inventec corporation · information regarding the company’s audit fee ... notebook computer...

Annual Report Website: http://mops.twse.com.tw Stock Code: 2356

Company Website: http://www.inventec.com

Printing Date: May 11, 2016

Inventec Corporation

2015 Annual Report

Notice to readers

This English version annual report is a summary translation of the Chinese version and is not

an official document of the shareholders’ meeting. If there is any discrepancy between the

English version and Chinese version, the Chinese version shall prevail.

http://mops.twse.com.tw/

1. Name, Title and Contact Information for Company’s Spokesperson

Name : Yu, Chin-Pao Tel. : 886(2) 2881-0721

Title : Vice President E-mail : [email protected]

Name, Title and Contact Information for Company’s Deputy Spokesperson

Name : Huang, Kuo-Chun Tel. : 886(2) 2881-0721

Title : President E-mail : [email protected]

2. Address and Telephone Number of Company’s Headquarters, Branches and Plant

Headquarters

Add : No.66, Hougang Street, Shilin District, Taipei City, Taiwan, R.O.C.

Tel : 886(2) 2881-0721

Taoyuan Factory

Add : No.255, Renhe Rd, Sec. 2, Daxi District, Taoyuan City, Taiwan, R.O.C.

Tel : 886(3) 390-0000

Taipei Research and Development Center

Add : No.166, Chengde Rd, Sec. 4, Shilin District, Taipei City, Taiwan, R.O.C.

Tel : 886(2) 2881-0721

Taoyuan Research and Development Center

Add : No.349, Renhe Rd, Sec. 2, Daxi District, Taoyuan City, Taiwan, R.O.C.

Tel : 886(3) 390-0000

Taoyuan Science and Technology Park

Add : No.88, Dazhi Rd, Taoyuan District, Taoyuan City, Taiwan, R.O.C.

Tel : 886(3) 390-0000

3. Common Share Transfer Agent And Registrar

Name : Registrar & Transfer Agency Department of Taishin International Bank

Add : B1F, No.96, Sec. 1, Jianguo N. Road, Zhongshan District, Taipei City, Taiwan, R.O.C.

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

Tel. : 886(2) 2504-8125

4. Information of the Certified Public Accountants for the Latest Financial Repot

Name of CPA: Chen, Ying-Ju and Yang, Liu-Fong

CPA Firm: KPMG

Add : 68F, No.7, Sec. 5, Xinyi Road, Taipei City, Taiwan, R.O.C.

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

Tel : 886(2) 8101-6666

5. Overseas Trade Places for Listed Negotiable Securities

None

6. Corporate Website

http: //www.inventec.com

http://www.kpmg.com.tw/

Contents

Letter to Shareholders ................................................................................................................. 1

Ⅰ. Company Introduction .......................................................................................................... 3

1.1 Founding Date ............................................................................................................... 3

1.2 Formation History ......................................................................................................... 3

Ⅱ. Corporate Governance Report ............................................................................................ 11

2.1 Organization Structure ................................................................................................. 11

2.2 Board of Directors, Supervisors and Management Team ............................................ 13

2.3 Implementation of Corporate Governance .................................................................. 31

2.4. Information Regarding the Company’s Audit Fee ...................................................... 80

2.5 Information Regarding the Replacement of CPA ........................................................ 81

2.6 Audit Independence ..................................................................................................... 81

2.7 Changes in Shares Trading and Pledge of Directors, Supervisors, Managers and

Major Shareholders: ................................................................................................... 82

2.8 The Relations of the Top Ten Shareholders ................................................................. 84

2.9 Ownership of Shares in Affiliated Enterprises ............................................................ 87

Ⅲ. Capital Overview .............................................................................................................. 88

3.1 Capital and Shares ....................................................................................................... 88

3.2 Issuance of Corporate Bond. ....................................................................................... 94

3.3 Issuance of Preferred Shares ....................................................................................... 94

3.4 Issuance of Global Depository Receipts...................................................................... 94

3.5 Issuance of Employee Stock Option............................................................................ 94

3.6 Issuance of Restricted Employee Shares. .................................................................... 94

3.7 Status of New Shares Issuance in connection with Mergers and Acquisitions. .......... 94

3.8 Financing Plans and Implementation .......................................................................... 94

Ⅳ. Operational Highlights ..................................................................................................... 95

4.1 Business Activities....................................................................................................... 95

4.2 Overview of the Market, Production, and Marketing ................................................ 104

4.3 Human Resources ...................................................................................................... 111

4.4 Information on Environmental Protection Costs ....................................................... 112

4.5 Labor Relations ......................................................................................................... 114

4.6 Important Contracts ................................................................................................... 121

Ⅴ. Financial Information .................................................................................................... 123

5.1 Five-Year Financial Summary ................................................................................... 123

5.2 Five-Year Consolidated Financial Analysis–Consolidated ..................................... 128

5.3 Supervisors’ Report or Audit Committee’s Review Report in the Most Recent

Year ........................................................................................................................... 136

5.4 Consolidated Financial Statements with Subsidiaries Audited by CPA .................... 136

5.5 The Effect on Company or its Affiliates have Experienced Financial Difficulties ... 136

VI. Review of Financial Conditions, Operating Results, and Risk Management ........... 137

6.1 Analysis of Financial Status ...................................................................................... 137

6.2 Analysis of Operation Results ................................................................................... 139

6.3 Cash flow Analysis .................................................................................................... 143

6.4 The Impact of Significant Capital Expenditure in Recent Years on Financial

Business .................................................................................................................... 144

6.5 Reinvestment Policy in Recent Years, the Main Reason for Profit Earning or Loss,

Improvement Plan, and Analysis on the Investment Plan in the Coming Year ........ 145

6.6 Analysis and Assessment of Risk Items .................................................................... 146

6.7 Other Important Matters ............................................................................................ 157

VII. Special Disclosure ......................................................................................................... 158

7.1 Summary of Affiliated Companies ............................................................................ 158

7.2 Private Placement Securities in the Most Recent Years ............................................ 176

7.3 The Shares in the Company Held or Disposed of by Subsidiaries in the Most

Recent Years ............................................................................................................. 176

7.4 The Matters Listed in Article 36, Paragraph 3, Subparagraph 2 of the Securities

and Exchange Act, which might Materially affect Shareholders' Equity or the

Price of the Company's Securities ............................................................................ 176

7.5 Other Matters that Require Additional Description................................................... 176

AppendixⅠ: Consolidated Financial Statements with Subsidiaries Audited by CPA of

2015 ................................................................................................................. 177

1

Letter to Shareholders

Thank you for attending Inventec’s annual shareholders’ meeting, the operation performance of

2015 is summarized below: with regard to revenue and profit making, the individual revenue and

consolidated revenue of the Company reached approximately NTD289.3 billion and NTD395.4

billion, respectively. The product portfolio is mainly computer products; compared to 2014 (in 2014,

individual revenue and consolidated revenue were approximately NTD330.7 billion and NTD435.5

billion, respectively), the individual revenue has decreased by 12.5%, while the consolidated

revenue decreased by 9.2%. Regarding product category, due to the continuous downturn of

notebook computer market, the popularity degree of the new operation platform was not as

expected, the annual revenue decreased by 25.28%; driven by the continuous fermentation of cloud

computing market issues, the revenue performance in server products has been relatively stable,

with the annual revenue in 2015 increasing by 24.05%. With regard to wireless devices and mobile

communication products, thanks to customer product hot sales and the expansion of production

capacity, the operation income contributed approximately NTD46.9 billion of revenue, and the

annual revenue performance increased by 0.29%. As for solar energy products, the overall revenue

contribution of the Group’s solar energy products was approximately NTD12.9 billion, an increase

of 14.79% year-on-year.

In regard to profit making, the annual net profit attributable to parent company shareholders reached

approximately NTD5.5 billion, with earnings per share of NTD1.55, a reduction of approximately

NTD1.5 billion from the previous year, profit making decreased by 21.6%, the main reason is that

the notebook computer market is facing slow-moving growth and price competition. Nevertheless,

the server and mobile communication product markets are continuing to experience stable growth;

furthermore, with regard to reinvestment business, under the supply chain vertical integration and

organizational merger, the Company hopes to improve its business turnover and profit making

capacity to bring positive benefit to the Group’s performance.

This year’s business plan summary and future development strategies:

Due to the continuous downturn of the global economy in 2016, the shipment volume of traditional

notebook computers continues to be impacted by the stagnated growth in the change of ultimate

consumer habits; faced with the challenges of the information industry operating environment,

Inventec will adhere to innovative thinking, adjust its operating strategy, and actively face future

challenges to seek new kinetic energy for operation growth. With regard to personal computer

products, Inventec will continuously coordinate with the demand of major international

manufacturers and develop light, thin, and portable products to meet market trends and consumer

demands; regarding enterprise solutions (including servers, storage, and LAN switches), Inventec

will continue to focus on the hardware leading foundation of network integration, storage,

computation modules, etc. and adhere to main trends in cloud application, integrate software and

hardware development capability, and actively develop customers to continuously expand its

2

leading position in the server-related product market; furthermore, with regard to wireless devices

and smart mobile products, we will gradually improve the proportion of automated processes in

order to reduce production costs, as well as coordinate with advanced technological solutions to

provide end customers with smart home and wireless intelligent end products; as for the solar

energy industry, through vertical integration of Inventec Solar Energy Corporation and Inventec

Energy Corporation, we will continue to cut costs in the hopes of gradually improving operation

efficiency to expand market competitiveness; in order to capture the opportunity of the handheld

wireless devices for industrial usage market, Inventec Corporation and Advantech Co., Ltd. form a

strategic alliance to establish a joint venture company, we hope to further provide a complete

solution to the customer and become the pioneer of industrial smart mobile devices through

combining the advantages of both parties in the aspect of research and development, manufacturing

and brand; finally, regarding research and development innovation, in 2015, the product research

and development costs of the Group reached NTD8.8 billion; in the future, we will continue to work

hard at product innovation, automated processes, etc. in order to maintain core competitiveness.

When pursuing an enterprise’s sustainable operation and creating enterprise value, Inventec also

fulfills its corporate citizenship responsibility. Through Inventec Group Charity Foundation, it has

gathered the Group’s caring volunteers to actively promote relevant volunteer businesses such as

social care, emergency relief, environmental protection, culture promotion, etc. over the long term

in order to practice the social service philosophy of Inventec Group, namely environmental

protection, culture, poverty relief, and community. In the past year, whether in the Formosa dust

explosion incident or Taiwan earthquake, you can always witness the social responsibility spirit of

Inventec Group in treating others as ourselves and loving others as ourselves and assisting disaster

stricken populations to live through hard times.

Looking toward 2016, Inventec will continue to adhere to the operation philosophy of “Innovation,

Quality, Open mind and Execution”, in addition to caring for its existing customers, Inventec will

continuously improve its management performance to consolidate its long-term competitive

advantage through product diversification, strategic investment, human resource inventory, and

organization optimization in order to expand the Group’s operation scale and its growth space in

profit making. This is the everlasting commitment of the Inventec management team to its

shareholders and investors. Again, thanks to every shareholder for their support of and guidance to

Inventec.

Best regards,

Chairman: Lee, Tsu-Chin

President: Huang, Kuo-Chun

3

Ⅰ. Company Introduction

1.1 Founding Date : June 9, 1975

1.2 Formation History

1975

．Inventec corporation was incorporated with a paid-in capital of NT$1 million.

1987

．Won the "PIP Optimal Growth Partner Award" issued by the world’s largest department store

chain, SEARS.

．Ranked No. 18 of the national export excellent manufacturers and won the Import and Export

Excellent Manufacturer Award issued by the Minister of the Ministry of Economic Affairs.

1988

．Started implementing upgrades of product structure and set up an overseas production base

plan.

．Won the "PIP Optimal Growth Partner Award" issued by SEARS again and won "Best

Cooperation Company Award" issued by Royal Dutch Philips Electronics Ltd.

．The Company’s application for being a public company was approved.

1989

．Began to produce notebook laptop computer and word processor products.

．Established Inventec Besta Co., Ltd.

1990

．Established Inventec Electronics (M) SDN. BHD.

．Started production of phone fax machines.

1991

．Won "Best Cooperation Company Award" issued by Zenith.

．Established the joint venture TIM Electronics (Malaysia) Co., Ltd. in Malaysia with Toshiba

Co. to produce communication products.

．Won "Excellent Manufacturer Award" issued by Texas Instruments.

．Invested in Inventec Electronics (Shanghai) Co., Ltd. through its investment in Inventec

Corporation (Hong Kong) Co., Ltd..

1992

．Granted ISO 9001 Quality Certification by BCIO and the BSI.

4

1993

．Among word processor products, the plug-in type language learning dictionary CD61 won

"Outstanding Boutique Award" in the national product image awards issued by the Ministry

of Economic Affairs.

．Won " Best Cooperation Company Award " issued by Texas Instruments again.

．Invested in Inventec Corporation (Hong Kong) Co., Ltd. for further investment in Inventec

Electronics (Tianjin) Co., Ltd., Inventec Electronics (Beijing) Co., Ltd., Inventec Electronics

(Nanking) Co., Ltd. and Inventec Electronics (Xi’an) Co., Ltd..

．Started production of PDAs.

1994

．Among word processor products, the reading electronic dictionary CD37 won the "Taiwan

Boutique Mark". Meanwhile, the plug-in type reading electronic dictionary CD65 and

e-books transcription machine won the "National Product Image Award" issued by the

Ministry of Economic Affairs.

．Inventec (Shanghai) Electronics Co.Ltd. earned ISO9001 certification.

．Won the "Quality Control Group Award" issued by the Chinese Society for Quality.

1995

．Won the "National Quality Award", which symbolizes the highest honor in national quality

operation and management.

．Started production of Pentium series multi-media notebooks.

．Established Donglan Factory in Shanghai.

．Inventec Electronics (Tianjin) Co., Ltd., Inventec Electronics (Beijing) Co., Ltd., Inventec

Electronics (Nanking) Co., Ltd., and Inventec Electronics (Xi’an) Co., Ltd. grated ISO 9001

Quality Certification.

．Established Hou Gang Factory to manufacture electronic dictionaries.

．Established Linkou Factory to manufacture and assemble computer peripherals.

1996

．Established Taipei Second Factory to manufacture PDA and graphic calculator.

．Established Jingting Factory in Shanghai.

．Inventec corporation officially listed.

．Achieved ISO 14001 Certification for Environmental Management System by SGS.

．Won " Best Cooperation Company Award " issued by Texas Instruments again.

1997

．Established subsidiaries in the United States, Scotland, and Singapore.

．Ranked No. 3 among enterprise operation performances rated by the China Credit Information

Service.

5

． Ranked first in Taiwan’s enterprise operation performance ranking list rated by

Commonwealth Magazine.

．Established Taipei Third Factory to manufacture notebook.

1998

．Taipei Second Factory and Third Factory earned ISO9002 quality system international

certification from the Bureau of Commodity Inspection and Quarantine (BCIQ) and the

British Standards Institution (BSI).

．Taipei Second Factory achieved ISO 14001 Certification by SGS.

．Established Taoyuan Factory for R&D and manufacture of high-end desktop and server.

1999

．Taipei Third Factory achieved ISO 14001 Certification by SGS.

．Taipei Third Factory achieved the whole country promotes the labor safe hygiene good prize

by Council of Labor Affairs, Executive Yuan.

．Taipei Second Factory achieved TI SEA Awards by Texas Instruments.

．Inventec Besta Co., Ltd changed Chinese company name.

．Established Inventec Micro-Electronics Corp. for calculators.

．Established Inventec Online Corp. for software development.

．Established Inventec Multimedia and Telecom Corp. for multimedia and communications

products.

2000

．Established Inventec Appliances Corp for the manufacture and sales of information appliances,

WAP phone, science plotter.

． Invested in Inventec (Cayman) Corp. for further investment in Inventec Corporation

(Shanghai) Co., Ltd..

．Elected to be the 1999 national good personalities and good deeds group representative of the

Republic of China.

．The Company was responsible for manufacturing more than four million Compaq Computer

Corporation commercial notebook computers.

．Taipei First factory won the “Industrial Excellence Award” issued by the Ministry of

Economic Affairs.

2001

．Invested in Inventec Tomorrow Studio Corporation for editorial tasks of book and electronic

publication and sales.

．Won the Gold Award from the National Invention Award Corporate Group, which affirmed the

outstanding achievement of the Company with regard to emphasizing intellectual property

rights and research and development from product technology to prospective technology.

6

．Won the 9th Ministry of Economic Affairs Industrial Technology Development Award -

Excellence Award, manifesting its emphasis on R&D achievement and remarkable effects

with incentive measures.

．Won the “Enterprise Gold Trade Award” issued by the Executive Yuan again.

．The Company was responsible for manufacturing more than five million Compaq Computer

Corporation commercial notebook computers.

．The notebook computers manufactured by the Company won the “Best Buy Award” issued by

"PC World" from mainland China.

2002

．Inventec Online Corp. and Inventec Appliances Corp. merged to integrate resources. Inventec

Appliances Corp. is the surviving company after the merger.

．The Company was responsible for manufacturing more than six million Hewlett-Packard

Company commercial notebook computers.

2003

．The Company sold its investment in Inventec Appliance (Shanghai) Co., Ltd. to Inventec

Appliances Corp..

．Invested in Inventec (Cayman) Corp. which invested in Inventec (Pudong) Corp. Inventec

(Pudong) Corp. engages in parts assembling.

2004

．Invested in Inventec Enterprise System Corp. for computer design, research and manufacture.

．Invested in Inventec (Czech) S.R.O. was engaged in parts assembling.

．Invested in Inventec (Cayman) Corp. which invested in Inventec (Pudong) Technology Corp.

and Inventec (Shanghai) Service Co., Ltd. engages in parts assembling.

．The Company reduced shareholding in Inventec Tomorrow Studio Corp. and accounted for

under the cost method.

．The Company sold its investment in Inventec Electronics (Nanking) Co., Ltd. to Inventec

Appliances Corp..

2005

．Invested in Inventec (Cayman) Corp. for further investment in Inventec Hi-Tech Co., Ltd.

whose major line of business is wireless phone production.

．Invested in Inventec Corporation Korea Branch which engages ib developing wireless phone

software.

．Inventec Appliances Corp. officially listed.

7

2006

．Established Hong Kong branch for wireless terminal production business.

．Invested in Inventec Holding (North America) Co., Ltd. for further investment in IEC

Technologies. S. de R.L. de C.V. in Mexico, which engages in server products and computer

parts assembling.

．Invested in Inventec Corporation (Singapore) Ltd. which finished business and liquidation.

2007

．Due to the business development purpose, purchased a R & D building at Shihlin.

．Invested in Inventec (Cayman) Corp. for further investment in Inventec Huan Hsin (Zhejiang)

Technology Co., Ltd..

．Inventec Besta Co., Ltd officially listed.

2008

．Invested in Win Semiconductors Corp..

．Reinvested in Inventec Huan Hsin (Zhejiang) Technology Co., Ltd..

．Exceeded 16 million units shipments of the Pudong Park notebook.

．Annual Sales exceeded 10 billion U.S. dollars.

2009

．Invested in Kohjinsha Co., Ltd..

．Purchased the R&D building at Taoyuan.

．Dr. Eye family (Dr. Eye 8.1 version, mobile dictionary for PPC, translation by USB drive

version) won three 2009 17th Taiwan Boutique Award information software awards.

．Won the “Corporate Social Responsibility Award” issued by Global Views Magazine.

．Established Inventec Investment Co., Ltd. for investment business.

．Established Inventec Technology (Singapore) Pte. Ltd in Singapore for server business.

．Established Inventec Tooling and Mold Co., Ltd for mold business.

．Merged 100% owned subsidiary, Inventec Enterprise System Corp..

．Inventec Investment Co., Ltd. invested Huga Optotech Inc..

．Established R&D Centers in Palo Alto and Houston.

．Invested in Inventec (Cayman) Corp. for further investment in Inventec (ChongQing)

Corporation.

．Invested in Inventec (Cayman) Corp. for further investment in Inventec (ChongQing) Service

Co., Ltd..

．Awarded a “Carbon Reduction Model Enterprise” by the Industrial Development Bureau,

Ministry of Economic Affairs.

8

2010

．Through Inventec (Cayman) Corp., established the joint venture Onkyo-Inventa (Hong Kong)

Co., Ltd. in Hong Kong with Onkyo Corporation.

．Through Inventec (Cayman) Corp., established the joint venture TPV-Inventa Holding Ltd.

with Admiral Overseas Corporation, and through the joint venture company, invested in

TPV-Inventa Technology (Fujian) Ltd., and TPV-Inventa Technology Co., Ltd. in Taipei.

．Reinvested in Inventec Huan Hsin (Zhejiang) Technology Co., Ltd.which became wholly

owned subsidiary of Inventec Corporation.

．Reinvested in Inventec Investment Co., Ltd. for further investment in Huga Optotech Inc..

．Kohjinsha Co., Ltd. changed company name to Inventec Development Japan Corporation,

moved to a new location, and reduced the capital.

．Invested in Arima Communications Corp..

．Established Inventec Solar Energy Corp..

．Achieved National Invention and Creation Silver Medal Awards.

．Grated ISO 14064-1 Certification.

2011

．Invested in Kinmac Solar Corp..

．Invested in E-TON Solar Tech. Co., Ltd..

．Invested in New E Materials Co., Ltd..

．Inventec Technology (Singapore) Pte.Ltd closed down.

．Inventec Appliances Corp. became wholly owned subsidiary of Inventec Corporation.

2012

．Onkyo-Inventa (Hong Kong) Co., Limited, and Onkyo-Inventa Technologies (Tianjin) Co.,Ltd.

closed down.

．In 2011, ranked No. 8 in national corporate patent application volume, No. 6 in invention

patent application volume, No. 7 in patent certification acquisition volume, and No. 5 in

invention patent certification acquisition volume.

．The Company was awarded“PPS Alignment Supplier of the Year” by HP.

．The Company was awarded“EG Service Supplier of the Year” by HP.

．Won the “Energy Saving and Carbon Reduction Action Mark - Excellence Award”, issued by

the Environmental Protection Administration, Executive Yuan.

9

2013

．In 2012, ranked No. 7 in national corporate patent application volume, No. 6 in invention

patent application volume, and No. 7 in invention patent certification acquisition volume.

．Reinvested in E-TON Solar Tech. Co., Ltd..

．Achieved the Best Partner Awards by Toshiba.

．Won 2013 Ministry of Economic Affairs Industrial Innovation Achievement Praise

-product/system/service innovation awards.

．Established the China Region of operation headquarters of enterprises in Mainland China.

．Taoyuan Science and Technology Park won the “Energy Saving and Carbon Reduction Action

Mark-Excellence Award”, issued by the Environmental Protection Administration, Executive

Yuan.

．Invested in Inventec Energy Corporation.

．Inventec (Cayman) Corp. carried out capital reduction to withdraw paid-in capital due to the

close down of Onkyo-Inventa Technologies (Tianjin) Co.,Ltd., a reinvested business in

mainland China.

．Invested in Inventec Technology (Chongqing) Corp. Ltd. through its investment in IEC

(Cayman) Corporation.

．Set up Inventec Energy Corporation for Hsinchu Plant and expanded the solar photovoltaic

module, with an annual production capacity of 150 MW.

．The capital of E-TON Solar Tech. Co., Ltd. increased NT$3,000,000,000 by cash, and the

paid-in capital of E-TON Solar Tech. Co., Ltd. was NT$7,794,498,000.

2014

．Named a U.S. "2013 Number of Patent Certification" global top 500 enterprise.

．Acquired "ISO-50001 International Energy Management System" certification for the first

time.

．Won Taiwan 2013 patent application and notice of certification as a top ten enterprise.

．Invested in SKSpruce Holding Limited.

．Reinvested in Inventec Solar Energy Corp..

．The Company won the 2014 Commonwealth Magazine World Corporate Citizenship Award.

．The Company won the 23rd ROC Corporate Environmental Protection Award issued by the

Environmental Protection Administration, Executive Yuan.

．The Company won the “2014 Taiwan Corporate Sustainability Award - Gold Award” issued

by the Taiwan Institute for Sustainable Energy.

．Inventec Appliances Corp. won Taiwan 2013 patent application and notice of certification as a

top 100 enterprise.

． Inventec Appliances Corp. subsidiary, Inventec Appliances (Nanjing) Corp.in Nanjing

expanded second phase plant and purchased machines and equipment to expand production

capacity.

10

2015

．Established Inventec Manufacturing (India) Private Limited.

．Invested in Inventec Asset-Management (Shanghai) Corporation through its investment in

Inventec (Shanghai) Corp..

．Reinvested in Chongqing YuYa Cloud Service Co., Ltd. through Inventec (Chongqing) Corp..

．Participated in TPV-Inventa Holding Ltd. cash capital increase through Inventec (Cayman)

Corp..

．47.68% common stock equity of Inventec Energy Corporation held by the Company was sold

to Inventec Solar Energy Corporation.

．Purchased the plant building in Taoyuan Science and Technology Park.

．Won the 2015 Commonwealth Magazine World Corporate Citizenship Award.

．Won the 24th ROC Corporate Environmental Protection Award issued by the Environmental

Protection Administration, Executive Yuan.

．Won the “2015 Taiwan Corporate Sustainability Award - Silver Award” issued by the Taiwan

Institute for Sustainable Energy.

．Won Taiwan 2015 patent application and notice of certification as a top ten enterprise.

2016

．The Company and Advantech Co., Ltd. jointly established AIMobile Co., Ltd..

11

Ⅱ. Corporate Governance Report 2.1 Organization Structure

Board of shareholders

Board of Directors

Supervisor

Remuneration Committee

Audit Center Social Responsibility Group

President

Chief Operating Officer

Safety & Health Center

Business Unit

Enterprise Business Group

Personal Solution Group

Cloud Information Services

Company Unit

Finance Center

Legal & Intellectual Property

Center

Information Technology

Center

Talent Center

Environmental Management

Center

Factory

China

Pudong Factory

Mexico Factory

Czech Factory

India Factory

Chongqing Factory

Business Center

Strategy Center

12

Department Functions

Major Department Major Business Activities

Audit Center Overall planning businesses such as internal control system, internal audits,

self-assessment, etc. of the company.

Social Responsibility

Group Plan and execute corporate social responsibility related matters.

Enterprise Business

Group

Planning and management of enterprise business computer design,

development, manufacturing, production, marketing, after-sales service, etc.

Personal Solution

Group

Planning and management of portable computer design, development,

manufacturing, production, marketing, after-sales service, etc.

Cloud Information

Services

Cloud solution research and development, sales, and service.

Exploitation of big data analytical ability and market application promotion.

Development and sales of Internet important system services.

Data center setting and fully established SaaS and PaaS service promotion.

IoT and industry 4.0 solution construction and sales services.

Finance Center Overall planning of the financial, accounting, investment, and stock affairs

business of the company.

Legal & Intellectual

Property Center

Overall planning of application protection business related to patent rights,

trademark rights, copyrights, and trade secrets of the company.

Information

Technology Center

Overall planning of the establishment and operation of a network system

structure, product life cycle management system, enterprise resource planning

system, manufacturing execution system, quality inspection management

system, supply chain management system, form management system, etc. of

the company.

Development and sales of enterprise solutions, enterprise system integration

and consulting services, office system import and process automation services,

and development and sales of green energy solutions.

Talent Center Overall planning of the company’s human resources related business.

Environmental

Management Center

Overall planning of the company’s related management business and the

integrated planning and supervision of environment and quality.

Pudong Factory

Responsible for design and development, manufacturing, after-sales services,

etc. of portable computers, wireless communication products, and corporate

computers.

Chongqing Factory

Responsible for design and development, manufacturing, after-sales services,

etc. of portable computers, wireless communication products, and corporate

computers.

Mexico Factory Responsible for production, testing, troubleshooting, after-sales services, etc.

of corporate servers and storage systems.

Czech Factory Responsible for production, testing, troubleshooting, after-sales services, etc.

of corporate servers and storage systems.

India Factory

Responsible for production and manufacturing, testing, troubleshooting,

after-sales services, etc. of mobile phones, plates, portable computers, wireless

communication products, corporate computers, corporate servers, and storage

systems.

Strategy Center Overall planning and integration of enterprise operation strategies.

13

2.2 Board of Directors, Supervisors and Management Team

2.2.1 Board of Directors and Supervisors

2.2.1.1 Introduction of Board of Directors and Supervisors 2016.04.30

Title

Nationality

or

Registered

Address

Name Date

Elected

Term

(Years)

Date First

Elected

Shareholding

when Elected

Current

Shareholding

Spouse & Minor

Shareholding

Shareholding

by Nominee

Arrangement Experience Education

Selected

Current

Positions

Executives, Directors or

Supervisors who are spouses or

within two degrees of kinship

Shares % Shares % Shares % Shares % Title Name Relation-

ship

Chairman

R.O.C Lee,

Tsu-Chin

2014.06.12 3 1980.06.08 115,833,835 3.23% 115,833,835 3.23% －－－－

Bachelor of Economics,

Tunghai University

Chairman, Inventec

Corporation

Note 1

None None None

Director

R.O.C Yeh, Kuo-I

2014.06.12 3 1975.06.09 254,361,330 7.09% 254,361,330 7.09% 99,314,117 2.77% －－

University of San Francisco

Chairman, Inventec

Corporation

Note 2 Supervisor

Wang,

Ping-Hui

Within

two

degrees of kinship

Director

R.O.C Wen,

Shih-Chih

2014.06.12 3 2004.05.27 35,685,590 0.99% 35,685,590 0.99% 37,399 0.00% －－

Xihu Vocational High School

of Industry and Commerce

Senior Vice President,


Note 3

Represent-

ative of

Supervisor

Yang,

Chiung-

Nan

Spouse

Director

R.O.C Chang,

Ching-Sung

2014.06.12 3 2014.06.12

788,644 0.02% 788,644 0.02% 6,743,434 0.19% －－

Master of Electric

Engineering, National Taiwan

University

Chairman, Inventec

Appliances Corporation

Note 4 None None None

Director

R.O.C

Huang,

Kuo-Chun 2014.06.12

3 2014.06.12

1,461,985 0.04% 1,461,985 0.04% 9,327 0.00% －－

Bachelor of Electric

Engineering, National

Cheng-Kung University

Qume Electronics, Taiwan

Note 5

None None None

14

Title

Nationality

or

Registered

Address

Name Date

Elected

Term

(Years)

Date First

Elected

Shareholding

when Elected

Current

Shareholding

Spouse & Minor

Shareholding

Shareholding

by Nominee


Selected

Current

Positions




Shares % Shares % Shares % Shares % Title Name Relation-

ship

Independent

Director

R.O.C Chang,

Chang-Pang

2014.06.12 3 2014.06.12

－－－－－－－－

Master of Laws, National

Cheng-Chi University Chairman, Fuhwa Financial

Holding Co., Ltd.

Deputy Minister, Ministry of

Economic Affairs

Deputy Secretary General,

Executive Yuan

Vice Minister, Ministry of

Finance

Chairman, Securities and

Exchange Commission,

Ministry of Finance


Independent

Director

R.O.C Chen,

Ruey-Long

2014.06.12 3 2014.06.12

－－－－－－－－

Bachelor of Economics,

National Chung-Hsing

University

Chairman, Institute for

Information Industry Minister, Ministry of

Economic Affairs


Supervisor

R.O.C Cheng,

Hsien-Ho

2014.06.12

3 2002.05.30 1,553,664 0.04% 1,443,664 0.04% 655,923 0.02% －－

Bachelor of Accounting,

National Cheng-Chi University

Senior Vice President,



Supervisor

R.O.C Wang,

Ping-Hui

2014.06.12

3 1990.04.07 19,317,657 0.54% 19,317,657 0.54% 18,200,345 0.51% －－

Tatung High School

Chairman, Snow Peak

Enterprise Co., Ltd.

None Director Yeh,

Kuo-I

Within

two

degrees

of kinship

Supervisor

R.O.C Shyh Shiunn

Investment

Corp.

2014.06.12

3 2011.06.09 139,416,690 3.89% 139,416,690 3.89% －－－－－ None

None None None

R.O.C Representative,

Yang,

Chiung-Nan 2014.06.12

3 2014.06.12

37,399 0.00% 37,399 0.00% 35,685,590 0.99% －－

Nan Ying Vocation High

School

Accountant, Taipei Veterans

General Hospital

Supervisor,

Tomorrow

Technology Corporation

Director

Wen,

Shih-Chih

Spouse

15

Note 1: Chairman of Inventec Investments Co., Ltd.；Director of Inventec Corporation (Hong Kong) Ltd., Inventec (Cayman) Corp., IEC (Cayman) Corporation,

Inventec Holding (North America) Corp., Inventec Electronics(USA) Corp., Inventec Manufacturing (North America) Corp., Inventec Configuration (North

America) Corp., Inventec Distribution(North America) Corp., IEC Technologies,S.de R.L.de C.V., Inventec Appliances Corp., and Inventec Group Charity

Foundation；Chief executive officer of Inventec Development Japan Corporation；President of Cloud Computing Association in Taiwan.

Note 2: Director of Inventec Corporation (Hong Kong) Ltd., W.K Technology Fund Ⅷ Ltd., PK Venture Capital Corp., PK Ⅱ Venture Capital Corp., Kuo Hsieh

Investment Co. Ltd., Fu Tai Investment Co. Ltd., WK Technology Fund., WK Technology Fund IV, W.K Technology Fund Ⅴ Ltd., W.K Technology Fund Ⅵ

Ltd., and Royal Base Corporation；Supervisor of W.K Technology Fund Ⅶ Ltd.；Chairman of Inventec Group Charity Foundation.

Note 3: Director of Inventec Huan Hsin (Zhejiang) Technology Co., Ltd., and Inventec Appliances Corp.；Chairman of Shyh Shiunn Investment Corp.

Note 4: Chairman of Inventec Appliances Corp., Inventec Electronics (Shanghai) Co. Ltd., Inventec Appliances (Pudong) Corp., Inventec (Nanjing) Electronics Co. Ltd.,

Inventec Appliances (Nanjing) Corp., Inventec Appliances (Nanjing) System Corp., Inventec Appliances (Xi'An) Corporation, Inventec Appliances (Nanchang)

Co., Ltd., and Inventec Appliances (Shang Hai) Co., Ltd.；Director of Inventec Appliances (Cayman) Holding Corp., Inventec Appliances (USA) Distribution

Corp., Inventec Appliances USA Inc. and Inventec Group Charity Foundation.

Note 5: Chairman of Inventec Huan Hsin (Zhejiang) Technology Co., Ltd., TPV-Inventa Holding Ltd., TPV-Inventa Technology Co., Ltd., and TPV-Inventa Technology

(Fujian) Ltd. ; President of Inventec Corp.；Director of Inventec Investments Co., Ltd., Inventec Holding (North America) Corp., Inventec Electronics (USA)

Corp., Inventec Manufacturing (North America) Corp., Inventec Configuration (North America) Corp., Inventec Distribution (North America) Corp., and IEC

Technologies,S.de R.L.de C.V.

Note 6: Chief Executive Officer of Lien Chan Foundation for Peace and Development；Independent Director of Formosa Petrochemical Corp., Silitech Technology

Corporation, Powerchip Technology Corporation；Director of Capital Securities Corp., Maxigen Biotech Inc., Global Financial Services, Global Investment

Holdings, Zi-Yu Investment Co., Ltd., and Inventec Group Charity Foundation；Supervisor of Jintex Corporation Ltd.

Note 7: Chairman of Sinocon Industrial Standards Foundation, and Powerchip Technology Corporation；Independent Director of Formosa Chemicals & Fibre

Corporation and China Petrochemical Development Corporation；Director of Teknowledge Development Corporation, Bank of Panhsin, HannStar Board Corp.,

Asia Cement Corporation, PowerGate Optical Inc., Gintech Energy Corporation, and Inventec Group Charity Foundation.

Note 8: Supervisor of Inventec Investments Co., Ltd., Inventec Solar Engergy Corporation, E-TON Solar Tech. Co., Ltd., Inventec Energy Corporation, New E Materials

Co., Ltd., and Inventec Appliances Corp.

16

2.2.1.2 The institutional shareholders

04/30/2016

Name shareholders

Shyh Shiunn Investment Corp. Wen, Shih-Chih (35.45%)、Wen, Shih-Yi (32.27%)、Huang, Ye-Ming (9.96%)

17

2.2.1.3 Professional Qualifications and Independence Analysis of the Board

04/30/2016

Criteria

Name

Met one of the following professional qualification requirements with at least five years work experience Independence（Note1）

Number of other

public companies in

which the individual

is concurrently

serving as an

independent director

An instructor of higher position in a

department of commerce,law,

finance, accounting, or other academic

department related to the business needs of

the company in a public or private junior college, or

university

A judge,public prosecutor, attorney,

CPA, or other professional or technical

specialist who has passed a national

examination and bee awarded a certificate in a profession necessary for the business of the

company

Have work experience in the

areas of commerce,law,

finance, accounting, or

otherwise necessary for the business of the

company

〈1〉〈2〉〈3〉〈4〉〈5〉〈6〉〈7〉〈8〉〈9〉〈10〉

Lee, Tsu-Chin - - - - - -

Yeh, Kuo-I - - - - - - - -

Wen, Shih-Chih - - - - - - -

Chang, Ching-Sung - - - - -

Huang, Kuo-Chun - - - - -

Chang, Chang-Pang 3

Chen, Ruey-Long - - 2

Cheng, Hsien-Ho - - - -

Wang, Ping-Hui - - - - -

Shyh Shiunn Investment Corp.

Representative, Yang, Chiung-Nan - - - - - -

18

Note1: The independece criteria to indicate whether the directors or supervisors had met any of the conditions during the 2 years prior to being elected

or during the term of office

（1）Not an employee of the company or its affiliates

（2）A director or supervisor of the company or any of its affiliates. The same does not apply, however, in cases where the person is an

independent director of the company, its parent company, or any subsidiary in which the company holds, directly or indirectly, more

than 50 percent of the voting shares.

（3）A natural-person shareholder who holds shares, together with those held by the person's spouse, minor children, or held by the person

under others' names, in an aggregate amount of one percent or more of the total number of issued shares of the company or ranking in

the top 10 in holdings.

（4）A spouse, relative within the second degree of kinship, or lineal relative within the third degree of kinship, of any of the persons in the

preceding three subparagraphs.

（5）A director, supervisor, or employee of a corporate shareholder that directly holds five percent or more of the total number of issued

shares of the company or that holds shares ranking in the top five in holdings.

（6）A director, supervisor, officer, or shareholder holding five percent or more of the shares, of a specified company or institution that has a

financial or business relationship with the company.

（7）A professional individual who, or an owner, partner, director, supervisor, or officer of a sole proprietorship, partnership, company, or

institution that, provides commercial, legal, financial, accounting services or consultation to the company or to any affiliate of the

company, or a spouse thereof, provided that this restriction does not apply to any member of the remuneration committee who exercises

powers pursuant to Article 7 of the Regulations Governing the Establishment and Exercise of Powers of Remuneration Committees of

Companies Whose Stock is Listed on the TWSE or Traded on the TPEx.

（8）Not having a marital relationship, or a relative within the second degree of kinship to any other director of the company.

（9）Not been a person of any conditions defined in Article 30 of the Company Act.

（10）

19

2.2.2 Introduction of the Management Team 2016.04.30

Title Nationality Name On-board

Date

Current

Shareholding

Spouse & Minor

Shareholding

Shareholding

By Nominee


Selected Current

Positions




Shares % Shares % Shares % Title Name Relationship

President

R.O.C Huang

Kuo-Chun

2013.06.13 1,461,985 0.04% 9,327 0.00% －

－ B.S. in Electrical Engineering, National

Cheng Kung University

QUME Electronics, Taiwan


Executive

Vice President

R.O.C Wu,

Yung-Tsai

2006.03.01 482,731 0.01% 12,864 0.00% －

－

M.B.A. in Management, National Taiwan

University of Science and Technology

Linco Precision


Senior Vice

President

R.O.C Chang,

Hui

2004.09.01 687,059 0.02% 306,721 0.01% －

－ M.B.A. in Global Management,

Thunderbird School of Global

Management


Senior Vice

President R.O.C

Yang,

Hsin-Hua

2006.03.01 227,928 0.01% 77,589 0.00% －

－ M.S. in Science and Technology, Keio

University

Director of E-TON

Solar Tech.Co., Ltd,

and Inventec

Development Japan

Corporation

None None None

Senior Vice

President R.O.C

Tsai,

Chih-An

2009.03.24 746,101 0.02% 13,208 0.00% －

－

B.S. in Industrial Engineering and

Enterprise Information, Tunghai

University

Digital Equipment Corporation

Representative of

Inventec (Czech) s.r.o None None None

Senior Vice

President R.O.C

Wen,

Chi-Wai

2010.01.22 622,556 0.02% －

－

－

－ B.S. in Electrical Engineering, Fu Jen

Catholic University

Microtek International Inc

None None None None

Senior Vice

President R.O.C

Lin,

Chin-Wen

2010.01.22 85,278 0.00% －

－

－

－ Ph.D. in Industrial Engineering, Purdue

University

The Boeing Company

None None None None

20


Date

Current

Shareholding

Spouse & Minor

Shareholding

Shareholding

By Nominee


Selected Current

Positions





Senior Vice

President R.O.C

Chen,

Yea-Ping

2013.07.30 120,000 0.00% 20,000 0.00% －

－ Ph. D. in Electrical Engineering,

University of Wisconsin-Madison

Philips Semiconductors

None None None None

Vice

President

R.O.C Chang,

Nai-Wen

2004.12.01

28,857 0.00% －

－

－

－ LL.M. in Law, University of Minnesota

VIA Technologies Inc. None None None None

Vice

President R.O.C

Hong,

Kuo-Ching 2006.03.01 382,010 0.01% 14,986 0.00% －

－

M.B.A. in Executive Master of Business

Administration, National Cheng-Chi

University

None None None None

Vice

President R.O.C

Chang

Yiu-Lang 2007.05.01 －

－

－

－

－

－

B.B.A. in Business Administration,

Senshu University

M.B.A. in Business Administration,

Taiwan National University

Alpha Networks

None None None None

Vice

President R.O.C

Yu,

Chin-Pao

2009.01.20

707,576 0.02% 175,105 0.00% －

－

B.B.A. in Accounting, National Cheng

Kung University

M.B.A. in Executive Master of Business

Administration, National Cheng-Chi

University


Vice

President R.O.C

Chien,

Kuei-Fen

2010.01.22 25,068 0.00% －

－

－

－ M.B.A., Missouri State University

Digital Equipment Corporation None None None None

Vice

President R.O.C

Lou,

Jin-Pang

2010.02.23

44,613 0.00% 573 0.00% －

－ B.S. in Electrical Engineering, National

Taipei University of Technology

Quanta Computer lnc.

None None None None

Vice

President R.O.C

Yi,

Fu-Ming

2010.12.28

65,637 0.00% －

－

－

－ B.S. in Electrical Engineering, Tatung

University None None None None

21


Date

Current

Shareholding

Spouse & Minor

Shareholding

Shareholding

By Nominee


Selected Current

Positions





Vice

President R.O.C

Tsai,

Yuh-Chen

2010.12.28

－

－

－

－

－

－ M.S. in Engineering and Computer

Science, Syracuse University

Arima Computer Corp.

None None None None

Vice

President R.O.C Hsu,

Ching-Wu 2012.01.16

88,508 0.00% －

－

－

－

M.B.A in Finance and Business

Administration, National Taiwan

University of Science and Technology

Sanyo Electric Corp., Ltd.

None None None None

Vice

President R.O.C Ting,

Chin-Yun 2012.05.29 96,520 0.00% －

－

－

－

Hofstra University Master of Science

First International Computer None None None None

Vice

President R.O.C

Chou,

Shao-Hsin

2013.07.30

592,615 0.02% －

－

－

－ B.S. in Computer Science and Information

Engineering, Tamkang University None None None None

Vice

President R.O.C

Tsung,

Yu-Lin

2013.07.30

－

－

－

－

－

－

Ph.D. in Computer Science, National

Chiao Tung University

Institute for Information Industry

Yuan Chi Computer Corp.

Director and President

of Chongqing Rongjie

Cloud Service Co.,

Ltd.

None None None

Senior

Director of

Talent Center

R.O.C Yu,

Win-Chee

2011.10.01 573,636 0.02% 156,922 0.00% －

－ M.S. in Communications Engineering,

National Chiao Tung University None None None None

Director of

Finance

Center

R.O.C Liang,

Wen-Jan

2008.08.01 －

－

－

－

－

－ B.B.A. in Economics, National Taiwan

University

OCBC Bank

None None None None

Director of

Talent Center R.O.C

Lin,

Shih-Pin

2015.03.30 28,000 0.00% －

－

－

－

M.S. in Manufacturing Engineering,

Boston University

Radiant Opto-Electronics Corporation

None None None None

Director of

Finance

Center

R.O.C Hsiao,

I-Ying

2015.04.01 996 0.00% 676 0.00% －

－

M.B.A., Baruch College, City University

of New York

CTBC bank

None None None None

22

Note 1: Chairman of Inventec Huan Hsin (Zhejiang) Technology Co., Ltd., TPV-Inventa Holding Ltd., TPV-Inventa Technology Co., Ltd.,

TPV-Inventa Technology (Fujian) Ltd.；Director of Inventec Corporation, Inventec Investments Co., Ltd., Inventec Holding (North

America) Corp., Inventec Electronics(USA) Corp., Inventec Manufacturing(North America) Corp., Inventec Configuration(North America)

Corp., Inventec Distribution(North America) Corp., IEC Technologies,S.de R.L.de C.V..

Note 2: Chairman of Inventec Technology (Chongqing) Corp., Inventec (Pudong) Corp., Inventec Hi-Tech Corp., Inventec (Pudong) Technology

Corp., Inventec (Shanghai) Corp., Inventec (Shanghai) Service Co., Ltd., Inventec (Chongqing) Corp., Inventec (Chongqing) Service Co.,

Ltd., Inventec (Beijing) Electronics Technology Co., Ltd., Inventec (Tianjin) Electronics Co., Ltd., and Inventec Asset-Management

(Shanghai) Corporation；President of Inventec (Shanghai) Corp., and Inventec (Shanghai) Service Co., Ltd. ; Director of Inventec Huan

Hsin (Zhejiang) Technology Co., Ltd., TPV-Inventa Holding Ltd., Inventec Appliances Corp., Inventec Besta Co., Ltd., Inventec Holding

(North America) Corp., Inventec Electronics(USA) Corp., Inventec Manufacturing (North America) Corp., Inventec Configuration(North

America) Corp., Inventec Distribution (North America) Corp and E28 Limited ; Representative of Inventec Manufacturing (India) Private

Limited.

Note 3: Dircetor of TPV-Inventa Holding Ltd., TPV-Inventa Technology Co., Ltd., TPV-Inventa Technology (Fujian) Ltd.；Representative of

Inventec Manufacturing (India) Private Limited.

Note 4: Director and President of Inventec Investments Co., Ltd.；Director of E-TON Solar Tech. Co., Ltd., Inventec Solar Engergy Corporation,

Arima Communications Corp., Global Strategic Investments Fund and TPV- Inventa Holding Ltd.；Supervisor of TPV- Inventa

Technology Ltd., Inventec Besta Co., Ltd., and TPV-Inventa Technology (Fujian) Ltd.；Chief Executive Officer of Inventec Group Charity

Foundation；Supervisor of Inventec Development Japan Corporation.

23

2.2.3 Remuneration of Directors, Supervisors, the President, and Vice President

2.2.3.1 Remuneration of Directors Unit: NT$ Thousands

Title Name

Remuneration

Ratio of total to net

income

Relevant remuneration received by directors who are also employees

Ratio of total

to net income

Co

mp

ensatio

n p

aid to

directo

rs from

an

invested

com

pan

y o

ther th

an th

e com

pan

y's

sub

sidiary

Compensation (A)

Retire-ment

Pension (B)

Bonus (C)

Allowance (D)

Salary and allowance

(E)

Severance pay (F)

Employees bonus (G)

Exercisable

employee

stock option

(H)

Number

of

restricted

employee

shares

(I)

Th

e com

pan

y

Co

mp

anies in

the

finan

cial repo

rt

Th

e com

pan

y

Co

mp

anies in

the

finan

cial repo

rt

Th

e com

pan

y

Co

mp

anies in

the

finan

cial repo

rt

Th

e com

p-an

y

Co

mp

anies in

the

finan

cial repo

rt

Th

e com

pan

y

Co

mp

anies in

the

finan

cial repo

rt

Th

e com

pan

y

Co

mp

anies in

the

finan

cial repo

rt

Th

e com

pan

y

Co

mp

anies in

the

finan

cial repo

rt

Th

e co

mp

any

Co

mp

ani

es in th

e fin

ancial

repo

rt

Th

e com

pan

y

Co

mp

anies in

the

finan

cial repo

rt

Th

e com

pan

y

Co

mp

anies in

the

finan

cial repo

rt

Th

e com

pan

y

Co

mp

anies in

the

finan

cial repo

rt

cash

stock

cash

stock

Chairman Lee,

Tsu-Chin

15,480 15,480 284 284 83,519 83,519 1,720 1,950 1.82% 1.82% 17,600 26,140 340 769 7,000 - 7,000 - - - - - 2.26% 2.43% -

Director Yeh, Kuo-I

Director Wen,

Shih-Chih

Director Chang,

Ching-Sung

Director Huang,

Kuo-Chun

Independent

Director

Chang,

Chang-Pang

Independent

Director

Chen,

Ruey-Long

24

Bracket

Name

Total of (A+B+C+D) Total of (A+B+C+D+E+F+G)

The Company Companies in the

financial report The Company

Companies in the

financial report

Below NT$ 2,000,000

NT$2,000,000(Included) ~

$5,000,000(Excluded)

Chang, Chang-Pang,

Chen, Ruey-Long

Chang, Chang-Pang,

Chen, Ruey-Long

Chang, Chang-Pang,

Chen, Ruey-Long

Chang, Chang-Pang,

Chen, Ruey-Long


$10,000,000(Excluded)


$15,000,000(Excluded)

Wen, Shih-Chih,

Huang, Kuo-Chun

Wen, Shih-Chih,

Huang, Kuo-Chun

Wen, Shih-Chih,

Huang, Kuo-Chun

Wen, Shih-Chih,

Huang, Kuo-Chun


$30,000,000(Excluded)

Lee, Tsu-Chin,

Yeh, Kuo-I,

Chang, Ching-Sung

Lee, Tsu-Chin,

Yeh, Kuo-I,

Chang, Ching-Sung

Lee, Tsu-Chin,

Yeh, Kuo-I,

Chang, Ching-Sung

Lee, Tsu-Chin,

Yeh, Kuo-I,

Chang, Ching-Sung


$50,000,000(Excluded)


$100,000,000(Excluded)

Over NT$100,000,000

Total 7 7 7 7

25

2.2.3.2 Remuneration of the Supervisors Unit: NT$ Thousands

Title Name

Remuneration Ratio of total

to net income

Compensation paid

to directors from

an invested

company other

than the company's

subsidiary

Compensation (A) Bonus (B) Allowance (C)

The

Company

Companies in the

financial report

The

Company

Companies in the

financial report

The

Company

Companies in the

financial report

The

Company

Companies in the

financial report

Supervisor Cheng, Hsien-Ho

5,160 5,160 14,739 14,739 780 1,062 0.37% 0.38% -

Supervisor Wang, Ping-Hui

Supervisor

Shyh Shiunn

Investment Corp.

Representative,

Yang,Chiung-Nan

Bracket

Name

Total of (A+B+C)

The company Companies in the financial report

Below NT$ 2,000,000

NT$2,000,000(Included) ~ $5,000,000(Excluded) Wang, Ping-Hui, Shyh Shiunn Investment Corp. Wang, Ping-Hui, Shyh Shiunn Investment Corp.

NT$5,000,000(Included) ~ $10,000,000(Excluded)


NT$15,000,000(Included) ~ $30,000,000(Excluded) Cheng, Hsien-Ho Cheng, Hsien-Ho



Over NT$100,000,000

Total 3 3

26

2.2.3.3 Remunerations paid to the management team Unit: NT$ Thousands

Title Name

Compensation (A)

Retirement Pension (B)

Bonus (C)

Employees bonus (D)

Ratio of total to net income

Exercisable employee

stock option

Number of restricted employee

shares

Compensati

on paid to directors

from an

invested company

other than

the company's

subsidiary

Th

e com

pan

y

Co

mp

anies in

the

finan

cial repo

rt

Th

e com

pan

y

Co

mp

anies in

the

finan

cial repo

rt

Th

e com

pan

y

Co

mp

anies in

the

finan

cial repo

rt

Th

e co

mp

any

Co

mp

ani

es in th

e fin

ancial

repo

rt

Th

e com

pan

y

Co

mp

anies in

the

finan

cial repo

rt

Th

e com

pan

y

Co

mp

anies in

the

finan

cial repo

rt

Th

e com

pan

y

Co

mp

anies in

the

finan

cial repo

rt

cash

stock

cash

stock

President

Huang, Kuo-Chun

58,080 62,601 3,485 3,485 101,800 102,219 46,100 - 46,100 - 3.76% 3.85% - - - - 130

Executive Vice President

Wu, Yung-Tsai

Senior Vice President

Chang, Hui

Senior Vice President Yang, Hsin-Hua

Senior Vice President Tsai, Chih-An

Senior Vice President Wen, Chi-Wai

Senior Vice President Lin, Chin-Wen

Senior Vice President Chen, Yea-Ping

Vice President

Chang, Nai-Wen

Vice President Hong, Kuo-Ching

Vice President Chang Yiu-Lang

Vice President Yu, Chin-Pao

Vice President Chien, Kuei-Fen

Vice President Lou, Jin-Pang

Vice President Yi, Fu-Ming

Vice President Tsai, Yuh-Chen

Vice President Hsu, Ching-Wu

Vice President Ting, Chin-Yun

Vice President Chou, Shao-Hsin

Vice President Tsung, Yu-Lin

27

Bracket Name

The Company Companies in the financial report

Below NT$ 2,000,000


$5,000,000(Excluded) Hsu, Ching-Wu, Tsung, Yu-Lin Hsu, Ching-Wu, Tsung, Yu-Lin


$10,000,000(Excluded)

Lin, Chin-Wen, Chen, Yea-Ping , Hong, Kuo-Ching,

Yu, Chin-Pao, Chang, Nai-Wen, Ting, Chin-Yun,

Chien, Kuei-Fen, Chang, Yiu-Lang, Tsai, Yuh-Chen,

Chou, Shao-Hsin

Lin, Chin-Wen, Chen, Yea-Ping , Hong, Kuo-Ching,

Yu, Chin-Pao, Chang, Nai-Wen, Ting, Chin-Yun,

Chien, Kuei-Fen, Chang, Yiu-Lang, Tsai, Yuh-Chen,

Chou, Shao-Hsin


$15,000,000(Excluded) Yang, Hsin-Hua, Yi, Fu-Ming, Lou, Jin-Pang Yang, Hsin-Hua, Yi, Fu-Ming, Lou, Jin-Pang


$30,000,000(Excluded)

Huang, Kuo-Chun, Wu, Yung-Tsai, Chang, Hui,

Tsai, Chih-An, Wen, Chi-Wai

Huang, Kuo-Chun, Wu, Yung-Tsai, Chang, Hui,

Tsai, Chih-An, Wen, Chi-Wai


$50,000,000(Excluded)


$100,000,000(Excluded)

Over NT$100,000,000

Total 20 20

28

2.2.3.4 Employee Profit Sharing Granted to Management Team

Unit: NT$ Thousands

Title Name Stock Cash Total

Ratio of Total

Amount to Net

Income

President

Huang, Kuo-Chun

-

49,100

49,100

0.88%

Executive Vice President

Wu, Yung-Tsai

Senior Vice President

Chang, Hui

Senior Vice President Yang, Hsin-Hua

Senior Vice President Tsai, Chih-An

Senior Vice President Wen, Chi-Wai

Senior Vice President Lin, Chin-Wen

Senior Vice President Chen, Yea-Ping

Vice President

Chang, Nai-Wen

Vice President Hong, Kuo-Ching

Vice President Chang, Yiu-Lang

Vice President Yu, Chin-Pao

Vice President Chien, Kuei-Fen

Vice President Lou, Jin-Pang

Vice President Yi, Fu-Ming

Vice President Tsai, Yuh-Chen

Vice President Hsu, Ching-Wu

Vice President Ting, Chin-Yun

Vice President Chou, Shao-Hsin

Vice President Tsung, Yu-Lin

Senior Director of Talent Center Yu, Win-Chee

Director of Finance Center

Liang, Wen-Jan

Director of Talent Center

Lin, Shih-Pin

Director of Finance Center

Hsiao, I-Ying

29

2.2.3.5 Compare and state the ratio of total remuneration paid to the Company’s Directors, Supervisors, President and Vice Presidents by

the company and the companies in the consolidated financial statements to net income in the past two years.

Unit: NT$ Thousands

Item The Company Companies in the financial report

2014 2015 2014 2015

Remuneration of Directors 124,569 101,003 125,243 101,233

Ratio of total to net income 1.76% 1.82% 1.76% 1.82%

Remuneration of the supervisors 24,924 20,679 25,207 20,961


Remuneration of the President and Vice President 244,345 209,465 255,396 214,405


Net income 7,097,815 5,563,633 7,097,815 5,563,633

2.2.3.6 Policy, standards, and combination of remuneration payment to directors, supervisors, President, and Vice President, the remuneration

determination procedure, and the relationship between operation performance and future risk

(1). Remuneration payment methods to directors and supervisors of the Company are stipulated below:

On December 29, 2015, the Board of Directors of the Company passed a resolution amending the Articles of Incorporation ; it

still needs to be passed as a resolution of the 2016 general meeting before being officially issued. According to the amended

Articles of Incorporation of the Company, if the Company has annual profits, no less than 3% of them shall be allocated as

employee remuneration, and no more than 3% as director and supervisor remuneration. However, when the Company

experiences accumulated losses, it shall reserve the compensation amount in advance. The employee remuneration may be

issued in cash or stock; the issuing object may include employees subordinated to the company that conform to certain

conditions; and the conditions and methods thereof will be stipulated by the Board of Directors.

The remuneration payment depends on the participation degree and contribution value of each director and supervisor and also

refers to normal industry standards; it will be decided by the Board of Directors after being reviewed by the Remuneration

30

Committee and shall not exceed the upper limit stipulated in the Company’s Articles of Association. Directors of the Company

carry out the duties of other company directors or supervisors stated in the consolidated statement on behalf of the Company;

supervisors of the Company concurrently assume the duty of other company supervisors stated in the consolidated statement

and thus receive a traffic allowance. Apart from that, they do not receive any remuneration from reinvestment business beyond

the Company.

(2). The relevant measures related to remuneration payment to the President and Vice President are stipulated below:

The remuneration payment to the President and Vice President is reviewed by the Remuneration Committee and proposed to

the Board of Directors for resolution before making a decision. Regarding the performance assessment and remuneration of

the manager, apart from referring to normal industry standards and considering the personal time engaged, the responsibility

assumed, achievement of personal targets, performance in assuming other duties, and the remuneration paid by the company to

employees of the same position, the Remuneration Committee of the Company also takes the achievement of short-term and

long-term business targets of the Company, related rationality of company operation performance and future risks, etc. as its

basis.

31

2.3 Implementation of Corporate Governance

2.3.1 Board of Directors

A total of 13 (A) meetings of the Board of Directors were held in 2015, the average attendance rate is 94%. Directors’ attendance status is as follows:

Title Name Attendance in

Person (B) By Proxy

Attendance Rate (%)

B/A Remarks

Chairman Lee, Tsu-Chin 13 0 100%

Director Yeh, Kuo-I 13 0 100%

Director Wen, Shih-Chih 13 0 100%

Director Chang, Ching-Sung 13 0 100%

Director Huang, Kuo-Chun 12 1 92%

Independent Director Chang, Chang-Pang 12 1 92%

Independent Director Chen, Ruey-Long 10 3 77%

Other matters that should be recorded:

I. For the matters specified in Point 3 of Article 14 of the Securities Exchange Act, and other resolutions of the Board of Directors in which

an independent director opposes or reserves opinion and with record or written statement, the date of the Board of Directors, stage,

proposal content, opinions of all independent directors, and the Company's handling of independent directors' opinion shall be specified:

Not available.

II. For the director's avoidance of proposal with a conflict of interest, the name of the director, proposal content, reason for conflict of

interest, and participation in voting shall be specified: Not available.

III.Objective of strengthening the function of the Board of Directors in the current year and recent years (e.g. set up an Audit Committee,

improve information transparency, etc.) and execution assessment: The Company adopted the system for nominating candidates in 2014

to elect the 14th session of directors and supervisors, electing seven directors (including two independent directors) and three supervisors;

the term of office is three years (from June 12, 2014 to June 11, 2017) in order to strengthen the independence and diversity of the Board

of Directors. If a member of the Board of Directors receives further continuous education during the term of office, the Company will buy

32

liability insurance for the business scope executed by all directors and supervisors. The Board of Directors is responsible to the

Shareholders' Meeting and exercise its function and power according to relevant laws and decrees, the Company’s Articles of Association,

and resolutions of Shareholders' Meetings. Members of the Board of Directors adhere to the attitude of loyalty, prudence, and fulfilling

manager's responsibility, take company interests as their premise, assess company operation strategies, risk management, annual budget,

and business performance, and supervise significant matters, such as major capital expenditure, investment disposal, etc. Board of

Directors meetings shall be convened at least once every quarter, and important resolutions shall be published immediately on the

company website for inquiry. The operation of the Board of Directors is subject to the "Rules for Board of Directors’ Discussion" and

follows the "Corporate Governance Best Practice Principles", "Code of Integrity Operation", "Code of Corporate Social Responsibility",

and execution objectives. Through the discussion of corporate governance issues, the Board of Directors communicates with an external

certified accountant to regularly review the corporate governance strategy every quarter; the support and persistence of the Board of

Directors to the "Inventec Internal Audit Penalty Point Provisions" has become important guidance and the best guarantee for the

Company to implement corporate governance and preventive (risk control) internal control system. The Company has established two

independent directors, who are concurrent members of the Remuneration Committee, and one of them is the convener of the

Remuneration Committee. On December 29, 2015, the Board of Directors passed a resolution to amend the Articles of Association as

follows: 1. In 2015, Shareholders' Meeting will amend the Articles of Association so that the number of independent directors shall be at

least two and no less than one fifth of the total number of directors. 2. The reelection of the Shareholders' Meeting will be conducted in

2017, and all independent directors (no less than three independent directors) will take posts as members of the Audit Committee. The

setup of the Audit Committee further strengthens the operation of the Board of Directors. Independent directors possess professional

knowledge, their stock holding and part-time job are restricted, and they shall maintain independence with the scope of business execution

and shall not have direct or indirect conflict of interests with the Company. To be more capable of exerting the maximum function and

increase the transparency of the Company’s financial statements, it can guarantee shareholders' rights and interests and improve company

value to achieve the objective of sustainable operation. In order to improve information transparency, in addition to disclosing significant

resolution matters of the Board of Directors on the company website, the Company has also set up the interested party zone to achieve the

purpose of full communication with investors and timeliness of public information disclosure through the website and an implemented

spokesman system. In the securities and futures market, the Development Foundation's eleventh and twelfth listed company information

disclosure evaluation is Class A. In 2016, according to the "Corporate Governance Center" of the Taiwan Stock Exchange Corporation,

the second corporate governance evaluation system, the evaluation result lists the Company as a top five percent company.

2.3.2 Audit Committee：NA

33

2.3.3 The Supervisors

A total of 13 (A) meetings of the Board of Directors were held in 2015, the average attendance rate is 100%. Supervisors’ attendance status is as

follows :

Title Name Attendance in person (B) Attendance rate (%) B/A

Supervisor Cheng, Hsien-Ho 13 100%

Supervisor Wang, Ping-Hui 13 100%

Supervisor Shyh Shiunn Investment Corp.

Representative, Yang, Chiung-Nan 13 100%

Other matters that should be recorded:

I. Supervisor composition and responsibility:

(I) The Company designates three supervisors with three-year terms of office; supervisors shall have integrity, dependability, fair judgment,

professional knowledge, capability of reading financial statements, etc.

(II) Responsibilities of the Company’s supervisors are as follows:

1. Investigate and supervise the business situation and financial condition of the company at all times in order to reduce the financial

crisis and operation risk of the Company and maintain the rights and interests of the Company and its shareholders.

2. Be familiar with relevant laws and regulations, understand the rights and obligations and responsibilities of the company directors, as

well as the responsibility division and operation content of each department, and attend the Board of Directors meetings to supervise

its operation and express opinions in a timely manner in order to master or find out abnormal conditions in advance.

3. Check all kinds of forms, lists, and data documents and issue reports.

4. Other responsibilities granted pursuant to laws and decrees or regulations.

(III) Communication circumstances (e.g. communication channels, methods, etc.) between the supervisor and company employees and

shareholders:

34

1. The Company has set up an employee opinion exchange zone, shareholder and interested party zone, and supervisor

intercommunication channel; through employee opinion investigation and the employee complaint system, the possible

disadvantages of the Company can be found and resolved in a timely manner through information delivery.

2. The supervisor shall actively participate in study and continuously attend further education courses in order to strengthen

professional quality and understand the trends of the latest laws and decrees; through the construction of internal and external

website information of the Company, the supervisor can fully achieve the communication purpose with internal employees and

external interested parties.

(IV) Communication circumstance (e.g. communication matters, methods, results, etc. regarding financial and business situations of the

Company) between the supervisor and the internal audit supervisor and accountant:

1. Pursuant to Article 15 of the "Guidelines for Public Companies to Establish Internal Control Systems", the internal audit supervisor

shall submit the audit report and tracking report to each supervisor for review before the end of the next month after completion of

the audit project, and the supervisor shall report the lookup result to the Board of Directors in the current month. Regarding the

instruction of the supervisor during review, the Audit Center will carry out subsequent improvement and tracking operations, and

after completion of improvement and tracking, it shall be reported to the supervisor and proposed to the Board of Directors.

2. When the supervisor establishes an audit project according to the instruction on important issues of the internal control system of

the Company, the Audit Center shall immediately establish an audit project team (or subsidiary supervision) to carry out

examination operations. Upon completion of the audit (or subsidiary supervision) project, it shall report the project audit result to

the supervisor and propose it to the Board of Directors.

3. The Audit Center will also regularly report audit business to each supervisor.

4. The supervisor shall keep in touch with the accountant at all times and communicate the important financial and business situations

of the Company by discussing corporate governance issues every quarter.

II. If the supervisor states an opinion when attending the Board of Directors meeting, the date of the Board of Directors meeting, stage,

proposal content, Board of Directors resolution result, and the company's handling of opinions stated by the supervisor shall be specified:

Not available.

35

2.3.4 Corporate Governance Implementation Status and Deviations from “Corporate Governance Best-Practice Principles for

TWSE/GTSM Listed Companies”

Item Implementation Status Non-implementation

and its reason(s) Y N Summary

1. If the Company established and

disclosed Corporate Governance

Principles in accordance with

Corporate Governance Best-Practice

Principles for TWSE/GTSM Listed

Companies?

The Company has formulated the "Inventec Corporation Corporate Governance Best

Practice Principles" pursuant to the "Listed Company Corporate Governance Best

Practice Principles"; the first amendment was passed by the Board of Directors on

January 27, 2015 and was disclosed on the company website and mops.twse.com.tw.

In order to establish good corporate governance and risk control, the Company takes

creating shareholder value and integrity operations as its objective and formulates

relevant corporate governance rules under the premise of complying with the basic

requirements of laws and ethical standards. In order to guarantee shareholder

equality, the Company has formulated the Code of Integrity Operation, Codes of

Ethical Conduct, Global Employee Code of Conduct Management Measures, and

Procedures for Handling Material Inside Information in order to regulate information

confidentiality and prevent insider trading and conflicts of interest, which will impact

the rights and interests of the Company. Furthermore, the Company provides

complaint channels and procedures to strengthen the enterprise’s attention to the

rights and interests of interested parties. Through the internal and external company

website, e-mail, and contract, the Company carries out educational propaganda on

corporate governance laws and decrees, so that company directors, supervisors,

managers, and employees can fully understand and abide by laws and codes of

conduct related to the businesses engaged by them.

Listed subsidiaries of the Company Group have not yet formulated such regulations,

but they all abide by relevant regulations.

No difference.

36



2. Shareholding Structure & Shareholders’

Rights

(1) If the Company established internal

procedures to handle shareholder

suggestions, proposals, complaints

and litigation and execute

accordingly?

(2) If the Company maintained of a list

of major shareholders and a list of

ultimate owners of these major

shareholders?

(3) If risk management mechanism and

“firewall” between the Company

and its affiliates are in place?

(4) If the Company established internal

policies that forbid insiders from

trading based on non-disclosed

information?

(1) Pursuant to internal stock affairs operation procedure, the Company assigns stock

affairs and relevant responsible units to be responsible for handling shareholder

suggestions, doubts, disputes, litigation, etc. and implement them according to

procedures; the Company otherwise appoints a professional stock affairs agency

as the window for serving shareholders.

(2) In case of change of stock rights held by an insider (director, supervisor, manager,

and shareholder holding more than 10% of the total stock), the Company will

declare such at mops.twse.com.tw on a monthly basis, so that the stock affairs

unit can instantly and effectively master major shareholders and the final

controller list of the major shareholders.

(3) The internal control of the Company covers risk management and operation

activity of the operation level and has formulated the "Subsidiary Management

Measures" to supervise operation management and financial and business

information of the subsidiary in order to implement the risk control mechanism to

the subsidiary. The Company has also formulated written specifications for

financial business related operations between and among affiliated enterprises; all

business contacts shall be handled according to the operation specifications in

order to completely eradicate non-routine transactions.

(4) The Company has formulated the "Codes of Ethical Conduct" and "Insider

Trading Prevention Management Operation Procedure", among others, to prohibit

company insiders from utilizing information undisclosed to the market to transact

negotiable securities; internal educational training and literature are carried out

regularly.

No difference.

No difference.

No difference.

No difference.

37



3.Structure of Board of Directors and its

responsibility

(1) Does the Board of Directors set and

implement a diversification policy?

(2) If the Company established any

other functional committee in

addition to Compensation

Committee,Audit Committee as

required by law?

(3) If the Company established methods

and procedures to assess the

(1) Pursuant to Article 20 of the "Inventec Corporation Corporate Governance Best

Practice Principles", the Company has formulated diversified policies for

members of the Board of Directors and implements them. Basic conditions and

value, as well as gender, age, nationality, culture, etc., shall be considered, and

they shall possess professional knowledge and skills, especially the knowledge,

skills and quality required to perform their duty, including operation judgment,

accounting and financial analysis, crisis management, leadership and

decision-making ability, and industry knowledge and international market view.

The Company designates seven directors (including two independent directors)

and three supervisors.

(2) All resolutions of the Company shall be passed by the Board of Directors. There

are three members of the Remuneration Committee, who will be appointed

through resolution of the Board of Directors. The Company appoints two

independent directors, who are concurrent members of the Remuneration

Committee, and one of them is the convener of the Remuneration Committee. In

2016, the Shareholders' Meeting will amend the Articles of Association so that

the number of independent directors shall be at least two and no less than one

fifth of the total number of directors; the reelection of the Shareholders' Meeting

will be conducted in 2017, and all independent directors (no less than three

independent directors) will take posts as members of the Audit Committee. The

Company sets up the "Social Responsibility Group", which will be dedicated to

promoting corporate social responsibility related affairs.

(3) Pursuant to Point 1 of Article 28 of the "Inventec Corporation Corporate

Governance Best Practice Principles", the Company regularly carries out

No difference.

No difference.

No difference.

38



performance of the Board and

conduct assessment on annual basis?

(4) If the Company assess the

independence of CPA periodically?

performance assessment every year through the Remuneration Committee in

order to improve the function of the Board of Directors. In 2015, the Board of

Directors convened a total of 13 meetings, with one at least every month, to

decide on proposals and operation policies, in which they continuously

supervised the execution effect of the operation team and appointed and

dismissed managers, fulfilling the responsibility of the Board of Directors.

(4) Every year, the Company lets the Board of Directors decide to appoint an

accountant and regularly examines the accountant’s independence and evaluates

whether there is circumstance of violating No. 10 of the Code of Ethics bulletin

or the occurrence of circumstances stipulated in Article 47 of the Accounting Act.

It further confirms that the accountant has no other financial interests and

business relationship with the Company other than the costs of certifying and

finance and taxation cases, and checks whether the accountant is a director,

supervisor, manager, or shareholder of the Company or gets payments from the

Company, confirming that the accountant is not an interested party. The

appointment of an accountant and fee review can only be conducted after the

Company has confirmed its independence through the examination of the

accountant independence assessment result..

No difference.

4. If the Company established

communication channel with

stakeholders and disclosed key

corporate social responsibility issues

frequently enquired by stakeholders on

the designated area of the corporate

website?

The Company has established a spokesman system, dedicated to handling relevant

matters, and the company website has created an interested party zone to maintain

communication channels with interested parties at any time through information

delivery by telephone, fax, e-mail, etc., for important corporate social responsibility

issues that concern interested parties and their feedback. The Company will also

properly handle matters to respect and maintain its due rights and interests.

No difference.

39



5. If the Company engaged professional

transfer agent to host annual general

shareholders’ meeting?

.

The Company has appointed the stock affairs agency department of "Taishin

International Bank Co., Ltd." to be responsible for serving shareholders and handling

affairs of the Shareholders' Meetings.

No difference.

6. Information Disclosure

(1) If the Company set up a corporate

website to disclose information

regarding the Company’s finance,

business and corporate governance?

(2) If the Company adopted any other

information disclosure channels

(e.g., maintaining an

English-language website,

appointing designated personnel to

handle information collection and

disclosure, appointing

spokespersons, webcasting investors

conference, etc)?

(1) Through the company website (http://www.inventec.com), the Company updates

and discloses financial business and corporate governance information regularly

and for special matters. Furthermore, the Company utilizes Shareholders'

Meetings and Investor Conferences to describe the governance situation of the

Company to investors.

(2) The Company has set up Chinese and English websites and assigned dedicated

personnel to be responsible for the collection and disclosure of company

information; it has also set up a spokesman and agency spokesman system; when

convening an Investor Conference, the Company will also place the process

materials on the company website for investor's to look up and input them at

mops.twse.com.tw as required.

No difference.

No difference.

7. If the Company had other important

information to facilitate better

understanding of the Company’s

corporate governance practices

(including but not limited to

employee rights, employee wellness,

1. Employee rights and interests: Pursuant to government laws and decrees and

personnel management measures of the Company, the Company provides all kinds

of basic due labor conditions, including a working hour mechanism and thorough

ask for leave system, as well as provides a stable and safe work environment, and

in addition to basic welfares, such as labor insurance, health insurance, pension

allocation, etc., employees can also enjoy regular health examinations, group

No difference

40



investor relations, supplier relations,

rights of stakeholders, directors’and

supervisors’ training records, the

implementation of risk management

policies and risk evaluation measures,

the implementation of customer

relations policies, and purchasing

insurance for directors and

supervisors)?

insurance, and thorough employee retirement measures.

2. Employee care: The Company has established the Occupational Safety and Health

Committee pursuant to laws to discuss safety and health related regulations. In

order to ensure employee safety and health, the Company has formulated the

"Occupational Safety and Health Policy", regularly holds all kinds of keynote

lectures and courses, provides physician consultation, opens diversified channel for

employee to express opinions and consultation, and creates good participation

sense and smooth two-way communication channel.

3. Investor relations: The Company takes guaranteeing shareholders' rights and

interests as its main objective, treats all shareholders equally, and instantly

announces relevant significant company information, such as finance, business,

change of insiders' stock holdings, etc. at "mops.twse.com.tw" pursuant to relevant

regulations.

4. Supplier relations: In addition to formulating "Codes of Ethical Conduct" and the

"Global Employee Code of Conduct Management Measures", the Company has

also formulated "New Manufacturer Assessment Management Measures" to

require new manufacturers to have good business reputation and conform to the

ethical requirements of the Company. In its "Purchase Contract", it shall explicitly

stipulate that suppliers shall abide by a special guarantee clause, and the payment

of commission, proportion commission, brokerage fees, tail end fees, or other

beneficial behaviors are prohibited. In 2015, the Company continuously held

Inventec Group GP and CSR supplier workshops, providing communication

channels to suppliers through explanation sessions and questionnaires, hoping to

set an example that will lead more supplier partners to jointly improve their

environmental protection awareness in order to fulfill our corporate social

41



responsibility.

5. Rights of interested parties: Operate pursuant to Articles 51-54 of the "Inventec

Corporation Corporate Governance Best Practice Principles" and set up an

interested party zone.

6. Execution circumstances of the risk management policy and risk measurement

standards: Through an external audit unit and execution of the internal control

system, the Company has properly identified, assessed, and reduced all kinds of

operation risks. In addition to controlling daily operation procedures, the Company

has established a crisis response team in a timely manner to supervise the

execution of risk control at any time in order to reduce adverse impacts on the

Company.

7. Execution circumstance of customer policy: The Company has formulated an

appropriate customer policy and operation target and adjusts its operation strategy

in a timely manner to achieve the target.

8. Circumstances of buying liability insurance for directors and supervisors: The

Company has bought relevant liability insurance for its directors and supervisors.

9. Situation of director and supervisor's attendance in Board of Directors meetings:

Board of Directors meetings are regularly convened, and directors and

supervisors actively attend; the Company reports the attendance situation of

directors and supervisors online in a timely manner.

8. If the Company implemented a

self-evaluation on corporate

governance or authorized any other

professional organization to conduct

Except for participating in securities and futures market development foundation

information disclosure assessment, the Company has not appointed other professional

institutions to issue a corporate governance assessment report, but it independently

evaluates its compliance with corporate governance every year and makes

No difference

42



such evaluation (if yes, please state if

the Board of Directors provided any

comment and what was the evaluation

result along with its major deficiencies,

suggestions and improvement plan)?

step-by-step improvements. In 2016, according to the "Corporate Governance

Center" of the Taiwan Stock Exchange Corporation, the second corporate governance

evaluation system, the evaluation result lists the Company as a top five percent

company.

9. Continuing Professional Education (CPE) Hours for Directors and Supervisors in 2015

Title Name Course Hours Institute

Chairman Lee,

Tsu-Chin

Combination of building and land taxation introduction and impact 1.5 Taiwan Corporate Governance Association

Discuss enterprise risk management and corporate governance from

procurement practice 1.5 Taiwan Corporate Governance Association

The impact of report examination by new accountants on readers of

financial statements 1.5 Taiwan Corporate Governance Association

Introduction of the Cross-Strait Tax Treaty 1.5 Taiwan Corporate Governance Association

Director Yeh, Kuo-I







43


Director Wen,

Shih-Chih







Director Chang,

Ching-Sung







Director Huang,

Kuo-Chun







Independent

Director

Chang,

Chang-Pang







44


Independent

Director

Chen,

Ruey-Long



How to properly protect business secrets, prevent fraud, and

strengthen corporate governance 3.0 Taiwan Corporate Governance Association


Supervisor Wang,

Ping-Hui







Supervisor Cheng,

Hsien-Ho







Supervisor

Shyh Shiunn

Investment Corp.

Representative,

Yang,

Chiung-Nan







45

10. Continuing Professional Education (CPE) Hours for Managers in 2015


President Huang,

Kuo-Chun


Discuss enterprise risk management and corporate governance

from procurement practice 1.5 Taiwan Corporate Governance Association




Vice President Yu,

Chin-Pao

The impact of a public company's revision of the Guidelines for

Public Companies to Establish an Internal Control System on

enterprise corporate governance and the response

3.0 Accounting Research and Development Foundation1

Enterprise secret leakage case analysis and studies on legal

responsibility of the newly amended Trade Secret Act 3.0 Accounting Research and Development Foundation1n

Understand the meaning of trust and legal responsibility of

fraud/perfidy from the judicial point of view and relevant case

analysis

3.0. Accounting Research and Development Foundation1

No. 15 of the International Financial Reporting Standards:

customer contract income analysis 3.0 Accounting Research and Development Foundation1

Vice President Hsu,

Ching-Wu

Important accounting subject auditing practice workshop 6.0 Securities and Futures Institute

Workshop to discuss fraud risk from circulation control operation 6.0 Securities and Futures Institute

Director of

Finance Center

Liang,

Wen-Jan

"Advanced India Character Guidance" seminar 3.5 KPMG Accounting Firm

2015 Corporate Governance Assessment Symposium 3.5 Taiwan Stock Exchange Corporation

Director of

Finance Center

Hsiao,

I-Ying

2015 global economic outlook and foreign currency market

analysis seminar 3.5 Cathay United Bank Co., Ltd.

"Advanced India Character Guidance" seminar 3.5 KPMG Accounting Firm

46

11. Certificate of License

Title Persons

Taiwan CPA 4

CIA 4

Taiwan CIA 5

CCSA 1

Public company accounting supervisor with professional certification 1

Stock Affair Specialist 2

Enterprise Internal Control Basic Ability 5

Note: Unless otherwise described, the listed subsidiaries of the Company Group comply with relevant regulations upon corporate governance operation.

47

2.3.5 Status of Compensation Committee

2.3.5.1 Compensation Committee

Title

(Note1)

Criteria

Name

Met one of the following professional qualification requirements

with at least five years work experience Independence（Note2） Number of

other public

companies in

which the

individual is

concurrently

serving as an

Compensation

Committee

member

Note3

全

文

完

An instructor of higher

position in a department of

commerce,law, finance,

accounting, or other

academic department related

to the business needs of the

company in a public or

private junior college, or

university

A judge,public prosecutor,

attorney, CPA, or other

professional or technical

specialist who has passed a

national examination and bee

awarded a certificate in a

profession necessary for the

business of the company

Have work

experience in the

areas of

commerce,law,

finance, accounting,

or otherwise

necessary for the

business of the

company

1 2 3 4 5 6 7 8

Independent

Director Chang, Chang-Pang 3 Y

Independent

Director Chen, Ruey-Long - - 4 Y

Other Chuang, Chau-Sui - - 0 -

Note1：Title: Ddirector, Independent Director, and other。

Note2：During the 2 years before being appointed or during the term of office, a remuneration committee member shall have been or be any of the following:

（1） Not an employee of the company or any of its affiliates.

（2） Not a director or supervisor of the company or any of its affiliates. The same does not apply, however, in cases where the person is an independent

director of the company, its parent company, or any subsidiary in which the company holds, directly or indirectly, more than 50 percent of the voting

shares.

（3） Not a natural-person shareholder who holds shares, together with those held by the person's spouse, minor children, or held by the person under any

other's name, in an aggregate amount of 1 percent or more of the total number of issued shares of the company or ranking in the top 10 in

shareholding.

48

（4） Not a spouse, relative within the second degree of kinship, or lineal relative within the third degree of kinship, of any of the persons in the preceding

three subparagraphs.

（5） Not a director, supervisor, or employee of a corporate shareholder that directly holds 5 percent or more of the total number of issued shares of the

company or ranks in the top 5 in shareholding.

（6） Not a director, supervisor, managerial officer, or shareholder holding 5 percent or more of the shares, of a specified company or institution that has a

financial or business relationship with the company.

（7） Not a professional individual who, or an owner, partner, director, supervisor, or managerial officer of a sole proprietorship, partnership, company, or

institution that, provides commercial, legal, financial, or accounting services or consultation to the company or to any affiliate of the company, or a

spouse thereof.

（8） Not been a person of any conditions defined in Article 30 of the Company Act.

Note3：If title is Director, please describe in accordance with the Article 6 item 5 of “Regulations Governing the Appointment and Exercise of Powers by the

Remuneration Committee of a Company whose stock is listed on the Stock Exchange or Traded Over the Counter”.

49

2.3.5.2 The state of The Compensation Committee's implementation

A. The Compensation Committee comprised of 3 members.

B. Tenure of the second session of Compensation committee is from 24th June, 2014 to 11th June, 2017. A total of 3 (A) meetings of the Compensation

Committee were held in 2015, the average attendance rate is 89%, the status of attendance is as follows:

Title Name Attendance in Person

(B) By Proxy

Attendance Rate (%)

B/A Remarks

Chairman Chang, Chang-Pang 2 1 67% Independent Director

Member Chen, Ruey-Long 3 0 100% Independent Director

Member Chuang, Chau-Sui 3 0 100%

Other information to be disclosed:

1. If Board of Directors did not adopt or revise the proposal made by the Compensation Committee, please specify the date, session, agendas and

resolutions of the Board of Directors meeting and how the Company handled the proposal made by the Compensation Committee ( If amount

of the compensation approved by the Board of Directors is higher than that proposed by the Compensation Committee, please specify the

reasons and differences in proposals.): None.

2. If any members of the Compensation Committee were against or reserved their opinions towards the resolutions, please specify the date,

session, agendas, opinions of all members and how the opinions were handled: None.

50

2.3.6 Implementation of Corporate Social Responsibility

Item Non-implement

-ation and its

reason(s) Y N Summary

1. Exercising Corporate Governance

(1) If the Company established

corporate social responsibility

(“CSR”) policy or system and

reviewed its implementation and

effectiveness?

(2) If the Company conducted CSR

related trainings?

(3) If the Company set up a unit

exclusively or concurrently to

execute CSR policies and if the

Board appointed member(s) of

management team to supervise

and report its implementation

status to the Board?

(4) If the Company adopted

appropriate remuneration

policies, integrated employee

performance appraisal with CSR

(1) The Company has formulated corporate social responsibility policies pursuant to the "Inventec

Corporation Code of Corporate Social Responsibility", believes in "corporate governance"

internally, practices "corporate citizenship" externally, and promotes relevant works and

activities through the Board of Directors operation, internal control system, and four directions

of "environmental protection, culture, poverty relief, and community".

Listed subsidiaries of the Company Group have not yet formulated such regulations, but they all

abide by relevant regulations.

(2) The Company regularly holds educational training on corporate social responsibility, including

promoting the inclusion of corporate social responsibility into operation activities and the

development direction of the company and approves specific promotion plans for corporate

social responsibility.

(3) The enterprise level of "corporate social responsibility" of the Company is the Chairman of the

Board of Directors, and the "Social Responsibility Group" is established under the Chairman to

be dedicated to promoting corporate social responsibility related affairs and regularly report to

the Board of Directors.

Listed subsidiaries of the Company Group have not established a dedicated (part-time) unit to

promote corporate social responsibility, but they ask relevant units to cooperate in the

proceedings.

(4) The Company has established a Remuneration Committee to assist the Board of Directors in

implementing and evaluating the overall remuneration and welfare policy of the company and

the remuneration of directors, supervisors, and managers. The Company has formulated a

reasonable remuneration policy and takes the "Global Employee Code of Conduct Management

No difference

No difference

No difference

No difference

51

Item Non-implement

-ation and its


policies, and established a clear

and effective incentive and

discipline system？

Measures" as the basis regarding the conduct of all employees; those who violate relevant

regulations will be punished according to the relevant rewards and punishment provisions in the

"Personnel Management Measures", allowing employees' salary to jointly grow with company

operations in order to fulfill our corporate social responsibility.

2.Fostering a Sustainable Environment

(1) If the Company endeavored to

utilize resources more efficiently

and utilized renewable materials

which have a lower impact on

the environment?


proper environment

management system based on

the characteristics of the

industry where the Company

(1) In order to save the resources needed in product production, at the stage of design and

development, to maintain product function and quality, the Company has reduced the

components and consumable materials needed to be used in product production through the

design of common use and reduction of materials and recycling, reusing, etc. Green design is

the design for the environment, and its connotation is to integrate the consideration of

environment, safety, etc. into the stage of product development and design through a systematic

approach, then include it in the product life cycle, import the concept of green design into the

manufacturing process, utilize the selection of raw materials and product easy dismantling

design, reduce product environmental impact, and maintain product price, efficiency, and

quality at the same time. The green design strategies of Inventec are divided into the following

eight points: 1. Spare no effort to seek approaches to reduce environmental impact; 2. Lessen

the total energy consumption in the product life cycle; 3. Mitigate the burden on the land; 4.

Design for clean production and use; 5. Design for durability; 6. Design for best function; 7.

Design for reuse, recovery, and recycling; 8. Avoid using raw materials with toxic substances in

the product.

(2) In recent years, the Company has gradually established a thorough environmental sustainability

management system and has passed the external validation and verification conducted by

independent third party validation units; the four major environmental sustainability

management systems of the Company include ISO 14001 Environmental Management System,

IECQ QC 080000 Hazardous Substance Process Management System, ISO 14064 Greenhouse

No difference

No difference

52

Item Non-implement

-ation and its


belongs to?

(3) If the Company monitored the

impact of climate change on the

Company’s business operations,

checked greenhouse gas

inventory and established

corporate strategies on energy

conservation and reduction on

carbon and greenhouse gas

emission?

Gas Management System, and ISO 50001 Energy Management System. They are the

communication basis and mechanism of interested parties, such as a complaint and feedback

system of product quality, environmental issue, energy, etc. For complaints related to

environmental issues, interested parties can complain through the official website of Inventec.

(3) In response to the issue of global energy depletion and climate change and to fulfill our

responsibility of corporate citizenship, the Company has set medium and long-term reduction

goals, namely "Take 2010 as the benchmark, reduce greenhouse gas emissions by 10% by

2020", in the hope of making certain contributions to the green economy and climate change

mitigation. The "Inventec Group 2015 Greenhouse Gas Inventory Report" has been disclosed

on the company website. The Company has imported a greenhouse gas inventory system since

2008, and so far, it has completed nine years (from 2007 to 2015) of greenhouse gas inventory

operations. Meanwhile, in order to optimize inventory operations, in 2011, the Inventec GHG

Portal was set up, allowing all inventory operations and the verification of third party

certification units to be completed on the platform, thus effectively improving inventory quality

and efficiency, and reducing unnecessary manual operation time and manual mistakes in order

to achieve the effect of energy saving and carbon reduction. In 2015, the total greenhouse gas

emissions of Inventec and Inventec Appliances Corp.’ major plants was 270,564.911 tonnes of

carbon dioxide; the main emission originated from purchasing electricity externally, accounting

for 93.58% of total emissions, an increase of 8,288.13 tonnes of carbon dioxide compared to the

262,276.781 tonnes of emissions in 2014. The main reason for increase was the expansion of

production capacity in Chongqing Plant of Inventec and Nanjing Plant of Inventec Appliances

Corp.. Regarding environmental sustainability, the Company strives to break through the

current situation and simultaneously reduce long-term operation costs. Since 2012, the

Company set up a solar energy power generation cleaning device in Pudong Plant, which started

operation in 2013, and the solar energy power generation available is 3.2 million degrees of

electricity every year, accounting for approximately 1.54% of the total power consumption in

No difference

53

Item Non-implement

-ation and its


nine of Inventec’s major plants. Saving energy and improving equipment energy efficiency have

always been the major directions of the Company. Over the years, the Company has been

devoted to energy saving, carbon reduction, and green energy environmental protection and has

finally achieved the phased goal in green building in March 2016, showing our determination to

attach importance to green energy environmental protection and caring for the earth.

3.Preserving Public Welfare

(1) If the Company followed

relevant labor laws, and

internationally recognized

human rights principal, and

established appropriate

management policies and

procedures?

(2）If the Company established

grievance channel for

employees and handled

complaints appropriately?

(1) Pursuant to relevant labor laws and regulations and by referring to internationally recognized

basic labor human rights principles, the Company has established relevant work specifications

and announced them so that the employees can understand in order to ensure the rights and

interests of employees. Furthermore, the Company has formulated the "Global Employee Code

of Conduct Management Measures" for each plant, which stipulate the basic code of conduct for

the labor and capital on the basis of fairness and impartiality. As an employee of the Company,

when facing all kinds of work behaviors and ethical and legal problems, we shall aim to create

shareholder and employee value and ensuring social responsibility. Therefore, under the

precondition of following the basic requirements of laws and ethical standards of each country

or district, we shall comply with all kinds of internal control systems of the company.

(2) The "Global Employee Code of Conduct Management Measures" and "Employee Complaints

and External Reporting Management Specifications" of the Company have been explicitly

stipulated to encourage the report of any illegal conducts or behaviors that violate ethical

standards, and their punishment measures. Anyone who violates relevant regulation shall be

punished pursuant to the relevant reward and punishment provisions in the "Global Employee

Code of Conduct Management Measures" and "Personnel Management Measures".

Furthermore, each plant has set up an "Employee Complaint System" to guarantee a fair

arbitration mechanism when employees suffer from human rights related infringements. In the

plants in mainland China, a grassroots employee care group has been especially set up to handle

No difference

No difference

54

Item Non-implement

-ation and its


(3) If the Company provided safe

and healthy working

envirnonment to employees

and conducted relevant training

on safety and health

management to employees

periodically?

(4) If the Company established a

periodical communication

mechanism to employees and

notified employees of significant

changes that may impact the

Company’s operation in a proper

manner?

employee complaints and understand the employee's voice through employee interviews, etc.

(3) In order to improve safety, health, and environment management performance, the Company

has established a professional and effective safety, health, environment, and energy

management system, and plans the safety, health, and environment management plan pursuant

to relevant laws every year, including occupational disaster prevention in its implementation.

Emergency response drills are carried out for different issues, such as fire, flood, earthquake,

etc. Risk management strategies are discussed and formulated, and all kinds of international

information are promptly mastered. In the spirit of sustainable improvement of the safety,

health, environment, and energy management system, and with systematized practice and

performance, the Company adopts continuous cycling mechanisms from planning, execution,

and examination to correction, exerts independent protection and control functions, and reduce

potential risks to safety, health, environment, and energy in order to reduce operation risks.

Regarding health promotion, new employees are required to provide a physical examination

report pursuant to law before reporting for duty; for in-service employees, better than what is

required by relevant laws and decrees, the Company regularly carries out all employees’

health examination every year and implements health management operations. It also regularly

cooperates with medical and health institutions to hold all kinds of health lectures and

consultations.

(4) Through all the mechanisms described below, the Company provides channels for significant

company information delivery, real-time employee responses, and regular communication.

(A) Internal website and announcement delivery: For company operation information,

management policies, change of personnel organization, or other relevant significant

messages, employees will be notified instantly through internal website or written and

electronic announcement.

(B) Two-way talks between grassroots employees and senior supervisors: quarterly meetings

No difference

No difference

55

Item Non-implement

-ation and its


(5) If the Company provided career

planning, relevant training and

skill development for

employees?

and all kinds of symposium held occasionally.

(C) Management policy and business process communication: communication meetings for

employee representatives from each department will be held regularly every month.

(D) Cross-department communication and labor and capital communication: internal portal

platform has set up the multi-functional "Employee Opinion Exchange Area".

(E) Instant response problem and information consultation: each unit has established a service

consultation window and service hot line.

(F) Employee welfare policy and welfare promotion: employee welfare committee monthly

meetings and special meetings.

(G) Grassroots employee care group: handle employee complaints and understand the

employee's voice through employee interviews, etc.

(5) By taking corporate operation objectives and development strategies as a training blueprint and

being oriented according to actual employee demands, the Company has developed an effective

career skills development training plan.

(A) Talent asset appreciation: Encourage employees to take in-service training in English,

Japanese, and patent courses in order to be in line with international norms.

(B) Corporate culture communication: After reporting for duty, new employees will receive

new employee training to become familiar with internal personnel regulation systems,

corporate culture, work environment, etc. All kinds of employee assemblies and

communication meetings will be held regularly, in which the senior supervisor will directly

deliver company operation philosophy and operation direction and describe the strategic

policy of each department.

(C) Supervisor cultivation plan: Basic supervisor training, advanced supervisor training, and

custom senior management courses will be regularly held in order to improve overall

management capability.

(D) Professional competency development: According to all kinds of demands to develop

No difference

56

Item Non-implement

-ation and its



consumer protection measures

with regard to the process of

research and development,

procurement, production,

operations and services and its

grievance channels?

(7) If the Company followed

relevant laws and regulations

and international guidelines on

marketing and labeling of

professional skills and with the Technical Committee, designedly carry out professional

skill training courses.

(E) Condense team consensus: Carry out all kinds of team building and encouragement courses

and strategic operation meetings based on the demand and build high identification for

both the team and the company.

(6) The Company provides customers with a comprehensive and thorough customer relations

management service mechanism, from order receiving to the stage of product development and

to the stage of mass production. After product delivery, we track the product condition to the

customer end and actively care about all feedback from the customer. Through the customer

complaint management system and with a complete customer complaint standard operation

procedure, the Company prepares reason analysis, correction and prevention solutions in project

review, and confirms effectiveness in order to give feedback on problem solving to customers

and understand real customer demands to achieve the highest customer satisfaction.

Furthermore, by periodically holding customer business review meetings, the Company can

discuss relevant issues, such as technology research and development, product delivery, product

quality, after-sales service, quotation cost, energy saving and carbon reduction, green products,

corporate social responsibility, etc., in response to the issues that concern customers. In order to

solve the problems reflected by customers, the customer service and quality assurance

departments have established a 24-hour customer service hot line and customer service website

and provide instant services and response mechanisms through a stationed service mechanism at

OEM/ODM customer end.

(7) In response to environmental protection legal issues of each country throughout the world and

provide customers with better environmental protection service, the Company will assist

customers in acquiring product green mark certification, including such certification

mechanisms as Taiwan Green Mark, China Green Mark (SEPA), China Energy Saving Mark

No difference

No difference

57

Item Non-implement

-ation and its


products and services?

(8) Prior to engaging commercial

dealings, if the Company

assessed whether the supplier

had track record o negative

impact on the environment and

society?

(9) If the contracts with major

suppliers stipulated a clause that

allowed the Company to

terminate or rescind the contract

at any time shall the suppliers

violate CSR policies and cause

significant impact to the

environment and society?

(CECP), China Energy Saving Label (CEL), Energy Star, American Green Procurement

Assessment Guideline (EPEAT), etc., in order to provide global customers more

environmentally friendly products and services.

(8) The Company strengthens its cooperation with suppliers through mutual understanding to seek

win-win situations. Supplier management carries out various assessments on suppliers

according to customer requirements, laws and regulations, and international trends, including

propaganda, promotion, and audit of the supplier. Regarding new supplier assessment, through

technical skill development and evaluation, subcontractor supply capability evaluation,

purchasing operation system audits, supplier corporate responsibility investigation and

appraisal, on-site examination, HSF assessment, and signing of environmental protection

affidavit, it will guarantee that the requirements and control contents stipulated in relevant

international environmental protection laws and regulations and relevant environmental

protection specifications of the Company are applicable now and in the future.

(9) With regard to the various assessments of suppliers, in addition to the quality, cost, delivery

time, technical skill, and service that are assessed in the general industry, with the rise of

corporate social responsibility awareness, the Company will also extend the assessment scope to

green products and corporate social responsibility, and the assessment scope will correspond to

the Company's requirements for supplier, including the establishment of management systems

such as ISO 9001, ISO 14001, OHSAS 18001, EICC, etc. Through diversified assessment

consideration, the Company ensures that the cooperating supplier can specifically respond to

important supply chain issues, such as product environmental protection, manufacturing process

environmental protection condition operation requirements, restriction of the use of hazardous

substances, prohibiting child labor, guaranteeing employee rights and interests, workplace

safety, etc. The Company ensures that the supplier does not violate the aforementioned

circumstances through supplier SER auditing. Every year, the Company will perform an on-site

No difference

No difference

58

Item Non-implement

-ation and its


audit on existing suppliers with medium and high risks and ask for improvement; furthermore,

contract contents explicitly stipulate a legal compliance clause, and in case of violation of

relevant important laws and regulations and having an obvious impact on the environment and

society, the contract can be terminated or canceled pursuant to such clause.

4. Enhancing Information Disclosure

If the Company disclosed CSR

report and other relevant

information on its corporate website

and MOPS?

(1) On the principle of accuracy, openness, and transparency, the Company discloses relevant

company information; through its investor service platform, the Company continuously and

instantly publishes corporate governance operation performance reports and financial

information on the information service disclosure platform and mops.twse.com.tw. All

corporate social responsibility related messages are also posted on the company website to be

read by the public.

No difference

5.If the Company established any guideline of corporate social responsibility in accordance with “Corporate Social Responsibility Best-Practice Principles for

TWSE/GTSM-Listed Companies” and please state the implementation status of the guideline and any reasons for non-implementation:

Pursuant to the "Listed Company Corporate Governance Best Practice Principles" and approved by Board of Directors in 2014, the Company has formulated the

"Inventec Corporation Corporate Governance Best Practice Principles"; the first amendment was passed by the Board of Directors on January 27, 2015, and its

operation has had no difference from the rules.

6.Other material information that helps to understand the operation of corporate social responsibility:

(1).Environmental protection:

To the Company, "environmental protection" is a part of its "social responsibility" in our top ten beliefs, namely "environmental protection, culture, poverty

relief, and community". In order to fulfill our corporate citizenship responsibility and practice the "green energy environmental protection" of our five major

policies, the Company has set Inventec's environmental objectives, environmental policies, and environmental projects in order to guide the overall power of

our colleagues to move towards a new vision of green sustainability.

59

Item Non-implement

-ation and its


(2). Community participation:

Integrate into community life with practical action and the long-term adoption of community parks and designate dedicated personnel for maintenance and

cleaning in order to provide community residents with a comfortable and clean public space.

(3). Social contribution:

In order to care for society, the Company responds to blood and love donation and is enthusiastic about social responsibility. From 2009 to 2015, the Company

has consecutively won the "Excellent Blood Donation Unit Award" issued by the Ministry of the Interior; based on the philosophy of enterprise society, the

Company has been devoted to improving its work environment and has been successful in constructing a good workplace, and has successively won the

affirmation of both the government and civil public credit institutions. In 2012, it won the "Labor Safety Excellent Unit - Enterprise Award" issued by Taipei

City and the "Excellent Breastfeeding Room Award" issued by Taipei City and Taoyuan County government; in 2013, it won the national "Labor Safety and

Health Excellent Unit Award", and "Energy Saving and Carbon Reduction Action Mark" issued by the Environmental Protection Administration, Executive

Yuan; in 2014, it won the "Healthy Workplace Certification - Health Promotion Mark" issued by the National Health Service, Ministry of Health and Welfare,

Executive Yuan, "ROC Enterprise Environmental Protection Award" issued by the Environmental Protection Administration, Executive Yuan, "2014 Taiwan

Corporate Sustainability Award - Gold Award", and Commonwealth Magazine’s 2014 "World Corporate Citizenship Award"; in 2015, it won the "Labor Safety

Excellent Unit Award" issued by the Ministry of Labor, Executive Yuan, "Certificate of Merit for Hazard-Free Working Hour Record", Commonwealth

Magazine’s "World Corporate Citizenship Award", the "National Excellent Occupational Safety and Health Unit Award" issued by the Ministry of Labor,

Executive Yuan, the "Enterprise Environmental Protection Award" issued by the Environmental Protection Administration, Executive Yuan, and the "Taiwan

Corporate Sustainability Report Award" issued by Taiwan Sustainable Energy Foundation, among others.

(4). Social service:

From 8:00 am to 9:00 am from Monday to Friday, the Company will arrange an internal security guard to ease vehicle congestion during office hours and

safeguard community traffic safety on surrounding roads of the Company.

(5). Social benefit:

Inventec encourages employees to actively participate in public benefit activities, such as minority group caring, literary and artistic activity, ecological

education, etc. In 2010, the Inventec Group Charity Foundation was established. Over the years, it has been carrying out heart-warming activities before the

60

Item Non-implement

-ation and its


Spring Festival and donating to dozens of social welfare charity groups, assisting them to input long-term social welfare occupation. It also evaluates the

fund-raising projects of social benefit charity institutions from all walks of life and selects projects that conform to the establishing purpose of Inventec

Foundation for donation. Since 2012, it has been adopting school children from Huiming Blind School in Taichung City every year, and in the dust explosion

that occurred in Formosa Fun Park in June 2015 and earthquake that occurred in Tainan, Kaohsiung in February 2016, it provided donations to respond to the

disaster relief work of the government. Furthermore, the social responsibility group of the Company also calls on colleagues to fundraise and regularly donates

to social welfare institutions, such as "Hsinchu City Charity Foundation" and "New Life Social Welfare Development Promotion Association", every month.

The Talent Center encourages colleagues to participate in World Vision - Hunger Thirty Experience Camp activity and also actively responds to the Ministry of

Health and Welfare to propagate the purchase of Mid-Autumn festival gift boxes promoted by disability social welfare institutions in order to support disabled

people to acquire the expertise to become independent. With regard to literary and artistic activities, in 2015, the Company donated to the Taipei Philharmonic

Foundation in order to hold the Taipei International Choral Festival activity; with regard to ecological conservation, over the years, the Company has

cooperated with the Wild Bird Society of Taipei to promote the environmental education course plan of Kwan-tu Nature Park. In addition to subsidizing school

children in remote districts for environmental and ecological education courses, it also calls on colleagues to serve as conservation volunteers at the Kwan-tu

wetlands.

(6). Consumer rights and interests:

The Company has provided product liability insurance, and has set up a related product customer service hot line.

(7). Human rights:

The Company has provided public accidental insurance and employee group insurance.

(8). Safety and health:

In addition to complying with the Occupational Safety and Health Act and relevant subordinate legislations and carrying out all kinds of matters as required,

the Company also effectively promotes the Taiwan Occupational Safety and Health Management System (TOSHMS) and International Occupational Health

and Safety Assessment Series (OHSAS 18001), implements all kinds of safety and health business management, and works together with community medical

and health resources to arrange employees to participate in the screening of four cancers (breast cancer, cervical cancer, oral cancer, colorectal cancer), bone

mineral density test, and physical fitness test, and also holds health lectures, etc. So far, the Company has won several awards, including: "Labor Safety

Excellent Unit - Enterprise Award", "Labor Safety and Health Excellent Unit - Five Stars Award", "Hazard-Free Working Hour Record Award", "Excellent

61

Item Non-implement

-ation and its


Health Workplace - Health Excellence Award", "Taipei City Excellent Breastfeeding Room Certification", "Taoyuan County Excellent Breastfeeding Room

Award", and "Blood Donation Excellent Enterprise Award", etc. Furthermore, the Company actively coordinates with the promotion of all kinds of government

policies, facilitates harmonious labor-capital relationships, and fulfills its corporate social responsibility.

The corporate social responsibility related information of the Company, such as corporate governance implementation, sustainable environment development,

social benefits, etc., are disclosed on the company website and mops.twse.com.tw.

7. Please provide further description for company product or corporate social responsibility report which is certified by relevant organization:

In order to improve the transparency, completeness, and reliability of information disclosure, for the "2015 Inventec Corporate Social Responsibility Report", the

Company designated a third party unit (SGS) to carry out substantial examination and assurance operations on the contents and data in the report according to

GRI G4 version "core option" in order to conform to the GRI G4 core option and AA1000 AS 2008 second type high assurance level.

Listed subsidiaries of the Company Group have not yet acquired relevant certification on corporate social responsibility report, but they all abide by relevant

regulations and have no significant difference.

Note: Unless otherwise described, the listed subsidiaries of the Company Group comply with relevant regulations upon Corporate Social Responsibility.

62

2.3.7 Implementation of Ethical Corporate Management Best Practice Principles

Items Implementation Status Non-implementation


1. Ethical Corporate Management Policy

(1) If the Company clearly specified

ethical corporate management and

process in its internal policies and

external document? If the Board

of Directors and the management

team committed to enforce such

policies rigorously and

thoroughly?


measures to prevent unethical

conduct and clearly prescribed the

specific ethical management

practice including operational

(1) The Company attaches importance to its reputation and takes integrity and

sustainable operations as the maximum assets accumulated by company operations.

Among them, the "Codes of Ethical Conduct" and "Code of Integrity Operation" are

the ethical standards of conduct and specifications for integrity operation philosophy

for directors, supervisors, managers, employees, appointees, or those with

substantial control capability of the Company in order to prevent the occurrence of

conflicts of interest and acts without good faith, as well as let interested parties of

the company better understand the above company standards by which they must

abide. The official business discussion of the Board of Directors of the Company

takes good governance system establishment, supervision function improvement,

and management mechanism strengthening as its major purposes. Unless otherwise

prescribed by laws and decrees or regulations, the Board of Directors meetings shall

be conducted pursuant to the "Rules for Board of Directors’ Discussion" of the

Company. Upon convening a Board of Directors meeting, the discussion unit

designated by the Board of Directors shall prepare relevant materials for the Board

of Directors' examination at any time and notify managers from relevant

departments who are not directors to attend according to the contents of the

proposals. When necessary, the Company will also invite accountants and other

professionals to attend meetings.

(2) The Company has formulated schemes for preventing acts without good faith in the

"Global Employee Code of Conduct Management Measures" and "Employee

Complaints and External Reporting Management Specifications" pursuant to the

"Code of Integrity Operations", including operation procedures, behavioral

guidelines, violation punishments, and a complaint system, and implements them.

No difference

No difference

63



procedures, guiding principles,

penalties and grievance channels?

(3) If the Company adopted any

preventive measures against

business activities specified in the

second paragraph of Article 7 of

Ethical Corporate Management

Best Practice Principles for

TWSE/GTSE Listed Companies

or in other business activities

within the business scope which

are possibly at a higher risk of

being involved in an unethical

conduct?

(3) In order to ensure the implementation of integrity operations, all new employees of

the Company must participate in the "Implement Internal Control System" and

relevant legal courses training, and an audit supervisor will report the important poor

external and internal control cases, deficiency analysis, and self-prevention

countermeasures in the Board of Directors meetings. Furthermore, the Company

signs improper benefits banned purchase contract with its suppliers, establishes an

effective accounting system and internal control system, regularly executes internal

auditing and self-assessment operations, and actually checks the company's

compliance in order to prevent the occurrence of acts without good faith.

No difference

2. Implementation of Ethical Corporate

Management

(1) If the Company checked whether

the respective counterparty holds

any record of unethical

misconduct and if the contract

terms required the compliance of

ethical corporate management

policy?

(1) In addition to formulating the "Codes of Ethical Conduct" and "Global Employee

Code of Conduct Management Measures", the Company has also formulated "New

Manufacturer Assessment Management Measures" that require new manufacturers

to have good business reputations and conform to the ethical requirements of the

Company. In "Purchase Contracts", it shall explicitly stipulate that the supplier shall

abide by the special guarantee clause, in which the payment of commission,

proportion commission, brokerage fees, tail end fees, or other beneficial behaviors

are prohibited. In case of violation, the Company is entitled to terminate the contract

immediately, and the supplier shall unconditionally cooperate to ask such person that

received benefits for compensation.

No difference

64



(2) If the Company set up a unit,

under the direct supervision of the

Board of Directors, to handle the

implementation of ethical

corporate management and

reported to the Board of Directors

periodically?


policy on prevention of conflict of

interests, provided appropriate

reporting channel and executed

rigorously and thoroughly?

(4) If the Company established an

effective accounting system and

internal control system to

implement ethical corporate

management, and if internal

auditing department or CPA

conducted periodic auditing?

(2) On November 10, 2015, the Board of Directors of the Company passed the second

amendment of the "Inventec Corporation Code of Integrity Operation", which

explicitly stipulates that the Talent Center is responsible for formulating and

supervising the execution of integrity operation policies and prevention schemes and

regularly report its execution situation to the Board of Directors.

(3) The Company has formulated the "Codes of Ethical Conduct", "Global Employee

Code of Conduct Management Measures", and "Employee Complaints and External

Reporting Management Specifications" to standardize the prevention of the

occurrence of conflict of interest circumstances, explicitly stipulating that directors,

supervisors, managers, and all employees must not accept any gift or business

entertaining and prohibiting transactions or business contact between the company

and relatives of colleagues in order to avoid the impact of personal improper

interests on company rights and interests. The Company has formulated a conflict of

interest prevention policy in the "Code of Integrity Operations" and provides proper

channel for directors, supervisors, managers, and other interested parties attending

Board of Directors meetings to actively describe whether they have any potential

conflict of interest with the company, which they shall evade.

(4) The Company has established an effective accounting system and internal control

system.

(A)Accounting system: In order to implement integrity operations, an effective

accounting system has been established. The accounting system of the Company

was formulated pursuant to relevant laws and decrees and principles, such as the

Securities Exchange Act, Company Act, Business Accounting Act, Securities

Issuer Financial Statement Preparation Standards and International Financial

No difference

No difference

No difference

65



Reporting Standards recognized by the Financial Supervisory Commission,

International Accounting Standards, interpretation and interpretation

announcements, etc., and was designed in accordance with company regulations,

aiming at meeting actual operation requirements.

(B) Internal control system: In order to implement integrity operations, an internal

control system has been established. The internal control system of the Company

is the management process following the "Guidelines for Public Companies to

Establish an Internal Control System" and was designed by a manager, approved

by the Board of Directors, and implemented by the Board of Directors,

managers, and other employees. Its purpose is to facilitate sound company

operation in order to reasonably ensure the achievement of the following

objectives: (1). Operation effect and efficiency. (2). The report is reliable, timely,

and transparent and conforms to relevant regulations. (3) Compliance with

relevant laws and decrees and regulations. Components of the Inventec internal

control system include: control environment, risk assessment, control operation,

information and communication, and supervision operation. The prevention (risk

control) internal control system of Inventec includes: preventive (risk control)

risk assessment, preventive (risk control) internal control, preventive (risk

control) internal audit, and preventive (risk control) self-assessment.

(C) "Inventec Internal Audit Penalty Point Provisions":

(a) Board of Directors' attention and commitment to the internal control system:

The Board of Directors approved the "Inventec Internal Audit Penalty Point

Provisions" to become the important driving force of Inventec to

continuously implement corporate governance, the internal control system,

internal audit, and self-assessment. It is also the best guarantee for the

Company to continuously and effectively implement the internal control

66



system. In order to continuously implement corporate governance, the

internal control system, and internal audit operations, the Board of Directors

has been instructed to formulate the "Inventec Internal Audit Penalty Point

Provisions", which was approved in August 2006 for implementation and

combines the internal control system of all units, execution effect of

self-assessment, and personal annual performance appraisal. "Inventec

Internal Audit Penalty Point Provisions" are not only the commitment and

oath of the Board of Directors to pay attention to corporate governance and

implementation of the internal control system, but also exert a rooting and

deepening effect on Inventec's promotion of corporate governance and

implementation of the internal control system.

(b) Do it right the first time: Carry out preventive (risk control) risk assessment

according to the nine major high risk policies (high risk items of Group

level, code of ethics, cost, International Financial Reporting Standards

(IFRS), asset preservation, legal compliance, business (production)

operation, credit investigation, and environmental protection high risk

indicator) in order to draft preventive (risk control) management mechanism

examination main points, check organizational processes, confirm high risk

control points, improve superfluous and repeated processes, and avoid

increasing workload and wasting resources without efficiency. We hope to

be able to determine potential operation risks as early as possible so that we

can take preventive measures, thus achieving the effect of "Prevention is

better than cure, do things right the first time".

(D) Execution and performance of the preventive (risk control) internal control

system:

(a) Corporate governance meeting: The Board of Directors and senior

67



supervisors of the Company attach great importance to corporate

governance and internal control system implementation. They not only

convene a Board of Directors meeting every month to review such issues as

corporate governance, operation, internal control system, etc., but also

convene corporate governance meetings every quarter. In addition to routine

examination by an accountant, the Board of Directors also appoints an

accountant to propose suggestions and descriptions on new laws and decrees

regarding the examination part in the corporate governance meeting

convened every quarter, and the Board of Directors complies with laws and

decrees to adjust the practice and regulation of corporate governance and

the internal control system. Meanwhile, the Board of Directors' support and

affirmation of the Audit Center also indicates the attention and

determination of Inventec’s Board of Directors to implementing corporate

governance and its actual performance through putting it into practice.

(b) Integrate and establish an all-in-one preventive (risk control) internal

control system:

Components of Inventec’s internal control system include: control

environment, risk assessment, control operation, information and

communication, and supervision operations. The prevention (risk control)

internal control system of Inventec includes: preventive (risk control) risk

assessment, preventive (risk control) internal control, preventive (risk

control) internal audit, and preventive (risk control) self-assessment.

Considering ethical value, organizational structure, responsibility

assignment, human resources policies, performance measurement, and

rewards and punishment of the Company, the Company integrates the

preventive (risk control) internal control system into ten major internal

control operation cycles and management systems, and has established a

68



thorough and effective preventive (risk control) internal control system. The

ten major cycles include: (1) Sales and cash receipts, (2) Purchase and

payment, (3) Production, (4) Salary, (5) Financing, (6) Real estate, plant,

and equipment, (7) Investment, (8) Research and development, (9)

Information, and (10) Other. Management systems include international

standard systems such as ISO 9001 Quality Management System, IECQ QC

080000 Hazardous Substance Process Management System, ISO 14001

Environmental Management System, ISO14064 Greenhouse Gas

Management System, OHSAS18001 Occupational Safety and Health

Management System, TOSHMS Taiwan Occupational Safety and Health

Management System, and ISO 50001 Energy Management System.

Furthermore, for the convenience of colleagues' inquiry and compliance, the

Company has established the "Preventive (Risk Control) Internal Control

System Procedure Document Inquiry System", with which employees can

inquire about internal control procedure documents of the subordinate

department on the internal company website at any time. If an employee

needs to inquire about cross-plant procedure documents, he/she can also

apply to the document control unit. In order to implement internal control

rooting work, the Company also arranges for all new employees to

participate in the new employee educational training course of "Preventive

(Risk Control) Internal Control System Implementation".

(c) Establishment of Inventec Group’s electronic preventive (risk control)

internal control system: The Company has consolidated all domestic and

overseas plants and all subsidiaries and plants to establish all-in-one

preventive (risk control) internal control system. The Inventec parent

company has issued a total of 355 preventive (risk control) internal control

system procedure documents; a total of 35 subsidiaries have issued 1,795

69



preventive (risk control) internal control system procedure documents. As of

now, a total of 2,150 procedure documents have been formulated.

For the convenience of colleagues' inquiry and compliance, the Company

has established an internal control system procedure document inquiry

system, with which employees can inquire about operation procedure

documents of the subordinate department on the internal company website

at any time. If an employee needs to inquire about cross-plant procedure

documents, he/she can also apply to the document control unit.

(d) Promotion of educational training on preventive (risk control) internal

control system: In order to implement internal control rooting work, the

Company arranges for all new employees to participate in the educational

training course of "Internal Control System Implementation"; in 2015, seven

new employee educational training sessions were held, and a total of 365

employees participated.

(E) Preventive (risk control) internal audit:

(a) Internal audit lean progress: Since March 2013, in order to improve internal

audit mechanisms, in addition to detection (wrongdoing prevention) audits,

the Company also actively promotes preventive (risk control) audits.

Mechanism and major tasks of detection (wrongdoing prevention) audit:

legal compliance audit, internal control system audit, internal control

execution audit, asset preservation audit, integration self-assessment,

subsidiary supervision, and wrongdoing prevention innovation audit. The

2016 preventive (risk control) audit is subject to nine major high risk

policies: high risk items of Group level, code of ethics, cost, International

Financial Reporting Standards (IFRS), asset preservation, legal compliance,

business (production) operations, credit investigation, and environmental

70



protection high risk indicator. The Company drafts preventive (risk control)

management mechanism examination main points in the hopes of being able

to find out potential operation risk as early as possible so that the operation

governance team can take preventive measures in advance and continuously

improve the contribution and value of internal audits to Inventec companies

and Group through this.

(b) Preventive (risk control) high risk audit items: Preventive (risk control)

audits adopt high risk assessment and control and draft preventive (risk

control) high risk audit items according to the modes, such as the essential

items required by the competent authority, audit item risk assessment of the

nine major high risk policies, accounting risk assessment, subsidiary risk

assessment, etc. In March 2013, the audit function was improved from

detection wrongdoing prevention function (auditing 401 items) to

preventive (risk control) function (revised auditing items to 124 items),

focusing on the risk control points of high value and high risk again in

February 2014, at which point the auditing items were changed from 124

items down to 81 items. In July 2014, auditing items were further focused to

39 items. In January 2015, in order to strengthen audit effect and efficiency,

the Company activated remote audits, and auditing items were revised into

43 items. In view of fierce turbulence of the global economy and finance in

2016, the overall operation of the Company may be affected, so credit

investigation has been included into the 2016 high risk audit policy, with

auditing items focused to 36 items, in order to create a higher contribution

value of internal audits to the enterprise.

(c) Preventive (risk control) internal audit plan: In 2015, the internal audit plans

include: company part (Shilin Plant, Taoyuan Plant), subsidiary part (EBG

71



group, solar energy group, a total of 23 groups and 11 Inventec Appliances

groups). In addition to the "Annual Audit Plan" approved by the Board of

Directors, the Audit Center also carries out preventive (risk control) internal

audits on each transaction cycle control operation of all plants and

subsidiaries. For significant problems and high risk businesses found in

routine audits, the Audit Center will ask the Board of Directors to establish

an audit project for further investigation to propose an audit report in order

to expand the depth of internal audits and improve the larger comprehensive

effect and contribution of internal audits.

(d) Preventive (risk control) internal audit result: After submitting and

approving the internal audit report and tracking report, they shall be

delivered to each supervisor for review before the end of the following

month after completing audit items. The review and instruction matters

delivered by the supervisor in 2015 will be continuously tracked and

improved by the Audit Center. The Audit Center will propose internal audit

deficiency and improvement suggestions in the 2015 internal audit

operation, and all non-conforming matters found have been improved.

(F).Preventive (risk control) self-assessment:

(a) Establishment of preventive (risk control) self-assessment mode: The

Company has established a risk-oriented self-assessment system, improved

from the previous detection (wrongdoing prevention) self-assessment

system into a preventive (risk control) system and that takes the high risk of

Group level, code of ethics, cost, International Financial Reporting

Standards (IFRS), asset preservation, legal compliance, and business

(production) operation as its risk determination criteria. It thus determines

consecutive duty targets and control points of high and low risk and

72



systematically implements self-assessment, thus becoming an important

driving force for each unit of the company to implement responsibility

system self-management.

(b) Preventive (risk control) self-assessment training explanation session: In

order to implement the self-supervision mechanism of the Company and

respond to environmental change in a timely manner, in order to adjust the

design and execution of the internal control system, in December every

year, the Company arranges to go to each plant and subsidiary to carry out

the "Self-assessment Training Explanation Session", ensuring that

supervisors above the department level fully understand the purpose and

practice of self-assessment and are able to actually execute self-assessment.

A total of seven training explanation sessions were held for self-assessment

in 2015, and the total number of supervisors and colleagues participating in

the self-assessment training explanation sessions was 680 people.

(c) Self-assessment results of the Company: In 2015, the Company completed

the parent company part by completing self-assessment on 198 units,

identifying a total of 1,634 unit operation targets and 1,973 risk items

affecting target achievement. Meanwhile, the Company has prepared 3,072

control points to reduce the occurrence of such risks in order to achieve

those targets. For the subsidiary part, the self-assessment work on a total of

314 departments from 33 subsidiaries was completed, identifying a total of

4,487 unit operation targets and 5,874 risk items affecting target

achievement. Meanwhile, the Company has prepared 9,342 control points to

reduce the occurrence of such risks in order to achieve those targets.

(G) The Board of Directors issues the "Inventec Internal Control System Statement":

73



(5) If the Company organized training

and awareness programs on ethical

corporate management to internal

and external parties?

The Company implements internal control self-assessment operations once a

year, and then the Audit Center will review the self-assessment report of each

unit and subsidiary. Together with the internal control deficiency and

improvement circumstance of abnormal matters found by the Audit Center, they

will be the major basis for the Chairman, President, and Board of Directors to

assess the effectiveness of the "Internal Control System" and issue the "Internal

Control System Statement". In 2015, the Company has declared said statement

according to the rules of the competent authority.

(5) The Company will regularly arrange for directors and supervisors to participate in

external integrity operation related courses every year. Furthermore, through

"Procedures for Handling Material Inside Information" and company website

disclosure, internal on-line educational training will be conducted, and the Company

will propagate integrity operation related specifications to its suppliers.anagement

internal and external parties.

No difference

3.Implementation of whistleblowing

system


whistleblowing and reward

system? Upon receiving a reported

case, is there a dedicated personnel

handling the reported case?


standard operational procedures

and relevant information

confidentiality policy for

(1) System management and special personnel for special responsibilities: In order to

solve major violations or misconduct, etc. complained about by employees, the

Company has set up external and internal complaint management. When employees

suffer from improper, illegal, or unreasonable events, they can submit a complaint

according to the complaint system.

(2) Pursuant to the "Employee Complaints and External Reporting Management

Specification", the Company has established investigation standard operation

procedures and a confidentiality mechanism to accept reporting matters and imposes

punishment by referring to trial principles.

No difference

No difference

74



investigation of reported cases?


measures for protecting

whistleblowers from inappropriate

disciplinary actions?

(3) In the "Employee Complaints and External Reporting Management Specifications",

the Company has designated a dedicated complaint accepter and complaint and

reporting hotline: Tel.: 2881-0721 ext. 21999 / E-mail: 21999 @inventec.com,

and according to the treatment principle, the Company will protect the reporter from

discriminations, threats, post transfers, and other unfavorable treatments.

No difference

4. Information Disclosure

(1) If the Company disclosed ethical

corporate management policy and

its status of implementation via

corporate website or Market

Observation Post System?

(1) The website of the Company discloses such information as integrity operation, social

responsibility, corporate culture, and operation policy. Furthermore, a dedicated

department has been established to be responsible for collecting and publishing all

kinds of information, and the spokesman system has been established and Investor

Conference convened pursuant to law, describing the company operation results and

business conditions. The meeting video files will be uploaded to the company

website and mops.twse.com.tw for review.

No difference

5. If the Company established any guideline of ethical business conduct in accordance with “Ethical Corporate Management Best Practice Principles for

TWSE/GTSM-Listed Companies”, please state the implementation status of the guideline and any reasons for non-implementation?

In 2014, pursuant to the "Listed Company Code of Integrity Operations", the Company formulated the "Inventec Corporation Code of Integrity Operation",

which was approved by the Board of Directors and submitted to the supervisor to propose at the Shareholders' Meeting; the first and second amendments

were passed by the Board of Directors in 2015, and the operation has no difference from the rules.

6. If any other information that helped to understand the operation of ethical business conduct and its implementation?

(1).Suppliers of the Company need to pass the supplier corporate social responsibility survey appraisal form with the aim that suppliers will fulfill corporate

75



social responsibility.

(2).The director conflict of interest system is stipulated in the "Rules for Board of Directors’ Discussion" of the Company in order to ensure that relevant

resolutions have no damage to company rights and interests.

(3).Regarding major operation policies, investment cases, asset acquisition and disposal, bank financing, capital loan to other persons, endorsements, etc. of

the Company, they shall be evaluated and analyzed by the relevant responsible unit and proposed to the Board of Directors for resolution.

(4).Every year, all departments throughout the Company will carry out self-assessment operations, coordinate with the change of organization and

environment in a timely manner, and review the appropriateness of the internal control system and whether colleagues are following the relevant

regulations for business execution in order to ensure effective implementation of the internal control system of the company.

Note: Unless otherwise described, the listed subsidiaries of the Company Group comply with relevant regulations upon Ethical Corporate Management.

2.3.8 Corporate Governance Guideline and Regulations

Please go to the company website (http://www.inventec.com), and click on investor service/corporate governance for inquiry.

2.3.9 Other Important Information Regarding Corporate Governance

The governance unit of the Company will fully communicate and discuss with a certified accountant every quarter regarding financial statement

examination matters and execution circumstances of the internal control system. Pursuant to the "Procedures for Handling Material Inside Information",

the Company has established good internal material information handling and disclosing mechanisms to prevent improper information leakage and also

implements a spokesman system to ensure the consistency and accuracy of information published externally by the Company. By participating in

corporate governance related course training and internal and external company website, e-mail, and contracts, the Company carries out educational

promotion on operation procedures and relevant laws and decrees, so that company directors, supervisors, managers, and employees can fully understand

and comply with relevant procedures.

76

2.3.10 Internal Control System

2.3.10.1 Statement of Internal Control System


Statement of Internal Control System Feb. 23, 2016

Based on the findings of self-assessment, the company states the following with regard to its internal control system in 2015:

1. The company is fully aware that establishing, operating and maintaining an internal control system are the responsibilities of its Board of Directors and

management. The aim of the internal control system is to provide reasonable assurance to operating effectiveness and efficiency (including profitability,

performance and safeguarding of assets), reliability of financial reporting and compliance of applicable laws and regulations.

2. An internal control system has inherent limitations. No matter how perfectly designed, an effective internal control system can only provide reasonable

assurance of accomplishing the aforementioned three objectives. Moreover, the effectiveness of an internal control system may be subject to changes of

environmental or circumstances. Nevertheless, the internal control system of the company contains self-monitoring mechanism and the company takes

corrective actions whenever a deficiency is identified.

3. The company evaluates the design and operating effectiveness of its internal control system based on the criteria provided in the Regulations Governing

the Establishment of Internal Control System by Public Companies (herein below, the “Regulations”). The criteria adopted by the Regulations identify

five components of internal control based on the process of management control: (1) control environment, (2) risk assessment, (3) control activities, (4)

information and communication, and (5) monitoring. Each component further contains several items. Please refer to the Regulations for details.

4. The company has evaluated the design and operating effectiveness of its internal control system according to the aforesaid criteria.

5. Based on the findings of the evaluation mentioned in the preceding paragraph, the company believes that, as of December 31, 2015, its internal control

system (including its supervision and management of subsidiaries), as well as its internal controls to monitor the achievement of its objectives

concerning operational effectiveness and efficiency, reliability of financial reporting, and compliance with the applicable laws and regulations, were

effective in design and operation, and reasonably assured the achievement of the above-stated objectives.

6. This Statement will be integral part of the company’s Annual Report for the year 2014 and Prospectus, and will be made public. Any falsehood,

concealment, or other illegality in the content made public will entail legal liability under Articles 20, 32, 171 and 174 of the Securities and Exchange

Law.

7. This Statement has been passed by the Board of Directors in their meeting held on Feb. 23, 2016 with zero of seven attending directors expressing

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

Inventec Corporation.

Chairman：Lee, Tsu-Chin

President：Huang, Kuo-Chun

77

2.3.10.2 If the Company is requested by the SEC to retain CPA’s service for examining internal control system, the Independent Auditor’s Report must be

disclosed: None

2.3.11 The penalties delivered to the Company and the staffs of the Company, or the penalties delivered by the Company to the

staffs for violations of internal control system, the major nonconformity, and the corrective action in the most recent

years and up to the date of the annual report : None.

2.3.12 Major Resolutions of Shareholders’ Meeting and Board Meetings

2.3.12.1 Major Resolutions of Shareholders’ Meeting

Date Major Resolutions Implementation

2015.06.16

1. Acknowledge the 2014 Business

Report and Financial Statements. Approved and acknowledged as proposed by the Board of Directors by voting

2. Acknowledge the 2014 Earnings

Distribution.

Approved and acknowledged as proposed by the Board of Directors by voting. The cash dividend to

shareholders is NT$1.75 per share, and the Ex-dividend record date is 2015/07/22.

3. Discussion of the Amendments to

“Rules of Procedure for

Shareholders Meetings ”

Approved and acknowledged as proposed by the Board of Directors by voting

78

2.3.12.2 Major Resolutions of Board Meetings

Date Major resolutions

2015.01.27

Approved the proposal of the salary and year-end bonus for managers, employees bonuses and compensation of Directors and Supervisors.

Approved to amend the Corporate Social Responsibility Best Practice Principles.

Approved to amend the Corporate Governance Best Practice Principles.

Approved the internal control statements issued by the Inventec Corporation (Hong Kong) Ltd., Inventec (Cayman) Corp., and Invnetec

Investments Co., Ltd. of the Company.

Approved to establish a subsidiary in India.

2015.02.25

Approved to issue the 2014 Internal Control System Statement.

Approved to amend the Codes of Ethical Conduct.

Approved to amend the Rules of Procedure for Shareholders Meetings.

Approved to amend the Ethical Corporate Management Best Practice Principles.

2015.03.24 Approved the 2014 financial statements, consolidated financial statements and business report.

Approved the 2015 Shareholders’meeting date, place, and meeting agenda.

2015.04.21 Approved the 2014 employee bonuses and compensation of Directors and Supervisors.

Approved the 2014 earnings distribution.

2015.05.11 Approved the 2015Q1 consolidated financial report.

Approved Inventec (Chongqing) Corp.to invest Chongqing YuYa Cloud Service Co., Ltd.

2015.06.30 Approved the ex-dividend record date.

2015.07.21 Approved to donate NT$10 million by Inventec Group Charity Foundation to the special account under New Taipei City Government to

support medical care for the Powder Explosion injured at the Formosa Fun Coast.

2015.08.11 Approved the 2015Q2 consolidated financial report.

2015.09.08

Approved the agreement between Inventec (Cayman) Corp. and Top Victory Investment Co., Ltd. to terminate the joint venture agreement of

TPV-Inventa Holding Ltd. and change the board seats.

Approved Inventec (Cayman) Corp. to reinvest TPV-Inventa Holding Ltd..

2015.09.30 Approved to increase investment to TPV- Inventa Technology (Fujian) Ltd. via subsidiary TPV- Inventa holding Ltd.by means of Debt for

Equity Swap.

79

Date Major resolutions

2015.10.20 Approved managerial officers to engage in competitive conduct.

2015.11.10

Approved the 2016 Internal Audit Plan.

Approved the 2015Q3 consolidated financial report.

Approved to amend the Ethical Corporate Management Best Practice Principles.

Approved the selling of 47.68% of the common stock equity of Inventec Energy Corporation held by the Company to Inventec Solar Energy

Corporation

2015.12.29

Approved to formulate operation procedures for the Company to apply to suspend and resume transactions.

Approved to amend Internal Control Systems.

Approval of the Amendments to Articles of Incorporation.

Approved to hire certified public accountants

Approved the 2016 corporate business plan.

Approved the remuneration of directors, supervisors, and managers and year-end bonus planning scheme of the Company.

Approved to purchase plant building in Taoyuan Science and Technology Park.

Approved to donate NT$7.5 million to Inventec Group Charity Foundation.

2016.02.23

Approved to issue the 2015 Internal Control System Statement.

Approved the renaming and revision of the "Director and Supervisor Election Rules" of the Company.

Approved to release the newly added non-competition restriction to the current directors Huang, Kuo-Chun, Chang, Chang-Pang, and Chen,

Ruey-Long.

Approved to subsequently confirm that the Company donates NT$10 million to Tainan City government through " Inventec Group Charity

Foundation " in response to earthquake disaster bailout.

2016.03.22

Approved the 2015 employee bonuses and compensation of Directors and Supervisors.

Approved the 2015 financial statements, consolidated financial statements and business report.

Approved the 2016 Shareholders’meeting date, place, and meeting agenda.

The Company and Advantech Co., Ltd. jointly established a joint venture company.

2016.04.26 Approved the 2015 earnings distribution.

80

2.3.13 Major Issues of Record or Written Statement Made by Any Director Dissenting to Important Resolutions Passed by

the Board of Directors in 2015 and to the date of the annual report : None.

2.3.14 Resignation or Dismissal of Personnel Involved in the Company : None.

2.4. Information Regarding the Company’s Audit Fee

2.4.1 Range of accountants’ fee

CPA Firm CPA Auditing Period Remark

KPMG Chen, Ying-Ru, Yang, Leou-Fong, 2015.01.01~2015.12.31 -

Unit: NT$ Thousands

Items

Amount Bracket Auditing Fees Non-Auditing Fees Total

1 Below 2,000 thousand

2 2,000 thousand (included) ~ 4,000 thousand(excluded)

3 4,000 thousand (included) ~6,000 thousand(excluded)

4 6,000 thousand (included) ~ 8,000thousand(excluded)

5 8,000 thousand (included) ~ 10,000thousand(excluded)

6 Over 10,000 thousand (included)

81

Unit: NT$ Thousands

CPA Firm CPA Auditing

Fees

Non-Auditing Fees

Auditing Period Note System

Design

Industrial and

Commercial

Registration

HR Others Total

KPMG Chen, Ying-Ru

8,600 0 0 0 1,165 1,165 2015.01.01~2015.12.31 Non-auditing services

include transfer pricing,

VAT and tax consultant. Yang, Leou-Fong 2015.01.01~2015.12.31

2.4.2 The non-audit fee paid to certified CPA, certified Office of CPA and affiliated companies accounts for over 1/4 to

audit fee: None

2.4.3 Alter the CPA Firm and the audit fee in altering year is less than that in the previous year: None

2.4.4 The audit fee is reduced by over 15% compared with the previous year: None

2.5 Information Regarding the Replacement of CPA

Change of CPA in recent two years and thereafter: as of the fourth quarter of 2014, CPAs are changed, from the original Lin, Wan-Wan and Chen,

Ying-Ru into Chen, Ying-Ru and Yang, Leou-Fong, such change is the internal rotation of accounting office, hence it is not applicable.

2.6 Audit Independence

If the chairman, president, and financial or accounting manager of the Company who had worked for the independent auditor or the related party in the

most recent year, the name, title, and the term with the independent auditor or the related party must be disclosed: None.

82

2.7 Changes in Shares Trading and Pledge of Directors, Supervisors, Managers and Major Shareholders: Unit: Thousand shares

Title Name 2015 2016/04/30

Holding Increase (Decrease)

Pledged Holding Increase (Decrease)



Chairman Lee, Tsu-Chin 0 0 0 0

Director Yeh, Kuo-I 0 0 0 0

Director Wen, Shih-Chih 0 0 0 0

Director Chang, Ching-Sung 0 0 0 0

Director Huang, Kuo-Chun 0 0 0 0

Independent Director Chang, Chang-Pang 0 0 0 0

Independent Director Chen, Ruey-Long 0 0 0 0

Supervisor Cheng, Hsien-Ho -110 0 0 0

Supervisor Wang, Ping-Hui 0 0 0 0

Supervisor Shyh Shiunn Investment Corp. 0 0 0 0

Representative of Shyh Shiunn Investment Corp.

Yang, Chiung-Nan 0 0 0 0

President Huang, Kuo-Chun 0 0 0 0

Executive Vice President Wu, Yung-Tsai -100 0 0 0

Senior Vice President Chang, Hui 0 0 0 0

Senior Vice President Yang, Hsin-Hua 0 0 0 0

Senior Vice President Tsai, Chih-An 0 0 0 0

Senior Vice President Wen, Chi-Wai 0 0 0 0

Senior Vice President Lin, Chin-Wen 0 0 0 0

Senior Vice President Chen, Yea-Ping 0 0 0 0

Vice President Chang, Nai-Wen 0 0 0 0

Vice President Hong, Kuo-Ching -220 0 0 0

Vice President Chang, Yiu-Lang 0 0 0 0

Vice President Yu, Chin-Pao 0 0 0 0

Vice President Chien, Kuei-Fen -10 0 0 0

Vice President Lou, Jin-Pang 0 0 0 0

Vice President Yi, Fu-Ming 0 0 0 0

Vice President Tsai, Yuh-Chen 0 0 0 0

83

Title Name 2015 2016/04/30





Vice President Hsu, Ching-Wu 0 0 0 0

Vice President Ting, Chin-Yun 0 0 0 0

Vice President Chou, Shao-Hsin 0 0 0 0

Vice President Tsung, Yu-Lin 0 0 0 0

Senior Director of Talent Center Yu, Win-Chee 0 0 0 0

Director of Finance Center Liang, Wen-Jan 0 0 0 0

Director of Talent Center Lin, Shih-Pin 28 0 0 0

Director of Finance Center Hsaio, I-Ying 0 0 0 0

Note 1: The Company has no shareholder holding more than ten percent of the total stock.

2.7.1 Information of Shares Transferred

Unit: Share

Name The reason Date Trading counterparties Relation Shares Price

Wu, Yung-Tsai endowment 2015/06/09 Wu, Ya-Chuan father-child 100,000 22.00

Cheng, Hsien-Ho endowment 2015/07/08 Lu, Hui-Chun daughter-in-law 110,000 19.95

Hong, Kuo-Ching endowment 2015/07/13 Hung, Yu-Chieh father-child 100,000 21.15

Hong, Kuo-Ching endowment 2015/11/27 Lin, Pi-Chin spouse 120,000 18.25

2.7.2 Information of Equity Pledged : None.

84

2.8 The Relations of the Top Ten Shareholders

Unit: Share

Name Shareholding Spouse and Minor

Shareholding by

Nominee Arrangement The R Note

Shares % Shares % Shares % Name Relations

Yeh, Kuo-I 254,361,330 7.09% 99,314,117 2.77% - -

Yeh, Li-Quan

Yeh, Li-Cheng

Kuo Hsieh

Investment Co., Ltd.

Fu Tai Investment

Co., Ltd.

Wang, Fu-Tai

Relative within the second

degree of kinship


degree of kinship

Director

Director

Spouse

Shyh Shiunn

Investment Corp. 139,416,690 3.89% - - - - Wen, Shih-Chih Chairman

Shyh Shiunn

Investment Corp.:

Representative,

Wen, Shih-Chih

35,685,590 0.99% 37,399 0.00% - -

Lai-Chu

Investment Co.,

Ltd.

136,721,634 3.81% - - - - Yang, Yuan-Yuan Chairman

Lai-Chu

Investment Co.,

Ltd.Representative

Yang, Yuan-Yuan

- - - - - - - -

Kuo Hsieh

Investment Co.,

Ltd.

118,152,558 3.29% - - - -

Yeh, Li-Quan

Yeh, Kuo-I

Wang, Fu-Tai

Yeh, Li-Cheng

Chairman

Director

Director

Supervisor

85


Shareholding by



Kuo Hsieh

Investment Co.,

Ltd..

Representative,

Yeh, Li-Quan

63,398,405 1.77% 2,711,196 0.09% - -

Yeh, Kuo-I

Yeh, Li-Cheng

Wang, Fu-Tai

Fu Tai Investment

Co., Ltd.


degree of kinship


degree of kinship


degree of kinship

Supervisor

Fu Tai

Investment Co.,

Ltd.

116,781,074 3.26% - - - -

Yeh, Li-Cheng

Yeh, Kuo-I

Wang, Fu-Tai

Yeh, Li-Quan

Chairman

Director

Director

Supervisor

Fu Tai Investment

Co., Ltd.

Representative,

Yeh, Li-Cheng

67,412,472 1.88% 600,000 0.03% - -

Yeh, Kuo-I

Yeh, Li-Quan

Wang, Fu-Tai

Kuo Hsieh

Investment Co., Ltd..


degree of kinship


degree of kinship


degree of kinship

Supervisor

Lee, Tsu-Chin 115,833,835 3.23% - - - - - -

Wang, Fu-Tai 99,314,117 2.77% 254,361,330 7.09% - -

Yeh, Li-Quan

Yeh, Li-Cheng

Kuo Hsieh


Fu Tai Investment

Co., Ltd.

Yeh, Kuo-I


degree of kinship


degree of kinship

Director

Director

Spouse

86


Shareholding by



Yeh, Li-Cheng 67,412,472 1.88% 600,000 0.03% - -

Yeh, Kuo-I

Yeh, Li-Quan

Wang, Fu-Tai

Kuo Hsieh



degree of kinship


degree of kinship


degree of kinship

Supervisor

Yeh, Li-Quan 63,398,405 1.77% 2,711,196 0.09% - -

Yeh,Kuo-I

Yeh, Li-Cheng

Wang, Fu-Tai

Fu Tai Investment

Co., Ltd.


degree of kinship


degree of kinship


degree of kinship

Supervisor

Employees

Provident Fund

Board-Pheim Asset

Management SDN

BHD as external

fund manager-EPF

MSCI

62,612,000 1.75% - - - - - -

Note 1: The top ten shareholders shall all be listed; for corporate shareholders, the name and representative of the corporate shareholder shall be listed

respectively.

Note 2: The calculation of shareholding ratio means the calculation of shareholding ratio in the name of oneself, spouse, minor children, or other person.

Note 3: For the corporate shareholders and natural person shareholders listed above, any relationship between and among them shall be disclosed.

87

2.9 Ownership of Shares in Affiliated Enterprises

Unit: Thousand shares

Long-Term Investment Ownership by Inventec

Direct/Indirect Ownership by Directors and Management

Total

Shares % Shares % Shares %

Inventec Appliances Corporation 536,857 100.00% - - 536,857 100.00%

Inventec Besta Co., Ltd 33,436 37.53% 1,104 1.24% 34,540 38.77%

Inventec Investment Corporation 108,800 100.00% - - 108,800 100.00%

Inventec Solar Energy Corporation 108,150 33.45% 63,568 19.66% 171,718 53.11%

E-Ton Solar Tech. Co., Ltd. 231,521 29.70% 48,633 6.24% 280,154 35.94%

Inventec Energy Corporation. 127 0.10% 62,454 49.26% 62,581 49.36%

Note: It is the investment of company by adopting the Equity Method.

88

Ⅲ. Capital Overview 3.1 Capital and Shares

3.1.1 Capital and Shares 04/30/2016

Month/

Year

Par

Value

(NTD)

Authorized Capital

Paid-in Capital

Remark

Shares

(1,000)

Amount

(NT$1,000)

Shares

(1,000)

Amount

(NT$1,000)

Sources of Capital

(NT$10,000)

Capital

Increased by

Assets Other

than Cash

Other

1988.11 10 22,060 220,600 22,060 220,600 Capital increase NT 3,000 by

Cash －

November 1, 1988 (77),

No. 09283

1989.08 10 66,999 660,000 33,200 332,000

Capital increase NT 4,080.80 by

Cash


Earnings

－ August 21, 1989 (78),

No. 01724

1990.05 10 100,000 1,000,000 76,360 763,600

Capital increase NT 3,320 by

Capital Surplus


Earnings

－ May 30, 1990 (79),

No. 28599

1991.07 10 100,000 1,000,000 83,996 839,960 Capital increase NT 7,636 by

Capital Surplus －

July 18, 1991 (80),

No. 01592

1992.06 10 100,795 1,007,952 100,795 1,007,952 Capital increase NT 16,799.20

by Earnings －

June 17, 1992 (81),

No. 01286

1993.07 10 120,954 1,209,542 120,954 1,209,542 Capital increase NT 20,159 by

Earnings －

July 20, 1993 (82),

No. 30624


Earnings －

June 20, 1994 (83),

No. 28255


Earnings －

June 21, 1995 (84),

No. 36512


Earnings －

June 21, 1995 (84),

No. 38703


Earnings －

May 06, 1997 (86),

No. 36918

1998.05 10 1,000,000 10,000,000 835,407 8,354,069

Capital increase NT9,663 by

Eapital Surplus


Earnings

－ May 12, 1998 (87),

No. 41354

1998.05 10 1,000,000 10,000,000 855,407 8,554,069 Capital increase NT 20,000 by

Cash －

May 20, 1998 (87),

No. 41353

1999.05 10 1,250,000 12,500,000 1,140,000 11,400,000 Capital increase NT 284,593 by

Earnings －

May 17, 1999 (88),

No. 46068

2000.05 10 1,500,000 15,000,000 1,375,860 13,758,600


Capital Surplus


Earnings

－ May 22, 2000 (89),

No. 43743

2001.05 10 2,000,000 20,000,000 1,660,700 16,607,000


Capital Surplus

Capital increase NT 257,322.8

by Earnings

－ May 18, 2001 (90),

No. 130976

2002.06 10 2,000,000 20,000,000 1,835,000 18,350,000


Capital Surplus

Capital increase NT 149,389.5

by Earnings

－ June 14, 2002 (91),

No. 132472

89

Month/

Year

Par

Value

(NTD)

Authorized Capital

Paid-in Capital

Remark

Shares

(1,000)

Amount

(NT$1,000)

Shares

(1,000)

Amount

(NT$1,000)

Sources of Capital

(NT$10,000)

Capital

Increased by

Assets Other

than Cash

Other


Earnings －

June 18, 2003 (92),

No. 0920127026


Earnings －

June 08, 2004 (93),

No. 0930125427


Earnings －

June 24, 2005 (94),

No.0940125418


Earnings －

June 27, 2006 (95),

No. 0950126555


Earnings －

June 25, 2007 (96),

No. 0960031988


Earnings －

June 24, 2008 (97),

No. 0970031477


Earnings －

June 25, 2009 (98),

No. 0980031805


Earnings －

June 25, 2010 (99),

No. 0990032858


Merging －

August 19, 2011 (100),

No. 1000037640

September 01, 2011

(100), No. 1000041230

2011.10 10 3,500,000 35,000,000 3,466,159 34,661,595 Cancellation of Treasury Stocks

NT2,762 －

－


Earnings －

June 27, 2012 (101),

No.1010028496

Unit : Share ; 04/30/2016

Information for Shelf Registration : None

Shares category Authorized Capital

Remarks Issued shares (Listed) Non-issued Total

Registered Common

Shares 3,587,475,066 62,524,934 3,650,000,000

90

3.1.2 Composition of Shareholders

04/30/2016

Item Government

Agencies

Financial

Institutions

Other

Juridical

Person

Domestic

Natural

Persons

Foreign

Institutions &

Natural Persons

Total

Number of

Shareholders 9 69 130 111,741 798 112,747

Shareholding

(shares) 42,503,370 57,759,793 637,272,909 1,660,429,513 1,189,509,481 3,587,475,066

Percentage 1.19% 1.61% 17.76% 46.28% 33.16% 100.00%

3.1.3 Shareholding Distribution Status

04/30/2016

Class of Shareholding

(Unit : Share)

Number of

Shareholders

Shareholding

(Shares) Percentage

1~ 999 36,460 11,122,222 0.31%

1,000~ 5,000 48,530 115,247,256 3.21%

5,001~ 10,000 14,278 104,518,766 2.91%

10,001~ 15,000 4,781 58,806,961 1.64%

15,001~ 20,000 2,493 45,222,104 1.26%

20,001~ 30,000 2,296 57,715,606 1.61%

30,001~ 40,000 1,012 35,801,448 1.00%

40,001~ 50,000 601 27,712,355 0.77%

50,001~ 100,000 1,091 76,413,327 2.13%

100,001~ 200,000 490 67,621,912 1.89%

200,001~ 400,000 256 73,255,379 2.04%

400,001~ 600,000 111 55,045,736 1.54%

600,001~ 800,000 55 38,675,640 1.08%

800,001~1,000,000 47 42,401,462 1.18%

1,000,001~999,999,999 246 2,777,914,892 77.43%

Total 112,747 3,587,475,066 100.00%

Preferred share: The Company did not issue any preferred share.

91

3.1.4 List of Major Shareholder

04/30/2016

Shareholder's Name Shareholding

Shares Percentage

Yeh, Kuo-I 254,361,330 7.09%

Shyh Shiunn Investment Corp. 139,416,690 3.89%

Lai-Chu Investment Co., Ltd 136,721,634 3.81%

Kuo Hsieh Investment Co., Ltd 118,152,558 3.29%

Fu Tai Investment Co., Ltd 116,781,074 3.26%

Lee, Tsu-Chin 115,833,835 3.23%

Wang, Fu-Tai 99,314,117 2.77%

Yeh, Li-Cheng 67,412,472 1.88%

Yeh, Li-Quan 63,398,405 1.77%

Employees Provident Fund Board- Pheim Asset Management SDN BHD as external fund manager-EPF MSCI

62,612,000 1.75%

92

3.1.5 Market Price Per Share, Net Value, Earnings & Dividends For Latest Two Years

Unit：NT$；Thousand shares

Year

Item 2014 2015

01/01/2016

~03/31/2016

Market Price

per Share

Highest Market Price 32.35 24.70 26.10

Lowest Market Price 18.55 13.30 20.15

Average Market Price 25.49 20.12 23.22

Net Worth

Per Share

Before Distribution 16.05 15.74 15.99

After Distribution 14.30 －－

Earnings

Per Share

Weighted Average Share Numbers 3,587,475 3,587,475 3,587,475

Earnings Per Share 1.98 1.55 0.34

Dividends

Per Share

Cash Dividends 1.75 －－

Stock Dividend

Dividends from Retained Earnings

－

－

－

Dividends from Capital Surplus

－

－

－

Accumulated Undistributed Dividends －－

－

Return on

Investment

Price / Earnings Ratio 12.87 12.98 －

Price / Dividend Ratio 14.57 －

－

Cash Dividend Yield Rate 0.07 －

－

Note: Price / Earnings Ratio = Average Market Price / Earnings Per Share

Price / Dividend Ratio = Average Market Price / Cash Dividends Per Share

Cash Dividend Yield Rate = Cash Dividends Per Share / Average Market Price

3.1.6 Corporate dividend policy and implementation condition

1. Corporate dividend policy

The Board of Directors of the Company passed a revision of the Articles of Incorporation on

December 29, 2015. Pursuant to the provisions of the revised Articles of Incorporation, if there is a

surplus in the general annual report of the Company, it shall first be used to pay taxes and offset

accumulated losses, and then 10% will be withdrawn as a statutory surplus reserve, except when the

statutory surplus reserve has accumulatively reached the total paid-up capital of the Company.

Furthermore, the special surplus reserve shall be set or returned according to the operation demand

of the company and pursuant to relevant laws and decrees. If there is still surplus and accumulated

undistributed surplus, a proper amount shall be reserved according to operation demand, and a

dividend of no less than 10% of the surplus in the current year shall be paid. The Board of Directors

shall prepare a surplus distribution proposal and submit it to the Shareholders' Meeting for

acknowledgment. The dividend policy of the Company considers the future fund demand and

long-term financial planning of the Company, as well as shareholders' demand on cash inflow. If

there is a surplus in the annual report, the cash dividend distributed every year shall not be less than

93

10% of the total cash and stock dividend distributed in the current year.

2. Dividend distribution situation

The dividend distribution situations of the Company for past five years are summarized in the

following table; the surplus distribution in 2015 is still pending acknowledgment by the 2016

general meeting.

Year 2011 2012 2013 2014 2015

Cash Dividend 0.30 0.80 1.60 1.75 1.40

Stock Dividend 0.35 - - - -

3.1.7 The impact of stock grants proposed by the Shareholders' Meeting at this time

on company business performance and earnings per share

This (2016) Shareholders' Meeting has not proposed any stock grants.

3.1.8 Remuneration of employees, directors, and supervisors

1. Percentage or scope of remuneration of employees, directors, and supervisors as stated in the

Articles of Association

On December 29, 2015, the Board of Directors of the Company passed a resolution amending the

Articles of Incorporation; it still needs to be passed as a resolution of the 2016 general meeting

before being officially issued. According to the amended Articles of Incorporation of the Company,

if the Company experiences overall annual profit, no less than 3% shall be allocated as employee

remuneration and no more than 3% as director and supervisor remuneration. However, when the

Company has accumulated losses, it shall reserve the compensation amount in advance. Employee

remuneration may be issued in cash or stock, the issuing object may include employees

subordinated to the company and conforming to certain conditions, and the conditions and

methods thereof will be stipulated by the Board of Directors.

2. Estimation base of employee, director and supervisor remuneration in this estimation, the number

of shares calculation base for employee remuneration in stock distribution, and accounting

treatment when the actual distribution amount differs from the estimated amount.

(1) Estimation base of employee, director and supervisor remuneration in this estimation:

Pursuant to the amended Articles of Association of the Company, if the Company experiences

overall annual profit, no less than 3% shall be allocated as employee remuneration and no

more than 3% as director and supervisor remuneration. However, when the Company has

accumulated losses, it shall reserve the compensation amount in advance.

(2) The number of shares calculation base for employee remuneration in stock distribution: In this

period, no employee remuneration is in stock distribution.

(3) When the actual distribution amount differs from the estimated amount, the balance thereof

will be listed as cost adjustments in the actual distribution year.

94

3. Situation of the Board of Directors' passing remuneration distribution

(1) The amount of employee, director, and supervisor remuneration in cash or stock distribution.

If it differs from the estimated amount in the recognized expense year, the balance, reason,

and handling situation shall be disclosed: the Board of Directors passed a resolution,

determining that the remuneration of employees in 2015 is NTD336,884,470, and the

remuneration of directors and supervisors in 2015 is NTD 98,257,971, which are the same as the

recognized expense amount in 2015.

(2) The proportion of employee remuneration amount in stock distribution in the net profit after

tax in individual financial statements of this period and the total employee remuneration:

None

4. For the actual distribution situation of employee, director, and supervisor remuneration last year

(including distributed shares, amount, and stock price), if it differs from the recognized employee,

director, and supervisor remuneration, the balance, reason, and handling situation shall be

specified.

In 2015, the relevant information on the employee, director, and supervisor remuneration

distributed by the Company from the distributable surplus in 2014 is summarized below:

Employee bonus distribution: NTD447,162,335; director and supervisor remuneration distribution:

NTD127,760,667, and the total distribution amount is greater than NTD574,923,002. It is the

same as the recognized cost amount in 2014.

The distribution situation passed by the Shareholders' Meeting is the same as the proposed

situation passed by the Board of Directors.

3.1.9 Company’s situation regarding buying back Company shares : None.

3.2 Issuance of Corporate Bond : None.

3.3 Issuance of Preferred Shares : None.

3.4 Issuance of Global Depository Receipts : None.

3.5 Issuance of Employee Stock Option : None.

3.6 Issuance of Restricted Employee Shares : None.

3.7 Status of New Shares Issuance in connection with Mergers and Acquisitions : None.

3.8 Financing Plans and Implementation

3.8.1 Plans：None.

3.8.2 Implementation：None.

95

Ⅳ. Operational Highlights

4.1 Business Activities

4.1.1. Business scope

1. Major business contents

The major business items of the Group include the manufacturing and sale of computer

software and hardware products, and solar batteries, as well as the assembly and sale of

communication and digital assistant products, etc.

2. Proportion of consolidated business

3. Commodity items and new commodities planned to be developed

A. Computer hardware products: portable notebooks, corporate computers (including servers,

data centers, storage equipment, work stations), etc.

B. Computer software products: including server management software ESMS, application

software, learning tool software, computer peripheral extended products, etc.

C. Cloud application platforms.

D. Consumer electronics products and handheld devices.

E. Solar batteries and module products.

4.1.2 Industry overview

1. The current situation and development of the industry

(1) Notebook computers

In the first half of 2015, some emerging market countries were affected by exchange

depreciation, causing the demand for notebook computers to decline and most brand

manufacturers to experience a general increase in inventory. In the second half, in order

to avoid inventory risk, distributors only actively purchased after the launch of Windows

10 computers, resulting in the sales growth to be obviously higher in the third quarter

than the second quarter. Furthermore, in recent years, with the diversification of mobile

device products, the degree of dependency on notebook computers has reduced, so the

overall sales volume is still lower than that in 2014. According to the statistics of

Year

Item 2014 2015

IT Product 97.42% 96.74%

Solar Product 2.58% 3.26%

Total 100.00% 100.00%

96

TrendForce, a global market research institution, the shipment volume of notebook

computers in 2015 was approximately 164 million computers, a decline of 6.3% from the

previous year.

Looking forward to the development of global notebook computers in 2016, the

consumer market is gradually shrinking. Although the demand for tablet PCs within the

same competitive market has been saturated, is the demand for network computers is still

affected by other mobile devices (such as smart phones, etc.). However, several brand

companies in mainland China are expected to launch notebook computers in the first half

of the year, the launch of the new products is expected to attract consumers and activate

the market. Although the gross profit margin of notebook computers declines annually

due to low-priced competition, the stimulation effect of low-price commodities on market

demand is no longer significant. Therefore, in order to increase sales profit, the branded

companies must increase the shipment proportion of high-end machines. Taiwan is a

technological leader with regard to the design and manufacturing of high-end machines.

Anticipating the importance of improving high-end machines, Taiwan’s industry will also

move towards high-quality development. In consideration of various trends, the market

survey research institution TrendForce estimates that the shipment volume of notebook

computers in 2016 will decline slightly by 3.2% to 159 million computers.

(2) Servers

In recent years, with the rapid development of cloud and mobile applications, the market

scale of servers has been growing continuously. Since mainland China

telecommunication dealers and Internet service providers have massive data processing

and storage demand and the shipment volume of server brand manufacturers in mainland

China are continuously growing, they are expected to catch up with the leading

manufacturers in Europe and the United States in the coming years. However, each brand

manufacturer in Europe and the United States continues to be devoted to the development

of new products. In addition to maintaining the self-manufacturing of high-end and

large-scale server products, brand manufacturers have outsourced medium and low-end

products and relevant components thereof to OEM for manufacturing. With an increase in

challenging brand manufacturers from mainland China, in addition to maintaining

inherent corporate hardware business, brand manufacturers in the United States are also

actively developing cloud computing solutions. According to the statistics of Gartner, an

international research and consultant institution, the shipment volume of global servers in

2015 increased by 9.9%, and the revenue grew by 10.1%. Looking to 2016, Gartner is

optimistic about the continuous and moderate growth of the overall server market.

Continuously driven by the demand for cloud application and data center computing, the

Institute for Information Industry also estimates that the market scale will reach 10.74

million servers, growth of 6.8% compared with 2015. Furthermore, since many large

scale data center markets adopt Whitebox server to construct their information center, the

demand of ODM Direct is growing drastically, compressing the market of brand

manufacturers, and the sales ratio and market share of ODM Direct is expected to

increase continuously.

97

(3) Cloud computing

Recently, mobile communication devices have been becoming more popular by the year,

and the information application market, such as wearable devices, Internet of Things, etc.,

has also been developing rapidly. In response to the demand of storing massive digital

data, all manufacturers worldwide have successively joined the cloud computing field,

which has driven all kinds of innovative services. Cloud computing has reshaped the

supply chain of the information communication industry and has triggered a new wave of

industry competition. With a continuous increase of output value in the entire cloud

industry, companies that offer cloud services also continue to increase. In addition to

large-scale Internet and virtual community dealers, many medium and small-scale

companies are providing all kinds of cloud services with development potential. Each

industry utilizes cloud computing and big data analysis to predict consumer behavior and

then formulate management decision and make its information department operate in a

more flexible manner in order to narrow the management span, increase production

efficiency, reduce costs, and improve the overall operation performance. With the

increase of cloud computing efficiency and cost reduction, data collection has become

more effective, and big data analysis more important. According to the global cloud

market analysis report issued by Synergy Research, a market research institution, global

enterprises' expenditure amount in the field of cloud computing in 2015 exceeds 60

billion US dollars, and the expenditure in private cloud and mixed cloud services is

continuously growing at the rate of 45% every year. Furthermore, according to the

estimation of the market research institution IDC, the expenditure of global public cloud

services in 2015 was approximately 70 billion US dollars. By 2019, it is expected to

reach 14.1 billion US dollars, with a compound annual growth rate of 19.4%. Most

software suppliers are expected to transfer to SaaS and PaaS models.

(4) Smart phone/wireless communication devices

According to statistics from the Institute for Information Industry, in 2015, the shipment

volume of global smart phones was approximately 1.531 billion phones, growth of 7.2%

compared with 2014; the single digit growth rate indicates that it has entered market

maturity. Since the market growth has slowed down, the sales volume of smart phones is

expected to reach 1.7 billion phones in 2020, with a compound annual growth rate of

4.0%. When comparing the market trend of each region, in mature markets with high

penetration rates, such as North America and Western Europe, the sales volume in 2016

will be close to that of 2015. Although the expected growth rate is lower than that of

emerging markets with low penetration rates, such as Africa, India, etc., they are still the

major sales areas for high-end mobile phones with high yield. On the other hand, the

Institute for Information Industry estimates that India will drive the huge domestic market

with economic development and will become the second largest smart phone market in

the world by 2019. The popularizing rate of mobile phones will also increase drastically

in Africa due to the general increase of personal income, and the market growth rate there

should not be underestimated.

With the development of the Internet of Things, related application services have

gradually matured, wearable devices will attract various dealers to actively invest in

98

developing relevant products due to such factors as technology improvement, increase of

consumer acceptance, etc. Many traditional industry dealers are carrying out research and

development to add the smart technology design into such products as watches and sports

products. According to the research report of Gartner, an international research and

consultant institution, in 2015, the shipment volume of global wearable devices was

approximately 232 million items. With the stimulation of such factors as the joining of

new manufacturers and the increase of consumer cognition degree, the shipment volume

of global wearable devices is expected to increase to 275 million items in 2016, with an

annual growth rate reaching 18.4%, and the revenue of wearable devices can reach 28.7

billion US dollars, of which 11.5 billion US dollars come from smart watches.

(5) Solar energy

Since 2011, the setup cost, module sales price, and module production cost in the solar

photovoltaic industry have declined drastically, causing global solar battery

manufacturers to gradually consolidate or quit the industry. Since green energy is

currently a major trend of global energy development, with the rapid decline of solar

energy setup costs and the active development of China, the U.S., Japan, and countries in

emerging districts, the global solar photovoltaic demand still sees high growth. In the first

half of 2015, the situation in which supply exceeded demand due to the excessive overall

production capacity expansion in the past few years was still present, but in the second

half of 2015, due to China's increase of installation targets and the increase of market

demand in Europe and the United States, the market supply and demand tend to balance,

and the price of solar batteries has gradually rebounded. According to the research data of

Energy Trend, a research institution, in 2015, the scale of global solar photovoltaic

demand was 53GW, an increase of 20% compared with 2014, the scale of global solar

photovoltaic demand is expected to reach approximately 59GW in 2016, further growth

of 11% compared with 2015. Looking toward 2016, the global solar energy industry will

positively and continuously develop, and the solar photovoltaic products and their

shipment volume in Taiwan are expected to grow alongside them, but we still need to

evaluate the subsidy policy of the government and the impact on the market caused by

dramatic production expansion by manufacturers from mainland China.

99

2. Relevance of upstream, midstream, and downstream of the information hardware industry

Upstream component

manufacturing industry Midstream semi-finished

products processing industry Downstream product distribution industry

(1) CPU

(2) ODD

(3) HDD

(4) LCD panel Module

(5) Battery

(6) Memory and Distributor

(7) Network device

(8) Keyboard Assembly

(9) Mainboard

(10) Adaptor

(11) Other components

3. All kinds of product development trends and competition situations


Due to fierce market competition, branded manufacturers continue to launch all kinds of

products. In the future, the major advancing direction of notebook computers still mainly

relies on their being lightweight, portable, and convenient. The mainstream notebook

computer also actively integrates notebook computers with touch screens and narrow

borders in order to improve portable convenience. Furthermore, many brand

manufacturers focus on the production of gaming notebooks, including entry-level and

medium and high-end specification products, especially under the development trend of

Augmented Reality (AR) and Virtual Reality (VR), which will improve consumer's

efficiency requirement on notebook computers. Because of the continuous decline in the

price of notebook computer panels, the prices of mainstream 14-inch and 15.6-inch HD

(1,366×768) screens have been close to cost, so manufacturers have started promoting

FHD (1,920×1080) panels to maintain profits. Through the aforementioned improvement

of notebook computer efficiency and performance, the industry hopes to stimulate

consumer's purchase intention in order to increase the sales volume of notebook

computers in 2016. Furthermore, after the Chromebook entered the education market

with a low price, the entry-level notebook has also reduced its sales price under mutual

competition between and among major American manufacturers. With successful

expansion in the education application market, major American search engine

manufacturers have also actively cooperated with local European brand manufacturers to

develop and expand the consumer market; major American computer operation system

manufacturers contend against them by reducing licensing fees. Among competition with

major brands, the product line of low-price notebook computers is expected to expand.

100

(2) Server and cloud computing

The reformation of software technology drives the virtualization of the data center, and

the software-defined data center (SDDC) has also been upgraded along with the new

generation of server specifications. The expansion of DDR4 memory support increases

the memory resources in the server, and the popularization of solid state disk resolves the

bottleneck of data I/O access, increasing the computing capacity of mainstream servers.

The cross-platform cooperation between manufacturers has gradually become universal,

and the server will develop built-in application programs to cross the platforms of

different cloud services. In recent years, cloud computing has been promoting computing

resources to gather at the server end. In addition to driving the output value of server and

data centers, it will also stimulate computing, storage, and network requirements,

including the IC application of memory and storage equipment, among others. Among

green and environmental protection trends, server products with high efficiency will

generate a lot of heat energy in the course of computing; the uninterrupted operation of

server rooms also need thorough cooling systems to reduce the heat. Therefore, most

server products are being developed towards the direction of reducing processor energy

dissipation and reducing the power consumption of cooling systems.

With the rise of the Whitebox server in recent years, relevant dealers have been actively

developing new markets and customers by providing solutions with more value-added

services through end product production bases, including overall server tied products of

storage, software, and service, and assisting local data center hardware equipment or

integration schemes. Future market trends will connect cloud computing with Internet of

Things technology for huge business opportunities. Using the reaction speed of the cloud

system and system upgrades, in addition to reducing costs, it can also create more

value-added cloud services and develop a cloud industry-supported service industry.

(3) Smart phones/wireless communication devices

Since smart phones entered into price competition with low product differentiation, each

manufacturer continues to focus on improving hardware specifications and higher cost

performance. Regarding high-end machines, the launch of the high-end smart phone with

64 bits and 8 core architecture processors has rapidly penetrated into the high-end

machines of each big brand. Furthermore, random access memory is expected to increase

to 4GB, and battery life will also continuously improve, while the fingerprint

identification function will become a universal allocation function as consumers

increasingly emphasize privacy security. According to the estimation of the Institute for

Information Industry, in 2016, the sales volume of smart phones in mature markets such

as North America, Western Europe, etc. will maintain at 180 million items and 160

million items, respectively. Although the growth range is not high, they are still the major

sales locations for high-end machines with high profits; therefore each manufacturer

continues to attach importance to such places.

Recently, with regard to wearable device products, in addition to the continuous

development of watches, bracelets, glasses, head-mounted cameras, etc., relevant product

applications have gradually expanded into many other devices, such as those related to

101

sports and medical treatment. The major purpose is to collect all-around relevant personal

physiological information and carry out analysis using a device that is closer to the

human body. Traditional dealers and new entrepreneurs are actively entering the smart

wear market one after another, creating fierce competition. In order to meet various

consumer demands, product design development is also quite diversified, prompting the

emergence of the competition status of small quantity product diversification. Therefore,

for future development, dealers must possess sales capability, such as good product

design, production support and marketing, etc. to obtain the advantage in such a market.

(4) Solar energy

Types of solar batteries are diversified, and different materials have different

characteristics in their reaction to the solar spectrum. Except for crystalline silicon,

thin-film materials, and III-V and II-VI compound semiconductor materials, organic

composite materials have low costs and are easily produced, and even specific nano

materials have solar energy power generation characteristics. Currently, commercialized

solar batteries include crystalline silicon type, thin-film type and III-V (GaAs) solar

batteries, but the crystalline silicon solar battery is the mainstream in market application.

Of those, three varieties are most common, namely single crystalline silicon,

polycrystalline silicon, and amorphous silicon. Although the energy conversion efficiency

of thin-film type solar batteries is lower than that of a crystalline silicon solar battery,

they do not require crystalline silicon wafers and can grow onto base materials with

different shapes and of different materials, and it has the characteristics of low cost and a

large applicable area; therefore, it still has the opportunity to drastically reduce the cost of

production equipment, which is originally relatively high. Currently, with the

development of centralized solar photovoltaic systems gradually maturing, the

development of a decentralized solar photovoltaic system will become the key point in

the next wave of promotion. Since the decentralized solar power generation cycle is

consistent with the household power consumption cycle, as solar energy power

generation costs continue to decline, the decentralized solar energy system will become

one of the solutions for replacing traditional household energy.

The research and development priority of each major manufacturer is continuously aimed

at products with high quality and high efficiency, including adjusting the manufacturing

process to ensure the total number of single crystalline and polycrystalline solar batteries

conforms to the PID-free requirement (exempt from efficiency attenuation triggered by

electric potential difference). Passivated Emitter and Rear Cell (PERC) processing

technology and material selection can effectively increase the battery's photovoltaic

conversion efficiency. The development of new type solar battery technology can

increase conversion efficiency, improve light attenuation, and reduce the efficiency

temperature coefficient.

102

4.1.3 Overview of technology and research and development

Table of R&D Expenditure Investment by the Group in the Past Two Years

Year 2014 2015

R&D Expenses (Unit: NT$ Thousand) 8,511,964 8,816,932

R&D Expenses to Revenue (%) 1.95 2.23

Growth Rate (%) 4.35 3.58

"Innovation" is the basic spirit of the Group foundation’s operation philosophy; it is the best

medium for shaping our enterprise's differentiation value, as well as our commitment to our

customers and partners. Therefore, we pay special attention to innovation research and

development and patents for invention in order to improve the international competitiveness

and influence of our Group. Over the years, the Group has invested considerable amounts of

expenditure into product research and development, with the R&D expenditure of the Group

in the past two years reaching NTD8.51 billion and NTD8.82 billion, respectively. In the

future, we will continue to invest large amounts of funds. We will be dedicated to the

improvement and expansion of original product line function, understanding the demand of

end consumers through product innovation, and participation in the research and development

design of major international manufacturers in order to strengthen the market concept of

original product design. We will further master, collect, and analyze the after-sales demands

of consumers through a global logistics service structure. Moreover, we will actively

cooperate with major component manufacturers, fully master the core design capability, and

establish cross-domain technology application platforms by integrating software and hardware

with integrative functions. Furthermore, we will integrate wireless communication technology

and establish new platforms for communication products to expand the product lineup.

The Group attaches great importance to cultivating innovation research and development

talents and motivates employees through financial reward and management mechanism;

innovation and patent protection have been fully integrated into the corporate organizational

culture. We have also established the innovation incubation fund; in addition to investing in

the innovation team externally, we also pay attention to encourage internal innovation inside

the Group, accelerating the cultivation of innovative entrepreneurial energy. Since the Group

has been continuously dedicated to independent innovation, as of the end of December 2015,

more than 14,000 patent certificates worldwide had been accumulatively acquired, and more

than 6,000 patents are under application. In Taiwan and China, the total number of invention

and patent certificates and the number of applications have officially ranked in the top ten for

more than eight consecutive years. In the future, we will continue to adhere to the spirit of

innovation and be dedicated to the research and development of core technology to improve

industrial competitiveness.

103

4.1.4 Long-term and short-term business development plans

1. Short-term business development plans

(1) Stick to knitting and strive for innovation improvement, satisfying customer and

market demands in the quickest and most direct way.

(2) Start from the operation philosophy of “Innovation, Quality, Open Mind, and

Execution” to integrate operation technology and management tools to improve

operation performance.

(3) Research and develop demand-oriented products and expand the depth and width of

product research and development level to achieve the target of multiple earning

growth.

(4) Actively carry out global arrangement, properly utilize each local resource

advantage, and construct an optimized global supply chain and operation network.

2. Long-term business development plans

(1) Combine software, hardware, and relevant applications to create relative advantage

to maintain an international foothold. Unlike the traditional manufacturing concept

of focusing on hardware only, emphasize the utilization of soft skills such as

information, simulation, research and development, system integration, services, etc.

and create product features and differentiation to improve added value.

(2) Focus on research and development and core capability management and develop

towards the direction of "Creating high value". Seek cooperative international

opportunities worldwide and cultivate technical talents with global competitiveness

to accelerate the improvement of our technical level and implement innovative

concepts.

(3) Continuously promote the five major development areas of "Rapid Innovation",

"Sustainable Energy", "Cloud Solutions", "Mobile Lifestyle", and "Emerging

Markets". Utilize vertical labor division, improve efficiency, provide customers with

timely and complete services, carry out supply chain integrating management, and

construct the production organization of an economic scale in order to strengthen

long-term competitive advantages.

(4) Continue diversified cultivation, based on a solid foundation of professional

notebook computer OEM, enter the fields of cloud computing, mobile computing,

wireless communication, network applications, smart family, application software,

green energy environmental protection, etc., expand corporate operation scale, and

overall arrange Internet of Things technology to become the top Internet enterprise.

104

4.2 Overview of the market, production, and marketing

4.2.1 Market analysis

1. Sales territory of major products

Major product department Name Major sales territory

Computer product Notebook computers, servers, and

other electronic information products

North America,

Europe, Asia

2. Market share, supply and demand situation, and growth in the future market


The rise of the notebook computer OEM supply chain in mainland China has caused the

order quantity to decline in some Taiwan OEM dealers. According to the statistics of the

Institute for Information Industry, in 2015, the global market share of Taiwan’s

notebook computers dropped by 1.1%; however, Taiwan notebook computer OEM

manufacturers possess global logistics capability, rapid response, and economic scale,

so major brand manufacturers from the U.S., Japan, and Taiwan continue to appoint

Taiwan OEM dealers for design and manufacturing, and Taiwan’s global market share is

approximately 83.8%, maintaining a leading position.

The development of Taiwan’s notebook computer industry is closely connected to

global industry development and is deeply influenced by customers' outsourcing

strategy. Looking toward 2016, as each major brand starts to attach importance to

product line and emphasizes high efficiency and specification improvements, the design

and manufacturing technology of Taiwan will continue to lead worldwide and have a

definite advantage regarding medium and high-end notebook computer OEM. The

Group still maintains the concept of continuous innovation, with competitive

advantages such as excellent global logistics service capability, the most flexible order

receiving production mode, and a localized and customized production mode. Therefore,

it has become the leading manufacturer in global notebook computer manufacturing.

Growth space for commercial notebook computers is still expected in the future; hence

the Group will continue to focus on the development of commercial notebook

computers while developing thinner and differentiated products.

(2) Servers

According to statistics from the Institute for Information Industry, in 2015, the

shipment volume of Taiwan’s server related products accounted for 81.5% of the

global market. Most American and Japanese brand dealers make orders to Taiwanese

OEM plants since they have no assembly plants; on the other hand, most Chinese

brand dealers own their own assembly plants and generally purchase main boards from

Taiwan OEM plants for independent assembly. With the rapid development of cloud

computing and mobile devices, the network has been able to be constructed onto a

universal type x86 server platform, and the server market has been growing rapidly in

105

the past three years. Together with the expansion of public cloud services and fierce

bidding degrees, the rise of large data center demands is also driving the demand of the

White box server, which will help Taiwan’s server dealers to obtain more orders.

Looking toward 2016, since the proportion of self-manufacturing of mainland China

manufacturers is increasing and major American brands have slightly scattered orders,

which is estimated to slightly reduce the global shipment share of Taiwan. The Group

has been thoroughly cultivating the server industry and continuously improving its

competitive advantage. Meanwhile, in response to the increase of computing demands,

the growth momentum of server demands is still good; therefore, our continuous

assessment goes beyond the strongholds in the existing North American and European

regions, and we will actively expand markets in emerging regions, amplifying server

end product assembly plants and continuously developing all kinds of server

businesses.

(3) Cloud computing

In recent years, the Group has been actively developing cloud services in the hopes of

creating a flexible cloud knowledge application environment by combining the SaaS

service provided by partners in order to provide customer solutions for software,

hardware, and service. To meet customer demands, customers can choose a cloud

service platform or enterprise cloud all-in-one scheme and switch between these two

schemes at different stages according to their business growth and demand. Starting

from 2015, with innovation incubation projects and mini venture investments, we have

been emphasizing three major aspects, namely Internet of Things, big data, and the

cloud, in order to facilitate business development. Meanwhile, we exploit global

supply chain systems, in addition to the existing cloud equipment production base on

the US-Mexico border and in the Czech Republic. In the future, we will also consider

establishing research and development and production bases in other areas to improve

company competitiveness. Furthermore, considering the "IOE removing" business

opportunity in the China cloud market, the Group has taken the leader as hardware

manufacturer, leading Taiwan network service providers and software integration

dealers to go to mainland China to seek cloud business opportunities together. In 2017,

the Group is expected to set five data centers in North China, East China, South China,

and Taiwan, focusing on the mixed cloud market of small and medium-sized

enterprises in both Taiwan and mainland China.

(4) Smart phones/wireless communication devices

Since most Chinese consumers have already switched from using feature phones to

using smart phones, the growth range of the global smart phone shipment volume will

gradually slow down. The research institution Institute for Information Industry

expects India to become the second largest market in the world in the future. Each

dealer has been actively arranging production plants in regions with a lower

penetration rate such, as India and Africa, or cooperating with local manufacturers in

order to exploit their consumer markets. Furthermore, according to the data of the

market research institution TrendForce, in 2015, the total shipment of China brands

was close to the total shipment of top two mobile phone brands globally; in the future,

106

the sales market of international big plants will be compressed due to the rise of

Chinese brands. The Group is dedicated to continuously strengthening design, testing,

and manufacturing capability through customer value innovation and actively

integrating the design OEM process; with the gradual maturity of company research

and development strength, test technology, and product design capability, we can take

our place in the field of smart phone manufacturing.

Since 2013, wearable devices have been developed into all kinds of styles and are

considered the main development commodities after computers and smart phones.

Each major brand plant has been devoted to designing wearable devices independent

of smart phones, as well as actively combining data collected from wearable devices

and providing users with information and suggestions to improve their added value.

With such advantages as existing smart phone designs and manufacturing, the Group

expects to first invest in research and development of wearable devices. Currently,

such application commodities as wearable devices and smart family also have market

competitiveness and are expected to bring more business opportunities to the Group in

the future.

(5) Solar energy

Reviewing the global solar energy industry in 2015, after the anti-dumping

investigation in Taiwan initiated by the U.S. Department of Commerce in 2014, the

average sales price of solar batteries declined to its lowest point in the middle of 2015

from a market price of more than 0.40 US dollars per watt in the beginning of 2014,

the lowest in the history of solar energy. However, throughout the entire year of 2015,

due to the strong domestic demand in mainland China and emerging markets such as

India and countries in Central and South America being devoted to developing solar

energy industries, this drove the recovery of prosperity, and the great decline in

quantity and price in the first half of the year turned into price stabilization and gradual

rise in the second half of the year.

Looking toward 2016, in the first half of the year, such wave of upsurge will continue,

but in the second half of the year, we still need to observe the impact of newly

increased production capacity on the supply and demand balance. According to the

estimation of the Institute for Information Industry, in 2016, mainland China will still

be the largest market for solar energy, with installation quantity accounting for 28.2%

globally, followed by the U.S., expected to account for 16.7%, and then Japan and

Europe, accounting for approximately 15.9% and 14.5%, respectively. The solar

energy demand in emerging markets is also increasing rapidly, with the solar energy

demand growing continuously in such regions as Southeast Asia, Africa, Central and

South America, Middle-South Asia, etc. However, the policy variability in such

markets is great and relatively unstable, so subsequent developments still need to be

observed. The Group has been actively optimizing product innovation and

manufacturing processes in order to develop high quality and high efficiency products

through professionalism and differentiation.

107

3. Competition niche, favorable and unfavorable factors in development prospects, and solutions

(1) Favorable factors

A. Product advantages continue to improve and drive the growth of market demand

Since the functions of notebook computers are continuously improving, and the weight

and modeling are becoming thinner and thinner, as well as the collocation of touch

control and continuous development of all kinds of digital mobile video multimedia

technologies, it has made the product line more extensive through innovation to meet

the demands of each consumer group.

B. Cloud computing is the mainstream in future development

The cloud computing industry and big data are both growing rapidly. In the future, the

cloud application business opportunities are infinite. The Group has been the industry

leader in the aspect of server OEM; through existing hardware technology and

application software development, we can take our place in the cloud computing

industry.

C. Construct an all-around system product line

Based on the good foundation of an existing all-around product line, in addition to

continuing to consolidate the notebook computer and server product fields, the Group

is also gradually expanding to relevant fields such as peripheral software products,

electronic information products, etc. with higher added value. Furthermore, in the solar

energy photovoltaic industry, through vertical integration and Group resources sharing,

the Group can take its place in the field of solar battery and module products.

D. Establishment of a global logistics supply chain system

In addition to strengthening the status of global manufacturing, research and

development, and the logistics center, the Group is also actively utilizing production

advantages and research and development factors in the Greater China economic circle

in order to construct a real time co-working platform with high efficiency and a market

feedback mechanism, and together with the setup of a research and development

innovation center, we will enhance technology and product design innovation

capability.

(2) Unfavorable factors

A. Since manufacturers in our country cannot sufficiently supply some important key

components, and we still rely on supply from overseas manufacturers, controlling both

material sources and price is not easy; for example, a significant natural disaster can

easily cause a supply chain disruption crisis.

Solution: The Company has long-term cooperative and strategic ally relationships with

major suppliers and has established multiple supply sources for important components

to ensure sufficient component supply; we also seek all kinds of approaches to

integrate the supply chain and reduce the impact.

B. The prices of important components have dropped rapidly, causing low price

computers to quickly extend, and supply manufacturers and brand manufacturers are

108

dominating the formulation of industry standards and mastering the distribution

channels, thus compressing the profits of downstream manufacturers.

Solution: In addition to being dedicated to the development of high added value

products and all-around products, we also actively improve operation efficiency in

such aspects as production, marketing, logistics, etc. to reduce operation costs and

improve overall operation efficiency through constructing Enterprise Resource

Planning (ERP), Supply Chain Management (SCM), and six sigma improvement

strategy.

C. Industrial technology is rapidly changing and constantly updating the environment of

shortening product life cycle and meager profits, causing fierce industry competition.

Solution: The Group will formulate a relevant operation risk management mechanism

to consider various operation strategies as relevant solutions; in addition to

coordinating with customers for the research and development of relevant demanded

commodities, we are also dedicated to patent and intellectual property innovation in

order to strengthen Group resource integration and expand emerging business

investments and arrangements to respond to changes in the market.

D. Our business is mainly export sales, so the change of exchange rate will significantly

impact company revenue and profit-making.

Solution: Most of the important components of the Company are purchased and

imported overseas and priced with foreign currency, and the sales are mostly priced

with foreign currency, which can naturally offset the impact of change of exchange

rate on revenue and cost. Furthermore, taking currency hedging measures can help us

reasonably avoid exchange rate risk.

4.2.2 Important uses and production processes of major products

1. Important uses of major product

Product

name Product type Important use

Computer

products

Notebook computers,

servers, and other

electronic information

products

Notebook computers are used for the storage,

computing, and analysis of digital and character data,

data transfer and receiving, etc. Through a server host

machine, several computers can execute the function of

computing, transfer, and data storage at the same time.

109

2.Production process

4.2.3 Major raw materials' supply condition

The major raw materials of the Group include central processing units, liquid crystal

displays, hard disks, etc. For the stability with regard to the quality of raw materials

suppliers, both delivery accuracy and quality specifications are factors in choosing

suppliers. The Group maintains a good cooperative relationship with its suppliers while

adopting a decentralized procurement process. We not only aim to strengthen the collection

and analysis of market conditions, but also strive for timely material supply to ensure

reasonable costs and sufficient material supply.

Key Material Suppliers

Item CPU PANEL HDD

Suppliers

INTEL AUO SEAGATE

AMD LG HGST

MARVELL INX TOSHIBA

Automatic assembly

SMT operation

SA operation

Welding repair and troubleshooting

Test

Semi-finished product assembly

LCM semi-finished product assembly

test

Process inspection

Finished product assembly


Outfit assembly Process inspection

Test

Image DL

Visual inspection

on appearance

Packing

Finished

product

storage

Outgoing quality control

Finished product

shipment

Automatic assembly

SMT operation

SA operation

Welding repair and troubleshooting

Test

Semi-finished product assembly

LCM semi-finished product assembly

Test

Process inspection

Finished product

assembly


Outfit assembly

Process inspection

Test

Image DL

Visual inspection

on appearance

Packing

Finished product

storage

Outgoing quality

control

Finished product

shipment

110

4.2.4 Major Accounts in the Past Two Years

A. Major Suppliers

Unit: NT$ Thousand

2014 2015 As of end of Q1, 2016

Item Company Amount

Percen

tage o

f total

Net P

urch

ases

Relatio

nsh

ip w

ith

the issu

er

Company Amount

Percen

tage o

f total

Net P

urch

ases

Relatio

nsh

ip w

ith

the issu

er

Company Amount

Percen

tage o

f total

Net P

urch

ases

Relatio

nsh

ip w

ith

the issu

er

1 A 161,206,331 44 Nil A 165,344,764 50 Nil A 39,992,440 46 Nil

2 B 50,202,590 14 Nil B 8,366,803 3 Nil B 383,747 0 Nil

3 Others 150,976,983 42 - Others 154,311,850 47 - Others 46,778,658 54 -

Total Net Purchases 362,385,904 100 -



B. Major Clients

Unit: NT$ Thousand

2014 2015 As of end of Q1, 2016

Item Company Amount P

ercentag

e of

total N

et Sales

Relatio

nsh

ip

with

the issu

er

Company Amount

Percen

tage o

f

total N

et Sales

Relatio

nsh

ip

with

the issu

er

Company Amount

Percen

tage o

f

total N

et Sales

Relatio

nsh

ip

with

the issu

er

1 C 223,243,940 51 Nil C 239,147,943 61 Nil C 57,504,245 60 Nil

2 D 73,012,045 17 Nil D 12,969,145 3 Nil D 667,545 1 Nil

3 Others 139,343,983 32 - Others 143,353,133 36 - Others 37,191,801 39 -

Total Net

Sales 435,599,968 100 -

Total Net

Sales 395,470,221 100 -

Total Net

Sales 95,363,591 100 -

4.2.5 Production Value in the Most Recent Years Unit: 1,000 pcs, NT$ Thousand

Quantity & Value

Major Product

2014 2015

Capacity Quantity Value Capacity Quantity Value

IT Product 414,445 314,888 353,989,199 522,641 350,125 311,481,323

Solar Product 211,432 196,959 12,201,048 282,540 268,699 12,832,227

Total 625,877 511,847 366,190,247 805,181 618,824 324,313,550

111

4.2.6 Sales Value in the Most Recent Years

Unit: 1,000 pcs, NT$ Thousand

Quantity &

Value

Major

Product

2014 2015

Domestic Export Domestic Export

Quantity Value Quantity Value Quantity Value Quantity Value

IT Product 17 25,064,790 311,860 399,294,489 13 21,986,826 354,234 360,580,881

Solar Product 8,046 2,514,229 165,333 8,725,474 16,849 1,673,578 250,292 11,228,698

Others - - - 986 - - - 238

Total 8,063 27,579,019 477,193 408,020,949 16,862 23,660,404 604,526 371,809,817

4.3 Human Resources

Year 2014 2015 Up to

Mar. 31, 2016

Employee

Number

Direct Labor 36,128 35,702 34,107

Indirect Labor 12,928 13,416 13,041

Total 49,056 49,118 47,148

Average Age 25.93 27.25 27.56

Average Seniority 2.47 2.61 2.84

Education

Distribution

%

PhD Degree 0.10% 0.12% 0.12%

Master Degree 3.06% 3.79% 3.83%

College 24.72% 26.50% 26.96%

High School

(and below) 70.67% 69.59% 69.09%

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4.4 Information on Environmental Protection Costs

4.4.1 The total amount of loss (including compensation) and punishment suffered

from polluting the environment

In recent years and as of the date of publication, the Company has not suffered loss or

punishment due to polluting the environment.

4.4.2 Future solutions (including improvement measures) and possible expenditures

In view of global green movements and the new wave of Internet technology innovation,

Inventec actively promotes the "Green energy environmental protection" strategy, mastering

the low carbon trend and developing towards a green economy. In addition to formulating the

social responsibility policy of "environmental protection, culture, poverty relief, and

community" as the foundation for promotion, Inventec has also set "Green product", "Green

production", and "Green life" as environment and quality objectives in order to meet the

expectations of each interested party. Inventec has been continuously adhering to the

environment and quality policies and sustainable projects formulated, as well as implementing

a series of plans. In 2015, the cost of relevant environmental protection expenditures of

Inventec was approximately NTD118.5 million, which mainly included waste disposal,

maintenance of pollution control equipment, environment detection, ecological afforestation,

green management system validation, product environmental protection mark certification,

environmental education, energy saving and carbon reduction projects, environmental

preservation activities, occupational health, and green supply chain management, among

others.

In order to comply with corporate sustainable development and social responsibility, Inventec

is constantly optimizing the existing comprehensive green management system. It takes the

circulation of PDCA (Plan, Do, Check, Action) in the ISO 9001 quality management system

as the basis to gradually optimize all kinds of green management systems, such as ISO14001

environmental management system, IECQ QC 080000 hazardous substance process

management system, ISO 14064-1 greenhouse gas management system, ISO 50001 energy

management system, TOSHMS, OHSAS 18001, and other safety, health, environment, and

energy management systems.

In response to the demands of the government, customers, and international investment

institutions on low carbon economies, Inventec has actively arranged the green energy

industry and continuously pursues the reduction of the impact of products on the environment

through green research and development, implementing green plants, enhancing energy

saving and water saving, reducing production energy consumption, disclosing environmental

information, etc. Regarding environmental sustainability, Inventec strives to break through the

current situation while reducing long-term operation cost. Since 2012, Inventec has set up a

solar energy power generation cleaning device in its Pudong Plant, which began operation in

2013. The solar energy power generation made available is 3.2 million degrees of electricity

every year, which accounted for approximately 1.54% of the total power consumption in nine

of Inventec’s major plants.

Saving energy and improving equipment energy efficiency have always been major directions

113

of Inventec. Over the years, Inventec has been devoted to energy saving and carbon reduction

and green energy environmental protection and finally achieved the phased goal in green

building in March 2016, showing our determination to attach importance to green energy

environmental protection and caring for the earth.

In response to the issue of global energy depletion and climate change and to fulfill our

responsibility as corporate citizens, Inventec has set medium and long-term reduction goals,

namely "Take 2010 as the benchmark, reduce greenhouse gas emissions by 10% by 2020", in

the hope of making certain contributions to the green economy and mitigating climate change.

The "Inventec Group 2015 Greenhouse Gas Inventory Report" has been disclosed on the

company website. Inventec has imported a greenhouse gas inventory system since 2008, and

so far, it has completed nine years (from 2007 to 2015) of greenhouse gas inventory

operations. Meanwhile, in order to optimize inventory operation, in 2011, Inventec’s GHG

Portal was set up, which allows all inventory operations and the verification of third party

certification units to be completed in the platform, effectively improving inventory quality

and efficiency, and reducing unnecessary manual operation time and manual mistakes in order

to achieve the effect of energy saving and carbon reduction. In 2015, the total greenhouse gas

emissions of Inventec and Inventec Appliances Corp.’ major plants was 270,564.911 tonnes of

carbon dioxide; the main emission originated from purchasing electricity externally,

accounting for 93.58% of total emissions, an increase of 8,288.13 tonnes of carbon dioxide

compared to the 262,276.781 tonnes of emissions in 2014. The main reason for increase was

the expansion of production capacity in Chongqing Plant of Inventec and Nanjing Plant of

Inventec Appliances Corp..

In order to spread Inventec's green enterprise influence, Inventec actively promotes the green

supply chain and holds Taiwan and mainland China supplier environmental protection

conferences through all kinds of assistance and integration with suppliers in order to

propagate the requirements related to conflict minerals, carbon marks, biodiversity etc. to its

cooperating supply partners, with the hope of making certain contributions to mitigate global

warming.

Inventec has been devoted to environmental and ecological protection for a long time. In

response to the implementation of the "Environmental Education Act", in addition to

amending the company "Code of Corporate Social Responsibility", constructing an

environmental education workplace, and implementing educational training on environmental

management, Inventec also adopts community parks, holds community environmental

protection lectures, and participates in the preservation of the important national wetland

"Kwan-tu Nature Park". Since 2012, Inventec and Inventec Group Charity Foundation has

adopted the important national wetland "Kwan-tu Nature Park" with the five-year plan of

"Love ‧ Happiness - Let us care for the ecological environment on earth together". Through

the company environmental protection volunteers' participation in wetland maintenance, we

hope to enable more citizens and children to understand the function and importance of

wetlands and properly care for such precious land in order to maintain biodiversity. With

regard to ecological education, in order to let children from the community’s disadvantaged

families learn about wetlands, Inventec has continuously cooperated with Kwan-tu Nature

Park to hold the "Aquatic Family Nature Exploration Experience Course" to promote

ecological conservation, which allows children with a lack of resources to cultivate proper

114

concepts and actions to protect Taiwan’s wetlands. In 2015, a total of eight courses were held,

benefitting 240 school children.

4.5 Labor Relations

Attaching importance to and maintaining harmonious labor-capital relationships has always

been one of the important foundations of the company’s operation and management; measures

that promote labor-capital relationships are summarized below:

4.5.1 Welfare measure and retirement system

Provide a stable working environment with development space, make talents stable, and

continue to create value! Based on government laws and decrees, the Company provides all

kinds of proper basic labor conditions to employees, including two-day weekends, a flexible

working hours mechanism, and a thorough ask for leave system. We also periodically hold

soft incentive lectures so that employees can obtain a balance between life and work. With

regard to safety and health and job security, in addition to basic welfares, such as labor

insurance, health insurance, pension allocation etc., every employee enjoys regular health

examinations and is insured with complete group insurance. Pursuant to the standards of the

"Labor Pension Act", we have also formulated thorough employee retirement programs and

actually implement them pursuant to the relevant laws and decrees. The old system part: we

regularly allocate reserves for labor retirement and deposit them into a special account in the

Bank of Taiwan, and the Labor Pension Supervision Committee is responsible for managing

and utilizing the reserve for retirement; the new system part: for employees choosing the new

system, every month, the Company will allocate 6% of pension to the employee's personal

special account in the Bureau of Labor Insurance, Council of Labor Affairs, liberating

employees from any worry at work. Furthermore, we have created performance-oriented

promotion, dividends, and all kinds of reward mechanisms to achieve the objective of

retaining talents and profit-sharing.

4.5.2 Work environment and employee personal safety protection measures

Within the Company, the Industrial Safety and Health Office is responsible for planning all

kinds of safety, health, and environment management matters and supervising relevant

departments in implementing and executing all kinds of safety, health, and environment

affairs. Furthermore, the Company has created an Occupational Safety and Health Committee

pursuant to law, which works on such matters as safety and health related regulations, an

occupational safety and health management system, an educational training implementation

plan, preventing hazardous equipment or raw materials, operating environmental monitoring

and improvements, occupational health management, health promotion, health protection, etc.,

which will be planned, promoted and propagated by a dedicated work, safety, and health unit

in each department for implementing and executing relevant matters. Furthermore, in order to

ensure employee safety and health, we have formulated the "Occupational Safety and Health

Policy" to focus on occupational safety and health related matters, actively carry out

occupational safety and health education, prevent the occurrence of occupational disasters,

promote a healthy workplace, facilitate employee health, and establish good communication

115

and consulting channel to effectively carry out continuous improvement in order to reduce the

risk of all kinds of hazards and let all employees work peacefully in a safe professional

environment.

Regarding safety, health, and environmental management, the Company has acquired all kinds

of certifications in safety, health, and environment energy systems, including "TOSHMS

Taiwan Occupational Safety and Health Management System", "OHSAS-18001 International

Occupational Health and Safety Assessment Series", "ISO-14001 Environmental Management

System", and "ISO-50001 Energy Management System" certification. Furthermore, the

Company has also won all kinds of awards issued by the government, including: the "Health

Excellence Award" for a Taipei City excellent healthy workplace, "Health LOHAS Award"

and "Health Sustainability Award" for a national excellent healthy workplace, "No Smoking

Workplace Model", "Excellent Independent Management Unit", "Blood Donation Excellence

Unit", "General Industry Excellent Independent Management Unit", "Excellent Breastfeeding

Room Certification", "Healthy Workplace Independent Certification - Health Promotion

Mark", "Labor Safety Award", "Carbon Reduction Model Award", "Corporate Social

Responsibility Award", "Energy Saving and Carbon Reduction Action Badge",

"Environmental Sustainability Award", "Excellent Unit in Labor Safety and Health

Promotion", "Excellent Unit in Hazard-Free Working Hour Implementation", "Excellent

Employee Welfare Business Unit", "Labor Safety and Health - Five Star Award", etc. In 2014,

we won Taipei City’s "Labor Safety Excellent Unit - Enterprise Award", the national "Labor

Safety and Health Excellent Unit Award", the Ministry of the Interior’s "Blood Donation

Excellent Enterprise Award", the National Health Service, Executive Yuan’s "Healthy

Workplace Certification - Health Promotion Badge", "ROC Enterprise Environmental

Protection Award", and "2014 Taiwan Enterprise Sustainability Award - Gold Award". In 2015,

we won the Ministry of Labor, Executive Yuan’s "Labor Safety Excellent Unit Award",

"Certificate of Merit for Hazard-Free Working Hour Record", Commonwealth Magazine’s

"World Corporate Citizenship Award", the Ministry of Labor, Executive Yuan’s "National

Excellent Occupational Safety and Health Unit Award", the Environmental Protection

Administration, Executive Yuan’s "Enterprise Environmental Protection Award", and Taiwan

Sustainable Energy Foundation’s "Taiwan Corporate Sustainability Report Award".

Meanwhile, we have also actively coordinated with all kinds of government policies to

promote and participate in relevant activities in order to further facilitate good and

harmonious labor-capital relationships, fulfill our corporate social responsibility, and move

towards the objective of corporate sustainable development.

1. Occupational safety and health policy: The Company has formulated its Occupational

Safety and Health Policy according to the requirements of the Taiwan Occupational

Safety and Health Management System (TOSHMS) and International Occupational

Health and Safety Assessment Series (OHSAS 18001), taking them as the highest

criteria for guaranteeing employees’ work safety.

2. Occupational safety and health management unit and personnel allocation: In order to

comply with laws and regulations to carry out risk assessment and continuous

improvements, the Industrial Safety and Health Office, as a whole, plans to handle and

execute all kinds of safety, health, and environment management related affairs. All

members possess safety, health, and environment professional certificates.

116

3. Setting of Occupational Safety and Health Committee and conference convening: The

Company will regularly convene the Occupational Safety and Health Committee

conference; it is currently convened once every quarter, so four times a year.

4. Safety, health and environment management plan and occupational disaster prevention:

Safety, health, and environment management plans are formulated pursuant to law and

include occupational disaster prevention. Items that are planned to be formulated include:

working environment or operation hazard identification, assessment and control,

hazardous chemicals classification and marking, general education and management,

purchase management, contractor management, safety and health operational standard

formulation, occupational disaster, near miss and investigation, handling and statistical

analysis on events affecting physical and psychological health, safety, health, and

environment management records, performance assessment measures, etc.

5. Health management plan and physical health examinations: Before reporting to the

Company, new employees shall provide a physical examination report pursuant to law;

moreover, better than what is required by regulations, in-service personnel will regularly

receive health examinations every year.

6. Automatic safety and health inspection: Pursuant to the Occupational Safety and Health

Act, the Company will automatically include each machine and piece of equipment that

should be inspected in the occupational safety and health management plan and

formulate automatic inspection management measures for management.

7. Operating environment monitoring and occupational disease prevention measures:

Based on the operating environment hazard property of the Company, as well as

monitoring purpose and relevant guidance announced by the central governing authority,

the Company has formulated an operating environment monitoring plan that includes a

sampling strategy and regularly carrying out operating environment monitoring

accordingly. Meanwhile, we also conduct results comparisons according to test results;

if the test data is relatively higher than the previous test data, we will immediately carry

out a risk identification investigation in order to reduce site hazards and achieve the

objective of preventing occupational disease and reducing site risk.

8. Strengthen contracting management: The Company has formulated contractor safety

operation management measures and requires the engineering unit to carry out

contractor safety and health educational training before starting engineering construction.

Relevant units will convene contractor safety and health management conferences to

carry out hazard notification and ask suppliers to sign the "Contracting Unit/Contractor

Safety and Health Meeting Minutes", "Contractor Safety and Health Management

Commitment", and "Contractor In-plant Work Application" of the Company. Upon

engineering construction, the contractor shall follow all kinds of operation management

measures of the Company, and the occupational safety and health unit will execute

contractor safety appraisal and abnormal deficiency analysis, as well as execute

prevention education according to the appraisal and analysis results in order to ensure

reduction of risks that might be caused by contracting construction.

9. Hazard risk assessment identification: Pursuant to the Taiwan Occupational Safety and

Health Management System "TOSHMS" and International Occupational Health and

117

Safety Assessment Series "OHSAS 18001", the Company has formulated safety and

health hazard risk identification and assessment management measures, regularly

execute comprehensive hazard identification and risk assessment operations according

to all kinds of potential factors that may cause personnel injury or accident, and further

formulate occupational safety and health targets, objects, and management plans as the

basis for planning the safety and health management system.

10. Occupational safety and health management plan: According to the results of the

occupational safety and health hazard identification and risk assessment, the Company

will give priority to certain high risk activities as improvement targets and regularly

trace the improvement effect by carrying out the management plan.

11. Safety and health educational training promotion: The Company will carry out safety,

health, and environment management and educational training for new employees;

educational training on safety, health, and environment risk identification, management

plan, laboratory education, laws and regulations, special operations, system documents,

internal audits, etc. will be otherwise given to key safety, health, and environment

members and relevant personnel in order to reduce the occurrence of occupational

disasters and ensure workplace safety.

12. The Company will regularly carry out fire lecturing and fire drills, emergency

evacuation drills, and fire tour inspections, regularly check all kinds of safety facilities,

and conduct task grouping and fire equipment drills to implement disaster prevention

and relief work.

13. Product development and design shall emphasize environmental issues and are aimed

at the advantages of low energy consumption, low pollution, recoverable, and

recyclable. Furthermore, energy saving and carbon reduction matters will be carried out

to reduce waste generation and the impact on the environment in order to achieve the

objectives of zero public hazard, diligent waste reduction, green products, and

ecological preservation, thus fulfilling our corporate responsibility and promoting

sustainable environmental protection.

14. The Company respects the life of laborers and emphasizes the health of colleagues by

effectively carrying out occupational health promotion activities and implementing

health management; furthermore, the Company is devoted to zero disaster related

prevention work to maintain zero disasters and care for its employee in order to

improve its healthy corporate image and move towards a healthy and sustainable

workplace.

4.5.3 Further education and training for employees

The Company adheres to a "talent-oriented" cultivation philosophy, provides outstanding

internal and external teachers and diversified cultivation channels to company talents, and is

devoted to balancing the emphasis on educational training and learning development in order

to continuously promote the Company’s corporate culture and continuously improve its

competitive advantage. In 2015, the expenditures related to employee training were

NT$10,775,149, and the total training hours were 56,756 hours.

118

"Talent cultivation" is the foundation for Inventec's sustainable operation, and the Company

continuously creates a friendly environment for employee's learning and growth. The

educational training system of the Company is divided into five major types of courses

centered on core value courses and delivers the corporate culture and value theory of Inventec.

Taking level type course and function type course as the two major axis, the Company teaches

employees in accordance with their aptitude, specifically plans personal development plan for

employee's career development, and assists colleagues to strengthen the capabilities required

at work. The language school provides further language education opportunities to the

employees to improve their personal competitive advantage; digital courses provide a

diversified learning environment, which allows colleagues to learn anytime, anywhere.

Course descriptions are summarized below:

(1) Core value course: Inventec pursues the maximization of shareholders' equity while

implementing corporate responsibility to make a certain contribution to society. All the

Company’s colleagues, from top to bottom and from inside out, have been shaped with

"Inventec" DNA through official conferences and activities, allowing employees to

acknowledge the operation philosophy of the company and become "Inventec Staff".

Contents include such courses and activities as monthly meetings, assistant level

meetings, management forums, strategic meetings, soft/incentive lectures, team

building exercises, etc.

(2) Level type course: Management courses are planned according to the demand of

colleagues at different levels; through meetings and daily communication, it improves

the colleagues' management capability and establishes a common communication

language and management beliefs to improve organizational performance. Contents

include: Inventec EMBA advanced class, senior supervisor training, advanced

supervisor training, basic supervisor training, professional training, new employee

training, production personnel training, etc.

(3) Function type course: These provide all kinds of professional knowledge and technical

bases, as well as advanced courses and lectures, to satisfy the functions of employees

needed in different specialties. Contents include innovation, product technology,

research and development production technology, patent and intellectual property,

industry intelligence, environmental safety and health, etc.

(4) Language school: In response to international development and the competition of the

Group, Inventec has been devoted to cultivating technology talents with multi-language

capabilities. English and Japanese seminars are held every quarter, thus providing

colleagues a learning environment for continuous language learning in the company,

and foreign language skills classes are also set up to immediately satisfy colleagues'

business demands. Meanwhile, internal English and Japanese tests will be held every

quarter to encourage colleagues to pass the test to acquire substantial affirmation and

allowance.

(5) Digital course: These provide colleagues an e-Learning on-line learning service,

constructs the Inventec networking academy, and is open as an important media for

employees' independent learning in order to facilitate the improvement and innovation

of technical capability, as well as further promote organizational learning and improve

119

work value and organizational competitiveness. Its contents cover all kinds of language,

management, and professional courses, thus allowing employees to learn independently

without time and place limitations.

4.5.4 Employee code of conduct

The Company has formulated "Global Employee Code of Conduct Management Measures" in

each plant, which stipulate the basic code of conduct for labor and capital on the basis of

fairness and impartiality. As an Inventec employee, when facing all kinds of work behaviors

and ethical and legal problems, we shall aim to create shareholder and employee value and

ensure social responsibility; therefore, under the precondition of following the basic

requirements of laws and ethical standards of each country or district, we shall abide by all

kinds of internal control systems of the company. Upon reporting for duty, every colleague

must sign and abide by it, and it shall be placed on the internal portal website, so that all

colleagues can read it at any time, and regularly carry out signing and promotion work; the

code of conduct is hereby summarized below:

(1) Safeguard a healthy work environment without sexual discrimination.

(2) All company-related confidential information must be kept confidential.

(3) Employees must protect the personal information of other persons circulated internally

or acquired upon business execution.

(4) Employees must protect intellectual property rights.

(5) Employees must abide by copyright regulations.

(6) Employees must not be involved in corruption or bribery of any kind.

(7) Employees must not participate in insider trading and avoid conflicts of interest.

In case of violation of the relevant requirements above, relevant punishment will be imposed

without exception.

In order to provide all employees with a healthy, safe, and highly efficient working

environment, the "Global Employee Code of Conduct Management Measures" also stipulates

that no employee or applicant shall be discriminated against or deprived of talent development

opportunities due to gender, age, race, color, nationality, religion, disability, or other factors

irrelevant to the legal interests of Inventec. Furthermore, each plant has set up an "Employee

Complaint System" to guarantee a fair arbitration mechanism when employees suffer from

human rights related infringements. In the plants in mainland China, a grassroots employee

caring group has been especially set up to handle employee complaints and understand the

employee's voice through employee interviews, etc.

4.5.5 Labor and capital communication mechanism

Through all the communication mechanisms listed below, the Company provides employees

with real-time responses and regular communication channels in order to facilitate a

harmonious working atmosphere and create a win-win situation for both the labor and capital.

120

(1) Two-way talks between grassroots employees and senior supervisor: quarterly

meetings and all kinds of symposiums occasionally held.

(2) Management policy and business process communication: communication meetings

for employee representatives from each department will be regularly held every

month.

(3) Cross-department communication and labor and capital communication: an internal

portal platform sets the multi-functional "Employee Opinion Exchange Area".

(4) Instant response problem and information consultation: each unit has established a

service consultation window and service hot line.

(5) Employee welfare policy and welfare promotion: employee welfare committee

monthly meetings and temporary meetings.

(6) Grassroots employees care group: handle employee complaints and understand the

employees' voice through employee interviews, etc.

4.5.6 In recent years and as of the date of the annual report publication, losses

suffered from labor dispute and disclosure of the estimated amount that are

occurring currently and likely to occur in the future and the resolution

In recent years and as of the date of the annual report publication, the Company has not

suffered any loss from labor disputes; it is estimated that, under the circumstances that the

Company continuously and actively promotes and implements all kinds of employee welfare

measures, there shall be no losses suffered from labor disputes in the future.

121

4.6 Important Contracts

Contract Nature Counterparty Contract Term Major Contents Restrictions

Sales

Agreement

HP Inc.

Three years from 1998/6/1;

automatically renewable for

one year terms

Acceptance of order and

production of HP branded

notebook products

The duty of

confidentiality

Quality

Agreement Same as above

Production of notebook products

compliant with HP quality

requirements based on Sales

Agreement.

The duty of

confidentiality

Service and

Support

Agreement

Same as above

Provision of necessary

components, after sales services

and related technical support for

HP branded notebook products

made based on Sales Agreement

The duty of

confidentiality

Sales Contract

Hewlett

Packard

Enterprise

Company

Four years from 2000/12/1;


one year terms


production of HP branded server

products

The duty of

confidentiality

Q

Quality

Agreement

Same as above

Production of server products

compliant with HP quality

requirements based on Sales

Agreement.

The duty of

confidentiality

S

Service and

Support

Agreement

Same as above




HP branded server products made

based on Sales Agreement

The duty of

confidentiality

Sales Contract

Toshiba

Corporation

One year from 2002/1/1 and


one year terms; effective on

2004/6/1 and automatically

renewable for one year

terms


production of Toshiba branded

notebook products

The duty of

confidentiality

Service

Contract Same as above




Toshiba branded notebook

products made based on Sales

Agreement

The duty of

confidentiality

Sales Contract Dell Prpducts

L.P.

Three years from 2008/4/21;


one year terms


production of Dell branded

notebook and server products

The duty of

confidentiality

122

Contract Nature Counterparty Contract Term Major Contents Restrictions

Sales Contract

Fujitsu

Limited

Five years from 2007/4/1;


one year terms


production of Fujitsu branded

computer system products

The duty of

confidentiality

Quality

Contract

Effective from 2007/4/1

until terminated by mutual

agreement of the parties

Production of products compliant

with Fujitsu quality requirements

based on the contract

The duty of

confidentiality

Syndicated

Loans Contract

Syndicated

Loans banks

Three Years from

2015/10/22

The Participant banks agree to

provide agreed credit line to

Inventec Corporation during the

contract term

None

123

Ⅴ. Financial Information 5.1 Five-Year Financial Summary

5.1.1 Five-Year Financial Summary - Consolidated Balance Sheet – IFRS

Unit: NT$ Thousands

Year

Item

Five-Year Financial Summary 01/01/2016

~3/31/2016 2011 2012 2013 2014 2015

Current Assets 121,900,414 130,970,654 168,811,543 151,098,840 133,577,659 120,941,355

Property, Plant and Equipment 38,207,206 35,238,180 34,032,310 35,073,036 34,660,330 40,052,559

Intangible Assets 1,158,928 982,226 887,259 901,392 872,905 866,723

Other Assets 12,737,205 12,029,148 10,440,024 8,628,461 6,635,579 5,893,670

Total Assets 174,003,753 179,220,208 214,171,136 195,701,729 175,746,473 167,754,307

Current

Liabilities

Before Distribution 107,014,115 109,720,439 135,212,247 126,668,060 98,771,869 95,909,222

After Distribution 108,053,963 112,590,419 140,952,207 132,946,141 －

－

Non-Current Liabilities 11,148,146 13,967,429 17,146,701 4,610,879 14,075,755 8,083,002

Total

Liabilities



－

Total Equity Attributable to

Owners of Parent 48,369,571 49,757,813 54,837,123 57,578,038 56,480,704 57,371,906

Share Capital 34,661,595 35,874,751 35,874,751 35,874,751 35,874,751 35,874,751

Capital Surplus 2,899,296 2,927,057 2,895,677 2,920,718 2,912,784 2,912,784

Retained

Earnings



－

Other Equity Interest 1,474,888 709,531 1,641,264 3,009,234 2,809,350 2,469,224

Treasury Stock －

－

－

－

－

－

Non-Controlling Interests 7,471,921 5,774,527 6,975,065 6,844,752 6,418,145 6,390,177

Total

Equity



－

Note 1: Above financial information has been audited (review) by CPA.

Note 2: The company also compiles individual statements. The brief individual balance sheet of the recent

five years is as follows.

124

Five-Year Financial Summary - Individual Balance Sheet– IFRS

Unit: NT$ Thousands

Year

Item

Five-Year Financial Summary

2011 2012 2013 2014 2015

Current Assets 76,834,419 98,042,298 156,799,371 109,949,533 91,631,494

Property, Plant and Equipment 6,423,112 6,232,467 6,030,123 5,820,213 5,739,243

Intangible Assets 56,338 62,352 75,128 86,258 56,851

Other Assets 33,291,531 30,517,611 34,040,342 37,385,215 38,286,030

Total Assets 116,605,400 134,854,728 196,944,964 153,241,219 135,713,618

Current

Liabilities

Before Distribution 57,673,474 72,329,394 126,500,178 93,810,253 68,203,221


Non-current liabilities 10,562,355 12,767,521 15,607,663 1,852,928 11,029,693

Total

Liabilities



Total Equity Attributable to

Owners of Parent 48,369,571 49,757,813 54,837,123 57,578,038 56,480,704

Share Capital 34,661,595 35,874,751 35,874,751 35,874,751 35,874,751

Capital Surplus 2,899,296 2,927,057 2,895,677 2,920,718 2,912,784

Retained

Earnings



Other Equity Interest 1,474,888 709,531 1,641,264 3,009,234 2,809,350

Treasury Stock －

－

－

－

－

Non-Controlling Interests －

－

－

－

－

Total

Equity




125

5.1.2 Five Year Financial Summary-Consolidated Statement of Comprehensive Income-IFRS

Unit: NT$ Thousands

Year

Item

Five-Year Financial Summary (Note2) 01/01/2016~

03/31/2016 2011 2012 2013 2014 2015

Sales Revenues 410,937,895 461,091,703 435,599,968 395,470,221 95,363,591

Gross Profit from Operation 19,147,808 22,808,470 23,348,338 21,705,408 5,645,077

Operating Expenses 3,606,340 7,511,866 7,109,079 5,407,268 1,865,142

Non-Operating Income and

Expenses -86,092 1,412,460 2,571,619 1,776,602 19,194

Profit before Income Tax 3,520,248 8,924,326 9,680,698 7,183,870 1,884,336

Profit for the Period 1,769,853 6,209,438 6,665,561 4,975,735 1,365,468

Loss from Discontinued

Operations －

－

－

－

－

Profit (Loss) for the Period 1,769,853 6,209,438 6,665,561 4,975,735 1,365,468

Other Comprehensive

Income (Loss) for the Period,

Net of Tax

-851,066 925,163 1,359,826 -245,620 -341,736

Total Comprehensive Income

for the Period 918,787 7,134,601 8,025,387 4,730,115 1,023,732

Profit Attributable to Owners

of Parent 3,253,368 7,074,172 7,097,815 5,563,633 1,231,328

Profit Attributable to

Non-Controlling Interests -1,483,515 -864,734 -432,254 -587,898 134,140

Comprehensive Income

Attributable to Owners of

Parent

2,400,327 8,011,952 8,455,834 5,315,880 891,202


Attributable to

Non-Controlling Interests

-1,481,540 -877,351 -430,447 -585,765 132,530

Basic Earnings Per Share 0.91 1.97 1.98 1.55 0.34


Note 2: If the adoption of IFRS for the financial information is less than five years, the ROC GAAP financial

information shall be disclosed.

Note 3: The company also compiles individual statements. The brief individual comprehensive income sheet

of the recent five years is as follows.

126

Five-Year Financial Summary-Individual Statement of Comprehensive Income-IFRS

Unit: NT$ Thousands

Year

Item

Five-Year Financial Summary（Note2）

2011 2012 2013 2014 2015

Sales Revenues 320,807,295 369,228,630 330,784,531 289,354,169

Gross Profit from Operation 13,396,524 15,126,403 13,346,958 12,049,443

Operating Expenses 5,790,761 6,666,457 4,471,632 3,801,715

Non-Operating Income and

Expenses

-1,733,261 1,894,985 4,293,281 2,781,569

Profit before Income Tax 4,057,500 8,561,442 8,764,913 6,583,284

Profit for the Period 3,253,368 7,074,172 7,097,815 5,563,633

Loss from Discontinued

Operations

－

－

－

－

Profit (Loss) for the Period 3,253,368 7,074,172 7,097,815 5,563,633

Other Comprehensive Income

(Loss) for the Period, Net of

Tax

-853,041 937,780 1,358,019 -247,753

Total Comprehensive Income

for the Period

2,400,327 8,011,952 8,455,834 5,315,880

Profit Attributable to Owners

of Parent

3,253,368 7,074,172 7,097,815 5,563,633

Profit Attributable to


－

－

－

－


Attributable to Owners of

Parent

2,400,327 8,011,952 8,455,834 5,315,880


Attributable to


－

－

－

－

Basic Earnings Per Share 0.91 1.97 1.98 1.55




127

Five-Year Financial Summary - Individual Statement of Comprehensive Income –– TW GAAP

Unit: NT$ Thousands

Year

Item

Five-Year Financial Summary

2008 2009 2010 2011 2012

Sales revenues 350,652,991 398,133,990 349,334,999 338,417,358 320,465,451

Gross profit from operation 12,656,398 13,992,034 14,810,141 13,738,319 14,011,124

Operating expenses 3,757,354 5,342,751 4,245,561 4,454,217 5,785,216

Non-operating income 2,443,090 591,618 1,491,969 526,124 314,736

Non-operating expenses -683,167 -686,878 -1,749,887 -2,002,651 -2,083,067

Income from operations of

continued segments -

before tax

5,517,277 5,247,491 3,987,643 2,977,690 4,016,885

Income from operations of

continued segments - after

tax

5,335,433 4,612,739 3,482,413 2,425,354 3,214,562

Income from discontinued

departments －－－－－

Extraordinary gain or loss －－－－－

Cumulative effect of

accounting principle

changes

－－－－－

Net income (loss) 5,335,433 4,612,739 3,482,413 2,425,354 3,214,562

Basic

earnings per

share ($)

(Note 2)

Before

adjustment 2.08 1.64 1.18 0.79 0.90

After

adjustment 1.89 1.56 1.18 0.76 －

Note 1: Above financial information has been audited by CPA.

Note 2: Earning per share is calculated according to the adjusted weighted number of shares. For

capitalization with retained earnings or additional paid-in capital, it will be adjusted by the capital

increase ratio. The issuance time of the shares will not be taken into consideration.

5.1.3 CPAs and Their Opinions for Most Recent 5-Year

Year CPA Firm CPA’S Name Auditing Opinion Remarks

2011 KPMG Lin, Wan-Wan & Chen, Ying-Ju Modified Unqualified



2014 KPMG Chen, Ying-Ju & Yang, Liu-Fong Modified Unqualified Internal Adjustment in

the Accounting Firm

2015 KPMG Chen, Ying-Ju & Yang, Liu-Fong Unqualified

128

5.2 Five-Year Consolidated Financial Analysis – IFRS

Year

Item

Five-Year Financial Analysis (Note2) 01/01/2016~

03/31/2016 2011 2012 2013 2014 2015

Capital

structure

(%)

Debt ratio 69.01 71.14 67.08 64.21 61.99

Ratio of long-term capital to

property, plant and equipment 197.23 232.01 196.83 222.08 179.38

Solvency

( % )

Current ratio 119.37 124.85 119.29 135.24 126.10

Quick ratio 86.86 95.08 92.95 104.37 88.91

Times interest earned (Times) 4.00 14.48 8.74 8.86 30.84

Operating

ability

Accounts receivable turnover

(Times) 6.91 7.38 6.45 6.12 6.51

Average collection period 53 49 57 60 56

Inventory turnover (Times) 11.11 11.34 11.10 11.74 10.74

Accounts payable turnover

(Times) 5.53 5.17 4.90 5.64 5.97

Average days in sales 32.86 32.19 32.88 31.09 34.00

Property, plant, and equipment

turnover (Times) 11.66 13.55 12.42 11.41 9.52

Total assets turnover (Times) 2.29 2.15 2.23 2.25 2.27

Profitability

Return on total assets (%) 1.55 3.44 3.76 3.09 0.83

Return on stockholders' equity (%) 3.18 10.58 10.56 7.82 2.16

To pay-in

Capital (%)

Operating income 10.05 20.94 19.82 15.07 5.20

PBT 9.81 24.88 26.98 20.02 5.25

Net profit margin (%) 0.43 1.35 1.53 1.26 1.43

Basic earnings per share ($) 0.91 1.97 1.98 1.55 0.34

Cash flow

Cash flow ratio (%) 18.49 15.61 0.64 17.23 0.90

Cash flow adequacy ratio (%) Note4 Note4 Note4 Note4 Note4

Cash reinvestment ratio (%) 0.20 0.16 -0.05 0.09 0.01

Leverage Operating leverage 3.93 4.74 5.14 3.89 3.41

Financial leverage 1.48 1.10 1.21 1.20 1.04

129

Analysis of financial ratio change in the last two years. (If the difference does not exceed 20%, the analysis

is not required.)

1. Return on stockholders' equity : The decrease in this period is mainly due to the change of product

portfolio generated from market factors, which resulted in a decrease in revenue; furthermore, the

depreciation of the RMB has caused the reduction of profit and loss from foreign currency exchange, thus

resulting in the reduction of overall profit and loss after tax when compared with last period.

2. Operating income to pay-in capital ratio : The decrease in this period is mainly due to the change of

product portfolio generated from market factors, which resulted in revenue reduction and a decrease in

operating income.

3. PBT to pay-in capital ratio : The decrease in this period is mainly due to the reduction of revenue and

profit and loss from foreign currency exchange, thus resulting in the reduction of profit and loss before

tax..

4. Basic earnings per share : The decrease in this period is mainly due to the reduction of revenue and profit

and loss from foreign currency exchange, thus resulting in the reduction of profit and loss before tax.

5. Cash flow ratio : The increase in this period is mainly due to the increase of cash flow in operating

activities.

6. Cash reinvestment ratio : The increase in this period is mainly due to the increase of cash flow in

operating activities.

7. Operating leverage : The decrease in this period is mainly due to the reduction of fixed operating

expenses.

Note1: Above financial information has been audited (review) by CPA.

Note2: If the adoption of IFRS for the financial information is less than five years, the ROC GAAP financial


Note3: The Company compiles individual statements, analysis of financial ratio shall be disclosed.

Note4: If the adoption of IFRS for the financial information is less than five years, the ROC GAAP financial


Note5: Net cash flow of operating activities is not included.

Note 6: Equations:

(1). Capital Structure:

Debt ratio＝Total liability／Total assets

Ratio of long-term capital to property, plant and equipment＝（Net shareholders’ equity＋Non-current

liability）／ Net property, plant and equipment

(2). Solvency:

Current ratio＝Current assets／Current liability

Quick ratio＝（Current assets－Inventory－Prepaid expense）／Current liability

Times interest earned＝Net income before tax and interest expense／Interest expense of the year

130

(3). Operating ability:

Account receivable turnover＝ Net sales／Average accounts receivable (including accounts receivable

and notes receivable derived from business operation)

Days sales in accounts receivable＝365／Account receivable turnover

Inventory turnover＝Cost of goods sold／Average inventory amount

Account payable turnover＝ Cost of goods sold／Average accounts payable (including accounts

payable and notes payable derived from business operation)

Average days in sales＝365／Inventory turnover

Ratio of property, plant and equipment＝Net sales／Average of net property, plant and equipment

Total assets turnover＝Net sales／Average total assets

(4). Profitability:

Return on assets＝〔Net income (loss)＋Interest expense×（１－Tax rate）〕／Average total assets

Return on shareholders’ equity＝Net income (loss)／Net average shareholders’ equity

Operating income (pre-tax income) to Paid-in Capital Ratio＝Operating income (pre-tax Income) ／Paid-in Capital

Profit ratio＝Net income (loss) ／Net sales

Basic earnings per share＝（Profit attributable to owners of parent－Preferred stock dividend)）／Weighted average stock shares issued

(5). Cash flow:

Cash flow ratio＝Net cash flow from operating activity／Current liability

Cash flow adequacy ratio＝Net cash flow from operating activity in the past 5 years／In the past 5 years

(Capital expenditure＋Inventory interest＋Cash dividend)

Cash reinvestment ratio＝(Net cash flow from operating activity－Cash dividend)／(property, plant and

equipment＋Long- term investment＋Other assets＋Working capital)

(6). Leverage:

Degree of operating leverage＝(Net operating income－Variable operating cost and expense) ／

Operating income

Degree of financial leverage＝Operating income ／ (Operating income－Interest expense)

131

Five-Year Individual Financial Analysis– IFRS

Year

Item

Five-Year Financial Analysis (Note2)

2011 2012 2013 2014 2015

Capital

structure

(%)

Debt ratio 63.10 72.16 62.43 58.38

Ratio of long-term capital to property,

plant and equipment 1,003.22 1,168.21 1,021.11 1,176.29

Solvency

( % )

Current ratio 135.55 123.27 117.20 134.35

Quick ratio 133.77 123.38 116.22 133.02

Times interest earned (Times) 16.85 40.21 32.93 36.91

Operating

ability

Accounts receivable turnover (Times) 6.91 7.61 6.14 5.56

Average collection period 53 48 59 66

Inventory turnover (Times) 228.12 355.62 362.84 307.45

Accounts payable turnover (Times) 5.58 4.09 3.72 5.00

Average days in sales 1.60 1.03 1.01 1.19

Property, plant, and equipment

turnover (Times) 51.47 61.23 56.83 50.42

Total assets turnover (Times) 2.38 1.87 2.16 2.13

Profitability

Return on total assets (%) 2.75 4.37 4.18 3.96

Return on stockholders' equity (%) 6.63 13.53 12.63 9.76

To pay-in

Capital (%)

Operating income 16.14 18.58 12.46 10.60

PBT 11.31 23.86 24.43 18.35

Net profit margin (%) 1.01 1.92 2.15 1.92

Basic earnings per share ($) 0.91 1.97 1.98 1.55

Cash flow

Cash flow ratio (%) 11.90 Note3 8.67 23.40

Cash flow adequacy ratio (%) Note4 Note4 Note4 Note4

Cash reinvestment ratio (%) 0.12 Note3 0.04 0.14

Leverage Operating leverage 2.41 4.37 6.02 4.01

Financial leverage 1.05 1.03 1.07 1.05

132

Analysis of financial ratio change in the last two years. (If the difference does not exceed 20%, the

analysis is not required.)

1. Accounts payable turnover : The decrease in this period is mainly due to the reduction of payment for

materials payable by interested parties, thus increasing the turnover rate of accounts payable.

2. Return on stockholders' equity : The decrease in this period is mainly due to the reduction of revenue

and profit and loss from foreign currency exchange, thus resulting in the reduction of profit and loss

after tax.

3. PBT to pay-in capital ratio : The decrease in this period is mainly due to the reduction of revenue and

profit and loss from foreign currency exchange, thus resulting in the reduction of profit and loss after

tax.

4. Basic earnings per share : The decrease in this period is mainly due to the reduction of revenue and

profit and loss from foreign currency exchange, thus resulting in the reduction of profit and loss after

tax.

5. Cash flow ratio : The increase in this period is mainly due to the increase of cash flow in operating

activities.

6. Cash reinvestment ratio : The increase in this period is mainly due to the increase of cash flow in

operating activities.

7. Operating leverage : The decrease in this period is mainly due to the reduction of fixed operating

expenses.




Note 3: Net cash flow of operating activities are not included.

Note 4: If the adoption of IFRS for the financial information is less than five years, the ROC GAAP

financial information shall be disclosed.

133

Five-Year Consolidated Financial Analysis– TW GAAP

Year

Item

Five-Year Financial Analysis

2008 2009 2010 2011 2012

Capital

structure

(%)

Debt ratio 63.59 67.09 60.85 58.33 62.94

Ratio of long-term capital to property, plant

and equipment 979.99 818.51 789.51 1,115.63 1,221.60

Solvency

( % )

Current ratio 142.81 133.51 135.45 134.04 136.37

Quick ratio 141.07 131.82 132.83 131.26 134.58

Times interest earned (Times) 19.99 50.00 28.71 16.16 16.70

Operating

ability

Accounts receivable turnover (Times) 6.40 6.34 6.15 6.83 6.91

Average collection period 57 58 59 53 53

Inventory turnover (Times) 385.21 427.11 291.92 229.60 227.42

Accounts payable turnover (Times) 7.11 7.03 6.65 7.41 5.57

Average days in sales 0.95 0.85 1.25 1.59 1.60

Property, plant, and equipment turnover (Times) 74.00 67.63 59.32 65.72 64.41

Total assets turnover (Times) 3.31 3.24 3.37 2.91 2.38

Profitabi-

-lity

Return on total assets (%) 5.79 4.11 3.18 2.35 2.73

Return on stockholders' equity (%) 14.21 11.67 8.59 5.45 6.54

To pay-in

Capital (%)

Operating income 14.67 18.94 14.33 12.85 16.13

PBT 21.54 18.60 13.46 8.59 11.20

Net profit margin (%) 1.52 1.16 1.00 0.72 1.00

Basic earnings per share ($) 1.89 1.56 1.18 0.76 0.90

Cash

flow

Cash flow ratio (%) Note3 Note3 17.90 14.96 11.90

Cash flow adequacy ratio (%) 54.71 49.82 80.29 77.93 94.84

Cash reinvestment ratio (%) Note3 Note3 0.15 0.09 0.12

Leverage Operating leverage 3.00 2.66 2.85 2.67 2.36

Financial leverage 1.09 1.02 1.04 1.05 1.05

134

Analysis of financial ratio change in the last two years. (If the difference does not exceed 20%, the


1. Accounts payable turnover: In this period, due to the improvement of gross profit and the decrease of

sales costs, the turnover rate of accounts payable has decreased.

2. Operating income to pay-in capital ratio: In this period, due to the increase of gross profit margins and

reduction of operating costs, the proportion of operating income in paid-up capital has increased.

3. Pre-tax income to issued capital ratio: The increase of proportion of net profit before tax in paid-up

capital is mainly due to certain increases in operating income.

4. Net profit margin: The increase of the net profit ratio is mainly due to the increase of operating income

in this period.

5. Cash flow ratio:This decrease is mainly due to the increase of current liabilities - accounts payable in

this year.

6. Cash flow adequacy ratio:In the past three years, the operating cash flow has been increasing when

compared with the previous year, thus increasing the cash flow adequacy ratio.

7. Cash reinvestment ratio: The increase of the cash reinvestment ratio compared to last year is mainly

due to the long-term investment amount in this year decreasing when compared with last year.

Note 1: Earning per Share is calculated according to the adjusted weighted number of shares. For

capitalization with retained earnings or additional paid-in capital, it will be adjusted by the capital

increase ratio. The issuance time of the shares will not be taken into consideration.

Note 2: Above financial information has been audited by CPA.

Note 3: Net cash flow of operating activities are not included.

Note 4: The calculation of inventory turnover is mainly based on the inventory in Taiwan.

Note 5: Equations:

1、Capital Structure:

Debt ratio＝Total liability／Total asset

Ratio of long-term capital to fixed assets＝（Net shareholders’ equit＋Long-term liability）／Net

fixed assets

2、Solvency:

Current ratio＝Current assets／Current liability

Quick ratio＝（Current assets－Inventory－Prepaid expense）／Current liability

Times interest earned＝Net income before tax and interest expense／Interest expense of the year

3、Operating ability:

Account receivable turnover＝Net sales／Average accounts receivable (including accounts

receivable and notes receivable derived from business operation)

Days sales in accounts receivable＝365／Account receivable turnover

Inventory turnover＝Cost of goods sold／Average inventory amount

135

Account payable turnover＝Cost of goods sold ／Average accounts payable (including accounts

payable and notes payable derived from business operation)

Average days in sales＝365／Inventory turnover

Fixed assets turnover＝Net sales／Net fixed assets

Total assets turnover＝Net sales／Total assets

4、Profitability:

Return on assets＝〔Net income (loss)＋Interest expense×（１－Tax rate）〕／Average total assets

Return on shareholders’ equity＝Net income (loss)／Net average shareholders’ equity

Operating income (pre-tax Income) to Paid-in Capital Ratio＝Operating income (pre-tax Income)

／Paid-in Capital Profit ratio＝Net income (loss)／Net sales

Basic earnings per share＝﹙Net income－Preferred stock dividend﹚／Weighted average stock

shares issued

5、Cash flow:

Cash flow ratio＝Bet cash flow from operating activity／Current liability

Cash flow adequacy ratio＝Net cash flow from operating activity in the past 5 years／In the past

5 years（Capital expenditure＋Inventory interest＋Cash dividend）

Cash reinvestment ratio＝（Net cash flow from operating activity－Cash dividend）／（Fixed

assets＋Long-term investment＋Other assets＋Working capital）

6、Leverage:

Degree of operating leverage＝(Net operating income－Variable operating cost and expense)／

Operating income Degree of financial leverage＝Operating income／(Operating income－

Interest expense)

136

5.3 Supervisors’ Report or Audit Committee’s Review Report in the Most

Recent Year

Supervisors' Review Report

Date: Apr. 28, 2016

The Board of Directors has prepared and submitted to us the Company’s 2015 financial statements

which have been audited and certified by Chen Ying Ju and Yang Liu Fong of KPMG Certified

Public Accountants, along with Company's business report and earnings distribution proposals. We,

the Supervisors, have duly examined the same as correct and accurate. We hereby report to the 2016

Annual General Shareholders Meeting in accordance with Article 219 of the Company Act for your

review.


Supervisor : Wang, Ping-Hui

Supervisor : Cheng, Hsien-Ho

Supervisor : Shyh Shiunn Investment Corp.

(Representative :Yang, Chiung-Nan)

5.4 Consolidated Financial Statements with Subsidiaries Audited by CPA Please refer to AppendixⅠ, page 178.

5.5 The Effect on Company or its Affiliates have Experienced Financial

Difficulties: None

137

VI. Review of Financial Conditions, Operating Results, and

Risk Management

6.1 Analysis of Financial Status

6.1.1. Consolidated

Unit: NT$Thousand

Year

Item 2015 2014

Difference

Amount %

Current assets 133,577,659 151,098,840 -17,521,181 -11.60%

Property, plant and equipment 34,660,330 35,073,036 -412,706 -1.18%

Intangible assets 872,905 901,392 -28,487 -3.16%

Other assets 6,635,579 8,628,461 -1,992,882 -23.10%

Total assets 175,746,473 195,701,729 -19,955,256 -10.20%

Current liabilities 98,771,869 126,668,060 -27,896,191 -22.02%

Non-current liabilities 14,075,755 4,610,879 9,464,876 205.27%

Total liabilities 112,847,624 131,278,939 -18,431,315 -14.04%

Share capital 35,874,751 35,874,751 - 0.00%

Capital surplus 2,912,784 2,920,718 -7,934 -0.27%

Retained earnings 14,883,819 15,773,335 -889,516 -5.64%

Total equity attributable to

owners of parent 56,480,704 57,578,038 -1,097,334 -1.91%

Analysis of financial ratio changed in the last two years. (If the difference does not exceed 20%,

the analysis is not required.)

1. Other assets: caused by the reduction of advance payments and long-term prepaid rents.

2. Current liabilities: the decrease in this period is mainly due to the newly added syndicated

loan case, which is used for enriching working capital and repaying due bank borrowings.

3. Non-current liabilities: mainly caused by the newly added syndicated loan case being

classified as long-term borrowing.

138

6.1.2. Individual

Unit: NT$Thousand

Year

Item 2015 2014 Difference

Amount %

Current assets 91,631,494 109,949,533 -18,318,039 -16.66%

Property, plant and quipment 5,739,243 5,820,213 -80,970 -1.39%

Intangible assets 56,851 86,258 -29,407 -34.09%

Other assets 38,286,030 37,385,215 900,815 2.41%

Total assets 135,713,618 153,241,219 -17,527,601 -11.44%

Current liabilities 68,203,221 93,810,253 -25,607,032 -27.30%

Non-current liabilities 11,029,693 1,852,928 9,176,765 495.26%

Total liabilities 79,232,914 95,663,181 -16,430,267 -17.18%

Share capital 35,874,751 35,874,751 0 0.00%

Capital surplus 2,912,784 2,920,718 -7,934 -0.27%

Retained earnings 14,883,819 15,773,335 -889,516 -5.64%

Total equity 56,480,704 57,578,038 -1,097,334 -1.91%

Analysis of financial ratio changed in the last two years. (If the difference does not exceed 20%,

the analysis is not required.)

1. Intangible assets: caused by disposing part of the intangible assets in the current period.

2. Current liabilities: the decrease in this period is mainly due to the newly added syndicated

loan case, which is used for enriching working capital and repaying due bank borrowings.

3. Non-current liabilities: mainly caused by the newly added syndicated loan case being

classified as long-term borrowing.

139

6.2 Analysis of Operation Results

6.2.1 Consolidated

Unit: NT$Thousand

Year

Item

2015 2014 Amount

changed

Change

percentage

(%) Amount Amount

Gross Sales Revenue 395,470,221 435,599,968 -40,129,747 -9.21%

Less：Sales Discounts and Allowances - - - -

Net Sales Revenue 395,470,221 435,599,968 -40,129,747 -9.21%

Operating Costs -373,764,813 -412,251,630 38,486,817 -9.34%

Gross Profit from Operation 21,705,408 23,348,338 -1,642,930 -7.04%

Operating Expense -16,298,140 -16,239,259 -58,881 0.36%

Operating Profit 5,407,268 7,109,079 -1,701,811 -23.94%

Non-operating Income and Expense 1,776,602 2,571,619 -795,017 -30.92%

Income from Operations of continued

segments - before tax 7,183,870 9,680,698 -2,496,828 -25.79%

Less: Income Tax (Expense) -2,208,135 -3,015,137 807,002 -26.77%

Profit attributable to owners of parent 5,563,633 7,097,815 -1,534,182 -21.61%

Profit attributable to non-controlling

interests -587,898 -432,254 -155,644 36.01%

Income from Operations of continued

segments - after tax 4,975,735 6,665,561 -1,689,826 -25.35%

Analysis of financial ratio changed in the last two years. (If the difference does not exceed 20%, the


1. Operating Profit: market factors affecting the change of product portfolio have caused revenue

reduction, thus also reducing the operating profit.

2. Non-operating Income and Expense: the reduction in the current period is mainly caused by losses

from RMB depreciation in foreign currency exchange..

3. Income from Operations of continued segments-before tax: mainly caused by revenue reduction

and a decline in non-operating income and expenses.

4. Income Tax Expense: it is mainly due to the decrease of net profit, which causes the reduction of

income tax expenses; furthermore, the Company has also strengthened tax planning to reduce the

effective tax rate.

5. Profit attributable to owners of parent: caused by revenue reduction and a decline in non-operating

income and expenses.

6. Profit attributable to non-controlling interests: mainly caused by the reduction of the net profit of

invested companies.

7. Income from Operations of continued segments-after tax: caused by revenue reduction and a

decline in non-operating income and expenses.

140

Individual

Unit: NT$Thousand

Year

Item

2015 2014 Amount

changed

Change

percentage

(%) Amount Amount

Gross Sales Revenue 289,354,169 330,784,531 -41,430,362 -12.52%

Less：Sales Discounts and Allowances - - - -

Net Sales Revenue 289,354,169 330,784,531 -41,430,362 -12.52%

Operating Costs -277,304,726 -317,437,573 40,132,847 -12.64%

Gross Profit from operation 12,049,443 13,346,958 -1,297,515 -9.72%

Less：Unrealized Profit(Loss) from Sales -15,615 -12,315 -3,300 26.80%

Plus：Realized Profit(Loss) from Sales 12,315 16,869 -4,554 -27.00%

Realized Gross Profit from operation 12,046,143 13,351,512 -1,305,369 -9.78%

Operating Expense -8,244,428 -8,879,880 635,452 -7.16%

Operating Profit 3,801,715 4,471,632 -669,917 -14.98%

Non-operating Income and Expense 2,781,569 4,293,281 -1,511,712 -35.21%

Income from operations of continued

segments - before tax 6,583,284 8,764,913 -2,181,629 -24.89%

Less: Income Tax Expense -1,019,651 -1,667,098 647,447 -38.84%

Income from operations of continued

segments - after tax 5,563,633 7,097,815 -1,534,182 -21.61%

Analysis of financial ratio changed in the last two years. (If the difference does not exceed 20%, the analysis

is not required.)

1. Unrealized Profit (Loss) from Sales: mainly caused by customers’ delay in picking up goods at the

end of the year.

2. Realized Profit (Loss) from Sales: the inventory from previous delivery to affiliated companies has

been sold to customers in the current period.

3. Non-operating Income and Expense: the decrease in this period is mainly due to the decrease of

income from investments recognized by the Equity Method.

4. Income from Operations of continued segments-before tax: mainly caused by revenue reduction and a


5. Income Tax Expense: it is mainly due to the decrease of net profit, which causes the reduction of

income tax expenses; furthermore, the Company has also strengthened tax planning to reduce the

effective tax rate.

6. Income from operations of continued segments-after tax: mainly caused by revenue reduction and a


141

6.2.2 Expected sales volume and its basis

In 2015, the decline in emerging market demand and environmental turbulence in Europe

impacted the consuming intentions of the general public, in addition to Win10 not driving the

market demand to change machines, the global personal computer market experienced a

recession. Furthermore, the tablet PC market was affected by continuously larger mobile

phone sizes, which have replaced the status of small tablets, and no innovative product

attracted consumers; therefore, tablet PCs experienced their first negative growth since their

launch. In 2015, the shipment volume of global notebook computers was approximately 164.4

million computers, with an annual decline rate of almost 6.3%. In 2016, in general, the decline

rate of notebook computers will slow compared to 2015. In 2016, with the launch of the new

platform Intel Skylake, and driven by brand dealers actively importing minimized E-sports

products to satisfy the niche market demand, the decline rate is expected to lessen. With the

gradual growth slowdown of personal computer products, the Company has been recently

devoted to seeking product innovation, such as the Internet of Things (IoT), virtual reality

related applications, etc. with the hope of deploying the production capacity of declining

demand and bringing continuous growth momentum to personal computer products.

Regarding global servers, the expansion of public clouds and the rise of private clouds both

drive the growth of server demand. In 2015, the overall server market emerged as a rising

trend. Looking toward the future, the boom of the Internet of Things in recent years has driven

the server demand. Through the computing demand of the data center and the emerging

market demand, the market scale will continue to grow. The Institute for Information Industry

MIC estimates that the global server market in 2016 will grow by 6.8% when compared with

2015.

Affected by manufacturers in China, the solar energy industry continued to have a supply that

exceeded demand in the first half of 2015. However, with the elimination of uncertain factors

of the U.S. double negative survey, China approved a policy to raise installation targets and

achieve the objective of carbon, fog, and haze reduction, and, together with India, established

solar energy power generation on a large scale to improve basic electric power construction.

The solar energy industry is again rising from the bottom. As of the end of 2015, more than

180 countries worldwide have jointly signed the Paris Climate Agreement, ensuring the

long-term development foundation of alternative energy sources, such as solar energy, etc.

Looking toward 2016 for the solar energy industry, due to the hot market demand in China,

India, the U.S., and the Southeast Asian market, global solar energy installations will continue

to increase, and Taiwan’s solar battery industry is expected to continuously grow. Despite the

active expansion of manufacturers increasing uncertain factors in the market in 2016, with the

rise of emerging market demand and continuous development of environmental protection

issues, the solar energy industry of the Company is expected to create large-scale economic

effects in the long run through the integration of industry chain resources. It is expected that it

will be good for mastering the layout of the future solar energy market.

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With regard to the handheld mobile device industry, in 2015, due to product homogeneity and

gradual market saturation, the growth rate slowed. Looking toward the future, the smart phone

will enter into its mature period, and smart phone manufacturers from mainland China will

battle for the market with high cost performance methods, resulting in the rapid market

saturation of mainland China and the continuous decline of sales prices. The market growth of

smart phones will be inferior to the explosive growth seen in previous years. However, with

the upgrading of mobile and wearable device products, together with the demand of 4G and

5G networks, Internet of Things, etc., driven by Internet communication products in cloud

service demand, the handheld mobile device industry can still be expected to grow in the

future. Furthermore, the penetration rate of smart phones is still low in developing countries,

and their demand to change to smart phones will become one of the industry’s driving forces.

6.2.3 Possible impact on the future financial business of the Company and

response plan

Looking toward 2016 and beyond, in addition to focusing on its original operation strategies,

the Company will continuously carry out vertical integration and strategic alliance to initiate

new opportunities. In order for the operation growth to face the rise of capital demand, the

Company’s professional team will give comprehensive consideration to financial resource

allocation, cost of capital, etc. through rigorous internal and external financial risk management

mechanisms in order to achieve the most thorough financial planning and ensure smooth

operations. Therefore, we currently have no doubt regarding significant impacts on future

financial business.

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6.3 Cash flow analysis –Consolidated

Unit: NTD thousand

Beginning

cash balance A

Annual net

cash flow

from operating

activities B

Annual cash

outflow C

Cash surplus

(insufficient)

amount

A+B-C

Remedial measures for cash

shortfall

Investment

plan

Financial

management plan

37,123,631 12,982,548 13,542,941 36,563,238 －－

1. Analysis on change of cash flow this year:

Operating activity: In 2015, since the Group continuously adjusted product proportion,

improved cost structure, and was devoted to stabilizing gross profit ratio,

along with proper capital movement employed by the Company’s team, the

operating cash flow is definitely proper this year, and the overall cash flow

is sufficient for the operation expenditures of the Group.

2. Remedial measures for expected cash shortfall and liquidity analysis: Comprehensively

influenced by all kinds of cash flow activities, there should be no circumstance causing

insufficient cash this year.

3. Cash liquidity analysis in the coming year:

Beginning cash balance (A): NTD 37,123,631 thousand

Expected annual net cash flow from operating activity (B): NTD 12,982,548 thousand

Expected annual cash outflow (C): NTD 13,542,941 thousand

Expected cash surplus (insufficient) amount (A+B-C): NTD 36,563,238 thousand

In 2016, despite the growth rate in the notebook computer business slowing, driven by the

growth in the server, solar energy, and handheld device businesses, and with the Company’s

professional team continuously adjusting product proportion and stabilizing gross profit ratio,

the cash flow in operating activities is expected to be sufficient. In addition to the expenditures

from operating activities due to investment activities, such as asset procurement, replacing old

equipment with new, etc. and issuing cash dividends, regarding financing activities, the

Company may also utilize loans from financial institutions and properly manage them for

employment, and the cash liquidity will be suitable.

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6.4 The impact of Significant Capital Expenditure in Recent Years on

Financial Business

6.4.1 Employment of significant capital expenditure and capital source:

Unit: NTD thousand

Planned

project

Actual or

expected

capital

source

Actual or

expected

completion

date

Total capital

needed

Circumstance of actual or expected capital

employment

2015 2016 2017 2018

Purchase more plant

space and equipment

Own

capital

Current

year 19,762,999 3,762,999 8,000,000 4,000,000 4,000,000

Note: The actual and expected capital employment in significant capital expenditure is consolidated data.

6.4.2 The impact of significant capital expenditure on financial business

Purchase more plant space: In response to the future product business expansion demands of

business units, each unit of the Group in Taiwan will conduct integration planning, reduce

management cost, and improve the Group’s overall research and development capability of

innovative products.

Purchase and update machines and R&D equipment: New product research and development

lineup are increased in order to accelerate product development schedules and improve

production efficiency.

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6.5 Reinvestment Policy in Recent Years, the Main Reason for Profit

Earning or Loss, Improvement Plan, and Analysis on the Investment

Plan in the Coming Year

Inventec Corporation was established over 40 years ago. Starting in the field of notebook

computers and servers at an early stage, Inventec gradually crossed fields to enter enterprise

network solutions, and even solar energy and smart end devices at later stages, actively

transforming Inventec into an Internet company. In recent years, the Group has done well in

reinvestments and has respectively achieved certain increases. Inventec Appliances Corp. has

started to focus on developing wireless smart end products and has taken planning the best

solutions for customers as its orientation. It is currently involved in the hottest Internet theme and

is dedicated to putting smart end devices into smart living. The delivery in 2016 is expected to

yield unusually brilliant results due to the customers’ order expansions. Inventec Besta Co., Ltd. is

the leading brand in computer dictionary and translation software in the overseas Chinese area; as

it continuously moves towards all-around learning and video entertainment platform, it will take

initiating cloud related products as its objective. TPV-Inventa Technology Co., Ltd. engages in the

research and development and production of All-in-one PC and AIO and will aim to enrich its

product line to improve future revenue. E-TON Solar Tech. Co., Ltd, Inventec Solar Energy

Corporation, and Inventec Energy Corporation are mainly dedicated to the research and

development, production, and sales of solar batteries, photovoltaic module manufacturing, and

photovoltaic system integration. The resource integration strategy between Inventec Solar Energy

Corporation and Inventec Energy Corporation in 2015 can ensure the production mode of a

coordinated process in order to effectively reduce cost. In February 2016, the European Union

published the anti-circumvention results, which affirmed that 21 Taiwan manufacturers, including

three solar energy subsidiaries of the Group, were real manufacturers, and anti-circumvention tax

could be exempted, thus stabilizing the sales situation in the European market. Despite the U.S.

Department of Commerce’s affirmation that our country practices dumping behavior and has then

levied anti-dumping tax on us, with the continuous expansion of market demand and development

of environmental protection issues, the solar energy company of the Group will accelerate the

adjustment of its overseas layout, utilization of product portfolios, development of high

performance products, and automation of manufacturing processes, it is expected to reverse from

loss to profit earnings. In general, although the growth of notebook computers still tends to be

conservative, with gradual recovery the in the server, smart end, and solar energy markets, the

performance in 2016 is expected to be acceptable.

146

6.6 Analysis and assessment of risk items

6.6.1 The impact of interest rate, change in exchange rate, inflation on loss and

profit of the Company, and future resolutions:

1. Impact on loss and profit of the Company:

2015 Net amount ofinterest

income (expenditure)

Net amount of

exchange (loss) profit

Unit: NTD thousand 1,198,055 (669,167)

2. Future resolutions:

A. Interest rate: The uncertainty of the global economy has made the interest rates in

European and American countries attract more attention. However, the U.S.

economic recovery, the slowdown of China’s economic growth rate, oil price

fluctuations, and the demand in the energy and mining industry and raw materials can

affect consumer’s confidence, as well as the authority on whether or not to raise

interest rates. Since most of the industry investment momentum in Taiwan is still

insufficient, the inflation is not obvious, and the commodity price is also moderate;

only consumption still suffers from the dual impact by structural factors and

short-term prosperity; therefore, it is expected that, the central bank will still comply

in 2016 with international trends and adopt loose monetary policies to reduce the

impact brought by the sharp fluctuation on the domestic economy. Regarding the

impact of interest rate change risk on capital operation, the Company will continue to

carry out the best employment on capital portfolio under the premise of considering

liquidity, safety, etc.

B. Exchange rate: For many years, the monetary policy in European and American

countries has always affected the performance of all other countries around the world,

and the long-term recession in the Eurozone and England’s desire to quit the

European Union has impacted the Eurozone’s recovery. Fortunately, since the market

inflation is still moderate, and the financial condition and overseas economic risk is

high, despite continuous rumors about raising interest rates, the market still expects

that the U.S. will postpone raising interest rates within a short time; therefore, the

exchange rate in each country throughout the world can be maintained relatively

stable. Among higher uncertainty factors in international major currency, the central

bank is still expected to adopt moderate exchange rate policies in response in 2016.

Major customers of the Company are big international manufacturers, and they have

the same transaction currency in goods purchase and sales; therefore, the mutual

offset of credit and debt can achieve a natural hedging effect. Furthermore, the

Company will make up the shortcomings of natural hedging through foreign currency

147

hedging operations in order to reduce the impact of exchange rate change risk on

profit and loss on exchange.

C. Inflation: Inflation is closely linked to monetary policy, but compared with dual-rate,

inflation has no directly significant impact on the profit and loss of the Company. The

different economic performance of each country causes divergence of opinions on

monetary policy. For example, the Eurozone implements negative interest rate, but

due to the limited effect, the expansion of quantitative easing seems to be

unavoidable; as far as the U.S. is concerned, since the economic data tends to be

positive and the employment market is getting stronger, the rumor of raising interest

rates begins again. However, in general, the adjustment of U.S. monetary policy is

still a major risk source affecting global economic growth and financial stability. It is

expected that when the central bank adopts a moderate monetary policy in 2016, it

shall also simultaneously consider the consequence of real interest rates on the

domestic economy in order to maintain it at a relatively stable status. In the future,

the Company will continue to actively carry out cost and operating expenditure

control, process improvement, and asset activating in order to mitigate the impact of

inflation on its operation.

6.6.2 Engage in high risk and high leverage investments, lend funds to other parties,

endorsement and derivatives transaction policy, main reasons for profit or

loss, and future resolutions:

Based on a steady operation philosophy, the Company mainly focuses on the operation of its

original product field. Regarding investments, in addition to relevant investments in the original

industry, upstream and downstream of the product field, vertical cooperation, etc., the Company

does not engage in any high risk or high leverage investments. Regarding lending funds to

other parties, endorsements, and derivatives related transactions, such is actually handled

according to the execution policy stipulated in Procedures for Acquisition and Disposal of

Assets, Procedures for Lending Funds to Other Parties, and Procedures for Endorsements and

Guarantees of the Company. In the future, the Company will still rigorously execute such

matters according to the handling procedures of relevant regulations in order to guarantee the

maximum rights and interests of the Company and its shareholders.

6.6.3 Future research and development plan and research and development

expenditures expected to be invested

1. Five major policies:

A. Rapid Innovation: “Innovation” has been the basic spirit of our operation philosophy

since the foundation of the Company in 1975; it is also the best media shaping enterprise

differentiated value, even for our commitment to customers and partners. In addition to

148

internal and external research and development, innovation cultivation, and accumulation

of competitive energy, the activation of intellectual property assets can also effectively

improve the international competitiveness and influence of the Company. As of December

2015, the Company has acquired more than 14,000 patent certificates worldwide and

more than 6,000 patents are currently under application. In addition to focusing on

notebook computers and servers, the Company has also achieved breakthroughs in the

fields of consumer electronics, mobile communication, wearable devices, wireless

integration plans, and application software. Recently, it has also actively transformed into

an Internet enterprise to initiate more abundant smart living tools.

B. Sustainable Energy: The increasing deterioration of climate warming and environment

has facilitated the rise of environmental protection awareness and further drives the rise

of global green consumerism. In order to respond to customers’ demands for green

products, enterprises around the world have started focusing on green production and

integrating ubiquitous environmental protection elements into green life in order to

reduce environmental impact and fulfill social responsibility. In addition to satisfying

customer demands and strengthening core competitiveness in product research and

development, the Group also spares no effort in fulfilling its social environment

responsibility. The Group completely implements green supply chain management by

formulating environmental objectives, environmental policies, and environmental projects,

as well as exerting green value-added benefits. Furthermore, regarding solar energy

products, the Group will strive to improve relevant manufacturing processes and energy

consumption in order to promote the use of alternative energy and contribute to society.

C. Cloud Solutions: As times change, cloud related products are expected to drive the overall

demand among considerations of resource benefits, price performance, and operational

assistance. As a cloud supplier, the Company will be dedicated to developing cloud

computing SaaS, PaaS, and IaaS and integrate them in the direction of a software,

hardware, and service three-in-one, taking overall solutions as a basis for creating more

unique market value.

D. Mobile Lifestyle: The coming of the Internet era not only makes high information and

communication technology more advanced, but also drives the reformation of smart end

products and their relevant extended devices. The Company mainly focuses on

developing wireless smart end products and provides diversified smart handheld devices

and network application products by linking cloud technology and services. In the future,

the Company will continuously adhere to such principles as innovation, good quality,

excellent talent, design, manufacturing, marketing, after-sales service, etc., with the aim

of becoming a benchmark in the global wireless communication industry. Since the smart

phone market is currently facing an awkward situation of growth slowdown and price

cutting competition, increasing profits is more difficult, and how to achieve further

149

transformation of products will become an important key for success in the future.

E. Emerging Markets: The notebook computer and server industry is subject to the impact of a

high saturation degree in mature European and American markets, and the law of survival

competition forces the territory to migrate to emerging markets with stronger growth

momentum in Latin America, Asia, etc. Furthermore, regarding the solar energy industry,

despite the final judgment on the U.S.’s new anti-dumping and countervailing policy, or the

European Union’s lifting its ban on Taiwan manufacturers that directly or indirectly affect

Taiwan manufacturers, the strategy of the Company will be to move towards adhering to

product efficiency improvement and overseas layout in order to reduce the impact.

Regarding smart phones, despite brand manufacturers from mainland China rising rapidly

around the world, with increasing saturation in the China market, “black mainland” has

aroused the investment fever of East Asia manufacturers, and India and Africa will be the

emerging industry cluster after the “made in China” age. The low penetration rate of

mobile phones in India and Africa makes for high consumption growth. Through the

improvement of brand recognition degree, high customization, and after-sales service, it is

expected to break through the current growth plateau period of smart phones.

2. Future research and development plan:

A. Notebook computers: After the performance and specification development of notebook

computers have satisfied the demand of most consumers, the specification competition of

the consumption style machine gradually transfers from computing performance to display

screen. Since the specifications of consumption style machines are diversified and of small

quantity, OEM no longer seeks economic scale but is oriented toward profit making. In

response to the change of OEM mode, consumer behavior, and operation system, the future

notebook of the Company will integrate cloud service applications and move towards the

direction of light, thin, long service, touch control, portable, low price, cross industry,

mashup, etc. In general, the consumption style machine still has relative pressure, but the

Company will focus on quality differentiation instead of pursuing quantity increase in

order to improve profit making.

B. Servers: The age of big data is driving the rise of cloud computing. Due to the change of

operation and consumption mode triggered by it, servers must be equipped with stronger

computing capabilities in order to effectively resolve the huge cloud data loading capacity

and effectively provide information to users for decision making. In order to expand the

market share and avoid a price war, the product research and development strategy of the

Company will strive for product differentiation and focus on products with high

performance computing, coordinated with the integration of all-around software and

hardware systems in order to provide customers with a complete solution. In 2016, in

consideration of dealers’ price-oriented and performance-oriented philosophies, as well as

the expanding demand, the revenue and shipment volume in the server business is expected

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to have good performance.

C. Cloud service: In recent years, with the coming of the Internet era appreciated and promoted

by China and each European and American country, the government of our country is also

aiming to build Taiwan as the Asian center of the Internet of Things. In order to carry the

cloud service needed in the Internet of Things, in addition to strategic system integration, the

Company also coordinates with overall resolution and localized services to accompany

customer growth in order to achieve the perfection of a software, hardware, and service

three-in-one. Furthermore, the Company still takes building a cross-strait cloud operation

center as its objective, and in 2015, we completed the establishment of a southwest (offshore)

cloud operation center, which will expand to East China, North China, South China, and all

of the Greater China area in 2016 and 2017. In 2016, the Company expects to increase order

receiving, which is good for revenue.

D. Solar energy: Since the solar energy market is becoming more and more mature, the

traditional price war is no longer the major battlefield; instead, higher quality and a more

stable power source will be the key factor for victory in the future, including module

efficiency, a stable system, and monitoring. The Company mainly focuses on the design and

manufacturing of the key supply chain for solar batteries (including single crystalline silicon

and polycrystalline silicon) and solar energy modules. Through the automation import of all

kinds of machines and the breakthrough in process conversion rate and optimization of

personnel quality, both the conversion efficiency and yield rate of solar wafers have

increased to some extent. Regarding solar modules, they continue to provide wafers and

power converters with high efficiency, stable system operation, and customized beautiful

installation in order to satisfy the end demands of customers.

E. Smart phones: In recent years, with a strong domestic demand, China brand manufacturers

have globally risen against the trend. With the gradual saturation of the mainland China

market, the exploitation of the overseas market is imperative. The future market mainly

originates from old customers’ demand to change phones, and fingerprint recognition,

uniform standard new specifications, customer loyalty establishment, and the active

development of products with high performance cost ratio, etc. will become the future

development trend.

3. Research and development expenditure expected to be invested:

The future development plan of the Company will continue to move in five major directions,

namely independent innovation, green energy environmental protection, cloud service, wireless

broadband, and emerging market by mastering market fluctuation and understanding customer

demands. In response to new market environments, manufacturing process improvement, and

technology development, the Group is expected to input more than NTD 9.1 billion in research

151

and development this year and will control the product development and market sales schedule

within six months.

4. The research and development plans in recent years, current progress of unfinished research and

development plans, research and development expenses that need to be invested, expected time

of completing mass production, and major factors influencing the success of research and

development in the future:

Recent

annual

plans

Current

progress

R&D

expenses

to be

invested

Time of

completing

mass

production

(Note)

Major factors influencing the success of

research and development in the future

Notebook

computer

Under

development

NTD 1.9

billion 2017

Provision of long-term accumulated

software and hardware technology and

customized overall solutions

Server and

cloud

computing

Under

development

NTD 4.5

billion 2017

Provision of long-term accumulated

software and hardware technology and

customized overall solutions

Solar

energy

Under

development

NTD 200

million 2017

Group resource integration and

combination of automation import,

manufacturing process conversion rate

improvement, and optimization of

personnel quality

Smart

phone and

wireless

communica

tion devices

Under

development

NTD 2.3

billion 2017

Continuous innovation, good quality,

excellent talent, design, manufacturing,

marketing, and after-sales service

capability

Note: This refers to the mass production time currently expected; the actual situation is still

subject to market and customer demands.

6.6.4 Important policies at home and abroad, the impact of law changes on the

Company’s financial business, and resolutions:

The relevant units of the Company have always strictly followed important policies at home and

abroad, as well as law changes, and pay close attention to any changes at all times. They also

actively coordinate and adjust company financial business activities in response to such changed

matters. With regard to the promotion of corporate governance by competent authorities,

successive issuing and amendment of the Company Act, Securities Exchange Act, and handling

criterion for all kinds of businesses, the reformation of the tax regulations environment, etc., the

Company actively coordinates to handle such matters as required.

Since 2013, listed companies have comprehensively applied IFRs, the Taiwan-IFRSs translated

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and issued by the Domestic Accounting Research and Development Foundation are the basis for

preparing the enterprise financial report. In the face of the change of accounting principles, the

Company has actively carried out training on financial and accounting personnel with relevant

knowledge, smoothly matching up with the accounting system. Furthermore, the Company

simultaneously maintains close communication with information personnel and coordinates with

the response method of the information system according to the change to the accounting system

in order to reduce the impact brought by the change of accounting principles in the future.

6.6.5 The impact of technology change and industry change on company financial

business and resolutions:

In light of the huge changes to network in modern times led by global Internet companies, the

rapid development of information and communication technology has also been driven. With the

increasing maturity of the notebook computer market, and the server market facing the impact of

cloud computing, the electronic industry will certainly face more challenges. In response to

technology and industry transformation and high speed competition, as well as the achievement of

the corporate mission of “Best system, software, and service company”, the Company strives to

follow five major policies, namely “Rapid Innovation, Sustainable Energy, Cloud Solutions,

Mobile Lifestyle, and Emerging Markets”, in order to create new prospects. In the short term, the

Company will accelerate asset activation; through the initiation of venture capital investments and

the integration of software and hardware, we will improve the level of research and development

and make the new investments increase Internet thinking. In the long term, in addition to product

diversity, the Company will optimize Group resources through cross-industry alliance and supply

chain integration. Furthermore, throughout research and development, design, production,

distribution and service, the Company will provide customers with all-around solutions to improve

profit making and further maintain corporate sustainable development. Mobile technologies such

as joint Internet, wireless communication transmission, etc. shorten the space barrier, allowing for

the smooth sharing of internal and external environmental resources of the company organization.

Importing an enterprise resource integration system and financial consolidation system will

improve the overall operation and handling efficiency of financial affairs. With regard to the solar

photovoltaic industry, despite being boycotted by the U.S.’s anti-dumping and countervailing

policy, the market of the Company has a decentralized arrangement, and customers themselves

also carry out strategic arrangements, so that we can minimize the impact. Furthermore, the

Company will accelerate the change and breakthrough of the Group this year by implementing

five changes, which include: 1. Handover inheritance, promoting younger supervisors; 2. Select

person based on talent, with men and women being equal; 3. Management must be innovative, and

supervisors must be responsible; 4. Business losing money must be stopped; and 5. Professional

leadership is required for future investments. Moreover, the so-called five breakthroughs refer to:

1. Manufacturing servitization, enterprise socialization; 2. Active investment merger, transforming

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into an Internet company, 3. Tangible assets activation, input start-up company; 4. Intangible

assets reevaluation, consolidate core war; and 5. Extensively recruit international talents and seek

strategic global alliances. Through comprehensive change and breakthrough, the Company is

expected to be able to break through the awkward operation situations of a bad political and

economic environment and courageously move forward. Through active and effective financial

and information technology application, the Company will assist in integrating upstream of vision

and strategy, medium of process and indicator, and down to management information, action plans,

etc. in order to take it as the best management tool in response to the change of technology and

industry.

6.6.6 The impact of corporate image change on corporate crisis management and

resolutions:

2015 is a milestone year as Inventec Corporation celebrates its 40th

anniversary. For a long time,

the Company has adhered to the operation philosophy of“Innovation, Quality, Open Mind, and

Execution”. From professional OEM at the early stage to current high technology product fields,

such as cloud computing, green energy, Internet, etc., Inventec has expanded its operation scale

and developed a long-term competition advantage through product diversification, strategic

alliance, and supply chain resource integration. The so-called “Top ten beliefs” take

“talent-oriented” as its first priority and “social responsibility” as its ultimate commitment. The

combination of operation philosophy and top ten beliefs constitutes the core value system of

Inventec and has formed the corporate culture of Inventec in its pursuit of sustainable

development. The baptism and shaping of corporate culture has also facilitated the understanding

and recognition of all colleagues in the company. Within a rigorous business environment, it can

improve work intention and attitude and then strengthen the company competition system to

create the maximum value of corporate culture.

In the spirit of “Talent-oriented, increase gross profit, and invest in the future”, in addition to the

originally established enterprise and brand image of innovation and high quality, as a member of

the global Internet industry, Inventec should also face such issues as climate change, energy

depletion, ecological conservation, protecting the underprivileged, public spirit, etc. with an active

attitude in order to promote social enterprise with core values. In the future, in addition to

providing support to non-profit institutions or non-governmental organizations, Inventec will

jointly discuss how to strengthen the function of social enterprises, thus effectively improving the

social responsibility of Internet enterprises.

The Company adheres to a consistent operation philosophy and corporate culture. Through

internal management mechanisms and external auditing execution, the Company vigorously

examines and approves the setting and execution of objectives and strategies, actually mastering

the overall organizational risk. As of the publication date of this annual report, the Company has

no impact on enterprise crisis management caused by a change of corporate image.

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6.6.7 Expected benefits of mergers, possible risks, and resolutions:

Since 2015 and as of the publication date of this annual report, the Company has no circumstances

related to conducting a merger.

6.6.8 Expected benefits of plant expansion, possible risks, and resolutions:

Based on customer demands, production capacity planning, and market layout, the Company

actively integrates group resources and exploits territory externally, in the hope of achieving the

objective of production optimization and cost control through scale economic benefits. However,

success or failure, both are due to the same reason: simultaneously considering the idling capacity

and capital risk hidden behind active plant expansion; this is indeed an important issue. Therefore,

the Company will continuously and prudently evaluate the demand for plant expansion and the

corresponding future economic benefits and accelerate current assets activation to reduce the

exposure risk accompanied by plant expansion. At the beginning of 2016, the Company newly

purchased a plant building in Guishan, Taoyuan, which is to be mainly used for server research

and development and operation. The new plant is expected to improve overall production

efficiency and make management simpler and more centralized.

6.6.9 Risks faced in centralized goods purchase and sales and resolutions:

2015 is a year of global mergers and acquisitions. Many large-scale brand manufacturers are

spreading consolidation news one after another, which indirectly impacts the OEM plant under the

Group. Regardless of internal acquisition, internal separation, external panel discussion, or hostile

takeover, we can clearly see that the global market layout has started to change, and the original

supply mode of OEM will cause market loss due to the operating decision of major customers.

However, instead of making excuses, in addition to pursuing further improvement of quality and

quantity and cost control, OEM dealers should go deep into establishing diversified customer

relationships in order to avoid the awkward situation brought by excessive concentration of sales.

The purchases and sales of the Company are mostly from and to suppliers or international brand

manufacturers with considerable scale in the industry. In addition to seeking alternative materials

and properly managing inventory levels to reduce the risk of material shortage by actively

dispersing supplier sources, the Company also continuously and actively opens channels and

exploits overseas markets; by reducing sales risk through product quality optimization, it is

expected to harvest potential global markets and grow against trends.

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6.6.10 The impact of massive transfer or change of stock equity between and among

directors, supervisors, or major shareholders holding more than ten percent

of the total share of the company and resolutions: not available.

6.6.11 The impact of change of operation rights of the company, risks, and resolutions:

not available.

6.6.12 Litigation or non-litigation cases:

1. Significant litigation, non-litigation or administrative litigation cases of the Company and

affiliated companies in the past two years, such cases that have been sentenced or are currently

pending, and the results thereof that have a significant impact on shareholders’ equity or

securities price:

A. Litigation case:

a. American merchant Convergence Technologies USA, LLC applied to the U.S. District

Court of the Northern District of California in November 2011 to add the Company as a

defendant; claims included that the Company and seven other joint defendants infringed

on one of its patent rights in the U.S., but Convergence did not specifically indicate the

amount it was requesting. After receiving the notice in January 2012, the Company

specially appointed American lawyers to handle it, and the court judged on motion to

stay on April 6, 2012, after the end of the Convergence patent reexamination procedure

conducted by the U.S. Patent and Trademark Office Patent Trial and Appeal Board. On

February 10, 2015, the final decision of the committee was that the scope of the patent

in the reexamination part is invalid. On May 18, 2015, the litigation parties reached a

consensus to withdraw the lawsuit.

b. The relationship between E-TON Solar Tech. Co., Ltd and Ji-Ee Industry Co., Ltd.

changed due to a dispute regarding the old land and building in the plant. Ji-Ee Industry

Co., Ltd. intended not to continue to lease to E-TON Solar Tech. Co., Ltd on the ground

that the leasehold relationship expired on December 31, 2013; therefore, E-TON Solar

Tech. Co., Ltd initiated litigation to the court, claiming a temporary state injunction. The

case was tried by Taiwan Tainan District Court, and the civil ruling thereof was that,

after E-TON Solar Tech. Co., Ltd had provided a guarantee of NTD 120 million to Ji-Ee

Industry Co., Ltd., before conforming to the litigation of a temporary state injunction

case between two parties, regarding the sidewalk and lane on land No. 73, 74, Kegong

Section, Annan District, Tainan City, and the gate set at land No. 74 of the same section

owned by Ji-Ee Industry Co., Ltd., Ji-Ee Industry Co., Ltd. was prohibited to change the

current situation, set a barrier, or conduct other similar behaviors that would obstruct the

156

access of E-TON Solar Tech. Co., Ltd, and shall allow the building at Building No.

16-10, Kegong Section, Annan District, Tainan City owned by E-TON Solar Tech. Co.,

Ltd to continue to occupy and use the land with the aforementioned land numbers,

namely allow E-TON Solar Tech. Co., Ltd to continue to use the building with Building

No. 16-1 and 16-7 at Kegong Section, Annan District, Tainan City, and shall not change

the current condition of such buildings.

E-TON Solar Tech. Co., Ltd applied for compulsory execution after providing the

guarantee according to the aforementioned civil ruling; in accordance with the

execution order of Nan-Yuan-Kun-2014-Si-Zhi-Quan-Jian-Zi No. 82, Ji-Ee Industry Co.,

Ltd. shall perform the contents of temporary state injunction mentioned above.

On July 15, 2014, according to the order of 2014 Si-Sheng-Zi No. 160 issued by Taiwan

Tainan District Court, litigation may be initiated with the competent court for civil

ruling if it intends to ask for preservation enforcement. On July 15, 2014, E-TON Solar

Tech. Co., Ltd initiated a civil litigation with Taiwan Tainan District Court for

conforming to the leasehold relationship, and it was accepted by Taiwan Tainan District

Court with case number of 2014 Chong-Su-Zi No. 196 and is currently being heard.

Furthermore, Ji-Ee Industry Co., Ltd. claimed to the court for payment order on the

ground that the liquidated damages incurred in January 2014, a total of NTD 8.537

million, that should be paid by E-TON Solar Tech. Co., Ltd was still in arrears, and

Taiwan Tainan District Court issued the 2014 Si-Cu-Zi No. 6096 Payment Order;

E-TON Solar Tech. Co., Ltd shall pay Ji-Ee Industry Co., Ltd. NTD 8.537 million, as

well as the interest calculated based on a five percent annual interest rate from the next

day after serving such payment order until the repayment date. The case entered into

civil procedures due to the objection raised by E-TON Solar Tech. Co., Ltd, and Ji-Ee

Industry Co., Ltd. added a standby request for unjust enrichment equivalent to the rent

from January to March 2014. According to the 2014 Chong-Su-Zi No. 73 Judgment

issued by Taiwan Tainan District Court, E-TON Solar Tech. Co., Ltd shall pay Ji-Ee

Industry Co., Ltd. NTD 6,098,000, and the interest calculated based on a five percent

annual interest rate from May 22, 2014 until the repayment date (namely the previous

request for liquidated damages was rejected, and the request for standby unjust

enrichment was approved). E-TON Solar Tech. Co., Ltd filed an appeal to the Tainan

Branch of Taiwan High Court on December 5, 2014, and it was accepted by such court

with case number 2015 Chong-Shang-Zi No. 5, which is currently being heard.

B. Non-litigation cases: not available in the past two years.

C. Administrative litigation cases: not available in the past two years.

157

2. As of the publication date of annual report, whether the directors, supervisors, President, and

shareholders with shareholding ratio over ten percent of the Company are involved in any

significant litigation, non-litigation or administrative litigation cases, such cases have been

sentenced or are currently pending, and the results thereof have a significant impact on

shareholders' equity or securities price: there is no such circumstance.

6.6.14 Other important risks and response measures: None.

6.7 Other Important Matters: None

158

VII. Special Disclosure

7.1 Summary of Affiliated Companies

7.1.1 The chart of Inventec Corporation

4.95 % 4.64 % 9.55 %

Inventec

Corporation

Inventec

Holding

(North America)

Corp.

100%

Inventec

(Czech), s.r.o.

100%

IEC

(Cayman) Corporation

100%

Inventec

(Cayman) Corp. 100%


(Hong Kong)

Ltd.

100%

Inventec Manufacturing

(India) Private

Limited

99.99%

E-TON Solar

Tech.

Co., Ltd

29.70%

Invnetec

Investments

Co., Ltd.

100%

Inventec Solar

Energy

Corporation 33.45%

Inventec

Appliances Corp.

100%

Inventec

Development

Japan

Corporation

100%

Inventec

Besta Co., Ltd. 37.53%

Refer to the

chart of

Inventec

Holding

(North

America)

Corp.

Inventec

Technology (Chongqing)

Corp.

100%

Refer to the

chart of

Inventec

(Cayman)

Corp.

Inventec

(Tianjin)

Electronics Co., Ltd.

100%

Inventec

(Beijing)

Electronics

Technology

Co., Ltd

100%

Refer to the

chart of

E-TON

Solar Tech

Co., Ltd.

Inventec Energy

Corporation

48.47%

Refer to the

chart of

Inventec

Appliances

Corp

Note1：

Investments in subsidiaries

Investments accounted for under the equity method

Investments between subsidiaries

Note 2：As of 12/31/2015

0.01 %

1.59 % 0.79 %

0.1 %

159

The chart of Inventec Holding (North America) Corp.

Inventec

Corporation

Inventec Holding (North America)

Corp. 100%

Inventec Electronics (USA) Corp.

100%


(North America) Corp. 100%

Inventec Configuration

(North America) Corp. 100%

Inventec Distribution (North America)

Corp. 100%

IEC Technologies, S. de

R.L. de C.V. 99%

1%

160

The chart of Inventec (Cayman) Corp.

Inventec

Corporation

Inventec (Cayman)

Corp. 100%

Inventec (Shanghai)

Corp. 100%

Inventec Asset-Management (Shanghai) Corporation

78%

Inventec (Pudong)

Corp. 100%

Inventec (Pudong)

Technology Corp. 100%

Inventec (Shanghai)

Service Co., Ltd. 100%

Inventec Hi-Tech Corp. 100%

Inventec Huan Hsin (Zhejiang)

Technology Co., Ltd. 100%

Inventec (Chongqing)

Corp. 100%

Chongqing Rongjie Cloud


Chongqing TaiYu Cloud


Chongqing

YuYa Cloud Service Co., Ltd.

100%



TPV-Inventa Holding

Ltd. 90%

TPV-Inventa Technology Co.,

Ltd. 100%

TPV-Inventa Technology (Fujian) Ltd.

100%

161

The chart of E-TON Solar Tech. Co., Ltd.


E-TON Solar Tech. Co., Ltd. 29.70%

Gloria Solar International Holding, Inc.

50.76%

Adema Techologies, Inc.

100%

Gloria Solar Co., Ltd 100%

162

The Chart of Inventec Apliances Corp.


Inventec Appliances Corp.

100%

Inventec Appliances (Cayman)

Holding Corp. 100%

Inventec Appliances

(USA) Distribution Corp.

100%

Inventec Appliances

Corporation USA Inc.

100%

Inventec Electronics

(Shanghai) Co., Ltd.

100%

Inventec Appliances

(Shang Hai) Co., Ltd.

100%

Inventec Appliances

(Pudong) Corp. 100%

Inventec (Nanjing)

ElectronicsCo. Ltd.

100%

Inventec Appliances

(Nanjing) Corp. 100%

Inventec Appliances

(Nanjing) System Corp. 100%

Inventec Appliances

(XI'AN) Corporation

100%

Inventec Appliances (Nanchang) Corporation

100%

163

7.1.2 Inventec Corporation Subsidiaries

Unit: NT$ Thousands As of 12/31/2015

Company Date of

Incorpo-

-ration Place of Registration

Capital Stock

Business Activities

Inventec Corporation (Hong Kong) Ltd.

1990.08 Level 28,Three Pacific Place 1, Queen`s Road East, Hong Kong

8,705

Investing in Mainland China and import and export business

Inventec (Tianjin) Electronics Co., Ltd.

1993.11

23F, Wanzhao Smart Valley Building, No. 218 Hongqi Road, Nankai District, Tianjin, China

164,100

Research, manufacture, sale and warranty services of electronic computers and related.

Inventec (Beijing) Electronics Technology Co., Ltd.

1994.07

A-206, No.1 Building (Information Center), Zhongguancun Software Park, No.8 Dongbeiwang West Road, Haidian District, Beijing, China.

47,589

Manufacture, and warranty services of computers and related; as well as business information consultation.

Inventec (Cayman) Corp.

2000.06

Floor 4,Willow House,Cricket Square, P.O.Box 2804, Grand Cayman KY1-1112, Cayman Islands

9,812,963 Holding Company

Inventec (Shanghai) Corp 2000.10 No.1295, Yi Shan Road Shanghai, China

968,190 Sale of servers, notebooks and related.

Inventec Asset-Management

(Shanghai) Corporation 2014.06

The first floor 08 business of No.7 building , No.1528 Gumei road, , Xuhui district, Shanghai ,China

647,975

Equipment leasing, storage, technological development and sale of computer

Inventec (Pudong) Corp. 2003.01 No.699 Puxing Road, Minhang District,Shanghai, China

1,641,000

Computer products assembly operations and sale of computer

Inventec (Pudong) Technology

Corp. 2004.04

No.789 Puxing Road, Minhang District, Shanghai, China

1,641,000 Manufacture and sale of Servers and related

Inventec (Shanghai) Service

Co., Ltd 2004.03

2F Building, No.1295, Yi Shan Road Shanghai, China

95,178 Research, and sale of software products

Inventec Hi-Tech Corp. 2004.09 No.789 Puxing Road, Minhang District, Shanghai, China

1,641,000

Computer products assembly operations and sale

Inventec Huan Hsin

(Zhejiang) Technology Co.,

Ltd.

2007.03

No. 8, XinDa Road, Huimin Avenue ,Jiashan County, Zhejiang Province, China

941,934

Complete of the electronic computer and product and sale of external equipment

Inventec (Chongqing) Corp. 2010.05 No.66, Xiqu Sceond Road, Shapingba District, ChongQing, China

1,641,000 Assembly and sale of computer products

Chongqing Rongjie Cloud Service Co., Ltd.

2015.03

No.1, 8F, B Building, No.24 Honghu West Road, Yubei District, Chongqing, China

101,084 Computer software system integration service

Chongqing TaiYu Cloud Service Co., Ltd.

2015.03


101,084 Computer software

system integration service

Chongqing YuYa Cloud Service Co., Ltd.

2015.03


101,084 Computer software

system integration service

Inventec (Chongqing) Service Co., Ltd.

2010.05

3F Building No.98, Xiqu Sceond Road, Shapingba District, ChongQing, China

32,820 Assembly and sale of computer products

164

Company Date of

Incorpo-


Capital Stock

Business Activities

TPV-Inventa Holding Ltd. 2010.05 54F, Hopewell Centre, 183 Queen’s Road East, Hong Kong


TPV-Inventa Technology Co., Ltd.

2011.05 7F, No.166 Chengde Rd Sec 4, Shilin District, Taipei City, Taiwan, R.O.C

152,500 Assembly and sale of AIO PC

TPV-Inventa Technology (Fujian) Ltd.

2010.06

Rongqiao Economic and Technological Development Zone, Fuqing City, Fujian Province, China.

1,476,900 Assembly and sale of AIO PC

IEC (Cayman) Corporation

2013.11

Floor 4,Willow House,Cricket Square, P.O.Box 2804, Grand Cayman KY1-1112, Cayman Islands

739,500 Holding Company

Inventec Technology (Chongqing) Corp.

2013.12

No.1-6, Building 9t, GuiFuJiaYuan, No.18, GuiFu No.2 branch, ShuangLongHu Sub-district, Yubei District, Chongqing, China

820,500

Computer software design and computer system integration service.

Inventec Holding (North America) Corp.

1997.09 11450 Compaq Center Dr. West Suite 200, Houston, TX 77070

159,003 Holding company in America

Inventec Electronics (USA) Corp.

1997.02 11450 Compaq Center Dr. West Suite 200

16,410

Computer product assembles and warranty services

Inventec Manufacturing (North America) Corp.

1997.09 11450 Compaq Center Dr. West Suite 200 65,640

Technical and Marketing support service

Inventec Distribution (North America) Corp.

1998.08 11450 Compaq Center Dr. West Suite 200 16,410 Sale of computer products

Inventec Configuration (North America) Corp.

1998.08 11450 Compaq Center Dr. West Suite 200 65,640

Assembly of computer products

IEC Technologies, S. de R.L. de C.V.

2006.09

Blvd.Independencia #10150,Centro Industrial del Norte #1, CD Juarez, Chihuahua, Mexico 32575

65,640 Assembly of servers and related.

Inventec (Czech), s.r.o. 2004.02

Modrice, Central Trade Park Evropska 863 664 42 Modrice, Czech Republic

85,921 Computer products assembly operations

Inventec Development Japan Corporation

2004.12

7F, No.1 Shinbashi-Ekimae BL.,2-20-15 Shinbashi, Minakotu-ku, Tokyo, Japan

32,048

Developing, designing and selling computer peripherals

Inventec Manufacturing (India) Private Limited

2015.04

Survey No.381, Padur Road, Kuthambakkam Village, Poonamallee Taluk. Chennai, Tamil Nadu, India, Pin:602107

281,720

Computer product assembles and warranty services

Invnetec Investments Co., Ltd.

2009.08 3F-1, No.166, Sec. 4, Chengde Rd., Shilin Dist., Taipei City, Taiwan

1,088,000 Investment activities

Inventec Solar Energy Corporation

2010.10 No.349, Sec 2, Renhe Rd., Daxi Township, Taoyuan City, Taiwan.

3,233,548 Developing, production and selling of solar cells.

Inventec Energy Corporation 2004.01 No.2, Gongye 3rd Rd., Hukou Township, Hsinchu County, Taiwan

1,267,801

Manufacturing and selling of photovoltaic systems integration

E-TON Solar Tech. Co.,

Ltd. 2001.12

NO.498,Sec.2, Bentian St., Tainan, Taiwan

7,794,498 Manufacturing and selling of solar cells

Gloria Solar International Holding, Inc.

2007.12

The Grand Pavilion Commercial Centre, Oleander Way, 802 West Bay Road, P.O. Box 32052 Grand Cayman, KY1-1208 Cayman Islands

1,166,345 Investment activities

165

Company Date of

Incorpo-


Capital Stock

Business Activities

Adema Techologies, Inc. 2000.11 4701 Patrick Henry Dr. Bldg 16, Ste 3H Santa Clara, CA 95051

0

Design and consulting service of photovoltaic systems

Gloria Solar Co., Ltd 2006.08 No.110, Ln. 320, Sec. 4, Anzhong Rd., Annan Dist., Tainan City, Taiwan

639,081 Manufacture and sale of photovoltaic modules

Inventec Appliances Corp.

2000.05

No.37, Wugong 5th Road, Wugu Industrial Park, Wugu District, New Taipei City, Taiwan

5,368,573 Wireless terminal products

Inventec Appliances (Cayman) Holding Corp.

2000.06

The Grand Pavilion Commercial Center, Oleander Way, 802 West Bay Road, P.O. Box 32052, Grand Cayman KY1-1208, Cayman Islands.


Inventec Appliances (USA) Distribution Corp.

2000.07 555 Republic Drive, Suite 200, Plano, Texas 75074 , USA

131 Sale of MP3 Play, and consumer electronics etc.

Inventec Appliances Corporation USA Inc.

2006.04 2880 Lakeside Drive, Suite 247, Santa Clara, California 95054

33 Sales activities

Inventec Electronics (Shanghai) Co., Ltd.

1991.07 No.7, Gui Qing Rd., Shanghai, China. 1,693,512

Manufacture and sale of Consumer electronics and IT products.

Inventec Appliances (Shang Hai) Co., Ltd.

2015.04

Room B506, Building 3, No.7 Guiqing Road, Xuhui District, Shanghai, China.

1,264

Development and consultation on software and hardware; as well as selling of electronic products

Inventec Appliances (Pudong) Corp.

2004.03 No.789, Puxing Rd., Minhang District, Shanghai, China.

2,527,140

Research, design and manufacture of consumer electronics, and MP3 Player

Inventec (Nanjing) Electronics Co. Ltd.

1993.10 No.100 Xian He Street, Nanjing, China

164,100 Real Estate Rental and Leasing

Inventec Appliances (Nanjing) Corp.

2004.02

No.133, Jiang-Jun Road ,Jiangning Economic and Technological Development Zone, Nanjing, China.

1,903,560

Research, design and manufacture of telecommunication

Inventec Appliances (Nanjing) System Corp.

2006.07

No.133 ,Jiang-Jun Road ,Jiangning Economic and Technological Development Zone, Nanjing, China.

328,200

Research, design and manufacture of telecommunication

Inventec Appliances (XI’AN) Corporation

2007.12

No.50 Jin-Ye 1st Road High-tech Industrial Development Zone, Xi' an China

131,280

Research, design and sale of electronic and software products

Inventec Appliances (Nanchang) Corporation

2008.12

C401-417,No. 698 Jingdong Boulevard, High-Tech Zone of Nanchang,Jiangxi,China.

68,922

Research, design and sale of electronic and software products

7.1.3 Shareholders in Common of Inventec Corporation and Its Subsidiaries with

Deemed Control and Subordination: None.

166

7.1.4 Industrial Classification in Inventec Corporation Subsidiaries

Industrial Classification Company Relationships to Related Party

Holding company Inventec Corporation (HongKong)

Ltd.

Direct investment in Inventec (Beijing) Electronics

Technology Co., Ltd. and Inventec (Tianjin)

Electronics Co., Ltd.

Electric Product Manufacturing Inventec (Tianjin) Electronics Co.,

Ltd.

Research, manufacture, sale and warranty services of

electronic computers and related.

Electric Product Manufacturing Inventec (Beijing) Electronics

Technology Co., Ltd.

Manufacture, and warranty services of computers and

related; as well as business information consultation.

Holding company Inventec (Cayman) Corp. Direct investment in Inventec (Shanghai) Corp. etc.

Electric Product Manufacturing Inventec (Shanghai) Corp. Sale of servers, notebooks and related.

Electric Product Manufacturing Inventec Asset-Management

(Shanghai) Corporation

Equipment leasing, storage, technological

development and sale of computer

Electric Product Manufacturing Inventec (Pudong) Corp. Computer products assembly operations and sale of

computer

Electric Product Manufacturing Inventec (Pudong) Technology Corp Manufacture and sale of servers and related

Electric Product Manufacturing Inventec (Shanghai) Service Co., Ltd Research and sale of sofeware products

Electric Product Manufacturing Inventec Hi-Tech Corp. Computer products assembly operations and sale

Electric Product Manufacturing Inventec Huan Hsin (Zhejiang)

Technology Co., Ltd. Computer products assembly operations and sale

Electric Product Manufacturing Inventec (Chongqing) Corp. Computer products assembly operations and sale

Electric Product Manufacturing Chongqing Rongjie Cloud Service Co. Computer software system integration service

Electric Product Manufacturing Chongqing TaiYu Cloud Service Co. Computer software system integration service

Electric Product Manufacturing Chongqing YuYa Cloud Service Co. Computer software system integration service

Electric Product Manufacturing Inventec (Chongqing) Service Co.,

Ltd. Assembly and sale of computer products

Holding company TPV-Inventa Holding Ltd. Direct investment in TPV-Inventa Technology Co.,

Ltd. etc.

Electric Product Manufacturing TPV-Inventa Technology Co., Ltd. Assembly and sale of AIO PC

Electric Product Manufacturing TPV-Inventa Technology (Fujian) Ltd. Assembly and sale of AIO PC

Holding company IEC (Cayman) Corporation Direct investment in Inventec Technology

(Chongqing) Corp.

Electric Product Manufacturing Inventec Technology (Chongqing)

Corp.

Computer software design and computer system

integration service.

Holding company InventecHolding (NorthAmerica)

Corp.

Direct investment in Inventec Electronics (USA)

Corp. etc.

Electric Producs Manufacturing Inventec Electronics (USA) Corp. Computer product assembles and warranty services

Electric Product Manufacturing Inventec Manufacturing (North

America) Corp. Technical and Marketing support service

Electric Product Manufacturing Inventec Distribution (North America)

Corp. Computer product assembles and sales

Electric Products Manufacturing Inventec Configuration (North

America) Corp. Computer product assembles

Electric Products Manufacturing IEC Technologies, S. de R.L. de C.V. Assembly of servers and related..

Electric Products Manufacturing Inventec (Czech), s.r.o. Computer product assembles and warranty

services

167

Industrial Classification Company Relationships to Related Party

Electric Product Manufacturing Inventec Development Japan

Corporation

Developing, designing and selling computer

peripherals

Electric Product Manufacturing Inventec Manufacturing (India)

Private Limited

Computer product assembles and warranty

services

Investment Invnetec Investments Co., Ltd. Investment activities

Energy Technical Services Inventec Solar Energy Corporation Developing, production and selling of solar cells.

Energy Technical Services Inventec Energy Corporation Manufacturing of photovoltaic systems integration

Energy Technical Services E-TON Solar Tech. Co., Ltd. Manufacturing and selling of solar cells

Investment Gloria Solar International Holding,

Inc. Investment in Adema Technologies, Inc. etc.

Energy Technical Services Adema Technologies, Inc. Design and consulting service of photovoltaic systems

Energy Technical Services Gloria Solar Co., Ltd Manufacture and sale of photovoltaic modules

Electric Product Manufacturing Inventec Appliances Corp. Communication and digital accessory product

assembles and sales

Holding company Inventec Appliances (Cayman)

Holding Corp.

Investment in Inventec Electronics (Shanghai) Co.,

Ltd. etc.

Electric Product Manufacturing Inventec Appliances (USA)

Distribution Corp.

Communication and digital accessory product

assembles and sales

Electric Product Manufacturing Inventec Appliances Corporation USA

Inc.


assembles and sales

Electric Product Manufacturing Inventec Electronics (Shanghai) Co.,

Ltd.


assembles and sales

Electric Product Manufacturing Inventec Appliances (Shang Hai) Co.,

Ltd.


assembles and sales

Electric Product Manufacturing Inventec Appliances (Pudong) Corp. Communication and digital accessory product

assembles and sales

Electric Product Manufacturing Inventec (Nanjing) Electronics Co.

Ltd.


assembles and sales

Electric Product Manufacturing Inventec Appliances (Nanjing) Corp. Communication and digital accessory product

assembles and sales

Electric Product Manufacturing Inventec Appliances (Nanjing) System

Corp.


assembles and sales

Electric Product Manufacturing Inventec Appliances (XI’AN)

Corporation


assembles and sales

Electric Product Manufacturing Inventec Appliances (Nanchang)

Corporation


assembles and sales

168

7.1.5 Rosters of Directors, Supervisors, and Presidents of Inventec Corporation’s Subsidiaries

Unit: Shares；% As of 12/31/2015

Company Title Name

Shareholding

Shares Investment

Holding (%)

Inventec

Corporation

(Hong Kong) Ltd.

Director

Director

Representative of Inventec Corporation：

Yeh, Kuo-I

Lee, Tsu-Chin

2,500,000 100%

Inventec (Tianjin)

Electronics Co.,

Ltd.

Chairman

Director

Director

Supervisor

*General manager

Representative of Inventec Corporation (Hong Kong) Ltd.：

Lee, Tsu-Chin

Wen, Shih-Chih

Huang, Kuo-Chun

Chen, Pei-chia

Chen, Chih-Feng

N/A 100%

Inventec (Beijing)

Electronics

Technology Co.,

Ltd.

Chairman

Director

Director

*General manager

Representative of Inventec Corporation (HongKong) Ltd.：

Lee, Tsu-Chin

Wen, Shih-Chih

Huang, Kuo-Chun

Chiu, Chuan-Cheng

N/A 100%

Inventec

(Cayman) Corp.

Director


Lee, Tsu-Chin 301,768,161 100%

Inventec

(Shanghai) Corp.

Chairman

Director

Director

Supervisor

*General manager

Representative of Inventec (Cayman) Corp.：

Wu,Yung-Tsai

Chien, Chin-Yen

Chang, Chung-Ming

Chen,Pei-Chia

Wu,Yung-Tsai

N/A 100%

Inventec

Appliances (Shang

Hai) Co., Ltd.

Chairman

Director

Supervisor

Director

*General manager

Representative of Inventec (Shanghai) Corp.：

Wu,Yung-Tsai

Chien, Chin-Yen

Chen,Pei-Chia

Shanghai Caohejing Hi-Tech Park Development Corp.

Chien, Chin-Yen

N/A

78%

22%

Inventec (Pudong)

Corp.

Chairman

Director

Director

Supervisor

*General manager


Wu,Yung-Tsai

Chien, Chin-Yen

Chang, Chung-Ming

Chen,Pei-Chia

Hsun, Chin-Ta

N/A 100%

Inventec (Pudong)

Technology Corp.

Chairman

Director

Director

Supervisor

*General manager


Wu,Yung-Tsai

Chien, Chin-Yen

Chang, Chung-Ming

Chen,Pei-Chia

Hu,Chih-Kuan

N/A 100%

Inventec

(Shanghai) Service

Co., Ltd

Chairman

Director

Director

Supervisor

*General manager


Wu,Yung-Tsai

Chien, Chin-Yen

Chang, Chung-Ming

Chen,Pei-Chia

Wu,Yung-Tsai

N/A 100%

169

Company Title Name

Shareholding

Shares Investment

Holding (%)

Inventec Hi-Tech

Corp.

Chairman

Director

Director

Supervisor

*General manager


Wu, Yung-Tsai

Chien, Chin-Yen

Chang, Chung-Ming

Chen, Pei-Chia

Hu,Chih-Kuan

N/A 100%

Inventec Huan

Hsin (Zhejiang)

Technology Co.,

Ltd.

Chairman

Director

Director

Supervisor

*General manager


Huang, Kuo-Chun

Wen, Shih-Chih

Wu, Yung-Tsai

Chen, Pei-Chia

Chien, Chin-Yen

N/A 100%

Inventec

(Chongqing) Corp.

Chairman

Director

Director

Supervisor

*General manager


Huang, Kuo-Chun

Wu, Yung-Tsai

Chien, Chin-Yen

Chen, Pei-Chia

Chien, Chin-Yen

N/A 100%

Chongqing

Rongjie Cloud

Service Co.

Chairman

Supervisor

*General manager

Representative of Inventec (Chongqing) Corp.：

Yang, Jen-Chieh

Chen, Pei-Chia

Tsung, Yu-Lin

N/A 100%

Chongqing TaiYu

Cloud Service Co.

Chairman

Supervisor

*General manager

Representative of Chongqing Rongjie Cloud Service Co.：

Kung, Ching-Cheng

Ma, Pin-Pin

Chin, Ching

N/A 100%

Chongqing YuYa

Cloud Service Co.

Chairman

Supervisor

*General manager

Representative of Chongqing TaiYu Cloud Service Co ：

Kung, Ching-Cheng

Ma, Pin-Pin

Chin, Ching

N/A 100%

Inventec

(Chongqing)

Service Co., Ltd.

Chairman

Director

Director

Supervisor

*General manager


Huang, Kuo-Chun

Wu,Yung-Tsai

Chien,Chin-Yen

Chen,Pei-Chia

Chien,Chin-Yen

N/A 100%

TPV-Inventa

Holding Ltd.

Chairman

Director

Director

Director

Director

*General manager


Huang, Kuo-Chun

Wu,Yung-Tsai

Chang, Hui

Chen, Wan-Chien

Yu, Chin-Pao

Chen, Wan-Chien

302,421,330 90%

TPV-Inventa

Technology Co.,

Ltd.

Chairman

Director

Director

Director

Supervisor

*General manager

Representative TPV-Inventa Holding Ltd.：

Huang, Kuo-Chun

Chang, Hui

Chen, Wan-Chien

Yu, Chin-Pao

Chen, Wan-Chien

15,250,000 100%

170

Company Title Name

Shareholding

Shares Investment

Holding (%)

TPV-Inventa

Technology

(Fujian) Ltd.

Chairman

Director

Director

Director

Supervisor

*General manager

Representative TPV-Inventa Holding Ltd.：

Huang, Kuo-Chun

Chang, Hui

Chen, Wan-Chien

Yu, Chin-Pao

Chen, Wan-Chien

N/A 100%

IEC (Cayman)

Corporation

Director


Lee, Tsu-Chin 25,000,000 100%

Inventec

Technology

(Chongqing) Corp.

Chairman

Director

Director

Supervisor

*General manager

Representative of IEC (Cayman) Corp.：

Wu, Yung-Tsai

Chien, Chin-Yen

Chang, Chung-Ming

Chen, Pei-Chia

Chien, Chin-Yen

N/A 100%

Inventec Holding

(North America)

Corp.

Director

Director

Director


Lee, Tsu-Chin

Huang, Kuo-Chun

Wu, Yung-Tsai

5,000,000 100%

Inventec

Electronics (USA)

Corp.

Director

Director

Director

*General manager

Representative of Inventec Holding (North America) Corp.：

Lee, Tsu-Chin

Huang, Kuo-Chun

Wu, Yung-Tsai

Lin, Chin-Wen

500,000 100%

Inventec

Manufacturing

(North America)

Corp.

Director

Director

Director

*General manager


Lee, Tsu-Chin

Huang, Kuo-Chun

Wu, Yung-Tsai

Lin, Chin-Wen

2,000,000 100%

Inventec

Distribution (North

America) Corp.

Director

Director

Director

*General manager


Lee, Tsu-Chin

Huang, Kuo-Chun

Wu, Yung-Tsai

Lin, Chin-Wen

500,000 100%

Inventec

Configuration

(North America)

Corp.

Director

Director

Director

*General manager


Lee, Tsu-Chin

Huang, Kuo-Chun

Wu, Yung-Tsai

Lin, Chin-Wen

2,000,000 100%

IEC Technologies,

S. de R.L. de C.V.

Director

Director


Lee, Tsu-Chin

Huang, Kuo-Chun

2 100%

Inventec (Czech),

s.r.o.

Representative

Representative

Representative


Tsai, Chih-An

John William Busby

Tseng, Kuang-Chao

68,000,000 100%

171

Company Title Name

Shareholding

Shares Investment

Holding (%)

Inventec

Development

Japan

Corporation

Representative

Representative

Director

Supervisor


Lee, Tsu-Chin

Ryu Kazuyoshi

Yuan, Chen-Fa

Yu, Chin-Pao

45,100 100%

Inventec

Manufacturing

(India) Private

Limited

Representative

Representative

Representative

*General manager


Wu, Yung-Tsai

Chang, Hui

N. Ramalingam

Hsu, Yu-Kuang

55,994,400

NA

99.99%

NA

Invnetec

Investments Co.,

Ltd.

Chairman

Director

Director

Supervisor

*General manager


Lee, Tsu-Chin

Huang, Kuo-Chun

Yu, Chin-Pao

Cheng, Hsien-Ho

Yu, Chin-Pao

108,800,000 100%

Inventec Solar

Energy

Corporation

Director

Chairman

Director

Director

Director

Supervisor

Supervisor

General manager


Cho, Tom-Hwar

Representative of Invnetec Investments Co., Ltd.：

Yu, Chin-Pao

Fu-Tai investment Corporation

Hsieh, Jui-Hai

Cheng, Hsien-Ho

Chen, Chin-Tsai

Hsieh, Jui-Hai

108,150,000

2,120,000

15,000,000

16,422,320

7,291,760

530,000

10,000

7,291,760

33.45%

0.66%

4.64%

5.08%

2.26%

0.16%

0.00%

2.26%

Inventec Energy

Corporation

Chairman

Director

Director

Director

Supervisor

Supervisor

General manager

Chen, Chin-Tsai

Huang, Ping-Lin

E-TON Solar Tech. Co., Ltd.

WIN Semiconductors Corp.

Cheng, Hsien-Ho

Chuang, Shuo-Hung

Hsieh, Jui-Hai

18,878

226,538

1,000,000

43,770,481

0

481,392

0

0.01%

0.18%

0.79%

34.52%

0.00%

0.38%

0.00%

E-TON Solar

Tech. Co., Ltd.

Chairman

Director

Director

Director

Independent Director



Supervisor

Supervisor

General manager


Hsu, Shen-Chun

Yu, Chin-Pao

Yang, Hsin-Hua

Representative of Fu-Tai investment Corporation：

Wen, Ching-Chang

Lai, Ming-Chang

Tsai, Yang-Tsung

Wu, Ying-Chih

Yeh, Li-Cheng

Cheng, Hsien-Ho

Wen, Ching-Chang

231,520,528

42,500,000

0

0

0

25,100,000

0

420,000

29.70%

5.45%

0.00%

0.00%

0.00%

3.22%

0.00%

0.05%

Gloria Solar

International

Holding, Inc.

Chairman

Director

Director

Director

Director

Representative of E-TON Solar Tech. Co., Ltd. ：

Hsu, Shen-Chun

Wen, Ching-Chang

Chen, Chao-Chuan

Lee, Chung-I

Su, Yao-Chuan

59,200,000

50.76%

172

Company Title Name

Shareholding

Shares Investment

Holding (%)

Adema

Technologies, Inc.

Chairman

Director

Director

Representative of Gloria Solar International Holding, Inc.：

Hsu, Shen-Chun

Chen, Chao-Chuan

Lee, Chung-I

1,100,000 100%

Gloria Solar Co.,

Ltd

Chairman

Director

Director

Supervisor

*General manager

Representative of Gloria Solar International Holding, Inc.：

Hsu, Shen-Chun

Wen, Ching-Chang

Lee, Chung-I

Chen, Chao-Chuan

Hsu, Shen-Chun

63,908,120 100%

Inventec

Appliances Corp.

Chairman

Director

Director

Director

Director

Supervisor

*General manager


Chang, Ching-Sung

Lee, Tsu-Chin

Wen, Shih-Chih

Wu, Yung-Tsai

Lee, Chia-En

Cheng, Hsien-Ho

Ho, Tai-Shui

536,857,254 100%

Inventec

Appliances

(Cayman) Holding

Corp.

Director

Representative of Inventec Appliances Corporation：

Chang, Ching-Sung 199,385,369 100%

Inventec

Appliances (USA)

Distribution Corp.

Director

*General manager

Representative of Inventec Appliances (Cayman) Holding Corp.：

Chang,Ching-Sung

Wang, Po-Hung

400,000 100%

Inventec

Appliances

Corporation USA

Inc.

Director

*General manager


Chang,Ching-Sung

Wang,Po-Hung

10,000 100%

Inventec

Electronics

(Shanghai) Co.,

Ltd.

Chairman

Director

Director

Supervisor

*General manager


Chang, Ching-Sung

Tsai, Shih-Kuang

Ho, Tai-Shui

Tseng, Ching-An

Tsai, Shih-Kuang

N/A 100%

Inventec

Appliances (Shang

Hai) Co., Ltd.

Chairman

Supervisor

*General manager

Representative of Inventec Electronics (Shanghai) Co., Ltd.：

Chang, Ching-Sung

Tseng, Ching-An

Tsai, Shih-Kuang

N/A 100%

Inventec

Appliances

(Pudong) Corp.

Chairman

Director

Director

Director

Director

Supervisor

*General manager


Chang,Ching-Sung

Lin,Wen-Yao

Chen, Kun-Hui

Ho, Tai-Shui

Chang, Hsueh-Ling

Tseng, Ching-An

Chen, Kun-Hui

N/A 100%

173

Company Title Name

Shareholding

Shares Investment

Holding (%)

Inventec (Nanjing)

Electronics Co.

Ltd.

Chairman

Director

Director

Supervisor

*General manager


Chang, Ching-Sung

Kao, Chao-Yang

Chen, Lieh-Hung

Shen, Cheng-Hung

Kao, Chao-Yang

N/A 100%

Inventec

Appliances

(Nanjing) Corp.

Chairman

Director

Director

Supervisor

*General manager


Chang, Ching-Sung

Chang, Hsueh-Ling

Kao, Chao-Yang

Chang, Shu-Ching

Kao, Chao-Yang

N/A 100%

Inventec

Appliances

(Nanjing) System

Corp.

Chairman

Director

Director

Supervisor

*General manager


Chang, Ching-Sung

Yang, Ming-Hsien

Kao, Chao-Yang

Chang, Shu-Ching

Kao, Chao-Yang

N/A 100%

Inventec

Appliances

(XI’AN)

Corporation

Chairman

Director

Director

Supervisor

*General manager


Chang, Ching-Sung

Chang, Hsueh-Ling

Pien, Yung-Tsai

Shen, Cheng-Hung

Pien, Yung-Tsai

N/A 100%

Inventec

Appliances

(Nanchang)

Corporation

Chairman

Director

Director

Supervisor

*General manager


Chang, Ching-Sung

Chen, Kun-Hui

Chang, Ju-Nan

Shen, Cheng-Hung

Chang, Ju-Nan

N/A 100%

Note: General managers marked with * are assigned and are not individual shareholders.

174

7.1.6 Operational Highlights of Inventec company Subsidiaries

Unit: NT$ Thousands (Except EPS)；As of 12/31/2015

Company Capital Total

Assets

Total

Liabilities

Total

Stockholders'

Equity

Sales

Revenue

Operating

Income

Income

after Tax

EPS after

Tax


(Hong Kong) Ltd. 8,705 56,860,724 56,361,564 499,160 203,336,695 6,701 174,530 －

Inventec (Tianjin)

Electronics Co., Ltd. 164,100 456,783 67,977 388,806 143,938 (30,243) 127,075 －

Inventec (Beijing)

Electronics Technology

Co., Ltd.

47,589 94,846 9,842 85,004 37,942 1,287 2,535 －

Inventec (Cayman) Corp. 9,812,963 13,983,905 0 13,983,905 0 65,775 (50,164) －

Inventec (Shanghai) Corp. 968,190 4,072,801 3,303,646 769,155 10,198,666 (14,026) (12,715) －

Inventec Appliances

(Shang Hai) Co., Ltd. 647,975 738,247 4,448 733,799 0 (19,617) (21,170) －

Inventec (Pudong) Corp. 1,641,000 15,524,058 13,744,824 1,779,234 23,966,662 (539,407) (678,243) －

Inventec (Pudong)

Technology Corp. 1,641,000 22,349,522 17,137,689 5,211,833 51,416,223 367,265 (46,584) －

Inventec (Shanghai)

Service Co., Ltd 95,178 49,832 8,605 41,226 32,520 4,552 5,769 －

Inventec Hi-Tech Corp. 1,641,000 12,918,077 11,153,380 1,764,697 18,390,901 15,257 (42,450) －

Inventec Huan Hsin

(Zhejiang) Technology

Co., Ltd.

941,934 956,504 684,549 271,955 755,423 (400,884) (440,918) －


Corp. 1,641,000 28,745,534 24,115,890 4,629,644 152,416,967 749,671 1,213,502 －

Chongqing Rongjie Cloud

Service Co. 101,084 101,033 2 101,031 0 (1) (54) －

Chongqing TaiYu Cloud

Service Co. 101,084 101,032 2 101,030 0 (1) (55) －

Chongqing YuYa Cloud

Service Co. 101,084 101,064 34 101,031 0 (173) (54) －


Service Co., Ltd. 32,820 105,491 69,444 36,047 94 (132) 516 －

TPV-Inventa Holding Ltd. 1,834,968 15,363 171,198 (155,835) 1,693,130 4,192 (150,699) －

TPV-Inventa Technology

Co., Ltd. 152,500 12,683,281 12,834,993 (151,712) 23,070,957 (303,997) (130,984) (8.59)

TPV-Inventa Technology

(Fujian) Ltd. 1,476,900 308,812 274,361 34,451 259,280 (14,558) (12,110) －

IEC (Cayman)

Corporation 739,500 784,561 0 784,561 0 0 12,346 －

Inventec Technology

(Chongqing) Corp. 820,500 784,666 105 784,561 0 0 12,346 －

Inventec Holding (North

America) Corp. 159,003 1,248,653 87,136 1,161,516 0 0 53,512 －


(USA) Corp. 16,410 246,050 313 245,737 58,173 2,770 1,840 －


(North America) Corp. 65,640 233,970 8,353 225,617 291,170 13,865 8,413 －

Inventec Distribution

(North America) Corp. 16,410 13,557,169 13,149,118 408,051 61,934,526 21,023 12,046 －

175

Company Capital Total

Assets

Total

Liabilities

Total

Stockholders'

Equity

Sales

Revenue

Operating

Income

Income

after Tax

EPS after

Tax

Inventec Configuration

(North America) Corp. 65,640 195,228 10 195,218 50,567 2,408 2,870 －

IEC Technologies, S. de

R.L. de C.V. 65,640 180,701 51,721 128,980 513,148 20,504 28,321 －

Inventec (Czech), s.r.o. 85,921 8,542,242 8,400,650 141,592 35,515,180 190,452 10,811 －

Inventec Development

Japan Corporation 32,048 127,394 2,982 124,412 20,856 (3,458) (3,679) －


(India) Private Limited 281,720 313,020 81,609 231,412 8 (50,482) (44,216) －

Inventec Investments Co.,

Ltd. 1,088,000 559,717 152 559,565 0 (238) (94,407) (0.87)

Inventec Solar Energy

Corporation 3,233,548 5,993,418 2,908,875 3,084,543 7,831,894 245,755 208,502 0.64

Inventec Energy Corporation 1,267,801 1,003,797 158,624 845,173 949,814 (125,191) (258,847) (2.04)

E-TON Solar Tech. Co.,

Ltd. 7,794,498 7,652,542 854,444 6,798,098 4,527,777 (787,120) (808,218) (1.04)

Gloria Solar International

Holding 1,166,345 162,312 547,916 (385,604) 0 (5,348) (46,239) －

Adema Technologies 0 388 17,897 (17,509) 0 (2,669) (2,266) －

Gloria Solar Co. 639,081 172,664 530,740 (358,076) 0 (2,157) (43,111) (0.67)

Inventec Appliances Corp. 5,368,573 26,337,666 11,926,311 14,411,355 40,948,618 1,190,554 1,693,572 3.15

Inventec Appliances

(Cayman) Holding Corp. 6,543,828 12,819,625 0 12,819,625 0 0 884,840 －

Inventec Appliances

(USA) Distribution Corp. 131 555,165 455,828 99,337 1,940,979 1,243 1,262 －

Inventec Appliances

Corporation USA Inc. 33 11,402 1,094 10,308 29,459 1,667 999 －


(Shanghai) Co., Ltd. 1,693,512 2,134,316 171,565 1,962,751 90,540 (77,156) 119,001 －

Inventec Appliances

(Shang Hai) Co., Ltd. 1,264 44 0 44 0 (1,228) (1,228) －

Inventec Appliances

(Pudong) Corp. 2,527,140 16,591,258 10,519,199 6,072,059 38,408,670 560,049 556,258 －

Inventec (Nanjing)

Electronics Co. Ltd. 164,100 328,707 5,004 323,703 0 (4,264) 13,476 －

Inventec Appliances

(Nanjing) Corp. 1,903,560 6,877,520 3,293,550 3,583,970 5,838,020 204,409 203,025 －

Inventec Appliances

(Nanjing) System Corp. 328,200 591,930 29,449 562,481 30,546 (1,421) 27,126 －

Inventec Appliances

(XI’AN) Corporation 131,280 194,539 176,930 17,609 0 (17,448) 4,810 －

Inventec Appliances

(Nanchang) Corporation 68,922 158,217 11,377 146,840 75,386 242 3,981 －

176

7.1.7 Consolidated Financial Statements of Affiliates

Representation Letter

The entities that are required to be included in the combined financial statements of Inventec

Corporation as of and for the year ended December 31, 2015 under the Criteria Governing

the Preparation of Affiliation Reports, Consolidated Business Reports, and Consolidated

Financial Statements of Affiliated Enterprises are the same as those included in the

consolidated financial statements prepared in conformity with International Financial

Reporting Standards No. 10 by the Financial Supervisory Commission, "Consolidated and

Spearate Financial Statements." In addition, the information required to be disclosed in the

combined financial statements is included in the consolidated financial statements.

Consequently, Inventec Corporation and its Subsidiaries do not prepare a separate set of

combined financial statements.

Company Name : Inventec Company.

Chairman : Lee, Tsu-Chin

Date: March 22, 2016

7.2 Private Placement Securities in the Most Recent Years: None

7.3 The Shares in the Company Held or Disposed of by Subsidiaries in

the Most Recent Years: None

7.4 The Matters Listed in Article 36, Paragraph 3, Subparagraph 2 of

the Securities and Exchange Act, which might Materially affect

Shareholders' Equity or the Price of the Company's Securities:

None

7.5 Other Matters that Require Additional Description: None

177

AppendixⅠ: Consolidated Financial Statements with Subsidiaries

Audited by CPA of 2015

178

Representation Letter

The entities that are required to be included in the combined financial statements of Inventec

Corporation as of and for the year ended December 31, 2015 under the Criteria Governing the

Preparation of Affiliation Reports, Consolidated Business Reports, and Consolidated Financial

Statements of Affiliated Enterprises are the same as those included in the consolidated financial

statements prepared in conformity with International Financial Reporting Standards No. 10 by the

Financial Supervisory Commission, "Consolidated and Spearate Financial Statements." In addition,

the information required to be disclosed in the combined financial statements is included in the

consolidated financial statements. Consequently, Inventec Corporation and its Subsidiaries do not

prepare a separate set of combined financial statements.

Company Name : Inventec Company.


Date: March 22, 2016

Note to Readers

The accompanying financial statements are intended only to present the financial position, results of operations and cash

flows in accordance with the International Financial Reporting Standards approved by the Financial Supervisory

Commissions in the Republic of China and not those of any other jurisdictions. The standards, procedures, and practices to

audit such financial statements are those generally accepted and applied in the Republic of China.

The independent auditors' report and the accompanying financial statements are the English translation of the Chinese

version prepared and used in the Republic of China. If there is any conflict between, or any difference in the interpretation

of, the English and Chinese language auditors’ report and financial statements, the Chinese version shall prevail.

179

Independent Auditors’ Report

The Board of Directors of Inventec Corporation：

We have audited the accompanying consolidated balance sheets of Inventec Corporation and its subsidiaries (the

"Group") as of December 31, 2015 and 2014, and the related consolidated statements of comprehensive

income, changes in equity and cash flows for the years then ended. These financial statements are the

responsibility of the Group's management. Our responsibility is to express an audit report based on our audits.

We did not audit the financial statements of certain consolidated subsidiaries with the total assets of

$72,686,249 thousand, representing 37% of the consolidated total assets as of December 31, 2014; and the net

sales of $82,918,862 thousand, representing 19% of the consolidated net sales for the years ended December

31, 2014. Also, we did not audit the long-term investments of other companies which amounted to $(542,888)

thousand, representing (0.28)% of the consolidated total assets as of December 31, 2014; and the related

investment income of $44,090 thousand, representing 0.45% of the consolidated net income before tax for the

years ended December 31, 2014. The financial statements of these subsidiaries and investees accounted for

under the equity method were audited by other auditors, whose reports have been furnished to us, and our

opinion, insofar as it relates to the amounts for these companies, were based solely on the reports of other

auditors.

We conducted our audits in accordance with the "Regulation Governing Auditing and Certification of Financial

Statements by Certified Public Accountants" and the auditing standards generally accepted in the Republic of

China. Those regulations and standards require that we plan and perform the audit to obtain reasonable assurance

about whether the financial statements are free of material misstatements. An audit includes assessing the

accounting principles used and significant estimates made by management, as well as evaluating the overall

financial statement presentation. We believe that our audits and the report of other auditors provide a reasonable

basis for our opinion.

In our opinion, based on our audit and the reports of other auditors, the accompanying consolidated financial

statements referred to above present fairly, in all material respects, the financial position of the Consolidated

Company as of December 31, 2015 and 2014, and the results of their operations and their cash flows for the

years then ended, in conformity with the Regulations Governing the Preparation of Financial Reports by

Securities Issuers and the International Financial Reporting Standards, International Accounting Standards,

IFRIC Interpretations and SIC Interpretations as endorsed by the Financial Supervisory Commission.

Note to Readers

The accompanying financial statements are intended only to present the financial position, results of operations and cash

flows in accordance with the International Financial Reporting Standards approved by the Financial Supervisory

Commissions in the Republic of China and not those of any other jurisdictions. The standards, procedures, and practices to

audit such financial statements are those generally accepted and applied in the Republic of China.

The independent auditors' report and the accompanying financial statements are the English translation of the Chinese

version prepared and used in the Republic of China. If there is any conflict between, or any difference in the interpretation

of, the English and Chinese language auditors’ report and financial statements, the Chinese version shall prevail.

180

We have also audited the non-consolidated financial statements of the Company as of and for the years ended

December 31, 2015 and 2014, and have issued an unqualified audit report and a modified unqualified audit

report thereon.

KPMG

CPA： Ying Ru, Chen

Leou Fong, Yang

Taipei, Taiwan, R.O.C.

March 22, 2016

(English Translation of Financial Report Originally Issued in Chinese)

INVENTEC CORPORATION AND ITS SUBSIDIARIES

Consolidated Balance Sheets

December 31, 2015 and 2014

(Amounts Expressed in Thousands of New Taiwan Dollars)

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

181

2015.12.31 2014.12.31

ASSETS Amount % Amount %

Current Assets：

1100 Cash and cash equivalents (Notes (4) and (6)(a)) $ 37,123,631 21 37,731,741 19

1110 Current financial assets at fair value through profit or loss (Notes (4) and (6)(b)) 221,615 - 440,972 -

1125 Current available-for-sale financial assets (Notes (4) and (6)(b)) 3,290,684 2 8,401,561 4

1170 Accounts receivable, net (Notes (4) and (6)(c)) 60,343,565 34 59,281,105 30

1180 Accounts receivable due from related parties, net (Notes (4), (6)(c) and (7)) 20,254 - 8,967,761 5

1200 Other receivables (Notes (4), (6)(c) and (7)) 1,004,386 1 1,039,645 1

1310 Inventories, manufacturing business, net (Notes (4) and (6)(d)) 28,959,904 16 31,772,851 16

1479 Other current assets – others (Notes (4) and (6)(k)) 2,613,620 2 3,463,204 2

133,577,659 76 151,098,840 77

Non-current assets：

1523 Non-current available-for-sale financial assets (Notes (4) and (6)(b)) 331,492 - 457,501 -

1543 Non-current financial assets at cost (Notes (4) and (6)(b)) 502,173 - 533,751 -

1550 Investments accounted for using equity method (Notes (4) and (6)(e)) 532,888 - 613,137 -

1600 Property, plant, and equipment (Notes (4) and (6)(h)) 34,660,330 20 35,073,036 18

1760 Investment property, net (Notes (4) and (6)(i)) 548,071 - 590,080 -

1780 Intangible assets (Notes (4) and (6)(j)) 872,905 1 901,392 1

1900 Other non-current assets (Notes (4), (6)(k) and (6)(o)) 4,720,955 3 6,433,992 4

42,168,814 24 44,602,889 23

TOTAL ASSETS $ 175,746,473 100 195,701,729 100

2015.12.31 2014.12.31

LIABILITIES AND EQUITY Amount % Amount %

Current Liabilities：

2100 Short-term borrowings (Note (6)(l)) $ 7,744,025 4 15,859,736 8

2120 Current financial liabilities at fair value through profit or loss (Notes (4) and (6)(b)) 88,985 - 41,666 -

2160 Notes payable－related parties (Note (7)) 12,132 - 24,263 -

2170 Accounts payable 58,582,313 33 67,231,370 35

2180 Accounts payable－related parties (Note (7)) 27,239 - 6,712,732 3

2230 Current tax liabilities 2,446,103 2 2,115,698 1

2200 Other payables (Note (7)) 17,456,471 10 12,165,426 6

2322 Long-term borrowings－current portion (Note (6)(l)) 266,800 - 15,232,531 8

2399 Other current liabilities－others 8,993,423 5 4,571,486 2

2313 Unearned revenue 3,154,378 2 2,713,152 1

98,771,869 56 126,668,060 64

Non-current Liabilities：

2540 Long-term borrowings (Note (6)(l)) 11,293,260 6 1,005,492 1

2640 Net defined benefit liabilities－non-current (Notes (4) and (6)(n)) 1,030,424 1 1,014,760 1

2670 Other non-current liabilities－others (Notes (4), (6)(e) and (6)(o)) 1,752,071 1 2,590,627 1

14,075,755 8 4,610,879 3

Total Liabilities 112,847,624 64 131,278,939 67

Equity attributable to owners of parent：

3110 Ordinary share (Note (6)(p)) 35,874,751 20 35,874,751 18

3200 Capital surplus (Note (6)(p)) 2,912,784 2 2,920,718 1

3300 Retained earnings (Note (6)(p)) 14,883,819 8 15,773,335 8

3400 Other equity (Note (6)(p)) 2,809,350 2 3,009,234 2

Total equity attributable to owners of parent 56,480,704 32 57,578,038 29

36XX Non-controlling interests 6,418,145 4 6,844,752 4

Total Equity 62,898,849 36 64,422,790 33

TOTAL LIABILITIES AND EQUITY $ 175,746,473 100 195,701,729 100


182



Consolidated Statements of Comprehensive Income

For the Years Ended December 31, 2015 and 2014


2015 2014

Amount % Amount %

4110 Sales revenue (Notes (4), (6)(s) and (7)) $ 395,470,221 100 435,599,968 100

5000 Operating costs (Notes (4) and (7)) 373,764,813 95 412,251,630 95

Gross profit from operation 21,705,408 5 23,348,338 5

Operating expenses：

6100 Selling expenses 2,688,381 1 2,926,456 -

6200 Administrative expenses 4,792,827 1 4,800,839 1

6300 Research and development 8,816,932 2 8,511,964 2

6400 Total operating expenses 16,298,140 4 16,239,259 3

Operating profit 5,407,268 1 7,109,079 2

Non-operating income and expenses：

7010 Other income (Note (6)(u)) 2,112,228 1 2,864,110 -

7020 Other gains and losses (Note (6)(u)) 676,152 - 1,015,376 -

7050 Finance costs (Note (6)(u)) (914,173) - (1,251,417) -

7060 Share of losses of associates and joint ventures accounted for using equity method (Notes (4) and (6)(e))

(97,605)

-

(56,450)

-

Total non-operating income and expenses 1,776,602 1 2,571,619 -

7900 Profit before income tax 7,183,870 2 9,680,698 2

7950 Less: Tax expenses (Notes (4) and (6)(o)) 2,208,135 1 3,015,137 -

8200 Profit for the year 4,975,735 1 6,665,561 2

Other comprehensive income (loss):

8310 Items that will not be reclassified subsequently to profit or loss

8311 Remeasurement from the defined benefit plans (58,068) - (6,610) -

8320 Share of other comprehensive income of associates and joint ventures

accounted for using equity method

69 - (4,265) -

8349 Income tax expense related to items that will not be reclassified subsequently 9,781 - 1,194 -

Total items that will not be reclassified subsequently to profit or loss (48,218) - (9,681) -

8360 Items that may be reclassified subsequently to profit or loss

8361 Exchange differences on translation of foreign financial statements (640,299) - 1,472,514 -

8362 Unrealized losses on available-for-sale financial assets 48,545 - 32 -

8370 Share of other comprehensive income of associates and joint ventures

accounted for using equity method

12,423 - 6,101 -

8399 Income tax benefit (expense) related to items that are or may be reclassified subsequently

381,929 - (109,140) -

Total items that may be reclassified subsequently to profit or loss (197,402) - 1,369,507 -

Other comprehensive income (loss), net of tax (245,620) - 1,359,826 -

8500 Total comprehensive income $ 4,730,115 1 8,025,387 2

Profit attributable to：

8610 Owners of parent $ 5,563,633 1 7,097,815 2

8620 Non-controlling interests (587,898) - (432,254) -

$ 4,975,735 1 6,665,561 2

Comprehensive income attributable to：

8710 Owners of parent $ 5,315,880 1 8,455,834 2

8720 Non-controlling interests (585,765) - (430,447) -

$ 4,730,115 1 8,025,387 2

Earning per share attributable to stockholders of parent (Notes (4) and (6)(r))

9750 Basic earnings per share (NT dollars) $ 1.55 1.98

9850 Diluted earnings per share (NT dollars) $ 1.54 1.96


183



Consolidated Statements of Changes in Equity



Equity Attributable to Owners of Parent Other Equity Interest

Capital Stock

Retained Earnings

Exchange

Differences on

Translation of

Unrealized Gains

(Losses)

Share Capital

Capital Surplus

Legal

Reserve

Unappropriated

Retained

Earnings

Foreign

Financial

Statements

on

Available-for-Sale

Financial Assets

Total Equity

Attributable to

Owners of Parent

Non-Controlling

Interests

Total Equity

Balance at January 1, 2014 $ 35,874,751 2,895,677 6,936,854 7,488,577 1,495,109 146,155 54,837,123 6,975,065 61,812,188

Net income (loss) for the period - - - 7,097,815 - - 7,097,815 (432,254) 6,665,561

Other comprehensive income (loss) for the period - - - (9,951) 1,373,853 (5,883) 1,358,019 1,807 1,359,826

Total comprehensive income (loss) for the period - - - 7,087,864 1,373,853 (5,883) 8,455,834 (430,447) 8,025,387

Appropriation and distribution of retained earnings:

Legal reserve appropriated - - 707,417 (707,417) - - - - -

Cash dividends of ordinary share - - - (5,739,960) - - (5,739,960) - (5,739,960)

Changes in non-controlling interests - - - - - - - 294,973 294,973

Others - 25,041 - - - - 25,041 5,161 30,202

Balance at December 31, 2014 35,874,751 2,920,718 7,644,271 8,129,064 2,868,962 140,272 57,578,038 6,844,752 64,422,790

Net income (loss) for the period - - - 5,563,633 - - 5,563,633 (587,898) 4,975,735

Other comprehensive income (loss) for the period - - - (47,869) (264,790) 64,906 (247,753) 2,133 (245,620)

Total comprehensive income (loss) for the period - - - 5,515,764 (264,790) 64,906 5,315,880 (585,765) 4,730,115

Appropriation and distribution of retained earnings:

Legal reserve appropriated - - 709,781 (709,781) - - - - -

Cash dividends of ordinary share - - - (6,278,081) - - (6,278,081) - (6,278,081)

Changes in non-controlling interests - - - - - - - 16,943 16,943

Others - (7,934) - (127,199) - - (135,133) 142,215 7,082

Balance at December 31, 2015 $ 35,874,751 2,912,784 8,354,052 6,529,767 2,604,172 205,178 56,480,704 6,418,145 62,898,849


184



Consolidated Statements of Cash Flows



2015 2014

Cash flows from operating activities：

Profit before income tax $ 7,183,870 9,680,698

Adjustments to reconcile profit before income tax to net cash provided by operating

activities：

Depreciation expenses 3,976,246 3,813,990

Amortization expenses 964,995 1,222,212

Provisions for bad debt expenses 25,179 15,856

Interest expenses 914,173 1,251,417

Interest income (2,112,228) (2,864,110)

Share-based payments 8,533 9,575

Share of losses of associates and joint ventures accounted for using equity method 97,605 56,450

(Gains) losses on disposal of property, plant, equipment and inventory property (136,531) 162,409

Gain on disposal of investments (331,861) (383,461)

Impairment losses on financial assets - 109,590

Impairment losses on non-financial assets 140,379 1,454,743

Others (772) (38,264)

Total adjustments to reconcile profit 3,545,718 4,810,407

Changes in operating assets and liabilities：

Changes in operating assets：

Decrease (increase) in financial assets held for trading 215,185 (227,010)

Decrease in accounts receivable 11,810,327 6,006,396

Decrease (increase) in other receivables 2,596,999 (27,568)

Decrease in inventories 2,892,534 8,914,388

Decrease (increase) in other current assets 1,610,970 (1,646,819)

Total changes in operating assets 19,126,015 13,019,387

Changes in operating liabilities：

Increase (decrease) in financial liabilities held for trading 48,343 (64,739)

Decrease in notes payable (12,131) (26,239)

Decrease in accounts payable (20,374,773) (31,253,048)

Increase in other payables 3,370,735 2,366,838

Increase in other current liabilities 4,276,868 1,638,197

Decrease in net defined benefit liabilities-non-current (41,869) (30,129)

Increase in deferred income 355,366 581,934

Total changes in operating liabilities (12,377,461) (26,787,186)

Total changes in operating assets and liabilities 6,748,554 (13,767,799)

Total adjustments 10,294,272 (8,957,392)

Cash inflow generated from operations 17,478,142 723,306

Interests received 2,269,550 2,942,046

Interests paid (864,916) (944,491)

Income taxes paid (1,861,137) (1,904,967)

Net cash flows from operating activities 17,021,639 815,894



Consolidated Statements of Cash Flows (CONT'D)



2015 2014


185

Cash flows from investing activities：

Acquisition of available-for-sale financial assets (23,452,524) (33,777,739)

Proceeds from disposal of available-for-sale financial assets 28,952,230 29,491,624

Proceeds from capital reduction of available-for-sale financial assets 35,371 6,650

Proceeds from repayments of bond investment without active market - 208,740

Acquisition of financial assets at cost (55,595) (144,403)

Proceeds from disposal of financial assets at cost - 1,268

Proceeds from capital reduction of financial assets at cost 88,354 -

Acquisition of investments accounted for using equity method (367,399) (939)

Proceeds from disposal of investments accounted for using equity method - 67,329

Acquisition of property, plant and equipment (3,762,999) (4,781,393)

Proceeds from disposal of property, plant and equipment 250,519 93,680

Acquisition of intangible assets (239,988) (378,368)

Net cash inflows from business combination 1,305,370 -

(Increase) decrease in other non-current assets (145,720) 438,857

Net cash flows from (used in) investing activities 2,607,619 (8,774,694)

Cash flows from financing activities：

Decrease in short-term borrowings (8,351,998) (9,035,069)

(Repayments) proceeds from long-term debt (4,659,943) 1,982,345

Increase in other non-current liabilities 13,762 19,090

Cash dividends paid (6,278,081) (5,739,960)

Change in non-controlling interests 249,395 19,175

Net cash flows used in financing activities (19,026,865) (12,754,419)

Effect of exchange rate changes on cash and cash equivalents (1,210,503) 1,512,290

Net decrease in cash and cash equivalents (608,110) (19,200,929)

Cash and cash equivalents at beginning of period 37,731,741 56,932,670

Cash and cash equivalents at end of period $ 37,123,631 37,731,741

186



Notes to the Consolidated Financial Statements


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

(1) Overview

Inventec Co., Ltd. (the “Company”) was organized in 1975. The Company engages primarily in

the developing, manufacturing, processing and trading of computers and related products. The

Company’s registered office address is located at No. 66 Hou-gang Street, Shin-Lin District,

Taipei, Taiwan, R.O.C. The shares of the Company became officially listed and traded on the

Taiwan Stock Exchange in November 1996.

The consolidated financial statements of the Company as of and for the year ended December 31,

2015 comprised the Company and its subsidiaries (together referred to as the “Group” and

individually as “Group entities”). The Group primarily is involed in the developing, computer

hardware and software products, manufacturing, processing and trading of computers and

related products, and sale of wired and wireless communication and digital accessory products.

Please refer to Note 4(c) for details. (2) Financial Statements Authorization Date and Authorization Process

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

March 22, 2016. (3) New Standards and Interpretations not yet Adopted

(a) Impact of the 2013 version of the International Financial Reporting Standard (“IFRS”) endorsed by

the Financial Supervisory Commissions R.O.C. (“FSC”).

The Group has adopted the 2013 version of the IFRS endorsed by the FSC (excluding IFRS 9

Financial instruments) in preparing consolidated financial statements starting in 2015.

The related new standards, interpretations and amendments issued by the International Accounting

Standards Board (“IASB”) were as follows:

New Standards and amendments

Effective date

per IASB

Amended IFRS 1“Limited Exemption from Comparative IFRS 7

Disclosures for First-time Adopters”

July 1, 2010

Amended IFRS 1“Severe Hyperinflation and Removal of Fixed

Dates for First-time Adopters”

July 1, 2011

Amended IFRS 1“Government Loans” January 1, 2013

Amended IFRS 7“Disclosure－Transfers of Financial Assets” July 1, 2011

Amended IFRS 7“Disclosure－Offsetting Financial Assets and

Financial Liabilities”

January 1, 2013

IFRS10 “Consolidated Financial Statements” January 1, 2013

(Investment Entities

amendments to be

adopted on January

1, 2014.)



Notes to the Consolidated Financial Statements (CONT'D)


(Amounts Expressed in Thousands of New Taiwan Dollars Unless Stated Otherwise)

New Standards and amendments

Effective date

per IASB

187

IFRS 11 “Joint arrangements” January 1, 2013

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

IFRS 13 “Fair Value Measurement” January 1, 2013

Amended IAS 1“Presentation of Items of Other Comprehensive

Income”

July 1, 2012

Amended IAS 12“Deferred Tax: Recovery of Underlying Assets” January 1, 2012

Amended IAS 19“Employee Benefits” January 1, 2013

Amended IAS 27“Separate Financial Statements” January 1, 2013

Amended IAS 32“Offsetting Financial Assets and Financial

Liabilities”

January 1, 2014

IFRIC20－“Stripping Costs in the Production Phase of a Surface

Mine”

January 1, 2013

The Group had assessed that the 2013 version of the IFRS may not have any significant impact on

the consolidated financial statements except for the following:

A. IAS 1 Presentation of Financial Statements

The other comprehensive income section is required to present line items which are classified by

their nature, and are grouped between those items that will or will not be reclassified to profit or

loss in subsequent periods. Allocation of income tax to two groups of items of other

comprehensive is also required. The Group is expecting to change the presentation of

comprehensive income statements in accordance with the standard. The Group has changed the

presentation of comprehensive income statement along with its comparison periods in

accordance with the standard.

B. IFRS 12 Disclosure of Interests in Other Entities

The Group will disclose any additional information about its subsidiaries accordingly by the

standard; please refer to Note 6(e).

C. IFRS 13 Fair value measurement

The standard revised the definition of the fair value, provides a framework for measuring fair

value, and requires the disclosures on fair value measurement. Under this standard, Group has

increased its disclosures on the measurement of fair value (Please refer to note 6(w)) and

postponed the adoption of the standard regarding fair value measurement during the transition

period of IFRS 13.

Comparative information need not be disclosed for periods before initial application.






188

(b) Impact of IFRSs issued by IASB but not yet endorsed by the FSC

The 2013 version of the IFRS issued by the IASB but not yet endorsed by the FSC were as

follows：

New Standards, Interpretations and Amendments

IASB Effective

Date

IFRS 9, ‘Financial instruments’ January 1, 2018

Sale or Contribution of Assets between an Investor and its Associate

or Joint Venture (amendments to IFRS 10 and IAS 28)

Not yet endosed by

IASB

Investment entities: Applying the Consolidation Exception

(amendments to IFRS 10, IFRS 12 and IAS 28)

January 1, 2016

Accounting for acquisitions of interests in joint operations

(amendments to IFRS 11)

January 1, 2016

IFRS 14 ‘Regulatory deferral accounts’ January 1, 2016

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

IFRS16 ‘Lease’ January 1, 2019

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

Disclosure initiative (amendments to IAS 7) January 1, 2017

Recognition of deferred tax assets for unrealized losses

(amendments to IAS 12)

January 1, 2017

Clarification of Acceptable Methods of Depreciation and

Amortization (amendments to IAS 16 and 38)

January 1, 2016

Agriculture: bearer plants (amendments to IAS 16 and IAS 41) January 1, 2016

Services related contributions from employees or third parties


July 1, 2014

Equity Method in Separate Financial Statements (amendments to

IAS 27)

January 1, 2016

Recoverable amount disclosures for non-financial assets


January 1, 2014

Novation of derivatives and continuation of hedge accounting


January 1, 2014

The Annual Improvements: 2010-2012 and 2011-2013 Cycles July 1, 2014

The Annual Improvements to IFRS: 2012-2014 Cycles January 1, 2016

IFRIC 21, ‘Levies’ January 1, 2014

As the standards and amendments above have not been endorsed by the FSC, the Group is in the

process of assessing the impact on the financial position and results of operations. Related impact

will be disclosed following the completion of its assessments.






189

(4) Significant Accounting Policies The consolidated financial statements are the English translation of the Chinese version prepared and

used in the Republic of China. If there is any conflict between, or any difference in the interpretation of,

the English and the Chinese language, the Chinese version shall prevail.

The significant accounting policies presented in the consolidated financial statements are summarized as

follows:

The significant accounting policies have been applied consistently to all periods presented in these

consolidated financial statements, except when otherwise indicated.

(a) Statement of compliance

These consolidated annual financial statements have been prepared in accordance with the

Regulations Governing the Preparation of Financial Reports by Securities Issuers (hereinafter

referred to the Regulations) and International Financial Reporting Standards, International

Accounting Standards, IFRIC Interpretations and SIC Interpretations endorsed by FSC (hereinafter

referred to as the IFRSs endorsed by FSC).

(b) Basis of preparation

1.Basis of measurement

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

following material items in the statement of financial position:

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

2) Available-for-sale financial assets are measured at fair value;

3) Liabilities for cash-settled share-based payment arrangements are measured at fair value;and

4) The net defined benefit liability (or asset) is recognized as the fair value of plan assets, net of

aggregation of the present value of the defined benefit obligation, with a limit based on a

defined benefit asset as disclosed in Note 4(s).

2.Functional and presentation currency

The functional currency of each entity of the Group is determined based on the primary

economic environment in which the entity operates. The Group consolidated financial statements

are presented in New Taiwan Dollar, which is the Company’s functional currency. All financial

information presented in New Taiwan Dollar has been rounded to the nearest thousand.

(c) Basis of consolidation

1.Principle of preparation of the consolidated financial statements

The consolidated financial statements comprise the Company and its subsidiaries. The Group

controls an entity when it is exposed, or has rights, to variable returns from its involvement with

the entity and has the ability to affect those returns through its control over the entity.






190

The financial statements of subsidiaries are included in the consolidated financial statements

from the date that control commences until the date that control ceases. Intra-group balances and

transactions, and any unrealized income and expenses arising from intra-group transactions, are

eliminated in preparing the consolidated financial statements. Income (losses) applicable to non

controlling interests in a subsidiary are allocated to the non-controlling interests even if doing so

causes the non-controlling interests to have a deficit balance.

Accounting policies of subsidiaries have been adjusted to ensure consistency with the policies

adopted by the Group.

Changes in the Group’s ownership interest in a subsidiary that do not result in a loss of control

are accounted for as equity transactions. Any differences between the Group’s share of net assets

before and after the change, and any considerations received or paid, are adjusted to or against

the Group reserves.

2.List of subsidiaries in the consolidated financial statements

Principal Shareholding Ratio

Investor Name of Subsidiary activity 2015.12.31 2014.12.31 Note

The Company Inventec Corporation (Hong Kong) Ltd. Investing in Mainland

China and import and

export business

100.00% 100.00%

〞 Inventec Holding (North America) Corp. Investment of holding

company in America

100.00% 100.00%

〞 Inventec (Cayman) Corp. Holding Company 100.00% 100.00%

〞 IEC (Cayman) Corporation Holding Company 100.00% 100.00%

〞 Inventec (Czech), s.r.o. Computer products

assembly operations

100.00% 100.00%

〞 Inventec Development Japan Corporation Developing,

designing

and selling

computer peripherals

100.00% 100.00%

〞 Inventec Investments Co., Ltd. Investment company 100.00% 100.00%

The Company、

Inventec Investments

Co., Ltd.、 Inventec

Appliances Corp. and

Inventec Energy

Corporation

Inventec Solar Energy Corporation Developing,

production and selling

of multi-crystalline

solar cells

49.23% 49.23%

The Company and


Co., Ltd.

E-TON Solar Tech. Co., Ltd Manufacturing and

selling of solar cells

34.65% 34.65%

The Company,

Inventec Solar Energy

Corporation and

E-TON Solar Tech.

Co., Ltd

Inventec Energy Corporation Manufacturing and

selling of

photovoltaic systems

integration

49.36% 49.36%

The Company Inventec Appliances Corp. Wireless terminal

products

100.00% 100.00%

The Company and


Co., Ltd.

Inventec Manufacturing (India) Private

Limited

Computer product

assembles and

warranty services

100.00% - %


(Hong Kong) Ltd.

Inventec (Tianjin) Electronics Co., Ltd. Electronic product

software and

hardware

development

manufacturing

100.00% 100.00%

〞 Inventec (Beijing) Electronics Technology

Co., Ltd. 〞 100.00% 100.00%








191

Inventec (Cayman)

Corp.

Inventec (Shanghai) Corp. Electronic

product

software and

hardware

development

manufacturing

100.00% 100.00%

〞 Inventec (Pudong) Corp. 〞 100.00% 100.00%

〞 Inventec (Pudong) Technology Corp. 〞 100.00% 100.00%

〞 Inventec (Shanghai) Service Co., Ltd. 〞 100.00% 100.00%

〞 Inventec Hi-Tech Corp. 〞 100.00% 100.00%

〞 Inventec Huan Hsin (Zhejiang) Technology

Co., Ltd.

Complete of the

electronic computer

and product and sale

of external equipment

100.00% 100.00%

〞 Inventec (Chongqing) Corp. Assembly and sale of

computer products

100.00% 100.00%

〞 Inventec (Chongqing) Service Co., Ltd 〞 100.00% 100.00%

〞 TPV-Inventa Holding Ltd. Holding Company 90.00% - % The board of Directors decided to terminate the

joint venture agreement with TPV Technology

Limited. The Company obtained all of the numbers

of the board of directors of TPV-Inventa Holding

Ltd. and obtain the controlling power in 2015.

Inventec (Shanghai)

Corp.

Inventec Asset-Management (Shanghai)

Corporation

Equipment leasing,

Storage, technological

development and sale

of computer

78.00% - %


Corp.

Chongqing Rongjie Cloud Service Co., Ltd. Software production 100.00% - %

Chongqing Rongjie

Cloud Service Co.,

Ltd.

Chongqing TaiYu Cloud Service Co., Ltd. 〞 100.00% - %

Chongqing TaiYu

Cloud Service Co.,

Ltd.

Chongqing YuYa Cloud Service Co., Ltd. 〞 100.00% - %

TPV-Inventa Holding

Ltd.

TPV-Inventa Technology Co., Ltd. AIO PC 100.00% - %

〞 TPV-Inventa Technology (Fujian) Ltd. 〞 100.00% - %

IEC (Cayman)

Corporation

Inventec Technology (Chongqing) Corp. Computer software

design and computer

system integration

service

100.00% 100.00%

Inventec Holding

(North America)

Corp.

Inventec Electronics (USA) Corporation Computer product

assembles and

warranty services

100.00% 100.00%

〞 Inventec Manufacturing (North America)

Corporation 〞 100.00% 100.00%

〞 Inventec Configuration (North America)

Corporation 〞 100.00% 100.00%

〞 Inventec Distribution (North America)

Corporation 〞 100.00% 100.00%

〞 IEC Technologies, S. de R.L. de C.V. 〞 100.00% 100.00%

E-TON Solar Tech.

Co., Ltd

Gloria Solar International Holding, Inc. Investment company 50.76% 50.76%

Gloria Solar

International Holding,

Inc.

Adema Technologies, Inc. Design and consulting

service of

photovoltaic systems

100.00% 100.00%

〞 Gloria Solar Co., Ltd. Manufacture and sale

of photovoltaic

modules

100.00% 100.00%








192

Inventec Appliances

Corp.

Inventec Appliances (Cayman) Holding Corp. Holding Company 100.00% 100.00%

Inventec Appliances

(Cayman) Holding

Corp.

Inventec Appliances (USA) Distribution

Corp.

Marketing promotion 100.00% 100.00%

〞 Inventec Appliances Corporation USA, Inc. Customer information

service

100.00% 100.00%

Inventec Appliances

(Cayman) Holding

Corp.

Inventec Electronics (Shanghai) Co.Ltd. Telecommunication

research

100.00% 100.00%

〞 Inventec Appliances (Pudong) Corp. Electronic

communication and

products

manufacturing

100.00% 100.00%

〞 Inventec Appliances (Nanjing) Corp. 〞 100.00% 100.00%

〞 Inventec (Nanjing) Electronics Co. Ltd. house leasing 100.00% 100.00%

〞 Inventec Appliances (Nanjing) System Corp. Electronic

communication and

products

manufacturing

100.00% 100.00%

〞 Inventec Appliances (XI'AN) Corporation Telecommunication

research and service

100.00% 100.00%

〞 Inventec Appliances (Nanchang) Corporation 〞 100.00% 100.00%


(Shanghai) Co.Ltd.

Inventec Appliances (Shang Hai) Co., Ltd. Development and

consultation on

software and

hardware; as well as

selling of electronic

products

100.00% - %

3.Subsidiaries excluded from the consolidated financial statements: None.

(d) Foreign Currency

1.Foreign currency transaction

Transactions in foreign currencies are translated to the respective functional currencies of

Group entities at exchange rates at the dates of the transactions. Monetary assets and liabilities

denominated in foreign currencies at the reporting date are retranslated to the functional currency

at the exchange rate at that date. The foreign currency gain or loss on monetary items is the

difference between amortized cost in the functional currency at the beginning of the period

adjusted for the effective interest and payments during the period, and the amortized cost in

foreign currency translated at the exchange rate at the end of the period.

Non monetary assets and liabilities denominated in foreign currencies that are measured at fair

value are retranslated to the functional currency at the exchange rate at the date that the fair value

was determined. Non-monetary items in a foreign currency that are measured based on historical

cost are translated using the exchange rate at the date of translation.

Foreign currency differences arising on retranslation are recognized in profit or loss, except for

those differences relating to available-for-sale equity investment which are recognized in other

comprehensive income.






193

2.Foreign operations

The assets and liabilities of foreign operations, including goodwill and fair value adjustments

arising on acquisition, are translated to the reporting currency at exchange rates at the reporting

date. The income and expenses of foreign operations are translated at average exchange rate.

Translation differences are recognized in other comprehensive income, and presented in the

foreign currency translation reserve in equity.

When a foreign operation is disposed of such that control, significant influence or joint control is

lost, the cumulative amount in the translation reserve related to that foreign operation is

reclassified to profit or loss as part of the gain or loss on disposal. When the Group dispose of

any part of its interest in a subsidiary that includes a foreign operation while retaining control, the

relevant proportion of the cumulative amount is reattributed to non-controlling interest. When the

Group dispose of only part of investment in an associate or joint venture that includes a foreign

operation while retaining significant or joint control, the relevant proportion of the cumulative

amount is reclassified to profit or loss.

When the settlement of a monetary item receivable from or payable to a foreign operation is

neither planned nor likely in the foreseeable future, foreign currency gains and losses arising

form such items are considered to form parts of a net investment in the foreign operation and are

recognized in other comprehensive income, and presented in the translation reserve in equity.

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

An asset is classified as current under one of the following criteria, and all other assets are classified

as non-current.

1.It expects to realize the asset or intends to sell or consume it, in its normal operating cycle;

2.It holds the asset primarily for the purpose of trading;

3.It expectes to realize the asset within twelve months after the reporting period; or

4.The asset is cash and its cash equivalent (as defined in IAS 7) unless the asset is restricted from

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

A liability is classified as current under one of the following criteria, and all other liabilities are

classified as non-current.

1.It expects to settle the liability in its normal operating cycle;

2.It holds the liability primarily for the purpose of trading;

3.The liability is due to be settled within twelve months after the reporting period; or

4.It does not have any unconditional right to defer settlement of the liability for at least twelve

months after the reporting period. Terms of a liability that could, at the option of the counterparty,

result in its settlement by the issue of equity instruments do not affect its classification.






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(f) Cash and cash equivalents

Cash comprise cash balances and call deposits. Cash equivalents with maturities of twelve months

or less from the acquisition date are subject to an insingnificant risk of changes in their fair value,

and are used by the Group in the management of its short-term commitments.

Time deposits which are held for the purpose of meeting short-term cash commitments, rather than

for investment or other purposes, are reported as cash equivalents.

(g) Financial instruments

Financial assets and financial liabilities are initially recognized when the Group become a party to

the contractual provisions of the instruments.

1.Financial assets

Financial assets are classified into the following categories: financial assets at fair value

through profit or lss, loans and receivables, and available-for-sale financial assets.

1) Financial assets are at fair value through profit or loss

A financial asset is classified in this category if they are classified as held-for-trading or is

designated as such on initial recognition.

Financial assets are classified as held-for-trading if they are acquired principally for the

purpose of selling in the short term. The Group designate financial assets, other than ones

classified as held-for-trading, as at fair value through profit or loss at initial recognition under

one of the following situations:

A.Designation eliminates or significantly reduces a measurement or recognition inconsistency

that would otherwise arise.

B.Performance of the financial asset is evaluated on a fair value basis.

C.A hybrid instrument contains one or more embedded derivatives.

Financial assets in this category are measured at fair value at initial recognition. Attributable

transaction costs are recognized in profit or loss as incurred. Financial assets at fair value

through profit or loss are measured at fair value and changes therein, which takes into account

any dividend and interest income, are recognized in profit or loss, under non-operating income

and expense. A regular way purchase or sale of financial assets shall be recognized and

derecognized, as applicable, using trade date accounting.

Investments in equity instruments that do not have a quoted market price in an active market,

and whose fair value cannot be reliably measured, are measured at amortised cost, and are

included in financial assets measured at cost.






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2) Available-for sale financial assets

Available-for-sale financial assets are non-derivative financial assets that are designated as

available-for-sale or are not classified in any of the other categories of financial assets.

Available-for-sale financial assets are recognized initially at fair value plus any directly

attributable transaction cost. Subsequent to initial recognition, they are measured at fair value

and changes therein, other than impairment losses, interest income calculated using the

effective interest method, dividend income, and foreign currency differences on

available-for -sale debt instruments, are recognized in other comprehensive income and

presented in the fair value reserve in equity. When an investment is derecognized, the gain or

loss accumulated in equity is reclassified to profit or loss, under non-operating income and

expense. A regular way purchase or sale of financial assets shall be recognized and

derecognized, as applicable, using trade date accounting.

Investments in equity instruments that do not have a quoted market price in an active market,

and whose fair value cannot be reliably measured, are measured at amortised cost, and are

included in financial assets measured at cost.

Dividend income is recognized in profit or loss on the date that the Group’s right to receive

payment is established, which in the case of quoted securities is normally the ex-dividend date.

Such dividend income is included in other income of non-operating income and expenses.

Interest income from investment in bond security is recognized in profit or loss, under other

income of non-operating income and expenses.

3) Loans and receivables

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

quoted in an active market. Loans and receivables comprise trade receivables, other

receivables, and investment in debt security with no active market. Such assets are recognized

initially at fair value plus any directly attributable transaction costs. Subsequent to initial

recognition, loans and receivables are measured at amortised cost using the effective interest

method, less any impairment losses other than insignificant interest on short-term receivables.

A regular way purchase or sale of financial assets shall be recognized and derecognized, as

applicable, using trade date accounting.

Interest income is recognized in profit or loss, under non-operating income and expense.

4) Impairment of financial assets

Except for financial assets at fair value through profit or loss, other financial assets are

assessed for impairment at each reporting date. A financial asset is impaired if, and only if,

there is objective evidence of impairment as a result of one or more events that occurred after

the initial recognition of the asset (a ‘loss event’) and that loss event (or events) has an impact

on the estimated future cash flows of the financial assets that can be estimated reliably.






196

Objective evidence that financial assets are impaired includes default or delinquency by a

debtor, restructuring of an amount due to the Group on terms that the Group would not

consider otherwise, indications that a debtor or issuer will enter bankruptcy, adverse changes

in the payment status of borrowers or issuers, economic conditions that correlate with defaults

or the disappearance of an active market for a security. In addition, for an investment in an

equity security, a significant or prolonged decline in its fair value below its cost is accounted

for as objective evidence of impairment.

All individually significant receivables are assessed for specific impairment. Receivables that

are not individually significant are collectively assessed for impairment by grouping together

assets with similar risk characteristics. In assessing collective impairment, the Group use

historical trends of the probability of default, the timing of recoveries and the amount of loss

incurred, adjusted for management’s judgment as to whether current economic and credit

conditions are such that the actual losses are likely to be greater or lesser than those suggested

by historical trends.

An impairment loss in respect of a financial asset measured at amortized cost is calculated as

the difference between its carrying amount and the present value of the estimated future cash

flows discounted at the asset’s original effective interest rate.

An impairment loss in respect of a financial asset measured at cost is calculated as the

difference between its carrying amount and the present value of the estimated future cash

flows discounted at the current market rate of return for a similar financial asset. Such

impairment loss is not reversible in subsequent periods.

An impairment loss in respect of a financial asset is deducted from the carrying amount,

except for trade receivables, for which an impairment loss is reflected in an allowance account

against the receivables. When it is determined a receivable is uncollectible, it is written off

from the allowance account. Any subsequent recovery of receivable written off is recorded in

the allowance account. Changes in the amount of the allowance accounts are recognized in

profit or loss.

Impairment losses on available-for-sale financial assets are recognized by reclassifying the

losses accumulated in the fair value reserve in equity to profit or loss.

If, in a subsequent period, the amount of impairment loss of financial assets measured at

amortized cost decreases and the decrease can be related objectively to an event occurring

after the impairment was recognized, the decrease in impairment loss is reversed through

profit or loss to the extent that the carrying value of the asset does not exceed its amortized

cost before impairment was recognized at the reversal date.

Impairment losses recognized on available-for-sale equity security are not reversed through

profit or loss. Any subsequent recovery in the fair value of an impaired available-for-sale

equity security is recognized in other comprehensive income, and accumulated in other equity.

If, in a subsequent period, the fair value of an impaired available-for-sale debt security

increases and the increase can be related objectively to an event occurring after the impairment

loss was recognized, then the impairment loss is reversed, with the amount of the reversal

recognized in profit or loss.






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Provision for doubtful accounts is recorded as general and administrative expenses. The

impairment loss on financial assets other than accounts receivable is recorded as other gains

and losses under non-operating income and expenses.

5) Derecognition of financial assets

Financial assets are derecognized when the contractual rights of the cash inflow from the asset

are terminated, or when the Group transfer substantially all the risks and rewards of ownership

of financial assets.

On derecognition of a financial asset in its entity, the difference between the carrying amount

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

had been recognized in other comprehensive income and presented in other equity –

unrealized gains or losses from available for sale financial assets are recognized in profit or

loss, under non-operating income and expenses.

2.Financial liabilities and equity instruments

1) Financial liabilities at fair value through profit or loss

A financial liability is classified in this category if it is classified as held-for-trading or is

designated as such on initial recognition.

A financial liability is classified as held-for-trading if it is acquired principally for the purpose

of selling in the short term. The Group designates financial liabilities, other than the ones

classified as held-for-trading, as at fair value through profit or loss at initial recognition under

one of the following situations:

A.Such designation eliminates or significantly reduces a measurement or recognition

inconsistency that would otherwise arise from measuring assets or liabilities or recognizing

the gains and losses on them on a different basis;

B.Performance of the financial liabilities is evaluated on a fair value basis;

C.A hybrid instrument contains one or more embedded derivatives.

Attributable transaction costs are recognized in profit or loss as incurred. Financial liabilities at

fair value through profit or loss are measured at fair value and changes therein, which take into

account any interest expense, are recognized in profit or loss, under non-operating income and

expenses.

The Group provides and designates financial guarantee contracts and loan commitments as at

fair value through profit or loss. Any gains and losses are recognized in profit or loss, under

non-operating income and expenses.






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2) Other financial liabilities

Financial liabilities not classified as held-for-trading, or designated as at fair value through

profit or loss, which comprise of loans and borrowings, and trade and other payables, are

measured at fair value plus any directly attributable transaction cost at the time of initial

recognition. Subsequent to initial recognition, they are measured at amortized cost calculated

using the effective interest method. Interest expense not capitalized as capital cost is

recognized in profit or loss, under non-operating income and expenses.

3) Derecognition of financial liabilities

A financial liability is derecognized when its contractual obligation has been discharged or

cancelled, or expires. The difference between the carrying amount of a financial liability

removed and the consideration paid (including any non-cash assets transferred or liabilities

assumed) is recognized in profit or loss, and under non-operating income and expenses.

4) Offsetting of financial assets and liabilities

The Group presents financial assets and liabilities on a net basis when the Group has the

legally enforceable rights to offset, and intends to settle such financial assets and liabilities on

a net basis or to realize the assets and settle the liabilities simultaneously.

3.Derivative financial instruments

The Group holds derivative financial instruments to hedge its foreign currency and interest rate

fluctuation exposures. Derivatives are recognized initially at fair value and attributable

transaction costs are recognized in profit or loss as incurred. Subsequent to initial recognition,

derivatives are measured at fair value, and changes therein are recognized in profit or loss, under

“non-operating income and expenses”. When the fair value of derivative instrument is positive,

it is classified as a financial asset; otherwise, it is classified as a financial liability.

For derivatives that are linked to investments in equity instruments that do not have a quoted

market price in an active market and must be settled by delivery of such unquoted equity

instruments, such derivating that are classified as financial assets are measured at amortized cost,

and are included in financial assets measured at cost, and are included in financial liabilities

measured at cost.

Embedded derivatives are separated from the host contract and are accounted for separately when

the economic characteristics and risk of the host contract and the embedded derivatives are not

closely related, and the host contract is measured as at fair value through profit or loss.

(h) Inventories

Inventories are measured at the lower of cost and net realizable value. The cost of inventories is

based on the weighted average method, and includes expenditure incurred in acquiring the

inventories, production or conversion costs and other costs incurred in bringing them to their

existing location and condition. In the case of manufactured inventories and work in progress, cost

includes an appropriate share of production overheads based on normal operating capacity.

Net realizable value is the estimated selling price in the ordinary course of business, less the

estimated costs of completion and selling expenses.






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(i) Investment in associates

Associates are those entities in which the Group has significant influence, but not control or jointly

control, over the financial and operating policies.

Investments in associates are accounted for using the equity method and are recognized initially at

cost. The cost of the investment includes transaction costs. The carrying amount of the investment

in associates includes goodwill arising from the acquisition less any accumulated impairment

losses.

The consolidated financial statements include the Group’s share of the profit or loss and other

comprehensive income of equity accounted investees, after adjustments to align the accounting

policies with those of the Group, from the date that significant influence commences until the date

that significant influence ceases. The Group recognizes any changes, proportionately with

shareholding ratio under additional-paid-in capital, when an associate’s equity changes due to

reasons other than profit and loss or comprehensive income, which did not result in changes in

actual controlling power.

Unrealized profits resulting from the transactions between the Group and an associate are

eliminated to the extent of the Group’s interest in the associate. Unrealized losses on transactions

with associates are eliminated in the same way, except to the extent that the underlying asset is

impaired.

When the Group’s share of losses exceeds its interest in associates, the carrying amount of the

investment, including any long-term interests that form part thereof, is reduced to zero, and the

recognition of further losses is discontinued except to the extent the Group has an obligation or has

made payments on behalf of the investee.

The Group shall discontinue the use of equity method from the date when its investment ceases to

be an associate or a joint venture. The Group shall measure the retained interest at fair value. The

difference between the fair value of retained interest and proceeds from disposals, and the carrying

amount of the investment at the date the equity method that was discontinued is recognized in profit

or loss. The Group shall account for all the amounts previously recognized in other comprehensive

income in relation to that investment on the same basis as would have been required if the investee

had directly disposed of the related assets or liabilities. If a gain or loss previously recognized in

other comprehensive income would be reclassified to profit or loss on the disposal of the related

assets or liabilities, the entity shall reclassify the gain or loss from equity to profit or loss (as a

reclassification adjustment) when the equity method is discontinued. If an entity's ownership

interest in an associate or a joint venture is reduced, while the entity continues to apply the equity

method, the entity shall reclassify the proportion of the gain or loss, that had previously been

recognized in other comprehensive income relating to that reduction in ownership interest, to profit

or loss.

If an investment in an associate becomes an investment in a joint venture or an investment in a joint

venture becomes an investment in an associate, the Group shall continue to apply the equity method

without remeasuring the retained interest.






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When the Group subscribes to additional shares in an associate at a percentage different from its

existing ownership percentage, the resulting carrying amount of the investment will differ from the

amount of the Group’s proportionate interest in the net assets of the associate. The Group records

such a difference as an adjustment to investments with the corresponding amount charged or

credited to capital surplus. The aforesaid adjustment should first be adjusted under additional

paid-in capital. If the additional paid-in capital resulting from changes in ownership interest is not

sufficient, the remaining difference is debited to retained earnings. If the Group’s ownership interest

is reduced due to the additional subscription to the shares of associate by other investors, the

proportionate amount of the gains or losses previously recognized in other comprehensive income

in relation to that associate shall be reclassified to profit or loss on the same basis as would be

required if the associate had directly disposed of the related assets or liabilities.

The Group ceases to have a significant influence over an associate and shall account for the

investment in accordance with IAS 9 and IAS 39 from that date, provided the associate does not

become a subsidiary or a joint venture as defined in IAS 31. On the loss of significant influence, the

investor shall measure at fair value any investment the investor retains in the former associate. The

investor shall recognize in profit or loss any difference between:

1.The fair value of any retained investment and any proceeds from disposing of the part interest in

the associate; and

2.The carrying amount of the investment at the date when significant influence is lost.

( j) Joint Arrangements

A joint venture is a joint arrangement whereby the parties that have joint control of the arrangement

(ie joint venturers) have rights to the net assets of the arrangement. A joint venturer shall recognize

its interest in a joint venture as an investment and shall account for that investment using the equity

method in accordance with IAS 28 “Investments in Associates and Joint Ventures”, unless, the

entity is exempted from applying the equity method as specified in that Standard.

When assessing the classification of a joint arrangement, the Group shall consider the structure and

legal form of the arrangement, the terms in the contractual arrangement and other facts and

circumstances. The Group had previously reviewed the contractual structure of the joint

arrangement, and has now decided to reclassify the investments in 「Jointly Controlled Entities」 to

「Joint Venturers」. Although the investments have been reclassified, they are still recorded under

the equity method. Thus, there is no effect in the recognized assets, liabilities and other

comprehensive income.

A joint arrangement is an arrangement of which two or more parties have joint control. The IFRS

classifies joint arrangements into two types-joint operations and joint ventures, and have the

following characteristics: (a)The participants are bound by a contractual arrangement; (b) The

contractual arrangement gives two or more of those parties joint control of the arrangement. IFRS

11 “Joint Arrangements” defines joint control as the contractually agreed sharing of control of an

arrangement, which exists only when decisions about the relevant activities (ie activities that

significantly affect the returns of the arrangement) require the unanimous consent of the parties

sharing control.






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(k) Investment property

Investment property is a property held either to earn rental income or for capital appreciation or for

both, but not for sale in the ordinary course of business, use in the production or supply of goods or

services or for administrative purposes. Investment property is measured at cost on initial

recognition and subsequently at cost less accumulated depreciation and accumulated impairment

losses. Depreciation method, useful lives, and hesidual values shall be treated in accordance with

IAS 16.

Cost includes expenditure that is directly attributable to the acquisition of the investment property.

The cost of self-constructed investment property includes the cost of raw materials and direct labor,

and any other costs directly attributable to bringing the investment property to a working condition

for their intended use and capitalized borrowing costs.

Any gain or loss on disposal of an investment property (caculated as the difference between the net

proceeds from disposal and its carrying amount) is recognized in profit or loss. When an investment

property that was previously classified as property, plant and equipment is sold, any related amount

included in the revaluation reserve is transferred to retained earnings.

When the use of an investment property changes such that it is reclassified as property, plant and

equipment, its book value at the date of reclassification becomes its cost for subsequent accounting.

The estimated useful lives for the current and comparative years of significant items of property,

plant and equipment are as follows:

Buildings 10 ~ 25years

(l) Property, plant, and equipment

Items of property, plant and equipment are measured at cost less accumulated depreciation and

accumulated impairment losses. Cost includes expenditure that is directly attributed to the

acquisition of the asset.

Each part of an item of property, plant and equipment with a cost that is significant in relation to the

total cost of the item shall be depreciated separately, unless the useful life and the depreciation

method of a significant part of an item of property, plant and equipment are the same as the useful

life and depreciation method of another significant part of that same item.

The gain or loss arising from the derecognition of an item of property, plant and equipment shall be

determined as the difference between the net disposal proceeds, if any, and the carrying amount of

the item, and it shall be recognized in profit or loss, under other gains and losses.

Subsequent expenditure is capitalized only when it is probable that future economic benefits

associated with the expenditure will flow to the Group. The carrying amount of those parts that

are replaced is derecognized. Ongoing repairs and maintenance is expensed as incurred.






202

The depreciable amount of an asset is determined after deducting its residual amount, and it shall be

allocated on a systematic basis over its useful life. Items of property, plant and equipment with the

same useful life may be grouped in determining the depreciation charge. The remainder of the items

may be depreciated separately. The depreciation charge for each period shall be recognized in profit

or loss.

Land has an unlimited useful life and therefore is not depreciated.

The estimated useful lives for the current and comparative years of significant items of property,

plant and equipment are as follows:

Buildings 10 ~ 50years

Machinery 2 ~ 11years

Transportation equipment 3 ~ 6years

Furniture and office facilities 2 ~ 18years

Power equipment 2 ~ 16years

Renovation and leasehold improvements 2 ~ 20years

Miscellaneous equipment 2 ~ 25years

Depreciation methods, useful lives, and residual values are reviewed at each reporting date. If

expectations differ from the previous estimates, the change is accounted for as a change in an

accounting estimate.

(m) Leases

1.Lessor

Lease income from an operating lease is recognized in profit or loss on a straight-line basis over

the lease term. Initial direct costs incurred in negotiating and arranging an operating lease are

added to the carrying amount of the leased asset and recognized as an expense over the lease

term on the same basis as the lease income. Incentives granted to the lessee to enter into the

operating lease are spread over the lease term on a straight-line basis so that the lease income

received is reduced accordingly.

Contingent rents are recognized as income in the period when the lease adjustments are

confirmed.

2.Lessee

Other leases are operating leases and are not recognized in the Group’s statement of financial

position.

Payments made under operating lease (excluding insurance and maintenance expenses) are

recognized in profit or loss on a straight-line basis over the term of the lease. Lease incentives

received are recognized as an integral part of the total lease expense, over the term of the lease.






203

(n) Intangible assets

1.Goodwill

1) Recognition

Goodwill arising from the acquisition of subsidiaries is recognized as intangible assets. For the

measurement of initial recognition of goodwill, please refer to Note 4(v).

2) Measurement

Goodwill is measured at its cost less impairment losses. Investments in associates are

accounted for using the equity method. The carrying amount of the investment in associates

includes goodwill, in which the kind of investment of impairment losses are recognized as a

part of the carrying amount of the investment, not associated to goodwill and any other assets.

2.Research and development

During the research phase, activities are carried out to obtain and understand new scientific or

technical knowledge. Expenditures during this phase are recognized in profit or loss as incurred.

Expenditures arising from the development phase shall be recognized as an intangible asset if all

the conditions described below can be demonstrated; otherwise, they will be recognized in profit

or loss as incurred.

1) The technical feasibility of completing the intangible asset so that it will be available for use or

sale.

2) Its intention to complete the intangible asset and use or sell it.

3) Its ability to use or sell the intangible asset.

4) How the intangible asset will generate probable future economic benefits.

5) The availability of adequate technical, financial and other resources to complete the

development and to use or sell the intangible asset.

6) Its ability to measure reliably the expenditure attributable to the intangible asset during its

development.

Capitalized development expenditure is measured at cost less accumulated amortisation and any

accumulated impairment losses.

Other intangible assets that are acquired by the Group are measured at cost less accumulated

amortisation and any accumulated impairment losses.

Subsequent expenditure is capitalized only when it increases the future economic benefits

embodied in the specific asset to which it relates. All other expenditures, including expenditure

on internally generated goodwill and brands, are recognized in profit or loss as incurred.

Depreciable amount of intangible asset is calculated based on the cost of an asset less its residual

values.






204

Amortization is recognized in profit or loss on a straight-line basis over the estimated useful lives

of intangible assets, other than goodwill and intangible assets with all indefinite useful life, from

the date that they are available for use. The estimated useful lives for the current and comparative

periods are as follows:

Patents 1 ~ 5years

Trademark rights 1 ~ 10years

Computer software cost 1 ~ 6years

The residual value, amortization period, and amortization method for an intangible asset with a

finite useful life shall be reviewed at least annually at each fiscal year-end. Any change shall be

accounted for as changes in accounting estimates.

(o) Impairment-Non-derivative-financial assets

The Group assesses the following assets for impairment and estimates the recoverable amounts for

any impaired assets at the end of each reporting period:

‧Inventories

‧Deferred tax assets

‧Assets arising from employee benefit

If it is not possible to determine the recoverable amount (fair value less cost to sell and value in use)

for an individual asset, then the Group will have to determine the recoverable amount for the asset's

cash-generating unit (CGU).

Notwithstanding whether indicators exist, recoverability of goodwill and intangible assets with

indefinite useful lives or those not yet in use are required to be tested at least annually. Impairment

loss is recognized if the recoverable amount is less than the carrying amount.

The recoverable amount for an individual asset or a cash-generating unit is the higher of its fair

value less costs to sell or its value in use. If, and only if, the recoverable amount of an asset is less

than its carrying amount, the carrying amount of the asset shall be reduced to its recoverable

amount. That reduction is an impairment loss. An impairment loss shall be recognized immediately

in profit or loss.

For the purpose of impairment testing, goodwill acquired in a business combination shall, from the

acquisition date, be allocated to each of the acquirer's cash-generating units or groups of

cash-generating units that are expected to benefit from the synergies of the combination,

irrespective of whether other assets or liabilities of the acquiree are assigned to those units or group

of units.

If the carring amount of the cash-generating units exceeds the recoverable amount of the unit, the

enity shall recognize the impairment loss, and the impairment loss shall be allocated to reduce the

carrying amount of each asset in the unit.

Reversal of an impairment loss for goodwill is prohibited.






205

The Group assess at the end of each reporting period whether there is any indication that an

impairment loss recognized in prior periods for an asset other than goodwill may no longer exist or

may have decreased. If any such indication exists, the entity shall estimate the recoverable amount

of that asset.

An impairment loss recognized in prior periods for an asset other than goodwill shall be reversed if,

and only if, there has been a change in the estimates used to determine the asset’s recoverable

amount since the last impairment loss was recognized. If this is the case, the carrying amount of the

asset shall be increased to its recoverable amount, as a reversal of a previously recognized

impairment loss.

An impairment loss in respect of goodwill is not reversed. For other assets, an impairment loss is

reversed only to the extent that the asset’s carrying amount does not exceed the carrying amount

that would have been determined, net of depreciation or amortization, if no impairment loss had

been recognized.

(p) Provisions

A provision is recognized if, as a result of a past event, the Group has a present legal or constructive

obligation that can be estimated reliably, and it is probably that an outflow of economic benefits

will be required to settle the obligation. Provisions are determined by discounting the expected

future cash flows at a pre-tax rate that reflects the current market assessments of the time value of

money and the risks specific to the liability. The unwinding of the discount is recognized as finance

cost.

1.Warranties

A provision for warranties is recognized when the underlying products or services are sold. The

provision is based on historical warranty data and a weighting of all possible outcomes against

their associated probabilities.

2.Onerous contracts

A provision for onerous contracts is recognized when the expected benefits to be derived by the

Group from a contract are lower than the unavoidable cost of meeting its obligations under the

contract. The provision is measured at the present value of the lower of the expected cost of

terminating the contract and the expected net cost of continuing with the contract. Before a

provision is established, the Group recognizes any impairment loss on the assets associated with

that contract.

(q) Treasury stock

Repurchased shares are recognized under treasury shares (a contra-equity account) based on their

repurchase price (including all directly accountable costs), net of tax. Gains on disposal of treasury

shares should be recognized under Capital Reserve – Treasury Shares Transactions; Losses on

disposal of treasury shares should be offset against existing capital reserves arising from similar

types of treasury shares. If there are insufficient capital reserves to be offset against, then such

losses should be accounted for under retained earnings. The carrying amount of treasury shares

should be calculated using the weighted average of different types of repurchase.






206

During the cancellation of treasury shares, Capital Reserve – Share Premiums and Share Capital

should be debited proportionately. Gains on cancellation of treasury shares should be recognized

under existing capital reserves arising from similar types of treasury shares; Losses on cancellation

of treasury shares should be offset against existing capital reserves arising from similar types of

treasury shares. If there are insufficient capital reserves to be offset against, then such losses should

be accounted for under retained earnings.

(r) Revenue recognition policies for the various businesses activities

1.Goods sold

Revenue from the sale of goods in the course of ordinary activities is measured at the fair value

of the consideration received or receivable, net of returns, trade discounts and volume rebates.

Revenue is recognized when persuasive evidence exists, usually in the form of an executed sales

agreement, that the significant risks and rewards of ownership have been transferred to the

customer, recovery of the consideration is probable, the associated costs and possible return of

goods can be estimated reliably, there is no continuing management involvement with the goods,

and the amount of revenue can be measured reliably. If it is probable that discounts will be

granted and the amount can be measured reliably, then the discount is recognized as a reduction

of revenue as the sales are recognized.

The timing of the transfers of risks and rewards varies depending on the individual terms of the

sales agreement.

2.Service

Revenue from services rendered including consulting and management is recognized in profit or

loss in proportion to the stage of completion of the transaction at the reporting date. The stage of

completion is assessed by reference to surveys of work performed.

3.Commissions

When the Group acts in the capacity of an agent rather than as the principal in a transaction, the

revenue recognized is the net amount of commission made by the Group.

4.Transfer of goods and or services

When goods or services are exchanged or swapped for goods or services which are of a similar

nature and value, the exchange is not regarded as a transaction which generates revenue. This is

often the case with commodities like oil or milk where suppliers exchange or swap inventories in

various locations to fulfill demand on a timely basis in a particular location. When goods are sold

or services are rendered in exchange for dissimilar goods or services, the exchange is regarded as

a transaction which generates revenue. The revenue is measured at the fair value of the goods or

services received, adjusted by the amount of any cash or cash equivalents transferred. When the

fair value of the goods or services received cannot be measured reliably, the revenue is measured

at the fair value of the goods or services given up, adjusted by the amount of any cash or cash

equivalents transferred.






207

(s) Employee benefits

1.Defined contribution plans

Obligations for contributions to defined contribution pension plans are recognized as an

employee benefit expense in profit or loss in the periods during which services are rendered by

employees.

2.Defined benefit plans

A defined benefit plan is a post-employment benefit plan other than a defined contribution plan.

The Group’s net obligation in respect of defined benefit pension plans is calculated separately for

each plan by estimating the amount of future benefit that employees have earned in return for

their service in the current and prior periods; that benefit is discounted to determine its present

value. Any fair value of any plan assets are deducted. The discount rate is the yield at the

reporting date on government bonds that have maturity dates approximating the terms of the

Group’s obligations and that are denominated in the same currency in which the benefits are

expected to be paid.

The calculation is performed annually by a qualified actuary using the projected unit credit

method. When the calculation results in a benefit to the Group, the recognized asset is limited to

the present value of economic benefits available in the form of any future refunds from the plan

or reductions in future contributions to the plan. In order to calculate the present value of

economic benefits, consideration is given to any minimum funding requirements that apply to

any plan in the Group. An economic benefit is available to the Group if it is realizable during the

life of the plan, or on settlement of the plan liabilities.

When the benefits of a plan are improved, the portion of the increased benefit relating to past

service by employees is recognized immediately in profit or loss.

Remeasurements of the net defined benefit liability (asset), which comprise (1) actuarial gains

and losses, (2) the return on plan assets (excluding interest) and (3) the effect of the asset ceiling

(if any, excluding interest), are recognized immediately in other comprehensive income. The

Group reclassified the amounts recognized in other comprehensive income to retained earnings.

The Group recognizes gains or losses on the curtailment or settlement of a defined benefit plan

when the curtailment or settlement occurs. The gain or loss on curtailment comprises any

resulting change in the fair value of plan assets, and any change in the present value of the

defined benefit obligation.

3.Terminated benefits

Termination benefits are recognized as an expense when the Group is committed demonstrably,

without realistic possibility of withdrawal, to a formal detailed plan to either terminate

employment before the normal retirement date, or to provide termination benefits as a result of

an offer made to encourage voluntary redundancy. The Group is required to recognize the

termination benefits at the earlier of when the Group can no longer withdraw the offer of those

benefits and when it recognizes any related restructuring costs. If benefits are payable more than

12 months after the reporting period, then they are discounted to their present value.






208

4.Short-term employee benefits

Short-term employee benefit obligations are measured on an undiscounted basis and are

expensed as the related service is provided.

A liability is recognized for the amount expected to be paid under short-term cash bonus or

profit-sharing plans if the Group has a present legal or constructive obligation to pay this amount

as a result of past service provided by the employee, and the obligation can be estimated reliably.

(t) Share-based payment

The grant-date fair value of share-based payment awards granted to employee is recognized as

employee salary expenses, with a corresponding increase in equity, over the period that the

employees become unconditionally entitled to the awards. The amount recognized as an expense is

adjusted to reflect the number of awards whose related service and non-market performance

conditions are expected to be met, such that the amount ultimately recognized as an expense is

based on the number of awards that meet the related service and non-market performance

conditions at the vesting date.

For share-based payment awards with non-vesting conditions, the grant-date fair value of the

share-based payment is measured to reflect such conditions, and there is no true-up for differences

between expected and actual outcomes.

The Company shall reserve a certain portion of the shares of its capital increase, which is issued on

the grant-date, to its employees. The subscription price and the number of shares should be

confirmed at the grant-date.

(u) Income taxes

Income tax expenses include both current taxes and deferred taxes. Except for expenses related to

business combinations or these recognised directly in equity or other comprehensive income, all

current and deferred taxes shall be recognized in profit or loss.

Current taxes include tax payables and tax deduction receivables on taxable gains (losses) for the

year calculated using the statutory tax rate on the reporting date or the actual legislative tax rate,

they also include tax adjustments related to prior years.

Deferred taxes arise due to temporary differences between the carrying amounts of assets and

liabilities for financial reporting purposes and their respective tax bases. Deferred taxes recognised

except for the following:

1.Assets and liabilities that are initially recognised but are not related to the business combination

and have no effect on net income or taxable gains (losses) during the transaction.

2.Temporary differences arising from equity investments in subsidiaries or joint ventures where

there is a high probability that such temporary differences will not reverse.

3.Initial recognition of goodwill.






209

Deferred tax assets and liabilities shall be measured at the tax rates that are expected to be applied

to the period when the asset is realised or the liability is settled based on the tax rates that have been

enacted or substantively enacted by the end of the reporting period.

Deferred tax assets and liabilities may be offset against each other if the following criteria are met:

1.The entity has the legal right to settle tax assets and liabilities on a net basis; and

2.the taxing of deferred tax assets and liabilities fulfill one of the below scenarios:

1) levied by the same taxing authority; or

2) levied by different taxing authorities, but where each such authority intends to settle tax assets

and liabilities (where such amounts are significant) on a net basis every year of the period of

expected asset realization or debt liquidation, or where the timing of asset realization and debt

liquidation is matched.

A deferred tax asset should be recognised for the carry-forward of unused tax losses, unused tax

credits, and deductible temporary differences, to the extent that it is probable that future taxable

profit will be available against which the unused tax losses, unused tax credits, and deductible

temporary differences can be utilized. Such unused tax losses, unused tax credits, and deductible

temporary differences shall also be re-evaluated every year on the financial reporting date, and

adjusted based on the probability that the future taxable profit will be available against which the

unused tax losses, unused tax credits, and deductible temporary differences can be utilized.

(v) Business combination

For those business acquisitions occurring goodwill is measured as the aggregation of the

consideration transferred (which generally is measured at fair value at the acquisition date) and the

amount of any non-controlling interest in the acquiree, net of the acquisition-date amounts of the

identifiable assets acquired and liabilities assumed (generally at fair value). If the residual balance is

negative, the Group shall re-assess whether it has correctly identified all of the assets acquired and

liabilities assumed, and recognize a gain on the bargain purchase thereafter.

All the transaction costs incurred for the business combination are recognized immediately as the

Group’s expenses when incurred, except for the issuance of debt or equity instruments.

The Group shall measure any non-controlling equity interest in the acquiree either at fair value or at

the non-controlling interest’s proportionate share of the acquiree’s identifiable net assets, if the

shareholder of non-controning equity interest has the right to claim ownership of the acquiree's net

assets when the acquiree is liquidated.

Other non-controlling interest is evaluated by its fair valne or by other basis permitted by IFRSs

endorsed by F.S.C..






210

In a business combination achieved in stages, the Group shall re-measure its previously held equity

interest in the acquiree at its acquisition-date fair value and recognize the resulting gain or loss, if

any, in profit or loss. In prior reporting periods, the Group may have recognized the changes in the

value of its equity interest in the acquiree in other comprehensive income. If so, the amount that

was recognized in other comprehensive income shall be recognized on the same basis as would be

required if the Group had disposed directly of the previously held equity interest. If the disposal of

the equity interest required a reclassification to profit or loss, such an amount shall be reclassified to

profit or loss.

If the initial accounting for a business combination is incomplete by the end of the reporting period

in which the combination occurs, the Group shall report in its financial statements provisional

amounts for the items for which the accounting is incomplete. During the measurement period, the

Group shall retrospectively adjust the provisional amounts recognized at the acquisition date, or

recognize additional assets or liabilities to reflect new information obtained about facts and

circumstances that existed as of the acquisition date. The measurement period shall not exceed one

year from the acquisition date.

(w) Earnings per share

The Group disclose the Company’s basic and diluted earnings per share attributable to ordinary

equity holders of the Company. The calculation of basic earnings per share is based on the profit

attributable to the ordinary shareholders of the Company divided by the weighted-average number

of ordinary shares outstanding. The calculation of diluted earnings per share is based on the profit

attributable to ordinary shareholders of the Company, divided by the weighted-average number of

ordinary shares outstanding after adjustment for the effects of all dilutive potential ordinary shares,

such as employee bonus and employee compensation.

(x) Operating segments

An operating segment is a component of the Group that engages in business activities from which it

may earn revenues and incur expenses (including revenues and expenses relating to transactions

with other components of the Group). Operating results of the operating segment are regularly

reviewed by the Group’s chief operating decision maker to make decisions about resources to be

allocated to the segment and assess its performance. Each operating segment consists of standalone

financial information.

(5) Significant Accounting Judgments, Estimation, Assumptions, and Sources of Estimation

Uncertainty The preparation of the consolidated anuual financial statements in conformity with IFRSs endorsed by

the FSC requires management to make judgements, estimations and assumptions that affect the

application of the accounting policies and the reported amount of assets, liabilities, income and expenses.

Actual results may differ from these estimates.

The management continuously reviews the estimates and basic assumptions. Changes in accounting

estimates are recognized in the period of change.






211

The group does not have any accounting policies which involve significant judgment which have

significant influence to the consolidated annual financial statements.

Information on assumptions and estimation uncertainties that do not have a significant risk of resulting in

a material adjustment within the next year.

(6) Explanation to Significant Accounts

(a) Cash and cash equivalents

2015.12.31 2014.12.31

Cash $ 9,397 7,054

Demand deposits and checking accounts 18,126,234 12,711,623

Time deposits 18,988,000 25,013,064

Cash and cash equivalents in consolidated

statement

of cash flows

$ 37,123,631 37,731,741

Refer to Note 6(w) for the sensitivity analysis and interest rate risk of the financial assets and

liabilities of the Group.

(b) Financial assets and liabilities at fair value through profit or loss、available-for-sale financial

assets and financial assets carried at cost

1.Details of financial assets are as follows：

2015.12.31 2014.12.31

Financial assets：

Financial assets at fair value through profit or loss

Held for trading $ 221,615 440,972

Available-for-sale financial assets 3,622,176 8,859,062

Financial assets carried at cost 502,173 533,751

Total $ 4,345,964 9,833,785

Current $ 3,512,299 8,842,533

Non-current 833,665 991,252

Total $ 4,345,964 9,833,785

Financial liabilities：

Financial liabilities at fair value through profit or loss

Held for trading $ 88,985 41,666

Current $ 88,985 41,666

Non-current - -

Total $ 88,985 41,666






212

All of the abovementioned investments in common stock and preferred stock which do not have

quoted market prices in an active market and whose fair value cannot be reliably measured were

reflected as non-current financial assets carried at cost on initial recognition and subsequently at

cost less accumulated impairment losses. There were objective evidences indicating that some

financial assets were impaired, and the Group recognized impairment loss for the asset whose

carrying value is higher than the recoverable amount. The Group recognized an impairment loss

of $109,590 in 2014.

As of December 31, 2015 and 2014, the aforesaid financial assets were not pledged as collateral.

2.Sensitivity analysis：

If the equity price changes, the sensitivity analysis shall be based on the same variables except

for the price index for both year, the impact to other comprehensive income will be as follows:

For the years ended December 31,

2015 2014

Equity price at

reporting day

After-tax other

comprehensive

income

After-tax

profit (loss)

After-tax other

comprehensive

income

After-tax

profit (loss)

Increase3% $ 22,570 1,436 26,601 4,267

Decrease3% $ (22,570) (1,436) (26,601) (4,267)

3.Foreign equity investments

Significant foreign equity investments at the end of the each period were as follows:

2015.12.31

Foreign

Currency

Exchange

Rate

TWD

CNY $ 537,774 CNY／TWD＝5.05 2,715,761

2014.12.31

Foreign

Currency

Exchange

Rate

TWD

CNY $ 1,542,043 CNY／TWD＝5.17 7,972,361






213

4.Derivative financail instruments not used for hedging:

The Group uses derivative financial instruments to hedge certain foreign exchange and interest

risk arising from its operating, financing and investing activities. The following are the

transactions that do not qualify for hedge accounting which are presented as held-for-trading

financial assets and liabilities as of December 31, 2015 and 2014:

1) Financial assets:

2015.12.31 Contract Amount Currency Contract Period

Forward USD 81,531 USD:CNY 2016.04.11-2016.04.22

Foreign exchange Swap USD 217,000 USD:TWD 2016.01.13-2016.03.31

Foreign exchange Swap USD 4,452 USD:JPY 2016.03.14

2014.12.31 Contract Amount Currency Contract Period


Foreign exchange Swap USD 112,000 USD:TWD 2015.01.14-2015.03.23

2) Financial liabilities:

2015.12.31

Contract Amount Currency Contract Period


2014.12.31

Contract Amount Currency Contract Period


Forward JPY 18,000 JPY:TWD 2015.01.19-2015.02.03

Foreign exchange Swap USD 12,000 USD:TWD 2015.03.26

Foreign exchange Swap USD 5,047 USD:JPY 2015.01.14

(c) Accounts receivable and other receivables

2015.12.31 2014.12.31

Accounts receivable due from related parties $ 20,254 8,967,761

Accounts receivable due from non-related parties 60,791,480 59,462,677

Other receivables due from related parties 522 29,900

Other receivables due from non-related parties 1,003,864 1,009,745

Less: Allowance for impairment (148,721) (162,377)

Allowance for sales returns and discounts (299,194) (19,195)

$ 61,368,205 69,288,511






214

2015.12.31 2014.12.31

Total amount Impairment Total amount Impairment

Not past due $ 57,223,377 41,996 63,484,455 12,754

Past due up to 180 days 4,435,743 8,164 5,770,684 6,016

Past due over 180 days 157,000 98,561 214,944 143,607

$ 61,816,120 148,721 69,470,083 162,377

As of March 10, 2016, the amount that received by the Group is $58,448,688.

The movement in the allowance for impairment with respect to accounts receivable and other

receivables during the period were as follow:

Individually

assessed

impairment

Collectively

assessed

impairment

Total

Balance on January 1, 2015 $ 12,020 150,357 162,377

Impairment loss 2,824 22,355 25,179

Written off unrecoverable amount (21,989) (24,625) (46,614)

Foreign exchange gain (loss) and other 47,845 (40,066) 7,779

Balance on December 31, 2015 $ 40,700 108,021 148,721 Balance on January 1, 2014 $ 618,125 154,785 772,910

(Reversal of) impairment loss 20,604 (4,748) 15,856

Written off unrecoverable amount (589,250) - (589,250)

Foreign exchange gain (loss) (37,459) 320 (37,139)

Balance on December 31, 2014 $ 12,020 150,357 162,377 The allowance for impairment account is used to record bad debt expenses. If the Group believes

that it may not be able to collect the receivables. The accumulated impairment was used to offset

the receivables when it is certain they are unrecoverable, after related legal actions were taken by

the Group.

As of December 31, 2015 and 2014, none of the receivables above are pledged as collateral for

loans and borrowings.

As of December 31, 2015 and 2014, the Group sold its accounts receivable without recourse as

follows:

(Unit: Foreign currency/TWD in Thousands)

2015.12.31

Purchaser

Assignment

Facility

Factoring Line

Advanced

Amount

Range of

Interest Rate

Collateral

Significant Transferring

Terms

Derecognition

Amount

(Note 1)

Non-related

parties

$ 2,235,586 USD 80,000 USD 40,940 0.97%~1.28% None The accounts receivable

factoring is without

recourse but the seller

still bears the risks except

for eligible obligor’s

insolvency.

1,343,636






215

2014.12.31

Purchaser

Assignment

Facility

Factoring Line

Advanced

Amount

Range of

Interest Rate

Collateral

Significant Transferring

Terms

Derecognition

Amount

Non-related

parties

$ 1,574,184 Note USD 49,753 0.6985% None The accounts receivable

factoring is without

recourse but the seller

still bears the risks except

for eligible obligor’s

insolvency.

1,574,184

Note1: The Group entered into an accounts receivable factoring agreement with a financial

institution. According to the agreement, the Group can only collect the amounts transferred

which are not yet drawn in advance, after the collection of transferee from the third party.

Therefore, the Group continues to recognized the full carrying value of its accounts

receivable. As of December 31, 2015, accounts receivable which were not derecognized

amounted to $891,950.

Note2: The Company and its client signed a factoring agreement with purchaser. The purchaser has

the right to make factoring transactions with the company based on the amount allocated by

the client under factoring agreement.

(d) Inventories

2015.12.31 2014.12.31

Raw materials and consumables $ 17,011,371 19,133,857

Work in process 6,563,538 6,861,460

Finished goods 5,302,552 5,385,817

Materials and supplies in transit 82,443 391,717

$ 28,959,904 31,772,851 For the years ended December 31, 2015 and 2014, the reversal of write-down of inventories

amounted to $20,280 and $183,713, respectively; expenses of idle capacity amounted to $277,474

and $262,986, respectively.

As of December 31, 2015 and 2014, the aforesaid inventories were not pledged as collateral.

(e) Investments accounted for under the equity method

The investment under equity method is as follows:

2015.12.31 2014.12.31

Associate $ 532,888 613,137

Joint venture - (556,600)

$ 532,888 56,537






216

1.Associate

The Group’s financial information for investments in individually insignificant associates

accounted for using equity method at the reporting date was as follows. These financial

information are included in the consolidated financial statements.

2015.12.31 2014.12.31 Individually insignificant associates $ 532,888 613,137

For the years ended December 31, 2015 2014

The Group’s share of profit (loss) of the

associates

Losses for the year $ (87,548) (96,765)

Other comprehensive income 12,170 2,504

Total comprehensive income $ (75,378) (94,261)

2.Joint venture

The Group’s financial information for investments in individually insignificant joint venture

accounted for using equity method at the reporting date was as follows. These financial

information are included in the consolidated financial statements.

2015.12.31 2014.12.31 Individually insignificant joint venture $ - (556,600)


The Group’s share of profit (loss) of the joint

venture

Losses for the year $ (10,057) 40,315

Other comprehensive income (24,079) (31,969)

Total comprehensive income $ (34,136) 8,346 The Group jointly invested in TPV-Inventa Holding Ltd., and owns 49% of TPV-Inventa

Holding Ltd.’s shares. On September 8, 2015, the board of Directors decided to terminate the

joint venture agreement with TPV Technology Limited. The Company obtained all of the

numbers of the board of directors of TPV-Inventa Holding Ltd. and obtain the controlling power.

The Group used the equity method to account for jointly controlled entity, of which the total

equity was negative; therefore, the Group recognized the credit balance of investments as other

non-current liabilities. Please refer to Note 13(a) for information of guarantee and endorsement.

As of December 31, 2015 and 2014, the Group’s investments under equity method has not been

pledged as collaterals or restricted in any way.






217

(f) Business combination

In September, 2015, the board of Directors decided to terminate the joint venture agreement with

TPV Technology Limited. The Company obtained all of the numbers of the board of directors of

TPV-Iventa Holding Ltd. and gain control over it. The Group adjusted its structure through this

acquisition and included the acquired subsidiary in its consolidated financial statements.

1.The fair value of identifiable assets acquired and liabilities assumed at the date of acquistion were

as follow:

Cash $ 1,335,051

Available-for-sale financial assets 62,516

Accounts receivable and other receivables 5,549,532

Inventories 387,278

Other current assets 161,509

Property, plant, and equipment 91,297

Intangible assets 5,783

Other non-current assets 78,457

Long-term and short term borrowings (1,236,750)

Notes payable and accounts payable (4,873,475)

Other payables (1,661,560)

Other current liabilities (348,544)

$ (448,906) At acquisition date, the gross amount of accounts receivable was $5,559,101, with the amount of

$9,569 expected to be unrecoverable.

2.Differences between equity price and carrying amount of the acquiree

Transfer price $ (219,964)

Non-controlling interest (calculated proportionately based on the

acquiree's identifiable net assets)

(228,942)

Less: Fair value of identifiable net assets (448,906)

$ -






218

(g) Changes in a parent's ownership interest in a subsidiary

1.Acquisition extra shares of subsidiaries without changes in controlling power

On September, 2015, in pursuant to the resolutions of the Board of Directors, the Group acquired

270,137 thousand shares of TPV-Inventa Holding Ltd. and paid the amount of USD12,967

thousand, which resulted in an increase in the equity interest of TPV-Inventa Holding Ltd. from

49% to 90%.

The aforesaid transaction did not affect the controlling power of the Group over TPV-Inventa

Holding Ltd. Therefore, the transaction was accounted for as equity transaction, which resulted

in a capital surplus in debit of 288,198 thousands.

2.Re-organization of Group structure

The Company adjusted its Group structure by transfering its 47.68% shares of ownership in

Inventec Energy Corporation to Inventec Solar Energy Corporation, with a transfer price

amounting to $483,634 thousands.

The effect of change in ownership attributable to the owners of the parent was as follows:

2015

Carrying amount of subsidiary of disposal $ 478,985

Transfer price (net of securities transaction tax) (482,184)

Capital surplus-difference between consideration and carrying

amount of subsidiaries disposed

$ (3,199)

(h) Property, plant and equipment

The cost, depreciation, and impairment of the property, plant and equipment of the Group for the

years ended December 31, 2015 and 2014 were as follows:

Land

Building and

construction

Machinery

and

equipment

Transportation

equipment

Office

equipment

Other

facilities

Leasehold

improvements

Others

Total

Cost or deemed cost:

Balance at January 1, 2015 $ 3,737,914 20,572,908 29,989,482 120,196 6,570,562 10,411,437 1,382,009 2,039,981 74,824,489

Additions 1,978 51,934 776,740 12,098 440,069 420,459 60,054 2,344,983 4,108,315

Disposals - (160,724) (703,627) (10,609) (386,302) (170,062) (39,581) - (1,470,905)

Other - 820,682 1,466,903 1,200 95,116 1,082,580 31,499 (2,926,914) 571,066

Effect of movements in

exchange rate

-

(374,511)

(384,136)

(1,668)

(97,349)

(167,867)

(868)

(20,810)

(1,047,209)

Balance at December 31, 2015 $ 3,739,892 20,910,289 31,145,362 121,217 6,622,096 11,576,547 1,433,113 1,437,240 76,985,756

Balance at January 1, 2014 $ 3,737,914 19,672,134 26,063,989 118,580 6,348,973 10,999,716 1,354,970 641,799 68,938,075

Additions - 14,334 2,440,872 21,775 395,303 42,272 106,958 1,730,321 4,751,835

Disposals - (5,664) (1,476,190) (24,552) (611,072) (40,286) (81,973) (6,056) (2,245,793)

Other - 10,149 2,056,702 353 201,772 (1,064,967) - (364,035) 839,974


exchange rate

-

881,955

904,109

4,040

235,586

474,702

2,054

37,952

2,540,398

Balance at December 31, 2014 $ 3,737,914 20,572,908 29,989,482 120,196 6,570,562 10,411,437 1,382,009 2,039,981 74,824,489






Land

Building and

construction

Machinery

and

equipment

Transportation

equipment

Office

equipment

Other

facilities

Leasehold

improvements

Others

Total

219

Depreciation and impairment

losses:

Balance at January 1, 2015 $ - 4,621,884 21,621,821 76,563 5,215,824 7,618,338 597,023 - 39,751,453

Depreciation for the period - 501,146 2,302,871 12,511 449,908 549,121 132,601 - 3,948,158

Reversal of impairment loss - - 88,483 - (11,357) 5,983 57,270 - 140,379

Disposals - (44,537) (764,008) (9,878) (354,219) (159,522) (39,222) - (1,371,386)

Other - - (13,816) 1,068 47,655 356,915 7,964 - 399,786


exchange rate

-

(84,168)

(272,780)

(1,033)

(70,300)

(114,233)

(450)

-

(542,964)

Balance at December 31, 2015 $ - 4,994,325 22,962,571 79,231 5,277,511 8,256,602 755,186 - 42,325,426

Balance at January 1, 2014 $ - 2,945,241 18,711,875 85,553 4,909,147 7,696,055 557,894 - 34,905,765

Depreciation for the period - 505,798 2,131,114 11,639 458,545 558,412 119,726 - 3,785,234

Impairment loss - 988,314 107,596 - 12 246,097 - - 1,342,019

Disposals - (4,144) (1,312,105) (23,248) (476,143) (38,890) (81,778) - (1,936,308)

Other - - 1,354,121 - 153,795 (1,184,897) - - 323,019


exchange rate

-

186,675

629,220

2,619

170,468

341,561

1,181

-

1,331,724

Balance at December 31, 2014 $ - 4,621,884 21,621,821 76,563 5,215,824 7,618,338 597,023 - 39,751,453

Carrying amounts:

Balance at December 31, 2015 $ 3,739,892 15,915,964 8,182,791 41,986 1,344,585 3,319,945 677,927 1,437,240 34,660,330

Balance at January 1, 2014 $ 3,737,914 16,726,893 7,352,114 33,027 1,439,826 3,303,661 797,076 641,799 34,032,310

Balance at December 31, 2014 $ 3,737,914 15,951,024 8,367,661 43,633 1,354,738 2,793,099 784,986 2,039,981 35,073,036

The Group performed an impairment test and adopted the value in use as its recoverable amount,

and recognized the impairment losses based on the differences between the book values and the

recoverable amounts of the property, plant and equipment. For the years ended December 31, 2015

and 2014, the impairment losses were $140,379 and $1,342,019, respectively.

As of December 31, 2015 and 2014, the details of property are subject to a registered debenture to

secure bank loans (see Note 8).

(i) Investment property

Land

Building and

construction

Total

Cost or deemed cost:

Balance at January 1, 2015 $ 9,492 1,057,916 1,067,408

Disposals for the period (9,846) (67,866) (77,712)

Effect of movements in exchange rate 354 2,440 2,794

Balance at December 31, 2015 $ - 992,490 992,490

Balance at January 1, 2014 $ 8,955 1,054,215 1,063,170

Effect of movements in exchange rate 537 3,701 4,238

Balance at December 31, 2014 $ 9,492 1,057,916 1,067,408






Land

Building and

construction

Total

220

Depreciation and impairment losses:

Balance at January 1, 2015 $ - 477,328 477,328

Depreciation for the period - 28,088 28,088

Disposals for the period - (63,272) (63,272)

Effect of movements in exchange rate - 2,275 2,275


Balance at January 1, 2014 $ - 445,145 445,145

Depreciation for the period - 28,756 28,756

Effect of movements in exchange rate - 3,427 3,427


Carrying amounts:


Balance at January 1, 2014 $ 8,955 609,070 618,025

Balance at December 31, 2014 $ 9,492 580,588 590,080

Fair value:

Balance at December 31, 2015 $ 579,882

Balance at January 1, 2014 $ 664,451

Balance at December 31, 2014 $ 643,869

Based on the purposes of earning rental income or for capital appreciaiton income or both, the

Group reclassified land and buildings to investment property.

The fair value of investment property as disclosed in the financial statements is based on the

valuation of the independent valuator. The inputs of levels of fair value hierarchy in determing the

fair value is classified to Level 3. It is measure at cost, and value of an objects is estimated by the

cost of re-acquisition or reconstruction deducting the accumulated depreciaion and other

deductibles, with a consideration of current situation, economy, and function of the object.

The Group assessed the recoverable amount for investment property and recognized the

accumulative impairment loss of $305,169 and $346,196 as of December 31, 2015 and 2014,

respectively.

Please refer to Note 8 for the information of the Group’s investment property pledging for bank

mortgage as of December 31, 2015 and 2014.






221

(j) Intangible assets

The costs of intangible assets, amortization, and impairment loss of the Group for the years ended

December 31, 2015 and 2014 were as follows:

Goodwill

Patent and

trademark

right

Software

cost

Total

Cost:

Balance at January 1, 2015 $ 1,083,429 124,621 860,531 2,068,581

Additions - 92 239,897 239,989

Other - - 33,295 33,295

Disposals - - (286,338) (286,338)

Effect of movements in exchange rate - - 1,086 1,086

Balance at December 31, 2015 $ 1,083,429 124,713 848,471 2,056,613

Balance at January 1, 2014 $ 1,167,745 124,621 711,200 2,003,566

Additions - - 378,368 378,368

Other (84,316) - 4,141 (80,175)

Disposals - - (233,431) (233,431)

Effect of movements in exchange rate - - 253 253

Balance at December 31, 2014 $ 1,083,429 124,621 860,531 2,068,581

Amortization and impairment losses:

Balance at January 1, 2015 $ 275,009 124,518 767,662 1,167,189

Amortization for the period - 60 274,206 274,266

Other - - 27,646 27,646

Disposals - - (286,330) (286,330)


Balance at December 31, 2015 $ 275,009 124,578 784,121 1,183,708

Balance at January 1, 2014 $ 359,325 124,488 632,494 1,116,307

Amortization for the period - 30 368,391 368,421

Other (84,316) - - (84,316)

Disposals - - (233,431) (233,431)


Balance at December 31, 2014 $ 275,009 124,518 767,662 1,167,189






Goodwill

Patent and

trademark

right

Software

cost

Total

222

Carrying amounts:

Balance at December 31, 2015 $ 808,420 135 64,350 872,905

Balance at January 1, 2014 $ 808,420 133 78,706 887,259

Balance at December 31, 2014 $ 808,420 103 92,869 901,392 The amortization of intangible assets and impairment losses are respectively included in the

statement of comprehensive income:


Operating costs $ 153,916 217,975

Operating expenses 120,350 150,446

Total $ 274,266 368,421 As of December 31, 2015 and 2014, the aforesaid Intangible assets were not pledged as collateral.

(k) Other current assets-others and other non-current assets

The other current assets-others and other non-current assets of the Group were as follows:

2015.12.31 2014.12.31

Refundable deposits $ 217,998 215,228

Prepayments to suppliers 1,406,945 2,364,980

Long-term prepaid rents 1,418,422 2,268,767

Prepayments for building 606,000 -

Others 3,685,210 5,048,221

$ 7,334,575 9,897,196 As of December 31, 2015 and 2014, the details of other non-current assets-others were pledged as

collateral, please refer to Note 8.

The Group entered into land and building purchase agreement. According to the agreement, the

total amount of $6,060,000 should be paid with a prepayment amount of $606,000. The related

legal transferring process was completed in February 2016.






223

(l) Long-term and short-term borrowings

The significant terms and conditions of long-term and short-term borrowings were as follows:

2015.12.31

Interest Rate Currency Period Amount

Secured bank loans 1.64%-2.50% TWD 2016-2017 $ 596,570

Unsecured bank loans 0.74%-3.19% TWD 2016 1,379,942

USD 2016-2018 17,327,573

Total $ 19,304,085

Current $ 8,010,825

Non-current 11,293,260

Total $ 19,304,085

Unused credit line $ 88,795,529

2014.12.31

Interest Rate Currency Period Amount

Secured bank loans 1.66%-2.51% TWD 2015-2018 $ 1,034,312

USD 2015 1,265,600

Unsecured bank loans 0.85%-6.00% TWD 2015 1,010,653

USD 2015-2017 27,530,695

CNY 2015 1,256,499

Total $ 32,097,759

Current $ 31,092,267

Non-current 1,005,492

Total $ 32,097,759

Unused credit line $ 71,687,165

1.Collateral of bank loans

Please refer to Note 8 for details of the related assets pledged as collateral. In order to assist the

Company to access credit line from banks, some shareholders and board of directors pledged

their assets as collaterals, please refer to Note 7 for details.

2.Contract of bank loans

According to the Company’s credit loan facility agreements with the banks, during the loan

repayment periods, the Company must comply with certain financial covenants based on its

audited annual consolidated financial statements and non-consolidated financial statements

(December 31) and reviewed semi-annual consolidated financial statement (June 30). The

Company is in compliance with these financial covenants.






224

According to the credit loan facility agreement with the banks, Inventec Solar Energy

Corporation must comply with certain financial covenants based on its audited annual financial

statements. If the covenants are breached, the credit line and relevant conditions must be

reviewed.

Inventec Solar Energy Corporation was not violate with the above financial covenants.

According to the credit loan facility agreement with the banks of Inventec Appliances

Corporantion's subsidiaries, the subsidiaries of Inventec Appliances Corporation must comply

with certain financial covenants based on its audited annual financial statements. If the covenants

are breached, the interest rates of the loans will increase by 15%.

Inventec Appliances Corporation was not violate with the above financial covenants.

Base on the above financial covenants, Inventec Appliances Corporation's subsidiaries must

comply with certain financial covenants based on its audited annual financial statments. If the

following covenants are breached, the interest rates of the loans will increase by 15%.

Inventec Appliances Corporation's subsidiaries was not violate with the above financial

conenants.

(m) Operating Leases

1.Leases entered into as lessee

Non-cancellable operating lease payable were as follows:

2015.12.31 2014.12.31

Within 1 year $ 193,065 102,276

Period after 1 to 5 years 465,234 383,800

Period after 5 years 169,467 201,394

$ 827,766 687,470

The Group lease a number of office, warehouse, factory facilities and staff dormitories under

operating leases. The leases typically run for a period of 1 to 20 years, with an option to renew

the lease after that date. The Group lease the land which is located on Ke Gong Section, Annan

Dist., Tainan City, the first two years of the leasing period is rent free; in the third and forth year

the rent accounts for 60% of the agreed rent in the contract; the fifth and sixth year the rent

accounts for 80% of the agreed rent in the contract, and the full amount of the agreed rent is

applied for the rest of the period.

For the years ended December 31, 2015 and 2014, expenses recognized in profit or loss in

respect of operating leases were $226,271 and $132,263.






225

The warehouse and factory leases were entered into many years ago as combined leases of land

and buildings. The Group determined that the land and building elements of the warehouse and

factory leases are operating leases. The rent paid to the landlord is increased to market rent at

regular intervals, and the Group does not participate in the residual value of the land and

buildings. As a result, it was determined that substantially all the risks and rewards of the land

and buildings are with the landlord.

2.Leases- Lessor

The future minimum lease payments under non-cancellable leases are as follows:

2015.12.31 2014.12.31

Within 1 year $ 186,208 198,217

Period after 1 to 5 years 195,860 334,791

Period after 5 years 56,934 177,310

$ 439,002 710,318

The rental revenues incurred by leasing plants were $217,450 and $241,353 for the years ended

December 31, 2015 and 2014, respectively.

(n) Employee benefits

1.Defined benefit plans

Reconciliation of defined benefit obligation at present value and plan asset at fair value are as

follows:

2015.12.31 2014.12.31

Present value of the defined benefit obligations $ 1,746,837 1,844,731

Fair value of plan assets (721,427) (835,395)

Net defined benefit liabilities $ 1,025,410 1,009,336 The Group makes defined benefit plan contributions to the pension fund account at Bank of

Taiwan that provides pensions for employees upon retirement. The plans (covered by the Labor

Standards Law) entitle a retired employee to receive an annual payment based on years of service

and average salary for the six months prior to retirement.

1) Composition of plan assets

The Group allocates pension funds in accordance with the Regulations for Revenues,

Expenditures, Safeguard and Utilization of the Labor Retirement Fund, and such funds are

managed by the Bureau of Labor Funds, Ministry of Labor. With regard to the utilization of

the funds, minimum earnings in the annual distributions on the final financial statements shall

be no less than the earnings attainable from the amounts accrued two-year time deposits with

interest rates offered by local banks.






226

The Group’s pension reserve account in Bank of Taiwan amounted to $721,351 at the end of

December 31, 2015. For information on the utilization of the labor pension fund assets

including the assets allocation and yield of the fund, please refer to the website of the Bureau

of Labor Funds, Ministry of Labor.

2) Movements in present value of the defined benefit obligations

The movements in present value of defined benefit obligations for the Group were as follows:


Defined benefit obligation at January 1 $ 1,844,731 1,864,142

Current service costs and interest 44,152 48,728

Remeasurement on the net defined benefit

liability

－Experience adjustments arising on the

actuarial gain or loss

6,339

11,557

－Actuarial loss (gain) arising from changes

in financial assumptions

59,477

(238)

Benefits paid by the plan assets (207,862) (79,458)

Defined benefit obligation at December 31 $ 1,746,837 1,844,731

3) Movements of defined benefit plan assets

The movements in the present value of the defined benefit plan assets for the Group were as

follows:


Fair value of plan assets at January 1 $ 835,395 813,921

Interest income 13,764 14,239

Remeasurement on the net defined benefit

liability

－Return on plan assets (excluding current

interest)

7,748 4,708

Contributions made 72,382 82,987

Benefits paid by the plan assets (207,862) (79,458)

Other - (1,002)

Fair value of plan assets at December 31 $ 721,427 835,395






227

4) Expenses recognized in profit or loss

The expenses recognized in profit or loss for the Group were as follows:


Current service costs $ 12,899 16,101

Net interest of net liabilities for defined

benefit obligations

17,489

18,388

$ 30,388 34,489 Operating cost $ 2,374 3,269

Selling expenses 3,378 3,499

Administration expenses 9,329 10,916

Research and development expenses 15,307 16,805

$ 30,388 34,489

5) Remeasurement on the net defined benefit liability recognized in other comprehensive income

The Group’s remeasurement on the net defined benefit liability recognized in other

comprehensive income were as follows:


Cumulative amount at January 1 $ (90,758) (84,148)

Recognised during the period (58,068) (6,610)

Cumulative amount at December 31 $ (148,826) (90,758)

6) Actuarial assumptions

The following are the Group’s principal actuarial assumptions:

Present Value of defined benefit obligations:


Discount rate 1.00%~1.70% 1.50%~2.30%

Future salary increases rate 1.00%~2.50% 1.00%~2.50%






228

The expected allocation payment made by the Group to the defined benefit plans for the one

year period after the reporting date was $300,190.

The weighted-average duration of the defined benefit obligation is 6~21.3 years.

7) Sensitivty analysis

When calculating the present value of the defined benefit obligations, the Group uses

judgments and estimations to determine the actuarial assumptions, including discount rate and

future salary changes, as of the financial statement date. Any changes in the actuarial

assumptions may significantly impact the amount of the defined benefit obligations.

If the actuarial assumptions had changed, the impact on the present value of the defined

benefit obligation shall be as follows:

Influences of defined benefit

obligations Increased 0.25% Decreased 0.25%

Discount rate (20,869) 21,340

Future salary increasing rate 714 (585) Reasonably possible changes at the reporting date to one of the relevant actuarial assumptions,

holding other assumptions constant, would have affected the defined benefit obligation by the

amounts shown above. The method used in the sensitivity analysis is consistent with the

calculation of pension liabilities in the balance sheets.

There is no change in the method and assumptions used in the preparation of sensitivity

analysis for 2015 and 2014.

2.Defined contribution plans

In accordance with the provisions of the Labor Pension Act, the Group contribute an amount

equal to 6% of the employee’s monthly wages to the Labor Pension personal account with the

Bureau of the Labor Insurance.

The pension costs incurred from the contributions to the to the Bureau of the Labour Insurance

amounted to $228,685 and $223,411 for the years ended December 31, 2015 and 2014,

respectively.

The pension expenses contributed by the foreign entities following the local regulations

amounted to $1,738,012 and $1,148,009 for the years ended December 31, 2015 and 2014,

respectively.






229

(o) Income taxes

1.The components of income tax expense (gain) in the years 2015 and 2014 were as follows:


Current tax expense

Current period $ 2,085,895 2,328,427

Adjustment for prior periods 73,775 (292,043)

2,159,670 2,036,384

Deferred tax expense

Origination and reversal of temporary

differences

41,302 998,056

Recognition of previously unrecognised tax

losses, tax credits and temporary

differences

(4,064) (11,229)

Tax incentives - (10,000)

Other 11,227 1,926

48,465 978,753

Income tax expense from continuing operations $ 2,208,135 3,015,137 The amount of income tax recognized in other comprehensive income for 2015 and 2014 was as

follows:


2015 2014

Items that will not be reclassified subsequently

to profit or loss:

Remeasurement from defined benefit plans $ 9,781 1,194 Items that may be reclassified subsequently to

profit or loss:

Unrealized gains (losses) on

available-for-sale financial assets

$ 381,929

(109,140)






230

A reconciliation of income before income tax and income tax expense recognized in profit or loss

was as follows:


Income before tax $ 7,183,870 9,680,698

Income tax using the Company’s domestic tax rate 1,983,188 2,751,273

Permanent differences (367,566) (312,304)

Tax credits (171,444) (245,561)

Recognition of previously unrecognized tax losses (4,064) (11,229)

Current-year losses for which no deferred tax asset

was recognized

641,881 64,378

Change in unrecognized temporary differences (41,142) 971,266

Under (over) provision in prior periods 73,775 (292,043)

Under (over) provision of tempopary differences 31,361 29,539

10% surtax on undistributed earnings 10,000 62,738

Other 52,146 (2,920)

Income tax expense $ 2,208,135 3,015,137

2.Deferred Tax Assets and Liabilities

1) Unrecognized Deferred Tax Assets

Deferred tax assets that have not been recognized in respect of the following items:

2015.12.31 2014.12.31

Tax effect of deductible Temporary

Differences

$ 2,537,916 2,799,412

The carryforward of unused tax losses 2,797,376 2,052,891

$ 5,335,292 4,852,303 The carryforward of unused tax credits were determined in accordance with the rules

established by each taxation authorities, and can be applied to offset against profit and income

tax in the future respectively. The deferred tax assets have not been recognized in respect of

the aforementioned items because they are not probable that future taxable profit will be

available against which the Group can utilize the benefits therefrom.

The Subidiaries located in China, where the income tax rate is 25%, in accordance with the

rules for the implementation of the Income Tax Law of the People's Republic of China for

enterprises with Foreign Investment and Foreign Enterrises, was entitled to the preferential

treatment for advanced technology industries with respect to reduction of or exemption from

income tax.

Under such tax law, commencing with the first profit-making year is exempted from income

tax in the first and second profitable year and is entitled to a 50% reduction from the third to

fifth year.






231

The Group invested in the companies which were incorporated in the Cayman Islands. The

earnings of these entities are not taxable by the local government in their respective

jurisdictions. Other foreign subsidiaries are taxed in accordance with the Income Tax Law of

their respective jurisdiction.

As of December 31, 2015 and 2014, the Group estimated that the part of the temporary

differences do not have more than 50% possiblity to realize in the visible future, so they were

not recognized as deferred tax assets.

The profits attributable to the expansion and construction projects of Photovoltaic (“PV”) cells

were exempted from income tax for a five-year period. Additionally, according to the Statue

for Upgrading Industries “Regulations for Encouraging Manufacturing Enterprises and

Technical Service Enterprises in the Newly Emerging, Important and Strategic Industries”, the

Company was granted certain investment tax credits. These credits may be applied over a

period of five years and may be deducted in any year.

Each company is taxed in accordance with the income tax law of their respective jurisdiction.

Unused operating loss carry-forwards can be applied to offset against profit in the future after

being examined by the Tax Authority. As of December 31, 2015, the company that have loss

carry forwards which can be used to offset profit were as follow. Among the taxable losses,

$70,292 were recognized as deferred tax assets.

As of December 31, 2015, the Group did not recognized its prior years' loss carry-forwards as

deferred tax assets, whose expiring years were as follows:

Unused balance Expring year

The carryforward of unused

losses $ 14,223,097 2016~2025

Due to the unstable economic environment recovery, the realizability of tax assets of the tax

losses, which amounted to $14,223,097, is doubtful. Therefore, the Group has recognized the

partial tax losses as deferred tax assets. If the sales grow continuously, the Group would

recognize the aforementioned tax losses in the future and generate the additional tax benefits.

2) Recognized Deferred Tax Assets and Liabilities

The movements in deferred tax assets and liabilities for the years ended December 31, 2015

and 2014 were as follows:

Gain (loss) on

investment

Other

Total

Deferred Tax Liabilities:

Balance at January 1, 2015 $ 1,223,737 568,813 1,792,550

Recognized in profit or loss 183,357 (86,326) 97,031

Recognized in other comprehensive income - (381,929) (381,929)

Balance at December 31, 2015 $ 1,407,094 100,558 1,507,652






Gain (loss) on

investment

Other

Total

Deferred Tax Liabilities:

232

Balance at January 1, 2014 $ 759,511 319,036 1,078,547

Recognized in profit or loss 464,226 140,637 604,863

Recognized in equity - 109,140 109,140

Balance at December 31, 2014 $ 1,223,737 568,813 1,792,550

Warranty

expense

Loss of

market

decline on

financial

assets

Defined

Benefit

Plans

Investment

tax credits

Others

Total

Deferred Tax Assets:

Balance at January 1 2015 $ 452,699 54,517 140,269 10,000 828,633 1,486,118

Recognized in profit or loss 61,343 14,567 (6,437) (10,000) (10,907) 48,566

Recognized in other comprehensive

income

- - 9,781 - - 9,781

Other - - - - 133,870 133,870

Effect of movements in exchange rate - - - - (2,950) (2,950)

Balance at December 31, 2015 $ 514,042 69,084 143,613 - 948,646 1,675,385

Balance at January 1, 2014 $ 352,101 324,983 144,520 - 1,018,176 1,839,780

Recognized in profit or loss 100,598 (270,466) (5,445) 10,000 (208,577) (373,890)

Recognized in other comprehensive

income

- - 1,194 - - 1,194

Effect of movements in exchange rate - - - - 19,034 19,034

Balance at December 31, 2014 $ 452,699 54,517 140,269 10,000 828,633 1,486,118

3.The Company’s income tax returns through 2013 have been examined and approved by the Tax

Authority.

The income tax return in 2012 is still in the process of examination.

4.Information related to the unappropriated earnings and tax deduction ratio is summarized below:

2015.12.31 2014.12.31

Accumulated in 1997 and prior years $ - 108,940

Accumulated in 1998 and thereafter 6,529,767 8,020,124

$ 6,529,767 8,129,064

Stockholders’ imputation tax credit account $ 888,376 681,214

2015 (Estimated) 2014 (Actual)

Tax deduction ratio for earnings distributable

to R.O.C. residents 23.13% 19.45%

The aforesaid information of tax deduction ratio for earnings distributable to R.O.C. residents

was prepared in accordance with Decree NO.10204562810 issued by Taxation Administration,

Ministry of Finance, R.O.C. on October 17, 2013.






233

5.Business income tax administrative remedies

The Group's income tax return for the year 2013 and 2012 had been examined by the tax

authorities, and the Group paid additional $93,653 and $39,551 for tax, respectively. The Group

disagreed with the examination results and requested for a re-examination.

(p) Capital and reserves

As of December 31, 2015 and 2014, the authorized capital of the Company both consisted of

3,650,000 thousand shares and both issued worth $36,500,000, with par value of $10 per share, and

its outstanding capital both consisted of 3,587,475 thousand shares of stock. All issued shares were

paid up upon issuance.

1.Capital surplus

The components of the capital surplus were as follows:

2015.12.31 2014.12.31

Share capital $ 2,891,959 2,891,959

Other 20,825 28,759

$ 2,912,784 2,920,718 In accordance with the ROC company Act, realized capital reserves can only be reclassified as

share capital or distributed as cash dividends after offsetting losses. The aforementioned capital

reserves include share premiums and donation gains. In accordance with the securities offering

and Issuance Guidelines, the amount of capital reserve to be reclassified under share capital shall

not exceed 10 percent of the actual share capital amount.

2.Retained earnings

The Company’s articles of incorporation require that after-tax earnings shall first be offset

against any deficit, and 10% of the rest be set aside as legal reserve. The appropriation for legal

reserve is discontinued when the balance of the legal reserve equals the total authorized capital.

Special reserve may be appropriated for operations or to meet regulations. Of the remainder, a

minimum of 3% will be distributed as employee bonus and a maximum of 3% will be allotted for

directors’ and supervisors’ remuneration. The remaining earnings, if any, may be appropriated

according to the proposal presented to the annual stockholders’ meeting by the board of directors.

If the employee bonus is distributed in the form of stock, the employees qualifying for such

distribution may include the employees of subsidiaries of the Company who meet certain specific

requirements. Such qualified employees and the distribution ratio shall be decided by the board

of directors. In consideration of the Company’s long-term operating plan, funding needs, and

satisfying shareholder demand for cash flow, the Company distributes cash dividends of at least

10% of the aggregate of cash dividends and stock dividends if the distributions include cash

dividend. According to The Company Act which was amended on May 2015, the employee

benefits and the rewards of the directors and supervisors should no longer be subject to earnings

distribution. The Company will amend its articles of association before the deadline set by the

authorities.






234

1) Legal reserve

In accordance with the ROC Company Act, 10 percent of net income should be set aside as

legal reserve, until it is equal to share capital. If the Company experienced profit for the year,

the meeting of shareholders shall decide on the distribution of the statutory earnings reserve

either by new shares or by cash, of up to 25 percent of the actual share capital.

2) Special reserve

In accordance with Permit No.1010012865 as issued by the Financial Supervisory

Commission on 6 April 2012, a special reserve equal to the contra account of other

shareholders' equity is appropriated from the current and prior period earnings. When the debit

balance of any of the contra accounts in the shareholders' equity is reveresd, the related special

reserve can be reversed. The subsequent reversals of the contra accounts in shareholders'

equity shall qualify for additional distributions.

3) Earnings Distribution

For the years ended December 31, 2014, the Company accrued employee bonuses of $447,162,

and directors’ and supervisors’ remuneration of $127,761. These amounts were estimated from

the Company’s net profit for 2014, to the earnings allocation method, priority and factor for

employee benefits and the board of director's remuneration as stated under the Articles of

Association. These benefits are charged to operating costs or expenses for the years ended

December 31, 2014.

There were no difference between the actual distribution for employee bonus and directors'

and superrisors' remuneration for the years 2014 and the amount estimated in the financial

statements. Related information can be accessed from the Market Observation Post System on

the web site.

During the meeting of shareholders on June 16, 2015 and June 12, 2014, the shareholders

approved to distribute the 2014 and 2013 earnings, respectively, as follows:

2014 2013 Dividend per

share ($)

Amount

Dividend per

share ($)

Amount

Dividends disrtibuted to common

shareholders

Cash $ 1.75 6,278,081 1.60 5,739,960

The information on prior year's distribution of the Company's earnings were announced

through the Market Observation Post System on the internet.






235

3.Other equity (net of taxes) and non-controlling interests

Exchange differences

on translation of

foreign financial

statements

Unrealized gains

(losses) on

available-for-sale

financial assets

Non-controlling

interests

Total

Balance, January 1, 2015 $ 2,868,962 140,272 6,844,752 9,853,986

Exchange differences on foreign operations (260,852) - 2,482 (258,370)

Exchange differences on subsidiaries accounted

for using equity method

(3,938)

-

-

(3,938)

Unrealized gains (losses) on available-for-sale

financial assets

-

48,545

-

48,545


financial assets of subsidiaries accounted for

using equity method

-

16,361

-

16,361

Acquisition control and extra shares of

subsidiaries

- - (429,089) (429,089)

Balance, December 31, 2015 $ 2,604,172 205,178 6,418,145 9,227,495

Balances, January 1, 2014 1,495,109 146,155 6,975,065 8,616,329

Exchange differences on foreign operations 1,363,861 - (487) 1,363,374

Exchange differences on subsidiaries accounted

for using equity method

9,992

-

-

9,992


financial assets

-

(1,992)

2,024

32


financial assets of subsidiaries accounted for

using equity method

-

(3,891)

-

(3,891)

Subsidiaries liquidation, lose control of

subsidiaries, and noncontrolling interests

-

-

(131,850)

(131,850)

Balances, December 31, 2014 $ 2,868,962 140,272 6,844,752 9,853,986

(q) Share-Based payments

1.E-ton Solar Tech Co. Ltd. and its subsidiaries

As of December 31, 2015, share-based payments of E-ton Solar Tech Co., Ltd. and its

subsidiaries were as follows:

E-Ton Solar Tech. Co., Ltd.

Employee Stock Option Plan

Second plan in 2010


First plan in 2010

Grant date August 1, 2011 September 3, 2010

Number of shares granted 1,567 thousand units 3,433 thousand units

Contractual life 6years 6years

Grant target Employees of E-Ton Solar Tech.

Co., Ltd.

Employees of E-Ton Solar Tech.

Co., Ltd.

Vesting period Subsequent 2~4 years service Subsequent 2~4 years service






236

1) Determining the fair value of equity instruments granted

E-Ton Solar Tech. Co., Ltd. and its subsidiaries adopted the Black-Scholes Model to calculate

the fair value of the stock option at grant date, and the assumptions adopted in this valuation

model were as follows:

E-Ton Solar Tech. Co., Ltd.


Second plan in 2010


First plan in 2010

Fair value at grant date $ 9.60 $ 13.22

Share price at grant date 26.10 35.55

Exercise price 26.10 35.55

Expected volatility(%) 44% 45%

Expected life of the option (year) 6 6

Expected dividend yield rate - % - %

Risk-free interest rate (%) 1.20% 1.00%

E-ton Solar Tech Co. Ltd. and its subsidiaries use the historical volatility as base to estimate

the expected volatility; the duration of stock options is in accordance with the regulations. The

expected dividends were set at 0, and the risk free rate was set considering the rate of the

short-term government bonds. The definition of fair value did not cover the service fee of the

trade or the non-market achievement conditions.

2) Employee stock options

Information on aforesaid employee stock options was as follows:

(Unit:Thousands)

E-Ton Solar Tech. Co., Ltd. For the years ended December

31, 2015

For the years ended December

31, 2014

Weighted-aver

age

Exercise Price

Numbers of

Options

Weighted-ave

rage

Exercise Price

Numbers of

Options

Balance, beginning of January 1 $ 20.72 1,847 20.73 2,024

Options granted - - - -

Options forfeited 20.47 (292) 20.79 (177)

Options exercised - - - -

Options expired - - - -

Balance, end of December 31 $ 20.77 1,555 20.72 1,847

Options exercisable, end of

December 31

$ 20.77 1,555 20.82 1,690

As of December 31, 2015 and 2014, the exercise prices of outstanding options were both

$21.50 for the first grant, and both $19.70 for the second grant. The weighted-average

remaining life of outstanding options of E-TON company were 1.04 years and 2.06 years.






237

3) Expenses and liabilities resulted from share-based payments

The E-TON company and its subsidiaries incurred expenses and liabilities from share-based

payments transactions for the years ended December 31, 2015 and 2014 as follows:


Expenses arising from granting of employee

share options

$ (13)

53

2.Inventec Solar Energy Corporation

As of December 31, 2015, the share-based payment of Inventec Solar Energy Corporation were

as follows:

Equity transaction

Capital increase by cash

for the employees to have

the share options in 2014

Employee Stock

Option in 2011

Grant date April 28, 2014 August 1, 2011

Number of shares granted 2,000,000 shares 20,000,000 shares

Contractual life - 5years

Grant target Employees of Inventec Solar

Energy Corporation

Employees of Inventec Solar

Energy Corporation

Vesting period - Subsequent 1 year service

1) Determining the fair value of equity instruments granted

Inventec Solar Energy Corporation adopted the Black-Scholes Option Valuation Model to

estimate the fair value of its employee stock options on the date of grant. The assumptions

used in this valuation model were as follows:


2014 2011

Capital increase by cash

for the employees to have

the share options

Employee Stock Option

Fair value at grant date $ 1.48 $ 2.68

Share price at grant date 13.19 7.76

Exercise price 12.00 10.00

Expected volatility(%) 40.96% 53.38%

Expected life of the option (year) 0.13 4.00

Expected dividend yield rate - % - %

Risk-free interest rate (%) 0.47% 1.07%






238

Inventec Solar Energy Corporation use the historical volatility as base to estimate the expected

volatility; the duration of stock options is in accordance with the regulations. The expected

dividends were set at 0, and the risk free rate was set considering the rate of the short-term

government bonds. The definition of fair value did not cover the service fee of the trade or the

non-market achievement conditions.

2) Employee stock options

Information on aforesaid employee stock options was as follows:

(Unit:Thousands) For the years ended December 31,

2015 2014 Weighted-aver

age

Exercise Price

Numbers of

Options

Weighted-aver

age

Exercise Price

Numbers of

Options

Balance, beginning of January 1 $ 10.00 6,051 10.00 11,121

Options granted - - - -

Options forfeited 10.00 (195) 10.00 (116)

Options exercised 10.00 - 10.00 (3,355)

Options expired 10.00 (5,856) 10.00 (1,599)

Balance, end of December 31 10.00 - 10.00 6,051

Options exercisable, end of

December 31

- - - -

As of December 31, 2015 and 2014, the exercise prices of outstanding options were both

$10.00. The weighted-average remaining life of outstanding options of Inventec Solar

Energy Corporation were 0.58 years and 1.58 years, respectively.

3) Expenses and liabilities resulted from share-based payments

The Inventec Solar Energy company incurred its expenses and liabilities from the share-based

payments transactions for the years ended December 31, 2015 and 2014 as follows:


Expenses arising from granting of employee

share options $ 8,546 6,062

Expenses arising from capital increase by cash

for the employees to have the share options -

2,960

Total $ 8,546 9,022






239

(r) Earnings per share

The following are the calculation of basic earnings per share and diluted earnings per share:


2015 2014

Basic earnings per share:

Profit attributable to ordinary shareholders $ 5,563,633 7,097,815

Weighted average number of ordinary shares

(thousand shares)

3,587,475

3,587,475

Basic earnings per share (NT dollars) $ 1.55 1.98

Diluted earnings per share:

Profit attributable to ordinary shareholders of the

Company (adjusted for the effects of all dilutive

potential ordinary shares)

$ 5,563,633 7,097,815


(thousand shares)

3,587,475 3,587,475

Effect of dilutive potential common shares

(thousand shares)

profit sharing to employees 26,479 28,479


(adjusted for the effects of all dilutive potential

ordinary shares)

3,613,954

3,615,954

Diluted earnings per share (NT dollars) $ 1.54 1.96

(s) Revenue

The details of revenue for the years ended December 31, 2015 and 2014 were as follows:


Sale of goods $ 394,511,666 434,971,494

Rendering of services 958,555 628,474

$ 395,470,221 435,599,968

(t) Rewards of employees, directors and supervisors

The Company's articles of incorporation which were authorized by the Board of Directors, but has

not yet been determined by the stockholders, require that earnings shall first be offset against any

deficit. A minimum of 3% will be distributed as employee compensation and a maximum of 3%

will be allocated as directors' and supervisors' compensation.






240

If the employee compensation are distributed in the form of stock or cash, the employees qualifying

for such distribution shall include the employees of the subsidiaries of the Company who meet

certain specific requirements. Such qualified employees and the distribution ratio shall be decided

by the board of divectors.

The rewards of employees amounted to $336,884 thousand, and rewards of directors and

supervisors amounted to $98,258 thousand for the years ended December 31, 2015. These amounts

are calculated using the Company's profit before tax for each period described above, and are

determined using the earnings allocation method which stated under the Company's article. These

bonus are expensed under operating cost or expenses in 2015. Related information can be accessed

from the Market Observation Post System on the web site. The difference between the actual

amounts of employee compensation and estimation of employee compensation, if any, will be

treated as changes in accounting estimates and adjusted in profit or loss in 2016.

(u) Non-operating income and expenses

1.Other income

The details of other income for the years ended December 31, 2015 and 2014 were as follows:


Interest income $ 2,112,228 2,864,110

2.Other income and losses

The details of other income and losses for the years ended December 31, 2015 and 2014 were as

follows:


Rent income $ 241,477 256,872

Foreign exchange gains (losses) (669,167) 870,133

Gains (losses) on disposal of investments and financial liabilities

331,861 383,461

Net gains (losses) on financial assets (liabilities) measured at fair value through profit or loss

Held-for-trading 31,250 613,138

Impairment losses on financial assets at cost - (109,590)

Impairment loss on non-financial assets (140,379) (1,454,743)

Gains (losses) on disposal of property, plant, equipment, investment properties and other assets

136,531 (162,409)

Other 744,579 618,514

$ 676,152 1,015,376






241

3.Finance costs

The details of finance expenses for the years ended December 31, 2015 and 2014 were as

follows:


Interest expenses

Bank borrowings $ 910,050 1,247,235

Others 4,123 4,182

$ 914,173 1,251,417

(v) Reclassification adjustments of components of other comprehensive income

For the years ended December 31, 2015 and 2014, the reclassification adjustments of components

of other comprehensive income amounted for $330,867 and $313,660, respectively.

(w) Financial instruments

1.Credit risks

1) Credit risks exposure

The carrying amounts of financial assets represented the maximum credit risk exposure of the

Group.

For contingencies resulting from guarantees and endorsements provided by the Company,

please refer to Note (13).

2) Condition of credit risk concentration

Implicit credit risk of the Group is inherent in its cash and accounts receivable. The cash is

deposited in different financial institutions. The Company manages the credit risk exposure

with each of these financial institutions and believes that cash do not have a significant credit

risk concentration.

The major customers of the Group are centralized in the high-tech computer industry. To

minimize credit risk, the Company periodically evaluates the Company’s financial positions

and the possibility of collecting trade receivables.

Besides, the Consolidated Company monitors and reviews the recoverable amount of the trade

receivables to ensure the uncollectible amount are recognized approprately as impairment loss.

As of December 31, 2015 and 2014, 60% and 56%, respectively, of accounts receivable were

two major customers. Thus, credit risk is significantly centralized.






242

2.Liquidity risks The following are the contractual maturities of financial liabilities of the Group, including

estimation of interest, but excluding the impact of netting arrangements:

Carrying

amount Contractual

cash flows

Less than

6 months

6 to 12

months

1 to 2 years

2 to 5 years

More than

5 years

December 31, 2015

Non-derivative financial liabilities

Secured bank loans $ 596,570 606,702 211,592 193,600 201,510 - -

Unsecured bank loans 18,707,515 19,161,601 7,709,257 83,753 1,083,862 10,284,729 -

Notes payable 12,132 12,132 12,132 - - - -

Accounts payable 58,609,552 58,609,552 58,609,552 - - - -

Other payables 11,911,563 11,911,563 11,911,563 - - - -

Derivative financial liabilities

Forward exchange contracts not

used for hedging:

Outflow 88,985 (2,577,197) (2,577,197) - - - -

inflow - 2,488,212 2,488,212 - - - -

$ 89,926,317 90,212,565 78,365,111 277,353 1,285,372 10,284,729 -

December 31,2014

Non-derivative financial liabilities

Secured bank loans $ 2,299,912 2,299,912 1,322,620 240,740 468,080 268,472 -

Unsecured bank loans 29,797,847 29,797,847 11,541,152 17,987,755 - 268,940 -

Notes payable 24,263 24,263 24,263 - - - -

Accounts payable 73,944,102 73,944,102 73,944,102 - - - -

Other payables 7,898,426 7,898,426 7,898,426 - - - -

Derivative financial liabilities

Foreign exchange swap contracts

not used for hedging:

Outflow 17,095 (533,454) (533,454) - - - -

Inflow - 516,359 516,359 - - - -

Forward exchange contracts not

used for hedging:

Outflow 24,571 (5,207,675) (5,207,675) - - - -

Inflow - 5,183,104 5,183,104 - - - -

$ 114,006,216 113,922,884 94,688,897 18,228,495 468,080 537,412 -

The Group are not expecting that the cash flows included in the maturity analysis could occur

significantly earlier or at significantly different amounts.






243

3.Currency risks

1) Exposure to currency risks

The Group's exposures to significant currency risk were those from its foreign currency

denominated financial assets and liabilities as follows:

2015.12.31 Foreign currency

(In thousand)

Exchange rate

TWD Financial assets

Monetary items

USD $ 1,200,137 USD：TWD 32.82 39,388,496

293,319 USD：CNY 6.49 9,626,730

199,532 USD：CUZ 24.83 6,548,640

JPY 4,179 JPY ：TWD 0.27 1,128

EUR 2,484 EUR：TWD 35.77 88,853

Non-monetary items

USD 54,981 USD：TWD29.50~33.02 1,787,761

EUR 182 EUR：TWD 35.77 6,510

Financial Liabilities

Monetary items

USD 1,320,318 USD：TWD 32.82 43,332,837

1,000,752 USD：CNY 6.49 32,844,681

4,665 USD：CUZ 24.83 153,105

JPY 7,200 JPY ：TWD 0.27 1,944

EUR 5,803 EUR：TWD 35.77 207,573


(In thousand)

Exchange rate

TWD Financial assets

Monetary items

USD $ 1,835,392 USD：TWD 31.64 58,071,803

668,563 USD：CNY 6.12 21,153,333

201,112 USD：CUZ 22.83 6,363,184

JPY 286,227 JPY ：TWD 0.26 74,419

EUR 688 EUR：TWD 38.34 26,378

Non-monetary items

USD 90,920 USD：TWD29.25~33.59 2,968,734







(In thousand)

Exchange rate

TWD

244

Financial Liabilities

Monetary items

USD 1,946,793 USD：TWD 31.64 61,596,531

1,577,310 USD：CNY 6.12 49,906,088

4,549 USD：CUZ 22.83 143,930

JPY 11,062 JPY ：TWD 0.26 2,876

EUR 4,682 EUR：TWD 38.34 179,508

Non-monetary items

USD 17,592 USD：TWD 31.64 556,600

2) Sensitivity analysis

The Group’s exposure to foreign currency risk arises from the translation of the foreign

currency exchange gains and losses on cash and cash equivalents, accounts receivable, other

receivables, loans and borrowings, accounts payable and other payables that are denominated

in foreign currency. A 0.5% depreciation or appreciation of the functional currency against

all the non-functional currency as of December 31, 2015 and 2014 would have increased or

decreased the net profit after tax by $81,468 and $106,664, respectively. The analysis is

performed on the same basis for both periods.

3) Gains or losses on foreign exchange

As Group deals with diverse foreign currencies, therefore, the gains or losses on foreign

exchange were summarized as a single amount. For the years ended December 31, 2015 and

2014, the foreign exchange gain (loss), including realized and unrealized, amounted to

$(669,167) and $870,133, respectively.

4.Interest rate analysis

The Group’s financial assets and financial liabilities with interest rate exposure risk were noted

in the liquidity risk section.

The following sensitivity analysis in interest rates is based on the risk exposure to interest rates

on the reporting date. For variable rate instruments, the sensitivity analysis assumes the variable

rate liabilities are outstanding for the whole year on the reporting date.

If the interest rate increases or decreases by 0.5%, the Group’s profit will decrease or increase by

$7,057 and $63,323 for the years ended December 31, 2015 and 2014, respectively, assuming all

other variable factors remain constant. This is mainly due to the Group's variable rate in

borrowings and time deposits.






245

5.Fair value of financial instruments

1) Fair value hierarchy

The Group uses the observable market data to evaluate its assets and liabilities. The different

inputs of levels of fair value hierarchy in determing the fair value are as follows:

‧Level 1: quoted prices (unadjusted) in active markets for identified assets or liabilities.

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

asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices).

‧Level 3: inputs for the assets or liability that are not based on observable market data

(unobservable inputs).

The carrying amount and fair value of the Group’s financial assets and liabilities, including the

information on fair value hierarchy were as follows; however, except as described in the

following paragraphs, for financial instruments not measured at fair value whose carrying

amount is reasonably close to the fair value, and for equity investments that has no quoted

prices in the active markets and whose fair value cannot be reliably measured, disclosure of

fair value information is not required :

2015.12.31 Fair Value Book Value Level 1 Level 2 Level 3 Total

Financial assets at fair value

through profit or loss

Derivative financial assets $ 163,956 - 163,956 - 163,956

Non derivative held-for-trading

financial assets

57,659

57,659

-

-

57,659

Subtotal 221,615 57,659 163,956 - 221,615

Available-for-sale financial assets

Stocks of listed companies 574,923 574,923 - - 574,923

Unquoted equity instruments 331,492 - 298,136 33,356 331,492

Unquoted financial instruments 2,715,761 - - 2,715,761 2,715,761

Subtotal 3,622,176 574,923 298,136 2,749,117 3,622,176

Total $ 3,843,791 632,582 462,092 2,749,117 3,843,791

Financial liabilities at fair value


Derivative financial liabilities $ - - 88,985 - 88,985






246

2014.12.31 Fair Value Book Value Level 1 Level 2 Level 3 Total

Financial assets at fair value


Derivative financial assets $ 298,746 - 298,746 - 298,746

Non derivative held-for-trading

financial assets

142,226

142,226

-

-

142,226

Subtotal 440,972 142,226 298,746 - 440,972

Available- for sale financial assets

Stocks in listed companies 429,200 429,200 - - 429,200

Unquoted equity instruments 457,501 - 420,178 37,323 457,501

Unquoted financial instruments 7,972,361 - - 7,972,361 7,972,361

Subtotal 8,859,062 429,200 420,178 8,009,684 8,859,062

Total $ 9,300,034 571,426 718,924 8,009,684 9,300,034

Financial liabilities at fair value


Derivative financial liabilities $ 41,666 - 41,666 - 41,666

2) Valuation techniques and assumption for financial instruments measured at fair value:

The fair value of financial assets and liabilities were decided in accordance with the solutions

as follows:

(2.1)Non-derivative financial instruments

A.The stocks of listed companies are financial assets with standard terms which are

traded in the active markets. Their fair values are based on the quoted market prices.

B.The fair value of private equity is based on standard terms and quoted market prices.

C.The fair value of unquoted instruments were estimated using either the discounted cash

flow model in which future cash flow were estimated and discounted or the fair value

of the recognized assets and liabilities of the consolidated subsidiaries on the

measurement day.

(2.2)Derivative financial instruments

Foreign exchange swap and forward exchange were usually evaluated in the latest

forward rate.

3) Transfers between level 1 and level 2

There were no transfers between level 1 and level 2 of the fair value in the year of 2015 and

2014.






247

4) The following table shows the movements in fair value measurements under level 3 of the fair

value hierarchy:

Available-for-sale

financial assets Balance as of January 1, 2015 $ 8,009,684

Total gains and losses recognized in

Profit or loss 330,867

Other comprehensive income (4,108)

Purchase 23,452,524

Disposals (28,621,363)

Effect of movements in exchange rate (412,087)

Proceeds from capital reduction (6,400)

Balance as of December 31, 2015 $ 2,749,117

Balance as of January 1, 2014 $ 3,016,571

Total gains and losses recognized in

Profit or loss 313,660

Other comprehensive income (5,819)

Purchase 34,177,265

Disposals (29,485,343)

Proceeds from capital liquidation (6,650)

Balance as of December 31, 2014 $ 8,009,684 For the years ended December 31, 2015 and 2014, total gains and losses included in “other

gains and losses” and “unrealised gains and losses from available-for-sale financial assets were

as follows:


Total gains and losses recognized in :

In other comprehensive income (recognized as

“unrealised gains and losses from

available-for-sale financial assets ”)

$ (4,108) (5,819)

5) The quantified information for significant unobservable inputs (Level 3) used in fair value

measurement

The Company uses level 3 inputs to measure fair values of available-for-sale financial assets.






248

Quantified information of significant unobservable inputs was as follows:

Item Valuation Technique

Significant

Non-observable Input

The Relationship between

Significant Non-observable

Input and Fair Value

Available-for-sale financial assets-financial instruments

without an active market

Discounted Cash Flow Method

‧Discount Rate ‧The higher the discount rate,

the lower the fair value.

Available-for-sale financial

assets -equity investments without an active market

Net Asset Value Method ‧Net Asset Value ‧Not applicable

6) Sensitivity analysis for fair values of financial instruments using Level 3 Inputs

The measurement would differ if different valuation models or valuation parameters are used.

For financial instruments using level 3 inputs, if the valuation parameters are changed, the

impact on net income or loss and other comprehensive income or loss will be as follows:

Impact of Fair Value Change on Other

Comprehensive income or loss

Input Variation Favorable Change Unfavorable Change

December 31, 2015

Available-for-sale financial assets financial instruments

without an active market

Discount Rate 0.5% $ 1,334 (1,334)

The favorable change and unfavorable change refer to the fluctuation of fair value. The fair

value is calculated based on the different levels of unobservable inputs. The table above shows

the impact on single input. Therefore, the relations and variations between inputs are not

considered.

6.Offsetting financial assets and financial liabilities

The Group has financial instruments transactions applicable to the International Financial

Reporting Standards Sections 42 NO. 32 approved by the FSC which required for offsetting.

Financial assets and liabilities relating those transactions are recognized in the net amount of the

balance sheets.

The Group also performs transactions not applicable to the International Financial Reporting

Standards Sections 42 NO. 32, but the Group has an exercisable master netting arrangement or

similar agreement in place with its counterparties, and both parties reach a consensus regarding

net settlement. The aforesaid exercisable master netting arrangement or similar agreement can be

net settled after offsetting the financial assets and financial liabilities. Otherwise, the transaction

can be settled at the total amount. In the event of default involving one of the parties, the other

party can have the transaction net settled.






249

The following tables present the aforesaid offsetting financial assets and financial liabilities.

2015.12.31

Financial assets that are offset which have an exercisable master netting arrangement

or similar agreement

Gross amounts

Gross amounts

of financial

liabilities offset

Net amount of

financial assets

presented in

Amounts not off set in the

balance sheet (d)

of recognized

financial assets

(a)

in the balance

sheet

(b)

the balance

sheet

(c)=(a)-(b)

Financial

instruments

(Note)

Cash

collateral

received

Net amount

(e)=(c)-(d)

Offsetting

agreement

$ 191,361,207 190,923,408 437,799 - - 437,799

Derivative financial

instruments

113,321

-

113,321

-

-

113,321

Total $ 191,474,528 190,23,408 551,120 - - 551,120

2015.12.31

Financial liabilities that are offset which have an exercisable master netting arrangement


Gross amounts

of recognized

Gross amounts

of financial

assets offset in

Net amount of

financial

liabilities

presented in


balance sheet (d)

financial

liabilities

(a)

the balance

sheet

(b)

the balance

sheet

(c)=(a)-(b)

Financial

instruments

(Note)

Cash

collateral

received

Net amount

(e)=(c)-(d) Derivative

financial

instruments

$ 88,985 - 88,985 - - 88,985

2014.12.31

Financial assets that are offset which have an exercisable master netting arrangement


Gross amounts

Gross amounts

of financial

liabilities offset

Net amount of

financial assets

presented in


balance sheet (d)

of recognized

financial assets

(a)

in the balance

sheet

(b)

the balance

sheet

(c)=(a)-(b)

Financial

instruments

(Note)

Cash

collateral

received

Net amount

(e)=(c)-(d)

Offsetting

agreement

$ 162,719,102 162,194,618 524,484 - - 524,484

Derivative

financial

instruments

259,344

-

259,344

5,099

-

254,245

Total $ 162,978,446 162,194,618 783,828 5,099 - 778,729






250

2014.12.31

Financial liabilities that are offset which have an exercisable master netting arrangement


Gross amounts

of recognized

Gross amounts

of financial

assets offset

Net amount of

financial

liabilities

presented in


balance sheet (d)

financial

liabilities

(a)

in the balance

sheet

(b)

the balance

sheet

(c)=(a)-(b)

Financial

instruments

(Note)

Cash

collateral

received

Net amount

(e)=(c)-(d)

Derivative

financial

instruments

$ 36,397 - 36,397 - - 36,397

Note: Master netting arrangements and non-cash financial collaterals are included.

(x) Financial risk management

1.Overview

The Group have exposures to the following risks from its financial instruments:

1) credit risk

2) liquidity risk

3) market risk

The following likewise discusses the Group’s objectives, policies and processes for measuring

and managing the above mentioned risks. For more disclosures about the quantitative effects of

these risks exposures, please refer to the respective notes in the accompanying consolidated

financial statements.

2.Risk management framework

The group are exposed to credit risk, market risk, operating risk and liquidity risk due to its

operating activities. To lower the latent unfavorable effects of changing market to the Group's

financial performance, the Group have made efforts in identifying and evaluating the risks and

avoiding the uncertainty of the market through derivative financial instruments.

The board of directors has the overall responsibility for the establishment and oversight of the

Group’s risk management framework. The fincancial units follows the risk managment policies,

and report the operating status to the board of dirctors regularly. The internal auditors perform

regular reviews by taking risk management control procedures and report to the board of

directors.

3.Credit risk

Please refer to Note 6(w) for the analysis of credit risk of cash, cash equivalent and accounts

receivable. Please refer to Note 13(a) for the endorsement and guarantee provided to the

subsidiaries and affiliates as of December 31, 2015 and 2014.






251

4.Liquidity risk

Liquidity risk is a risk that the Group is unable to meet the obligations associated with its

financial liabilities that are settled by delivering cash or another financial asset. The Group’s

approach to managing liquidity is to ensure, as much as possible, that it always have sufficient

liquidity to meet its liabilities when due, under both normal and stressed conditions, without

incurring unacceptable losses or risking damage to the Group’s reputation.

The Group use actual cost to estimate the cost of its products and services to better assist the

Group's monitoring on the cash flow and optimizing the return on investment. As of December

31, 2015, the capital and working funds of the Group are sufficient to meet its entire contractual

obligation; therefore, the management is not expecting any significant issue on liquidity risk. As

of December 31, 2015 and 2014, the Group's unused credit line were amounted to $88,795,529

and $71,687,165, respectively.

5.Market risk

Market risk is the risk that changes in market prices, such as foreign exchange rates, interest rate,

and equity prices which will affect the Group’s income or the value of its holdings of financial

instruments. The objective of market risk management is to manage and control market risk

exposures within acceptable parameters while optimising the return.

The Group buys and sells derivatives, and also incurs financial liabilities, in order to manage

market risks. All such transactions are carried out within the guidelines set by the Group.

1) Currency risk

The Group is exposed to currency risk on sales, purchases and borrowings that are

denominated in a currency other than the respective functional currencies of the Group’s

entities, primarily the New Taiwan Dollars (TWD), US Dollars (USD), Czech Koruna (CZK),

Japanese Yen (JPY) and China Yuan (CNY). The currencies used in these transactions are

denominated in TWD, USD, JPY and CNY.

The Group often uses the principle of natural hedging as its basis, and proceed

supplemented by derivative instruments for hedging exchange rate risk.

The interest is denominated in the same currency as borrowings. Generally, borrowings are

denominated in currencies that match the cash flows generated by the underlying operations of

the Group. This provides an economic hedge without derivatives being entered into, and

therefore, hedge accounting is not applied in these circumstances.

In respect of other monetary assets and liabilities denominated in foreign currencies, the Group

ensures that its net exposure is kept to an acceptable level by buying or selling foreign

currencies at spot rates when necessary to address short-term imbalances.






252

2) Interest rate risk

The Group's interest rate risk arises from long-term borrowings bearing floating interest rates.

The fluctuation of the the market interest rate changes the floating interest rates of the

long-term borrowings, and thus affect the future cash flow. In order to decrease the effect of

the market interest rate fluctuation on to the future cash flow, the Group periodically evaluates

bank and currency borrowing rate to hedge the cash flow risk caused by the market interest

rate fluctuation.

(y) Capital Management

The Board’s policy is to maintain a strong capital base so as to maintain investor, creditor and

market confidence and to sustain future development of the business. Capital consists of ordinary

shares, additional paid-in capital, retained earnings and non-controlling interests of the Group. The

Board of Directors monitors the return on capital as well as the level of dividends to ordinary

shareholders.

The group's objective for managing capitals is to maintain investor, creditor and market confidence,

and to sustain future development of the business by making debts and equities the most suitable

capital structure and optmizing the best of it based on industrial scales, future growth development,

and capital expenditures needed for plants and equipments. Thus, the Group calculates the operating

funds based on the life cycle of the products, plans for the development in the long run, and then

decides the most suitable captial structure considering the business cycle.

The Group ensures the financial resources and the operating plan are sufficient to support the future

needs of operating funds, capital expenditures, debt refunding and dividend distribution.

The Group’s debt to equity ratio at the reporting date was as follows:

2015.12.31 2014.12.31

Total Liabilities $ 112,847,624 131,278,939

Less: cash and cash equivalents (37,123,631) (37,731,741)

Net debt 75,723,993 93,547,198

Total Equity 62,898,849 64,422,790

Total Capital $ 138,622,842 157,969,988

Debt to equity ratio 54.63% 59.22% According to the Company's management, there were no changes in the Group's approach to capital

management at of December 31, 2015.

(7) Related Party Transactions (a) The Company and the ultimate controlling party

The Company is the ultimate controlling party of the Group.






253

(b) Significant transactions with related parties

1.Sale revenue

The amounts of significant sales transactions and outstanding balances between the Group and

related parties were as follows:


2015 2014 Associates $ 15,503,838 30,160,467

For related parties, the price and terms were determined in accordance with mutual agreements

with its collection terms of OA30~90 days for sales. Receivables from related parties were not

secured with collaterals, and did not require provisions for bad debt expenses.

2.Purchase

The amounts of significant purchase transactions between the Group and related parties were as

follows:

For the years ended December 31, 2015 2014 Associates $ 1,822,700 4,640,199

There is no other vendor as comparison for the above purchases, and the purchase prices are

based on the settling price agreed by both sides. The payment term is 30~75 days。

3.Account receivables from related parties

The amounts of account receivables between the Group and related parties were as follows:

Financial Statement Account Related Party Categories 2015.12.31 2014.12.31

Account receivables Associates $ 20,254 8,967,761

Other receivables Associates 522 29,900

$ 20,776 8,997,661

4.Account payables from Related Parties

The amounts of Account payables between the Group and related parties were as follows:

Financial Statement Account Related Party Categories 2015.12.31 2014.12.31

Accounts payable Associates $ 27,239 6,712,732

Notes payable Other related parties 12,132 24,263

Other accounts payable Associates 3,732 -

Other accounts payable

(excluding borrowings)

Other related parties 5,045

899

$ 48,148 6,737,894






254

5.Property transactions

The amounts of acquisition of property, plant and equipment between the Group and related

parties were as follows:

1) Acquisition of property, plant and equipment

For the year ended December 31, 2015 the Group purchused property, plant and equipment

from associates and paid the amounted $7,629.

2) On September 8, 2015 and September 30, 2015, in pursuant to the resolution of the board of

Directors, the Group paid the amount of $367,399 to TPV-Inventa Holding Ltd..

3) In 1999, the Group sold property, deferred assets, assets stated under expense, and trademarks

to associates resulting in a gain on property disposal of $51,712 and other revenue of $40,453.

As of December 31, 2015 and 2014, the unrealized other revenues are both $1,211.

6.Borrowings of Related Parties

The amount of the Group financed from related parties was as follows:

For the years ended

December 31, 2015 Ending

Balance

Interest rate

Ending interests

payable

Interest

expense

Related parties $ 328 2.20%~3.14% - 114

For the years ended

December 31, 2014

Related parties $ 4,746 2.20%~3.14% 26 36

7.Guarantees and endorsements

As of December 31, 2014, guarantee and endorsements of bank loans provided by the Group for

related parties amounted for $1,240,288, the amount of $860,597 were exercised.

8.Others

1) As of December 31, 2015 and 2014, in order to assist the affiliate to access credit line from

banks, related parties pledge a time deposit amounted to $131,500 and $126,700 certificate

as collateral. As of December 31, 2015, the accrued expenses resulting from time deposit,

which was pledged as collateral, amounted to $5,045.

2) General and adminstrative expense and SAP expense collected amount from related parties

were as follow:


2015 2014 Associates $ 12,008 19,681

3) Donation for other related parties for the years ended December 31, 2015 and 2014 were

$17,800 and $11,500, respectively.






255

4) Administrative expenses paid to associates were as follows:

For the years

ended December

31, 2015 Associates $ 14,843

(c) Key management personnel compensation

Key management personnel compensation includes:


2015 2014

Short-term employee benefits $ 642,557 628,286

Post-employment benefit 7,887 7,318

Share-based payments - 888

Terminated benefits 564 -

$ 651,008 636,492 Please refer to Note 6(q) for further explanations related to share-based payment transactions.

(8) Pledged Assets The carrying values of pledged assets were as follows:

Pledged assets Object 2015.12.31 2014.12.31

Refundable deposits

(Other non-current assets)

Customs duty guarantee and rental

deposit

$ 217,998 215,228

Restricted cash in banks

(Other current assets and

Other non-current assets)

Short-term borrowings,

construction contract guarantee,

long-term borrowings and

Secured deposits for executing

technology agreements with

goverment

5,760 1,000,720

Other non-current assets Guaranty for material purchase

contracts

17,723 24,632

Land, buildings, structures,

machinery and equipment, net

(Property, plant and equipment,

Investment property and Other

non-current assets)

Long-term borrowings, and

short-term borrowings

1,597,510

1,621,365

Total $ 1,838,991 2,861,945






256

(9) Significant Commitments and Contingencies (a) Major Commitments:

1.Unused standby letters of credit were as follows:

2015.12.31 2014.12.31

EUR $ 2,888 3,511

USD 8,105 6,971

JPY 25,210 48,710

TWD - 322,839

2.Promissory notes issued for bank credit, forward contracts, and Secured deposits for executing

technology agreements with the goverment and property deposits are as follows:

2015.12.31 2014.12.31

TWD $ 21,758,059 21,415,172

USD 1,319,000 1,239,900

3.As of December 31, 2015, the executed agreement for acquisition of plants amounted to

$6,060,000, in which, $5,454,000 has not yet been paid.

(b) Contingencies

1.Inventec Energy Corporation sold photovoltaic modules to TOPCO Scientific Co., Ltd.. Upon the

installation of the said products by TOPCO Scientific Co., Ltd., it was discovered that there were

some flaws on the products. Therefore, TOPCO Scientific Co., Ltd. hired another company to

repair or replace the damaged products. On August 10, 2010, TOPCO Scientific Co., Ltd. filed a

lawsuit in the Taipei District Court against Inventec Energy Corporation, asking Inventec Energy

Corporation to pay the amount of USD1,799 thousand as compensation for the maintenance and

the replacement of the products sold by Inventec Energy Corporation to TOPCO Scientific Co.,

Ltd.. However, on July 3, 2013, Taipei District Court ruled in favor of Inventec Energy

Corporation and dismissed the case.

On July 26, 2013, TOPCO Scientific Co., Ltd. appealed against Inventec Energy Corporation

demanding for the damage costs of NT$3,486 and US$961 thousand.

On August 31, 2015, Inventec Energy Corporation received the investigation result from Taiwan

High Court, which includes a fine of USD 83 thousand.

Inventec Energy Corporation is to pay 8% of the expenses for filing the lawsuit, except for those

already confirmed.

Inventec Energy Corporation and TOPCO scientific Co., Ltd. both appealed to Taiwan Supreme

Court before September 29, 2015. The case is still in investigation.






257

2.The relationship between E-Ton Company and JI-EE Industry Co., Ltd. has deteriorated due to a

dispute over the lands and buildings which JI-EE Industry Co., Ltd. leased to E-Ton Company.

JI-EE Industry Co., Ltd. claimed that the lease is due on December 31, 2013 and decided to

discontinue to rent the aforesaid lands and buildings to E-Ton Company. Therefore, E-Ton

Company filed a temporary injunction to the Tainan District Court concerning this matter.

Tainan District Court requests that E-ton Company should provide a guarantee deposit of 1.2

billion New Taiwan Dollars for the temporary injunction mentioned above. In return, JI-EE

Industry Co., Ltd. should leave the driveways and doors of the building (which is located on No.

73 and 74 Ke Gong Section, Annan Dist., Tainan City) in its current condition until this case is

resolved. Furthermore, JI-EE Industry Co., Ltd. should allow E-ton Company to continue using

the other buildings located on No.16-1, 16-7, and 16-10 Ke Gong Section, Annan Dist., Tainan

City.

In accordance with the enforcement order No.82 (103), JI-EE Industry Co., Ltd. has to follow the

aforementioned injunction. E-Ton Company has received the civil ruling No. 160 (103) from the

Tainan District Court and submitted the indictment to the Tainan District Court on July 15,

2014. The case is filed as No. 196 (103) and is still in progress.

In accordance with the payment order No.6096 from Tainan District Court, JI-EE Industry Co.,

Ltd. advocated that E-Ton Company should pay a penalty of $8,537, plus, interest payables

accrued with an annual interest rate of 5% from the issuance date of the payment order to the

payment date.

E-Ton Company disagreed with the demand of JI-EE Industry Co., Ltd. and filed an appeal to the

Tainan District Court against JI-EE Industry Co., Ltd.. JI-EE Industry Co., Ltd. filed an appeal

against E-Ton Company asking for compensation for the damage. In 2014, according to case No.

73 of Zhong-Su-Zi, Tainan District Court granted the demand of JI-EE Industry Co., Ltd., which

resulted to the penalty of 6,098, plus, interest payables accrued with an annual interest rate of 5%

from the issuance date on May 22, 2014. Therefore, E-Ton Company filed an appeal to the

Taiwan High Court against JI-EE Industry Co., Ltd. on December 5, 2014. Currently, the case is

filed as No. 5 (104) and is still in progress.






258

3.As of December 31, 2015, the long-term supply agreement of the Group entered with various

vendors were summarized as follows:

Term of Unused Down

Supplier Contract Prepayment Payment Note

M.Setek 2006.4- 2016.12 US$ 149,000 US$ 50,048 M. Setek is required to supply E-TON SOLAR

TECH.CO., LTD (E-TON) with “Monocrystalline Silicon

Wafer" and polysilicon at the contract price. Pursuant to the agreement, E-TON has to prepay a certain amount as

down payment. E-TON entered into a Memorandum of

Understanding (“MOU”) with M. Setek on August 17, 2011. According to the MOU, E-TON and M. Setek

agreed to subsequently reframe another purchase contract

to replace the original one. The expiry date of the renewed agreement will be extended to December 31,

2020. In addition, M. Setek is required to repay

US$3,000 thousand in settlements by December 31, 2011. E-TON had received US$2,000 thousand as of the date

the report was issued, because the settlement is not

reached , remainder US$1,000 thousand is reclassified

account to other receivables.

According to the MOU, if E-TON didn't reached the

agreement of the plan of supply, prepayment of

carryforward and principle with M.Setek, the original

contracts will be excuted.

E-TON and M. Setek have signed a new MOU in March

2013, the remainding prepayments can be deferred for

future purchases.

E Company 2009.1- 2014.12 4,105 2,644 E company is required to supply E-TON with“Monocrystalline Silicon Wafer” at the contract

price. Pursuant to the agreement, E-TON has to prepay

a certain amount as down payment. As of December 31,

2015 the two parties are still in the negotiation.

N Company 2009.1- 2015.12 16,280 4,620 N company is required to supply E-TON

with“Monocrystalline Silicon Wafer” at the contract

price. Pursuant to the agreement, E-TON has to prepay

a certain amount as down payment.

J Company 2011.1- 2012.12 -

-

E-TON entered an agreement to purchase

“Monocrystalline Silicon Wafer” at the negotiated price.

E-TON has to provide 45 metric tons of polysilicon as collateral which will be returned by supplier when the

agreement is expired. In 2011, E-TON did not purchase

the required quantities of products in compliance with the contract due to fluctuation in market

conditions.Therefore, E-TON entered into a agreement

with J Company on November 23, 2011 and agreed to extend the expiry date of the original agreement to the

first quarter in 2013. As of December 31, 2015, the two

parties are still in the negotiation.

W Company 2011.01-2016.12 22,825

5,704

W company is required to supply ADEMA with polysilicon at the contract price. Pursuant to the

agreement, ADEMA has to prepay a certain amount as

down payment.






Term of Unused Down

Supplier Contract Prepayment Payment Note

259

GCL 2011.02-2015.12 7,499

312

GCL is required to supply Inventec Solar Engergy Corporation with “Monocrystalline Silicon Wafer” at the

contract price. Pursuant to the agreement, Inventec Solar

Engergy Corporation has to prepay a certain amount as down payment. Although the agreement had reached its

expiry date, the supplier continued to agree with Inventec

Solar Energy Corporation for the usage of its

“Monocrystalline Silicon Wafer” until February 2016.

US$ 199,709 US$ 63,328

Considering the significant price fluctuation in the solar market as compared to the date of the

supply contract, the purchase price per unit and deductible amount from the down payment were

adjusted to a negotiated price to reflect the change in spot price for the individual transaction.

Besides, the Group has accrued the impairment loss based on the estimation of solar market

fluctuation.

(10) Losses Due to Major Disasters : None.

(11) Subsequent Events : None.

(12) Other (a) The employee benefits, depreciation, depletion and amortization expenses categorized by function

were as follows:

By function For the years ended December 31, 2015 For the years ended December 31, 2014

By item Operating

costs

Operating

expense

Total

Operating

costs

Operating

expense

Total

Employee benefits

Salary 10,918,860 8,361,983 19,280,843 11,392,985 8,249,554 19,642,539

Labor and health

insurance

944,605 722,532 1,667,137 795,852 582,379 1,378,231

Pension 1,423,399 573,686 1,997,085 950,271 455,638 1,405,909

Others 940,698 229,101 1,169,799 948,254 174,817 1,123,071

Depreciation 3,020,004 956,242 3,976,246 2,653,925 1,160,065 3,813,990

Amortization 534,071 430,924 964,995 537,965 684,247 1,222,212

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