dollars.  For these subsidiaries,taken. Therefore, the Company translatesassumes that the assetscustomers will achieve the necessary sales volume target to earn the maximum rebate. The provisions are subject to continuous review and liabilities at exchange rates in effect atadjustment as appropriate based on the most recent information available to management.


As of the balance sheet date, the Company recalculates and adjusts the provision for rebate based on the actual sales.

Interest income
For all financial assets measured at amortized cost, interest income is recorded using EIR. EIR is the rate that exactly discounts the estimated future cash payments or receipts over the expected life of the financial instrument or a shorter period, where appropriate, to the net carrying amount of the financial asset or liability. Interest income is included in finance income in the income statement.

Rental income
Rental income arising from operating leases on investment properties is accounted for on a straight-line basis over the lease terms and expense accountsis included in revenue due to its operating nature.

Dividends
Dividend revenue is recognized when the Company’s right to receive the payment is established, which is generally when shareholders approve the dividend.
F-26
ASIA PACIFIC WIRE & CABLE CORPORATION LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
3.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

3.15  Foreign currencies

The Company’s consolidated financial statements are presented in USD, which is also the parent company’s functional currency. For each entity the Company determines the functional currency and items included in the financial statements of each entity are measured using that functional currency.

Transactions and balances
Transactions in foreign currencies are initially recorded by the Company’s entities at average exchangetheir respective functional currency spot rates during the year.  Resulting currency translation adjustments are recorded directly to accumulated other comprehensive income within stockholders’ equity. 

Foreign currency transactions are recorded at the applicable rates of exchange in effect atdate the transaction dates.  first qualifies for recognition.


Monetary assets and liabilities denominated in foreign currencies at the balance sheet date are translated at the applicablefunctional currency spot rates of exchange at the reporting date.

Differences arising on settlement or translation of monetary items are recognized in effectprofit or loss with the exception of monetary items that are designated as part of the hedge of the Company’s net investment of a foreign operation. These are recognized in other comprehensive income until the net investment is disposed of, at which time, the cumulative amount is reclassified to profit or loss. Tax charges and credits attributable to exchange differences on those monetary items are also recorded in other comprehensive income.

Non-monetary items that date.  Gains and losses fromare measured in terms of historical cost in a foreign currency transactions are recorded intranslated using the consolidated statementsexchange rates at the dates of operations.

Foreign Currency Forward Contracts

The Company recognizes derivative financial instruments in the consolidated financial statementsinitial transactions. Non-monetary items measured at fair value regardless ofin a foreign currency are translated using the purposes or intent for holdingexchange rates at the instrument. Changes indate when the fair value is determined. The gain or loss arising on translation of derivative financial instruments are either recognized periodically in income or in shareholders’ equity as a component of comprehensive income depending on whether the derivative financial instruments qualify for hedge accounting, and if so, whether they qualify as anon-monetary items measured at fair value or cash flow hedge.

Generally, changesis treated in fair values of derivatives accounted for as fair value hedges are recorded in income alongline with the portionsrecognition of the changesgain or loss on change in the fair value of the hedgeditem (i.e., translation differences on items that relate to the hedged risks. Changes inwhose fair value of derivatives accounted for as cash flow hedges, to the extent they are effective as hedges, are recordedgain or loss is recognized in other comprehensive income net of deferred taxes. Changes in fair value of derivatives used as hedges of the net investment in foreign operationsor profit or loss are reportedalso recognized in other comprehensive income as part of the cumulative translation adjustment. Changes in fair values of derivatives not qualifying as hedges are reported in the consolidated statements of operations.

or profit or loss, respectively).

Translation to the presentation currency

The results and financial position of an entity whose functional currency are translated into a different presentation currency using the following procedures:

a.  assets and liabilities for each balance sheet presented are translated at the closing rate at the date of that balance sheet;
b.  income and expenses for each statement presenting profit or loss and other comprehensive income (ie including comparatives) are translated at exchange rates at the dates of the transactions;
c.  all resulting exchange differences shall be recognized in other comprehensive income; and
d.  for equity items, the historical rate is used; therefore, these equity items are not retranslated.
F-27
ASIA PACIFIC WIRE & CABLE CORPORATION LIMITED AND SUBSIDIARIES                           


NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(In thousands

3.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

3.16  Employee benefits

The Company has both defined contribution and defined benefit obligation. The liabilities of U.S. Dollars, except share data)

4.SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES(continued) 

Foreign Currency Forward Contracts (cont’d)

The Company’s subsidiaries use forward foreign exchange contracts to reduce their exposure to foreign currency risk for liabilities denominated in foreign currency. A forward foreign exchange contract obligates the Company to exchange predetermined amounts of specified foreign currencies at specified exchange rates on specified dates or to make an equivalent U.S. dollar payment equalarising from defined benefit obligations, and the related current service cost, are determined using the projected unit credit method.


For defined benefit plans, the cost charged to the valueincome statement consists of such exchange.  Realizedcurrent service cost, net interest cost and unrealizedpast service cost.  Re-measurements, comprising of actuarial gains and losses on foreign exchange contractsbut excluding net interest are included as foreign exchange gains or lossesrecognized immediately in the consolidated statementsbalance sheet with a corresponding debit or credit to retained earnings through other comprehensive income in the period in which they occur.  Re-measurements are not reclassified to profit or loss in subsequent periods. Contributions to defined contribution plans are charged to the income statement as incurred.  All past service costs are recognized at the earlier of operationswhen the amendment occurs.
Compensated absence
The cost of accumulating paid absences is recognized when employees render the service that increases their entitlement to future paid absences.

The cost of accumulating paid absences is measured as such contracts do not qualify for hedge accounting.

Asthe additional amount that the entity expects to pay as a result of December 31, 2010 and 2011, the Company had outstanding forward exchange purchase contracts with notional valuesunused entitlement that has accumulated at the end of $nil and $2,317, respectively. The outstanding forward exchange contracts as of December 31, 2011 matured in January 2012. the reporting period.


3.17  Earnings per share

The Company records these contracts at fair value with the related gains and losses of $nil, $nil and $64, for the years ended December 31, 2009, 2010 and 2011, respectively in the consolidated statements of operations.

Copper Future Contracts

Copper future contracts are designed to manage the Company’s consolidated exposure to change in inventory value due to fluctuations in market prices for selected operating units. Within the ordinary course of business the Company routinely enters into purchase transactions for copper. The majority of these transactions take the form of contracts that were entered into and continue to be held for the purpose of receipt or delivery of the copper in accordance with the Company’s expected sales or production timing or usage requirements. Such contracts are not within the scope of hedging accounting, or derivatives. To date, these contract positions have not had a material effect on the Company’s financial position, results of operations or cash flow.

Earnings (Loss) Per Share

            Basicpresents basic and diluted earnings (loss) per share are(“EPS”) data for its common shares. Basic EPS is calculated in accordance with ASC 260, “Earnings Per Share”.  There are no dilutive equity instruments for all periods presented.


ASIA PACIFIC WIRE & CABLE CORPORATION LIMITED AND SUBSIDIARIES                           

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In thousands of U.S. Dollars, except share data)

4.SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES(continued) 

Fair Value Measurements

Effective from January 1, 2008,by dividing the Company adopted the provisions of ASC 820, “Fair Value Measurements and Disclosures” for financial assets and liabilities. Under ASC 820, fair value is defined as the price that would have been received to sell an asset or paid to transfer a liability (i.e., the “exit price”) in an orderly transaction between market participants at the measurement date.

In determining fair value, the Company uses various valuation approaches. ASC 820 establishes a hierarchy for inputs used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the most observable inputs be used when available. Observable inputs are inputs that market participants would use in pricing the asset or liability developed based on market data obtained from sources independent of the Company. Unobservable inputs are inputs that reflect the Company’s assumptions about the assumptions market participants would use in pricing the asset or liability developed based on the best information available in the circumstances. The hierarchy is broken down into three levels based on the observability of inputs as follows:

•   Level 1 - Valuations based on quoted prices in active markets for identical assets that the Company has the ability to access. Valuation adjustments and block discounts are not applied to Level 1 instruments. Since valuations are based on quoted prices that are readily and regularly available in an active market, valuation of these products does not entail a significant degree of judgment.

•   Level 2 - Valuations based on one or more quoted prices in markets that are not active or for which all significant inputs are observable, either directly or indirectly.

•   Level 3 - Valuations based on unobservable inputs which are supported by little or no market activity and significant to the overall fair value measurement.

The availability of observable inputs can vary from investment to investment and is affected by a wide variety of factors, including, for example, the type of investment, the liquidity of markets and other characteristics particular to the transaction. To the extent that valuation is based on models or inputs that are less observable or unobservable in the market, the determination of fair value requires more judgment and the investments are categorizes as Level 3.

The carrying amounts of financial instruments, including cash and cash equivalents, bank deposits, trade receivables, other current assets, trade payables, related party balances and other liabilities approximate their fair value due to the short-term maturities of such instruments.


ASIA PACIFIC WIRE & CABLE CORPORATION LIMITED AND SUBSIDIARIES                           

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In thousands of U.S. Dollars, except share data)

4.SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES(continued) 

Recent Pronouncements

In May 2011, the FASB issued an additional guidance ASU 2011-04  “Fair Value Measurement (Topic 820): Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs” which clarifies the application of existing fair value measurement and disclosure requirements, changes certain fair value measurement principles and requires additional disclosures about fair value measurements. The updated guidance is effective on a prospective basis for financial statements issued for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2011. The adoption of this guidance will not have a material impact on the Company’s consolidated financial statements.

In June 2011, the FASB issued an ASU 2011-05“Presentation of Comprehensive Income” which amended guidance for the presentation of comprehensive income. The amended guidance requires the presentation of comprehensive income, the components of net income and the components of other comprehensive income either in a single continuous statement of comprehensive income or in two separate but consecutive statements. The amended guidance also requires presentation of adjustments for items that are reclassified from other comprehensive incomeattributable to net income in the statement where the components of net income and the components of other comprehensive income are presented. The amended guidance is effective on a retrospective basis for financial statements issued for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2011. The Company believes the adoption of this update will change the order in which certain financial statements are presented and provide additional detail on those financial statements when applicable, but will not have any other impact on its financial statements or results of operations. The Company plans to adopt this standard with effect during and from the interim period ended March 31, 2012.

In December 2011, ASU No. 2011-12, “Comprehensive Income (Topic 220): Deferral of the Effective Date for Amendments to the Presentation of Reclassifications of Items Out of Accumulated Other Comprehensive Income in Accounting Standards Update No. 2011-05”. This ASU defers the changes in ASU 2011-05 that relate to the presentation of reclassification adjustments and supersedes certain pending paragraphs. ASU 2011-12 will be applied retrospectively. ASU 2011-12 is effective for fiscal years, and interim periods within those years, beginning after December 15, 2011. Early adoption is permitted. The Company believes the adoption of this update will change the order in which certain financial statements are presented and provide additional detail on those financial statements when applicable, but will not have any other impact on its financial statements or results of operations. The Company plans to adopt this standard during the interim period ended March 31, 2012.


ASIA PACIFIC WIRE & CABLE CORPORATION LIMITED AND SUBSIDIARIES                           

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In thousands of U.S. Dollars, except share data)

5.SHORT-TERM BANK DEPOSITS

 

 

As of December 31

 

 

2010

 

2011

 

 

 

 

 

Unrestricted short-term bank deposits

 

 $–

 

$ 2,529

Restricted short-term bank deposits

 

17,422

 

12,024

 

 

$ 17,422

 

$ 14,553

Short-term bank deposits are deposits with maturities of more than three months but less than one year. Restricted short-term bank deposits represent the amounts of cash pledged by two subsidiaries in Thailand to secure credit facilities granted by financial institutions.

These bank deposits bear interest rates ranging from 0.06% to 1.98% and 0.3% to 3.7% per annum as of December 31, 2010 and 2011, respectively.

6.GOODWILL 

Goodwill of $8,801 as of December 31, 2010 relating to the manufactured products segment and the changes in the carrying amount of goodwill are as follows:

Balance as of December 31, 2010

$ 8,801

Disposal of a subsidiary

(10)

Impairment charge

(8,791)

Balance as of December 31, 2011

$ –  

In accordance with ASC 350, the Company assessed the fair value of the reporting unit as of December 31, 2011. The Company adopted the discounted cash flow approach and, considering that the reporting unit constituted the majority of the overall consolidated group, by reference to the closing price of its common stock on that date as well as an assumed control premium. From January 2011 to December 2011, the stock market downturn caused a decline in the Company’s stock price by 54.8%, which resulted in a significant reduction in the Company’s market capitalization. As of December 31, 2011, the assessed fair value was below the carrying value of the reporting unit. The Company then performed a hypothetical purchase price allocation using the fair value of reporting unit and determined that the goodwill was fully impaired. As a result, the Company recognized a goodwill impairment charge of $8,791 for the year ended December 31, 2011 as a separate item in the consolidated statements of operations.

7.INVESTMENTS 

A summary of the carrying values and balance sheet classification of all investments in privately-held equity securities and available-for-sale securities was as follows: 

 

 

As of December 31

 

 

2010

 

2011

 

 

 

 

 

Available-for-sale securities, at fair value

 

$

 92

 

$

 –

Equity securities in privately-held companies, at cost

 

652

 

618

Total investments

 

$

 744

 

$

 618


ASIA PACIFIC WIRE & CABLE CORPORATION LIMITED AND SUBSIDIARIES                           

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In thousands of U.S. Dollars, except share data)

7.INVESTMENTS (continued)

The investments in equity securities in privately-held companies are recorded at cost as their market value is not readily determinable. It consists of the investment in Thai Metal Processing Co., Ltd, which is engaged in the fabrication of copper rods.  

       The investments in available-for-sale securities above represent the investments in TT&T Public Company Limited (TT&T), which is listed on the Stock Exchange of Thailand. Its principal activity is the operation of a provincial telephone network throughout Thailand and services include, fixed line telephone, pay phone, data communication and distribution of telephone equipment.

During 2011, the Company recorded an unrealized loss of $68 on its investments in TT&T in other comprehensive income. In June 2011, the Company sold the investments in TT&T and received the proceeds of $24. The amount of unrealized loss of $68 was reclassified out of accumulated other comprehensive income into consolidated statements of operations.

8.BANK LOANS AND OVERDRAFTS

Bank loans and overdrafts consist of the following:

 

As of December 31,

 

2010

2011

Bank loans and overdrafts

$ 25,259

$13,886

Trust receipts

42,092

38,927

Total bank loans and overdrafts

$ 67,351

$ 52,813

Under line of credit arrangements for short-term debt with the Company’s bankers, the Company may borrow up to approximately $316,369 (2010: $292,833) on such terms as the Company and the banks may mutually agree upon.  These arrangements do not have termination dates but are reviewed annually for renewal.  As of December 31, 2011, the unused portion of the credit lines was approximately $224,640 (2010:$209,634), which included unused letters of credit amounting to$128,409 (2010: $128,211). Letters of credit are issued by the Company in the ordinary course of business through major financial institutions as required by certain vendor contracts. As of December 31, 2011, the Company had open letters of credit totaling$49,596 (2010: $53,724). Liabilities relating to the letters of credit are included in current liabilities.

            The credit linesshareholders of the Company were collateralized by:

(i)Mortgage of the Company’s land, buildings, machinery and equipment with a total carrying amount of $15,792 at December 31, 2011 (2010: $17,177);

(ii)    ��         Pledge of short-term deposits and accounts receivables of $12,024 at December 31, 2011 (2010: $16,104);

(iii)Pledge of not fewer than 112 million shares of Charoong Thai; and  

(iv)Corporate guarantee issued by the Company and a subsidiary of the Company.

(v)A trading facility was secured by the assets with total carrying amount of $31,414  of a subsidiary as at December 31, 2011 (2010:$28,484).

            The weighted average interest rates on bank loans and overdrafts as of December 31, 2009, 2010 and 2011 were 4.4%, 3.6% and 3.7% per annum, respectively.


ASIA PACIFIC WIRE & CABLE CORPORATION LIMITED AND SUBSIDIARIES                           

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In thousands of U.S. Dollars, except share data)

8.BANK LOANS AND OVERDRAFTS (continued)

During 2011, CCH (HK) entered into a bank loan agreement with Bangkok Bank Hong Kong Branch with a total cash loan of US$ 14 million and a trade facility of US$ 8 million. The cash loan carries an interest rate of SIBOR (Singapore Inter-bank Borrowing Rate) plus 2.5% for a period of 5.5 years, adjusted quarterly as the SIBOR fluctuates. The bank loan is guaranteed by the Company, as guarantor.  As of December 31, 2011, CCH (HK) was not in compliance with certain financial and non-financial loan covenants and the cash loan would become callable on demand. The outstanding balance was classified as a current liability as of December 31, 2011. The Company started negotiation in December 2011 with the Bank on revising the loan covenants and issuing waiver for the default. Up to the date of these financial statements, the negotiation is still in process.

9.EARNINGS (LOSS) PER SHARE

The Company computes earnings (loss) per share in accordance with ASC 260 “Earning Per Share”. Basic net earnings (loss) per share is computed by dividing net income (loss) by the weighted-average number of common shares outstanding during the period. Diluted net earnings (loss) per share is computed by dividing net income (loss) byperiod, adjusted for own shares held.


In calculating diluted EPS, the sum of the weighted-average number of common shares outstanding and ifshould be that used in calculating the basic EPS, plus the weighted average number of shares that would be issued on the conversion of all the dilutive the potential common shares into common shares. The earnings figure should be that used for basic EPS adjusted to reflect any post-tax effects from changes that would arise if the potential shares outstanding duringin the period.

The following table sets forthperiod were actually issued.


3.18  Treasury shares

Own equity instruments that are reacquired (treasury shares) are recognized at cost and deducted from equity.  No gain or loss is recognized in the computationprofit or loss on the purchase, sale, issue or cancellation of basicthe Company’s own equity instruments. Any difference between the carrying amount and diluted earnings (loss) attributablethe consideration, if reissued, is recognized in additional paid-in capital. Voting rights related to common shareholders per share:

treasury shares are nullified and no dividends are allocated to them.
 

Years ended December 31,

 

 

2009

 

2010

 

2011

 

 

 

 

 

 

 

Numerator:

 

 

 

 

 

 

Income (loss) attributable to APWC from continuing operations

 

$ 9,858

 

$ 14,142

 

$ (6,832)

Income (loss) attributable to APWC from discontinued operations

 

231

 

(2)

 

1,393

Net income (loss) attributable to APWC

 

$ 10,089

 

$ 14,140

 

$ (5,439)

 

 

 

 

 

 

 

Denominator (in number of shares):

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted-average common shares outstanding - basic and diluted

 

13,830,769

 

13,830,769

 

13,830,769

 

 

 

 

 

 

 

Earnings (loss) per share - basic and diluted

 

 

 

 

 

 

Continuing operations

 

$ 0.71

 

$ 1.02

 

$ (0.49)

Discontinued operations

 

0.02

 

(0.00)

 

0.10

Total earnings (loss) per share - basic and diluted

 

$ 0.73

 

$ 1.02

 

$ (0.39)


F-28

ASIA PACIFIC WIRE & CABLE CORPORATION LIMITED AND SUBSIDIARIES                           


NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(

3.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

3.19  Investments in an associate

The Company’s investment in its associates are accounted for using the equity method. An associate is an entity in which the Company has significant influence. Under the equity method, the investment is initially recognized at cost. The carrying amount of the investment is adjusted to recognize changes in the Company’s share of net assets of the associate since the acquisition date. Goodwill relating to the associate is included in the carrying amount of the investment and is neither amortized nor individually tested for impairment.

The income statement reflects the Company’s share of the results of operations of the associate. Any change in other comprehensive income of those investees is presented as part of the Company’s other comprehensive income.  When there has been a change recognized directly in the equity of the associate, the Company recognizes its share of any changes, when applicable, in the statement of changes in equity. Unrealized gains and losses resulting from transactions between the Company and the associate are eliminated to the extent of the interest in the associate.

The Company’s share of profit or loss of an associate is shown on the face of the income statement and represents profits or loss after tax and non-controlling interests in the subsidiaries of the associate.

The financial statements of the associate are prepared for the same reporting period as the Company. When necessary, adjustments are made to bring the accounting policies in line with those of the Company.
After application of the equity method, the Company determines whether it is necessary to recognize an impairment loss on its investment in its associate. The Company determines at each reporting date whether there is any objective evidence that the investment in associates is impaired. If this is the case, the Company calculates the amount of impairment as the difference between the recoverable amount of the associate and its carrying value and recognizes the amount in share of losses of associates in the income statement.

Upon loss of significant influence over the associate, the Company measures and recognizes any retained investment at its fair value. Any difference between the carrying amount of the associate upon loss of significant influence and the fair value of the retaining investment and proceeds from disposal is recognized in profit or loss.

3.20  Government grant

Government grants are recognized where there is reasonable assurance that the grant will be received and all attached conditions will be complied with. When the grant relates to an expense item, it is recognized as other income on a systematic basis over the periods that the related costs, which it is intended to compensate, are expensed.  When the grant relates to an asset, it is recognized as an liability in equal amounts over the expected useful life of the related asset.

3.21  Non-current assets held for sale

The Company classifies non-current assets and disposal groups as held for sale/distribution to owners if their carrying amounts will be recovered principally through a sale/distribution rather than through continuing use. Non-current assets and disposal groups are measured at the lower of their carrying amount and fair value less costs to sell. The criteria for held for sale classification is regarded met only when the sale is highly probable and the asset or disposal group is available for immediate sale in its present condition. Management must be committed to the sale, which should be expected to qualify for recognition as a completed sale within one year from the date of classification.

Property, plant and equipment and intangible assets once classified as held for sale/distribution to owners are not depreciated or amortized.

When equity method investments are classified as held for sale, the investor discontinues the use of the equity method from the date that the investment (or the portion of it) is classified as held for sale; instead, the associate or joint venture is then measured at the lower of its carrying amount and fair value less cost to sell.
F-29
ASIA PACIFIC WIRE & CABLE CORPORATION LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
3.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

3.22  Significant accounting judgements, estimates and assumptions

The preparation of the Company’s consolidated financial statements requires management to make judgements, estimates and assumptions that affect the reported amounts of revenues, expenses, assets and liabilities, and the accompanying disclosures, and the disclosure of contingent liabilities. Uncertainty about these assumptions and estimates could result in outcomes that require a material adjustment to the carrying amount of assets or liabilities affected in future periods.

Judgements

In thousandsthe process of U.S. Dollars, except share data)

10.VALUATION AND QUALIFYING ACCOUNTS

Description

Balance at beginning of year

Net charge (credit) to income

Deduction

Currency translation adjustment

 

Balance atend of year

Year ended December 31, 2009:

 

 

 

 

 

Allowance for doubtful accounts

$ 9,644

$ (860)

$ (326)

$ 236

$ 8,694 

Inventory impairment

 

 

 

 

 

- Lower of cost or market

26,282

(24,268) 

42

1,158

3,214 

- Obsolescence

433

319 

(6)

35

781 

Allowance for deferred tax assets

6,683

(4,781) 

–

587

2,489

 

$ 43,042

$ (29,590)

$ (290)

$ 2,016 

$ 15,178

Year ended December 31, 2010:

 

 

 

 

 

Allowance for doubtful accounts

$ 8,694

$ (1,317)

$ (1,063)

$ 572 

$ 6,886 

Inventory impairment

 

 

 

 

 

- Lower of cost or market

3,214

(2,219)

–

201 

1,196 

- Obsolescence

781

245

–

93 

1,119 

Allowance for deferred tax assets

2,489

2,460

–

(132)

4,817

 

$ 15,178

$ (831)

$ (1,063)

$ 734 

$ 14,018 

Year ended December 31, 2011:

 

 

 

 

 

Allowance for doubtful accounts

$ 6,886

$ (1,555)

$ (664)

$ (53) 

$ 4,614 

Inventory impairment

 

 

 

 

 

- Lower of cost or market

1,196

1,725

(888)

(14) 

2,019 

- Obsolescence

1,119

268

–

(81) 

1,306 

- Charges related to flooding

–

3,572

– 

(130)

3,442 

Allowance for deferred tax assets

4,817

(3,942)

–

–  

875

 

$14,018

$ 68

$ (1,552)

$ (278) 

$ 12,256 

During 2009,applying the copperCompany’s accounting policies, management has made the following judgements, which have the most significant effect on the amounts recognized in the consolidated financial statements:


Bill and hold transaction
Revenue from sale of goods is recognized when the significant risks and rewards of ownership of the goods have been transferred to the buyer, usually on delivery of the goods.

Estimates and assumptions

The key assumptions concerning the future and other key sources of estimation uncertainty at the reporting date, that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year, are described below. The Company based its assumptions and estimates on parameters available when the consolidated financial statements were prepared. Existing circumstances and assumptions about future developments, however, may change due to market changes or circumstances arising beyond the control of the Company. Such changes are reflected in the assumptions when they occur.

Impairment of non-financial assets
At each reporting date or whenever events indicate that the asset’s value has declined or significant changes in the market with an adverse effect have taken place, the Company assesses whether there is an indication that an asset in the scope of IAS 36 may be impaired. If any indication exists, the Company completes impairment testing for the CGU to which the individual assets belong. Where the carrying amount of an asset or CGU exceeds its recoverable amount, the asset is considered impaired and is written down to its recoverable amount. The recoverable amount of an individual asset or CGU is the higher of fair value less costs to sell and its value in use. The fair value less costs of disposal calculation is based on available data from binding sale arrangements, conducted at arm’s length, for similar assets or observable market prices less incremental costs for disposal of the assets. The value in use is measured at the net present value of the future cash flows the entity expects to derive from the asset or CGU. Cash flow projection involves subjective judgments and estimates which include the estimated useful lives of property, plant and equipment, capacity that generates future cash flows, capacity of physical output, potential fluctuations of economic cycle in the industry and the Company’s operating situation.

Fair value disclosure of investment properties
The Company carries its investment properties at cost, and discloses the fair value of the investment properties in footnotes.  The Company engaged an independent valuation specialist to assess fair value. The valuation has been made on London Metal Exchange (the “LME”) gradually rosethe assumption to sell the property interests on the open market in the neighborhood without the benefit of any deferred term contract, leaseback, joint venture, management agreement or any similar arrangement which would serve to increase the value of the property interests. The method of valuation used to determine the fair value of the investment properties is provided in Note 17.
F-30
ASIA PACIFIC WIRE & CABLE CORPORATION LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
3.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

3.22  Significant accounting judgements, estimates and assumptions (continued)

Fair value of financial instruments
Where the fair values of financial assets and financial liabilities recorded in the balance sheet cannot be derived from $3,220active markets, they are determined using valuation techniques including income approach (for example, the discounted cash flows model) or the market approach. Changes in January 2009assumptions about these factors could affect the reported fair value of the financial instruments. Please refer to $6,981 in December 2009. Note 11 for more details.

Impairment of trade receivables
The previous recognizedCompany maintains an allowance for estimated loss arising from the inability of its customers to make the required payments. The Company makes its estimates based on the ageing of its trade receivable balances, customers’ creditworthiness, historical write-off experience and recovery of collateral. If the financial condition of its customers was to deteriorate so that the actual impairment loss might be higher than expected, the Company would be required to revise the basis of making the allowance and its future result would be affected.

Refer to Note 12 and Note 26 for more information regarding the impairment of $24,268 duetrade receivables and the related credit risks.

Net realizable value of inventory
Net realized value is the estimated selling price in the ordinary course of business less estimated costs to lowercompletion and the estimated costs necessary to make the sale. Management makes reference to actual sales prices after reporting date when making their estimate of costnet realizable value.

Refer to Note 13 for more information regarding the net realizable value of inventory.

Taxes
Uncertainties exist with respect to the interpretation of complex tax regulations, changes in tax laws, and the amount and timing of future taxable income. Given the wide range of international business relationships and the long-term nature and complexity of existing contractual agreements, differences arising between the actual results  and the assumptions made, or market was creditedfuture changes to costsuch assumptions, could necessitate future adjustments to tax income and expense already recorded. The Company establishes provisions, based on reasonable estimates, for possible consequences of sales for those finished goodsaudits by the tax authorities of the respective counties in which were sold at above marketit operates. The amount of such provisions is based on various factors, such as experience of previous tax audits and differing interpretations of tax regulations by the taxable entity and the responsible tax authority. Such differences of interpretation may arise on a wide variety of issues depending on the conditions prevailing in 2009.

During 2010,the respective domicile of the Company exercised rigorous controls over raw-material inventory and through long-term copper future contacts reduced its exposurecompanies.


Deferred tax assets are recognized for unused tax losses to the fluctuations in market prices for copper,extent that it is probable that taxable profit will be available against which resulted inthe losses can be utilized. Significant management judgement is required to determine the amount of deferred tax assets that can be recognized, based upon the likely timing and the level of future taxable profits together with future tax planning strategies.

As of December 31, 2014, the Company has $7,730 (2013: $7,739) of tax losses carried forward. These losses related to subsidiaries that have a significant reductionhistory of losses, do not expire and may not be used to offset taxable income elsewhere in the inventory impairment.

During 2011,Company except for $40 (2013: $194) that will be realized. The subsidiaries do not have any tax planning opportunities available that could support the decreaserecognition of these losses as deferred tax assets. On this basis, the Company has determined that it cannot recognize deferred tax assets on the tax losses carried forward.


If the Company was able to recognize all unrecognized deferred tax assets, profit and equity would have increased by $2,815 (2013: $1,566; 2012: $1,341). Further details on taxes are disclosed in commodity prices, including thatNote 8.

Post-employment benefits under defined benefit plans
In accordance with the Thailand labor law, Charoong Thai and its subsidiaries are obliged to make payment to retiring employees, at rate of copper, resulted in a write-down1 to 10 times of their monthly salary rate, depending on the length of service.  In addition, Charoong Thai also has the extra benefit plan to make payment to qualified retiring employees 29 times of their final monthly salary.
F-31
ASIA PACIFIC WIRE & CABLE CORPORATION LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
3.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

3.22  Significant accounting judgements, estimates and assumptions (continued)

Post-employment benefits under defined benefit plans (continued)
The cost of the inventorydefined benefit pension plan and the present value of the pension obligation are determined using actuarial valuations. An actuarial valuation involves making various assumptions that may differ from actual developments in the future. These include the determination of the discount rate, future salary increases and mortality rates. Due to the complexity of the valuation and its long-term nature, a defined benefit obligation is highly sensitive to changes in these assumptions. All assumptions are reviewed at each reporting date.

In determining the appropriate discount rate, management considers the limited corporate bond in Thailand, taken into account the yields on Thai Government Bonds and extrapolated maturity corresponding to the expected duration of the defined benefit obligation.

The mortality rate is based on most recent mortality investigation on policyholders of life insurance companies in Thailand. Future salary increases and pension increases are based on expected future inflation rates derived from external economic data and together with historical experience of Charoong Thai.

Further details about the assumptions used, including a sensitivity analysis, are given in Note 21.

Revenue recognition of SDI projects
Changes in percentage of completion would result in changes in contract revenue and costs recognized in the statement of comprehensive income during the year. Significant estimation by management is also required in assessing the recoverability of the contracts based on estimated total contract revenue and contract costs.  In making the estimation, management’s evaluation is based on the actual level of work performed and past experience.

The carrying amount of the Company’s gross amounts due from customers for contract work-in-progress is disclosed in Note 14.
F-32
ASIA PACIFIC WIRE & CABLE CORPORATION LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
4.  
STANDARDS ISSUED BUT NOT YET EFFECTIVE

The standards and interpretations that are issued, but not yet effective, up to the date of issuance of the Company’s financial statements are disclosed below.  The Company intends to adopt these standards, if applicable, when they become effective.

IFRS 15 Revenue from contracts with customers

In May 2014, the IASB issued IFRS 15, Revenue from Contracts with Customers. According to the new standard, revenue is recognized to depict the transfer of promised goods or services to a customer in an amount that reflects the consideration to the entity expects to be entitled in exchange for those goods or services. Revenue is recognized when, or as, the customer obtains control of the goods or services. IFRS 15 also includes guidance on the presentation of contract balances, this is, assets and liabilities arising from contracts with customers, depending on the relationship between the entity’s performance and the customer’s payment. In addition, the new standard requires a set of quantitative and qualitative disclosures to enable users of financial statements to understand the nature, amount, timing and uncertainty of revenue and cash flow arising from contracts with customers. IFRS 15 supersedes IAS 11, Construction Contracts and IAS 18, Revenue as well as related interpretations. IFRS 15 is effective for annual periods beginning on or after January 1, 2017. Earlier application is permitted. The Company is currently assessing the impact of the standard on its consolidated financial statements.

Accounting for Acquisitions of interests in Joint Operations-Amendments to IFRS 11

In May 2014, the IASB issued an amendment to IFRS 11, Joint Arrangements, entitled Accounting for Acquisitions of Interest in Joint Operations. The amendment adds new guidance on how to account for the acquisition of an interest in a joint operation that constitutes a business and requires the application of IFRS 3, Business Combinations, for such acquisitions. The amendment is effective for annual periods beginning on or after January 1, 2016. Earlier application is permitted. The Company does not expect the amendments to have an impact on its consolidated financial statements.

Clarification of Acceptable Methods of Depreciation and Amortization- Amendments to IAS 16 and IAS 38

In May 2014, the IASB issued amendments to IAS 16, Property, Plant and Equipment, and IAS 38, Intangible Assets, entitled Clarification of Acceptable Methods of Depreciation and Amortization. Amendments clarify that the use of revenue-based methods to calculate the depreciation of an asset is not appropriate, because revenue generated by an activity that includes the use of an asset generally reflects factors other than the consumption of the economic benefits embodied in the asset. These amendments are effective for annual periods beginning on or after January 1, 2016. Earlier application is permitted. The Company does not expect these amendments to have an impact on its consolidated financial statements.

IFRS 9 Financial Instruments

In July 2014, the IASB issued the final version of IFRS 9, Financial Instruments, which replaces the guidance in IAS 39, Financial Instruments: Recognition and Measurement and all previous versions of IFRS 9. This final version includes requirements on: (1) classification and measurement of financial assets and liabilities; (2) impairment; and (3) hedge accounting. IFRS 9 introduces a single approach for the classification and measurement of financial assets according to their cash flow characteristic and the business model they are managed in, and provides a new impairment model based on expected credit losses. IFRS 9 also includes new regulations regarding the application of hedge accounting to better reflect an entity’s risk management activities especially with regard to managing non-financial risks. IFRS 9 is effective for annual periods beginning on or after January 1, 2018. Earlier application is permitted. The Company is currently assessing the impact of the standard on its consolidated financial statements.

Sales or Contribution of Assets between an investor and its Associate or Joint Venture-Amendments to IFRS 10 and IAS 28

In September 2014, the IASB issued amendments to IFRS 10, Consolidated Financial Statements and IAS 28, Investments in Associates and Joint Ventures, entitled Sales or Contribution of Assets between an Investor and its Associate or Joint Venture. These narrow scope amendments clarify, that a full gain or loss is recognized when a transaction involves a business (whether it is housed in a subsidiary or not), and a partial gain or loss is recognized when a transaction involves assets that do not constitute a business. The amendments are effective for annual periods beginning on or after January 1, 2016. Earlier application is permitted. The Company does not expect the amendments to have an impact on its consolidated financial statements.
F-33
ASIA PACIFIC WIRE & CABLE CORPORATION LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
4.STANDARDS ISSUED BUT NOT YET EFFECTIVE (continued)

Investment Entities: Applying the Consolidated Exception-Amendments to IFRS 10, IFRS 12 and IAS 28

In December 2014, IASB issued narrow scope amendments to IFRS 10, Consolidated Financial Statements, IFRS 12, Disclosure of Interests in Other Entities and IAS 28, Investments in Associates and Joint Ventures. These amendments introduce clarifications to the requirements when accounting for investment entities.  The amendments also provide relief in particular circumstances, which will reduce the costs of applying the Standards. The amendments are effective for annual periods beginning on or after January 1, 2016. Earlier application is permitted. The Company does not expect the amendments to have an impact on its consolidated financial statements.

Disclosure Initiative – Amendments to IAS 1

In December 2014, IASB issued the amendments to IAS 1, Presentation of Financial Statements. The amendments mark the completion of the five narrow-focus improvements to disclosure requirements include (1) amended guidance on materiality in IAS 1 to clarify that immaterial information can detract from useful information, materiality applies to the whole of the financial statements and materiality applies to each disclosure requirement in an IFRS; and (2) amended guidance on the order of the notes, including accounting policies to  remove language from IAS 1 that has been interpreted as prescribing the order of notes to the financial statements and clarify that entities have flexibility about where they disclose accounting policies in the financial statements. The amendments are effective for annual periods beginning on or after January 1, 2016. Earlier application is permitted. The Company does not expect the amendments to have a material impact on its consolidated financial statements.

5.  SEGMENT INFORMATION
For management purposes, the Company organizes its business segments along regional lines and has three operating segments, consisting of the North Asia region, the Thailand region and the Rest of the World (“ROW”) region.
Each segment engages in business activities generating revenues and incurring expenses.  Each segment generates a management report which contains its own financial information and submits to the Company’s chief operating decision maker (“CODM”) for review on a monthly basis.  The Company’s Chief Executive Officer (“CEO”) and Chief Operating Officer (“COO”) are the ones who review all the management reports provided by each segment, makes the decisions on how the resources are to be allocated and assesses the operating performances based on the reports.  Each reporting segment has a segment manager who is in charge of the business operations in such region and regularly contacts the Company’s CEO and COO to discuss operational-related matters.
As the three operating segments exceed the quantitative thresholds, they are also reportable segments.
In 2014, the Company changed the structure of its internal organization, which caused the composition of its operating segments to change.  The segment information was restated retroactively to reflect the change.
F-34
ASIA PACIFIC WIRE & CABLE CORPORATION LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
5.  SEGMENT INFORMATION (continued)

Transfer prices between operating segments are on an arm’s length basis in a manner similar to transactions with third parties.

Segment performance is evaluated based on profit or loss and is measured consistently with profit or loss in the consolidated financial statements. The accounting policies for segment information, including transactions entered between segments are generally the same as those described in the summary of significant accounting policies.
Inter-segment revenues are eliminated upon consolidation and reflected in the “adjustments and eliminations” column. All other adjustments and eliminations are part of detailed reconciliations presented further below.
              Corporate expense    
              adjustments    
Year ended
December 31, 2014
 
North
Asia
  Thailand  ROW  Total segments  
and
eliminations
  Consolidated 
  US$’000  US$’000  US$’000  US$’000  US$’000  US$’000 
Sales of goods / services                  
External customers  114,836   166,864   169,627   451,327   -   451,327 
Inter-segment  1,665   53   -   1,718   (1,718)  - 
Segment net income (loss)  (2,181)  6,338   7,571   11,728   (8,967)  2,761 
Depreciation and amortization  (1,385)  (3,068)  (1,646)  (6,099)  (6)  (6,105)
Interest income  38   1,036   90   1,164   3   1,167 
Interest expense  (846)  (427)  (91)  (1,364)  (9)  (1,373)
Income tax (expense)/benefit  583   (1,834)  (552)  (1,803)  (471)  (2,274)
                         
Other disclosures                        
Capital expenditure  2,154   3,159   
677
   
5,990
   -   
5,990
 
              Corporate expense    
              adjustments    
Year ended
December 31, 2013
 
North
Asia
  Thailand  ROW  Total segments  
and
eliminations
  Consolidated 
  US$’000  US$’000  US$’000  US$’000  US$’000  US$’000 
                   
Sales of goods / services                  
External customers  69,347   175,347   215,982   460,676   -   460,676 
Inter-segment  43,136   117   38,724   81,977   (81,977)  - 
Segment net income (loss)  (2,000)  10,969   5,851   14,820   (3,554)  11,266 
                         
Depreciation and amortization  (1,063)  (2,947)  (1,675)  (5,685)  (33)  (5,718)
Interest income  67   1,101   135   1,303   3   1,306 
Interest expense  (735)  (517)  (95)  (1,347)  (11)  (1,358)
Income tax expense  (328)  (2,969)  (1,726)  (5,023)  (495)  (5,518)
                         
Other disclosures                        
Capital expenditure  3,817   4,606   1,086   9,509   -   9,509 
F-35
ASIA PACIFIC WIRE & CABLE CORPORATION LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
5.  SEGMENT INFORMATION (continued)

              Corporate expense    
              adjustments    
Year ended
December 31, 2012
 
North
Asia
  Thailand  ROW  Total segments  
and
eliminations
  Consolidated 
  US$’000  US$’000  US$’000  US$’000  US$’000  US$’000 
                   
Sales of goods / services                  
External customers  55,633   190,379   216,253   462,265   -   462,265 
Inter-segment  111,318   14   56,253   167,585   (167,585)  - 
Segment net income (loss)  (184)  14,916   6,036   20,768   (3,794)  16,974 
                         
Depreciation and amortization  (948)  (2,881)  (1,617)  (5,446)  (34)  (5,480)
Interest income  145   1,065   108   1,318   4   1,322 
Interest expense  (877)  (670)  (129)  (1,675)  (14)  (1,690)
Income tax expense  (290)  (4,619)  (2,015)  (6,924)  (654)  (7,578)
                         
Other disclosures                        
Capital expenditure  4,333   5,658   995   10,986   11   10,997 
Adjustments and eliminations
Corporate expenses, gain on disposal of investment, and share of gain (loss) of associates are not allocated to individual segments as the underlying instruments are managed on a group basis.
Capital expenditure consists of additions of property, plant and equipment, intangible assets and investment properties including assets from the acquisition of subsidiaries.
Reconciliation of profit
  For the year ended December 31, 
  2014  2013  2012 
  US$’000  US$’000  US$’000 
Segment net income  11,728   14,820   20,768 
Corporate expense  (4,103)  (3,136)  (3,476)
Gain on disposal of investment held for sale  -   232   - 
Loss on disposal of a subsidiary  (178)  -   - 
Share of net loss of associates  (338)  (211)  (21)
Gain on liquidation of subsidiaries  -   -   279 
Inter-segment profit (elimination)  (3,877)  56   78 
Tax expenses  (471)  (495)  (654)
             
Profit after tax  2,761   11,266   16,974 

F-36
ASIA PACIFIC WIRE & CABLE CORPORATION LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
5.  SEGMENT INFORMATION (continued)
  
North
Asia
  Thailand  ROW  Total segments  
Corporate expense
adjustments
and
eliminations
  Consolidated 
  US$’000  US$’000  US$’000  US$’000  US$’000  US$’000 
As of December 31, 2014                  
Total assets  74,686   194,231   98,517   367,434   11,238   378,672 
Total liabilities  41,917   75,590   33,254   150,761   6,700   157,461 
As of December 31, 2013                        
Total assets  48,581   175,379   130,716   354,676   9,959   364,635 
Total liabilities  13,876   52,967   65,042   131,885   4,623   136,508 
Reconciliation of assets:
  As of December 31, 
  2014  2013 
  US$’000  US$’000 
Segment operating assets  367,434   354,676 
         
Corporate and other assets  4,828   4,212 
Investment in associates  2,571   2,937 
Deferred tax assets  4,551   3,978 
Inter-segment elimination  (712)  (1,168)
Total assets  378,672   364,635 
Reconciliation of liabilities:
  As of December 31, 
  2014  2013 
  US$’000  US$’000 
Segment operating liabilities  150,761   131,885 
         
Corporate liabilities  4,877   5,081 
Deferred tax liabilities  2,720   2,676 
Inter-segment elimination  (897)  (3,134)
Total liabilities  157,461   136,508 
F-37
ASIA PACIFIC WIRE & CABLE CORPORATION LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
5.  SEGMENT INFORMATION (continued)

Revenue from external customers is attributed to individual countries based on the customer’s country of domicile and is summarized as follows:
  For the year ended December 31, 
  2014  2013  2012 
  US$’000  US$’000  US$’000 
Revenues from external customers         
          
Thailand  141,661   154,646   167,762 
Singapore  115,399   109,790   93,285 
Australia  48,706   61,463   64,402 
PRC  125,131   116,497   120,763 
Vietnam  8,037   6,436   6,366 
Southeast Asia  12,393   11,844   7,376 
Northeast Asia  -   -   2,311 
             
   451,327   460,676   462,265 
Countries in the Southeast Asia region include Cambodia, Indonesia, India, Laos, Malaysia and Myanmar.
Countries in the Northeast Asia region include Japan and South Korea.
Major customer information
Revenue from one customer amounted to $47,175 (2013: $58,984) represent 10.5% (2013: 12.8%), arising from sales in the ROW segment. There was no customer that accounted for more than 10% of our consolidated revenue in 2012.
Long-lived assets by the country of domicile are summarized as follow:
  As of December 31, 
  2014  2013 
  US$’000  US$’000 
Long-lived assets by area:      
Thailand  23,574   23,370 
North Asia  14,029   13,432 
ROW  13,050   14,690 
Corporate  2   6 
         
Total long-lived assets  50,655   51,498 
F-38
ASIA PACIFIC WIRE & CABLE CORPORATION LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

6.  MATERIAL PARTLY-OWNED SUBSIDIARIES

The Company has a subsidiary with material non-controlling interests (“NCI”). Information regarding the subsidiary is as follows:

Proportion of equity interest held by NCI:

   As of December 31, 
 
Name
Country of incorporation and operation 2014  2013 
        
Charoong Thai and its subsidiaries (“CTW Consolidated”)Thailand  49.07%  49.07%
SYEChina  33.65%  33.65%
As of December 31, 2013, SYE was owned by APWC through Charoong Thai group and CCH (HK) with the effective shareholding of 66.35%, as compared to 54.41% in 2012, in consequence, an effect of $(27) on the equity attributable to the parent arose from changes in percentage of ownership in subsidiary. From APWC group perspective, SYE is considered an entity with material non-controlling interests and should be separated from Charoong Thai group.
  As of December 31, 
  2014  2013 
  US$’000  US$’000 
Accumulated balances of material NCI:      
    
CTW Consolidated  62,479   63,771 
SYE  2,192   3,190 
  For the year ended December 31, 
  2014  2013  2012 
  US$’000  US$’000  US$’000 
Profit / (loss) of material NCI:         
       
CTW Consolidated  2,874   1,029   9,268 
SYE  (953)  (254)  (187)
F-39
ASIA PACIFIC WIRE & CABLE CORPORATION LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

6.  MATERIAL PARTLY-OWNED SUBSIDIARIES (continued)
The summarized financial information of the subsidiary is provided below. This information is based on amounts before inter-company eliminations:
Summarized income statements for 2014:
  CTW consolidated  SYE 
  US$’000  US$’000 
Revenues  166,917   40,372 
Cost of sales  (151,021)  (38,783)
Administrative expenses  (7,063)  (3,665)
Finance costs  (651)  (767)
Others  128   11 
Profit/(loss) before tax  8,310   (2,832)
Income tax  (1,834)  - 
Profit/(loss) for the year  6,476   (2,832)
Total comprehensive income/(loss)  5,856   (2,832)
Profit/(loss) attributable to non-controlling interests  2,874   (953)
Dividends paid to non-controlling interests  4,158   - 
Summarized income statements for 2013:
  CTW consolidated  SYE 
  US$’000  US$’000 
Revenues  175,464   41,251 
Cost of sales  (148,861)  (39,699)
Administrative expenses  (12,117)  (1,475)
Finance costs  (770)  (747)
Others  (564)  (85)
Profit/(loss) before tax  13,152   (755)
Income tax  (2,968)  - 
Profit/(loss) for the year  10,184   (755)
Total comprehensive income/(loss)  2,098   (755)
Profit/(loss) attributable to non-controlling interests  1,029   (254)
Dividends paid to non-controlling interests  3,877   - 
Summarized income statements for 2012:
  CTW consolidated  SYE 
  US$’000  US$’000 
Revenues  190,394   42,405 
Cost of sales  (165,330)  (40,639)
Administrative expenses  (7,953)  (1,390)
Finance costs  (916)  (780)
Others  3,121   (7)
Profit/(loss) before tax  19,316   (411)
Income tax  (4,641)  - 
Profit/(loss) for the year  14,675   (411)
Total comprehensive income/(loss)  18,887   (411)
Profit/(loss) attributable to non-controlling interests  9,268   (187)
Dividends paid to non-controlling interests  3,067   - 
F-40
ASIA PACIFIC WIRE & CABLE CORPORATION LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
6.  MATERIAL PARTLY-OWNED SUBSIDIARIES (continued)
Summarized balance sheets as of December 31, 2011. Copper prices on the LME fell from an average monthly price high2014:
  CTW consolidated  SYE 
  US$’000  US$’000 
Cash, inventory and other current assets  167,785   14,903 
Property, plant and equipment and other non-current assets  38,193   2,170 
Trade and other payable (current)  (69,516)  (10,558)
Other non-current liabilities  (6,073)  - 
Non-controlling interest  (3,062)  - 
Total equity  127,327   6,515 
Equity attributable to equity holders of the parent
  64,848   4,323 
Non-controlling interests
  62,479   2,192 
Summarized balance sheets as of $9,555 in January 2011 to $7,657 in December 2011. As a result, inventory write-down to market of $1,725 was charged to cost of sales31, 2013:
  CTW consolidated  SYE 
  US$’000  US$’000 
Cash, inventory and other current assets  148,319   18,583 
Property, plant and equipment and other non-current assets  38,086   2,481 
Trade and other payable (current)  (47,512)  (11,584)
Other non-current liabilities  (5,455)  - 
Non-controlling interest  (3,479)  - 
Total equity  129,959   9,480 
Equity attributable to equity holders of the parent
  66,188   6,290 
Non-controlling interests
  63,771   3,190 
Summarized cash flow information for the year ended December 31, 2011.

The impairment charge of $3,572 was related to flooding in Thailand (note 14).

2014:

  CTW consolidated  SYE 
  US$’000  US$’000 
Operating  7,985   1,544 
Investing  (13,881)  (97)
Financing  7,443   (1,189)
Effect of changes in exchange rate on cash  90   (18)
Net increase in cash and cash equivalents  1,637   240 

Summarized cash flow information for the year ended December 31, 2013:
  CTW consolidated  SYE 
  US$’000  US$’000 
Operating  15,644   (1,715)
Investing  771   (72)
Financing  (11,772)  1,819 
Effect of changes in exchange rate on cash  511   (3)
Net increase in cash and cash equivalents  5,154   29 
Summarized cash flow information for the year ended December 31, 2012:
  CTW consolidated  SYE 
  US$’000  US$’000 
Operating  13,040   406 
Investing  (8,392)  (29)
Financing  (11,900)  224 
Effect of changes in exchange rate on cash  (73)  (14)
Net (decrease) / increase in cash and cash equivalents  (7,325)  587 
F-41
ASIA PACIFIC WIRE & CABLE CORPORATION LIMITED AND SUBSIDIARIES                           


NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(In thousands of U.S. Dollars, except share data)

11.INCOME TAXES

7.  OTHER INCOME/EXPENSES AND ADJUSTMENTS

7.1  Other operating income

  For the year ended December 31, 
  2014  2013  2012 
  US$’000  US$’000  US$’000 
Recovery of losses from flooding  -   -   4,762 
Reversal of allowance for trade receivables  -   -   709 
Reversal of allowance for investment properties  26   68   - 
Gain on disposal of property, plant, and equipment  63   113   354 
             
Total other operating income  89   181   5,825 

7.2  Other operating expenses

  For the year ended December 31, 
  2014  2013  2012 
  US$’000  US$’000  US$’000 
Charge related to flooding  -   -   888 
Allowance for trade receivables  2,168   196   - 
             
Total other operating expenses  2,168   196   888 

7.3   Finance costs

  For the year ended December 31, 
  2014  2013  2012 
  US$’000  US$’000  US$’000 
Interest on debts and borrowings  1,368   1,339   1,649 
Finance charges payable under finance leases and hire  purchase contracts  5   19   41 
             
Total interest expenses  1,373   1,358   1,690 
             
Banking charges  324   376   505 
             
Total finance costs
  1,697   1,734   2,195 

7.4   Finance income

  For the year ended December 31, 
  2014  2013  2012 
  US$’000  US$’000  US$’000 
          
Interest income  1,167   1,306   1,322 
             
Total finance income
  1,167   1,306   1,322 

7.5  Other income

  For the year ended December 31, 
  2014  2013  2012 
  US$’000  US$’000  US$’000 
Sales of scrap copper  493   392   564 
Net gain on financial instruments  -   -   603 
Dividend income  104   110   109 
Others  553   952   657 
             
Total other income  1,150   1,454   1,933 
F-42
ASIA PACIFIC WIRE & CABLE CORPORATION LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
7. OTHER INCOME/EXPENSES AND ADJUSTMENTS (continued)

7.6  Other expenses

  For the year ended December 31, 
  2014  2013  2012 
  US$’000  US$’000  US$’000 
Net loss on financial instruments  -   207   - 
Others  49   53   - 
             
Total other expenses  49   260   - 

7.7   Depreciation, amortization and lease expense included in the consolidated income statements

  For the year ended December 31, 
  2014  2013  2012 
  US$’000  US$’000�� US$’000 
Included in cost of sales:         
Depreciation – tangible assets  4,986   4,582   4,235 
Amortization – intangible assets  2   -   - 
Included in selling expenses:            
Depreciation – tangible assets  188   223   181 
Included in general and administrative expenses:            
Depreciation – tangible assets  823   767   907 
Amortization – intangible assets  29   69   80 
Amortization – prepaid land lease payment  59   59   59 
Depreciation – investment property  18   18   18 
Minimum lease payments recognised as an operating lease expense  1,100   1,301   866 
   7,205   7,019   6,346 

7.8   Employee benefits expenses

  For the year ended December 31, 
  2014  2013  2012 
  US$’000  US$’000  US$’000 
Included in cost of sales:         
Wages and salaries  14,183   14,469   13,243 
Labor and health insurance costs  67   53   48 
Pension costs  927   917   2,208 
Other employment benefits  788   838   732 
Included in selling expenses:            
Wages and salaries  3,784   3,774   3,659 
Labor and health insurance costs  10   9   10 
Pension costs  324   318   444 
Other employment benefits  51   84   74 
Included in general and administrative expenses:            
Wages and salaries  9,569   9,746   8,336 
Labor and health insurance costs  81   81   71 
Pension costs  576   599   1,783 
Director fees  907   2,120   1,148 
Other employment benefits  366   386   664 
             
Total employee benefits expenses  31,633   33,394   32,420 
F-43
ASIA PACIFIC WIRE & CABLE CORPORATION LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
8.  INCOME TAX

Under current Bermuda law, the Company is not subject to tax on income or capital gains, nor is withholding tax of Bermuda imposed upon payments of dividends by the Company to its shareholders.


The Company’s investments in the Operating Subsidiaries are held through subsidiaries incorporated in the British Virgin Islands (“BVI”). Under current BVI law, dividends from the BVI subsidiaries’ investments are not subject to income taxes and no withholding tax is imposed on payments of dividends by the BVI subsidiaries to the Company.


The Operating Subsidiaries and equity investees are governed by the income tax laws of Singapore, Thailand, Australia and the People’s Republic of China.PRC.  The corporate income tax rate in Singapore was 17% for each of the three years ended December 31, 2011,2014, and there is nowithholding tax on dividends applicable to the Company.  For Thailand, the statutory corporate income tax rate was 30% for each of the threeyears ended December 31, 2011 and a withholding tax of 10% is levied on dividends received by the Company. CTW Charoong Thai is listed on Stock Exchange of Thailand (“SET”), its applicable corporate income rate was 25% for the first 300 million Baht of net profit and 30% for the amount exceeding 300 million Baht. The reduced rate of taxation applied for listed companies for three accounting periods from 2008 to 2010.. As a part of an initiative to promote Thailand’s competitiveness, the Thai Government announced in Royal Decree (No. 530) to provide for a reduction of corporate income tax on December 21, 2012: (1) Reduction of corporate tax from 30% to 23% for accounting period from January 1, 2012; (2) Further reduction of corporate income tax to 20%from 30% to: (1) 23% for the subsequent twoany accounting periods fromcommencing between January 1, 2013. The2012 and December 31, 2012; (2) 20% from any accounting periods commencing between January 1, 2013 and December 31, 2014. Thai Government announced in Royal Decree (No. 577) the corporate income tax reduction is valid for three years from 2012 to 2014.continues at 20% on or after January 1, 2015, but not exceeding December 31, 2015. In Australia, the corporate income tax rate was 30% for 2009/2010, 2010/20112012/2013, 2013/2014 and 2011/20122014/2015 tax years. The applicable corporate income tax rate for the subsidiaries in the People’s Republic of ChinaPRC was 25% for each of the three years ended December 31, 2011.2014

Pursuant to.

Under the Corporate Income Tax Law (the CIT Law)“CIT Law”) of the PRC, that came into effect on January 1, 2008, all the enterprises generally are subject to corporate income tax at an effective rate of 25% on income as reported in their statutory accounts. An enterprise located in specially-designated regions or cities and eligible for the preferential policy in the form of a reduced tax rate shall have five years from the time when the CIT Law takes effect to transition progressively to the legally prescribed tax rate. During this period, an enterprise that enjoyed the 15% corporate income tax rate shall be subject to the 18% tax rate for the year 2008, 20% for the year 2009, 22% for the year 2010, 24% for the year 2011, and 25% for the year 2012. 

PEWS is located in Shenzhen, which is a region where preferential tax rates apply and currently qualifies for a reduced rate of taxation of 20%, 22%, and 24% for the years 2009, 2010, and 2011, respectively. PEWS is the only subsidiary of the Company in the PRC that qualifies for the preferential tax rates under the CIT Law.Under the CIT law, dividend distributions of profits earned prior to January 1, 2008 to foreign investor(s) are exempt from withholding tax; distribution of the profits earned after January 1, 2008 is subject to withholding tax of 10%, reduced to 5% under the Arrangement between the Mainland of China and the Hong Kong Special Administrative Region on the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with Respect to Taxes on Income provided that the Hong Kong holding company, CCH(HK), isCCH (HK) qualified as the “beneficial owner” of the dividend income under CuoshuibanGuoshuifa [2009] No.601. As the management of APWC decided to simplify the CCH (HK) to have the sole function of controlling and directing its subsidiaries. CCH (HK) does not carry on substantive business activities effective early 2013. This may lead it not qualify as the “beneficial owner” of the dividend income under Circular 601 to be applicable to withholding tax of 5%.  As such, the withholding tax for 2013 and 2014 were calculated based on 10% tax rate

.

F-44
ASIA PACIFIC WIRE & CABLE CORPORATION LIMITED AND SUBSIDIARIES                           


NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(In thousands of U.S. Dollars, except share data)

11.INCOME TAXES(continued) 

Pre-tax income (loss) from continuing operations was taxed in the following jurisdictions:

 

 

Year ended December 31,

 

 

2009

 

2010

 

2011

 

 

 

 

 

 

 

Thailand

 

$ 10,921

 

$ 24,750

 

$ 8,760

Singapore

 

3,149

 

1,671

 

(80)

Australia

 

3,020

 

2,176

 

3,130

The People’s Republic of China

 

3,690

 

6,921

 

985

Others

 

(2,318)

 

(3,665)

 

(12,101)

 

 

 

 

 

 

 

 

 

18,462

 

31,853

 

694

 

 

 

 

 

 

 

Equity investees

 

 

 

 

 

 

The People’s Republic of China

 

(40)

 

(21)

 

(58)

 

 

$ 18,422

 

$ 31,832

 

$ 636

            Significant

8.  INCOME TAX (continued)

The major components of income tax expenses for the provision (benefit) for income taxes are as follows:

 

 

Year ended December 31,

 

 

2009

 

2010

 

2011

 

 

 

 

 

 

 

Allocated to net income (loss)

 

 

 

 

 

 

 

 

 

 

 

 

 

Current:

 

 

 

 

 

 

Thailand

 

$ 813

 

$ 4,069

 

$ 4,869

Singapore

 

–

 

–

 

–

The People’s Republic of China

 

814

 

1,324

 

679

Australia

 

680

 

956

 

1,291

Total current

 

2,307

 

6,349

 

6,839

 

 

 

 

 

 

 

Deferred:

 

 

 

 

 

 

Thailand

 

1,723

 

170

 

(1,446)

Singapore

 

100

 

59

 

(154)

The People’s Republic of China

 

389

 

197

 

(43)

Australia

 

128

 

(262)

 

(316)

Total deferred

 

2,340

 

164

 

(1,959)

 

The benefits of operating loss carried forwards

 

 

–

 

 

 

(72)

 

 

 

(314)

 

 

 

$ 4,647

 

$ 6,441

 

$ 4,566

Allocated to other comprehensive income (loss)

 

$ 18

 

$ 84

 

$ –

 

 

 

 

 

 

 

years ended December 31, 2014, 2013 and 2012 are:

ASIA PACIFIC WIRE & CABLE CORPORATION LIMITED AND SUBSIDIARIES                           

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In thousands of U.S. Dollars, except share data)

11.INCOME TAXES(continued) 

  2014  2013  2012 
  US$’000  US$’000  US$’000 
Consolidated income statements         
Current income tax:         
Current income tax charge  2,462   4,725   6,042 
Deferred tax expenses / (benefits):            
Relating to origination and reversal of temporary differences  (188)  793   1,536 
             
Income tax expense reported in the income statement  2,274   5,518   7,578 
             
             
Consolidated statements of comprehensive income            
Deferred tax related to items recognized in other comprehensive income during the year:            
Unrealized gain (loss) on available-for-sale financial assets  (214)  (402)  172 
Net loss on actuarial gains and losses  (213)  (15)  (46)
             
Income tax expenses / (benefits) charged to other comprehensive (loss) income  (427)  (417)  126 

The parent company’s tax is filed in Bermuda, which does not have a statutory tax rate. The provision for income taxes differs based on the taxestax incurred by the Operating Subsidiaries, in their respective jurisdiction. The Company determines its statutory tax rate based on its major commercial domicile that is its subsidiarysubsidiaries in Thailand. The reconciliation of the statutory tax rate and the Company’s effective tax rate is as follows:

 

 

Year ended December 31,

Income tax at statutory tax rate in:

 

2009

 

2010

 

2011

 

 

 

 

 

 

 

Tax provision at statutory rate (30%)

 

$ 5,755

 

$ 9,608

 

$ 191

 

 

 

 

 

 

 

Foreign income taxed at different rate

 

(455)

 

881

 

1,350

Expenses not deductible for tax purpose

2,437

1,684

753

Impairment of goodwill not deductible for tax

 

–

 

–

 

2,637

Written-off deferred tax assets arising fromliquidation of a subsidiary

 

–

 

–

 

3,633

Reversal of valuation allowance arising fromliquidation of a subsidiary

 

–

 

–

 

(3,633)

Utilization of prior year tax losses

 

–

 

(6,186)

 

–

Changes in valuation allowance

 

(3,959)

 

2,473

 

(291)

Written-off deferred tax

 

1,473

 

215

 

-

Tax exempt on income

 

(1,573)

 

(2,583)

 

(1,453)

Difference due to effect of tax holidays

 

(141)

 

(583)

 

–

Unrecognized tax benefits

 

708

 

354

 

1,026

Deferred tax liability arising from

undistributed earnings

 

402

 

578

 

193

Effect of temporary tax rate changes on deferred tax assets

 

–

 

–

 

862

Others

 

–

 

–

 

(702)

Total tax income for the year

 

$ 4,647

 

$ 6,441

 

$ 4,566

Pacific Thai had deferred tax assets (mainly from prior year net operating losses) of $3,633 with a 100% valuation allowance as of December 31, 2010. Following the de-registration of Pacific Thai on January 5, 2011, its deferred tax assets could no longer be realized and thus were written off. The corresponding valuation allowance was reversed during the year.


  2014  2013  2012 
  US$’000  US$’000  US$’000 
          
Profit before tax  5,035   16,784   24,552 
Tax at statutory rate of 20% (2013: 20%; 2012: 23%)  1,007   3,356   5,645 
Foreign income taxed at different rate  868   930   694 
Expenses not deductible/(solely deductible) for tax purpose
  (358)  100   277 
Utilization of previously unrecognised tax losses  -   (10)  (31)
Net deferred tax asset not recognized  1,196   656   281 
Written-off deferred tax  -   -   17 
Tax exempt on income  (187)  (43)  (99)
Uncertain tax position  (984)  82   34 
Return to provision adjustment  12   (151)  - 
Deferred tax liability arising from undistributed earnings  85   239   303 
Effect of changes in temporary differences to be realized in different periods with different enacted tax rates  14   (36)  19 
Withholding tax on dividends  558   584   427 
Others  63   (189)  11 
             
Income tax expense reported in income statement  2,274   5,518   7,578 


At the effective income tax rate of 45.16% (2013: 32.88%; 2012: 30.87%)

F-45
ASIA PACIFIC WIRE & CABLE CORPORATION LIMITED AND SUBSIDIARIES                           


NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(In thousands

8.  INCOME TAX (continued)

Deferred tax

Deferred tax relates to the following:

  Consolidated balance sheet  Consolidated income statement 
  As of December 31,  For the year ended Decembers 31, 
  2014  2013  2014  2013  2012 
  US$’000  US$’000  US$’000  US$’000  US$’000 
                
Outside basis differences  (2,775)  (2,690)  85   239   302 
Revaluations of available-for-sale investment to fair value  (565)  (779)  -   -   - 
Book over tax basis in subsidiary  (36)  (33)  6   1   (14)
Accrued interest income  (77)  (68)  9   10   14 
Unutilized building allowance (net)  63   (231)  (286)  231   - 
Unused tax losses  40   194   146   (197)  326 
Allowance for doubtful accounts  102   131   27   143   291 
Inventory impairment  750   279   (470)  137   444 
Allowance for impairment in investments  411   410   -   33   66 
Rebates and other accrued liabilities  701   774   4   417   716 
Unpaid retirement benefits  1,680   1,659   (14)  (115)  (740)
Charges related to flooding in Thailand  -   -   -   8   895 
Deferred revenue and cost of sales  416   690   277   (118)  (282)
Actuarial loss  275   62   -   -   - 
Unabsorbed depreciation  842   893   21   19   (482)
Allowance for investment property impairment  4   11   7   (15)  - 
Deferred tax expenses / (benefits)          (188)  793   1,536 
Net deferred tax assets  1,831   1,302             
Reflected in the balance sheet as follows:
                
Deferred tax assets  4,551   3,978             
Deferred tax liabilities  (2,720)  (2,676)            
Deferred tax assets, net  1,831   1,302             
Reconciliation of U.S. Dollars, except share data)

11.INCOME TAXES(continued) 

Deferreddeferred tax assets, net


  2014  2013  2012 
  US$’000  US$’000  US$’000 
          
Opening balance as of January 1  1,302   2,096   3,560 
Tax benefit/(expenses) during the period recognized in profit or loss  188   (793)  (1,536)
Tax benefit/(expenses) during the period recognized in other comprehensive income  427   417   (126)
Exchange difference on translation foreign operations  (86)  (418)  198 
Closing balance as of December 31  1,831   1,302   2,096 

The Company offset tax assets and liabilities if and only if it has legally enforceable right to set off current tax assets and current tax liabilities and the deferred tax assets comprised the following:

 

 

As of December 31

 

 

2010

 

2011

 

 

 

 

 

Deferred tax liabilities:

 

 

 

 

 

 

 

 

 

Outside basis differences

 

$ (1,973)

 

$ (2,172)

 

 

 

 

 

Total deferred tax liabilities

 

(1,973)

 

(2,172)

 

 

 

 

 

Deferred tax assets:

 

 

 

 

Unused tax losses

 

4,480

 

1,181

Allowance for doubtful accounts

 

1,454

 

682

Inventory impairment

 

649

 

744

Allowance for impairment in investment

 

1,203

 

933

Rebates and other accrued liabilities

 

1,420

 

1,980

Unpaid retirement benefits

 

–

 

854

Charges related to flooding

 

–

 

874

Deferred revenue and cost of sales

 

–

 

320

 

 

 

 

 

Total deferred tax assets

 

9,206

 

7,568

Valuation allowance for deferred tax assets (note 10)

 

(4,817)

 

(875)

 

 

Total deferred tax assets

 

4,389

 

6,693

 

 

Net deferred tax assets

 

$ 2,416

 

$ 4,521

The amount ofand deferred tax liabilities and assets at December 31, 2010 and 2011 were as follows:

 

 

As of December 31,

 

 

2010

 

2011

 

 

 

 

 

Gross current deferred tax liabilities

 

$ (43)

 

$ (49)

 

 

 

 

 

Gross current deferred tax assets

 

3,763

 

5,234

Valuation allowance for deferred tax assets

 

(400)

 

–

 

 

 

 

 

 

 

 

 

 

 

 

3,363

 

5,234

 

 

 

 

 

 

 

 

 

 

Net current deferred tax assets

 

3,320

 

5,185

 

 

 

 

 

 

 

 

 

 

Gross non-current deferred tax liabilities

 

(1,930)

 

(2,123)

 

 

 

 

 

Gross non-current deferred tax assets

 

5,443

 

2,334

Valuation allowance for deferred tax assets

 

(4,417)

 

(875)

 

 

 

 

 

1,026

 

1,459

 

 

Net non-current deferred tax assets

 

(904)

 

(664)

 

 

 

 

 

 

 

Net deferred tax assets

 

$ 2,416

 

$ 4,521

related to income taxes levied by the same tax authority.

F-46
ASIA PACIFIC WIRE & CABLE CORPORATION LIMITED AND SUBSIDIARIES                           


NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(In thousands of U.S. Dollars, except share data)

8.  INCOME TAX (continued)

11.INCOME TAXES(continued) 

The deferred tax liabilities and assets are presented in the accompanying consolidated balance sheets as follows:

 

 

As of December 31,

 

 

2010

 

2011

 

 

 

 

 

Current

 

 

 

 

Deferred tax assets

��

$ 3,320

 

$ 5,185

 

 

 

 

 

Total current

 

3,320

 

5,185

 

 

 

 

 

 

 

 

 

 

Non-current

 

 

 

 

Deferred tax assets

 

677

 

517

Deferred tax liabilities

 

(1,581)

 

(1,181)

Total non-current

 

(904)

 

(664)

 

 

 

 

 

 

 

Net deferred tax assets

 

$ 2,416

 

$ 4,521

As of December 31, 2011, the Company has available unused net operating losses which arose in Thailand and China as of December 31, 2014, and arose in Thailand, China and Singapore as of December 31, 2013, that may be applied against future taxable income and that expire as follows:

follows respectively:

 

 

 

 

 

Date of expiration

 

2010

 

2011

 

 

 

 

 

2011

 

$ 3,089

 

$– 

2012

 

5,399

 

656

2013

 

3,115

 

461

2014

 

5,069

 

853

2015

 

353

 

356

2016

 

–

 

839

No expiration

 

1,396

 

1,801

 

 

$ 18,421

 

$ 4,966


The remaining net operating losses can be carried forward, subject to any condition to be met under the relevant

  As of December 31, 
Year of expiration 2014  2013 
  US$’000  US$’000 
2014  -   161 
2015  355   866 
2016  836   842 
2017  1,577   1,594 
2018  2,774   3,288 
2019  2,188   988 
No expiration  -   - 
   7,730   7,739 

Deferred tax laws of the respective jurisdictions. The utilizationassets have not been recognized in respect of these net operating loss carry forwards is subjectlosses as they may not be used to agreementoffset taxable profits elsewhere in the Company, as they have arisen in subsidiaries that have been loss-making for some time, and there are no other tax planning opportunities or other evidence of recoverability in the near future. If the Company were able to recognize all unrecognized deferred tax assets, the profit would increase by $2,815 for the year ended December 31, 2014 (2013: $1,566; 2012: $1,341).

There are no income tax consequences attached to the payment of dividends in either 2014 or 2013 by the income tax authorities in the respective jurisdictions.

Company to its shareholders.


As of December 31, 20102014 and 2011,2013, the Company is subject to taxation in The People’s Republic of China,PRC, Australia, Thailand, and Singapore.  The Company’s tax years from 20062009 and forward are still opensubject to examination by the tax authorities in various tax jurisdictions.

jurisdictions.

F-47
ASIA PACIFIC WIRE & CABLE CORPORATION LIMITED AND SUBSIDIARIES                           


NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(In thousands of U.S. Dollars, except share data)

11.INCOME TAXES(continued) 

A reconciliation of the beginning and ending amounts of unrecognized tax benefits is as follows:

Change in Uncertain Tax Positions

As of December 31,

 

 

2009

 

2010

 

2011

Balance at January 1

 

$ 2,055

 

$ 2,198

 

$ 2,332

Additions based on tax positions related to the current year

 

143

 

134

 

308

Additions for tax positions of prior years

 

–

 

–

 

–

Settlements

 

–

 

–

 

–

 

 

 

 

 

 

 

Balance at December 31

 

$ 2,198

 

$ 2,332

 

$ 2,640


8.  INCOME TAX (continued)

A reconciliation of the beginning and ending amounts of uncertain tax position is as follows:
Change in Uncertain Tax Positions         
  2014  2013  2012 
  US$’000  US$’000  US$’000 
Balance as of January 1  2,266   2,302   2,640 
Additions based on tax positions related to the current year  -   72   28 
Decrease due to lapses in statute of limitations  (375)  (108)  (366)
             
Balance as of December 31  1,891   2,266   2,302 
The Company is not expecting there would be any reasonably possible change in the total amounts of unrecognizeduncertain tax benefitsposition within twelve months of the reporting date. As of December 31, 20102014, 2013 and 2011,2012, the amount of unrecognizeduncertain tax benefitsposition (excluding interest and penalties) included in the consolidated balance sheetsheets that would, if recognized, affect the effective tax rate is $2,332$1,891, $2,266 and $2,640,$2,302 respectively.


The Company recognized interest expense and penalties related to income tax matters as a component of income tax expense. The amount of related interest and penalties the Company havehas provided as of the reporting date,dates listed below were:

 

As of December 31,

 

 

2009

 

2010

 

2011

Accrued interest on unrecognized tax benefits

 

$ 1,299

 

$ 1,373

 

$ 1,783

Accrued penalties onunrecognized tax benefits

 

1,806

 

1,948

 

2,256

 

 

 

 

 

 

 

Total accrued interest and penalties on Unrecognized tax benefits

 

$ 3,105

 

$ 3,321

 

$ 4,039


The bases for interest

  As of December 31, 
  2014  2013  2012 
  US$’000  US$’000  US$’000 
Accrued interest on uncertain tax position  2,116   2,368   2,143 
Accrued penalties on uncertain tax position  1,818   2,176   2,284 
             
Total accrued interest and penalties on uncertain tax position  3,934   4,544   4,427 

For the years ended December 31, 2014, 2013 and penalties are of 0.05% per day (18.25% annually) and 100% respectively of2012, the relevant income tax liabilities. The Company recognized $74$327, $395 and $142$409 in interest and penalties during 2010$nil, $nil and $410$28 in penalty, respectively. For the years ended December 31, 2014, 2013 and $3082012, the Company reversed $579, $170 and $49 in interest and $358, $108 and $nil in penalties, during 2011. Asrespectively, due to lapses in statute of December 31, 2010 and 2011, the Company recognized $3,321 and $4,039, respectively, in interest and penalties.  

limitations.

The Company consider each uncertain tax positions individually, by first consider whether each position taken in the tax return is probable of being sustained on examination by the taxing authority. It should recognize a liability for each item that is not probable of being sustained. The liability then is measured using a single best estimate of the most likely outcome. The uncertain tax positions presented in the current tax liability is the total liability for uncertain tax positions.

F-48
ASIA PACIFIC WIRE & CABLE CORPORATION LIMITED AND SUBSIDIARIES                           


NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(In thousands

9.  EARNINGS PER SHARE

Earnings per share are calculated by dividing net profit attributable to equity holders of U.S. Dollars, except share data)

the parent by the weighted average number of shares outstanding during the year. The Company does not have any dilutive securities beyond the treasury shares disclosed in Note 22. The treasury shares transaction resulted in an immediate reduction in outstanding shares used to calculate the weighted-average common shares outstanding for both basic and diluted earnings per share.


The following table sets forth the computation of basic and diluted earnings attributable to common shareholders per share:

  For the year ended 
  December 31, 
  2014  2013  2012 
  US$’000  US$’000  US$’000 
  (except for number of shares and earnings per share) 
Numerator:         
Net profit attributable to APWC from continuing operations  572   5,847   9,694 
Net profit attributable to APWC  572   5,847   9,694 
             
Denominator:            
Weighted-average common shares outstanding – basic and diluted  13,819,669   13,820,200   13,830,751 
             
Earnings per share – basic and diluted            
Continuing operations  0.04   0.42   0.70 
Total earnings per share – basic and diluted  0.04   0.42   0.70 
12.Income from continuing operations attributable to non-controlling interests are $2,189, $5,419 and $7,280 for the years ended December 31, 2014, 2013 and 2012, respectively.
10.  CASH AND CASH EQUIVALENTS

  As of December 31, 
  2014  2013 
  US$’000  US$’000 
Cash on hand and cash at banks  68,863   62,509 

Cash at banks earns interest at floating rates based on daily bank deposit rates. Cash equivalents include short-term deposits which are made for varying periods of between one day and three months, depending on the immediate cash requirements of the Company, and earn interest at the respective short-term deposit rates. As of December 31, 2014 and 2013, the Company had no cash equivalents.
F-49
ASIA PACIFIC WIRE & CABLE CORPORATION LIMITED

VALUE ADDED TAX (“VAT”)NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

According


11.  OTHER FINANCIAL ASSETS AND FINANCIAL LIABILITIES

11.1Other financial assets
  As of December 31, 
  2014  2013 
  US$’000  US$’000 
       
Assets held-to-maturity      
Quoted debt securities  336   335 
Total assets held-to-maturity  336   335 
         
Available for sale investments        
Unquoted equity shares  2,479   3,189 
         
Total available for sale investments  2,479   3,189 
         
Total other financial assets  2,815   3,524 
         
Total current  -   - 
         
Total non-current  2,815   3,524 

Assets held-to-maturity – quoted debt securities
A Thai subsidiary invested $360 (Baht 11 million) in subordinated debentures of Bangkok Bank Public Company Limited. The debentures bear a fixed interest rate of 4.375% per annum with a maturity of ten years callable at the option of the issuer after five years. As the call option is clearly and closely related to the value-added tax policydebt host contract, no bifurcation of embedded call option is required. The debentures are marketable and rated AA- by Fitch Rating (Thailand) Ltd.

The market yield is close to coupon rate. The fair value approximated its amortized cost as of December 31, 2014 and 2013.

Available-for-sale investments - unquoted equity shares
The investments in shares of a non-listed company, which are recognized initially at fair value plus transaction costs. After initial measurement, available-for-sale financial investments are subsequently measured at fair value with unrealized gains or losses recognized as the other comprehensive income. Available-for-sale investments – unquoted equity share consist of the investments in Thai Metal Processing Co., Ltd, (“TMP”) which is engaged in the fabrication of copper rods. During the years ended December 31, 2014, 2013 and 2012, the Company received dividends of $104, $110 and $109 from TMP, respectively, which were recorded in other income in the consolidated income statements.
F-50
ASIA PACIFIC WIRE & CABLE CORPORATION LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
11.  OTHER FINANCIAL ASSETS AND FINANCIAL LIABILITIES (continued)

11.2  Interest-bearing loans and borrowings

Under the line of credit arrangements for short-term debt with the Company’s banks, the Company may borrow up to approximately $278,370 and $351,794 as of December 31, 2014 and 2013, respectively, on such terms as the Company and the banks may mutually agree upon. These arrangements do not have termination dates but are reviewed annually for renewal. As of December 31, 2014 and 2013, the unused portion of the credit lines was approximately $168,241 and $236,532, respectively, which included unused letters of credit amounting to $85,943 and $106,480, respectively. Letters of credit are issued by the Company in the ordinary course of business through major financial institutions as required by certain vendor contracts. As of December 31, 2014 and 2013, the Company had open letters of credit totaling $49,042 and $33,668, respectively.  Liabilities relating to the letters of credit are included in current liabilities.
 As of December 31, 
 2014  2013 
 
Interest rate
%
Maturity 
Local currency
‘000
 US$’000  
Interest rate
%
 Maturity 
Local currency
‘000
 US$��000 
Current interest-bearing loans and borrowings                
Bank loans      -  3.30 Aug. 2014 US$1,500  1,500 
Bank loans5.88 ~ 6.45Mar. 2015 ~ Dec. 2015 RMB$78,250  12,589  6.30 Aug. 2014 ~ Nov. 2014 RMB$69,292  11,336 
Trust receipt1.20 ~ 1.60Jan. 2015 ~ Jun. 2015 THB$1,291,811  39,469  1.20 ~ 1.80 Jan. 2014 ~ Jun. 2014 THB$748,589  22,779 
Trust receipt1.97 ~ 1.98Dec. 2015 SGD$2,386  1,805  1.94 ~ 2.04 Dec. 2014 SGD$7,832  6,174 
Total current interest-bearing loans and borrowings      53,863         41,789 
During 2011, CCH (HK) entered into a bank loan agreement with Bangkok Bank Hong Kong Branch with a total loan amount of $14 million and a trade facility of $8 million. The loan carried an interest rate of SIBOR (Singapore Inter-bank Borrowing Rate) plus 2.5% for a period of 5.5 years, adjusted on a quarterly basis. The bank loan was guaranteed by the Company, as guarantor. As of January 1, 2012, CCH (HK) was not in compliance with certain financial and non-financial loan covenants and the loan became callable on demand. The outstanding balance was classified as current liabilities as of January 1, 2012.  As of December 31, 2012, the loan was classified as current liabilities and it had been fully repaid in 2013.  For information with respect to the collateral, please refer to Note 26.
F-51
ASIA PACIFIC WIRE & CABLE CORPORATION LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
11.  OTHER FINANCIAL ASSETS AND FINANCIAL LIABILITIES (continued)

11.3 Hedging activities and derivatives

Commodity price risk

The Company purchases copper on an ongoing basis as its operating activities require a continuous supply of copper for the manufactured products. The Company exercises rigorous controls through the commodity forward contracts to reduce its exposure to the fluctuations in market prices for cooper for selected operating units. The majority of these transactions take the form of contracts that are entered into and continue to be held for the purpose of receipt or delivery of the copper in accordance with the Company’s expected sales or production timing or usage requirements. Such contracts are not within the scope of hedging accounting, or derivatives. To date, these contract positions have not had a material effect on the Company’s financial position, results of operations or cash flow.

F-52
ASIA PACIFIC WIRE & CABLE CORPORATION LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
11.  OTHER FINANCIAL ASSETS AND FINANCIAL LIABILITIES (continued)

11.4Fair values

Set out below is a comparison of the carrying amounts and fair value of the Company’s financial instruments that are carried in the financial statements:
  Carrying amount  Fair value 
  As of December 31,  As of December 31, 
  2014  2013  2014  2013 
  US$’000  US$’000  US$’000  US$’000 
Financial assets-current            
Cash and cash equivalents  68,863   62,509   68,863   62,509 
Trade receivables  88,194   122,893   88,194   122,893 
Other receivables  23,024   11,139   23,024   11,139 
Due from related parties  24,711   3,842   24,711   3,842 
Financial assets-non-current                
Other non-current financial assets – available for sale  2,479   3,189   2,479   3,189 
Other non-current financial assets – held to maturity  336   335   336   335 
Total  207,607   203,907   207,607   203,907 
                 
Financial liabilities-current                
Interest-bearing loans and borrowings  53,863   41,789   53,863   41,789 
Trade and other payables  36,467   41,369   36,467   41,369 
Due to related parties  22,208   11,126   22,208   11,126 
Due to immediate holding company  1,537   1,732   1,537   1,732 
Financial lease liabilities  31   37   31   37 
Financial liabilities-non-current                
Financial lease liabilities  38   28   38   28 
Total  114,144   96,081   114,144   96,081 
The fair value of the financial assets and liabilities is included at the amount at which the instrument could be exchanged in a current transaction between willing parties, other than in a forced or liquidation sale. The following methods and assumptions were used to estimate the fair values:

uCash and cash equivalents, trade receivables, other receivables, due from related parties, trade and other payables, due to related parties, due to immediate holding company and financial lease liabilities approximate their carrying amounts largely due to the short-term maturities of these instruments.
uFixed-rate and variable-rate receivables/borrowings are evaluated by the Company based on parameters such as interest rates, specific country risk factors, individual creditworthiness of the customer and the risk characteristics of the financed project. Based on this evaluation, allowances are taken to account for the expected losses of these receivables. As of December 31, 2014, the carrying amounts of such receivables, net of allowances, were not materially different from their calculated fair values.

F-53
ASIA PACIFIC WIRE & CABLE CORPORATION LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
11.  OTHER FINANCIAL ASSETS AND FINANCIAL LIABILITIES (continued)

 11.4Fair value (continued)

uFair value of unquoted available-for-sale financial assets is estimated using appropriate valuation techniques.
uFair value of interest-bearing borrowings and loans and other non-current financial assets – held to maturity are determined by using discounted cash flow method using discount rate that reflects the issuer’s borrowing rate as of the end of the reporting period. The own non-performance risk as of December 31, 2014 was assessed to be insignificant.

Description of significant unobservable inputs to valuation

  Valuation technique Significant unobservable inputs Liquidity discount Sensitivity of the input to fair value
   (2014 and 2013) 
        20142013
Financial asset         
Available-for-sale financial assets in unquoted equity instruments
 Market Approach Method Liquidity Discount 30% 5%  decrease in the discount would increase in fair value by $1835% decrease in the discount would increase in fair value by $234

The Company estimates the fair value of available-for-sale financial investments in unquoted equity shares by using the market approach (market comparatives approach). The key in this method is the selection of quoted comparable companies and accommodate adjustments to bring the accounts of different companies into a broadly consistent framework for analysis. Then, select appropriate Indicators of Value. The followings should be taken into account:

}Enterprise Value (EV) versus Market Capitalization;
}Earnings-based: EBITDA +/or EBIT versus Net Earnings +/or Net Cash Flow
}Balance Sheet based: Net Total Assets versus Shareholders Funds

Discount for the lack of liquidity to reflect the lesser liquidity of unquoted equity instruments compared with those of its comparable public company peers. The Company assessed the discount for the lack of liquidity to be 30 percent on the basis of relevant studies applicable in the region and industry as well as on the specific facts and circumstances of the unquoted equity shares. The unquoted equity shares’ finance performance is characterized by stable, consistent growth and profitability. The Company believes the liquidity discount of 30% would be appropriate.

The Company carries unquoted equity shares as available-for-sale financial instruments classified as level 3 within the fair value hierarchy.  A reconciliation of the beginning and closing balances is summarized below:
Total
US$’000
At January 1, 20134,577
Re-measurement recognized in other comprehensive income (loss)(1,338)
Exchange difference(50)
At December 31, 20133,189
Re-measurement recognized in in other comprehensive income (loss)(713)
Exchange difference3
At December 31, 20142,479
F-54
ASIA PACIFIC WIRE & CABLE CORPORATION LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
12.  TRADE AND OTHER RECEIVABLES
  As of December 31, 
  2014  2013 
  US$’000  US$’000 
       
Trade receivables  91,899   124,581 
Less: Provision for impairment  (3,705)  (1,688)
Trade receivable, net  88,194   122,893 
Other receivable  23,024   11,139 

As of December 31, 2014 and 2013 trade receivables of an initial value of $3,705 and $1,688, respectively, were fully impaired. See below for the movement in the provision for impairment of trade receivables.
  Individually impaired  Collectively impaired  
 
Total
 
  US$’000  US$’000  US$’000 
At January 1, 2013  2,402   178   2,580 
Charge for the year  371   37   408 
Write-off  (1,016)  (1)  (1,017)
Unused amounts reversed  (170)  (42)  (212)
Currency translation adjustment  (46)  (25)  (71)
At December 31, 2013  1,541   147   1,688 
Charge for the year  2,359   73   2,432 
Write-off  (46)  (31)  (77)
Unused amounts reversed  (253)  (28)  (281)
Currency translation adjustment  (53)  (4)  (57)
At December 31, 2014  3,548   157   3,705 

The ageing analysis of trade receivables is as follows:

        Past due but not impaired 
  Total  Neither past due nor impaired  Past due 1-3 months  Past due 3-6 months  Past due 6-12 months  Past due over 12 months 
  US$’000  US$’000  US$’000  US$’000  US$’000  US$’000 
December 31, 2014  88,194   73,552   12,502   578   840   722 
December 31, 2013  122,893   98,853   22,296   760   553   431 
The Company maintains provision for impairment of trade receivables for estimated losses resulting from the relevant tax authorities,inability of its customers to make required payments. Management considers the sales are subject to an output VAT, whilefollowing factors when determining the purchasecollectability of products is subject to an input VAT. VAT payable or receivable isspecific customer accounts: customer credit-worthiness, customer financial condition, past transaction history with the netcustomer, current economic industry trends, and changes in customer payment terms. The impairment losses assessed individually as of December 31, 2014 and 2013 primarily resulted from the financial difficulties of the counter trading parties and the amounts recognized were the difference between periodic output VATthe carrying amount of the accounts receivable and deductible input VAT. the present value of expected collectable amounts.

The revenue, expensesCompany obtained collateral in respect of customer doubtful accounts. The collateral takes the form of a lien over the customer’s assets and gives the Company a claim on these assets for the doubtful accounts. The Company has the first lien for the collateral. The collateral is in general, not recorded on the balance sheet. The fair value of the collateral has been determined based on the valuation performed by independent appraisers. As of December 31, 2014 and 2013, the fair values of the collateral were $917 and $902, respectively, which were higher than the amounts of the associated delinquent accounts, as a result, no impairments were recognized.

See Note 26(b) credit risk of trade receivables, which discusses how the Company manages and measures credit quality of trade receivables that are neither past due nor impaired.
F-55
ASIA PACIFIC WIRE & CABLE CORPORATION LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
13.  INVENTORIES
  As of December 31, 
  2014  2013 
  US$’000  US$’000 
Raw materials and supplies  37,535   23,669 
Work in progress  13,790   14,750 
Finished goods  42,896   44,042 
Distributed products  16,957   14,880 
   111,178   97,341 
Allowance for inventories  (3,770)  (1,396)
Total inventories at the lower of cost and net realizable value  107,408   95,945 

To conform with the current year’s presentation, the inventory of $2,249 related to SDI previously presented in 2013 financial statements has been reclassified to the gross amount due from customers for contract work-in-process.  The reclassification is a change in the Company’s classification which had no effect on financial condition, gross profit, income from operations or net income.

For the year ended December 31, 2014, the Company recognized allowance for inventory of $2,394 as an expense in cost of sales for inventories carried at net ofrealizable value.

For the year ended December 31, 2013 and 2012, the amount of VAT except where$1,046 and $5,161, respectively, were credited to cost of sales when the VAT incurredcircumstances that caused the net realizable value of inventory to be lower than its cost no longer existed.
14.  GROSS AMOUNTS DUE FROM CUSTOMERS FOR CONTRACT WORK-IN-PROGRESS

  As of December 31, 
  2014  2013 
  US$’000  US$’000 
Construction contract work-in-progress      
Construction costs  36,976   17,094 
Attributable loss/(profit)  141   (107)
   37,117   16,987 
Less: Progress billing received and receivable  (35,186)  (14,738)
Total gross amounts due from customers for contract work  1,931   2,249 

Revenues recognized in a purchaseexcess of amounts billed are classified as current assets or servicesunder contract work-in-progress. Amounts billed to clients in excess of revenues recognized to date are classified as current liabilities under advance billings on contracts.

F-56
ASIA PACIFIC WIRE & CABLE CORPORATION LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
15.  PROPERTY, PLANT AND EQUIPMENT
  Land  Buildings  Building improvement  Machinery and equipment  Motor vehicle and other asset and assets under finance lease  Office equipment  Construction in progress  Total 
  US$’000  US$’000  US$’000  US$’000  US$’000  US$’000  US$’000  US$’000 
                         
Cost                        
At January 1, 2013  5,681   48,848   3,152   120,991   4,539   6,599   6,418   196,228 
Additions  -   -   36   584   642   586   7,646   9,494 
Disposals  -   (17)  -   (15,558)  (383)  (540)  -   (16,498)
Transfer  -   5,139   641   2,868   232   72   (8,952)  - 
Exchange differences  (598)  (3,245)  (206)  (8,173)  (300)  (414)  (42)  (12,978)
                                 
At December 31, 2013  5,083   50,725   3,623   100,712   4,730   6,303   5,070   176,246 
                                 
Additions  -   -   16   1,003   564   331   4,083   5,997 
Disposals  -   -   -   (1,941)  (364)  (145)  -   (2,450)
Transfer  -   1,636   425   4,164   -   44   (6,269)  - 
Exchange differences  (39)  (886)  (2)  (816)  (99)  (103)  (21)  (1,966)
                                 
At December 31, 2014  5,044   51,475   4,062   103,122   4,831   6,430   2,863   177,827 
                                 
                                 
Depreciation                                
At January 1, 2013  -   (30,243)  (2,404)  (106,981)  (3,342)  (5,794)  -   (148,764)
Depreciation charge for the year  -   (1,894)  (109)  (2,661)  (559)  (349)  -   (5,572)
Depreciation on disposals  -   17   -   15,549   351   537   -   16,454 
Transfer  -   -   -   1   -   (1)  -   - 
Exchange differences  -   2,362   167   7,251   213   352   -   10,345 
                                 
At December 31, 2013  -   (29,758)  (2,346)  (86,841)  (3,337)  (5,255)  -   (127,537)
F-57
ASIA PACIFIC WIRE & CABLE CORPORATION LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
  Land  Buildings  Building improvement  Machinery and equipment  Motor vehicle and other asset and assets under finance lease  Office equipment  Construction in progress  Total 
  US$’000  US$’000  US$’000  US$’000  US$’000  US$’000  US$’000  US$’000 
                                 
At December 31, 2013  -   (29,758)  (2,346)  (86,841)  (3,337)  (5,255)  -   (127,537)
Depreciation charge for the year  -   (1,932)  (163)  (2,923)  (593)  (386)  -   (5,997)
Depreciation on disposals  -   -   -   1,941   364   138   -   2,443 
Transfer  -   -   -   -   -   -   -   - 
Exchange differences  -   468   (6)  570   71   90   -   1,193 
                                 
At December 31, 2014  -   (31,222)  (2,515)  (87,253)  (3,495)  (5,413)  -   (129,898)
                                 
                                 
Net book value                                
At December 31, 2014  5,044   20,253   1,547   15,869   1,336   1,017   2,863   47,929 
At December 31, 2013  5,083   20,967   1,277   13,871   1,393   1,048   5,070   48,709 
At January 1, 2013  5,681   18,605   748   14,010   1,197   805   6,418   47,464 
F-58
ASIA PACIFIC WIRE & CABLE CORPORATION LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
15.  PROPERTY, PLANT AND EQUIPMENT (continued)

Capitalized borrowing costs
Capitalized interest on construction in progress is not recoverable from taxation authority,added to the cost of the underlying asset and is depreciated over the estimated useful life of the asset in which case the VAT is recognizedsame manner as the underlying asset. The capitalized interest was related to and has been included as part of the cost of acquisitionNingbo Pacific’s construction in progress.

The amount of borrowing costs capitalized during the years ended December 31, 2014, 2013 and 2012 were $43, $30 and $69, respectively. The rate used to determine the amount of borrowing costs eligible for capitalization was in the range of 1.15% to 6.30 %, 1.5% to 6.23% and 1.7% to 6.77%, during each of 2014, 2013 and 2012, respectively.

Financial leases under property, plant and equipment
The carrying value of motor vehicles under financial leases as of December 31, 2014 and 2013 were $43 and $8, respectively.

Pledge
Information about the property, plant and equipment that were pledged to others as collaterals is provided in Note 26.

16.  PREPAID LAND LEASE PAYMENTS

  2014  2013 
  US$’000  US$’000 
Carrying amount as of January 1,  1,999   2,018 
Recognized lease expense during the year  (59)  (59)
Exchange difference  (22)  40 
Carrying amount as of December 31,  1,918   1,999 
Current portion included in prepayments  59   60 
Non-current portion included in prepaid land lease payments  1,859   1,939 

The property land is situated in Mainland China and is held under a long-term operating lease for 33 – 50 years.
F-59
ASIA PACIFIC WIRE & CABLE CORPORATION LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
17.  INVESTMENT PROPERTIES

The net book value of investment properties as of December 31, 2014 and 2013 was as follow:

  Land not being used for operation  Office buildings for rent  Total 
  US$’000  US$’000  US$’000 
As of December 31, 2014         
Cost  583   346   929 
Less: Accumulated depreciation  -   (160)  (160)
Less: Accumulated impairment  (12)  -   (12)
             
Net book value  571   186   757 
  Land not being used for operation  Office buildings for rent  Total 
  US$’000  US$’000  US$’000 
As of December 31, 2013 :         
Cost  581   345   926 
Less: Accumulated depreciation  -   (142)  (142)
Less: Accumulated impairment  (38)  -   (38)
             
Net book value  543   203   746 
A reconciliation of the assets ornet book value of investment properties was as partfollow:

  2014  2013 
  US$’000  US$’000 
Net book value at January 1  746   751 
Depreciation (included in administrative expenses)  (18)  (18)
Reversal of impairment loss  26   68 
Exchange difference  3   (55)
Net book value at December 31  757   746 

Investment properties are carried at historical cost less accumulated depreciation and impairment. Land is not depreciated and office buildings are depreciated on a straight-line basis over the estimated useful lives from 20 to 30 years.

F-60
ASIA PACIFIC WIRE & CABLE CORPORATION LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

17.  INVESTMENT PROPERTIES (continued)
The amount recognized in profit arising from the investment properties for the years ended December 31, 2014, 2013 and 2012 was as follow:
  2014 2013 2012
  US$’000 US$’000 US$’000
Rental income derived from investment properties 11 21 21
Direct operating expenses (including repairs and maintenance) (1) (1) (1)
generating rental income
Direct operating expenses (including repairs and maintenance) that did not (1) (1) (1)
generate rental income
Net profit arising from investment properties carried at cost 9 19 19
The fair value of the expenses item as applicable. Receivable and payable thatinvestment properties are stated below:
  As of December 31, 
  2014  2013 
  US$’000  US$’000 
Land not being used for operation  11,509   11,437 
Office building for rent  647   617 

The fair value of aforementioned investment properties have been determined based on the valuation performed by  independent appraisers and is considered a level 3 measurement.  The valuation has been made on the assumption to sell the property interests in the open market in the neighborhood without the benefit of any deferred term contract, leaseback, joint venture, management agreement or any similar arrangement, which would serve to increase the value of the property interests. The valuation adopted market comparison approach to estimate the fair market value of the properties. Under the market comparison approach, the appraisal is based on recent sales and listings of comparable property. Adjustments were made for differences between the subject property and those actual sales and listings regarded as comparable. The factors which used for considering the property valuation include the significant unobservable inputs, such as location, transportation, land uses, facilities, neighboring area, land characteristics, potential, regulations and liquidity.
18.  INTANGIBLE ASSETS

Computer software
  2014  2013 
  US$’000  US$’000 
Cost      
At January 1  346   342 
Addition  39   15 
Exchange difference  (4)  (11)
At December 31  381   346 
         
Accumulated amortization        
At January 1  (242)  (179)
Amortization  (31)  (69)
Exchange difference  2   6 
At December 31  (271)  (242)
         
Net book value        
At December 31  110   104 
The cost of acquiring software is capitalized separately as an intangible asset on the basis of the costs incurred to acquire and bring to use the specific software. Intangible assets are stated at cost less accumulated amortization. Amortization of intangible assets are charged to operating expenses and cost on a straight-line basis over 5 years from the date they are available for use.

F-61
ASIA PACIFIC WIRE & CABLE CORPORATION LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
19.  INVESTMENTS IN ASSOCIATES

The associates of the Company are set out below:
      Percentage of equity interest 
    Country of incorporation As of December 31 
Company Name Nature of business  20142013 
         
Shandong Pacific Rubber Cable Co., Ltd. (“SPRC”) Manufacturing of rubber cable PRC 25.00%25.00% 
         
Siam Pacific Holding Company Limited (“SPHC”) Investment & holding company Thailand 49.00%49.00% 
         
Loxpac (Thailand) Company Limited (“Loxpac”) (Formerly known as “Loxley Pacific Co., Ltd.)
 Providing telecommunication service Thailand 21.39%21.39% 
         
Loxpac Hong Kong Co., Limited (“Loxpac HK”) (Formerly known as “Loxley Pacific Hong Kong Co., Limited” )
 Investment & holding company Hong Kong 28.06%28.06% 

  As of December 31, 
  2014  2013 
  US$’000  US$’000 
Balance at January 1  2,937   3,133 
Additions  -   16 
Capital return  -   (16)
Share of loss of associates  (338)  (211)
Exchange difference  (28)  15 
         
Balance at December 31  2,571   2,937 
The investments in Loxpac and Loxpac HK have been fully impaired.
F-62
ASIA PACIFIC WIRE & CABLE CORPORATION LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

19.  INVESTMENTS IN ASSOCIATES (continued)

The Company’s investments in associates are accounted for using the equity method in the consolidated financial statements.
The following table summarized financial information of the Company’s investments in associates:

  As of December 31, 
  2014  2013 
  US$’000  US$’000 
Current assets  108,269   92,044 
Non-current assets  13,214   16,231 
Current liabilities  (100,454)  (84,188)
Non-current liabilities  (2,160)  (2,937)
Equity  18,869   21,150 
  For the year ended December 31, 
  2014  2013  2012 
  US$’000  US$’000  US$’000 
Revenue  49,105   49,813   57,467 
Loss for the year (continuing operations)  (2,136)  (874)  (1,067)
Other comprehensive income  -   -   - 

As of December 31, 2014 and 2013, the Company's associates had no contingent liabilities or capital commitments.

20.  TRADE AND OTHER PAYABLES
  As of December 31, 
  2014  2013 
  US$’000  US$’000 
Trade payables  30,411   34,304 
Other payables  6,056   7,065 
   36,467   41,369 
Terms and conditions of the above financial liabilities:
u   Trade payables are non-interest bearing and are normally settled on 60-day terms.
u   Other payables are non-interest bearing and have an average term of 60 days.    
u   For terms and conditions relating to other related parties, refer to Note 23.

F-63
ASIA PACIFIC WIRE & CABLE CORPORATION LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
21.  EMPLOYEE BENEFIT

Pension – Defined contribution plans

The Company has several defined contribution plans covering its employees in Australia, PRC and Singapore. Contributions to the plan are made annually. Total charges for the years ended December 31, 2014, 2013 and 2012, were $1,283, $1,285 and $1,186, respectively.

Pension – Defined benefit plans

The defined benefit liability recognized in the consolidated balance sheet in respect to defined benefit plans is the present value of the defined benefit obligation at the end of the reporting period, together with adjustments for past service costs and actuarial losses. The defined benefit obligation is calculated annually by independent actuaries using the projected unit credit method. The present value of the defined benefit obligation is determined by discounting the estimated future cash outflows using future actuarial assumptions about demographic and financial variables that affect the determination of the amount of such benefits.
In accordance with the VAT incurred.Thailand labor law, Charoong Thai and its subsidiaries are obliged to make payment to retiring employees, at rates of 1 to 10 times of their final month’s salary rate, depending on the length of service.  In addition, Charoong Thai also has the extra benefit plan to make payment to qualified retiring employees, the extra benefits payment to retiring employees was changed at rates of 1 to 5 times of final month's salary to 29 times effective January 1, 2012. The changes created a prior service cost and increased the benefit obligation totaling $3 million (Baht 91million). The Company’s net benefit cost was $544, $549 and $3,249 for the years ended December 31, 2014, 2013 and 2012, respectively.  The plan is not funded. As of December 31, 2014 and 2013, the amount recognized were $665 and $419 in current liabilities, $6,073 and $5,455 in non-current liabilities, respectively. The Company pays to settle the obligations as and when employees retire.

The following tables summaries the components of net benefit expense recognized in the income statement and the funded status and amounts recognized in the consolidated balance sheet for the plan:

  For the year ended December 31, 
Net benefit cost 2014  2013  2012 
  US$’000  US$’000  US$’000 
Current service cost  305   322   192 
Interest cost on benefit obligation  239   227   128 
Past service costs recognized  -   -   2,929 
Net benefit cost  544   549   3,249 

  For the year ended December 31, 
Other comprehensive income 2014  2013  2012 
  US$’000  US$’000  US$’000 
Actuarial (gain) / loss – experience  (1)  185   499 
Actuarial (gain) / loss – demographic assumption  -   23   - 
Actuarial (gain) / loss – financial assumption  713   (157)  (346)
Actuarial (gain) / loss  712   51   153 

  For the year ended December 31, 
Change in the defined obligation 2014  2013  2012 
  US$’000  US$’000  US$’000 
Defined benefit obligation at January 1  5,874   5,840   3,315 
Current service cost  305   322   192 
Interest cost on benefit obligation  239   227   128 
Past service costs recognized  -   -   2,929 
Net benefit cost for the current period  6,418   6,389   6,564 
Benefits paid directly by the Company  (408)  (138)  (1,038)
Actuarial loss in other comprehensive income  712   51   153 
Exchange differences  16   (428)  161 
Defined benefit obligation at December 31  6,738   5,874   5,840 
F-64
ASIA PACIFIC WIRE & CABLE CORPORATION LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
21.  EMPLOYEE BENEFIT (continued)
Actuarial assumptions

The significant assumptions used in determining the actuarial present value of the defined benefit obligations for the year ended December 31, 2014 and 2013 are as follows:
  2014  2013 
  %  % 
Discount rate  3.2   4.3 
Rate of salary increase  6.0   6.0 
Maturity profile of defined benefit obligation
The following pension benefit payments are expected payments to be made in the future years out of the defined benefit plan obligation:
  As of December 31, 
  2014  2013 
  US$’000  US$’000 
Within the next 12 months (next annual reporting period)  665   419 
Between 2 and 5 years  1,322   1,467 
Between 5 and 10 years  2,535   2,352 
Beyond 10 years  15,583   15,342 
Total expected payments  20,105   19,580 
         
Weight average duration of defined benefit obligation 13 years  15 years 

Sensitivity analysis

A one-percentage point change in the assumed rates would have yielded the following effects:
  2014  2013 
  US$’000  US$’000 
Discount rate – 1% increase  (655)  (544)
Discount rate – 1% decrease  771   638 
Rate of salary increase – 1% increase  741   621 
Rate of salary increase – 1% decrease  (644)  (541)

The sensitivity result above determines their individual impact on the plan’s year-end defined benefit obligation. In reality, the plan is subject to multiple external experience items which may move the defined benefit obligation in similar or opposite directions, while the plan’s sensitivity to such changes can vary over time.

Long service leave
The liability for long service leave is recognized in the provision for employee benefits and measured as present value of expected future payments to be made in respect of services provided by employees up to the reporting date using the projected unit credit method. Consideration is given to expected future wage and salary levels, experience of employee departure, and periods of service. Expected future payments are discounted using market yields at the reporting date on national government bonds with terms to maturity and currencies that match as closely as possible, the estimated future cash outflows.  As of December 31, 2014 and 2013, the amounts of long service leave was $584 and $577, respectively.
F-65
ASIA PACIFIC WIRE & CABLE CORPORATION LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

22.  EQUITY

  As of December 31, 
Authorized shares 2014  2013 
  Number of shares  Number of shares 
Common shares of US$0.01 each  50,000,000   50,000,000 
Common shares issued and fully paid Number of shares  US$’000 
At December 31, 2014  13,830,769   138 
At December 31, 2013  13,830,769   138 
At January 1, 2013  13,830,769   138 

Outstanding shares
Number of shares
At January 1, 201213,830,769
Purchase of treasury shares(1,900)
At December 31, 201213,828,869
Purchase of treasury shares(9,200)
At December 31, 201313,819,669
Purchase of treasury shares-
At December 31, 201413,819,669
Additional paid-in-capital
US$,000
At January 1, 2012111,541
Increase in shareholding in a subsidiary(933)
At December 31, 2012110,608
Increase in shareholding in a subsidiary-
At December 31, 2013110,608
Increase in shareholding in a subsidiary-
At December 31, 2014110,608
F-66
ASIA PACIFIC WIRE & CABLE CORPORATION LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

22.  EQUITY (continued)

Other comprehensive income – net of tax

The disaggregation of changes of other comprehensive income by each type of reserve in equity is shown below:

  For the year ended December 31, 2014 
  Available-for-sale reserve  Foreign currency translation reserve  Actuarial losses on defined benefit plans  
 
 Total
 
  US$’000  US$’000  US$’000  US$’000 
Exchange difference on translation of foreign operations  -   (4,521)  -   (4,521)
Re-measuring losses on defined benefit plans  -   -   (499)  (499)
Net loss on available-for-sale financial assets  (499)  -   -   (499)
   (499)  (4,521)  (499)  (5,519)
  For the year ended December 31, 2013 
  Available-for-sale reserve  Foreign currency translation reserve  Actuarial losses on defined benefit plans  
 
 Total
 
  US$’000  US$’000  US$’000  US$’000 
Exchange difference on translation of foreign operations  -   (15,418)  -   (15,418)
Re-measuring losses on defined benefit plans  -   -   (36)  (36)
Net gain on available-for-sale financial assets  (936)  -   -   (936)
   (936)  (15,418)  (36)  (16,390)
  For the year ended December 31, 2012 
  Available-for-sale reserve  Foreign currency translation reserve  Actuarial losses on defined benefit plans  
 
 Total
 
  US$’000  US$’000  US$’000  US$’000 
Exchange difference on translation of foreign operations  -   6,113   -   6,113 
Re-measuring losses on defined benefit plans  -   -   (107)  (107)
Net gain on available-for-sale financial assets  400   -   -   400 
   400   6,113  ��(107)  6,406 
F-67
ASIA PACIFIC WIRE & CABLE CORPORATION LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
23.  RELATED PARTY TRANSACTIONS

The related parties are defined as affiliates of the Company; entities for which investments are accounted for by the equity method by the Company; the principal owners of the Company; its management; members of the immediate families of the principal owners of the Company and its management.

Moon View Venture Limited (“Moon View”), PEWC, Singapore Branch, PEWC Singapore Co. (Pte) Ltd., Dragon Conqueror Ltd. and PEWC (HK) are controlled by PEWC. Moon View is the immediate holding company of the Company. Italian-Thai Development Public Company Limited (“Italian-Thai”) is the non-controlling shareholder of one of the Company’s operating subsidiaries in Thailand. SPHC is one of the Company’s equity investees. Fujikura Limited is a non-controlling shareholder of one of the Company’s operating subsidiaries in Thailand.

(a)  Outstanding balance with related parties:
The following table provided the total amount of VAT recoverable from, or payable to,outstanding balance at December 31, 2014 and 2013.
  Amounts due from related parties  Amounts due to related parties 
  As of December 31,  As of December 31, 
  2014  2013  2014  2013 
  US$’000  US$’000  US$’000  US$’000 
The ultimate parent company            
PEWC  639   1,233   4,288   7,630 
PEWC, Singapore Branch  -   1,114   -   892 
PEWC Singapore Co. (Pte) Ltd.  -   -   973   1,074 
PEWC (HK)  21,141   -   14,938   - 
Dragon Conqueror Limited  220   -   -   - 
                 
The immediate holding company                
Moon View  -   -   1,537   1,732 
                 
Associate                
SPHC  178   177   1,362   1,362 
                 
Non-controlling shareholder of subsidiary                
Italian-Thai and its affiliates  2,532   1,318   450   - 
Fujikura Limited  -   -   104   98 
                 
Others  -   -   93   70 
Total  24,711   3,842   23,745   12,858 
As of December 31, 2014 and 2013, the taxation authority is included as part of receivable or payable ininterest rates on the balance sheet.

The VAT rates of our Operating Subsidiaries in various tax jurisdictions are:

due to PEWC Singapore Co., (Pte) Ltd. range from 1.23% to 1.24% and 1.25% to 1.31%, respectively, and the payables are repayable upon demand. All balances with related parties are unsecured.
F-68
ASIA PACIFIC WIRE & CABLE CORPORATION LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

China

23.  

17%

Singapore

7%

Thailand

6%

Australia

10%

RELATED PARTY TRANSACTIONS (continued)


(b)  Transactions with related parties:

The transactions undertaken with related parties are summarized as follows:

   For the year ended December 31, 
   2014  2013  2012 
   US$’000  US$’000  US$’000 
The ultimate parent company          
PEWCPurchases of materials  16,036   15,505   21,443 
 Purchases of products  4,782   -   9,083 
 Purchases of machinery  -   -   203 
 Sales  410   287   106 
 Management fee received  19   19   19 
 Management fee paid  256   252   388 
 Information technology service fee paid  115   118   136 
PEWC, Singapore BranchManagement fee received  -   -   15 
PEWC Singapore Co. (Pte) Ltd.Interest expenses paid  9   11   14 
PEWC (HK)Purchases of materials  23,132   -   - 
 Sales  19,789   -   - 
              
Non-controlling shareholder of subsidiary             
Italian Thai and its affiliatesSales  2,418   2,192   2,563 
Fujikura LimitedPurchases of products  1,179   1,412   1,074 

Terms and condition of transactions with related parties
The sales to and purchases from related parties are based on negotiation by the entities. Outstanding balances at the year-end are unsecured and interest free. There have been no guarantees provided or received for any related party receivables or payables. For the years ended December 31, 2014, 2013 and 2012, the Company did not record any impairment of receivables relating to amounts owed by related parties. This assessment is undertaken each financial year through examining the financial position of the related party and the market in which the related party operates.
Copper is the major raw material of the Company’s wire and cable products.  The Company purchases copper in the form of copper rods and copper cathode.  Copper cathode is purchased by Siam Pacific to avoid the high import tariffs levied on copper rods.  Copper cathode needs to be processed into copper rods prior to the manufacturing of wire and cable products. 
Substantially all of the Company’s copper rods are supplied by PEWC while copper cathodes are supplied by unrelated third parties. The price of copper rods purchased from PEWC is determined by reference to the quoted copper prices on the London Metal Exchange (the “LME”) plus a certain premium.
F-69
13.ASIA PACIFIC WIRE & CABLE CORPORATION LIMITED

COMMITMENTS AND CONTINGENCIESNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

23.  RELATED PARTY TRANSACTIONS (continued)
Terms and condition of transactions with related parties (continued)
In addition to copper rods, the Company purchases high voltage power cable from PEWC for distribution purposes. The purchase price of power cable from PEWC is determined by reference to the quoted copper prices on the LME. No sales commission was received from PEWC during the years ended December 31, 2014, 2013 and 2012.  
Pursuant to the composite services agreement:
(a)   PEWC will sell copper rod to the Company, upon the Company’s request, (i) at a price consisting of the average spot price of copper on the LME for the one month prior to purchase plus an agreed upon premium, (ii) at prices and on terms at least as favorable as it provides copper rod to other purchasers of similar amounts of copper rod in the same markets as PEWC and (iii) will give priority in the supply of copper rod to the Company over other purchasers of copper rod from PEWC.
(b)  PEWC grants to the Company the right to distribute any wire or cable product manufactured by PEWC in all markets in which the Company presently distributes or develops the capability to distribute in the future, such products on such terms as have historically been in effect or on terms at least as favorable as PEWC grants to third parties that distribute such products in such markets. However, PEWC shall not be required to grant to the Company the right to distribute products manufactured by PEWC in the future in markets where the Company does not currently have the capability to distribute unless and until PEWC has no pre-existing contractual rights which would conflict with the grant of such right to the Company.
(c)  PEWC will make available to the Company, upon the Company’s request and on terms to be mutually agreed between PEWC and the Company from time to time, access to certain of PEWC’s technology (and PEWC personnel necessary to use such technology) with respect to the design and manufacture of wire and cable products, including, without limitation, certain fiber optic technology.
(d)  PEWC will make available to the Company, upon the Company’s request and on terms to be mutually agreed between PEWC and the Company from time to time, certain services with respect to the design and manufacture of wire and cable products, computerization, inventory control, purchasing, internal auditing, quality control, emergency back-up services, and recruitment and training of personnel; such services may include the training of the Company’s employees and managers at PEWC facilities and the secondment of PEWC employees and managers to the Company.
(e)  Each of PEWC and the Company will offer the other party the right to participate in any negotiations with a third party concerning the establishment of any facility or similar venture to manufacture or distribute any wire or cable product outside of the markets where the Company currently manufactures or distributes, or intends to develop the capability to manufacture or distribute, any wire or cable product. Unless the Company and PEWC mutually agree otherwise, the Company shall have the right of first refusal to enter into any definitive agreement with such third party. If, however, such third party would not agree to the substitution of the Company for PEWC or such substitution would prevent the successful completion of the facility or venture, PEWC will arrange for the Company to participate to the extent possible.

(c)  Compensation of key management personnel of the Company

  For the years ended December, 31 
  2014  2013  2012 
  US$’000  US$’000  US$’000 
Short-term employee benefits  4,853   6,432   5,682 
Post-employment benefits  92   95   91 
Termination benefits  126   182   684 
Total compensation paid to key management personnel  5,071   6,079   6,457 

The amounts disclosed in the table are the amounts recognized as an expense during the reporting period related to key management personnel.
F-70
ASIA PACIFIC WIRE & CABLE CORPORATION LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
24.  COMMITMENTS AND CONTINGENCIES

(a)  Operating lease commitments – the Company as lessee

The Company leases a piece of land in Singapore and certain buildings under non-cancellable operating lease arrangements for terms from 5 to 30 years.

Future minimum rental payable under non-cancellable operating leases with initial terms of one year or more consisted of the following:
  As of December 31, 
  2014  2013 
  US$’000  US$’000 
Within one year  1,680   913 
After one year but not more than five years  1,440   1,706 
More than five years  1,665   2,060 
   4,785   4,679 

(b)  Finance lease and hire purchase commitments

(a)Leases 

The Company leases certain machinery and equipment under capitalfinance leases for 2010 and 2011.

                        The Company leases a piece of land in Singapore and certain buildings under non-cancellable operating lease arrangements for terms from 5 to 30 years.

                        Future minimum payments under capital leases and non-cancellable operating.


Future minimum payments under finance leases with initial terms of one year or more consisted of the following as of December 31:

  2014  2013 
  Minimum payments  Present value of payments (Note 15 )  Minimum payments  Present value of payments (Note 15 ) 
  US$’000  US$’000  US$’000  US$’000 
Within one year  34   31   41   37 
After one year but not more than five years  42   38   29   28 
More than five years  -   -   -   - 
Total minimum lease payments  76   69   70   65 
Less: amount representing finance charges  (7)  -   (5)  - 
Present value of minimum lease payment  69   69   65   65 

As of December 31, 2011:

 

 

Capital Leases

 

Operating Leases

 

 

 

 

 

2012

 

$ 882

 

$ 866

2013

 

173

 

663

2014

 

46

 

430

2015

 

30

 

177

2016

 

4

 

172

Thereafter

 

–

 

2,354

 

 

 

 

 

Net minimum lease payments

 

$ 1,135

 

$ 4,662

 

 

 

 

 

Less: amount representing interest

 

(57)

 

 

 

 

 

 

 

 

 

 

 

 

Present value of net minimum lease payments

 

$ 1,078

 

 

Less: non-current portion included in other non-current liabilities

 

(842)

 

 

Current portion included in other current liabilities

 

236

 

 


ASIA PACIFIC WIRE & CABLE CORPORATION LIMITED AND SUBSIDIARIES                           

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In thousands of U.S. Dollars, except share data)

13.COMMITMENTS AND CONTINGENCIES(continued) 

(a)Leases (continued)

                        Rental expense consisted of2014 and 2013, the following:

 

 

2009

 

2010

 

2011

 

 

 

 

 

 

 

Rentals under operating leases

 

$ 1,013

 

$ 937

 

$ 911

 

 

 

 

 

 

 

            The capitalfinance lease liabilities are secured by the leased machinery and equipment at cost of $330$149 and $195 as of December 31, 2010 and 2011,$139, respectively. The accumulated depreciation of these leased assets as of December 31, 20102014 and 20112013 amounted to $264$106 and $97,$131, respectively. The depreciation of machinery and equipment under capitalfinance leases are included in the depreciation expenses under costs of sales.

  The average discount interest rate implicit in the lease is in the range of 6.58%7.84% and 6.57% to 8.78%8.58%, for 2014 and 6.5% to 8.73% for 2010 and 2011, respectively.

(b)2013, respectively.

F-71
ASIA PACIFIC WIRE & CABLE CORPORATION LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
24.  COMMITMENTS AND CONTINGENCIES (continued)

(c)  Purchase commitments

As of December 31, 2014 and 2013, the Company and its subsidiaries had commitments to purchase raw materials totaling $160 million to $213 million and $174.9 million to 234 million (24,500 to 32,590 metric tons and 23,116 to 30,780 metric tons), respectively, from third parties at the prices stipulated in the contracts.

(d)  Capital commitments

As of December 31, 2011,2014 and 2013, the Company and its subsidiaries had commitmentscapital commitment relating to purchase raw materialsthe construction of factory building improvement and acquisition of machinery, totaling $186.6$4.6 million to $243and $3.1 million, (23,774 to 30,936 metric tons), from third parties at the prices stipulated in the contracts.

(c)respectively.


(e)  Guarantees

As of December 31, 2011,2014 and 2013, Charoong Thai and its subsidiaries had given continuing corporate guarantee of $9.7$6.9 million (2010: $12.8 million)and $10.7 million, respectively, in respect of banking facilities extended to two Operating Subsidiaries.

operating subsidiaries.


As of December 31, 2010, two subsidiaries of Charoong Thai had commitments to provide cross guarantees for credit lines of $66.2 million. There was no such commitment as of December 2011.

            As of December 31, 2011,2014 and 2013, the Company provided a corporate guarantee not exceeding the sum of $26.3$31.2 million (2010: $20.5 million)and $31.2 million, respectively, for the bond performance and banking facility of Sigma Cable.


As of December 31, 2011,2014 and 2013, there were outstanding bank guarantees of $18$31.5 million (2010: $19.8 million)and $34.78 million, respectively, issued by the banks on behalf of Charoong Thai and its subsidiaries in respect of certain performance bonds as required in the normal course of business of the companies. These guarantees generally expire within 1 year.

(d)As of December 31, 2011, the Company and its subsidiaries had capital commitment relating to the installation of equipment and acquisition of machinery, totaling $1 million (2010: $0.1 million).

(e)As of December 31, 2011, the Company and its subsidiaries had commitments in respect of repair and maintenance consulting service with unrelated parties and related parties totaling $0.1 million (2010: $0.2 million) and $3.1 million (2010: $0.2 million) respectively.

(f)As of December 31, 2011, the Company pledged 112 million shares of Charoong Thai to reserve a $14 million term loan facility and a $8 million trade facilities of CCH HK.

            As of December 31, 2010, SPFO pledged account receivables of $3.9 million against a bank loan.


ASIA PACIFIC WIRE & CABLE CORPORATION LIMITED AND SUBSIDIARIES                           

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In thousands of U.S. Dollars, except share data)

13.COMMITMENTS AND CONTINGENCIES(continued) 

(g)
(f)  Service commitments


As of December 31, 2014 and 2013, the Company and its subsidiaries had commitments in respect of repair and maintenance consulting services with related parties totaling $0.1 million and $0.2 million, respectively.

(g)  Shareholders’ Agreement

As disclosed in noteNote 1, on June 28, 2007 SOF entered into a shareholders’ agreementShareholders’ Agreement with the Company and PEWC (the “Shareholders Agreement”).PEWC. On March 27, 2009, SOF sold 10.2% of the issued and outstanding shares of the Company to PEWC. On July 1, 2011, SOF transferred its remaining 9.8% interest in the Company to COF, which became a party to the Amended Shareholders Agreement, which provides for the following:


Indemnification


The Company must certify to SOF (now became COF) whether or not it is considered a Controlled Foreign Corporation or a Passive Foreign Investment Company as of each fiscal year end. Should this certification be challenged by the taxing authorities and found to be incorrect, the Company must indemnify SOF (now became COF) and its shareholders against interest and penalties that may be imposed and reasonable attorney’s fees incurred.


It is management’s opinion that this indemnification will not result in any adverse material financial consequence to the Company.


Controlled Foreign Corporation is any foreign corporation of which more than 50

percent of either -

–


(1) The total combined voting power of all classes of stock of the corporation entitled to vote; or



F-72
ASIA PACIFIC WIRE & CABLE CORPORATION LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

24.  COMMITMENTS AND CONTINGENCIES (continued)

(g)  
Shareholders’ Agreement (continued)

(2) The total value of the stock of the corporation, is owned by United States shareholders on any day during the taxable year of such foreign corporation.

The term “United States Shareholders” is defined to mean only U.S. shareholders holding blocks of 10% or more of the common shares.


Passive Foreign Investment Company (“PFIC”) has one of the following attributes:


(1) At least 75% of the corporation's income is considered "passive", which is based on investments rather than standard operating business.


(2) At least 50% of the company's assets are investments that produce interest, dividends and/or capital gains.


PFICs include foreign-based mutual funds, partnerships and other pooled investment vehicles that have at least one U.S. shareholder.


Registration Rights


The Company has prepared and filed with the SEC a registration statement on Form F-1 (now converted to Form F-3) covering the resale of the “Registrable Securities” for an offering to be made on a continuous basis pursuant to Rule 415 of the Securities Act of 1933, which registration statement was declared effective under the Securities Act by the SEC on March 11, 2009,,but requires updating by means of incorporation by reference of futures filings with the SEC or the filing of a post-effective amendment to include the most recent annual audited financial statements, and, from time to time, unaudited financial statements for the six month period then ended.ended.  “Registrable Securities” includes the shares beneficially owned by COF and the 10.2% of the common stockshares acquired by PEWC from SOF in March 2009.


Subject to the Amended Shareholders’Shareholders Agreement, the Company must use its reasonable best efforts to keep such registration statement continuously effective until (i) all Registrable Securities either have been sold or may be sold without volume restrictions pursuant to Rule 144 of the Securities Act of 1933 and (ii) COF receives freely transferable shares from the Company’s transfer agent.

agent.

ASIA PACIFIC WIRE & CABLE CORPORATION LIMITED AND SUBSIDIARIES                           

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In thousands of U.S. Dollars, except share data)

13.COMMITMENTS AND CONTINGENCIES(continued) 

Registration Rights (cont’d)

If any such registration statement ceases to remain continuously effective for any reason after the effective date and during any time when the registration statement is required to be effective, or SOF (now became COF) is otherwise not permitted to utilize the prospectus therein to resell such Registrable Securities, in either case, for more than thirty (30) consecutive trading days or more than an aggregate of sixty (60) trading days during any twelve month period (an “ Event ”)“Event”), then the “Put Right” (as explained in noteNote 1) will become immediately exercisable and will continue until such event has been cured.

14.curedFLOODING IN THAILAND.

Siam Pacific, a wholly owned subsidiary of Charoong Thai, suspended operations temporarily in 2011 due to damage sustained from the region’s recent flooding. The facility of Siam Pacific, located 30 kilometers north of Bangkok, manufactures enameled wire and communication wire. The facility sustained water damage, as the water level reached approximately 1.5 meters which damaged some of the machinery and equipment in the plant, as well as some of the inventory in the warehouse. As a result, the Company recorded $3,947 of flood-related charges, including property, plant and equipment, impairments, repairing charges and a write-down of damaged inventory and recognized $874 of deferred tax asset related to the charges in 2011. These charges are separately stated as a line item, “Charges related to flooding” included in operating expense on the consolidated statement of operations.

The Company’s insurance policy covers the flood damage to the building, machinery, and inventory; however, it does not cover losses incurred due to the business disruption. The process of submitting claims to the Company’s insurers is still ongoing and the Company is unable to determine of the amount of losses to be recovered from the insurance company.

The following table summarizes the flood related charges for the year ended December 31, 2011:

Inventory write-down

$ 3,572

Property, plant and equipment impairment

25

Repairing charges

350

Total charges

$ 3,947


F-73
ASIA PACIFIC WIRE & CABLE CORPORATION LIMITED AND SUBSIDIARIES                           


NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(In thousands


25.  FAIR VALUE MEASUREMENT

Quantitative disclosures fair value measurement hierarchy for assets as of U.S.December 31, 2014:
   Fair value measurement using 
 Date of valuation Total  Quoted prices in active markets  Significant observable inputs  Significant unobservable inputs 
   　  (Level 1)  (Level 2)  (Level 3) 
   US$’000  US$’000  US$’000  US$’000 
Fair value information:             
Available-for-sale financial assets (Note 11.1)
             
Unquoted equity shares             
     Thai Metal Processing Co., Ltd.31-Dec-14  2,479   -   -   2,479 
Assets for which fair values are disclosed:                 
Investment properties (Note 17)                 
     Land31-Dec-14  11,509   -   -   11,509 
     Office buildings31-Dec-14  647   -   -   647 

There have been no transfers between Level 1 and Level 2 during the year.
F-74
ASIA PACIFIC WIRE & CABLE CORPORATION LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
25.  FAIR VALUE MEASUREMENT (continued)

Quantitative disclosures fair value measurement hierarchy for assets as of December 31, 2013:

   Fair value measurement using 
 Date of valuation Total  Quoted prices in active markets (Level 1)  
Significant observable inputs
(Level 2)
  
Significant unobservable inputs
(Level 3)
 
   US$’000  US$’000  US$’000  US$’000 
Fair value information:            
Available-for-sale financial assets (Note 11.1)
             
Unquoted equity shares             
Thai Metal Processing Co., Ltd.December 31, 2013  3,189   -   -   3,189 
Assets for which fair values are disclosed:                 
Investment properties (Note 17)                 
LandDecember 31, 2013  11,437   -   -   11,437 
Office buildingsDecember 31, 2013  617   -   -   617 
There have been no transfers between Level 1 and Level 2 during the year.

F-75
ASIA PACIFIC WIRE & CABLE CORPORATION LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

26.  FINANCIAL RISK MANAGEMENT OBJECTIVES

Financial risks are those derived from financial instruments the Company is exposed to during or at the closing of each fiscal year. The objective of the Company’s financial risk management is to minimize its risk exposure against various financial risks, which include market risk, credit risk and liquidity risk. The Company uses derivate instruments to cover certain risks when it considers them necessary. It is the Company’s policy that no trading in derivatives for speculative purposes shall be undertaken.
The Company manages its exposure to key financial risks, as described in the succeeding paragraphs.

(a)   Market risk

Market risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate because of changes in market prices. Market prices comprise four types of risk: interest rate risk, equity price risk, foreign currency risk and commodity price risk. Financial instruments affected by market risk include loans and borrowings, available-for-sale investments and derivative financial instruments.
The sensitivity analyses in the following sections relate to the position as of December 31, 2014 and 2013.
The analyses exclude the impact of movements in market variables on the carrying value of other post-retirement obligations provisions and on the non-financial assets and liabilities of foreign operations.

Interest rate risk

The Company’s exposure to interest rate risk is arising from borrowing at floating interest rates.  Changes in interest rate will affect future cash flows but not the fair value. Less than 40% of the Company’s financial liabilities bear floating interest rate and rest of financial liabilities either bears fixed interest rate which are close to the market rate or non-interest rate.

At the reporting dates, a change of 30 basis points of interest rate in a reporting period could cause the profit for the years ended December 31, 2014 and 2013 to increase/decrease by $127 and $100, respectively.

Equity price risk

The Company’s unlisted equity security is classified as non-current financial assets-available for sale which is subsequently measured at estimated fair value.

At the reporting date, the exposure to unlisted equity security at fair value was $2.5 million (2013: $3.2 million).  Sensitivity analysis of the unlisted equity investment has been provided in Note 11.4.
F-76
ASIA PACIFIC WIRE & CABLE CORPORATION LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

26.   FINANCIAL RISK MANAGEMENT OBJECTIVES (continued)

Foreign currency risk

Foreign currency risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in foreign exchange rates. The Company’s exposure to the risk of changes in foreign exchange rates arise from sales, purchases and borrowings by operating units in currencies other than the unit’s functional currency. The Company’s principal operations are located in Thailand, the PRC and Singapore and a substantial portion of its revenues are denominated in Thai Baht, US Dollars except share data)

15.    FAIR VALUE DISCLOSURES

or Singapore Dollars, whereas a substantial portion of the Company’s cost of sales are denominated in US Dollars. Any devaluation of the Thai Baht or Singapore dollar against the US dollar would have an adverse impact on the operations of the Company. The Company currently does not maintain a foreign currency hedging policy. However, management monitors the foreign exchange exposure and will consider hedging significant foreign currency exposure should the need arise.


The balance of financial assets and liabilities denominated in a currency different from the Company’s functional currency are summarized below.

  Financial Assets  Financial Liabilities 
  As of December 31,  As of December 31 
  2014  2013  2014  2013 
             
Thai Baht (THB)  10,158   228,870   -   214,816 
Singapore dollar (SGD)  79   2,514   56   7,637 
Taiwan dollar (TWD)  10,976   26,248   4,217   3,910 
Renminbi (RMB)  91,037   80,404   13,197   5,389 
Hong Kong dollar (HKD)  2,360   10,327   167   58 
Japanese yen (JPY)  -   -   12,000   - 

Foreign currency sensitivity

The following methodstable demonstrates the sensitivity of the Company’s profit before tax and assumptions wereequity to a reasonably possible change of each foreign currency exchange rates against US dollar, with all other variables held constant.

  Change rate  THB  SGD  TWD  RMB  HKD  JPY 
2013  5%  21   (202)  37   614   66   - 
   -5%  (21)  202   (37)  (614)  (66)  - 
                             
2014  5%  16   1   11   626   14   (5)
   -5%  (16)  (1)  (11)  (626)  (14)  5 
F-77
ASIA PACIFIC WIRE & CABLE CORPORATION LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
26.  FINANCIAL RISK MANAGEMENT OBJECTIVES (continued)

Commodity price risk

The Company is affected by the volatility of certain commodities. Copper is the principal raw material used by the Company. The Company in estimating its fair value disclosurespurchases copper at price closely related to the prevailing international spot market on the London Metal Exchange for financial instruments:

Cashcopper. The price of copper is influenced heavily by global supply and cash equivalents:  The carrying amount reporteddemand as well as speculative trading. Consequently, a change in the balance sheet forprice of copper will have a direct effect on the Company’s cost of sales.  The Company does not use derivative instruments to hedge the price risk associated with the purchase of these commodities.  However, we cover some of these risks through long-term purchase contracts.


Commodity price sensitivity

The following table shows the effect of price changes in copper.

  Change in year-end price  Effect on profit before tax  Effect on equity 
  US$’000  US$’000  US$’000 
          
2014  +13%  3,751   N/A 
Copper  -13%  (3,751)  N/A 
             
2013  +13%  3,730   N/A 
Copper  -13%  (3,730)  N/A 

In average, copper composes around 84% of the product cost.  The above sensitivity analysis is based on the average fluctuation rate in the past five years and one month manufacturing lead time to estimate its impact on profit before tax.

(b)   Credit risk

Credit risk arises from the financial assets of the Company, which comprises cash and cash equivalents, approximates its fair value because of the short-term maturity of these instruments.

Bank deposits:  The carrying amount reported in the balance sheet for bank deposits approximates its fair value because of the short-term maturity of these instruments.

Accounts receivable and accounts payable:  The carrying amounts reported in the balance sheet for accounts receivable and accounts payable approximate their fair values because of the short-term maturity of these instruments.

Related party balances:  The carrying amounts reported in the balance sheet for related party balances approximate their fair values because of the short-term maturity of these instruments.

Short-term debt: The carrying amounts of the Company’s borrowings under its short-term revolving credit arrangements approximate their fair values. The fair value of the non-interest bearing short-term debt from related parties approximates to its carrying amount as it is repayable on demand.  

Investment securities: The fair values of marketable equity securities are based on quoted market prices, details of which are set out in note 7. In accordance with ASC 820, the marketable securities are classified within Level 1 of fair value hierarchy. It is not practicable to estimate the fair values of the equity investments that do not have a quoted market price, without incurring excessive costs. In accordance with ASC 820, such instruments are classified in the Level 3 of fair value hierarchy. 

Forward exchange contracts: The fair values of forward exchange contracts are estimated by reference to market quotations for forward contracts with similar terms, adjusted where necessary for maturity differences. The foreign currency forward contracts are classified within Level 2 as the valuation inputs are based on quoted prices and market observable data of similar instruments.

16.    CONCENTRATIONS OF RISKS

(a)Concentrations of credit risk

                        Financial instruments that potentially subject the Company to significant concentrations of credit risk consist principally of cash and cash equivalents, bank deposits, investments, investmentheld-to-maturity securities and trade accounts receivable.

and other receivables.


The Company maintains cash and cash equivalents with various financial institutions. These financial institutions are located in Singapore, Thailand, Australia, Hong Kong and the People’s Republic of China. The Company’s policy is designed to limit its exposure to any one institution. The Company performs periodic evaluations of the relative credit standing of those financial institutions that are considered in the Company’s investment strategy.

In addition, in selected countries, the Company uses credit rating agency such as Dun and Bradstreet to screen out new low performing customers. Customers are given credit terms over time when they establish good payment patterns with the Company.


Concentrations of credit risk with respect to trade accounts receivable are limited due to the large number of entities comprising the Company’s customer base. The Company carefully assesses the financial strength of its customers and generally does not require any collateral. At December 31, 2011, no single group or customer represents greater than 10% of the Company’s accounts receivable. The Company’s exposure to credit risk arises from default of counterparty, with maximum exposure equal to the carrying amount of these financial instruments.


ASIA PACIFIC WIRE & CABLE CORPORATION LIMITED AND SUBSIDIARIES                           

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In thousands of U.S. Dollars, except share data)

16.    CONCENTRATIONS OF RISKS

(a)Concentrations of credit risk (cont’d)

The Company is exposed to credit loss in the event of non-performance by counter partiescounter-parties on foreign exchange contracts butand trade and other receivables. In 2014, the Company doesrecorded a provision of allowance for doubtful accounts of $2.2 million for a customer of a subsidiary who was not anticipate non-performance by any counter parties.

(b)able to settle overdue paymentsConcentrations.


As of customers

OneDecember 31, 2014 and 2013, trade receivables from one customer accounted for more than 10%represented 7.1% and 10.2% of total trade receivables of the total revenue for the year ended December 31, 2009 (note 20). No single customer accounted for more than 10%Company, respectively. The credit concentration risk of the total revenue for the years ended December 31, 2010 and 2011.   

(c)Risk related to copper and supplier

Copperother trade receivables is the principal raw material used by the Company. The Company purchases copper at prices closely related to the prevailing international spot market prices on the London Metal Exchange for copper. The price of copper is influenced heavily by global supply and demand as well as speculative trading. Consequently, a change in the price of copper will have a direct effect on the Company’s cost of sales.

Substantially all of the Company’s copper rods are supplied by PEWC. In addition to copper rod, the Company purchases high voltage power cable from PEWC for distribution purposes.

(d)Foreign exchange risk

            Changes in exchange rates influence the Company’s results of operations. The Company’s principal operations are located in Thailand, the People’s Republic of China (“PRC”) and Singapore and a substantial portion of its revenues are denominated in Thai Baht, U.S. Dollars or Singapore Dollars, whereas a substantial portion of the Company’s cost of sales are denominated in U.S. Dollars. Any devaluation of the Thai Baht or Singapore dollar against the US dollar would have an adverse impact on the operations of the Company. 

(e)Current vulnerability due to certain other concentrations

The Company conducts substantial business operations in the PRC. The results of operations and prospects may be adversely affected by significant economic, legal and other developments in the PRC. Although the PRC government has been pursuing economic reform policies for more than 20 years, no assurance can be given that the PRC government will continue to pursue such policies or that such policies may not be significantly altered, especially in the event of a change in leadership, social or political disruption or unforeseen circumstances affecting the PRC’s political, economic and social conditions. There is also no guarantee that the PRC government’s pursuit of economic reforms will be consistent or effective.

(f)    Concentration in the geographic area

The Company conducts substantial business operations in the Thailand, PRC, Singapore and Australia. See note 20 – Segment Financial Information for details.

insignificant.

F-78
ASIA PACIFIC WIRE & CABLE CORPORATION LIMITED AND SUBSIDIARIES                           


NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(In thousands of U.S. Dollars, except share data)

17.    RELATED PARTY BALANCES AND TRANSACTIONS  

The related parties are defined as affiliates of


26.  FINANCIAL RISK MANAGEMENT OBJECTIVES (continued)

(c)   Liquidity risk

Liquidity risk arises from the Company; entities for which investments are accounted for by the equity method by the Company; the principal owners of the Company; its management; members of the immediate families of the principal ownersfinancial liabilities of the Company and its management.

Moon View, PEWC, Singapore Branchsubsequent ability to meet their obligations to repay their financial liabilities as and PEWC Singapore Co. (Pte) Ltd are controlledwhen they fall due. Management manages the Company’s liquidity risk by PEWC.  Moon Viewclosely monitoring cash flow from the operations. The Company has about $69 million cash and cash equivalents, $168 million unutilized amount of bank loans, and the total financial liabilities is $114 million at the immediate holding company ofreporting date, which results in a net asset position. Liquidity risk is considered to be minimal.


The table below summarizes the Company. Italian-Thai is the minority shareholder of onematurity profile of the Company’s Operating Subsidiaries in Thailand. Shandong Yanggu is the shareholder of one of the Company’s Operating Subsidiaries in China. SPHC is one of the Company’s equity investees. Fujikura Limited is a shareholder of one of the Company’s Operating Subsidiaries in Thailand.

 

 

December 31,

 

 

2010

 

2011

 

 

 

 

 

Due from:

 

 

 

 

PEWC

 

$ 1,628 

 

$ 1,797 

PEWC, Singapore Branch

 

1,030 

 

1,071 

Italian-Thai Development Public Company Limited (“Italian-Thai”) and its affiliates

 

3,346 

 

1,180 

SPHC

 

1,631 

 

1,179 

Shandong Yanggu Wire & Cable Corp Ltd (“Shandong Yanggu”)

 

514 

 

– 

Others

 

97

 

–

 

 

$ 8,246

 

$ 5,227

 

 

 

 

 

Due to:

 

 

 

 

PEWC

 

$ 11,389 

 

$ 9,490 

PEWC, Singapore Branch

 

891 

 

893 

PEWC Singapore Co. (Pte) Ltd.

 

1,262 

 

1,276 

Shandong Yanggu

 

9 

 

– 

Fujikura Limited

 

224 

 

184 

Thai Metal Processing Co., Ltd.

 

112 

 

60 

SPHC

 

2,858 

 

2,384 

Shandong Huayu

 

395

 

406

 

 

$ 17,140

 

$ 14,693

 

 

 

 

 

Short-term loan from:

 

 

 

 

Moon View Ventures Limited (“Moon View”)

 

$ 1,732

 

$ 1,732

 

 

$ 1,732

 

$ 1,732

The interest ratesfinancial liabilities based on the above balances with related parties range from 1.25% to 1.38% and are repayable upon demand. All balances with related parties are unsecured.

contractual undiscounted payments.

  < 1 year  2 to 3 years  4 to 5 years  > 5 years  Total 
  US$’000  US$’000  US$’000  US$’000  US$’000 
As of  December 31, 2014               
Financial liabilities               
Interest-bearing loans and borrowings  54,712   -   -   -   54,712 
Trade and other payables  36,467   -   -   -   36,467 
Due to related parties  22,208   -   -   -   22,208 
Due to immediate holding company  -   -   -   1,537   1,537 
Finance lease liability  34   25   17   -   76 
   113,421   25   17   1,537   115,000 
                     
As of December 31, 2013                    
Financial liabilities                    
Interest-bearing loans and borrowings  42,565   -   -   -   42,565 
Trade and other payables  41,369   -   -   -   41,369 
Due to related parties  11,126   -   -   -   11,126 
Due to immediate holding company  -   -   -   1,732   1,732 
Finance lease liability  41   29   -   -   70 
   95,101   29   -   1,732   96,862 
F-79
ASIA PACIFIC WIRE & CABLE CORPORATION LIMITED AND SUBSIDIARIES                           


NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(In thousands of U.S. Dollars, except share data)

17.    RELATED PARTY BALANCES AND TRANSACTIONS (continued)

            The transactions undertaken with related parties are summarized as follows:

 

 

Year ended December 31,

 

 

2009

 

2010

 

2011

 

 

 

 

 

 

 

Purchases of copper from PEWC

 

$ 33,426

 

$ 42,236

 

$ 44,466

Purchases of power cables from PEWC

 

12,211

 

3,846

 

7,164

Purchases of raw materials from Thai Metal Processing Co. Ltd

 

955

 

1,153

 

1,139

Purchases of goods from PEWC

 

11,247

 

210

 

320

Purchases of goods from Fujikura Limited

 

1,946

 

2,536

 

1,348

Sales to Italian Thai and its affiliates

 

4,144

 

3,741

 

3,663

Sales to PEWC

 

–

 

65

 

–

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest expense paid to PEWC

 

135

 

–

 

–

Interest expense paid to PEWC Singapore Co. (Pte) Ltd

 

19

 

14

 

13

Interest income from Italian Thai Development Public Co Ltd

 

 

3

 

 

–

 

 

–

Management fee paid to PEWC

 

147

 

204

 

239

Management fee received from PEWC

 

–

 

–

 

19

Management fee received from PEWC, Singapore Branch

 

13

 

 

14

 

14

Management fee received from Italian Thai Development Public Co., Ltd

 

63

 

34

 

 

–

Dividend income from Thai Metal Processing Co. Ltd.

 

65

 

106

 

–

 

 

 

 

 

 

 

Information technology service fee paid to PEWC

 

36

 

35

 

38


26.  FINANCIAL RISK MANAGEMENT OBJECTIVES (continued)

(d)   Capital management


The primary objectives of the Company’s capital management are to safeguard the Company’s ability to continue as a going concern and maintain healthy capital ratios in order to support its business, maximize shareholders’ value and to maintain an optimal capital structure to reduce the cost of capital.

The Company manages its capital structure and makes adjustments to it, in light of changes in economic conditions and the risks characteristics of the underlying assets. To maintain or adjust the capital structure, the Company may adjust the dividend payment to shareholders, return capital to shareholders, or issue new shares, conduct stock repurchase programs. The Company is not subject to any externally imposed capital requirements. No changes were made in the objectives, policies or processes for managing capital during the years ended December 31, 2014 and 2013.

In line with industry practices, the Company monitors capital using a gearing ratio, which is net debt divided by total capital plus net debt. The Company includes within net debt, interest bearing loans and borrowings, trade and other payables, less cash and cash equivalents.

  As of December 31, 
  2014  2013 
  US$’000  US$’000 
Interest bearing loans and borrowings  53,863   41,789 
Trade and other payables  36,467   41,369 
Less: cash and cash equivalents  (68,863)  (62,509)
Net debt  21,467   20,649 
Total Equity  221,211   228,127 
Capital and net debt  242,678   248,776 
Gearing ratio  8.8%  8.3%

The Company has no direct business operations other than its ownership of the capital stock of its subsidiaries and joint venture holdings.  While the Company has no present intention to pay dividends, should the Company decides in the future to do so, as a holding company its ability to pay dividends and meet its other obligations will depend upon the amount of distributions, if any, received from its operating subsidiaries and other holdings and investments.  The Company’s operating subsidiaries and other holdings and investments, from time to time, may be subject to restrictions on their ability to make distributions to the Company, including as a result of restrictive covenants contained in loan agreements, restrictions on the conversion of local currency earnings into U.S. dollars or other hard currency and other regulatory restrictions.  For example, PRC legal restrictions permit payments of dividends by our business entities in the PRC only out of their retained earnings, if any, determined in accordance with relevant PRC accounting standards and regulations.  Under PRC law, such entities are also required to set aside a portion of their net income each year to fund certain reserve funds.  These reserves are not distributable as cash dividends.  The foregoing restrictions may also affect the Company’s ability to fund operations of one subsidiary with dividends and other payments received from another subsidiary.

(e)  Collateral

The credit lines of the Company were collateralized by:
(i)  Mortgage of the Company’s land, buildings, machinery and equipment with a total carrying amount of $12,988 at December 31, 2014 (2013: $14,416);
(ii)  Pledge of other receivables of $9,595 at December 31, 2014 (2013: $10,340) ;
(iii)  Corporate guarantee issued by the Company and a subsidiary of the Company.
(iv)  A trading facility was secured by all the assets and uncalled capital with total carrying amount of $31,466 of a subsidiary as of December 31, 2014 (2013: $ 33,314).
The weighted average interest rates on bank loans and overdrafts as of December 31, 2014 and 2013 were 3.57% and 3.68% per annum, respectively.
F-80
ASIA PACIFIC WIRE & CABLE CORPORATION LIMITED AND SUBSIDIARIES                           


NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(In thousands

26.  FINANCIAL RISK MANAGEMENT OBJECTIVES (continued)
(f)  Derivative - offsetting loans

The Company entered into Import Bill Advance Loan denominated in USD at floating rate and time deposit denominated in USD or RMB at fixed rate with one bank for a term of less than twelve months for the amount of $17.0 million as of December 31, 2013.

In 2014, the Company entered into Import Bill Advance Loan denominated in SGD at floating rate and time deposit denominated in USD at fixed rate with one bank for the amount of $2.9 million. At same time, the Company entered into a currency forward transaction to sell SGD to reduce the currency risk.

These transactions were net settled upon the maturity of the loan agreement. The contractual effect of the loans is the equivalent of a cross-currency interest rate swap arrangement with no initial net investment.

The patterns of these transactions met all the indicators under IAS 391G B.6 based on the fact that the loan and time deposit were entered into at the same time, had same counterparty, had underlying variable of foreign exchange rate and interest rate, and no initial net investment. The transactions should be accounted for at fair value through profit or loss; therefore, the Company recognized $5 and $21 as exchange gain for the year ended December 31, 2014 and 2013.
27.  SUBSEQUENT EVENT
Since the end of U.S. Dollars, except share data)

17.    RELATED PARTY BALANCES AND TRANSACTIONS (continued)

            Copperfinancial year the Company is the major raw materialnot aware of the Company’s wire and cable products.  The Company purchases copperany matter or circumstance not otherwise dealt with in the formreport that has significantly affected or may significantly affect the operations of copper rods and copper cathode.  Copper cathode is purchased by Siam Pacific to avoid the high import tariffs levied on copper rods.  Copper cathode needs to be processed into copper rods prior to the manufacturing of wire and cable products. 

            Substantially all of the Company’s copper rods are supplied by PEWC while copper cathodes are supplied by unrelated third parties. The price of copper rods purchased from PEWC is determined by reference to the quoted copper prices on the London Metal Exchange (the “LME”) plus a certain premium.

            In addition to copper rods, the Company purchases high voltage power cable from PEWC for distribution purposes. The purchase price of power cable from PEWC is determined by reference to the quoted copper prices on the LME. No sales commission was received from PEWC during the years 2009, 2010 and 2011.  

            Pursuant to the composite services agreement:

            (a)        PEWC will sell copper rod to the Company, upon the Company’s request, (i) at a price consisting of the average spot price of copper on the LME for the one month prior to purchase plus an agreed upon premium, (ii) at prices and on terms at least as favorable as it provides copper rod to other purchasers of similar amounts of copper rod in the same markets as PEWC and (iii) will give priority in the supply of copper rod to the Company over other purchasers of copper rod from PEWC.

            (b)        PEWC grants to the Company, the right to distribute any wireresults of those operations, or cable product manufactured by PEWC in all markets in which the Company presently distributes or develops the capability to distribute in the future, such products on such terms as have historically been in effect or on terms at least as favorable as PEWC grants to third parties that distribute such products in such markets.  However, PEWC shall not be required to grant to the Company the right to distribute products manufactured by PEWC in the future in markets where the Company does not currently have the capability to distribute unless and until PEWC has no pre-existing contractual rights which would conflict with the grantstate of such right to the Company.

            (c)        PEWC will make available to the Company, upon the Company’s request and on terms to be mutually agreed between PEWC and the Company from time to time, access to certain of PEWC’s technology (and PEWC personnel necessary to use such technology) with respect to the design and manufacture of wire and cable products, including, without limitation, certain fiber optic technology.

            (d)        PEWC will make available to the Company, upon the Company’s request and on terms to be mutually agreed between PEWC and the Company from time to time, certain services with respect to the design and manufacture of wire and cable products, computerization, inventory control, purchasing, internal auditing, quality control, emergency back-up services, and recruitment and training of personnel; such services may include the trainingaffairs of the Company’s employees and managers at PEWC facilities and the secondment of PEWC employees and managers to the Company.

            (e)        Each of PEWC and the Company will offer the other party the right to participate in any negotiations with a third party concerning the establishment of any facility or similar venture to manufacture or distribute any wire or cable product outside of the markets where the Company currently manufactures or distributes, or intends to develop the capability to manufacture or distribute, any wire or cable product.  Unless the Company and PEWC mutually agree otherwise, the Company shall have the right of first refusal to enter into any definitive agreement with such third party.  If, however, such third party would not agree to the substitution of the Company for PEWC or such substitution would prevent thesuccessful completion of the facility or venture,  PEWC will arrange for the Company to participate to the extent possible.


ASIA PACIFIC WIRE & CABLE CORPORATION LIMITED AND SUBSIDIARIES                           

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In thousands
28.  APPROVAL OF THE FINANCIAL STATEMENTS

The financial statements were approved and authorized for issue by the board of U.S. Dollars, except share data)

17.    RELATED PARTY BALANCES AND TRANSACTIONS (continued)

            (f)        Without the consent of the Company, PEWC will not compete with respect to the manufacture of wire and cable products in any market in which the Company is manufacturing or has taken significant steps to commence manufacturing.

            (g)        For purposes of the composite services agreement, each province in China is considered the equivalent of a market.

            (h)        The composite services agreement dated November 7, 1996 has a three-year term. The Agreement originally expired on November 7, 1999. The Company gave a notice to extend the Agreement by successive one-year periods commencingdirectors on April 20, 2001. The notice is treated as a standing notice for successive one-year period renewals until further written notice from the Company. 

            To the extent that transactions occur in the future between the Company and PEWC or affiliates of PEWC other than under the Composite Service Agreement, such transactions will be entered into on an arm’s length basis on terms no less favorable than those available from unaffiliated third parties.

18.    DEFINED CONTRIBUTION AND BENEFIT PLANS

The Company records the funded status of the Company’s defined benefit plans in the consolidated balance sheet. Actuarial gains and losses and prior service costs continue to be deferred and recognized in expense ratably over appropriate future periods, but the overfunded or underfunded status of the defined benefit plans is now measured as the difference between the fair value of plan assets and the projected benefit obligation (“PBO”). This difference is recorded as an asset (if overfunded) or a liability (if underfunded), with a corresponding adjustment to accumulated other comprehensive loss, net of tax. The net unrecognized actuarial loss and unrecognized prior service costs are recognized in net periodic benefit cost in the consolidated statements of operations, those amounts are reclassified from accumulated other comprehensive (loss) income. The Company currently measures the funded status of its plan as of the balance sheet date.

In accordance with the Thailand labor law, Charoong Thaiis obliged to make payment to retiring employees, at rates of 1 to 10 times of their final month’s salary rate, depending on the length of service. During the financial year 2011, the Company’s total expense included $288 (2010: $539; 2009: $451).  The plan is not funded and the amount is recognized in Other Current Liabilities in the balance sheet. The Company pays to settle the obligations as and when employees retire.

The Company has several defined contribution plans covering its employees in Australia, the People’s Republic of China (“PRC”) and Singapore. Contributions to the plan are made annually. Total charges of continuing operations for the years ended December 31, 2009, 2010 and 2011 were $615, $708, and $891, respectively and for years ended December 31, 2009 and 2010 and period ended November 30, 2011 that of discontinued operations were $77, $138 and $205, respectively.

2015.

ASIA PACIFIC WIRE & CABLE CORPORATION LIMITED AND SUBSIDIARIES                           

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In thousands of U.S. Dollars, except share data)

18.    DEFINED CONTRIBUTION AND BENEFIT PLANS(continued) 

In conformity with ASC 715“Compensation – Retirement Benefits” (“ASC 715”), the following table sets forth the Plan’s funded status and pension amounts recognized as at December 31, 2010 and 2011 based on the latest actuarial valuation:

 

2009

2010

2011

 

 

 

 

Change in benefit obligation:

 

 

 

Benefit obligation at beginning of year

 

$ 2,012

$ 2,761

Foreign currency translation adjustments

 

285

(136)

Service cost

 

302

181

Interest cost

 

223

106

Benefits paid

 

(61)

(219)

Actuarial loss

 

–

244

Curtailment

 

–

(2)

Benefit obligation at end of year

 

$ 2,761

$ 2,935

 

 

 

 

Change in plan assets:

 

 

 

Fair value of plan assets at beginning of year

 

$– 

$– 

Employer’s contribution

 

 

 

Fair value of plan assets at end of year

 

–

–

Funded status

 

$ (2,761)

$ (2,935)

Unrealized net transition obligation

 

–

–

Unrecognized net actuarial loss (gain)

 

–

–

Accrued benefit cost

 

$ (2,761)

$ (2,935)

 

 

 

 

Components of net periodic benefit cost:

 

 

 

Service cost

$ 374

$ 302

$ 181

Interest cost

85

223

106

Amortizations of:

 

 

 

Unrecognized net prior service cost (credit)

(8)

(8)

(8)

Unrecognized actuarial loss

–

22

9

Net periodic benefit cost

$ 451

$ 539

$ 288

 

 

 

 

Amounts recognized in accumulated other comprehensive loss

consist of the following: (recognized under ASC 715)

 

 

 

Actuarial loss

$ 68

$ 669

$ 602

Prior service (credit) cost

–

(129)

7

Total recognized in other comprehensive loss

$ 68

$ 540

$ 609

The accumulated benefit obligations amounted to $2,761 and $2,935 as of December 31, 2010 and 2011, respectively.

The estimated net loss and prior service cost (credit) for the defined benefit plans that will be amortized from accumulated other comprehensive (loss) income into net periodic benefit cost over the next fiscal year are $(27) and $8, respectively.

The actuarial loss increased in 2011 due to the change in assumption:

-Discount rate was changed from 4.8% per annum to 3.8% for 2012 to reflect prevailing bond yield.

-The mortality rate have been updated from TMO97 table (Thailand Mortality Ordinary Lite Tables 1997) to TMO98 table (Thailand Mortality Ordinary Lite Tables 2008) reflect the latest available mortality study. 


ASIA PACIFIC WIRE & CABLE CORPORATION LIMITED AND SUBSIDIARIES                           

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In thousands of U.S. Dollars, except share data)

18.    DEFINED CONTRIBUTION AND BENEFIT PLANS(continued) 

The significant assumptions used in determining the actuarial present value of the projected benefit obligations as of December 31, 2010 and 2011 are as follows:

 

2010

 

2011

Discount Rate

 

4.8%

 

4.2%

Rate of Increase in Compensation Levels

 

6.0%

 

6.0%

Employee turnover rates:-

 

 

 

 

Prior to age 35

 

4.0% - 15.0%

 

4.0% - 15.0%

Age 35 to 50

 

2.0% - 7.0%

 

2.0% - 7.0%

Age 51 to 60

 

-

 

0.0% - 2.0%

The following pension benefit payments, which reflect expected future service, as appropriate, are expected to be paid:

Year ended December 31

 

 

2012

$ 24

2013

221

2014

33

2015

257

2016

121

2017 - 2021

1,171

 

$ 1,827



ASIA PACIFIC WIRE & CABLE CORPORATION LIMITED AND SUBSIDIARIES                           

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In thousands of U.S. Dollars, except share data)

19.    DISCONTINUED OPERATIONS

           The Company entered into an agreement to dispose its 51% equity interest in the SPFO joint venture to a group of investors in exchange for a total cash consideration of RMB18.5 million (approximately $2.9 million), effective upon the directors’ approval on September 7, 2011. The purpose of the disposal is to focus on the Company’s core wire and cable business that are more profitable by divesting its non-core fiber-optics cable, of which the market in china has very competitive. The share transfer was completed on December 1, 2011, consequently, the Company’s deconsolidated SPFO effective December 1, 2011. The Company recognized $1,962 gain on disposal of a subsidiary in consolidated statement of operations.

SPFO was consolidated prior to its disposal and it met the criteria for reporting as discontinued operations. Therefore, the results of operations of SPFO and the gain of the disposal have been classified as “Income from operations of discontinued SPFO” in the consolidated statement of operations for the year ended December 31, 2011 and prior periods' amounts have been reclassified accordingly.

            Results from discontinued operations related to SPFO for the years ended December 31, 2009 and 2010 and period ended November 30, 2011 are as follows:

 

Year ended December 31,

 

2009

2010

2011

 

 

 

 

Net sales

$ 35,993

$ 22,736

$ 30,210

Cost of sales

(30,244)

(18,072)

(25,111)

Gross profit

5,749

4,664

5,099

Selling, general and administrative expenses

(4,456)

(3,545)

(4,809)

Recovery of doubtful accounts

752

377

68

Income from discontinued operations

2,045

1,496

358

Exchange gain, net

20

-

-

Interest income

-

110

129

Interest expenses

(1,000)

(1,197)

(1,336)

Other income (expenses)

85

37

(38)

Income (loss) before income tax

1,150

446

(887)

Gain on disposal of SPFO

-

-

1,962

Income from operations of discontinued SPFO

1,150

446

1,075

Income tax

(697)

(450)

(229)

Net income (loss) of discontinued operations

$ 453

$ (4)

$ 846

Net income (loss) attributable to non-controlling interests

222

(2)

(547)

Net income (loss) attributable to APWC

231

(2)

1,393

             The transactions undertaken with related parties are summarized as follows:

 

 

Year ended December 31,

 

 

2009

 

2010

 

2011

 

 

 

 

 

 

 

Purchases of goods from Shandong Yanggu

 

–

 

17

 

317

Sales to Shandong Yanggu

 

–

 

96

 

536

Sales to SPRC

 

–

 

160

 

157

Interest expense paid to Shandong Yanggu

 

–

 

63

 

–

Management fee paid to Shandong Yanggu

 

–

 

–

 

387


F-81

ASIA PACIFIC WIRE & CABLE CORPORATION LIMITED AND SUBSIDIARIES                           

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In thousands of U.S. Dollars, except share data)

20.    SEGMENT FINANCIAL INFORMATION

Description of Products by Segment

t57 ititivein china has very re than 10% of the total reveune 4 (2010:$28,484) of a subsidiary as at Decebsidiary as at DeceentsIn accordance with ASC 280,“Segment Reporting”, the Group chief operating decision maker has been identified as the chief operating officer, who reviews consolidated results when making decisions about allocating resources and assessing performance of the Group. According to the management approach, the Company currently operates in three operating segments: (1) manufacturing of wire and cable products (“Manufactured products”), (2) distribution of copper and cable products manufactured by PEWC (“Distributed products”) and (3) sales, delivery and installation of wires and cables (“SDI”).

Measurement of Segment Profit or Loss and Segment Assets

The Company evaluates performance and allocates resources based on profit or loss from operations before interest, gains and losses on the Company’s investment portfolio, and income taxes. The accounting policies of the reportable segments, including transactions entered between reportable segments, are the same as those described in the summary of significant accounting policies.

 

 

Year ended December 31,

 

 

2009

 

2010

 

2011

 

 

 

 

 

 

 

Revenues

 

 

 

 

 

 

 

 

 

 

 

 

 

Revenues from external customers:

 

 

 

 

 

 

Manufactured products

 

$ 264,128

 

$ 396,059

 

$ 429,474

Distributed products

 

28,102

 

26,935

 

25,500

Supply, delivery and installation of wires and cables

 

34,008

 

23,600

 

16,972

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total revenues from external customers

 

$ 326,238

 

$ 446,594

 

$ 471,946

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Intersegment revenues:

 

 

 

 

 

 

Manufactured products

 

$ 12,235

 

$ 3,143

 

$ 3,283

Distributed products

 

–

 

9,898

 

13,960

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total intersegment revenues

 

$ 12,235

 

$ 13,041

 

$ 17,243

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total segment revenues

 

$ 338,473

 

$ 459,635

 

$ 489,189

 

 

 

 

 

 

 

Reconciling item

 

 

 

 

 

 

Elimination of intersegment revenues

 

(12,235)

 

(13,041)

 

(17,243)

 

 

 

Total revenues

 

$ 326,238

 

$ 446,594

 

$ 471,946


ASIA PACIFIC WIRE & CABLE CORPORATION LIMITED AND SUBSIDIARIES                           

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In thousands of U.S. Dollars, except share data)

20.    SEGMENT FINANCIAL INFORMATION (continued)

 

 

Year ended December 31,

 

 

2009

 

2010

 

2011

 

 

 

 

 

 

 

Segment profit (loss)

 

 

 

 

 

 

Manufactured products

 

$ 14,288

 

$ 53,429

 

$ 42,876

Distributed products

 

1,517

 

1,378

 

2,955

Supply, delivery and installation of wires and cables

 

889

 

242

 

57

Inventory impairment

 

23,949

 

1,974

 

(1,993)

 

 

 

 

 

 

 

Total segment profit

 

$ 40,643

 

$ 57,023

 

$ 43,895

 

 

 

 

 

 

 

Reconciling items

 

 

 

 

 

 

Corporate and other expenses

 

(24,228)

 

(28,371)

 

(42,079)

Exchange gain (loss)

 

507

 

3,041

 

(1,346)

Interest income

 

458

 

492

 

1,409

Interest expense

 

(1,597)

 

(1,364)

 

(2,217)

Share of net loss of equity investees

 

(40)

 

(21)

 

(58)

Gain on liquidation of subsidiary

 

568

 

–

 

–

Other income

 

2,111

 

1,032

 

1,032

 

 

 

 

 

 

 

Income from continuing operations before income taxes

 

 

$ 18,422

 

 

$ 31,832

 

 

$ 636

 

 

 

 

 

 

 

Segment assets

 

 

 

 

 

 

Manufactured products

 

$ 280,179

 

$ 374,634

 

$ 326,960

Distributed products

 

6,363

 

8,195

 

4,369

Supply, delivery and installation of wires and cables

 

864

 

359

 

357

 

 

 

 

 

 

 

Total segment assets

 

$ 287,406

 

$ 383,188

 

$ 331,686

 

 

 

 

 

 

 

Reconciling items

 

 

 

 

 

 

Corporate and other assets

 

5,383

 

493

 

1,168

Investment in equity investee companies

 

3,263

 

3,242

 

4,435

 

 

 

 

 

 

 

Total assets

 

$ 296,052

 

$ 386,923

 

$ 337,289

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Expenditures for additions to long-lived assets

 

 

 

 

 

 

Manufactured products

 

$ 3,260

 

$ 3,650

 

$ 8,775

Distributed products

 

–

 

–

 

–

Supply, delivery and installation of wires and cables

 

 

–

 

 

–

 

 

–

Corporate

 

–

 

3

 

113

 

 

 

 

 

 

 

Total expenditure for additions to long-lived assets

 

$ 3,260

 

$ 3,653

 

$ 8,888


ASIA PACIFIC WIRE & CABLE CORPORATION LIMITED AND SUBSIDIARIES                           

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In thousands of U.S. Dollars, except share data)

20.    SEGMENT FINANCIAL INFORMATION (continued)

 

 

Year ended December 31,

 

 

2009

 

2010

 

2011

 

 

 

 

 

 

 

Depreciation expenses

 

 

 

 

 

 

Manufactured products

 

$ (8,165)

 

$ (6,474)

 

$ (6,014)

Distributed products

 

–

 

–

 

–

Supply, delivery and installation of wires and cables

 

–

 

–

 

–

Corporate

 

(14)

 

(14)

 

(52)

 

 

 

 

 

 

 

Depreciation expenses of continuing operations

 

$ (8,179)

 

$ (6,488)

 

$ (6,066)

Depreciation expenses of discontinued operations

 

(762)

 

(369)

 

(396)

Total depreciation expenses

 

(8,941)

 

(6,857)

 

(6,462)

 

 

 

 

 

 

 

Impairment loss of long-lived assets and goodwill

 

 

 

 

 

 

Manufactured products

 

$ –

 

$ –

 

$ (8,816)

Distributed products

 

–

 

–

 

–

Supply, delivery and installation of wires and cables

 

–

 

–

 

–

Corporate

 

(77)

 

–

 

– 

 

 

 

 

 

 

 

Total impairment loss

 

$ (77)

 

$ –

 

$ (8,816)

 

 

 

 

 

 

 

Interest income

 

 

 

 

 

 

Manufactured products

 

$ 408

 

$ 454

 

$ 1,305

Distributed products

 

21

 

27

 

81

Supply, delivery and installation of wires and cables

 

29

 

11

 

3

Corporate

 

–

 

–

 

20

 

 

 

 

 

 

 

Total interest income of continuing operations

 

$ 458

 

$ 492

 

$ 1,409

 

 

 

 

 

 

 

Interest expense

 

 

 

 

 

 

Manufactured products

 

$ (1,414)

 

$ (1,203)

 

$ (2,050)

Distributed products

 

(59)

 

(73)

 

(88)

Supply, delivery and installation of wires and cables

 

(87)

 

(39)

 

(39)

Corporate

 

(37)

 

(49)

 

(40)

 

 

 

 

 

 

 

Total interest expense of continuing operations and discontinuing operations

 

$ (1,597)

 

$ (1,364)

 

$ (2,217)

 

 

 

 

 

 

 

Share of net loss of equity investees

 

 

 

 

 

 

Manufactured products

 

$ –

 

$ –

 

$ –

Distributed products

 

–

 

–

 

–

Supply, delivery and installation of wires and cables

 

–

 

–

 

–

Corporate

 

(40)

 

(21)

 

(58)

 

 

 

 

 

 

 

Total share of net loss of equity investees

 

$ (40)

 

$ (21)

 

$ (58)



ASIA PACIFIC WIRE & CABLE CORPORATION LIMITED AND SUBSIDIARIES                           

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In thousands of U.S. Dollars, except share data)

20.    SEGMENT FINANCIAL INFORMATION (continued)

            There is no sales of 10% or more of the total revenue to a single customer for 2010 and 2011. In 2009, sale to SP Powerassets Ltd. exceeded 10% of total revenue, which included sales of manufactured products, distributed products, and sales, delivery and installation of wires and cables, are as follows:

2009

Manufactured products

$ 10,398

Distributed products

22,746

Supply, delivery and installation of wires and cables

32,806

$ 65,950

Geographic Area Data

            Revenue from external customers is attributed to individual countries based on the customer’s country of domicile and is summarized as follows:

 

 

Year ended December 31,

 

 

2009

 

2010

 

2011

 

 

 

 

 

 

 

Revenues from external customers

 

 

 

 

 

 

Continuing operations

 

 

 

 

 

 

Thailand

 

$ 96,799

 

$ 165,191

 

$ 176,011

Singapore

 

94,782

 

70,154

 

86,474

Australia

 

34,574

 

46,288

 

61,457

The People’s Republic of China

 

90,768

 

146,529

 

138,970

Vietnam

 

4,550

 

9,752

 

5,106

Others (Southeast Asia)

 

4,765

 

8,680

 

3,928

 

$ 326,238

 

$ 446,594

 

$ 471,946

Revenue from discontinued operations

 

$ 35,993

 

$ 22,736

 

$ 30,210

 

 

 

 

 

 

 

 

Long-lived assets by the country of domicile are summarized as follow:

 

Long-lived assets by area:

 

 

 

 

 

 

Thailand

 

$ 28,002

 

$ 27,926

 

$ 19,894

Singapore

 

8,069

 

8,987

 

10,339

Australia

 

3,515

 

3,520

 

6,119

The People’s Republic of China

 

12,837

 

12,261

 

6,500

Others

 

18

 

8

 

62

Total long-lived assets

 

$ 52,441

 

$ 52,702

 

$ 42,914


ASIA PACIFIC WIRE & CABLE CORPORATION LIMITED AND SUBSIDIARIES                           

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In thousands of U.S. Dollars, except share data)

21.   SUMMARIZED FINANCIAL INFORMATION OF EQUITY INVESTEES

            The following tables present summarized financial information of the Company’s principal equity investees, Lox Pac, SPHC, Shandong Huayu and SPRC.

 

 

As of December 31,

 

 

2010

 

2011

 

 

Unaudited

 

Unaudited

 

 

 

 

 

Current assets

 

$ 51,305

 

$ 54,968

Non-current assets

 

19,348

 

17,961

Current liabilities

 

(40,162)

 

(44,870)

Non-current liabilities

 

(2,023)

 

(1,156)

 

 

Total shareholders’ equity

 

$ 28,468

 

$ 26,903


 

 

Year ended December 31,

 

 

2009

 

2010

 

2011

 

 

Unaudited

 

Unaudited

 

Unaudited

 

 

 

 

 

 

 

Net sales

 

$28,090

 

$44,866

 

$55,727

Gross Profit

 

6,582

 

10,457

 

13,543

Net income (loss)

 

(629)

 

(1,347)

 

(1,360)