Elite Materials Co., Ltd 2015 ANNUAL REPORT

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Stock Code:2383 Search 2015 Annual Report Website:http://newmops.tse.com.tw

EMC

Elite Materials Co., Ltd 2015 ANNUAL REPORT

Printed Date:May 20th, 2016

1.The Company Spokesman: Name:Li-Chio, Chang Job Title:Assistant Manager, Administration Section Telephone:(03)483-7937 Email:[email protected] The Company Acting Spokesman: Name:Bi-Chu, Chiang Job Title:Vice Manager, Finance Section Telephone:(03)483-7937 Email:[email protected] 2.Elite Material Co., Ltd. Headquarter Address:No.18, Ta-Tung 1st Rd., Kung-Yin Industry District, Kuang-Yin District, Tao-Yuang City Telephone:(03)483-7937 Hsin-Chu Factory Address: No.14, Wen-Hua Rd., Feng-Shuang Valley, Hu-Ko County, Hsin-Chu Hsien Telephone:(03)598-1688 3.Stock Transfer Processing Institute: Name:Agent of Ya-Tong Securities Co., Ltd. Address:No.86, 3F, 1st Section Chong-Ching South Rd., Taipei Telephone:(02)2361-8608 Website:www.osc.com.tw 4.Certified Accountant of the Latest Annual Finance Report: Name of the Accountant:Accountant, Liu-Feng, Yang/Accountant, Ying-Ru, Chen Name of the Firm:KPMG Address: No.7, 68F, 5th Section Hsin-Yi Rd., Taipei Telephone:(02)8101-6666 Website:www.kpmg.com.tw 5.Name of the Transaction Place of the Global Negotiable Securities Commerce and the Ways to Inquire the Information of the Global Negotiable Securities :The Company has not issued the Global Negotiable Securities 6. The Company Website:www.emctw.com

Catalogue of the Annual Report I. The Report to All of the Shareholders ....................................................................... 1 II. Introduction of the Company 1. Established Date .................................................................................................. 4 2. History and Development of the Company ........................................................ 4 III. Administer Report of the Company 1. Organization System ......................................................................................... 8 2. The Information of the Directors, Supervisors, General Managers, Vice-General Managers, Assistant Managers, and the Chiefs of the Branches ............................................................................................................ 11 3. Administrative Conditions of the Company ..................................................... 24 4. The Public Fee Information of the Accountants ............................................. 47 5. The Information of Changing the Accountants................................................. 47 6. The Chairman, General Managers, and the Managerial Officers who Take Charge of the Finance or Accounting Affairs in the Company, who Have Ever Worked in the Firms or Related Corporations of the Certified Accountants within the Very Latest One Year .................................................. 47 7. The Shares Rights Transfer and Pledge Situation of the Shareholders who is the Director, Supervisor, or Managerial Officer and Owned 10% or More in the Latest Year and Dated to the Annual Report Printed Date.......................... 47 8. The Information of the Shareholders who hold the Shares in the Top Ten and the Mutual Relationship is the Parties of Spouse or the Second Degree Relatives that is Regulated in the Financial Accounting Standard Bulletin No.6. .................................................................................................................. 49 9. The Amount of Holding Shares of the Same Automatic Reinvestment Corporations of the Company, Directors, Supervisors, Managerial Officer, and the Corporations that the Company is able to Control Directly or Indirectly, as well as the Calculation of the Comprehension Shares Holding Ratio. ................................................................................................... 49 IV. Funding Situation 1. Company Capital and the Shares ...................................................................... 51 (1) Sources of the Stock Capital ....................................................................... 51 (2) Structure of the Shareholders ...................................................................... 52 (3) Scattering Situation of the Stock Rights ..................................................... 52 (4) Name of the Main Stockholders ................................................................. 53 (5) The Information of the Per Share Market Price, Net Value, Profile, and Dividend in the Latest Two Years ............................................................... 53 (6) The Company Dividend Policy and Execution Situation ........................... 54 (7) The Effect of the Proposal of Stock Grant to the Company Operation Result and the Earnings Per Share in this Shareholder Conference ........... 55 (8) The Bonus of the Employee and the Rewards of the Directors and Supervisors .................................................................................................. 55 (9) Condition of the Company Shares Repurchased by the Company ............. 56 2. Handling Condition of the Corporate Bond ...................................................... 56 3. Handling Condition of the Preferred Stock ...................................................... 56

4. Handling Condition of the Global Depository Receipt .................................... 56 5. Handling Condition of the Employee Stock Option Certificates ................... 57 6. Handling Condition of the Limited Employee Right Shares and the Merge or Transferee Other Company Issued New Shares ........................................... 58 7. Executing Condition of the Capital Operation Plan ....................................... 59 V. Operation Profile 1. Business Content ............................................................................................... 60 (1) Business Scope............................................................................................ 60 (2) Industrial Profile ......................................................................................... 60 (3) Technology and Research Profile ............................................................... 61 (4) Long/Short Term Business Development Plan ........................................... 61 2. Market and Production/Sale Profile .................................................................. 62 (1) Market Analysis .......................................................................................... 62 (2) Function and Producing Process of the Main Products .............................. 64 (3) Supply Situation of the Main Raw Material ............................................... 64 (4) Name of the Clients who Stock In/ Sale Out More than 10% in the Latest Two Years, and the Amount and Ratio of the Buy In/Sale Out . 64 (5) The Production Value Table of the Latest Two Years ................................. 65 (6) The Sale Value Table of the Latest Two Years ............................................ 66 3. The Working Employee Information of the Latest Two Years ......................... 66 4. The Expense Information of Environment Protection ...................................... 66 5. The Relationship between the Labor and the Company ................................... 67 6. Important Contracts........................................................................................... 68 VI. Financial Profile 1. Concise Balance Sheet and Profit & Lose Statement of the Latest Five Years .... 69 2. Financial Analysis of the Latest Five Years ...................................................... 78 3. Supervisor Review Report in the Latest Annual Financial Report ................... 85 4. The Latest Annual Financial Tablet .................................................................. 86 5. The Latest Annual Combined Financial Tablet of the Parent and Subsidiary Companies that is Checked by the Certified Accountant ................................. 86 6. The Turnover Conditions that effect the Company Financial Condition of the Company and the related Corporation in the Latest Year and Dated until the Annual Report Printed Date ...................................................................... 86 VII.The Review Analysis and Risk Matters of Financial Condition and Management Result 1. Review and Analysis of Financial Condition ................................................... 87 2. Financial Result................................................................................................. 88 3. Cash Flow Review and Analysis....................................................................... 89 4. The Effect of the Expense of Significant Capital to the Financial Affairs in the Latest Year ................................................................................................. 89 5. The Major Reasons and Improve Project of Profit or Deficit of the Automatic Reinvestment Policy in the Latest Year and the Investment Project in the Next Year .................................................................................... 89 6. Risk Management ............................................................................................. 89 7. Other Important Affairs ..................................................................................... 91

VIII. Special Recorded Items 1. Related Information of the Related Corporations ............................................. 92 2. Handling Condition of Private Placement of Negotiable Securities in the Latest Year and Dated to the Annual Report Printed Date ............................... 95 3. Condition of Holding or Acting Stock Against the Company in the Latest Year and Dated to the Annual Report Printed Date .......................................... 95 4. Other Necessary Additional Note Items ........................................................... 95 5. The Important Effect Items of Shareholder Interest or Securities Price in the 2-2of the Act 36 in the Latest Year and Dated to the Annual Report Printed Date ....................................................................................................... 95 Annex I:The Measurement of the Employee Stock Warrant Issue and Subscription of the First time of 2011 .............................................................. 96

I.The Report to the Shareholders (I). Operation Condition of 2015 (1)Practice Result of Operation Plan A.QunXang Factory, China: Monthly Production Capacity has reached 1,350,000 pcs/Month. B.JunXang Factor, China: Monthly Production Capacity has reached 950,000 pcs/Month. C.Guang-Yin Factory: Monthly Production Capacity has reached 500,000 pcs/Month.

Unit: TWD thousand dollars Category 2015 Operating revenue 20,869,717 Gross profit from 5,064,330 operations Operating profit 3,249,150 Profit before tax 3,330,650 Profit after tax 2,392,187 (Note): Profit after tax: $2,948,000 combined with the net profit after taxes and the minor stock right in 2015. (2)Budget Execution Condition: The Company need not to disclose the financial forecast in 2015. (3)Revenue and expenditure:Unit: TWD thousand dollars Category Net cash flows from operating activities Net cash flows used in investing activities Net cash flows used in financing activities Effect of exchange rate changes on cash and cash equivalents Net increase in cash

2015 3,574,639 233,602 1,562,378 -36,308 1,742,351

(4)Profitability Analysis:

Financial Information for these

Years Item

2 years 2014

2015

Return on assets (%)

10.11

14.08

Return On Equity(%)

20.44

26.78

57.99

102.33

58.17

2015.90

Profit margin (%)

8.16

11.46

Earnings Per Share(dollars)

4.91

7.55

Operating Profitability In (%) of capital stock

profit Earnings before taxes

1

(5) Research & Development Condition: It has developed successfully in 2015 as followings: (5)-1. High Reliable Environmental Protection Base Material for Automobile Electrics. (5)-2. New Type Ultra-Low Dielectric Application Environmental Protection Base Material for High Frequency Communication (5)-3. New Type Ultra-Low Signal Lose. Base Material Because the trend of the Global Green & Environmental Protection has added warmth continuously, the Ultra-Low Dielectric Mid Tg Environmental Protection Base Material has mass produced full-scally in 2015. The New Type Ultra-Low Dielectric Application Environmental Protection Base Material has completed the development and expanded to send the High-Level Communication samples to the great global terminal factories for certification. The High-Frequency, High-Speed, and High-Coating application and the Automobile Electric application Environmental Protection Base Material have completed the certification and mass production in the end of customers. The target is to expand the global environmental protection material market occupied ratio with all of our strength, and to ensure the stable first position in the global environmental protection material market. (II)Operation Plans Profile of 2016: (1)Management Guideline: (1)-1 Increase the Certification of the Automobile Base Material (1)-2 Search for the International Strategy Cooperation Partners. (1)-3 To Promote the High-Temperature Base Material Actively. (1)-4 To Culture the HDI Deeply. (2)Expected sales: CCL(Sheet) Guanyin 5,943,864 factory Kunshan 13,781,214 factory Zhongshan 8,700,161 factory Hsinchu factory Total 28,425,239

PP(Roll) 141,822

M/L(K PNL)

250,926 184,001 1,579 576,749

1,579

(2)-1. Expected Total Sale Amount of CCL: 28,425,239 pcs/year Expected Total Sale Amount of PP: 576,749 rolls/year Expected Total Sale Amount of M/L: 1,579 KPNL /year (2)-2. Important Production and Marketing Policy: (2)-2-(1) Production/Marketing balance, adjust the inventories elastically and loose the operation capital. (2)-2-(2) To raise the defect-free rate to satisfy the demand of the customers (2)-2- 3) To increase the Environmental Protection Material sale to cope with the regulations of the European Union. (III) The Company development strategy and the effect of suffering the outer competition environment, the regulation environment, and the entire management environment. (1)The major development strategies of EMC in the future are as followings: (1)-1 To raise the ratio of Automobile Base Material sale (1)-2 To do customer service well and keep the relationship with the customers closely. (1)-3 To implement the inner control system and promote the management quality. 2

(1)-4 To harmony with the demand of the Cloud and develop the High-Frequency and High-Temperature Base Material. (2)The effect of suffering the outer competition environment, the regulation environment, and the entire management environment: Prospecting to 2016, up on the gradual recovery after economic storm assault and the growth of the market demand in the world, the future economic development direction of Taiwan will combine with the fast growth economic areas. The dealing ways of the Company will be as followings: (2)-1 To increase the market occupied ratio of the Halogens-Free Material and the Automobile Base Material. Due to the future trend of Green & Environmental Protection, the cell phones and the consumer electric products will be entirely switched to Halogens-Free Material. The Company will be good at using the original superiority to increase the market occupied ratio of Halogens-Free Material and the Automobile Base Material. (2)-2 To strengthen the customer service, to consolidate the present market, and to develop new customers actively. (2)-3 To optimize the quality of result management and implement the self-exam system. (2)-4 To increase the goods ship-out ratio of High-Frequency and High-Temperature Base Material. Sincerely to thank all of the shareholders of cherish and support continuously. With Fully Respect to Wish Healthy and Best Wishes

Huy-Lian, Tsai, Chairman

3

II.Company Introduction (I) Established Date Company Registration Date: March 24, 1992 (1)Company Unified Business No.:86521351 Company Address: No.18, Ta-Tung 1st Rd., Guan-Yin Industrial District, Guan-Yin District, Tao-Yen City Company Telephone:(03)4837937 (2)Factory Established Permit: 81Jian-Yi Tzu No.083375, Construction Tin, Province Government Issued on June 15, 1992 Factory Address: No.18, Ta-Tung 1st Rd., Guan-Yin Industrial District, Guan-Yin District, Tao-Yen City Factory Telephone:(03)4837937 (II) Company Variation and Development: 1992

The Company called for the first time Founder Meeting and passed the Joint Venture Agreement, the Company Rules and designated February 25th, 1992 as the deadline of Capital Stock Subscription. The Company called for the second time Founder Meeting and voted for the Directors and Supervisors. The Company called for the First Degree, the first time meeting and elected Mr. Ho-Zen, Chu as the Chairman.

1993

The Provisional Shareholder Conference passed the Case of Capital Increase of $122,500,000. The amount of capital after capital increase was $430,000,000. The factory registration number is 99-079038-00 according to 82 Jian-Yi-Tze No.075808, Construction Tin, Taiwan Provience Government The Provisional Shareholder Conference passed the Case ofvReelection for Directs and Supervisors, and voted 7 Directors and 2 Supervisors accordance with the Company Regulation No.22.

1995

1996

To expand business and create larger profit, the Provisional Shareholder Conference passed the proposal of expanding factory building, purchasing machine and equipment, and proposed to conduct cash capital increase of $210,000,000. The amount of capital was $640,000,000 after capital increase. To lose the listed companies in OTC market and encourage the qualified companies, the Securities and Futures Commission certified the Company and asked to apply for the guidance operation of the listed company in OTC market in 1995. The Board of Directors passed the amendment of Company Rules and switched the Supervisors from 2 to 3, and voted for the Third Degree Election of Directors, Supervisors, and Chairman. Business Result Launching Ceremony prior to Listed Company in OTC OTC Stock Go Public started date 4

The Board of Directors passed the Case of Expand Facilities on present owned lot site in 1997. 1997

The Company called for the First Time Shareholder Provisional Conference of 1997 and passed the followings: 1. Cash Capital Increase $70,000,000 Issued new Shares 7,000,000 shares $10 face value per share Premium issued $35 per share 2. Applied for Listed Company instead of Listed Company in OTC in 1998 To develop the business opportunities and expand the scope of business, the Company proposed to engage in automatic reinvestment business in domestic and abroad market.

1998

The Stockholder Permanent Conference voted for the Fourth Degree Directors and Supervisors. The 4th Degree 1st time meeting of the Board of Director elected Mr. Ho-Zen, Chu as the Chairman again. Shares Go Public started date

2001

The Stockholder Permanent Conference voted for the Fifth Degree Directors and Supervisors. The 5th Degree 1st time meeting of the Board of Director elected Mr. Ho-Zen, Chu as the Chairman again.

2002

The Stockholder Permanent Conference passed the Case of $18,280,038 of Legal Surplus to make up the deficit of 2001.

2003

The Stockholder Permanent Conference passed the Case of $61,010,761 of Capital surplus and $56,449,987 of Legal Surplus to make up the deficit of 2002. The Fifth Degree 18th meeting of Board of Directors stated Mr. Ho-Zen, Chu retired from the position of the Chairman and slated Ms. Mei-Chin, Dong-Her stepped as the position of the Chairman.

2004

The Shareholder Permanent Conference voted for the Sixth Degree Directors and Supervisors. The 6th Degree the 1st Board of Director Meeting elected Mr. Huy-Lian, Tsai as the Chairman and Mr. Ding-Yu, Dong as the Vice Chairman.

2005

Hsin-Chu Factory started to use and plunged into the production of Mass Lam.

2006

The 6th Degree 24th Board of Directors Meeting passed the Case of Organization Construct Rebuilding. The subsidiary companies of Grand Shianhai and EMC-HK that originally controlled by the EMC-Holding, and Grand ZhongShan switched the control to Grand ZhuHai

2007

The Shareholder Permanent Conference voted for the 7th Degree Directors 5

and Supervisors. The 7th Degree 1st Board of Director Meeting elected Mr. Huy-Lian, Tsai as the Chairman and Mr. Ding-Yu, Dong as the Vice Chairman. The Earning Profit transfer to Capital Increase and the Convertible Bonds transfer to Common Share $274,997,960 The Contributed Capital after Capital Increase was $2,383,918,790 2008

The Treasury Shares decrease capital $23,180,000 The Contributed Capital after Decrease Capital was $2,369,331,320 The Earning Profit transfer to Capital Increase and the Convertible Bonds transfer to Common Share $214,708,230 The Contributed Capital after Capital Increase was $2,575,447,020

2009

The Treasury Shares decrease capital $28,880,000 The Contributed Capital after Decrease Capital was $2,546,567,020 The Earning Profit transfer to Capital Increase and Employee Subscription Share Right and the Convertible Bonds transfer to Common Share $135,116,740 The Contributed Capital after Capital Increase was $2,681,683,760

2010

The Shareholder Permanent Conference voted for the 8th Degree Directors and Supervisors. The 8th Degree 1st Board of Director Meeting elected Mr. Huy-Lian, Tsai as the Chairman and Mr. Ding-Yu, Dong as the Vice Chairman. The Earning Profit transfer to Capital Increase and Employee Optional Share Right and the Convertible Bonds transfer to Common Share $163,450,840 The Contributed Capital after Capital Increase was $2,845,134,600

2011

The Earning Profit transfer to Capital Increase and Employee Optional Share Right and the Convertible Bonds transfer to Common Share $180,297,340 The Contributed Capital after Capital Increase was $3,025,431,940

2012

The Treasury Shares decrease capital $30,000,000 The Contributed Capital after Decrease Capital was $2,995,431,940 The Emplyee Subscription Share Right and the Convertible Bonds transfer to Common Share $68,492,650 The Contributed Capital after Capital Increase was $3,063,924,590

2013

The Shareholder Permanent Conference voted for the 9th Degree Directors and Supervisors. The 9th Degree 1st Board of Director Meeting elected Mr. 6

Huy-Lian, Tsai as the Chairman and Mr. Ding-Yu, Dong as the Vice Chairman. 2014

The Earning Profit transfer to Capital Increase and Employee Subscription Share Right and the Convertible Bonds transfer to Common Share $20,303,110 The Contributed Capital after Capital Increase was $3,136,011,400

2015

The Earning Profit transfer to Capital Increase and Employee Subscription Share Right and the Convertible Bonds transfer to Common Share $37,220,0000 The Contributed Capital after Capital Increase was $3,173,231,400

7

8

Producing Section

Marketing Section

Administration Section

Senior Vice-General Manager (General Manager)

ZhonShan Factory

(I) Organization System 1. Organization Structure

Marketing Section Basilar Plate Producing Section

Purchase Room

OEM Producing Section

OEM Marketing Section

Vice-General Manager

Hsin-Chu Factory

Strategy Development

Salary and Reward

Supervisor

Administration Section

General Manager

Chairman

Board of Director

Shareholder Conference

Senior Vic-General manager

Guan-Yin Factory

Research & Development

Audit Room

III. Company Administer Report

Adminis tration Section

Marketing Section

Producing Section

Senior Vice-General manager(Gernal Manager)

QuanXan Factory

9

To take an overall plan of the operation, legal affairs, and contract review and management of the parent /subsidiary company, and the automatic reinvestment related corporation that the Company owned the leadership.

1. To designate the Company strategies and guidelines, and to manage the Company operation affairs. 2. To propose the annual management guidelines, target, and management strategies, and to assign the representatives of quality, HSPM, environmental safety management and customers. 3. To appraise and decide the Company policies and target of quality, environmental safety & sanitation, and HSF. 4. Organization operation Build up and supervise & manage the quality, environmental safety & sanitation, and HSPM system

To assist the General Manager to engage in the affairs, such as financial accounting, personnel administration, information management, and environmental safety & sanitation management.

To assist the chief officers of the Department of Guan-Yin to engage in the affairs such as domestic & international marketing, stock material management, and customer service.

To assist the chief officers of the Department of Hsin-Chu to engage in the affairs such as domestic & international marketing, stock material management, and customer service.

To assist the chief officers of the Department of Guan-Yin to engage in the affairs such as Basilar Plate products technology, producing, and quality protection and maintain.

To assist the chief officers of the Department of Hsin-Chu to engage in the affairs such OEM production, quality protection, and facilities maintain.

To assist the manager level personnel to estimate the regulations of inner accounting and management control.

Chairman Room

General Manager Room

Administration Section

Guan-Yin Marketing Section

OEM Marketing Section

Basilar Plate Production Section

OEM Production Section

Audit Room

2. The Operation Affairs of the Major Departments and Sections

10

To assist the manager level personnel to designate the short/medium/long terms strategies and developments.

1. To take charge of the environment suppliers, environmental concerning, targets and objects. 2. To evaluate, consult, and manage the suppliers/outsourcers to harmony with the quality and the requirement of HSF. 3. To assist the affairs such as purchasing, import/export, and customs

To take charge of the research & development, patent, and promotion of the new products.

Strategy Development Room

Purchase Room

Research & Development Section

11

Director

Director

Director

ROC

Vice Chairman

ROC

ROC

ROC

ROC

Chairman

Title

National ity / Place of Incorpor ation

Term of Firstly office appointm ent date

102.6.25

102.6.25

Xie, Meng-Zhang

3 years

3 years

93.6.25

92.6.24

93.6.25

Representative of Yu Chang 3 Investment 102.6.25 years Ltd. : LI, SHU-JIU

Shen, Yan-Shi

90.5.25

Dong, Ding-yu

3 102.6.25 years

Representative of Yu Chang Investment 102.6.25 3years 93.6.25 Ltd. : Tsai, Hui-Liang

Name

Date of taking office

0

0

0

25,461,477

6,825,766

1,526,244

25,461,477

Number of shares

0.00

0.00

0.00

8.19

2.20

0.49

8.19

Propo rtion of shares

Holding of shares at the appointment

0

0

0

25,461,477

5,265,766

1,775,244

25,461,477

Number of shares

Holding of shares of spouse and minor children

Holding of shares in other's name

0.00

0.00

0.00

8.00

1.65

0.56

8.00

0

0

0

0

15,842

0

0

0.00

0.00

0.00

0.00

0.00

0.00

0.00

0

0

0

0

0

0

0

of

Chemical

Engineering, National Tsing

Master

Academic background and experience

Other Current Positions

Engineering,

0.00

of

International

Brothers Inc.

Fund Manager of Salomon

Affairs, Columbia University

Master

manager manager

of

of

Ltd.

Synmax Biochemical Co.,

General

ROYAL CHEF Ltd.

General

Chairman of Apex Biotechnology Corp and Metertech Inc.

Chairman of Sinotech Consultants, Inc.

General manager of Elite Assistant Professor, San Jose Material Co., Ltd. State University Doctor of Chemical engineering, University of 0.00 Tennessee The former ministry of 0.00 economic affairs - vice minister Doctor of Biochemistry and 0.00 Molecular Biology, University of Massachusetts

0.00

of

Stanford University

Doctor

Corporation

None

Title Name

Relat ion

Managing officers, directors or supervisors are the 2nd degree relatives

2016.4.15

Hua University CEO of Elite Material Co., Ltd. 0.00 General manager of Taiwan Union Technology

000

Nu Propo Propo mbe Proporti rtion Number of rtion r of on of of of shares shar shares shares shares es

Current shares held

Information of directors, supervisors of the Company (1)

(II) The information of the Directors, Supervisors, General Managers, Vice-General Managers, Assistant Managers, and the Chief Officers of the Departments and Branches:

12

Supervisor

Supervisor

ROC

ROC

Dong, Feng-Rong

Shen, Dao-Zhen

3 102.6.25 years

3 102.6.25 years

96.6.25

90.5.25

0

2,242,316

0.00

0.72

0

2,242,316

0.00

0.71

0

0

0.00

0.00

0

0

0.00

0.00

of

Ming

Construction.Co.,Ltd

Chairman

University

Vice general manager of

None

Tai Guang Da concrete Ltd.

Bachelor of Law, Soochow

University

Professor of Central Police

Pacific University

Doctor of Law, Columbia

Table 1: Major Corporate Shareholder 2016.4.15

Corporate Shareholder Name

Major Corporate Shareholder

Yu Chang Investment Ltd.

Yu Sheng Investment Ltd.

Table 2:Table 1 Major Corporate Shareholder 2016.4.15

Corporate Name

Major Corporate Shareholder

Yu Sheng Investment Ltd.

DAITON PACIFIC LTD.

Information of directors, supervisors of the Company(2) 2016.4.15 Personnel with more than 5 years experience and with the Condition Name

Representative of Yu Chang Investment Ltd.:Tsai, Hui-Liang Representative of Yu Chang Investment Ltd.:LI, SHU-JIU Dong, Ding-yu

following qualification persecutor, University lecturer Judge, accountant, with Commercial, lawyer, legal, accounting and other personnel national or other with qualification certificate qualification

Commercial, legal, accounting or other qualification

Qualification for independence (Note1)

1

2

3

4

V

V

V

V

V

V

V

7

8

9

10

Part time independ ent directors of other company

5

6

V

V

V

V

V

V V

V

V

V V

V V

-

V

V

-

V

-

Shen, Yan-Shi

V

V

V

Xie, Meng-Zhang

V

V

V

V V

V V

V

V

V

V

V

V

-

V

V

V

V

V

V

V

-

V

V

V

V

V

V

V

-

Shen, Dao-Zhen Dong, Feng-Rong

V V

V

V

V

V

V

V

V

V

-

Note 1: Please Check(“”) the Directors and Supervisors who copes with the following conditions

within the elected first two years and the duty period on the blank under the condition signs. (1) Not the employee of the Company or the related corporations (2) Not the Directors or Supervisors of the Company. But not limited to the person who is the Independent Director of the Company, parent Company, or the subsidiary Company that the Company hold the shares of right to vote more than 50%. (3) Not the personal and spouse, minor children or on others’ name to hold more than 1% shares of the total issued Shares, or the natural person shareholder with top ten shares (4) Not the spouse, the second degree relatives, or the direct descendant of the fifth degree of the above 3 conditions mentioned. (5) Not the employee, director, or supervisor of the legal person shareholder who holds more than 5% of the Company issued Shares. Or the employee, director, or supervisor of the legal person shareholder who holds the top Five shares. (6) Not the director, supervisor, manage officer, or the shareholder who holds more than 5% shares of the company or institute that deal with the Company in financial or business affairs. (7) Not the professional expert or the owner, partner, director, supervisor, manage officer, or spouse of sole investor or joint venture that supply the service or consulting of commercial, legal affairs, financial affairs, or accounting to the Company. (8) Without spouse or the second degree relative relationship between other directors (9) Without any conditions of the Clause 30 of the Company Act (10) Not against the Clause 27 of the Company Act to win the election by the title of government, legal person, or their representative

13

14

Name

73,222 0.02%

0 0.00%

Senior vice Guan, ROC 96.5.1 general manager En-Xiang

Zhang, Vice general ROC Wen-Xin 97.7.1 manager g

111,175 0.03%

Senior vice Wang, ROC 95.7.1 general manager Li-Gang

Vice

Vice

Vice

Assistant President

Assistant President

Assistant President

ROC

96.6.1

Chen, 98.8.15 Ding-Yan

Mu, Xin-De 88,241 0.03%

65,192 0.02%

0 0.00%

Lin, ROC Zheng-L 93.6.1 ong

ROC

174,774 0.05%

100.4.1

Vice general Peng, ROC manager Yi-Ren

Holding of shares in others' name

0 0.00%

0 0.00%

0 0.00%

0 0.00%

1,457 0.00%

29 0.00%

0 0.00%

15,842 0.00%

0 0.00%

None

None

None

None

None

None

None

None

None

Propo Propo Propo Number rtion Number of rtion rtion of of of shares of shares shares shares shares

1,775,244 0.56%

Number of shares

5,265,766 1.65%

ROC

Tsai, ROC Hui-Lian 93.2.4 g

Natio nality

Holding of shares

Dong, 97.10.1 Ding-yu

General manager

CEO

Title

Date of taking office

Holding of shares of spouse and minor children Other Current Positions

Graduated from Lunghwa University of Science and Technology Project Manager, Walter Electronic Co. Ltd Graduated from Department of Chemical Engineering, Taoyuan Innovation Institute of Technology Taiwan Union Technology Corporation MLVICE DIRECTOR Bachelor of Applied Chemistry, Tamkang University

Master of Chemistry, Lamar University

None

None

None

None

Master of Chemical Engineering, National Tsing Hua University None General manager of Taiwan Union Technology Corporation Doctor of Engineering, Stanford University None Assistant professor, San Jose State University Master of Chemical Engineering, None University of Nebraska Bachelor of Applied Chemistry, National General manager of Cheng Kung University EMC(KunShan)/EM Factory Manager of Baolide Co., Ltd. C(ZhongShan) Bachelor of Money and Banking, National Chengchi University None Vice general manager, Bao Chen Construction Co. Ltd

Academic background and experience

Detaols of General manager,Vice general manager,Assistant Vice President,and other Branch Chief

None

Title Name

Relati on

MANAGER WITH 2ND DEGREE RELATIVES RELATION

2016.4.15

15

Name

Zhou, 100.4.1 Li-Ming Vice Yang, ROC 100.4.1 Yong-De

Vice

Assistant President

Assistant Vice President (Also the ROC Finance Supervisor) Accounting ROC Supervisor

ROC

Holding of shares in others' name

134,984 0.04%

17,000 0.01%

Yan, 2015.3.16 Xiu-Zhu 0 0.00%

0 0.00%

0 0.00%

0 0.00%

126,049 0.04% 115,960 0.04%

0 0.00%

83,791 0.03%

0 0.00%

None

None

None

None

None

None

Propo Propo Propo Number rtion Number of rtion rtion of of of shares of shares shares shares shares

40,000 0.01%

Number of shares

Holding of shares

2015.3.16

Zhang, Li-Qiu

Huang, 103.8.11 Yao-Guo

Vice

Assistant President Assistant President

ROC

Vice

Cui, ROC Wen-Xia 98.8.17 ng

Natio nality

Assistant President

Title

Date of taking office

Holding of shares of spouse and minor children

Master of Accounting, Chung Yuan Christian University

Graduated from Department of Accounting, Tunghai University Audit Manager, Elite Material Co., Ltd.

Master of Materials Science, National Taiwan University Master, National Taiwan University of Science and Technology Graduated from Department of Mechanical Engineering, St. John’s University

Master of Technology Management, National Tsing Hua University(MBA) International Marketing Director, Taiwan Union Technology Corporation

Academic background and experience

None

None

None

None

None

None

Other Current Positions

Title Name

Relati on

MANAGER WITH 2ND DEGREE RELATIVES RELATION

16

Vice ROC

Assistant President

Li, De-Nan

Vice ROC Yang, Fu-Duo

Assistant President

2015.7.1

2015.7.1

Vice ROC Lin, 2015.7.1 Hong-Da

Assistant President

Name

Vice ROC Jiao, 2015.7.1 Zhi-Yong

Natio nality

Assistant President

Title

Date of taking office

Holding of shares in others' name

37,000 0.01%

37,000 0.01%

125,931 0.04%

0 0.00%

0 0.00%

0 0.00%

0 0.00%

None

None

None

None

Propo Propo Propo Number rtion Number of rtion rtion of of of shares of shares shares shares shares

71,766 0.02%

Number of shares

Holding of shares

Holding of shares of spouse and minor children Other Current Positions

Elite Electronic Material Graduated from Chien Hsin University of (Zhongshan) Co., Science and Technology Ltd.Assistant Vice President Elite Electronic Master of Chemical Engineering, Material (Kunshan) University of Missouri-Columbia Co. Ltd.Assistant Vice President Master of Chemistry, National Taiwan None University Graduated from Mechanical Engineering, Elite Electronic Cheng-kung Senior Industial Commercial Material (Kunshan) Vocational School/Product Manager, Co. Ltd.Assistant GRACE T.H.W. GROUP Vice President

Academic background and experience

None

Title Name

Relati on

MANAGER WITH 2ND DEGREE RELATIVES RELATION

17

ng

Meng-Zha

Xie,

Yan-Shi

Shen,

SHU-JIU

LI,

Ding-yu

Dong,

Hui-Liang

Tsai,

Name

0

pany

Com

The

0

0

nt

nt

0

eme

eme

the

d in

stat

ny

Compa

stat

the

d in

liste

es

es

The

pani

pani

liste

com

com

22,855

ny

Compa

The

22,855

ent

statem

in the

listed

nies

compa

All

295

ny

Compa

The

295

statement

the

s listed in

companie

All

expense (D)

Business execution

0.97%

ny

Compa

The

0.97%

statement

the

s listed in

companie

All

profit after tax

of A+B+ C+D in net

The ratio of amount

12,970

ny

Compa

The

All

43,448

statement

the

s listed in

companie

etc.(E)

Special Disbursement

Salary, Bonus and

267

ny

Compa

The

6,237

ent

statem

in the

listed

nies

compa

All

pension(F)

Retirement

3,678

Cash

0

Shares

The Company

3,678

Cash

0

Shares

statement

listed in the

All companies

Employee bonus(G)

Part-time employee compensation

0

ny

Compa

The

0

statement

the

s listed in

companie

All

issuance amount

option certificate

Employee stock

0

any

mp

Co

The

0

statement

in the

es listed

compani

All

Shares from the restriction of employee's right (I)

nsatio

C+D+E+F+G in net

1.68%

ny

Compa

The

3.20%

nt

stateme

in the

listed

nies

compa

All

None

ny

compa

iary

subsid

than

other

ny

compa

sted

reinve

from

n

compe

of A+B+ profit after tax

ve the

The ratio of amount

Recei

Unit: TWD thousand dollars

(Note): Salary, reward, and the special expense cost (fuel expense and driver salary included) are $1,132,000 (Note): The total amount of the abdicate retirement pension on above table is the provisional amount of the Company Retirement Pension in 2015.

Director

Director

Director

Vice Chairman

Chairman

3

All

Compensation(C)

pension(B)

All

Rewards(A)

Directors

Retirement

Directors’ remuneration

(1) Directors’ remuneration

Remuneration of Director, Supervisor, General manager and Vice general manager

18

Total

More than 100,000,000 dollars

included)

50,000,000 dollars(included)~100,000,000 dollars(not

included)

30,000,000 dollars(included)~50,000,000 dollars(not

included)

15,000,000 dollars(included)~30,000,000 dollars(not

included)

10,000,000 dollars(included)~15,000,000 dollars(not

included)

5,000,000 dollars(included)~10,000,000 dollars(not

included)

2,000,000 dollars(included)~5,000,000 dollars(not

Less than 2,000,000 dollars

Compensation level of the Directors’ remuneration

Tsai, Hui-Liang

Dong, Ding-yu,LI, SHU-JIU,Shen, Yan-Shi,Xie, Meng-Zhang

The Company

Tsai, Hui-Liang

Dong, Ding-yu,LI, SHU-JIU,Shen, Yan-Shi,Xie, Meng-Zhang

The Company

All companies listed in the statement

Total amount for the previous 7 items (A+B+C+D+E+F+G)

Tsai, Hui-Liang

Dong, Ding-yu

Tsai, Hui-Liang

Dong, Ding-yu

LI, SHU-JIU,Shen, LI, SHU-JIU,Shen, Yan-Shi,Xie, Yan-Shi,Xie, Meng-Zhang Meng-Zhang

Name of Director

All companies listed in the statement

Total amount for the previous 4 items (A+B+C+D)

Compensation Level

19

Shen, Dao-Zhen

Supervisor

0

0

7,619

7,619

All companies listed in the statement

122

Name of Supervisors

122

0.32%

Less than 2,000,000 dollars 2,000,000 dollars (included)~ 5,000,000 dollars Shen, Dao-Zhen,Dong, Feng-Rong (not included) 5,000,000 dollars (included)~10,000,000 dollars (not included) 10,000,000 dollars (included)~15,000,000 dollars (not included) 15,000,000 dollars (included)~30,000,000 dollars (not included) 30,000,000 dollars (included)~50,000,000 dollars (not included) 50,000,000 dollars (included)~100,000,000 dollars (not included) More than 100,000,000 dollars Total

The Company

Shen, Dao-Zhen,Dong, Feng-Rong

All companies listed in the statement

0.32%

All companies listed in the statement

None

Receive the compensation from reinvested company other than subsidiary company

Unit: TWD thousand dollars The ratio of amount of A+B+ C in net profit after tax

All companies The The in Company Company listed the statement

Business execution expense (C)

Total amount for the previous 3 items (A+B+C)

Compensation Level

All companies The The Company listed in Company the statement

Compensation level of the Supervisor’ remuneration

Dong, Supervisor Feng-Rong

Name

Title

Rewards(A)

Compensation (B)

Supervisors’ remuneration

(2) Supervisors’ remuneration

20

Peng, Yi-Ren

Zhang, Wen-Xin g

Wang, Li-Gang

Guan, En-Xian g

Dong, Ding-yu

Tsai, Hui-Liang

Name

Bonus and Special Disbursement etc.(C)

6,668

19,710

638

6,608

16,602

60,378

All All All The companies The companies The companies Company listed in the Company listed in the Company listed in the statement statement statement

Retirement pension(B)

7,803

Cash

0

Share s

The Company

7,803

0

All companies listed in the statement Share Cash s

Employee bonus Amount of money(D)

1.33%

3.95%

All The companies Company listed in the statement

The ratio of amount of A+B+ C+D in net profit after tax

251 (1000-share lot)

The Company

251 (1000-share lot)

All companies listed in the statement

Employee stock option certificate issuance amount

0

0

All companies The listed in the Company statement

Shares from the restriction of employees' right

None

Receive the compensatio n from reinvested company other than subsidiary company

Unit: TWD thousand dollars

(Note): The total amount of the abdicate retirement pension on above table is the provisional amount of the Company Retirement Pension in 2015.

General manage r Senior vice general manage r Senior vice general manage r Vice general manage r Vice general manage r

CEO

Title

Salary(A)

(3) General manager and vice general managers’ remuneration

21

The Conpany

Tsai, Hui-Liang

Dong, Ding-yu,Guan, En-Xiang,Wang, Li-Gang

Zhang, Wen-Xing,Peng, Yi-Ren

All companies listed in the statement

Names of General manager and vice general manager

Less than 2,000,000 dollars 2,000,000 dollars (included)~5,000,000 dollars (not Dong, Ding-yu,Guan, En-Xiang,Wang, Li-Gang,Zhang, Wen-Xing,Peng, Yi-Ren included) 5,000,000 dollars (included)~10,000,000 dollars (not included) 10,000,000 dollars (included)~15,000,000 dollars (not Tsai, Hui-Liang included) 15,000,000 dollars (included)~30,000,000 dollars (not included) 30,000,000 dollars (included)~50,000,000 dollars (not included) 50,000,000 dollars (included)~100,000,000 dollars (not included) More than 100,000,000 dollars Total

Compensation level of General manager and vice general manager

Compensation Level

22

Tsai, Hui-Liang Dong, Ding-yu Wang, Li-Gang Guan, En-Xiang Zhang, Wen-Xing Peng, Yi-Ren Lin, Zheng-Long Mu, Xin-De Chen, Ding-Yan Cui, Wen-Xiang Zhou, Li-Ming Yang, Yong-De Huang, Yao-Guo Jiao, Zhi-Yong Lin, Hong-Da Yang, Fu-Duo Li, De-Nan

Name

Assistant Vice President Assistant Vice President Assistant Vice President Assistant Vice President Assistant Vice President(Also the Zhang, Li-Qiu Finance Supervisor) Accounting Supervisor Yan, Xiu-Zhu

Assistant Vice President

Assistant Vice President Assistant Vice President

Assistant Vice President

Assistant Vice President

Assistant Vice President

Assistant Vice President

Vice general manager

Vice general manager

Senior vice general manager

Manager General manager Senior vice general manager

CEO

Title

0

Shares

16,845

Cash

16,845

Total

0.70%

2015.12.31/Unit: TWD thousand dollars The total amount and net profit after tax ratio (% )

(4) The name and details of the Managers distributed upon the Employee bonus

23

1.33%

1.68% 0.32% 3.95%

1.40%

1.54% 0.28%

The Company

3.68%

2014 Companies in the consolidated statement 2.76% 0.28% -0.07%

0.14% 0.04%

The Company

0.27%

0.44% 0.04%

Companies in the consolidated statement

Increase (decrease ) ratio

The dependence of the policy, standard, and assemble of reward payment and the process of reward design, and the management result and the future risk: According to the assignment of the Company Regulation, what the Company paid for the General Manager and Vice-General Manager within the two years is divided into salary, award, and employee reward and accordance with the Company regulations..

Director Supervisor General manager and vice general manager

The Company

2015 Companies in the consolidated statement 3.20% 0.32%

The total amount and net profit after tax ratio (% )

(5)The total compensation amount and the ratio in net profit after tax for the Director, Supervisor, General manager and vice general manager of the Company and Companies in the consolidated statement:

(III) The Company Administer and Operation Conditions 1. The Operation Conditions of Board of Directors The presentation of director and supervisor in the Board for the latest 6 time: Actual By Actual Attendance Attendance(T proxy(Ti Rate(%)【B/A】 Title Name Note mes) imes)B Representative of Yu Chairman Chang Investment 6 100% Ltd.: Tsai, Hui-Liang Representative of Yu Director Chang Investment 6 100% Ltd.:LI, SHU-JIU Vice Dong, Ding-yu 6 100% Chairman Director Shen, Yan-Shi 6 100% Director Xie, Meng-Zhang 4 2 67% Supervisor Shen, Dao-Zhen 6 100% Supervisor Dong, Feng-Rong 6 100% Other required recorded tiems: 1. The mentioned items in Clause 14-3 of the Securities Transaction Act and other opposed or reserved opinions of the Independent Director with record or in written statement that the Board of Directors had resolved: NIL 2. The execution condition of director duck to the stake issues : There is no director duck to the stake condition. 3. The target to strengthen the professional ability of the Board of Directors in the present and recent years and the estimate of execution condition. Such as to settle the audit committee and raise the information transparency.: NIL

24

2. The operation condition of the Audit Committee: The Company will settle the Audit Committee in 2016. Supervisor participating Operation of the Board: The presentation status for the latest 6 times: Title

Name

Actual Actual Attendance Attendance(Times)(B) Rate(%)(B/A)

Note

Supervis Shen, 6 100% or Dao-Zhen Supervis Dong, 6 100% or Feng-Rong Other required recorded items: 1. The assemble and responsibilities of Supervisors: (1)The communication situation between the Supervisors and the employee and the shareholders: The Supervisors consider that it needs to communicate and dialogue to the employee and shareholders directly if it is necessary (2)The communication condition between the Supervisors and the chief officers of inner audit and accountant: (2)-1 The chief audit officers reported the audit report to the Supervisors in the next month after completing the audit items. The Supervisors had no opposed opinion. (2)-2 The chief officer presented to the regular scheduled Board of Directors and reported the audit affairs. The Supervisors had no opposed opinion. (2)-3 The Supervisors communicated with the accountant for the financial conditions face-to-face or in written form irregularly. 2.If the Supervisors show up to the Board of Directors and state opinion, he or she should interpret clearly the date of Board of Directors, the degree, the content of the issue, the resolution result of the Board of Directors, the measurement of the Company to the opinion of the Supervisors: NIL.

25

26

Whether the Company designatedand disclose the Company Administer Guideline accordance with the Listed Company/Listed Company in OTC? (1) Whether the Company designated the inner operation process to deal with the stockholder suggestion, doubt, dispute and litigation affairs, and executed accordance with the procedure or not? (2) Whether the Company handle the name list of the major shareholder The Company and the final controller of the share shareholder who controlled the constructure Company definitely or not ? and the rights (3) Whether the Company build up and and benefit of executed the risk control and the shareholder management and the fire wall with the related corporation or not? (4) Whether the Company designated the inner regulation to prohibit the inner personnel against buying or selling negotiable securities by using the non-disclosed information in the market or not?

Same as the Left description

The Company continuously handled the holding share information of the Directors, No significant manage officer, and the major shareholder who hold more than 10% shares of the difference Company and claim the situation accordance with the regulation of the Securities Transaction Act monthly. The Company had settled the treatment process of obtaining or measuring property, the No significant operation process of capital loan to others, and the operation process of endorsement difference guarantee and built up the risk control and fire wall properly. To counter against the insider trading and treatment process of important information, No significant the Company had settled the management operation to against insider trading and the difference operation process of inner information treatment. The Company will do self-estimate and the audit room do the regular auditing annually..

V

V

The Company has settled the stock affairs and the agent of stock affair to deal with the No significant suggestion and dispute of the shareholder. difference

The Company had not designated the Company Administer Guideline

V

V

V

3. The Company Administer Operation Condition and the Difference and Causes Condition with the Administer Guidelines of Listed Company/Listed Company in OTC the Difference Operation Condition and Causes Condition with the Administer Estimate Items Guidelines of Yes No Summary & Description Listed Company/Listed Company in OTC

27

(1) Whether the Board of Directors proposed the diversification guidelines coped with the members and allocate the execution? (2) Whether the Company settled the salary and reward committee and audit committee accordance with the Assemble and regulations and will settle other responsibility of various functional committee with the Board of their will or not? Director (3) Whether the Company designated the estimated measurement and estimate method for the result of the Board of Directors and processed the result estimate or not? (4) Whether the Company estimated the independence of the certified accountant regularly or not? Whether the Company built up the communication tunnel with the stakeholders and settled the special area of the stakeholder on the Company website, and responsed properly the issue of the social responsibility of an important industry that the stakeholder concerned or not? Whether the Company commissioned the professional institute of stock affair agent to conduct for the shareholder conference or not?

Estimate Items

V

V

The Company commission the Ya-Don Securities Co., Ltd as the agent of dealing with No significant the affairs of shareholders. difference

No significant difference

No significant difference

The Company certified accountants are from the large scale accountant firm. To cope with the requirement of independence, the Company changed the accountant every five years. The Company will charge the spokesman, the acting spokesman, the stock affairs, and special assigned person with a task to communicate with the stakeholder in different conditions and settle the contact information of the Company spokesman and acting spokesman on the Company Website.

Same as the Left description

V

The Company had not settled other various functional committees.

The result estimate of the director and manage officer and the policy, regulation, No significant standard, and structure of salary and reward is drawn up and regularly reviewed by the difference Company Reward and Salary Committee. The Reward and Salary Committee will send the suggestion to the Board of Directors for discussion.

V

The members of the Company Board of Directors is diversified and owned various No significant profession background and working field. It might sturdy the structure of the Company difference Board of Directors.

Summary & Description

the Difference and Causes Condition with the Administer Guidelines of Listed Company/Listed Company in OTC

V

V

Yes No

Operation Condition

28

Whether the Company owned the important information that is helpful to realize the Company administer operation condition Included but not limited to the employee concerning, the

Information Open to the Public

The execution condition of the customer policy

The relationship of the investors The relationship of the suppliers The rights of the stakeholders The condition of buying liability insurance of the Directors and the Supervisors The execution condition of the risk management policy and the standard of risk evaluation

(1) Whether the Company had settled the website to disclose the financial and administer affairs or not? (2) Whether the Company adopted other ways to disclose the information. Such as to settle the English website, to assign the special assigned person to take charge the collection and of the Company disclosure information, to allocate the spokesman system, and to post the procedure of the investor conference on the Company website, etc. The rights of the employee The concerning of the employee

Estimate Items

V

To draw up the various inner regulations accordance with the Law and Regulations. To No significant process the risk management and estimate. difference To counter against the insider trading and treatment process of important information, the Company had settled the management operation to against insider trading and the operation process of inner information treatment. The Company will do self-estimate and the audit room do the regular auditing annually. The Company should maintain stable and good relationship with the customers, realize No significant the demand of the customers, audit and improve the products quality continuously, and difference ensure to satisfy the customer demand.

V

No significant difference

No significant difference

The Company had bought liability insurance for the Director, Supervisor, and Manage No significant Officer and estimated the credit of insured regularly and annually. difference

The Company protect the employee legal rights and benefit accordance with the Labor Basic Code and build mutual confidential and reliable relationship with the employee through the welfare system and good education training system. The Company settles spokesman and acting spokesman. It is the tunnel to announce the opinion or response the question to the investor

The Company had settled the Company website and disclosed the financial and related No significant business information. It might be inquired the financial, business, and administer affairs difference of the Company through the information operation station that is opened to the public. The Company had assigned the special assigned person to take charge of the task of the No significant open information observation station of exchange house and the disclosure of the difference Company website information, and allocated the system of the Company spokesman.

Summary & Description

the Difference and Causes Condition with the Administer Guidelines of Listed Company/Listed Company in OTC

V

V

V

V

V

Yes No

Operation Condition

29

Yes No

investor relationship, the supplier relationship, the right of stakeholder, the condition of advanced education of the Director and Supervisor, the execution condition of the The Condition of Advanced Education of risk V the Directors and the Supervisors in 2015 management policy and

Estimate Items

Meng-Jan, Hsieh

Ding-Yu, Dong

Directo r

Direct or

Name

Job Title

Taiwan Corporate Governance Association

2015.08.12

104.11.11

Taiwan Corporate Governance Association

2015.12.17

Taiwan Corporate Governance Association

Host Unit

Chinese Securities and Futures Market Development Foundation

2015.10.20

Educated Date

Classes To view the outer audit and inner control from the angle of the Directors and Supervisors Practical Case Study and Analysis of bringing the Director and Supervisor Disloyalty and Special Disloyalty Would the Directors and Supervisors out of committing a crime not be claimed for compensation? Set the financial report as the center point. The Compensation Claim Cases analysis of Investors Protection Institute to the Company Directors and Supervisors Third-Party Payment Supervising Philosophy and Regulation Suggestion

Summary & Description

Operation Condition

3

3

3

3

Educated Hours

No significant difference

the Difference and Causes Condition with the Administer Guidelines of Listed Company/Listed Company in OTC

30

Whether the Company with the administer self-estimate report or with other commissioned professional institute to issue the administer evaluated report or not? If yes, please interpretate clearly the opinion of the Board of Director, the result of self-estimate or commissioned evaluation, the major fault, the suggestion, and the improvement condition.

Estimate Items Summary & Description

V The Company still had no self-estimate report

Yes No

Operation Condition

Same as the Left description

the Difference and Causes Condition with the Administer Guidelines of Listed Company/Listed Company in OTC

4. (1) The Information of the Members of the Salary and Reward Committee Whether owned 5-year and up

V

V

V

V

V

V

V

V

V

The number of Serving as a member concurre Note ntly in the salary and 8 reward committ ee of other public issue company V -

V

V

V

V

V

V

V

V

V

V

-

V

V

V

V

V

V

V

V

V

V

-

working experience and the below professional qualification or not? Instructor Judge, With the or above prosecutor, working in public lawyer, experien or private accountant or ce of commer Identific Name college of other commerce professional ce, legal Conditio , ation and affairs, legal person technician affairs, financial (Note1) n financial who passed affairs, the state accounti affairs, accountin examination ng, or g, or the and hold the the demand of certificate and demand with the of the the Company business Compan business demand of the y Company business

other other other

Wang, Jing-Yi You, Sheng-F u Lin, Han

The Condition Cope with Independence(Note2)

1

2

3

4

5

6

7

(Note 1): Please fill in Director, Independent Director, or other in the column of Identification (Note 2): Please Check(“”) the Directors and Supervisors who copes with the following conditions within the elected first two year and the duty period on the blank under the condition signs. (1) Not the employee of the Company or the related corporations (2) Not the Directors or Supervisors of the Company. But not limited to the person who is the Independent Directors of the Company, parent Company, or the subsidiary Company that the Company hold the shares of right to vote more than 50%. (3) Not the personal and spouse, minor children or on others’ name to hold more than 1% shares of the total issued Shares, or the natural person shareholder with top ten shares (4) Not the spouse, the second degree relatives, or the direct descendant of the fifth degree of the above 3 conditions mentioned. (5) Not the employee, director, or supervisor of the legal person shareholder who holds more than 5% of the Company issued Shares. Or the employee, director, or supervisor of the legal person shareholder who holds the top Five shares. (6) Not the director, supervisor, manage officer, or the shareholder who holds more than 5% shares of the company or institute that deal with the Company in financial or business affairs. (7) Not the professional expert or the owner, partner, director, supervisor, manage officer, or spouse of sole investor or joint venture that supply the service or consulting of commercial, legal affairs, financial affairs, or accounting to the Company. (8) Without any conditions of the Clause 30 of the Company Act (Note 3): If the identification of the member is Director, please explain clearly whether cope with the regulation of the Settlement and Execution Position Rule of the Salary Committee of the Listed Company or the Clause 6-5 of the Securities Company Operation Act

31

(2) The Information of Operation Condition of the Salary and Reward Committee 1. The number of the committee member of the Company Salary and Reward Committee is 3. 2. Assigned Period of the committee member: From August 9th, 2013 to June 24th, 2016. The salary and reward committee called for 2 meetings in the latest year.

The qualification of the committee members and the presentation condition is as followings. Title

Name

Actual Attendance(Times)(B)

By proxy(Times)

Actual Attendance Rate (%) (B/A)

Note

Convener Wang, Jing-Yi 2 100 Committee You, 2 100 member Sheng-Fu Committee Lin, Han 2 100 member Other required recorded items: NIL 1. If the Board of Directors DO NOT adopt or verify the suggestion of the Salary and Reward Committee, the Board of Directors has to interpretate clearly the date, the degree, the content of the issue, the resolution result of the Board of Directors, and the measurement of the Company to the opinion of the Salary and Reward Committee. 2. If the member of the Salary and Reward Committee had any opposed or reserved opinion to the resolution of the committee and with record or written statement, he or she has to interpretate clearly the date, the degree, the content of the issue, all of the opinions of the members, and the treatment to all of the opinions of the members.

32

33

Implement the (1) Whether the Company Company designated the policy or Administer regulation of social responsibility and reviewed the result? (2) Whether the Company held the social responsibility education training regularly? (3) Whether the Company settled the special unit of promoting corporation social responsibility and deal by the high level manager who was authorized by the Board of Director, and reported the measurement to the Board of Directors or not? (4) Whether the Company implemented reasonable salary and reward policies, combined the employee assess system of result with the social responsibility policy, and settled explicit and effective reward and punishment regulations?

Estimate Items

V

V

Yes

V

V

No

Operation Condition

The Company appraised and decided the employee salary by the education background and No Significant working experience, professional knowledge and technology, professional working Difference experience, and personal performance result. The employee assess system will follow the reward and punishment regulation of the Company Personnel Management Regulation.

The Company had not settled the special or concurrent unit to promote the corporation It depends on the social responsibility. practical operation to settle in the future

The related sections that took charge of the social responsibility conduct the related affairs No Significant accordance to their duties. Difference

The difference and cause with the Listed Company/Listed Company in OTC Summary & Description Corporation Social Responsibility Practical Guidelines Even though the Company had not designated the corporation social responsibility policy, It depends on the the Company still will conduct the corporation social responsibility continuously and will practical operation draw up the related policy in the future. to draw up in the future

5. Performance of Social Responsibility

34

Develop sustainable environment

(1) Whether the Company devoted to promote the efficiency using of the resource, and utilized the recycle material that was lower impact to the environment negative burden? (2) Whether the Company built up moderate environment management system accordance with the industrial specialty or not? (3) Whether the Company concerned the effect of climate change to the operation activities, and executed the interrogate and examine of greenhouse gases and settled the strategy of conserve energy and reduce carbon and greenhouse gases emission?

Estimate Items

V

V

V

Yes

No

The difference and cause with the Listed Company/Listed Company in OTC Summary & Description Corporation Social Responsibility Practical Guidelines The Company is a professional corporation to produce bonded flat and CCL. The Company No Significant has devoted to promote the product environment, pursued the ever-lasting management Difference corporation, and passed the ISO 14000 certification since the Company founded. The Company business hazardous waste was classified system and stored carefully, and commissioned the EPA certified waste treatment institute to clean away.

Even though the Company had not designated any strategy of conserve energy and reduce No Significant carbon and greenhouse gases, the Company followed the Company regulated environment Difference policy of the contamination protection and reduce waste, compliance to the regulation and allocate the environment protection, and improve continuously to conduct the philosophy of environment protection and reduce the damage of ecosystem.

The Company settled the special assigned person to take charge of treatment of air No Significant pollution protection, water contamination protection, and waste clean away. Difference

Operation Condition

35

(1) Whether the Company Maintain settled related management social public policy and process welfare accordance with the related the regulations and international human right treatment? (2) Whether the Company built up the employee appeal mechanism and tunnel and treated properly? (3) Whether the Company provides the safe and healthy working environment to the employee, and carried out the employee safety and health education regularly?

Estimate Items

V

V

V

Yes

No

The difference and cause with the Listed Company/Listed Company in OTC Summary & Description Corporation Social Responsibility Practical Guidelines The Company settled the working and related personnel management regulations No Significant accordance with the labor working regulations and laws to protect the right and benefit of Difference the employee , and called for the labor and capital meeting to promote the labor and capital harmony and create the mutual win-win perspective.

To protect against the professional disaster damage and protect the employee safety and health, the Company drawn up the Safety and Sanitation Working Guidelines to be followed by the employee accordance with the Labor Safety and Sanitation Act and the detail regulations.

The new employee had to be trained adequately in pre-employment period. In the working sites, the chief officer should supervise and ensure the safety of the working sites. To ensure the employee health, the Company had to conduct the employee health examination regularly and the special health examination to the special operation employee.

The Company had conducted the environment inspection and the facilities maintain No Significant accordance with the schedule, and settled ESH environmental safety and sanitation Difference management system to push the OHSAS18001 and ISO14001 systems for the target of environmental safety and sanitation.

The Company regulated the employee appeal system to treat the employee appeal cases, No Significant and settled the labor opinion box to adopt the suggestions to expand the communication Difference tunnel.

Operation Condition

36

(7) Whether the Company followed the related regulations and international guidelines for the marketing and indication of products and service?

(4) Whether the Company built up regular employee communication mechanism and to inform reasonably the employee the possible significant effective operation change might be caused? (5) Whether the Company built up effective professional ability development plans to the employee? (6) Whether the Company designated related policies and appeal process to protect the right and interest of the consumer in research & development, purchasing, producing, operation, and service procedure?

Estimate Items

V

V

V

V

Yes

No

No Significant Difference

The Company arranged the meeting to communicate with the customers regularly. To execute the customer satisfaction survey annually. To identify the 9-index contact with the customers. Each index has the special assigned unit to take charge of building the satisfaction index and target settlement and to supervise the satisfaction. If the analysis of satisfaction could not reach the standard, the assigned unit had to execute the improvement strategy and to be reviewed in the high level chief officer management review meeting. The Company settled the subcommittee of hazardous material to start to manage. To ensure No Significant to cope with the REACH spirit, the Company conducted to process the product control and Difference dealing accordance with the RoHS 2005 and the REACH. To know well the latest international regulated trend, the Company had to collect the major international environment regulations.

The Company drawn up the training plans to cultivate the employee according to the professional ability and the function of the working section. To conduct effective continuous tradition of profession and technology, the Company selected the outer training institute classes or the inner instructor training for the employee. The Company settled the customer service department to deal with the customer complain. To reach the target of corporation ever-lasting management, the Company built up the quality system of customer-guide.

The Company announced the operation change that might be a significant effect to the employee with a reasonable ways. No Significant Difference

The difference and cause with the Listed Company/Listed Company in OTC Summary & Description Corporation Social Responsibility Practical Guidelines The Company built up the employee communication and dialogue tunnel to make the No Significant employee be able to obtain the information and right of the activities and the policies of the Difference Company management. Operation Condition

37

Yes

No

(8) Whether the Company V estimates the supplier with any record of effecting the environment or society before dealing with the supplier? The Company conducted to audit and estimate the social environmental responsibility of No Significant (9) Whether if the major V the major supplier to ensure the supplier compliance to the acting guidelines of the electric Difference supplier involved against industry or the local regulation and laws. The compliance of the related regulations, the corporation social allocation of labor insurance, and against bribe and corruption to be included in the responsibility policy and contract. If the supplier violates these, it will affect the cooperation relationship with the effected to the environment Company. and society obviously, the Company could terminate and release the contract included in the contract between the Company and the major supplier? 4. To strengthen to disclose the information The Company had not drawn up the corporation social responsibility report. It will be Same as the Left Whether the Company disclosed the related V conducted in the future to strengthen to disclose the corporation social responsibility. Description information of the great concerned and reliable corporation social responsibility on the website and the information observation station opened to the public? 5. If the Company settled the corporation social responsibility guideline of itself accordance with the Listed Company/Listed Company in OTC Corporation Social Responsibility Practical Guideline, please interpreted clearly the difference of the operation and the ruled guidelines: The Company had not settled the corporation social responsibility guideline and related regulations. 6. Other important information that were helpful to realize the operation condition of corporation social responsibility: 1. Environment Protection: To cope with the global design and production trend and deal with the request of RoHS, customer HSF, and the Company HSF, the Company

Estimate Items

The difference and cause with the Listed Company/Listed Company in OTC Summary & Description Corporation Social Responsibility Practical Guidelines The Company had to estimate the legal specialty, credibility management policy, and bad No Significant faith achievement record prior to start to build up the business relationship with the Difference supplier and to obtain the letter of commitment of environment, professional safety and sanitation, and energy from the supplier.

Operation Condition

38

The difference and cause with the Listed Company/Listed Estimate Items Company in OTC Yes No Summary & Description Corporation Social Responsibility Practical Guidelines ensured the Company products are not only conformed to the international regulation and the customer demand, but also compliance to the Waste Clean Act, Water Pollution Protection Act, and Air Contamination Protection Act to execute contamination protection and maintain the environment quality. 2. Community participation, Social Contribution, Social Service, and Social Public Interest:The Company participated to the activities of education, public interest, and culture through donating to the social groups to conduct the corporation social responsibility. 3. Right and benefit of the consumer: To realize the satisfaction condition of the customers, to ensure the existing customers, and to catch the favor of the potential customers By the ways of active, prompt, and effective service quality to promote the Company compete ability. 4. Human rights: The Company employee are equal in the career opportunities no matter to the gender whether male or female, religions, and parties. The Company provided good working environment to the employee and protected the employee against discrimination and harassment. 5. Safety and Sanitation: The Company compliance the government labor and sanitation regulations to conduct the safety and sanitation affairs. The related detailed information were drawn up in the labor safety and sanitation working guidelines. 7. If the report of the Company Corporation Social Responsibility passed related certified standard of related certified institute, the Company had to explain clearly. To completely ensure and conduct the hazardous material concentration of the raw material and product to harmony with the international regulation and the demand of the customers, the Company applied and passed the QC080000 of the hazardous material management system to conduct and regulate the specification of the hazardous material. Heavy metal and special contamination material, such as Lead, Mercury, Cadmium, Hexavalent Chromium, and Bisphenol A, etc. It is to ensure the marketing competition and reach the level of environment protection to avoid the contamination of heavy metal and special contamination material. Operation Condition

39

V

V

V

(2) Whether the Company stipulated the scheme of protecting against the bad faith conduct, designated the operation procedure, conduct guideline, punishment, and appeal system on the scheme, and implement to execute or not?

(3) Whether the Company adopted any protection measurement to against the conducts of referring to the 7-2 of the Credibility Management Guideline of the Listed Company/Listed Company in OTC or other business activities with higher risk of bad faith conduct in the business scope or not?

Yes

(1) Whether the Company clearly expressed the Stipulate policy and measure of the credibility credibility management on the outer document or the managemen regulations, and the promise to actively t policy and implement the management policy of the Board scheme of Director and the manager level?

Estimate items No

The difference and cause of credibility management guidelines of Listed Company/Listed Company in OTC No Significant Difference

The protection measurement of bad faith conduct should be included in the No Significant Company inner control mechanism and the inner signed and approved Difference procedure to ensure to protect effectively and discover the corruption deeds.

The Company personnel prohibit to conducting any bad faith deed. The said bad faith deed included the Company personnel provided, accept, promise or request any unfair interest directly or indirectly or conducted other deeds that violated the credibility, illegal or disobey the responsibility of commission in order to obtain or maintain the interest during executing the business affairs.

The Company based on the principle of fairness, honesty, credibility, and transparent to conduct the business activities. To implement the credibility management and protect against the bad faith deed actively, the Company designated the Operation Procedure and the Conduct Guideline of Credibility Management to concretely regulate the Company personnel to be careful during executing the business affairs.

Summary & Description

Operation condition

Implement the credibility management condition

6. The fulfill condition and adopt measurement of the Company credibility management:

40

(4) Whether the Company built up effective accounting system and inner control system in order to implement the credibility management, and assigned the inner audit unit or commissioned the accountant to check regularly? (5) Whether the Company held the inner and outer education training of credibility management regularly or not?

(2) Whether the Company settled the special assigned unit that is governed by the Board of Director to push the corporation credibility management? Does it report the execution condition to the Board of Director regularly? (3) Whether the Company designated the policy of protecting interest conflict, provided appropriate tunnel, and implement the execution or not?

Implement (1) Whether the Company estimated the credibility record of the dealing objects and stipulated the clearly the treatment of credibility conduct on credibility the designated contract with the dealing object managemen or not? t

Estimate items

No Significant Difference

The Company publicized and complimented the corporation credibility No Significant management idea through the meetings and trainings. Difference

V

V

No Significant Difference

The Company should realize the credibility management condition of the dealing object and compliance to subsume the credibility management into the treatment of the contract. The Company appointed the personnel department as the special assigned No Significant unit to process the related operation and supervise execution of amendment, Difference execution, explanation, consulting service and reporting the content registration and file of the operation procedure and the conduct guidelines. The Company strengthened to advise the inner morality notion and encourage the employee to report to the supervisor, manager, inner audit chief or other appropriate person when wonder or discover any deed that violated to the laws or regulations or the conduct guideline of morality. It had better to provide adequate information to the Company to treat the continuous affairs properly. The operation condition of the Company accounting system and inner control had conducted the inner audit for checking the conduct condition.

No

V

V

V

Yes

The difference and cause of credibility management guidelines of Summary & Description Listed Company/Listed Company in OTC The Company would estimate the legal specialty, the credibility No Significant management policy, and the bad faith conduct record of the agent, supplier, Difference customer, and other business dealing object before building the business relationship to ensure the fair and transparent types of business management and would not request, provide, or receive bribe. Operation condition

41

No

The Company will treat the report cases by secured ways, and investigated by independent tunnel and with our best to protect the reporter.

8. Other significant information that is good to promote the realization of the Company administer operation condition: None.

7. If the Company had stipulated the Company administer guidelines and related regulations, it has to disclose the enquiry ways: Please refer to the Company administer page on the investor section of the Company website.

V

V

V

V

Yes

The Company Board of Director had passed the Operation Procedure and Conduct Guideline of Credibility Management and the Guidelines of Morality Conduct in December, 2014, and put forward and hand in to the permanent stockholder conference of 2015. Those which will be post on the Company administer pages in the investor section of the Company website to be enquired for the investors. 5. If the Company designate the credibility management guideline of itself accordance with the credibility management guideline of the Listed Company/Listed Company in OTC, please interpretate clearly the difference of operation to the guideline: No difference. 6. Other significant information is helpful to realize the credibility management operation of the Company t: To promote the effect of the Company credibility management, it needs to watch the related development of the credibility management and to discuss and improve the policy of the Company credibility management.

(1) Whether the Company stipulated concrete report The and reward system, built up convenient report operation tunnel, and allocated the proper special assigned condition of person to deal with the person who is reported or system of not? report (2) Whether the Company designated the investigation standard operation procedure of receiving report and the related security mechanism or not? (3) Whether the Company adopted the measurement of protecting the reporter against suffering unfair treatment because of reporting or not? 4. To strengthen to disclose the information Whether the Company disclosed the content of the credibility management guideline and the result of promotion on the website and the information observation station opened to the public?

Estimate items

The difference and cause of credibility management guidelines of Summary & Description Listed Company/Listed Company in OTC The Company strengthened to advise the inner morality notion and No Significant encourage the employee to report to the supervisor, manager, inner audit Difference chief or other appropriate person when wonder or discover any deed that violated to the laws or regulations or the conduct guideline of morality. It had better to provide adequate information to the Company to treat the continuous affairs properly. Operation condition

9. The execution condition of the inner control system (1)Statement of the Inner Control EMC Statement of the Inner Control System Date: March 23, 2016 The result of the self-estimate of the 2015 inner control system is stated as followings: 1. The Company confirm and realize that build, conduct, and maintain the inner control system is the responsibility of the Board of Director and the managers. The Company has built the system. The purpose of the system is to reach the operation effect and efficiency that the profit, business result and property safety protection are included, the reliability or report, the promptness, transparent, and compliance with the related regulations and laws and provide reasonable insurance. 2. The inner control system has the inbred limitation, so the effective inner control system could only provides reasonable ensure to reach the above mentioned three targets no matter the design is how perfect. Besides, due to the change of the environment and condition, the efficiency of the inner control system might be changed. Because there is the self-supervise mechanism in the Company inner control system, the Company will adopt update actions once the fault identified. 3. According to the effective judgment items of the inner control system of the Treatment Guidelines of the Public Issue Company to Build Up the Inner Control System, thereinafter the Treatment Guideline, the Company would judge the efficiency of the design and execution of the inner control system. The judgment items of the inner control system of the Treatment Guidelines is the management of control procedure and is divided into five composition factors. 1. Control Environment 2. Risk Estimate 3. Control Operation 4. Information and Communication 5. Supervise Operation There are certain items in each composition factors. Please refer the above mentioned items to the regulation of the Treatment Guidelines. 4. The Company has adopted the judgment items of the inner control system, and estimated the design and the efficiency of execution of the inner control system 5. Based on the result of the above estimate, the Company considered that the inner control system that the supervise and management of the subsidiary company is included of December 31, 2015 is effective, such as to realize the operation result and efficiency of target reaching, the reliability of report, promptness, transparent, and compliance of design and execution of the related regulations and laws of inner control system. It could assure to reach the above mentioned targets reasonably. 6. The Statement will be the major content of the Company Annual Report and the Public Prospectus, and will be opened to the public. If the above mentioned

42

content contained any illegal affairs such as false or lurk, it will involve the legal responsibility of the Securities Transaction Act No.20, No.32, No.171, and No.174. 7. The Statement has been passed on March 23, 2016 through the Company Board of Director. All of the 5 presented Directors agreed the content of the Statement without any opposed opinion. Therefore, to express as the above. EMC

Chairman:

General Manager:

Signature/Seal

Signature/Seal

(2)Inner Control Review Report of the Accountant: None

43

10. The major deficiency and improvement condition of the events, including the punishment that the employee being punished accordance with the regulation and the Company punished the employee who violated the inner control regulations of the latest year and up to the Annual Report printed date: None. 11. The significant resolution of the shareholder conference and the Board of Director in the latest year and up to the Annual Report printed date: Shareholder Conferance Year of the Conference Shareholder Permenant Conference of 2015

Date Significant Resolution & Execution Condition 2015.6.15 1. Cause of Action: The Company Final Account Tablets of 2014 Resolution: The cause has been unamimously confessed and passed by probing the present shareholders through the chairman of the conference 2. Cause of Action: The Company Profit Allocation Cause. Resolution: The cause has been unamimously confessed and passed by probing the present shareholders through the chairman of the conference Execution Condition: The Board of Director decided to stipulate September 2, 2015 as the cash stock interest allocation record date, and to grant on September 25, 2015. 3. Cause of Action: The Amendment of the Company Regulation Resolution: The cause has been unamimously confessed and passed by probing the present shareholders through the chairman of the conference Execution Condition: It has completed the alter registration on July 6, 2015. 4. Cause of Action: The Amendment of the Election Measurement of Directors and Supervisors Resolution: The cause has been unamimously confessed and passed by probing the present shareholders through the chairman of the conference Execution Condition: It has complete the Amendment of the Election Measurement of Directors and Supervisors accordance with the treatment of the shareholder conference

Board of Directors Meeting Degree Date Significant Resolution Order 9th Degree, 12th 2015.03.09 1. passed the business operation report and financial report tablet of 2014. 2. passed the business operation report and financial report tablet of 2014. Meeting 3. passed calling for the 2015 permenant shareholder conference and the related affairs. 4. passed the Statement of the inner control system of 2014. 5. passed the case of reducing endorsement money guarantee to the subsidiary company. 6. passed the case of the Company automatical human resource cut off and the capital expense. 7. passed the Company domestic 3rd naked position convertible bond at maturity repayment of principle and terminated the case of Listed Company in OTC. 8. passed the Company Syndicated Loan case of $200,000,000. 9. passed the Company personnel rotation case.

44

9th Degree, 13th 2015.05.06 1. Passed the issue new share record date case of the Company domestic 3rd Meeting naked position convertible bond transfer into the common stock. 2. Passed the issue new share record date case of the Company employee optional share certificate transfer into the capital increase share. 3. passed the case of reducing endorsement money guarantee to the subsidiary company. 4. passed the case of suggestion of the Salary and Reward Committee to the salary and reward of the Directors, Supervisors, and Managers. 5. passed the amendment of the Operation Procedure of the Company Stamp and Certification. 9th Degree, 14th 2015.06.25 1. passed the capital expense of Guan-Yin Factory. Meeting 2. Passed the issue new share record date case of the Company domestic 3rd naked position convertible bond transfer into the common stock. 3. Passed the issue new share record date case of the Company employee optional share certificate transfer into the capital increase share. 9th Degree, 15th 2015.07.30 1. passed the dividend record date of undivided profit of 2014. 2. passed the case of reducing endorsement money guarantee to the subsidiary Meeting company. 3. passed the Company capital expense case. 9th Degree, 16th 2015.11.04 1. Passed the issue new share record date case of the Company employee Meeting optional share certificate transfer into the capital increase share. 2. passed the Company capital expense case. 3. Passed the capital expense case of the Company subsidiary company, JongShan EMC Inc. 4. passed the audit plan of 2014. 5. passed the payment calculation standard of management award of the two Mainland Chinese factories. 9th Degree, 17th 2015.12.23 1. passed the Company budget and capital expense case of 2016. 2. Passed the issue new share record date case of the Company employee Meeting optional share certificate transfer into the capital increase share. 3. passed the case of the Salary and Reward Committtee to review the allocate amount ratio of the reward of Directors and Supervisors, and the adjust measuement and regulation of the employee bonus and reward, and the working proposal description of the Committee of 2016. 4. passed the adding designate cases of the Company Meeting Rules of the Shareholder, the Election Measurement of Director and Supervisor, the Conduct Guideline of Morality, the Operation Procedure and Conduct Guideline of Credibility Management, the Operation Procedure of Obtain or Measure the Property, the Operation Procedure of Endorse Guarantee, the Operation Procedure of Capital Loan to Others, and the Transaction Deal Procedure of Acting the Financial Derivatives. 5. Passed adding the case of the Operation Procedure of Suspend and Restore Transaction Application. 6. Passed the amendment case of the Inner Authorization Regulation. 7. Passed the case of the Proposal of Raising the Ability of Self-Draw Up Financial Report. 8. passed the case of reducing endorsement money guarantee to the subsidiary company. 9. passed the case of reducing the Company short period extend credit amount. 9th Degree, 18th 20165.03.2 1. passed the case of the Salary and Reward Committee review of the Director Meeting 3 and Supervisor reward allocation ratio and the salary and reward of the Directors, Supervisors, and Managers of 2015 and 2016. 2. passed the amendment of the Company Regulations. 3. passed the reward allocation case of the employee and the Directors and Supervisors of 2015.

45

9th Degree, 19th Meeting

4. passed the business opertion report and financial report tablet of 2015. 5. passed the allocation case of profit of 2015. 6. passed the case of calling for the 2016 shareholder permenant conference and related affairs. 7. passed the case of the Company Directors Reelection and settle the audit committee. 8. Passed the issue new share record date case of the Company employee optional share certificate transfer into the capital increase share. 9. passed the Statement of the inner control system of 2014. 10. passed the case of the Company capital expense. 11. passed the case of the capital expense of the subsdiary company, JongShan EMC Inc. 12. passed the amendment of the Company Information Safety Management Measurement. 13. Passed the amendment of the Company Employee Bonus Measurement. 20165.04.2 1. Passed the amendment of the Operation Procefure of the Company Budget 8 Management, and the Financial Expense and Receipt Measurement and Procedure. 2. Passed adding the Company the Checking Standard Operation Procedure and Autonomy Regulation of Strategic Alliance, Financing, Investment, Merge, and the Major Customer Visiting. 3. passed the case of the ratio adjust arrangement of the Company management award allocation. 4. passed the case of reviewing name list of the nomination of the Director candidate who holds the shares more than 1% that the shareholder permenant conference of 2014 accepted. 5. passed to release the case of the Director non-compete clause.

12. The Directors or Supervisors held different opinion to the passed significant resolution and with record or in written statement in the latest year or up to the Annual Report printed date: None. 13. The Chairman, General Manager, Accounting Chief, Financial Chief, Inner Audit Chief, and Research & Development Chief resigned or released condition: None.

46

(IV) Professional fees of the certified public accountant Numerical Range Scale Professional fees of the certified public accountant (Please Check the harmony range scale or fill-in the amount) Accounting Firm KPMG Peat Marwick

Accountant Yang, Liu-Fen

Official expense Amount of money Level 1 2 3 4 5 6

Chen, Yin-Ju

Audit fee

Less than 2,000 thousand dollars 2,000 thousand dollars(included) ~4,000 thousand dollars 4,000 thousand dollars(included) ~6,000 thousand dollars 6,000 thousand dollars(included) ~8,000 thousand dollars 8,000 thousand dollars(included) ~10,000 thousand dollars More than 10,000 (included) thousand dollars

V

Verification period

Note

2015/1/1~2015/12/31 Unit: in thousand dollars (TWD) Non-audit Total fees V V V

(1) The Audit Public Fee paid to the certified accountant, the firm of the certified accountant, and the related corporation is one-forth and up: None. (2) The Audit Public Fee of changing the accountant firm and year is lower than the prior year: The Company did not change the certified accountant firm in 2015. (3) The Audit Public Fee decreased up to 15% and above compared to the prior year: None.

(V) The information of changing the accountant: None. (VI) The Company Chairman, General Manager, or the manager who took charge of financial or accounting affairs who had worked in the certified accountant firm or the related corporation: None. (VII) The stock right transfer and pledge condition of the Directors, Supervisors, Managers, and the stockholders who hold the Company share more than 10% in the latest year and dated before the Annual Report printed date.

47

(1) The share holding alteration of Director, Supervisor, Manager, and major shareholders Title

Name

2015 Increase or Increase or decrease of decrease of share share holding pledged

Representative of Yu Chang Chairman Investment (260,000) Ltd.:Tsai, Hui-Liang Vice Chairman Dong, Ding-yu Representative of Yu Chang Director Investment Ltd.:LI, SHU-JIU Director Xie, Meng-Zhang Director Shen, Yan-Shi Supervisor Shen, Dao-Zhen Supervisor Dong, Feng-Rong General manager Dong, Ding-yu Senior vice 100,000 general manager Wang, Li-Gang Senior vice (137,000) general manager Guan, En-Xiang Vice general Zhang, Wen-Xing manager Vice general Peng, Yi-Ren 106,000 manager Assistant Vice Lin, Zheng-Long (36,000) President Assistant Vice Mu, Xin-De 30,000 President Assistant Vice Chen, Ding-Yan 41,000 President Assistant Vice Cui, Wen-Xiang (108,000) President Assistant Vice Zhou, Li-Ming 53,000 President Assistant Vice Yang, Yong-De 4,000 President Assistant Vice Huang, Yao-Guo (80,000) President Assistant Vice President Zhang, Li-Qiu (35,000) Also the Finance Supervisor Accounting Yan, Xiu-Zhu 17,000 Supervisor

(2) Stock Right Transfer Information: None (3) Stock Right Pledge Information: None

48

A s o f A p r. 1 5 , 2 0 1 6 Increase or Increase or decrease of decrease of share share pledged holding

-

375,000

-

-

270,000

-

-

-

-

-

270,000

-

-

-

-

-

-

-

-

-

-

-

45,000

-

-

-

-

-

30,000

-

-

38,000

-

-

40,000

-

-

-

-

-

40,000

-

-

7,000

-

-

-

-

-

-

-

(VIII) The Mutual Spouse or the Second Degree Relative Relationship of the Top Ten Share Holding Ratio Shareholder: The 10 Major shareholders are related parties or with 2nd degree relatives relation

HOLDING OF SHARES-PERSONAL

SHARES HOLD BY SPOUSE OR MINOR CHILDREN

Number of shares

Proportion of shares

Number of shares

Proportion of shares

Number of shares

Proportion of shares

Name

Relation

Yu Chang Investment Ltd.

25,461,477

8.00

0

0

0

0

Dong, Ding-yu

Yu Chang Investment Ltd.Chairman

None

Si, Run-Hong

14,690,303

4.61

0

0

0

0

None

None

None

7,290,000

2.29

0

0

0

0

None

None

None

6,309,000

1.98

0

0

0

0

None

None

None

5,953,713

1.87

0

0

0

0

None

None

None

Dong, Ding-yu

5,265,766

1.65

15,842

0.00

0

0

None

None

None

Deutsche Bank

4,957,334

1.56

0

0

0

0

None

None

None

Tang, Shao-Hao

4,881,963

1.53

0

0

0

0

None

None

None

4,782,000

1.50

0

0

0

0

None

None

None

4,038,278

1.27

0

0

0

0

None

None

None

NAME

HSBC ENTRUSTED ROBECO CAPITAL INCREMENT FUND ACCOUNT Labor Pension Fund(New Scheme) Standard Chartered Bank Dunhua Branch Entrusted Fund Account

HSBC ENTRUSTED MITSUBISHI UFI MORGAN STANELY SECURITY TRANSACTION ACCOUNT Dong, Feng-Cheng

SHARE HELD IN OTHERS' NAME

NOTE

(IX) The Shareholding Amount of the Automatic Reinvestment of the Company, the Director, the Supervisor, the Manager, and the Industry that is controlled by the Company directly or indirectly. It also combined the calculation of the comprehensive shareholding ratio.

49

Comprehensive Shareholding Ratio Unit:Share;% Investmetn Directly or Indirectly Controlled Invested by the Company General Investment Director, Supervisor, and Reinvested Company Manager (Note) Number of shareholding Number of shareholding Number of shareholdin shares ratio shares ratio shares g ratio EMC Overseas 100.00% 35,656,950 100.00% Holding Incorporated 35,656,950 Li Cheng Tech Co., 16,412,918 33.50% 5,342,644 10.90% 21,755,562 44.40% LTD.

(Note): The Company adopted investments accounted for using equity method.

50

IV. Funding Condition (I) The Company Capital and Shares (1) Source of capital: Authorized capital stock Year/M Issue onth price

2015.2

2015.5

10

10

Number of shares

400,000,000

400,000,000

Cash Amount

4,000,000,000

4,000,000,000

Paid in capital

Note Subscriptions paid by properties other than cash

Others

315,994,140

Transfer of bond and 3,159,941,400 share warrant certificate

None

Note:(1)

316,392,140

Transfer of bond and 3,163,921,400 share warrant certificate

None

Note:(2)

None

Note:(3)

Number of shares

Cash amount

Source of capital

2015.7

10

400,000,000

4,000,000,000

316,613,140

Transfer of bond and 3,166,131,400 share warrant certificate

2015.11

10

400,000,000

4,000,000,000

317,323,140

Transfer of 3,173,231,400 share warrant certificate

None

Note:(4)

105.1

10

400,000,000

4,000,000,000

317,505,140

Transfer of 3,175,051,400 share warrant certificate

None

Note:(5)

105.4

10

400,000,000

4,000,000,000

318,123,140

Transfer of 3,181,231,400 share warrant certificate

None

Note:(6)

(Note 1): Permit of the Jin-Guan-Jen-Far Tze No. 0990026578 of June 1, 2001 approved that fund and issued the domestic 3rd naked position convertible bonds. Permit of the Jin-Guan-Jen-Far Tze No. 1000031551 of the Financial Supervisory Commission of Administry Yen of July 7, 2011 approved that issued the employee option stock right certificate. Jin-So-San Tze No. 10401005330 of Ministry of Economic Affairs of February 16, 2015 (Note 2): Permit of the Jin-Guan-Jen-Far Tze No. 0990026578 of June 1, 2001 approved that fund and issued the domestic 3rd naked position convertible bonds. Permit of the Jin-Guan-Jen-Far Tze No. 1000031551of the Financial Supervisory Commission of Administry Yen of July 7, 2011 approved that issued the employee option stock right certificate. Jin-So-San Tze No. 10401092260 of Ministry of Economic Affairs of May 21, 2015 (Note 3): Permit of the Jin-Guan-Jen-Far Tze No. 0990026578 of June 1, 2001 approved that fund and issued the domestic 3rd naked position convertible bonds. Permit of the Jin-Guan-Jen-Far Tze No. 1000031551of the Financial Supervisory Commission of Administry Yen of July 7, 2011 approved that issued the employee option stock right certificate. Jin-So-San Tze No. 10401132650 of Ministry of Economic Affairs of July 6, 2015 (Note 4): Permit of the Jin-Guan-Jen-Far Tze No. 1000031551of the Financial Supervisory Commission of Administry Yen of July 7, 2011 approved that issued the employee option stock right certificate. Jin-So-San Tze No. 10401240920 of Ministry of Economic Affairs of November 17, 2015 (Note 5): Permit of the Jin-Guan-Jen-Far Tze No. 1000031551of the Financial Supervisory Commission of Administry Yen of July 7, 2011 approved that issued the employee option stock right certificate. Jin-So-San Tze No. 10501002670 of Ministry of Economic Affairs of January 8, 2016 (Note 6): Permit of the Jin-Guan-Jen-Far Tze No. 1000031551of the Financial Supervisory Commission of Administry Yen of July 7, 2011 approved that issued the employee option stock right certificate. Jin-So-San Tze No. 10501069800 of Ministry of Economic Affairs of April 21, 2016

51

Authorized capital stock

Type of Share

Outstanding shares(listed)

Unissued Stock

318,460,140 shares

81,539,860 shares

Registered common stock

R e m a r k

Total

337,000shares are not 400,000,000 shares registered for alteration

The related information of the sum-up declaration system: None (2) Shareholder structure: 2016.4.15 Shareholder structure

Government

Financial

Other legal

organization Institutions

Amount Number of

personal

Total

4

13

117

30,816

246

31,196

8,738,008

5,569,218

49,225,729

147,206,048

107,721,137

318,460,140

2.74%

1.75%

15.46%

46.22%

33.83%

100%

people Shares held

person

Foreign institutions and foreigner

shareholding ratio

(3) Share holding status: 2016.4.15

Share holding scale 1 to

The number of shareholders

Shares held

shareholding ratio

(%)

999

16,639

2,460,329

0.77

1,000 to

5,000

10,703

21,940,716

6.89

5,001 to

10,000

1,785

13,975,492

4.39

10,001 to

15,000

644

8,032,269

2.52

15,001 to

20,000

363

6,706,467

2.11

20,001 to

30,000

333

8,498,192

2.67

30,001 to

40,000

145

5,220,275

1.64

40,001 to

50,000

88

4,082,602

1.28

50,001 to 100,000

218

15,488,770

4.86

100,001 to 200,000

117

16,675,697

5.24

200,001 to 400,000

59

16,879,301

5.30

400,001 to 600,000

28

13,962,311

4.38

600,001 to 800,000

15

10,660,071

3.35

800,001 to 1,000,000

5

4,595,000

1.44

More than 1,000,001 股

54

169,282,648

53.16

31,196

318,460,140

100.00

Total

(Note): The Company did not issue Prefer Stock

52

(4) List of major shareholders: Shares

Shares held

Major shareholders Yu Chang Investment Ltd. Si, Run-Hong HSBC ENTRUSTED ROBECO CAPITAL INCREMENT FUND ACCOUNT Labor Pension Fund(New Scheme) Standard Chartered Bank Dunhua Branch Entrusted Fund Account Dong, Ding-yu Deutsche Bank Tang, Shao-Hao HSBC ENTRUSTED MITSUBISHI UFI MORGAN STANELY SECURITY TRANSACTION ACCOUNT Dong, Feng-Cheng

shareholding ratio(%)

25,461,477 14,690,303 7,290,000 6,309,000 5,953,713 5,265,766 4,957,334 4,881,963 4,782,000 4,038,278

8.00 4.61 2.29 1.98 1.87 1.65 1.56 1.53 1.50 1.27

(5) Price per share, net amount, profit and dividends within 2 years Unit: TWD Ye a r

As of

2014

2015

Price per Highest

42.10

77.40

62.90

share

Lowest

25.00

39.25

49.80

(Note1)

Average

31.85

58.28

57.31

Before distribution

25.84

30.49

32.09

After distribution

23.34

(Note9)

Item

Book

2016.3.31

value per share

-

(Note2) Earnings Weighted shares Per Share Earnings Per Share Before adjusting (Note 3)

After adjusting

Cash Dividends

Dividend per share

Share allotment

Stock Dividends from Retained Earnings Stock dividends from capital

surplus

Unpaid dividend (Note4)

313,197,478

316,634,554

317,600,138

4.91

7.55

4.91

(Note9)

-

2.496265

(Note9)

-

-

(Note9)

-

-

(Note9)

-

1.75

-

-

-

Return on P r i c e e a r n i n g s r a t i o ( N o t e 5 )

6.49

7.72

-

investme P r i c e - d i v i d e n d r a t i o ( N o t e 6 )

12.76

(Note9)

-

0.08

(Note9)

-

nt analysis

C a s h D i v i d e n d Yi e l d ( N o t e 7 )

(Note 1): Present the annual highest and lowest market price of the common stock the average market price is according to the calculation of the annual transaction price and the transaction amount.

53

(Note 2): Please follow the standard of the issued stock amount of the end of the year and fill in according to the allocation resolution of the shareholder conference (Note 3): If there is the situation of gratis and has to trace back and to be adjusted, it has to present the earnings per share of before and after adjustment. (Note 4): If the issue condition of equity securities ruled that the non-grant stock interest could be accumulated to the profit year for grant, it has to disclose the accumulated non-grant stock interest up to the year respectively. (Note 5): PE ratio = the average per share closing price of the present year/earnings per share (Note 6): price/profit ratio=the average per share closing price of the present year/per share cash share profit (Note 7): cash share profit yield = per share cash share profit/ the average per share closing price of the present year (Note 8): per share net value and earnings per share has to be filled in the latest season information that is checked and reviewed by the accountant up to the Annual Report printed date the else column have to fill in the present year information up to the Annual Report printed date (Note 9): Refer to the resolution of the 2016 annual shareholder permanent conference

(6) The Company stock interest policy and the execution condition: 1. The stock interest policy To concern about the speciality of industry growth and sturdy the Company financial structure, the Company might delete the annual profit allocation in the deficit year. The future development, the financial condition and the shareholder reward will be the prime consideration of the stock interest policy, then to deliberate the future capital expense budget to allocate the stock interest in order to reserve the demand cash. When there is profit in the annual final account, it has to pay the income tax first and make up the past deficit. To make provision 10% of the legal surplus according to the laws and regulations, and the special reserve or reserve part of the profit for non-grant according to the Securities Transaction Act No.41 or the resolution of the shareholder conference. The special profit surplus could be turn to the reserve profit for grant if the laws or regulation amended or the causes of the laws or regulations of making provision special profit surplus die out. The allocation of profit will be 10% to 70% of the allocable profit after making provision surpluses. The shareholder bonus is depended on the operation condition and is proposed by the Board of Director. Then, it could be submit to the shareholder conference for resolution and allocate. The Company Board of Director might adjust the allocation according to the actual operation environment and then submit to shareholder conference for resolution and allocate. Note: The above stock interest policy will be refer to the 2016 shareholder permanent conference amendment. 2. The proposed allocation conditon of stock interest in the shareholder conference: Dividend Apprved Cash Dividends Stock Dividend from Year distribution date (dollars) Retained Earnings(dollars) 2015

105/3/23

1,367,929,502 (Per share 4.3 dollars)

-

Note: per share distribution ratio is based on the amount of the circulation Shares. The case will be carried out according to the related regulations and be refer to the resolution of the shareholder permenant conference of June 13, 2016.

3. Expect stock interest policy will be changed significantly :None

54

(7)The effect of the shareholder proposed stock grants to the Company business operation and earnings per share: Unit:TWD Year

2016

Item

In the beginning of the term-Paid-in capital 3,175,051,400 Cash dividends/per share(dollar) 4.30 Allotment Profit transferred to dividends 0.00 and dividend Capital surplus transferred to dividends 0.00 Operating profit Operating profit comparing to previous term Net profit after tax Performance Net profit after tax comparing to previous term status Earnings Per Share Earnings Per Share comparing to previous term Average annual Return On Investment(Average PER reversal) Conducting the cash dividend Earnings Per Share N/A(Note1) issuance from the profit Average annual Return transferring to capital increment On Investment Earnings Per If not conducting Capital surplus Earnings Per Share Share and transferring to capital increment Average annual Return Price On Investment earnings ratio If not conducting Capital surplus Earnings Per Share transferring to capital increment Average annual Return and instead of issuing Cash On Investment dividends (Note 1): The Company has not drawn up and announced the 2015 financial forecast. The Company might not to disclose the information according to the regulation of the Tai-Tsai-Jen Tze(1) No.00371 of February 1, 2000 of the Securities and Futures Commission of the Ministry of Economic Affairs. (Note 2): ration share and ration interest condition according to the Board of Director passed allotment of profit of March 23, 2016.

(8)The reward of the employee, Director, and Supervisor: 1. The portion and scope of the reward of the employee, Director, and Supervisor in the Company Regulation: If there is profit, the Company should allocate 3% as the employee reward and less than 1.2% as the reward of the Directors. Yet, if the Company still has the accumulated deficit, it has to reserve the makeup amount. If the employee reward released by stock or cash, the releasing objects should include the qualified subsidiary company employee the measurement is designated by the Board of Director respectively. 2. The estimate base of the reward of the employee, Director, and Supervisor is accordance with the amount of the stock that is the reward of the employee. If there is difference between the actual allotment and the estimated amount, it will be treated by accounting measurement. The estimate reward amount of the employee, Director, and Supervisor is considered to the past

55

years self resolved lose-profit amount. If the actual grant is different from the estimate, it will be considered as the accounting estimate change and be listed on the 2015 lose-profit. 3. The information of the proposal of allocation of the employee reward that the Board of Director passed: The proposal the Board of Director passed on March 23, 2016 is as: (1). The amount of the allocation of cash reward for the employee and the Directors and Supervisors:  The employee cash reward is TWD 91,422,260.  The reward of the Directors and Supervisors is TWD 30,474,087. There is no difference between the total amount of the allocation of the cash reward of the employee and the reward of the Directors and Supervisors that the Board of Director proposed and the recognition expense of 2015. (2). The proposed amount of the allocation of the employee stock reward and the ratio of the individual net profit after taxes and the employee reward total amount: There is no employee stock reward allocation this time. (3). The hypothesis calculation of the earnings per share of the proposed allocation beyond the reward of the employee and the Directors and Supervisors: The reward of the employee and the Directors and Supervisors has been as expenditure since 2008. Note: The above mentioned the reward of the employee and the Directors and Supervisors will be distributed after the passed amendment of the 2016 shareholders permanent conference. 4. The actual allotment condition of the profit of 2014 allocated in 2015: Unit:TWD 2015 2014 Item Actual Difference Reason Status Accountting distribution Director,Supervisor 16,998,394 16,997,588 806 To Compensation dollars dollars dollars Listed in estimate 2015adjustment 42,495,987 42,493,970 2,017 difference Employee bonus dollars dollars dollars

(9)The Company repurchase the Company shares: None

(II) Corporation Bonds Process Condition: None (III) Preferred Stock Process Condition: No Company Preferred Stock issued (IV) Global Deposit Receipt Process Condition No Company Global Deposit Receipt issued

56

(V) Employee Stock Subscription Certificates Conduct Condition: (1) Employee Stock Subscription Certificates Conduct Condition April 15, 2016

categories of the Employee Stock Subscription Certificates Declare Effective Date

The 1 s t Employee Stock Subscription Certificates of 2011 July 7, 2011

July 7, 2011 July 6, 2012

Issued Date August 9, 2011 Amount of the Issued Units 6,000,000 1,500,000 Amount of the Issued 1,500,000/318,460,140 6,000,000/318,460,140 subscription Shares / Total 0.47% 1.88% amount of the Issued shares Refer to the No.6 of the Issue and Subscription Measurement of th e 1 s t Employee The Period of the subscription Continue to exist Stock Subscription Certificates of 2011 as the Annex II Types of honour an agreement (%)Subscription Period and percentage limit Amount of the Obtained Executive shares Subscription Amount of the executed Amount of Non-Executed Subscription Per Share Subscription price of the Non-executed (%)Amount of Non-Executed Subscription/ Total amount of the issued shares Effect to the Shareholders

pay by the type of the issued new stock Refer to the No.6 and No.7 of the Issue and Subscription Measurement of the 1 s t

Employee Stock Subscription Certificates of 2011 as the Annex II 4,979,000

597,000

49,790,000

5,970,000

296,000

358,000

17.1

22.2

0.09%

0.11%

NIL

NIL

57

Name

a

Lin, Zheng-Long

Assistant Vice President

n

58

a

g

Chen, Ding-Yan Zhou, Li-Ming Cui, Wen-Xiang Yang, Yong-De Huang, Yao-Guo Jiao, Zhi-Yong

e

Li, De-Nan

r

CEO

Subscri ption Amount

0.36%

Subscription A m o u n t / To t a l Issued Share amount

891,000 Shares

Subscription Amount

$17.7 $17.1 $23 $22.2 $16,050,000

0.28%

Subscription A m o u n t / To t a l Issued Share amount

December 31, 2015

1,348,000Sha res

$17.1 $22.2

$24,020,000

0.42%

Not Executed Subscripti Subscripti Subscripti Subscription on Amount on Price on Sum of A m o u n t / To t a l I s s u e d Money Share amount

(VI) The Conduct Condition of the Limited Employee Rights Shares and Merge(Combine, Purchase, and Division Included): NIL.

Assistant Vice President (Also the Finance Zhang, Li-Qiu Supervisor) Accounting Supervisor Yan, Xiu-Zhu

Assistant Vice President

Assistant Vice President Yang, Fu-Duo

Assistant Vice President Lin, Hong-Da

Assistant Vice President

Assistant Vice President

Assistant Vice President

Assistant Vice President

Assistant Vice President

Assistant Vice President

Assistant Vice President Mu, Xin-De

Peng, Yi-Ren

Vice general manager

CEO

Tsai, Hui-Liang Dong, General manager Ding-yu Senior vice general Guan, manager En-Xiang Senior vice general Wang, manager Li-Gang Zhang, Vice general manager Wen-Xing

Job Title

Executed Subscripti Subscripti on Price on Sum of Money

(2)Subscription Condition and the Name List of the Managers Who obtained the Employee Stock Right Subscription and the Employee who obtained the Top Ten Subscription Amount

M

The plan content and execution condition of the incompleted separate issue or private equity negotiable securities up to the former season of the Annual Report printed date: NIL.

(VII) Execution Condition of Capital Operation Plan:

59

V. Operation Profile (I) Business Operation Content (1) Business Operation Scope: 1. Major Content of the Business Operation - CC01080 Electronic component Production, CB01020business machine Production CC01110 Computer and the peripheral facilities Production, C801010 Basic Chemical Industry. - C801990 Other Chemical Material Production, C901990 Other non-metal Mining Product Production. - F401010 International Trading. - ZZ99999 Able to Operate the Business affairs that the Laws and Regulations do not exhibit or limit out of the approved business affairs. 2. The Company Exist Products: - CCL of the Double edged PCB. - Inlayer CCL & prepreg of the Mutiple Layer PCB. - Mass Lam Board.Mass Lam Board 3. Operation Ratio: The major operation of Company are the producing, processing, and selling of PCB, Prepreg, and Mass Lam Board after built the factory in 1993 and expanded the factory in 2005. The Operation Ratio of 2015 is as: Major product CCL Bonding sheet Multi-layer laminated board Others Total

Unit: TWD thousand dollars;% Operating Revenue Operating Revenue Ratio 10,613,293 50.85 9,277,723 44.46 977,927

4.69

774 20,869,717

0.00 100.00

4. The planed new products 4. The main shaft of product development should cope with the environment protection and conserve energy, so the Company continuously has developed the environment protection material to harmony with the demand and development of the future market. (1) Ultra-Low Signal Lose High Tg environment protection base material for radio frequency (2) High size-stability Ultra-Low Signal Lose environment protection base material for radio frequency (3) Low-flow- glue High- Liable environment protection prepreg for rigid-flex bond

(2) Industry Profile: 1. Industry present condition and development: The major market of 2015 is Taiwan and China. The major export area is Korea The expected major market of 2016 will still be Taiwan and China, and Korea will take the second place. The target is to raise the ratio of the Hi-Tg, Br-Free, and Low CTE, etc to 60% and up..

60

2. The dependence of the industy upstream, middlestream, and downstream: To make the upstream-downstream cooperation relationship better and to stable the market mechanism. 3. The various development trend and competition condition of the products: The product and technology development trend is originated from the downstream demand, so the electronic products should head not only to light, thin, short, small, high reliability, multi-function, but also to high frequency, high-speed, and green environment protection. For example, the trend of environment protection demand ratio of HDI plate, multi-layer plate, IC load plate, rigid-flex plate, etc applied on the products such as cell phones and consumer electric products is higher The high functional green environment protection base material opposes strong growth potential and will be the major point of the PCB product development in the future.

(3)Technology and Research & Development Profile: Year 1. 2. 2013

3. 4. 5. 1. 2.

2014

3. 4. 1.

2015

2. 3. 4.

Successfully Developed Technology and Product Ultra-Low Dielectric Mid Tg Environment Protection Base Material of the next generation. Ultra-Low Signal Lose High Tg Environment Protection Base Material for Extra-High-Frequency Communication. Low-Flow-Glue Low Dielectric Environment Protection Prepreg for Rigid-Flex Plate Bond. Compatible Price Tg Tg240℃ High Heat Duration IC Load Plate of Environment Protection Base Material. There are 8 patents in Taiwan and China. Ultra-Low wastage environment protection material for high-speed communication transportation. Ultra-Low Signal Lose Environment Protection Base Material for Radio-Frequency. Tg 240℃ High Size-Stability Environment Protection Base Material for Load Plate. There are 18 pattens in Taiwan, China, and U.S.A. High-Reliable Environment Protection Base Material for Automobile Electrics. New style Ultra-Low Dielectric Environment Protection Base Material for High-Frequency Communication. New style Ultra-Low Signal Lose High Ta Base Material. There are 21 pattens in Taiwan, China, and U.S.A.

(4)Long/Short Term Business Development Plan: The Company upholds the credibility principle and builds good mutual relationship with the customers to reach the realm of win-win. Also, the operation team constructs the future view, value philosophy, and the long/medium/short terms development strategy as the followings: 1. Short Term Development Strategy: (1) Reach the 2016 Budget. (2) To increase the ratio of selling of the High-Frequency High-Temperature Base Material, Automobile Base Material, Heat Conduction Base Material. (3) To deal with the demand of the customers, the Company adopt the integrate marketing operation. 2. Medium/Long Term Development Strategy: (1) Expand the abroad market and raise the competition ability.

61

(2) Expand the diversity marketing tunnels of products.

(II) Market and Produce & Sale Profile: (1)Market Analysis: 1. The major market of 2015 is Taiwan and China. The major export market is Korea. The 2016 major expected market is Taiwan and China. 2015 sale market percentage is as follow: 2015 market analysis Region

Sales ratio (%)

Taiwan P.R.C Others

21.97 68.19 9.84

Total

100.00

2. Market occupied ratio: There 10 domestic corporations produced FR-4 CCL, PP, and Mass Lam Board in 2015. The produce capacity of the corporations are as follow: CCL Company name

Nan Ya Plastic Corporation Taiwan Union Technology Corporation Elite Material Co., Ltd. ITEQ Corporation Panasonic Taiwan Co., Ltd. Isola Taiwan Uniplus Electronics Co., Ltd.

Productio n capacity per month (10,000 sheets)

Multi-layer laminated board

Bonding sheet Production capacity per month (10,000 m)

Market share (%)

Market share (%)

Production capacity per month (10,000 m2)

Market share (%)

220

38.9

220

20.4

70

12.4

135

12.5

120

30.8

50

8.9

180

16.7

80

20.5

40

7.1

100

9.3

30

5.3

100

9.3

50

8.9

80

7.4

30

5.3

180

16.7

60

15.4

62

CCL Company name

HONG TAI ELECTRIC INDUSTRIA L CO.,LTD. ShineMore Technology Materials Corporation., Ltd. Advance Materials Corporation Total

Productio n capacity per month (10,000 sheets)

Multi-layer laminated board

Bonding sheet Production capacity per month (10,000 m)

Market share (%)

Market share (%)

Production capacity per month (10,000 m2)

Market share (%)

30

5.3

30

2.7

25

4.4

10

0.9

50

12.8

20

3.5

45

4.1

80

20.5

565

100.0

1,080

100.0

390

100.0

3. The supply-demand situation and the growth of the future market: Taiwan will expand to the higher level products. 4. The expected sale amount and the basis of 2016: Refer to the 2015 production and marketing result, the future prosperity, the market supply and demand conditon, and the result of the first season, the Company do as the followings: 2016anticipated sales. CCL(Sheet) Guanyin 5,943,864 factory Kunshan 13,781,214 factory Zhongshan 8,700,161 factory Hsinchu factory

PP(Roll) 141,822

M/L(KPNL)

250,926 184,001 1,579

5. The effective factors of the future business affairs development: (1) The favorable factors: -

CCL is the basic material of electric products, so there has had no any replacement so far. The CCL life cycle is pretty long as well. adding value. Halogen-Free product is popular with high market occupied ratio and creates high adding value. The Company products are diversified and coincided to the customer future

63

-

development demand. There are directly producing factories in the bilateral coasts. There are marketing bases in Hong Kong and Korea as well.

(2) The unfavorable factors: - The raw material prices changed greatly to effect the gross profit. (3) counterplot of dealing: - To increase the sale ratio of the high level product material to strengthen the adding value. - To scatter the sources of the raw material to reduce the risk. To negotiate the long term co-operate unified purchase system with the supplier by the bilateral coast group demand to reach the stable cost and supply target.

(2)The function and producing procedure of the major products: 1. The function of the major products CCL: used in producing double edged or multiple-layer PCB. Prepreg: Used in producing multiple-layer PCB. Mass Lam Board: Used in producing multiple-layer PCB. 2. Produce Flow Path: Mix Glue →Serve Glue →Dried by heat →Pile up →compose →thermoforming →Inspection →Product

(3)The supply condition of the raw material: The major raw material of the products are copper foil, glassfiber cloth, and epoxy resin. Table of the major raw material supply areas and the conditon major raw material copper foil glassfiber cloth epoxy resin

supply area domestic Japan, domestic Japan, domestic

supply condition Normal Normal Normal

(4)The name list , stock-in(out) amount of money, and ratio of the customer who occupied 10% or more of the stock-in(out) amount in any one year in latest two years to interpretate the changing causes of increase/decrease.

64

The major supplier information of the latest two years Unit: TWD thousand dollars 2014

2015

item s

Name

amount of 〔%〕 money Occupi ed ratio of stock-in

1

other

10,523,395

100

2

relation ship with the issuer

Name

NIL

other

up to the first season of 2016

amount of 〔%〕relatio money Occu nship pied with ratio the of issuer stockin NIL 13,547,229 100

Name

amount of 〔%〕 money Occupied ratio of stock-in

other

2,783,014

relati onshi p with the issuer

100

NIL Stock-in net amount

10,523,395

NIL -

Stock-in net amount

100

Stock-in 2,783,014 net amount

100

100

Major sale customer information of the latest two years Unit: TWD thousand dollars 2014 Item Name

1

someo ne

2

other Stockout net amoun t

amount of money

up to the first season of 2016

2015 〔%〕 relatio Name Occupie d ratio of stock-out

nship with the issuer

amount of money

amount of money

〔%〕 relation Name Occupie ship d ratio with the issuer of stock-out

2,459,425

13

NIL

someo ne

2,946,457

14

NIL

16,425,320

87

NIL

other

17,923,260

86

NIL

18,884,745

100

Stock-o ut net amount

20,869,717

100

Stock-o ut net amount

〔%〕 relatio Occupied nship ratio of with stock-out the issuer

4,821,171

100

4,821,171

100

NIL

Interpretation of the changing cause of increase/decrease: The supplier/ customer of stock-out who occupied 10% or more is the same as before. The major changing cause of stock-in/stock-out amount of money is caused by the operation increased. (5) Table of the production amount value in the latest two years: Unit: TWD thousand dollars /1,000 sheets/1,000 M/1,000 SF 2015

Year Production

Unit

Amount

Product name

2014

Amount of m o n e y

Amount

Amount of money

CCL

SHT

29,297

11,497,269

27,962

10,899,097

Bonding sheet

MTR

98,157

7,748,282

95,882

6,984,570

S.F.

6,738

1,040,534

7,492

1,123,751

Multi-layer laminated board T

o

t

a

l

20,286,085

65

19,007,418

(6)Table of the Sale amount value in the latest two years Unit: TWD thousand dollars /1,000 sheets/1,000 M/1,000 SF Year sales Products

2015 Domestic Sales Quanti Value ty

CCL Bonding sheet Multi-layer laminated board

2014 Export Sales Quan Value tity

Domestic Sales Quan Value tity

Export Sales Quan Value tity

11,935

4,257,886 15,443

6,355,494 11,059

3,870,841 15,454

6,013,455

36,754

3,990,222 44,922

5,287,149 33,579

3,484,312 43,181

4,453,657

5,925

956,229

787

22,737

6,023

880,176

1,476

178,366

-

-

-

-

-

3,938

-

-

Others Total

9,204,337

11,665,380

8,239,267

10,645,478

(Note): 1. Because of the amount of other commodities and units are at odds, it could not be gathered together 2.Other commodities include the copper coil, chemical, glass cloth, raw material

(III)The working employee information of the latest two years and up to March 31, 2016: Items employee amount

direct indirect marketing management

2014

2015

Up to March 31, 2016

1,796

1,582

1,615

229

235

231

237

231

237

2,256

2,054

2,083

average age

31.71

32.44

32.63

average serve year

4.47

4.91

5.03

doctor

0.18

0.15

0.14

master

2.88

3.16

3.26

college

34.97

39.92

39.56

senior high

59.71

54.58

55.21

distribution ratio

total

under senior high

2.19

2.26

1.82

(IV) Environmental protection expense information: Total amount of the damage and punishment caused by contaminating the environment in the latest year and up to the Annual Report printed date: NIL.

66

(V) Labor-capital relationship: (1) To present the employee welfare measurement, further study, training, retired system, and the conduct condition. 1. Employee welfare measurement (1) Designated staff welfare commission to conduct the employee welfare, such as the irregular schedule employee travel and various entertainment and competitions. By the way, there are individual domestic and abroad tour allowance. (2) Award of the 3 festivals, birthday, marriage and death, and Labor Date. (3) To hold regular employee training according to the Company training system and blueprint to raise the corporation competition ability. (4) To conduct the regular employee health exam, labor insurance, national health insurance, and group insurance. (5) To hold the annual year-end party and draw prize. (6) The employee bonus system is to encourage the employee to participate in the Company management. (7) To issue the employee subscription stock right certificate to lead the employee to grow with the Company and enjoy the result together with the Company.

2. The Company further study and training system and the conduct condition. The Company training classes is divided into the dispatch training and self-conduct training. After training, it has to fill in the report for learning. Except implementing the adequated training measurement, the Company took account of the response in the training period, and combined the training with the promotion. Besides, according to the individual education training information, the Company will take it as the reference of promotion and post away in the future. The education training fee of 2015 is $967,000. Total training hour is 4,881 hours, including the inner and outer training. The average training hour of the employee is 6 hours. It is to strengthen the discipline and raise the human power quality.

3. Retirement system and the conduct condition According to the regulation of the new rules of the retirement pension, the Company allocates 6% of the retirement pension in the employee personal exclusive account of the Labor Insurance Bureau.

4. Agreement between labor and capital The rights and responsibilities of the labor and capital accordance with the Company employee handbook. To protect the right and interest of the labor and capital and to negotiate the relationship of the labor and capital, the Company devoted to strengthen the harmony of the labor and capital and conduct the mutual communication to resolve the problems. So far, the labor and capital relationship is harmony and there is no significant labor and capital dispute happened. To keep maintaining the harmony labor and capital relationship, the Company management level will take much more account of the mutual communication tunnel of labor and capital, and conduct the human-base management system to create the good future together.

5. Measurement maintain condition of the employee right and benefit All of the departments and sections stipulated completed operation flow pathes and implement the reasonable right and benefit and the responsibility accordance with the related laws and regulations and the inner control regulations. In addition, with good communication mechanism, the Company take account of the opinion exchange between the employee and the chief and make appropriate treatment to maintain the right and benefit of the employee and the Company.

67

(2) To present the damage caused by the labor and capital dispute of the latest year and up to the Annual Report printed date, and disclose the possible estimate amount of money and the measurement that might happen in the present time and the future. If it is unable to estimate, please interpretate the facts of being unable to estimate reasonably: NIL.

6. Significant Contracts: contract nature

litigant

authorization, formula using and marketing

Japan H Corporation

contract major content limited clause start/end date 2002.1.21~ Patent authorization, formula NIL 2022.3.31 using and marketing

68

VI. Financial Profile (I)Concise Balance Sheet and Profit& Loss Statement of the latest 5 years (1)Simplified Balance Sheet Consolidated Gain and Loss

Simplified Balance Sheet (Consolidated) Unit: TWD thousand dollars

Year Item Current assets Property, Plant and Equipment Intangible assets Other assets Total assets Before distribu tion Current liabilities After distribu tion Non-Current liabilities Before distribu tion Total liabilities After distribu tion Equity attributable to owners of the parent Capital Capital surplus Before distribu tion Retained earnings After distribu tion Other Equity Treasury Share Non-controlling Interests Total equity Before distribu tion After distribu tion

2012

2013

8,746,132

9,109,439

4,561,523

5,093,002

2,982 297,207 13,607,844

3,491 365,500 14,571,432

6,311,698

6,622,432

6,869,839

7,185,329

1,007,019

1,041,502

7,318,717

7,663,934

11,113,393 12,575,994 5,099,578 4,656,802

As of 2016.3.31 Financial Information 12,516,910 4,670,143

1,614 3,286 489,308 471,747 16,703,893 17,707,829 7,753,666 6,295,239

3,128 466,758 17,656,939 5,724,037

2014

2015

8,544,091

(Note)

774,818 8,528,484

1,720,810 8,016,049

9,318,909

(Note)

(Note) 1,712,617 7,436,654 (Note)

7,876,858

8,226,831

6,274,843

6,890,271

8,166,112

9,680,618

10,208,500

3,083,880 329,063

3,124,138 381,700

3,159,941 419,305 3,999,677

3,175,051 432,549 5,616,843

3,181,231 437,176 6,174,073

2,727,353

3,010,095 3,209,252

(Note)

2,169,212

2,447,198

134,547 14,284

374,338 17,227

587,189 9,297 8,175,409

456,175 11,162 9,691,780

6,289,127

6,907,498 7,384,984

(Note)

5,730,986

6,344,601

(Note): refer to the resolution of the 2016 shareholder permanent conference

69

(Note) 416,020 11,785 10,220,285 (Note)

Simplified Balance Sheet (Individual) Unit: TWD thousand dollars

Year Item Current assets Property, Plant and Equipment Intangible assets Other assets Total assets Before distributio n Current liabilities After distributio n Non-Current liabilities Before distributio n Total liabilities After distributio n Equity attributable to owners of the parent Capital Capital surplus Before distributio n Retained earnings After distributio n Other Equity Treasury Share Non-controlling Interests Total equity Before distributio n After distributio n

2012

2013

2014

2015

2,852,003 2,438,446 2,900,868 3,059,571 1,646,204 1,690,781 1,592,347 1,494,447 2,106 2,430 1,077 1,794 5,022,365 6,085,763 7,597,212 9,252,895 9,522,678 10,217,420 12,091,504 13,808,707 3,152,842 2,412,692 2,261,777 2,288,643 2,819,918

2,851,540

986,058

1,038,506

3,247,835

3,327,149

3,805,976

3,890,046

6,274,843

6,890,271

3,083,880 329,063

3,124,138 381,700

2,727,353

3,010,095

2,169,212

2,447,198

134,547 -

374,338 -

6,274,843

6,890,271

5,716,702

3,943,267

(Note)

772,550 3,925,392

1,715,397 4,128,089

4,715,817

(Note)

8,166,112

9,680,618

3,159,941 419,305 3,999,677

3,175,051 432,549 5,616,843

3,209,252

(Note)

587,189 8,166,112

456,175 9,680,618

7,375,687

(Note)

6,327,374

(Note): refer to the resolution of the 2016 shareholder permanent conference

70

Simplified Composite Income Sheet(Consolidated) Unit: TWD thousand dollars

Year Item Operating revenue Gross profit from operations Operating income(loss) Non-operating income and expenses Profit before tax Continuing operations Net Income Loss for non-operating units Net Income(loss) Other Comprehensive Income (net amount after tax) Total Comprehensive Income Net profit for parent company Net profit for Non-controlling Interests Composite income for parent company Composite income for Non-controlling Interests Earnings Per Share

2012

2013

2014

15,960,163 16,873,122 18,884,745 3,430,572 2,665,851 2,545,266 1,832,391

3,249,150

5,860

81,500

1,032,667

1,838,251

3,330,650

756,045

1,032,667

1,838,251

3,330,650

756,045

1,245,616

1,019,278

-16,048

13,389

1,229,568 1,229,568 -

As of 2016.3.31 2015 Financial Information 20,869,717 4,821,171 5,064,330 1,195,096

-

-

-

799,886 -43,841

-

1,132,450

838,123

1,541,633

2,392,187

557,910

-130,627

245,494

227,042

-113,745

-40,212

1,768,675

2,278,442

1,001,823

1,083,617

1,130,206

836,020

1,538,696

2,389,239

557,230

2,244

2,103

2,937

2,948

680

999,969

1,080,674

1,765,330

2,276,577

517,075

1,854

2,943

3,345

1,865

623

3.74

2.69

4.91

7.55

1.75

71

517,698

Simplified Statement of Comprehensive Income(Individual) Unit: TWD thousand dollars

Year Item Operating revenue Gross profit from operations Operating income(loss) Non-operating income and expenses Profit before tax Continuing operations Net Income Loss for non-operating units Net Income(loss) Other Comprehensive Income (net amount after tax) Total Comprehensive Income Earnings Per Share

2012

2013

2014

2015

5,024,071

4,817,145

5,357,007

800,132

552,787

838,482

341,904

141,366

396,502

844,999

757,037

1,216,328

1,186,903

898,403

1,612,830

2,925,513

1,186,903

836,020

1,538,696

2,389,239

-

-

-

5,852,231 1,223,274 706,201 2,219,312

-

1,130,206

836,020

1,538,696

2,389,239

-130,237

244,654

226,634

-112,662

999,969

1,080,674

1,765,330

2,276,577

3.74

2.69

4.91

7.55

72

(2)Simplified Balance Sheet Composite Income Sheet-Taiwan FAS Simplified Balance Sheet (Consolidated)-Taiwan FAS Unit: TWD thousand dollars Year Item Current assets

2009

2010

2011

2012

6,208,842

7,434,736

6,926,156

8,743,389

55,077

106,808

24,199

25,704

3,544,601

3,606,346

4,449,977

4,561,523

81,295

110,997

114,152

107,172

Other assets

296,592

152,511

121,922

154,767

Total assets

10,186,407

11,411,398

11,636,406

13,592,555

4,843,285

5,214,863

5,113,669

6,298,031

5,031,863

5,714,529

5,653,108

6,856,172

Long-term liabilities

932,016

1,159,310

711,916

845,441

Other liabilities

136,961

86,173

151,325

140,483

5,912,262

6,460,346

5,976,910

7,283,955

6,100,840

6,960,012

6,516,349

7,842,096

2,690,241

2,847,817

2,995,432

3,083,880

122,777

197,419

233,933

330,300

1,060,624

1,956,202

2,207,468

2,794,875

737,347

1,385,155

1,668,029

2,236,734

-26,441

-29,291

-37,662

-49,287

138,601

-30,679

247,894

134,547

4,274,145

4,951,052

5,659,496

6,308,600

4,085,567

4,451,386

5,120,057

5,750,459

Funds and Investments Fixed assets Intangible assets

Current

Before

liabilities

distribution After distribution

Total

Before

liabilitie distribution s

After distribution

Capital Capital surplus Retained Before earnings distribution After distribution Unrecognized net loss for pension cost Cumulative Translation Adjustments Total

Before

Sharehold distribution ers' Equity

After distribution

73

Simplified Balance Sheet (Individual)-Taiwan FAS Unit: TWD thousand dollars Year 2009

Item

2010

2011

2012

Current assets

2,052,057

2,858,228

2,205,461

2,846,532

Funds and Investments

2,516,743

3,283,682

4,296,075

4,975,514

Fixed assets

1,345,390

1,595,067

1,682,938

1,646,204

4,710

2,804

2,151

2,106

Other assets

262,666

88,481

32,684

50,577

Total assets

6,181,566

7,828,262

8,219,309

9,520,933

1,282,940

1,729,025

1,717,228

2,248,503

1,471,518

2,228,691

2,256,667

2,806,644

Long-term liabilities

769,203

1,067,969

700,737

834,180

Other liabilities

143,621

89,800

154,279

143,935

2,195,764

2,886,794

2,572,244

3,226,618

2,384,342

3,386,460

3,111,683

3,784,759

2,690,241

2,847,817

2,995,432

3,083,880

122,777

197,419

233,933

330,300

1,060,624

1,956,202

2,207,468

2,794,875

737,347

1,385,155

1,668,029

2,236,734

Intangible assets

Current

Before

liabilities

distribution After distribution

Total

Before

liabilitie distribution s

After distribution

Capital Capital surplus Retained Before earnings distribution After distribution Unrecognized net loss for pension cost Cumulative

(26,441)

(29,291)

138,601

(30,679)

(37,662)

(49,287)

247,894

134,547

Translation Adjustments Total

Before

3,985,802

4,941,468

5,647,065

6,294,315

3,797,224

4,441,802

5,107,626

5,736,174

Sharehold distribution ers' Equity

After distribution

74

Simplified Balance Sheet (Consolidated)-Taiwan FAS Unit: TWD thousand dollars Year 2009

2010

2011

2012

Item Operating revenue

9,885,533

13,487,405

14,738,806

15,960,163

Gross profit from operations

1,812,698

2,445,126

2,432,572

2,663,604

979,833

1,372,517

1,227,539

1,242,466

Non- operating income

25,160

117,682

43,675

48,745

Non-Operating expenses and losses

97,131

81,239

102,208

64,788

Income before tax from continuing operations

907,862

1,408,960

1,169,006

1,226,423

Gain and loss from operating department

788,064

1,220,961

852,036

1,129,090

Gain and loss from non-operating department

-

-

-

-

Abnormal Gain and loss

-

-

-

-

Accumulate alteration amount related to the alteration of FAS

-

-

-

-

Net income or loss for current period

788,064

1,220,961

852,036

1,129,090

2.80

4.30

2.87

3.73

Operating ( loss ) gain

Earnings Per Share

75

Simplified Balance Sheet (Individual)-Taiwan FAS Unit: TWD thousand dollars Year 2010

2011

2012

3,568,185

4,508,029

4,703,075

5,024,072

Gross profit from operations

613,884

713,059

617,674

797,923

Operating ( loss ) gain

320,201

352,735

232,987

338,722

Non- operating income

489,484

963,945

759,458

875,136

Non-Operating expenses and losses

(29,118)

(23,579)

(63,931)

(30,100)

Gain and loss from operating department

780,567

1,293,101

928,514

1,183,758

Gain and loss from operating department

739,642

1,218,855

850,183

1,126,846

Income (loss) on discontinued operations

-

-

-

-

Extraordinary Gain (Loss)

-

-

-

-

Accumulate alteration amount related to the alteration o f F A S

-

-

-

-

739,642

1,218,855

850,183

1,126,846

2.80

4.30

2.87

3.73

2009 Item Operating revenue

Net income or loss for current period Earnings Per Share

76

Name and the Check Opinion of the Certified Accountant of the latest 5 years



Year

Name of Accountant

Opinion

2011

Jiang, Chon-Yi Yang, Liu-Fen

Clean Audit Opinion

2012

Jiang, Chon-Yi Yang, Liu-Fen

Clean Audit Opinion

2013

Jiang, Chon-Yi Yang, Liu-Fen

Clean Audit Opinion

2014

Yang, Liu-Fen Chen, Yin-Ju

Clean Audit Opinion

2015

Yang, Liu-Fen Chen, Yin-Ju

Clean Audit Opinion

If there is the event of changing the accountant, please present the interpretation of changing clause of the former and the step accountants: It changed the KPMG Firm because of the adjustment of the inner affairs of the firm.

77

(II) Financial Analysis of the latest 5 years (1)Financial Analysis(consolidated) Year

2012

Item

Debts ratio Capital structure(%)

Repayment ability%

Profitability

Degree of leverage

2015

As of 2016.3.31

52.60

51.06

45.27

42.12

Long-term capital to Property, Plant and Equipment Ratio

156.41

152.25

170.89

234.66

245.30

Current ratio

138.57

137.55

143.33

199.77

218.67

Quick ratio

111.76

113.21

119.52

171.33

186.73

24.05

21.71

40.06

94.06

106.71

3.26

3.04

3.01

3.02

2.93

111.96

120.06

121.26

120.86

124.57

9.16

8.50

8.75

8.45

7.77

4.05

4.40

3.80

3.44

3.43

39.84

42.94

41.71

43.19

46.97

3.50

3.31

3.70

4.48

4.13

1.17

1.16

1.13

1.18

1.09

9.32 18.98

6.24 12.70

10.11 20.44

14.08 26.78

3.19 5.60

39.87

33.05

58.17

104.9

23.77

7.10 3.74

4.97 2.69

8.16 4.91

11.46 7.55

11.57 1.75

17.08

18.83

25.48

56.78

12.13

151.12

178.36

100.98

131.04

150.90

5.36

5.90

10.43

16.94

4.07

Operating leverage

2.14

2.96

2.18

1.74

1.69

Financial leverage

1.04

1.05

1.03

1.01

1.01

Turnover of accounts receivable (times) Average collection days of receivables Turnover of inventory (times) Turnover of accounts payable (times) Average days of sales Property, plant and equipment turnover rate (times) Turnover of total assets (times) Return on assets (%) Return on equity (%) Profit Before Tax to Capital Stock (%) Profit margin (%) Earnings Per Share (TWD) Cash flow ratio (%)

Cash flow

2014

53.78

Times interest earned ratio

Operating efficiency

2013

Cash flow adequacy ratio (%) Cash flow reinvestment ratio (%)

78

The variation causes of the financial ratio of the latest two year: variation increase/decrease not reach to 20% could depose from analysis. 1. Long-term fund to property, plant and equipment ratio: This term caused by increase in the profit and the long-term debt. 2. Index of repayment ability: This term caused by increase in the profit and short-term debt’s switching to the long-term debt. 3. Property, plant and equipment turnover rate: This term caused by the profit increase. 4. Index of profitability: Because of the effect of market product demand, the gross profit is higher than the former year and the index of the related profit increase as well. 5. Index of cash flow: Because the present term profit is higher than last year, the cash flow ratio, cash flow adequacy ratio, and cash flow reinvestment ratio is higher than last year. 6. Operating leverage is lower than last year, times interest earned ratio is higher than last year: Caused by the present term gross profit is higher than last year.

79

(1-1)Financial Analysis(Individual) Year

2012

2013

2014

2015

Item Capital structure(%) Repayment ability%

Operating efficiency

Profitability

Cash flow

Degree of leverage

Debts ratio Long-term fund to property, plant and equipment ratio Current ratio Quick ratio Times interest earned ratio Turnover of accounts receivable (times) Average collection days of receivables Inventory Turnover rate (times) Turnover of accounts payable (times) Average days of sales Property, plant and equipment turnover rate (times) Turnover of total assets (times) Return on assets (%) Return on equity (%) Profit Before Tax to Capital Stock (%) Profit margin (%) Earnings Per Share (TWD) Cash flow ratio (%)

34.11

32.56

32.46

29.89

431.84

457.40

546.56

730.09

126.10 100.30 48.92

106.55 84.27 37.84

92.01 73.65 55.17

126.81 107.84 97.26

3.24

3.01

3.36

3.21

112.65

121.26

108.63

113.70

8.51

7.51

7.99

8.40

4.21

3.79

3.80

3.38

42.89

48.60

45.68

43.45

3.05

2.85

3.36

3.92

0.53 12.97 18.99

0.47 8.68 12.70

0.44 14.02 20.44

0.42 18.64 26.78

38.49

28.76

51.04

92.14

22.50 3.74

17.36 2.69

28.72 4.91

40.83 7.55

15.56

18.66

14.79

53.77

Cash flow adequacy ratio (%)

85.71

81.50

58.33

74.13

Cash flow reinvestment ratio (%)

-1.61

-1.13

-0.87

3.68

Operating leverage

3.37

6.61

3.08

2.24

Financial leverage

1.08

1.21

1.08

1.04

The variation causes of the financial ratio of the latest two year: variation increase/decrease not reach to 20% could depose from analysis. 1. Long-term fund to property, plant and equipment ratio: This term caused by increase in the profit and the long-term debt. 2. Index of repayment ability: This term caused by increase in the profit and short-term debt’s switching to the long-term debt. 3. Index of profitability: Because of the effect of market product demand, the gross profit is higher than the former year. 4. Index of cash flow: Because the current liabilities is higher than last year, the cash flow ratio and cash reinvestment ratio is higher than last year; and because of the capital expenditure is higher than last year, the cash flow adequacy ratio is also lower than last year. 5. Operation leverage: Caused by the present term gross profit is higher than last year.

80

Note: the calculation formula of the ratio in the above tables are as followings 1. Capital structure analysis (1) Debts ratio=Total liabilities /Total assets. (2) Long-term capital to Property, Plant and Equipment Ratio=(Total equity+Non-Current liabilities)/ Property, plant and equipment net amount. 2. Repayment ability (1) Current ratio=Current assets/Current liabilities. (2) Quick ratio=(Current assets-Inventory-Advanced payment)/Current liabilities. (3) Times interest earned ratio= Net profit before Income Tax and Interest expense/Interest expense. 3. Operating efficiency (1) Turnover of accounts receivable (including Accounts Receivable and Notes Receivable occurred from operation)= Net sales/Average accounts receivable (including Accounts Receivable and Notes Receivable occurred from operation) balance. (2) Average collection days of receivables=365/Turnover of accounts receivable. (3) Inventory Turnover rate=Cost of sales/Average Inventories. (4) Turnover of accounts payable (including Accounts Payable and Notes Payable occurred from operation)= Cost of sales/Average accounts payable (including Accounts Payable and Notes Payable occurred from operation) balance. (5) Average days of sales=365/Inventory Turnover rate. (6) Property, plant and equipment turnover rate=Net sales/Average property, plant and equipment net amount. (7) Turnover of total assets=Net sales/Average Total assets. 4. Profitability (1) Return on assets=〔Post-tax profit or loss+Interest expense×(1-tax rate)〕/ Average Total assets. (2) Return on equity=Post-tax profit or loss/Average Total equity. (3) Profit margin=Post-tax profit or loss/Net sales. (4) Earnings Per Share=(Profit (loss), attributable to owners of parent-Preferred share divedend)/加 Weighted average issued shares.(Note4) 5. Cash flow (1) Cash flow ratio=Operational Net Cash flow/Current liabilities. (2) Net Cash flow adequacy ratio=Operational Net Cash flow within 5 years/ (Capital Expenditure+ Inventory increment+Cash dividends) within 5 years. (3) Cash flow reinvestment ratio=(Operational Net Cash flow-Cash dividends)/(property, plant and equipment gross amount + Long-term investments + Other Non-Current assets + Working capital).(Note5) 6. Degree of leverage: (1) Operating leverage=(Operating revenue net amount-Altered Operating costs and expenses) / Operating profit (Note6). (2)Financial leverage=Operating profit / (Operating profit-Interest expense).

81

(2) Financial Analysis(consolidated)-Taiwan FAS Year Item

2009

2010

2011

2012

58.04

56.61

51.36

53.59

146.88

169.43

143.18

156.83

128.19

142.57

135.44

138.83

110.90

117.04

112.94

111.95

12.50

25.81

20.54

23.99

3.04

3.41

3.48

3.26

120.17

107.04

104.88

111.96

10.15

9.95

9.74

9.17

Operating Turnover of accounts efficiency payable (times)

5.26

4.69

4.88

4.40

Average days of sales

35.95

36.68

37.47

39.80

Turnover of fixed assets (times)

2.79

3.74

3.31

3.50

Turnover of total assets (times)

0.97

1.18

1.27

1.17

Return on assets(%)

8.89

11.70

7.82

9.30

Return On Equity(%)

20.33

26.47

16.06

18.87

36.42

48.20

40.98

40.29

33.75

49.48

39.03

39.77

Profit margin (%)

7.97

9.05

5.78

7.07

Earnings Per Share (TWD)

2.72

3.88

2.88

3.74

Cash flow ratio (%)

24.53

32.45

22.43

18.72

65.68

108.87

113.19

108.06

11.14

17.16

6.70

5.92

2.80

1.96

1.98

2.45

1.09

1.04

1.05

1.04

Debts ratio

Capital structure % Long term capital to fixed assets ratio Current ratio Repayment Quick ratio ability % Times interest earned ratio Turnover of accounts receivable (times) Average collection days of receivables Turnover of inventory (times)

Operating profit

In (%) of Profitability capital stock Profit Befo re Tax

Cash flow adequacy ratio Cash flow (%) Cash flow reinvestment ratio (%) Degree of Operating leverage leverage Financial leverage

82

(2-2)Financial Analysis(individual)-Taiwan FAS Year Item

2009

2010

2011

2012

35.52

36.88

31.30

33.89

353.43

376.75

377.19

433.03

159.95

165.31

128.43

126.60

138.46

136.58

106.53

100.36

34.39

68.89

43.70

48.79

Turnover of accounts receivable (times)

3.32

3.52

3.39

3.24

Average collection days of receivables

110

104

108

112.65

Inventory turnover Rate (times)

11.15

9.64

9.17

8.51

Operating Turnover of accounts efficiency payable (times)

5.66

5.00

4.85

3.98

Average days of sales

33

38

40

42.89

Turnover of fixed assets (times)

2.65

2.83

2.79

3.05

Turnover of total assets (times)

0.58

0.58

0.57

0.53

Return on assets (%)

13.10

17.60

10.82

12.94

Return On Equity (%)

20.50

27.31

16.06

18.87

11.90

12.39

7.78

10.98

29.02

45.41

31.00

38.39

Profit margin (%)

20.73

27.04

18.08

22.43

Earnings Per Share (TWD)

2.55

3.88

2.87

3.73

Cash flow ratio (%)

36.23

30.07

23.25

17.20

61.42

74.99

77.68

65.96

6.50

4.33

(1.22)

(1.66)

2.74

2.79

3.98

3.40

1.08

1.06

1.10

1.08

Debts ratio

Capital structure % Long term capital to fixed assets ratio Current ratio Repayment Quick ratio ability % Times interest earned ratio

Operating profit

In (%) of Profitability capital stock Profit Befo re Tax

Cash flow adequacy ratio Cash flow (%) Cash flow reinvestment ratio (%) Degree of Operating leverage leverage Financial leverage

83

Note: the calculation formula of the ratio in the above tables are as followings: 1.Capital structure analysis (1) Debts ratio=Total liabilities /Total assets. (2) Long term capital to fixed assets ratio=(Net amount of shareholders' equity+Long-term liabilities)/Fixed assets net amount. 2.Repayment ability (1) Current ratio=Current assets/Current liabilities. (2) Quick ratio=(Current assets-Inventories-advanced payment)/Current liabilities. (3) Times interest earned ratio= Income Tax and Interest expense/Interest expense. 3.Operating efficiency (1) Accounts receivable(including Accounts Receivable and Notes Receivable occurred from operation) turnover rate = Net sales / Average Accounts receivable(including Accounts receivable and Notes Receivable occurred from operation ) net amount. (2) Average collection days of receivables=365/Accounts receivable turnover. (3) Inventory turnover rate=Cost of sales/Average Inventories. (4) Accounts payable(including Accounts Payable and Notes Payable occurred from operation) turnover rate= Cost of sales/Average Accounts payable(including Accounts Payable and Notes Payable occurred from operation) net amount. (5) Average sales day=365/Inventory turnover rate. (6) Fixed assets turnover=Net sales/Fixed assets net amount. (7) Turnover of total assets=Net sales/Total assets. 4.Profitability (1) Return on assets=[Profit after tax+Interest expense(1-tax rate)]/Average Total assets. (2) Return On Equity=Net profit after tax/Shareholders' equity net amount. (3) Profit margin=Post-tax profit or loss/Net sales. (4) Earnings Per Share=(Profit after tax- Preferred share dividend)/Weighted average issued shares. 5.Cash flow (1) Cash flow rate=Operational Net Cash flow/Current liabilities. (2) Cash flow adequancy ratio=Operational Net Cash flow within 5 years/ (Capital Expenditure+ Inventories increment+Cash dividends) within 5 years. (3) Cash flow reinvestment ratio = (Operational Net Cash flow - Cash dividends) / (Fixed assetsgross amount+Long-term investments+Other assets+Working capital). 6.Degree of leverage (1) Operating leverage=(Operating revenue net amount-Variated Operating costs and expenses)/ Operating profit (2) Financial leverage=Operating profit/(Operating profit-Interest expense).

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(III) Supervisor Review Report Supervisor Review Report To Grant The Board of Director designated and sent the business operation report, financial report, and profit allocation proposal of 2015. The financial report has been commissioned Accountant Liu-Feng, Yang and Yin-Zu, Chen of KPMG accountant firm and has completed and issued the checking report. The above mentioned business operation report, financial report, and profit allocation proposal have been checked by the Supervisor completely and considered that there is nothing not compliance. So, it has to issue the report accordance with the regulation of Clause 219 of the Company Act. Please be informed carefully.

With Kind Regard

Shareholder Conference, EMC

Supervisor, EMC

_______________________ Dou-Jen, Sen

_______________________ Fong-Zon, Dong

March 23, 2016

85

(IV) Individual Financial Statement of 2015: Refer to the Annex III (V) 2015 Consolidated Financial Statement of the Parent/ Subsidiary Company that is certified and checked by the accountant: Refer to the Annex IV. (VI) If the Company or the related corporation

happened the financial turnover

difficulty in the latest year and up to the Annual Report printed date, it has to present the effect to the Company financial conditon: NIL.

86

VII. Review Analysis and Risk Affairs of the Financial Condition and Management Result (I)Analysis on Financial Status:

Unit: TWD thousand dollars;%

2015

2014

Variation Amount

Current assets

12,575,994

11,113,393

1,462,601

Long-term investments

-

Year Item

Fixed assets

-

-

% 13.16 -

4,656,802

5,099,578

-442,776

-8.68

3,286

1,614

1,672

103.59

471,747

489,308

-17,561

-3.59

17,707,829

16,703,893

1,003,936

6.01

Current liabilities

6,295,239

7,753,666

-1,458,427

-18.81

Long-term liabilities

1,235,660

539,366

696,294

129.09

485,150

235,452

249,698

106.05

Total liabilities

8,016,049

8,528,484

-512,435

-6.01

Share capital

3,175,051

3,159,941

15,110

0.48

432,549

419,305

13,244

3.16

5,616,843

3,999,677

1,617,166

40.43

456,175

587,189

-131,014

-22.31

11,162

9,297

1,865

20.06

9,691,780

8,175,409

1,516,371

18.55

Intangible assets Other assets Total assets

Other liabilities

Capital surplus Retained earnings Share holders' equity and other Items Non-controlling interests Total Shareholders' Equity

Remark: 1. Increment of Intangible assets:Owing to the purchase of Intangible assets. 2. Increment of Long-term liabilities:Owing to the loan. 3. Increment of Other liabilities:Owing to the increase of deferred income tax. 4. Increment of Retained earnings:Owing to the continuous incoming profit. 5. Decrease of Share holders' equity and other Items :Owing to the exchange rate. 6. Increment of Non-controlling interests:Owing to the continuous profit earning.

87

(II) Financial performance: Unit: TWD thousand dollars Year

2015

2014

Item

Alteration

Variation ratio

amount

(%)

Operating revenue, net

20,869,717

18,884,745

1,984,972

10.51

Operating costs

15,805,387

15,454,173

351,214

2.27

Gross profit from operations

5,064,330

3,430,572

1,633,758

47.62

Operating expenses

1,815,180

1,598,181

216,999

13.58

Operating ( loss ) gain

3,249,150

1,832,391

1,416,759

77.32

81,500

5,860

75,640

1290.78

3,330,650

1,838,251

1,492,399

81.19

938,463

296,618

641,845

216.39

2,392,187

1,541,633

850,554

55.17

Non-operating income and expenses Profit before tax from continuing operations Deduction: Tax expense Profit after tax from

continuing operations Increase/decrease ratio variation analysis interpretation: front/rear term variation reaches 20% variation amount of money reaches NT$10,000,000. (1) Gross profit from operations, Operating (loss) gain: The gross profit of the present term is higher than last year because of the effect of market product demand. (2) Non-operating income and expenses: effect of exchange rate variation. (3) Tax expense, Profit before/after tax from continuing operations: caused by the present term profit is higher than last year.

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(III) Review and Analysis of Cash Flow (1) Shifting Analysis of the Latest Two Years

Net cash flows from operating activities Net cash flows used in investing activities Net cash flows used in financing activities 淨現金流入

Unit: TWD thousand dollars Variation Alteration % amount

2015

2014

1,297,207

466,199

(75,703)

(109,278)

(1,060,662)

(328,018)

160,842

28,903

831,008

178.25

33,575

(30.72)

(732,644) 131,939

223.35 456.49

Causes of variation interpretation (1) Net cash flows from operating activities is higher than last year: Caused by the present term profit is higher than last year. (2) Net cash flows used in investing activities is lower than last year: Caused by the expense of obtaining property, plant and equipment is lower than last year. (2) Net cash flows used in financing activities is higher than last year: Caused by repayment the debt. (3)net cash flow-in is higher than last year: Net cash flows from operating activities is higher than the Net cash flows used in investing activities.

(2) Cash Shifting Analysis in the future one year Unit: TWD thousand dollars Cash flow from Cash outflow Cash residual Plan for cash shortage Cash residual the operating for the year at the revenue beginning of Investment Financial plan the term plan 653,223 1,783,459 1,882,670 (99,211) 1. Cash flow condition analysis of the year (1) Operation activity: Match up the operation expect the net cash flow-in will be $1,783,459,000 come from the operation activity. (2) Investment activity: Match up the business affair demand to improve the producing facilities (3) Financing activity: Distribute cash stock interest match up the capital condition to increase loan 2. Redeem measurement and shifting analysis when cash insufficient: proposed to loan from the bank to make up the insufficient amount of money.

(IV) Effect of Significant capital expense to the financial affairs of the latest year: NIL. (V) The latest year reinvestment policy, the profit/lose major cause and the improve plan and the next year investment plan: NIL. (VI) Risk management (1) Effect of the latest year interest rate, exchange rate variation, inflation to the Company profit/lose and the future measurement: Item

2015(NT$ Thousand dollars) 35,792 112,878

Interest expense Foreign exchange (loss) gain To obtain much more premium loan interest rate, the Company estimate the

89

bank loan interest rate and keep close contact with the bank. To deal with the foreign exchange variation, the Company designated concise foreign exchange avoid risk strategy and strict control procedure.

(2)Major causes of profit/lose and the future measurement of conducting high risk, high lever investment, capital loan to others, policy of endorsement guarantee and financial derivative transaction: except the financing endorsement guarantee to the subsidiary company of automatic reinvestment, the Company has not conducted any high risk, high

lever investment, capital loan to others, policy of endorsement guarantee and financial derivative transaction. Out of the careful estimate, regular response and control, the Company designated the Treatment Procedure of Obtaining and Measurement of Property, Operation Procedure of Loaning Capital to Others, Operation Procedure of Endorsement Guarantee, Treatment Procedure of Financial Derivative Transaction to follow. The endorsement guarantee amount will be decrease gradually followed by the profit of the subsidiary company.

(3) The future development and research plans and the expected cast in research and development Expense: Insist green environment protection management idea The future research and development plan will focus on environment protection and conserve energy. expected cast Items of the future expected major factors that affect in expense of research and complete/mass the research and research and development plans produce date development to success development Ultra-Low Signal lose High Tg Product Certifications environmental the 4th season of $12,000,000 2016 and market demand protection base material for radio frequency High Size-stability Ultra-Low Signal Product Certifications Lose the 4th season of $14,000,000 Environmental 2016 and market demand protection Base Material Low-Glue High-Reliable Environmental the 4th season of Product Certifications $6,000,000 Protection Prepreg 2016 and market demand for Rigid-Flex Board

(4) Effect and measurement of domestic/abroad important policy and laws change to the Company financial affairs of the latest year: NIL.

90

(5) Effect and measurement of science and technology change to the Company financial affairs of the latest year: NIL. (6) Effect and measurement of corporation image change to the risk management of the latest year: NIL. (7) Expected benefit and efficiency, possible risk, and measurement of merge of the latest year: NIL. (8) Expected benefit and efficiency, possible risk and measurement of expanding factory building of the latest year: NIL. (9) Risk and measurement of concentrated Stock-in/Stock-out of the latest year: NIL. (10) Effect of the mass transfer or variation of share right of the Director, Supervisor, or the major shareholder who hold 10% or more shares to the Company, risk and measurement of the latest year: NIL. (11) Effect of the variation of right of management to the Company Risk and Measurement of the latest year: NIL. (12) Litigation and non-litigation events of the latest year: NIL. (13) Other important risk and measurement: NIL. (VII) Other important affairs: NIL.

91

VIII. Special Record Items (I) Related information of the related corporation (1) Organization profile of the related corporation 1. Structure of the related corporation 33.5%

EMC

Li-Chen Science and Technology Inc.

100%

EMC OVERSEAS HOLDING INCORPORATED 100%

(GRAND ZHUHAI INCORPORATED)

99.79%

100%

(GRAND ZHONGSHAN INCORPORATED)

(GRAND SHANGHAI INCORPORATED 100%

100%

EMC(QunSHAN)

EMC(ZhongShan)

(2) Basic Information of the related corporation Company

Date of Incorporati on

Address

Paid-up Capital Major Business Item

EMC OVERSEAS HOLDING INC. Jul. 1999

P.O. Box 957,Offshore Incorporations Center, Road US$35,656,950 Town, Tortola, British Virgin Islands

Investment

Li Cheng Tech Co., Jun. 1999 LTD.

No.11, Gongye 5th Rd., Guanyin Dist., Taoyuan City NT$489,951,900

Rechargeable Polymer Lithium Battery

Grand Shanghai May.1997 Incorporated

P.O. Box 957,Offshore Incorporations Center, Road US$18,200,000 Town, Tortola, British Virgin Islands

General Import/Export Business Investment

EMC(KunShan)

Sep. 1997

No. 368, You Bi Road, Zhou Shi Township, Kun US$18,200,000 Shan City, Jiangsu Province

Manufacturing PCB bonding sheet and CCL

GRAND SHANGHAI Apr. 2004 INCORPORATED

Scotia Center, 4thFloor, P.O. Box 2804, George US$33,798,821 Town, Grand Cayman, Cayman Islands

General Import/Export Business Investment

92

Company

Date of Incorporati on

Address

Paid-up Capital Major Business Item

GRAND ZHONGSHAN May. 2004 INCORPORATED

P.O. Box 957,Offshore Incorporations Center, Road US$16,437,000 Town, Tortola, British Virgin Islands

General Import/Export Business Investment

EMC(ZhongShan) Jun. 2004

No. 7, Ke Ji Blvd., Huo Ju Development Zone, US$20,200,000 Zhong Shan City, Guangdong Province

Manufacturing PCB bonding sheet and CCL

(3)According to the Clause 369-3 of the Company Act, if it presumption control and subsidiary relationship, it has to disclose the items: NIL. (4)The industries of the entire related corporation business affair comprised: refer to the above mentioned the basic information of the related corporation. (5)Director, Supervisor, and General Manager of the related corporation. March 31, 2016

Company EMC OVERSEAS HOLDING INC. GRAND SHANGHAI INCORPORATED GRAND SHANGHAI INCORPORATED GRAND ZHONGSHAN INCORPORATED Elite Electronic Material (Kunshan) Co. Ltd.

Elite Electronic Material (Zhongshan) Co., Ltd.

Title

Name or Representative

Dong, Ding-yu (Legal Director Representative, Elite Material Co., Ltd.) Dong, Ding-yu (Legal Director Representative, EMC OVERSEAS HOLDING INC.) Dong, Ding-yu (Legal Representative, Grand Zhuhai Director Incorporated) Tsai, Hui-Liang/Zhang, Wen-Xing Dong, Ding-yu (Legal Director Representative, Grand Zhuhai Incorporated) Grand Shanghai Incorporated Director Representative:Dong, General Ding-yu/Tsai, Hui-Liang/Zhang, manager Wen-Xing Guan, En-Xiang Grand Zhongshan Incorporated Director Representative:Dong, General Ding-yu/Tsai, Hui-Liang/Zhang, manager Wen-Xing Guan, En-Xiang

93

Holding of shares Number of shareholding shares(Share) ratio(%) 35,656,950

100

33,798,821

100

18,161,515

99.79

16,437,000

100

-

100

-

100

(6) Operation Profile of the related corporation 2015.12.31/Unit: TWD thousand dollars

Net

Company

Capital

Total

Total

assets

liabilities

Net value

income or

Earnings

Operating

Operating

loss for

per share

revenue

Income

current

after tax

period

(dollars)

(After tax) EMC OVERSEAS

1,160,487

9,148,078

50

9,148,028

0

0

2,220,063

62.26

1,109,446

7,464,419

50

9,105,619

0

0

2,219,965

65.68

597,415

5,741,450

462,862

5,278,588

1,340,923

(32,584)

1,394,231

76.61

Zhongshan

539,545

4,320,985

484,711

3,836,275

713,584

(25,718)

828,938

50.53

Incorporated Elite Electronic Material (Kunshan) Co. Ltd. Elite

597,415

7,563,197

2,219,112

5,344,085

9,396,478 1,605,826

1,421,126

-

663,065

5,492,288

1,718,059

3,774,229

5,906,127

846,006

-

HOLDING INC. Grand Zhuhai Incorporated Grand Shanghai Incorporated Grand

Electronic Material

981,272

(Zhongshan) Co., Ltd. Note: Earnings per share is according to the share amount of the end of the term to calculate

(7) Consolidated Financial Statement tablet of the related corporation: should intake draw up related corporation Consolidated Financial Statement tablet is the same as the should intake draw parent/subsidiary company according to the Financial and Accounting Guideline Bulletin No.7, so it has not drawn related corporation combined financial tablet.

94

(II) Private equity conducting condition of the latest year and up to the Annual Report printed date: No private equity conduction. (III) Subsidiary company hold or measure the Company stock condition of the latest year and up to the Annaul Report printed date: None. (IV) Other necessary additional Note items: NIL. (V) If it happened the significant effect events to the shareholder right and benefit or the stock price ruled by the Clause 36-2-2 of the Company Act: None.

95

Annex I.

EMC The 1st Employee Subscription Right Certificate Issue and Subscription Measurement of 2011 1. Issue Purpose: To encourage the employee effectively, to keep the required talent for the Company development, to raise the centripetal force and loyalty of the employee to the Company, to promote the Company operation result, to share the operation result to the operation result to the colleagues promptly, and to reach the target of benefit and glory together, the Company stipulated the measurement. 2. Issue Period: The employee subscription stock right certificate will be issued one year after approved by the authorization organization. It will depend on the actual demand to issue one or two times. The actual issued date will be stipulated by the Company Chairman. 3. Issue total amount: The total issued amount is 7,500 units. Per unit could subscribe the Company common stock 1,000 shares accordance with the related regulation of the Measurement. 4. People of Subscription: The working employee and the employee who is full-time accredit at 8-degree and above of the domestic or abroad subsidiary company that the Company directly or indirectly hold 50% or more the right to vote or the employee performed perfect approved by the Chairman, and conference to the working result, the entire contribution, or special acting or seniority, etc, after reviewed by the Chairman and then put forward and hand in to the Board of Directors to pass. Any of the authorized employee subscription amount could not surpass 10% of the employee subscription stock right certificate. Meanwhile, any sole subscription person is unable to subscribe surpass 1% of the total amount of issued stock on the end date of the year. 5. Subscription Price: The subscription price will be the same as the Company common stock closing price on the date of the subscription issued. 6. Period of right exercise: The continue to exist period of the certificate is 5 years The subscription person should execute the right of subscription as below 2 years after granting the certificate: 1:2 years after granting the certificate, the employee is able to subscribe up to 50% of the amount of the certificate by the stipulated price. 2:3 years after granting the certificate, the employee is able to subscribe up to 75% of the amount of the certificate by the stipulated price. 3:4 years after granting the certificate, the employee is able to subscribe up to 100% of the amount of the certificate by the stipulated price. 7. Exercise Limit: The certificate could not be transferred in the period of continue to exist, but not limit to the successor. After at maturity, the non-executed certificate will be regarded as abandon, so the subscribed person could not claim the right. If the subscribed person leave the job by causes, it will be treated as the followings: 1: The retire employee follows the example of the working employee to exercise the right of subscription accordance with the time schedule of the Clause 6 of the Measurement. 2: Volunteer to leave the job or dismissed according to the related regulations of the Labor Safety and Health Basic Act: the subscription certificate with exercise right could exercise the subscription right within a month dated from the date of leaving the job position. But if it happens to be suspended transferring, the period of exercising should be postponed according to the continue to exist period. The subscription certificate without exercise right would forfeit the right on the date of leaving the job. 3: Common Death: The subscription certificate with exercise right could be exercised by the successor within a year from the date of death. The subscription certificate without exercise right could not request to perform the right after the date of death.

96

4: Dead or handicapped caused by professional disaster: 4.1: The grant subscription certificate of the man who is handicapped caused by professional disaster and unable to work continuously could exercise the entire subscription right during the period of leaving the job and could not be limited by the time schedule or ratio of the Clause 5th of the Measurement. Definitely, the right of subscription should be selected from one of the date counted from the date of leaving the job or the two-year maturity date of granting the subscription certificate and should exercise within a year. Absolutely, it should be limited in the period of continuing to exist. 4.2: The grant subscription certificate of whom dead of suffering professional disaster could be exercised the entire right by the successor after the death and might not be limited by the related time schedule and subscription ratio of the Clause 6th of the Measurement. Definitely, the right of subscription should be selected from one of the date counted from the date of death or the two-year maturity date of granting the subscription certificate and should exercise within a year. Absolutely, it should be limited in the period of continuing to exist. 5: Currently in suspension without pay: The subscription certificate with exercise right of the employee who approved to be currently in suspension without pay could exercise the subscription right from the date of being currently in suspension without pay within one month. But if it happens to be suspend transferring according to the regulations or laws, the subscription right could be recovered after being reinstated. Definitely, the subscription right exercise period should be postponed accordance with the period of being currently in suspension without pay. 6: Severance: The subscription certificate with exercise right could exercise the right from the date of severance effected within one month. But if it happens suspend transfer in according to the laws or regulations, the exercise period of the subscription certificate should be postponed accordance with the period of continuing to exist. The subscription certificate without exercise right should be canceled from the date of severance effected. 7: Post away: The right of the subscription certificate of whom is post away due to the demand of the Company operation and approved by the Company should not be effected. 8: Other issues of terminating or adjusting the employ relationship could follow time schedule and ratio of the right accordance with the Clause 6 of the Measurement or being approved the subscription right by the Company Chairman and reported to the Board of Directors for post recognition. 9: The Company could reclaim the subscription certificate without exercise right if the man who violated significant fault of the labor contracts or working regulation after being grant the subscription certificate. 8. Ways of performing an Agreement: The ways of performing an agreement of the subscription is that the Company will issue new Shares to hand over to the employee. 9. Subscription Price Adjustment: (1)If the subscription certificate meets any variation of the Company shares after issuing, ie., conduct cash capital increase, profit or capital surplus transfer to capital increase, corporation merge, stock split, or conduct cash capital increase joint to the GDR, the stock price will be adjusted accordance with the followings. The calculation down to NT$ cent. Below NT$ cent will be round down or up. Subscription Price after adjustment = Subscription Price before adjustment X 【﹝issued stock amount + ((per share payment×new stock issue amount)÷Subscription Price before adjustment)﹞÷(issued stock amount+new stock issue amount)】

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1: Issued stock amount is the Company issued common stock amount (the Company repay but not being canceled or transfer treasury shares included”; subscription stock payment certificate and the shares of bond right transfer certificate are not included). 2: If the per share payment is stock grant or stock split, the payment will be “zero(0)”. Because the Company issue the employee bonus new Shares, the adjustment formula of the per share payment as mentioned above should be the closing price one day before the shareholder conference and consider the effect of ex-right and ex-dividends. 3: If the subscription price after adjustment is higher than before adjustment, it would not be adjusted. (2)If the subscription certificate meets the condition of common stock share decreasing not caused by treasury share cancel decrease capital after issued, it should adjust the subscription price after adjustment and the subscription ratio after adjustment on the decrease capital record date according to the below formula(calculated down to NT$ cent, below the NT$ cent should be round down or up). The subscription Price after adjustment = the subscription before adjustment ×〔issued common stock amount before decrease capital÷issued common stock amount after decrease capital〕 (3)If the subscription meets the condition that the Company distribute the common stock cash stock interest occupied per share present price is 1.5% or more, it should adjust down the transfer price accordance with the below formula of the occupied per share present price ratio on the ex-dividends record date.: Transfer Price after adjust down = Transfer Price before adjust down×(1 - the ratio of distribution common stock cash stock interest occupied the per share present price). The designation of the per share present price should follow the simple arithmetic mean of the common stock closing price of the date of 1, 3, or 5 operation days before the date of cash stock interest stopping transferring ex-dividends announcement date. 10. Procedure of Exercising Subscription Right: 1: The subscription person could exercise the subscription right accordance with the designated time schedule of the Clause 3rd of the Measurement except the suspend transferring period and the date from the Board of Directors called for deciding the grant stock record date and interest allocation record date to the grant stock record date and interest allocation record date (prevail the latest date) , and fill in the subscription demandant to apply from the Company stock affairs agency. It will be effective in delivery time and could not apply for rescinding. 2: The Company will announce the subscription person to pay the stock payment to the appointed bank after the Company stock affair agency accepted the subscription request. The overdue payment will be considered to abandon the right of the subscription. 3: The Company stock affair agency should record the subscription share amount on the Company stock record after confirming the adequate stock payment, and has to hand over the Company new issued common stock within 5 business days by the way of deposit allot. The mentioned common stock will go to market for transaction from the date the agency hand over to the distribution person. 4: The Company will apply the capital variation registration of the increased new issued shares of exercised employee subscription certificate toward the authorized organization the Company registrated. 11. Employee could exercise the subscription right twice per month. 12. The right and responsibility of the Company consigned new issue common stock is the same as the Company common stock.

98

13. The taxes of the Shares that the people subscribed according to the measurement transaction should conduct accordance with the present ROC Taxes Regulations. 14. The Measurement could be agreed by 2/3 of the Board of Director present and 1/2 present Directors before issuing. Amendment before issuing is the same. And report to the authorized organization declaration effective and then execute. If there is anything not explain clearly, it should cope with the related laws and regulations to conduct.

99

Annex II Individual Financial Statement that is checked and certificatedby the Accountant of 2015.

, Independent Auditors  Report 

To the Board of Directors of Elite Material Co.,Ltd:  We  have  audited  the  balance  sheets  of  Elite  Material  Co.,Ltd.  as  of  December  31,  2015  and  2014,  and  the  related  statements  of  comprehensive  income,  changes  in  equity  and  cash  flows  for  the  years  ended  December  31,  2015  and  2014.  These    , financial  statements  are  the  responsibility  of  the  Company s management.  Our  responsibility is to issue a report on these financial statements based on our audits.  We  conducted  our  audits  in  accordance  with  the  “Regulations  Governing  Auditing  and  Attestation  of  Financial  Statements  by  Certified  Public  Accountants”  and  the  auditing  standards  generally  accepted  in  the  Republic  of  China.  Those  standards  require  that  we  plan  and  perform  the  audit  to  obtain  reasonable  assurance  about  whether  the  financial  statements  are  free  of  material  misstatement.  An  audit  includes examining, on a test basis, evidence supporting the amounts and disclosures  in the financial statements. An audit also includes assessing the accounting principles  used  and  significant  estimates  made  by  management,  as  well  as  evaluating  the  overall  financial  statement  presentation.  We  believe  that  our  audits  provide  a  reasonable basis for our opinion.  In  our  opinion,  the  financial  statenmnts  referred  to  above  present  fairly,  in  all  material respects, the financial position of Elite Material Co.,Ltd. as of December 31,  2015 and 2014, and the results of their operations and their cash flows for the years  ended December 31,2015 and 2014, in conformity with the Guidelines Governing the  Preparation of Financial Reports by Securities Issuers and with the IFRSs, IASs, IFRIC  Interpretations and SIC Interpretations endorsed by the FSC. 

KPMG (90) Tai Cai Chen(VI) Tzi No. 166967 Securities Competent Authority’s : Jin Guan Chen Liu Tzi No. 0950161002 Approval March 23rd, 2016

100

101

Net Trade receivable(Note 6 (3))

Trade receivable-Related parties

Other Receivables

Inventory(Note 6 (4))

Other Current Assets

1150

1170

1181

1200

1310

1470

Deferred Income Tax Asset(Note 6 (13))

Other Non-current Assets

Refundable deposit

1840

1900

1920

Total Assets

Total Non-current Assets

Intangible Assets

Real Estate、Plant and Equipment(Note 6 (6))

1600

1780

Investments Accounted for Using Equity Method (Note 6 (5))

1550

Non-current Assets:

Total Current Assets

Cash and cash equivalents(Note 6 (1))

Net Notes Receivable(Note 6 (3))

1100

Current Assets:

Assets

5

3

1 78

-

-

-

11

66

22

-

-

-

12

2

13,808,707 100

10,749,136

5,429

89,806

10,820

1,794

1,494,447

9,146,840

3,059,571

24,108

457,668

15,534

16,878

1,691,920

200,240

653,223

4

5

1

1 76

-

-

-

13

62

24

-

-

12

2

12,091,504 100

9,190,636

2,176

82,080

15,242

1,077

1,592,347

7,497,714

2,900,868

24,339

578,849

64,958

19,449

1,510,517

210,375

492,381

103.12.31 Amount %

Short-Term Notes and Bills Payable(Note 6 (8)) Accounts Payable Accounts Payable-Related parties Other Payables Current Income Tax Liabilities Provisions - Current(Note 6 (11)) Current portion of bond repurchase (Note 6 (10)) Long Term Debts-Current Portion(Note 6 (9)) Other Current Liabilities-Other

2110 2170 2180 2200 2230 2250 2321 2322 2399

Net benefit liability-Non current(Note 6 (13)) Deferred Income Tax Liabilities(Note 6 (13)) Guarantee Deposits Received

2551 2570 2645

Capital Surplus

3200

Accumulated Earnings/Deficits Other Equity

3351 3400

Total liabilities and equity

Total equity

Legal Reserve

3310

Retained Earnings:

Capital Stock

3100

Equity (Note 6 (14)):

Total liabilities

Total Non-current liabilities

Long Term Debt(Note 6 (9))

2540

Non-current liabilities:

Total Current Liabilities

Short-Term Borrowings(Note 6 (7))

2100

Current liabilities:

Liabilities and Equity

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

$

$

104.12.31 Amount %

(English Tranlation of Financial Report Originally Issued In Chinese)

Balance Sheets DECEMBER 31, 2015 AND 2014 (Amounts Expressed in Thousands of New Taiwan Dollars)

Elite Material Co., Ltd.

$

$

8,329

-

2

1

4

1

9

587,189

6

1

3

6

2

4

68

5

29

5

3

26

32

-

-

26

-

-

-

-

11

2

3

12,091,504 100

8,166,112

3 70

3,412,810

586,867

419,305

3,159,941

35

5

3

24

772,550 3,925,392

15,379

199,615

35,837

521,719

30

4

9

3,152,842

3,993

712,500

9,801

5,446

63,652

421,108

22,994

1,323,679

199,626

390,043

103.12.31 Amount %

13

-

-

17

-

-

-

-

-

13,808,707 100

9,680,618

456,175

4,876,106

740,737

432,549

3,175,051

4,128,089

1,715,397

10,547

477,179

7,971

1,219,700

2,412,692

4,645

312,500

3,892

205,738

487,225

76,218

1,314,145

-

104.12.31 Amount %

Elite Material Co., Ltd. Statement of Comprehensive Income FOR THE YEARS ENDED DECEMBER 31,2015 AND 2014 (Amounts Expressed in Thousands of New Taiwan Dollars) (English Tranlation of Financial Report Originally Issued In Chinese)

4000 5000 5910 5920

6100 6200 6300 6300

7010 7020 7370 7050 7900 7951 8300 8310 8311 8349 8360 8361 8399

Operating Income Operating Costs(Note 6 (4)) Gross Income from Operations Deduction: Unrealized sales profit and loss Add: Realized sales profit and loss Gross Income from Operations Operating Expenses: Marketing Expenses Administrative expenses Research and Development Expenses Operating Expenses Net Operating Income Non-Operating Income and Expenses: Other Income Other Gains and Losses(Note 6 (18)) Share of Profit of Associates Accounted for Using Equity Method Financial Costs Non-Operating Income and Expenses Continuing Operations’ Income Before Tax Deduction: Income Tax Expense Net Income (loss) Other Comprehensive Income: Items not to be reclassified into profit or loss Defined benefit plans Remeasurement

(224,776) (217,967) (74,330) (517,073) 706,201

Items that may be subsequently reclassified into profit or loss Exchange difference in the financial report from operating units aboard Income tax related to Items to be reclassified

Other Comprehensive Income(Amount after tax) Total Comprehensive Income Earnings Per Share(Note 6 (16))(Unit:TWD) Diluted Earnings Per Share (Note 6 (16))(Unit:TWD)

4 4 1 9 12

(193,714) (174,098) (74,168) (441,980) 396,502 -

(1) 22 30 (1) 29

1,452 28,190 2,220,063

38

845 8,627 1,236,630

(30,393) 2,219,312 2,925,513 (536,274) 2,389,239

(1) 37 49 (9) 40

(29,774) 1,216,328 1,612,830 (74,134) 1,538,696

22,110 (3,758) 18,352

Income tax related to Items not to be reclassified

Items that may be subsequently reclassified into profit or loss

8300

2015 2014 Amount Amount % % $ 5,852,231 100 5,357,007 100 (4,629,473) 79 (4,517,638) 84 1,222,758 21 839,369 16 (973) (1,489) 602 1,489 1,223,274 21 838,482 16

-

(157,847) (3) 26,833 (131,014) (3) (112,662) (3) 37 $ 2,276,577 $ 7.55 $ 7.46

4,958 8,825 13,783 256,447 (43,596) 212,851 226,634 1,765,330

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

102

4 3 1 8 8

23

5 (1) 4 4 33 4.91 4.84

103 -

-

-

-

-

-

-

-

-

3,175,051

13,510

1,600

3,159,941

19,610

16,193

3,124,138

-

-

-

-

-

36,884 (36,884)

-

-

-

-

-

(1,224) 11,144 1,740 432,549

2,168 (584)

17,274 4,368 419,305

21,918 (5,955)

381,700

Capital Surplus

-

-

-

-

-

-

740,737

153,870

586,867

83,602

503,265

-

-

-

-

4,876,106

(153,870) (790,425)

3,412,810 2,389,239 18,352 2,407,591

(83,602) (562,897)

-

-

-

-

-

456,175

(131,014) (131,014)

587,189

Exchange Differences on Translation of Foreign Financial Statements 2,506,830 374,338 1,538,696 13,783 212,851 1,552,479 212,851

Retained Earnings Undistributed Legal Reserve Earnings

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

Note 1: The compensation for directors and supervisors, 12,105,000 dollars, and the employee bonus, 30,263,000 dollars for 2013 has been deducted from Statement of Comprehensive Income. Note 2: The compensation for directors and supervisors, 16,998,000 dollars, and the employee bonus, 42,496,000 dollars for 2014 has been deducted from Statement of Comprehensive Income.

$ Jan.1, 2014 Balance Net Income Other Comprehensive Income Total Comprehensive Income Appropriation and distribution of retained earnings(註1): Legal Reserve Cash Dividends of Common Stock Convertible Securities Conversion The right to transfer the right of charge of convertible bonds payable converted to common share Advance Receipts for Capital Stock Exercise Employee Stock Warrants Stock-based Payment Transaction Dec.31, 2014 Balance Net Income Other Comprehensive Income Total Comprehensive Income Appropriation and distribution of retained earnings(註2): Legal Reserve Cash Dividends of Common Stock Convertible Securities Conversion The right to transfer the right of charge of convertible bonds payable converted to common share Matured bonds payable Exercise Employee Stock Warrants Stock-based Payment Transaction Dec.31, 2015 Balance $

Capital Stock Capital collected in Common Stock advance

(English Tranlation of Financial Report Originally Issued In Chinese)

FOR THE YEARS ENDED DECEMBER 31,2015 AND 2014 (Amounts Expressed in Thousands of New Taiwan Dollars)

Statement of changes in equity

Elite Material Co., Ltd.

-

-

-

(1,224) 24,654 1,740 9,680,618

(790,425) 2,168 1,016

4,368 8,166,112 2,389,239 (112,662) 2,276,577

36,884

(562,897) 38,111 (5,955)

6,890,271 1,538,696 226,634 1,765,330

Total equity

Elite Material Co., Ltd. Statement of Cash Flows FOR THE YEARS ENDED DECEMBER 31,2015 AND 2014 (Amounts Expressed in Thousands of New Taiwan Dollars) (English Tranlation of Financial Report Originally Issued In Chinese) 2015 Cash Payments for Other Goods and Services: Net Income before Tax Adjustments: Income & Expense Items Depreciation Expense Amortization

$

Expense for bad debts expense (transferred to income) Gains on Financial Assets (Liabilities) at Fair Value through Net Profit or Loss Share of Profit of Associates Accounted for Using Equity Method Interest expense Interest revenue Interest from the disposition of Real Estate, Plant and Equipment

Cost for share-based compensastion Convertible bonds issuance discount cost and interest expense Buy back the interests on Bonds Payable Others Income & Expense Items合計 Changes In Operating Assets and Liabilities: Net Change In Operating Assets: Notes Receivable Trade receivable Other Receivables Inventory Deferred Revenues Other Current Assets Other Non-current Assets Net Change In Operating Assets Net Change In Operating Liabilities: Accounts Payable Other Payables Provisions Other Current liabilities Net Defined benefit liability Net Change In Operating Liabilities Changes In Operating Assets And Liabilities Adjustments Cash Inflows of Operations Interest Received Classified As Investing Activities Dividends Received Classified As Investing Activities Interest Paid Classified As Financing Activities Income taxes paid Cash provided by (used in) operating activities Cash flows from investing activities: Acquisition Of Real Estate, Plant and Equipment Proceeds From Disposal Of Real Estate, Plant and Equipment Acquisition Of Intangible Assets Decrease(Increase) In Refundable deposit Cash provided by (used in) investing activities Cash flows from financing activities: Decrease(Increase) In Short-Term Borrowings Decrease(Increase) In Short-Term Notes and Bills Payable Bonds buy back Proceeds From Long Term Debt Repayments Of Long Term Debt Decrease In Guarantee Deposits Received Cash Dividends Exercise Employee Stock Warrants Cash Flows From Financing Activities Increase In Cash And Cash Equivalents Cash And Cash Equivalents At Beginning Of Period Cash And Cash Equivalents At End Of Period

$

2014

2,925,513

1,612,830

165,755 1,339 (2,185) (2,220,063) 30,310 (1,452) 2,395 1,740 83 (1,224) (2,023,302)

186,330 1,622 (280) 85 (1,236,630) 29,033 (845) 51 4,368 741 1,125 (1,014,400)

10,246 (176,713) 49,377 121,181 (1,174) 231 (7,726) (4,578)

(25,421) (274,382) (55,939) (69,004) 231 (8,494) (4,004) (437,013)

43,690 66,058 (1,554) 652 (5,756) 103,090 98,512 (1,924,790) 1,000,723 1,457 414,262 (30,109) (89,126) 1,297,207

318,484 60,681 (201) (470) (5,316) 373,178 (63,835) (1,078,235) 534,595 845 (28,858) (40,383) 466,199

(70,710) 316 (2,056) (3,253) (75,703)

(111,106) 1,551 (269) 546 (109,278)

(381,714) (199,626) (6,700) 1,535,481 (1,237,500) (4,832) (790,425) 24,654 (1,060,662) 160,842 492,381 653,223

164,173 49,991

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

104

581,250 (593,750) (3,669) (562,897) 36,884 (328,018) 28,903 463,478 492,381

Elite Material Co., Ltd. Footnotes to Individual Financial Statement 2015 & December 31, 2014 (Unless otherwise noted, all amounts are stated in thousands of New Taiwan Currency)

Ⅰ. Company History Founded on March 24, 1992 after being approved by the Ministry of Economic Affairs, Elite Material Co., Ltd. (hereinafter referred to as the Company) was engaged in manufacturing and marketing raw materials, semi-finished products and finished products of green sheets, speciality chemicals for electronic industry and electronic components, with green sheets and adhesive sheets as the main operating revenue. The application of the Company for shares over-the-counter was approved on October 3, 1996, and shares were officially listed for sale on December 26, 1996; the application for listing of transferring shares was approved on October 22, 1998, and transferring shares were officially listed for sale on November 27, 1998. Registered address is No.18, Datong 1st Rd., Guanyin Dist., Taoyuan City. Please see Footnotes XIV. Ⅱ. Date and Procedures of Approval of Financial Statement The Individual Financial Statement was approved and released by the Board of Directors on March 23, 2016. Ⅲ. Application of New and Revised Standards and Interpretations (Ⅰ) Influence of the Adoption of New and Revised Standards and Integrations Approved by the Financial Supervisory Commission Since 2015, the Company has fully adopted the International Financial Report Standards (2013 Version) (excluding IFRS 9 Financial Instruments) which is approved by the Financial Supervisory Commission (hereinafter referred to as FSC) to come into effect to compile consolidated financial reports, with relevant new, amended and revised standards and interpretations listed as follows: New/Amended/Revised Standards & Interpretations Amendments to IFRS 1 IFRS 7 First-time Adoption Exemption

Effective Date Released by IAS Board July 1 2010

Amendments to IFRS 1 Severe Hyperinflation and Removal of July 1 2011 Fixed Dates for First-time Amendments to IFRS 1 Government Loan

January 1, 2013

Amendments to Amendments to IFRS 7 Disclosures-Transfer of July 1 2011 Financial Assets Amendments to IFRS 7 [Disclosures-Offsetting Financial Assets January 1, 2013

105

and Liabilities] IFRS 10 Consolidated Financial Report

January 1, 2013 (Individual investor effective date

IFRS 11 Joint Agreement

January 1, 2013

IFRS 12

January 1, 2013

Disclosures of Rights and Interests of Other Individuals

106

Elite Material Co., Ltd. Footnotes to Individual Financial Statement

Effective Date Released by IAS New/Amended/Revised Standards & Interpretations Board IFRS 13 Fair Value Measurement January 1, 2013 Amendments to IAS 1 Other Comprehensive Income Presentation July 1, 2012 Amendments to IAS 12 Deferred Income Tax Asset: Withdrawal of January 1, 2012 Target Assets Revision to IAS 19 Employee Benefits January 1, 2013 Revision to IAS 27 Separate Financial Report January 1, 2013 Amendments to IAS 32 Offsetting Financial Assets and Financial January 1, 2014 Liabilities IFRI 20 Stripping Costs in the Production Phase of a Surface Mine January 1, 2013 Nature and impact of major changes to the consolidated financial report by adopting IFRS (2013 Version) are as follows: 1. IFRS 13 Fair Value Measurement IFRS changes the definition of fair value, sets out in a single framework for measuring fair value and requires disclosures about fair value measurements. The Company has added disclosures related to fair value measurement in accordance with the new standards and postponed the provisions on fair value measure applicable to the new standards in accordance with the interim provisions of the new standards but is not required to provide detailed information concerning the provisions on the added disclosures. Although the applicable new measurement provisions had been postponed from 2015, the assets and liabilities of the Company haven’t suffered material influences. 2. IAS 1 Financial Report Presentation The Standards makes amendments to the presentation of Other Comprehensive Income and divides the items under Other Comprehensive Income into two categories Subsequent Non Reclassification under Gains and Losses and Subsequent Reclassification under Gains and Losses by nature. The Amendments also stipulates that the relevant taxes of Other Comprehensive Income recognized with pre-tax amounts shall be separately recognized with the foregoing two categories. The Company has changed the presentation of Other Comprehensive Income statement in accordance with the Standards, with the comparison matched with the reclassification presentation. 3. IAS 19 Employee Benefits The main amendments to the Standards multiply net defined benefit liability (assets) by discount rate to determine the net interest, uses it to replace the pre-amendment interest costs and the expected returns of the planned assets, removal of actuarial gains and losses Corridor Approach or the accounting policy choice of one-time recognized under gains and losses when occurs, and stipulates remeasurements (including actuarial gains and losses) of the defined benefit plans to be recognized as other comprehensive income when occurs, past service costs to be considered as gains and losses when occurs, and stipulates not to recognize the apportion any longer based on the straight line method under the costs during the average period before meeting the defined conditions. In addition, companies could not any longer recognize the earlier of the cancelation of the offer of post-employment benefits or the recognition of relevant re-construction costs under the post-employment benefits, rather than to always recognize the post-employment under liabilities and costs when defining the premise of relevant post-employment events. Additional disclosures are required in relation to defined benefit plans. Following accessment, the Standards hasn’t greatly affected the financial status and operation achievements of the Company, and will add defined benefit plans related disclosures as stipulated.

107

Elite Material Co., Ltd. Footnotes to Individual Financial Statement

(Ⅱ)

New and Revised Standards and Interpretation Not Approved by FSC The standards and interpretations listed in the table below have been released by the

International Accounting Standards Boards (hereinafter referred to as IASB) but not approved to come effect by FSC: Effective Date Released by IAS New/Amended/Revised Standards & Interpretations Board IFRS 9 [Financial Instrument] 2018.1.1 Amendments to IFRS 10 and IAS 28 Sale or Contribution of Assets To be decided between Investor and Its Affiliated Company Amendments to IFRS 10, IFRS 12 and IAS 28 Individual Investor: January 1, 2016 Applicable Exceptions from Consolidated Report Exceptions Amendments to IFRS 11 Accounting for Interests in Joint January 1, 2016 Operations IFRS 14 Regulatory Deferral Accounts January 1, 2016 IFRS 15 Revenue from Contracts with Customers January 1, 2018 IFRS 16 Leases January 1, 2019 Amendments to IAS 1 Disclosures January 1, 2016 Amendments to IAS 7 Disclosures January 1, 2017 Amendments to IAS 12 Recognition of Deferred Income Tax Asset January 1, 2017 for Unrealized Loss Amendments to IAS 16 and IAS 38 Clarification of Acceptable January 1, 2016 Methods of Depreciation and Amortizement Amendments to IAS 16 and IAS 41 Agriculture: Bear Plants January 1, 2016 Amendments to IAS 19 Defined Benefits Plan: Employee July 1, 2014 Promotion Amendments to IAS 27 Equity Method of Separate Financial January 1, 2016 Statements Amendments to IAS 36 Recoverable Amount Disclosure for January 1, 2014 Non-Financial Assets Amendments to IAS 39 Novation of Derivative and Continuation of January 1, 2014 Hedge Accounting 2010‑2012 and 2011‑2013 Annual Improvements July 1, 2014 2012‑2014 International Financial Report Annual Improvements January 1, 2016 IFRS 21 Course January 1, 2014 The Company is continuously assessing the influences of the abovementioned standards and interpretation on the financial status and operation results of the Company, with the relevant influences to be disclosured upon completion.

108

Elite Material Co., Ltd. Footnotes to Individual Financial Statement

Ⅳ.

Summary of Major Accounting Policies

The major accounting policies adopted in this Individual Financial Statement are summarized as follows. Unless otherwise noted, the following accounting policies have been applicable for all presentation period of the Individual Financial Statement.

109

Elite Material Co., Ltd. Footnotes to Individual Financial Statement

(Ⅰ) Following Statements The Individual Financial Statement was compiled in accordance with the Guidelines Governing the Preparation of Financial Reports by Securities Issuers. (Ⅱ) Compiling Foundation 1. Measurement Foundation Except the major items in the following balance sheet, the Individual Financial Statement was complied based on the historical costs: (1) Financial assets at fair value through profit or loss measured with fair value; (2) Net defined benefit liability (or asset), is measured according to the fair value of the retirement fund assets deducting present value of the defined benefit obligation and the ceiling influence value listed in Footnotes IV (15) 2. Functional Currency and Presentation Currency Each party of the Company takes the currency of major economic environment where its operation is located as its functional currency. The Individual Financial Statement is presented in the functional currency of the Company, TWD. All of the financial information expressed herein in TWD is of one thousand per unit. (Ⅲ) Foreign Currency 1. Foreign Currency Trading Foreign currency is converted into functional currency according to exchange rate on the date of transaction. The monetary items in foreign currency on the date of report are converted into functional currency according to exchange rate on the day. The gains and losses from conversion refer to the difference between the amount after costs after amortization priced in functional currency in the beginning of the period adjust the effective interests and post-payment amount in the current period and the amount of the costs after amortization priced in functional currency is converted according to exchange rate on the report day. The non-monetary items of foreign currency measured with fair value are converted into functional currency according to exchange rate on the day of measuring the fair value, while the non-monetary items of foreign currency measured by historical costs are converted according to exchange rate on the transaction day. Unless non-monetary equity instruments available for sale are designated to be financial liabilities to hedge for the net investment of foreign operating organizations or qualified cash flow, the foreign currency exchange difference resulting from the conversion is recognized to be other comprehensive Income, otherwise, recognized to be gains and losses. 2. Foreign Operating Organizations

110

Elite Material Co., Ltd. Footnotes to Individual Financial Statement

The assets and liabilities of foreign operating organizations, including the business reputation and fair value adjustment during the acquisition, are converted to be TWD according to exchange rate on the report day; gains and losses are converted into TWD according to exchange rate in the current period, and the resultant conversion difference is recognized to be other comprehensive Income. In case of the loss of control, joint control or material influences arising from the punishment on foreign operating organizations, the accumulated conversion differences related to the foreign operating organizations shall be fully reclassified as gains and losses. In case of subsidiary company of foreign operating organizations involved in the punishment, the related accumulated conversion differences shall be reclassified as non-controlling interests in proportion. In case of affiliated company or joint ventures of foreign operating organizations involved in some of the punishment, related accumulated conversion differences shall be fully reclassified as gains and losses in proportion. As to the receivable and payable monetary items of foreign operating organizations, if without the repayment plan or the possibility of repayment in foreseeable future, the resultant gains and losses from foreign currency conversion shall be regarded as a part of net investments to the foreign operating organizations as recognized as other comprehensive income.

111

Elite Material Co., Ltd. Footnotes to Individual Financial Statement

(IV) Standards for Classifying Current and Non-current Assets and Liabilities Assets meeting one of the following conditions are recognized to be current assets, and other assets not belonging to current assets are recognized to be non-current assets: 1. Those that are expected to be realized during the normal operating period of the Company or intended to be sold or consumed. 2. Those held mainly for the purpose of transaction. 3. Those expected to be realized within 12 months after the balance sheet. 4. Cash or cash equivalents, but not including those used for exchange, liquidation of liabilities or those with other restrictions. The liabilities meeting any one of the following conditions are current liabilities, and other liabilities not belonging to current liabilities are recognized to be non-current liabilities: 1. Those expected to be paid off during the normal operating period of the Company. 2. Those held mainly for the purpose of transaction. 3. Those expected to be paid off within 12 months after the balance sheet. 4. Those that shall not allow the Company to unconditionally extend the liquidation period to at least 12 months. Liabilities for liquidation arising from the issuing of equity instruments in accordance with the clauses chosen by the other party of transaction will not affect their classification. (V) Cash or Cash Equivalents Cash includes cash on hand and demand deposits. Cash equivalents are the investments which are allowed to be converted into normed cash with few value change risks and short-term high flowability. Certificate of deposit which satisfy the foregoing definition and with the holding purpose of meeting the short-term cash pledges rather than investment or others shall be recognized as cash equivalents. (VI) Financial Instrument Financial assets and financial liabilities can be recognized when the Company becomes one party stipulated under the conditions of the Financial Instrument. 1. Financial assets Financial assets of the Company are classified into: financial assets at fair value through profit or loss, loans and account receivables. (1) Financial assets at fair value through profit or loss Such financial assets refer to those held for trading or designated financial assets at fair value through profit or loss. Financial assets held for trading are sold or re-purchased within a short period due to the main purpose of obtaining or incurring. In case of any of the following

112

Elite Material Co., Ltd. Footnotes to Individual Financial Statement

conditions for the Company, the financial assets excluding those held for trading are designated to be those measured fair value in accordance with gains and losses at the original recognition: A. Eliminate and greatly reduce the inconsistent measure or recognition arising from the measurement on assets or liabilities on different basis and recognition of relevant gains and losses. B. Financial assets assess the performance based on fair value. C. Composite instruments include embedded derivative.

113

Elite Material Co., Ltd. Footnotes to Individual Financial Statement

Such financial assets are measured with fair value at the original recognition and the transaction costs are recognized as gains and losses when they occur; the subsequent assessment is measured with fair value and the re-measurement gains or losses (including relevant dividends income and interest income) are recognized as gains and losses, which are then listed under non-operating income and expenses. When purchasing or selling financial assets on the basis of the trade practices, accounting treatment on the trading day will be adopted. If such financial assets belong to the equity investment of Tight Market Public Offer and Unreliable Fair Value Measurement, they shall be measured with costs deducting impairment loss and recognized as Financial Assets Measured with Costs. (2) Loans and account receivables Loans and account receivables shall be public offer in tight market, and be the financial assets with fixed or decidable payment amount, including account receivables and other receivables. At original recognition, they shall be measured with fair value plus the trading costs which can be directly attributable, and in subsequent assessment, they are measured with post-amortization costs deducting impairment losses according to effective interest rate method, except short-term receivables recognized as those without materiality. When purchasing or selling financial assets on the basis of the trade practices, accounting treatment on the trading day will be adopted. Interest income is recognized under non-operating income. (3) Financial assets impairment As to financial assets or financial liability not measured at fair value through profit or loss, impairment loss shall be assessed on each report day. When there is objective evidence showing single or multiple events happen on financial assets after original recognition which gives rise to losses to the estimated future cash flow of the financial assets, the impairment has occurred. The object evident of financial asset impairment includes major financial difficulties of issuers or debtors, default (such as the delay payment or default of interest or non-payment), the greater possibility of debtors’ going bankrupt or other financial re-organization and the disappearance of activated market of financial assets due to financial difficulties. In addition, when the fair value of equity investment available for sale greatly or continuously declines to below the costs, it also belong to objective impairment evidence. If there is no impairment arising from the individual evaluation on the accounts receivables, combined basis shall be adopted to evaluate the impairment. The objective

114

Elite Material Co., Ltd. Footnotes to Individual Financial Statement

impairment evidence of receivables combination possibly includes the past receivables experience of the Company, the increase in delayed payment exceeding the loan period and national or regional economic situation changes related to the default of receivables. The impairment loss amount measured and recognized with post-amortization costs is the difference between the carrying amount of the assets and the present value of the estimated future cash flow discounted according to the original effective rate of the financial assets. All financial asset impairment losses are directly deducted from the carrying amount of the financial assets, and only the carrying amount of the accounts receivable shall be lowered through the provision accounts. When the accounts receivables are judged to be uncollectible, they are used to offset the provision accounts. The originally offset but later receivable amount can credit the provision accounts. The changes of the carrying amount of the provision accounts are recognized to be gains and losses.

115

Elite Material Co., Ltd. Footnotes to Individual Financial Statement

When the financial assets are measured with post-amortization costs, in case of the reduction in subsequent impairment loss and such reduction occurring after the recognition of impairment loss, the impairment losses previously recognized are allowed to re-recognized as gains and losses, and accumulated under other equity interest, but the carrying amount of the investment on the impairment re-recognition date shall not be higher than the post-amortization costs when the impairment losses are not recognized. The bad debts loss of accounts receivable and increased amount shall be recognized under administrative expenses. (4) Financial assets de-recognition When the Company only terminates the contractual rights from the cash flow of such assets or has transferred the financial assets and almost all risks and returns of the asset ownership have been transferred to other enterprises, the financial assets shall be de-recognized. When de-recognizing the overall single financial asset, the difference between the carrying amount and the sum of the total of the received or receivable consideration and the amount recognized as other comprehensive income and accumulated under Other Equities – Unrealized Gains and Losses of available-for-sale financial assets shall be recognized as gains and losses and listed under non-operating income and expenses. When not de-recognizing the overall single financial asset, the Company takes the relative fair value of each part on the transferring date as basis to apportion the original carrying amount of the financial assets to the parts that is continuously recognized and de-recognized due to continuous participation. The difference between the carrying amount that is apportioned to the de-recognition part and the sum of consideration collected for de-recognition part and the part of any accumulated gains or losses recognized as other comprehensive income that is apportioned to be de-recognition part shall be recognized as gains and losses and listed under non-operating income and expenses. The accumulated profits and losses recognized as other comprehensive income shall be apportioned to continuously recognized part and de-recognized part in accordance with their relative fair value. 2. Financial Liabilities and Equity Instruments (1) Classification of Liabilities and Equity The liabilities and equity instruments issued by the Company shall be classified as financial liabilities or equity instruments in accordance with the essence of the contract the definitions of financial liabilities and equity.

116

Elite Material Co., Ltd. Footnotes to Individual Financial Statement

Equity instruments shall refer to any contract recognizing the remaining equities of the Company after deducting all liabilities from assets. The equity instruments issued by the Company shall be recognized as the amount after directly deducting issuing costs from the obtained prices. As to the composite financial instruments issued by the Company, the owner has the right of choice, and the instruments can be converted to be convertible bond of capital, with the quantity of outstanding shares not to be changed as their fair value varies. As to the liabilities of composite financial instruments, the original recognition amount shall be measured with fair value of similar equities excluding equity conversion right. The original recognition amount of equities shall be measured with the difference between the overall composite financial instrument fair value and liabilities fair value. Any trading costs which can be directly attributable shall be apportioned to liabilities and equities according to the proportions of carrying amount of original liabilities and equities. After original recognition, the liabilities of composite financial instruments shall be measured with the costs after apportions according to the effective interest method. The equities of composite financial instruments are not required to be re-measured after original recognition. Interests and losses or profits related to financial liabilities shall be recognized as gains or losses and listed under non-operating income and expenses. Financial liabilities are re-classified as equities during conversion, and the conversion doesn’t generate gains and losses.

117

Elite Material Co., Ltd. Footnotes to Individual Financial Statement

(2)Financial assets or financial liabilities at fair value through profit or loss Such financial liabilities refer to financial liabilities held for trading or measured with financial asset or financial liabilities at fair value through profit or loss Financial liability held for trading refer to those with main purpose for obtaining or occurring being sold or re-purchased within a short period. In case of any of the following conditions, the Company designates the financial liabilities excluded from the financial assets held for trading to be measured with fair value according to gains and losses: A. Eliminate and greatly reduce the inconsistent measure or recognition arising from the measurement on assets or liabilities on different basis and recognition of relevant gains and losses. B. Financial assets assess the performance based on fair value. C. Composite instruments include embedded derivatives. Such financial assets are measured with fair value at the original recognition and the trading costs are recognized as gains and losses when they occur; the subsequent assessment is measured with fair value and the re-measurement gains or losses (including relevant dividends income and interest income) are recognized as gains and losses, which are then listed under non-operating income and expenses. If financial assets or financial liabilities at fair value through profit or loss belong to unquoted equity investments unreliably measured with selling borrowed fair value and shall deliver such equity investments, they are measured with costs and listed under Financial Liabilities Measured with Costs. The interests or losses of financial guarantee contract and loan pledge measured with fair value designated and issued by the Company shall be recognized as gains and losses and listed under non-operating income and expenses. (3) Other Financial liabilities The financial liabilities which do not belong to those held for trading and are not designated to be measured with fair value according to gains and loss (including long-term and short-term borrowings, accounts payable and other payables) shall be measured with fair value plus directly attributable trading costs at original recognition; and they are measured with post-apportion costs according to the effective interest method at subsequent evaluation. The interests which haven’t capitalized as capital costs shall be listed under non-operating income and expenditure of financial costs. (4) De-recognition of Financial Liabilities The Company shall de-recognize financial liabilities when the contract obligations have been performed, canceled or terminated.

118

Elite Material Co., Ltd. Footnotes to Individual Financial Statement

When de-recognizing financial liabilities, the difference between carrying amount and the sum of paid or payable considerations (including any transferred non-cash capital or assumed liabilities) shall be recognized as gains and losses and listed as the financial assets (liabilities) gains and losses measured with fair value according to gains and losses under non-operating income and expenses. (5) Offset between Financial Assets and Liabilities Financial assets and financial liabilities can be offset with each other and represented on the balance sheet with net value only when the Company has legal rights to offset and has the intention to deliver with net value as well as realize capital and liquidate the liabilities. (6) Financial Guarantee Contract As to financial guarantee contract, it means the issuer must reimburse the losses of the holder with special amount when the specific debtor fails to make payment on due date in accordance with the clauses of liability instruments.

119

Elite Material Co., Ltd. Footnotes to Individual Financial Statement

The financial guarantee contract issued and designated by the Company to be measured with fair value according to gains and losses shall be originally measured with fair value deducting directly attributable trading costs, and subsequently measured with the higher of the following amount: (a) the contract obligation amount determined under IAS 37 Provisions or Contingent Liabilities or Contingent Assets; and (b) original recognition amount deducting the amount appropriately accumulate charged for amortization recognized according to income accounting policy. 3. Derivative Financial Instruments The Company holds derivative financial instruments to avoid foreign currency and interest rate risks. They are measured with fair value in original recognition, and the trading costs are recognized to be gains and losses; in subsequent evaluation, they are measured with fair value, and the profits or losses due to re-measurement are directly recognized as gains and losses and listed under non-operating income and expenses, while the derivative instruments designated to the instruments effectively avoiding risks shall be determined according to the nature of the hedging relationship when they are recognized as gains and losses. When the fair value of the derivative instruments is positive, they are recognized as financial assets; when it is negative, they are recognized as financial liabilities. The risks and features of embedded derivative instruments are not closely related with those of host contract, and when the host contract is not measured with fair value according to gains and losses, the derivative instruments are regarded as single derivative instruments. (VII) Inventory Inventory shall be measured with the lower of the costs and net realizable value. The costs include the acquisition, production and processing costs enabling them to arrive at the available places and status and other costs, which are calculated according to the standard cost method, and priced at cost transferring according to weighted mean method. The costs of the inventory of finished products and products in process include the manufacturing costs amortized based on normal production capacity according to proper percentage. Net realizable value refers to the estimated prices under normal operation deducting estimated costs to be needed for estimated completion and estimated costs to be needed for completing selling. (VIII) Investment Affiliated company Affiliated companies refer to the enterprises which the Company has great influence on their financial and operation policies but doesn’t control or jointly control. The Company adopts equity method to treat the equities of its affiliated companies.

120

Elite Material Co., Ltd. Footnotes to Individual Financial Statement

Under the equity method, the equities are recognized originally with costs, and the costs of an investment include the trading costs. The carrying amount of investment affiliated company includes the business reputation recognized at the original investment deducting any accumulated impairment losses. The Individual Finance Statement includes the amount of gains and losses of investment affiliated company recognized by the Company according to equity percentage and other comprehensive income after the accounting policy consistence adjustment with the Consolidated Company from the date of having significant influence till the date of losing influence. The unrealized profits generated from the trading between the Company and its affiliated companies have been eliminated from the equity scope of the Company on the investee company. The elimination method of the unrealized losses is the same as that of the unrealized profits, but limited to the situation without impairment evidence. When the loss share of affiliated companies recognized by the Company according to percentage is equal to or exceeds the equity of affiliated companies, loss recognition shall be terminated immediately. However, when legal obligations or constructive obligations occur or the Company has made payments on the behalf of the investee company, the extra losses and relevant liabilities shall be recognized.

121

Elite Material Co., Ltd. Footnotes to Individual Financial Statement

(IX)Investment in subsidiary company The Investee company is evaluated by equity method and the alteration of the ownership of the subsidiary company shall be conducted with the owner by equity transaction. (Ⅹ) Real Estate, Plant and Equipment 1. Recognition and Measurement The recognition and measure of real estate, plant and equipment adopt cost mode, and are measured with the costs deducting accumulated depreciation and accumulated impairment. Costs include the expenditure which can be directly attributed to assets. Self-constructed assets costs include raw materials and direct labor costs, any other directly attributable costs which make assets reach the serviceable condition for expected usage, costs of dismantling and removing the items and relocating to the original places and borrowing costs meeting essential asset capitalization. In addition, costs also include real estate, plant and equipment procurement arising from foreign currency denomination. The software purchased for integrating the functions of relevant equipment is also capitalized to be one part of the equipment. When real estate, plant and equipment include different components which belong to major items compared with the overall costs of the project and are appropriate to adopt different depreciation rate or depreciation methods, these components are processed as individual items (major components) of real estate, plant and equipment. The gains and losses from the processing of real estate, plant and equipment are determined by the difference between the carrying amount of real estate, plant and equipment and the processing prices, and recognized with net value to be Other Gains and Losses. 2. Subsequent Costs If the future economic benefits forecast in subsequent expenditure of real estate, plant and equipment items possibly flow into the Company and the amount can be reliably measured, the expenditure is recognized as one part of the carrying amount of the project and the reset carrying amount shall be de-recognized. The daily maintenance costs of real estate, plant and equipment are recognized as gains and losses when they occur. 3. Depreciation Depreciation is calculated with costs deducting salvage based on the durable years according to the straight-line method, and evaluated according to the major components of assets. If the durable years of certain component are different from others, the depreciation of the component shall be adjusted separately. The adjustment of

122

Elite Material Co., Ltd. Footnotes to Individual Financial Statement

depreciation is recognized as gains and losses. Land is not required to make depreciation adjustment. The estimated durable life in the current and comparison periods is as follows: (1)Buildings (Structures)

3~56 years

(2)Machinery and equipment

3~19 years

(3)Other facilities

2~14 years

123

Elite Material Co., Ltd. Footnotes to Individual Financial Statement

Depreciation methods, durable years and salvage are inspected at the closing day of each fiscal year, and if the expected value is different from the previously estimated value, make adjustments if necessary and such changes will be processed according to the provisions on accounting estimate changes. (Ⅺ) Intangible Assets Other intangible assets obtained by the Company are measured with costs deducting accumulated amortization and accumulated impairment. The subsequent expenditure can be capitalized only when they can increase the future economic benefits of relevant specific assets, and all of other expenditures are recognized as gains and losses when they occur. In amortization, the assets costs deducting salvage are amount available for amortization. Intangible assets are amortized with the straight-line method according to the following estimated durable years from the date when they can be available for using, and the amount available for amortization is recognized as gains and losses: 1.Option Premium 2. Computer software

5 years 2~5 years

It is required to inspect the salvage, amortization period and amortization methods of the intangible assets at least on the closing date of fiscal year, and any changes are regarded to be accounting estimated changes. (Ⅻ) Non Financial Asset Impairment As to the non financial assets not coming from stocks, deferred income tax asset and employee benefits, the Company assesses whether there is impairment on the closing date of every report period, and estimates the recoverable amount of the assets with signs of impairment. In case of the failure in estimating the recoverable amount of some assets, the Company estimates the recoverable amount of cash-generating unit where the asset belong to evaluate the impairment. The recoverable amount is subject to the fair value of the higher of individual asset or cash-generating unit deducting the cost of sale and their use value. If the recoverable amount of individual asset or cash-generating unit is lower than the carrying amount, reduce the carrying amount of individual asset or cash-generating unit to the recoverable value and recognize it as impairment loss. The impairment loss shall be immediately recognized as the current gains and losses. The Company re-assesses at the closing date of every report period whether there are signs showing that the impairment loss recognized by the non financial assets excluding business reputation in the previous year might not exist or reduce. If there are any changes to the estimates that determine the recoverable amount, covert the impairment loss to increase the carrying amount of individual asset or cash-generating unit to recoverable

124

Elite Material Co., Ltd. Footnotes to Individual Financial Statement

amount but not exceeding the carrying amount after amortization or deducting the depreciation expected to be adjusted if the individual asset or cash-generating unit didn’t recognize the impairment loss in the previous year. Business reputation, intangible assets with non-deterministic durable years and intangible assets not available shall be tested on impairment regularly every year, and the difference between the recoverable amount and carrying amount is recognized as impairment losses. (ⅩⅢ) Provisions By the recognition of provisions, it means the Company is likely to reserve the resources with economic benefits to liquidate the current obligations arising from the past events and the amount of such obligations can be reliably estimated. Provisions is discounted according to the pre-tax discount rate reflecting the time value of money and liabilities specific risk evaluation in the current market, and the amortization of discount is recognized as interest expense. The provisions of discounts due to the defective goods sold by the Company is recognized when the goods is sold. Such provisions is measured and estimated with the relevant probability in accordance with the historical experience data and all possible results.

125

Elite Material Co., Ltd. Footnotes to Individual Financial Statement

(ⅩⅣ) Income Recognition The incomes from normal goods sales are measured with fair value of paid or payable considerations after taking into account the return, commercial discounts and quantity discounts. Incomes are recognized when there is persuasive evidence (generally the signed sales agreement), major risks and returns of ownership have been transferred to the buyer, the price is likely to be taken back, relevant costs and possible goods return can be reliably estimated, and management and income amount of uncontinuous goods can be reliably measured. If discounts are in all possibility and the amount can be reliably measured, they can be recognized at the sales recognition as the deductions of incomes. The time of risk and return transfer is determined based on the individual provisions of sales contract. Export sales mainly adopts free on board shipping point, and risks and returns are transferred to the buyer when loading the goods at the port; as to import sales, risks and returns are usually transferred upon the arrival of goods at the warehouse of the client for acceptance. (XV)Employee Benefits 1. Defined Contribution Plan Contribution obligations of defined contribution plan are employee benefit expense recognized under gains and losses during the service period of employees. 2. Defined benefit plans Post-employment benefit plan not belonging to the defined contribution plan is defined benefit plan. Net obligations of the Company under the defined benefit and pension plans are calculated for various benefit plans by discounting the future benefit amount earned by employees through current or past service to be present value. The fair value of any plan capital shall be deducted. Discount rate is subject to the interest rate of market yield rate of high quality corporate bonds or government bonds with due date close to the net obligation term of the Company and valuation currency same as the expected payment benefit funds on the financial report day. Enterprise net obligations are calculated actuarially annually by qualified actuaries according to the projected unit credit method. When the calculation results are good for the Company, the recognized capital is limited to the capital able to be returned from the plan in the future or the sum of the present value of economic benefits able to be obtained through the ways such as the future contribution to this plan. It is supposed to consider the minimum capital contribution needs applicable to any plans of the Company when calculating the present value of economic benefits. One benefit which is able to be realized within the plan period or when the plan liabilities are liquidated is with economic benefits for the Company.

126

Elite Material Co., Ltd. Footnotes to Individual Financial Statement

When the benefits of the plan improve, the relevant expenses from the part of benefits increased due to the past services of employees are recognized as gains and losses. The re-measured number of the net defined benefit liabilities (assets) includes (1) actuarial gains and losses; (2) return on plan assets but excluding the amount included in the net interest of the net defined benefit liabilities (assets); and (3) any changes to the influence number of the capital upper limit, but excluding the amount included in the net interest of the net defined benefit liabilities (assets). The re-measured number of the net defined benefit liabilities (assets) is recognized under other comprehensive income. The Company recognizes the remeasurement from defined benefit plants to be retained earnings. The Company recognizes the deductions and liquidated gains and losses of the defined benefit plan when deductions and liquidations occur. Deductions and liquidated gains include any changes in fair Value of Plan Assets and changes in present value of the defined benefit obligation.

127

Elite Material Co., Ltd. Footnotes to Individual Financial Statement

3. Short-term employee benefits Short-term employee benefits are measured according to the undiscounted basis and recognized as expenses in the supply of relevant services. As to short-term cash dividends or the amount expected to be paid under the dividend plan, if current legal or constructive obligations assumed by the Company are attributed to the past services of employees and can be reliably estimated, the amount is recognized to be liabilities. (XVI) Stock-based Payment Transaction Share-based payment rewards for employees are recognized as compensation costs and increase relevant equities with fair value on the grant date during the period when employees can get payment unconditionally. The recognized compensation costs are adjusted according to the reward amount expected to meet the service conditions and non market price vested conditions; the final recognized amount is measured based on the vested reward amount meeting the service conditions and non market price vested conditions. The non vesting conditions of share-based payment rewards have been reflected on the fair value measurement on the grant date of share-based payment, and the difference between the expected and actual results are not required to check and adjust. (XVII) Income Tax Income taxes include current and deferred income tax asset. Except those related to enterprise consolidation and items directly recognized as equities or other comprehensive income, Current tax and deferred income tax asset shall be recognized as gains and losses. Current taxes include expected payable income taxes or receivable tax rebates of the annual taxation (losses) calculated according to the legal tax rate or substantial legal tax rate on the report day, and any unappropriated retained earnings plus 10% income tax recognized as tax expense in the shareholders meeting resolution year calculated according to the adjustments to the payable income taxes in the previous year and the provisions of income tax laws. Deferred income tax assets are measured and recognized according to the temporary difference between the carrying amount and taxation basis of assets and liabilities with financial report objectives. In case of any of the following situations, the temporary differences will not be recognized as deferred income tax assets: 1. Those not belong to the assets or liabilities originally recognized in the transaction of enterprise consolidation, and not influencing accounting profits and taxation incomes (losses) during the transaction.

128

Elite Material Co., Ltd. Footnotes to Individual Financial Statement

2. Those generated due to investment subsidiary company and joint equities and likely to not to be returned in the foreseeable future. 3. Original recognition of business reputation Deferred income tax assets are measured according to the tax rate in the current period when the expected capital is realized or liabilities are liquidated, and based on the legal tax rate or substantial legal tax rate on the report day. Only when the Company shall meet the following conditions at the same time, can the deferred income tax assets and deferred tax liabilities offset with each other: 1. Having the legal execution right to make the current income tax assets and the current tax liabilities offset with each other: and 2. Deferred income tax assets and deferred tax liabilities are related to one of the subjects of tax payment from which the same tax authority levies income tax; (1) Same subject of tax payment; or

129

Elite Material Co., Ltd. Footnotes to Individual Financial Statement

(2) Different subjects of tax payment, but all subjects intend to liquidate the current tax liabilities and assets based on net amount or at the same time realize assets and liquidate liabilities in each of the future periods when deferred income tax assets of major amounts are expected to be recovered and deferred tax liabilities expected to be liquidated. Carry forward of unused taxation losses and unused income tax and deductible temporary differences are recognize as deferred income tax assets within the scope where the possible future taxable incomes are available. They are re-evaluated on each report day and deduct the income tax benefits which are not possible to be realized. (XVIII) Earnings Per Share The Company lists the basic and diluted earnings per share of holders of common stock equity of the Company. The basic earnings per share of the Company shall be calculated with the gains and losses of the holders of common stock equity of the Company divided by the weighted mean of current outstanding common shares. Diluted earnings per share shall be calculated after adjusting the influence of all potential diluted common shares of the gains and losses of the holders of common stock equity of the Company and the weighted mean of current outstanding common shares. The potential diluted common shares of the Company include convertible corporate bonds and stock options for employees. (XIX) Department Please refer to the consolidated statement for the details for the separate departments. Ⅴ. Primary Sources of Major Accounting Judgment, Estimate and Assumption Uncertainties When compiling the Consolidated Financial Report under IFRS approved by the Financial Supervisory Commission, the management must make judgment, estimate and assumption, which will influence the adoption of accounting policies and the report amount of assets, liabilities, incomes and expenditures. There may be differences between the actual results and estimate. The management authority continuously inspects the estimate and basic assumption, and accounting changes are recognized during the period of changes and the period of future to be influenced. The relevant information about the major adjustments for the coming year arising from the major risks of the estimate and assumption uncertainties is seen in the following attachments: (1) Attachment Ⅵ (II): Assessment on Accounts Receivable Impairment (2)Attachment Ⅵ (III): Inventory Evaluation

130

Elite Material Co., Ltd. Footnotes to Individual Financial Statement

Ⅵ. Description of Major Accounting Items (Ⅰ)Cash and cash equivalents Dec.31, 2015 Cash

$

Demand deposits Certificate of Deposit $

Dec. 31, 2014 506

525

603,717

441,856

49,000

50,000

653,223

492,381

Disclosures of interest rate risks and sensitivity analysis on financial assets and liabilities of the Company are seen in Footnote Ⅵ (19).

131

Elite Material Co., Ltd. Footnotes to Individual Financial Statement

(Ⅱ) Notes Receivable, Accounts Receivable and Other Receivables Dec.31, 2015 Notes Receivable

$

Accounts receivable-related parties Accounts receivable-non-related parties Other Receivables Deduction: Allowance for impairment loss $

Dec. 31, 2014

200,246

210,490

16,878

19,449

1,692,072

1,512,800

15,576

64,958

(200)

(2,398)

1,924,572

1,805,299

Notes receivable, accounts receivable and other receivables: Dec.31, 2015 Not overdue

$

Overdue 1~30 days Overdue 31~120 days Overdue over 121 days $

Dec. 31, 2014

1,915,927

1,780,268

7,379

19,254

297

6,930

1,169

1,245

1,924,772

1,807,697

Statement of Changes to the allowance for bad debt of notes receivable, accounts receivable and other receivables of the Company for year 103 and 104 in Republic of China is as follows: Individual Impairment loss Jan.1, 2015 Balance

$

Impairment loss (reverse) Amount not to be written off for not

Overall Impairment loss

Total

13

2,385

2,398

42

(2,227)

(2,185)

(13)

-

(13)

received for the year Dec.31, 2015 Balance

$

42

158

200

Jan.1, 2014 Balance

$

204

2,654

2,858

(11)

(269)

(280)

Reversal impairment loss Amount not to be written off for not

(180)

-

(180)

received for the year Dec. 31, 2014 Balance

$

13

2,385

2,398

The Company and financial institutions sign a contract on accounts receivable factoring without recourse, under which the Company is not required to bear the risk of unability to recover receivables, but only required to assume the losses arising from commercial disputes, so the accounts receivable meets the conditions of financial assets de-recognition. The information related to undue accounts receivable factoring on the

132

Elite Material Co., Ltd. Footnotes to Individual Financial Statement

report date is as follows: Sales objects

Derecogniti on

Taipei Fubon

$

Dec. 31, 2014 Credit Advanced (thousand amount dollars)

54,834 USD

Commercial Bank Co., Ltd.

133

4,000

-

Interest rate range

Bank credit

-

None

Elite Material Co., Ltd. Footnotes to Individual Financial Statement

(III) Inventories Dec.31, 2015 Raw Materials and Supplies

$

Dec. 31, 2014

240,880

317,737

Work in Process

29,022

41,160

Finished Goods

184,374

218,418

3,392

1,534

457,668

578,849

Goods in Transit $

The details of the cost of sales sold of the Company for year 103 and 104 in Republic of China are as follows: 2015 Cost of sales

$

2014

4,652,514

4,573,899

4,103

5,650

22,797

807

(49,941)

(62,718)

4,629,473

4,517,638

Loss on obsolete inventory Inventory Valuation and Obsolescence Losses Revenue from sale of scraps Total

$

As of December 31 of year 103 and 104 in Republic of China, the inventory of the Company hadn’t been used for pledge guarantee. (IV)Investments Accounted for Using Equity Method The investments of the Company made by adopting equity method on the closing date during the financial reporting period are listed as follows: Dec.31, 2015 subsidiary company

$

Affiliated company $

Dec. 31, 2014

9,146,840

7,497,714

-

-

9,146,840

7,497,714

1. Subsidiary company Please refer to the 2015 consolidated Financial Statement. 2. Affiliated company The Company approved at the end of year 94 in Republic of China that the investee company Licheng Technology (Stock) Company (the former ELITE IONERGY CO., LTD., with cost of an investment of TWD 173.694 million) had been shut down, whose assets could repay the liabilities and investment value had been impaired, so the investments were all recognized as losses in year 94 in Republic of China and book value was offset to zero.

134

Elite Material Co., Ltd. Footnotes to Individual Financial Statement

(V) Real Estate, Plant and Equipment Changes to costs and depreciation of real estate, plant and equipment of the Company for year 103 and 104 in Republic of China are as follows: Land

Buildings and Structures

Machinery and equipment

Other facilities

Unfinished Construction and Equipment to be verified

Total

Cost or Deemed cost: Jan.1, 2015 Balance

$

470,621

642,667

2,276,987

415,502 -

-

36,117

3,841,894

70,566

70,566

Add

-

-

Disposal

-

(2,185)

(21,671)

(10,151)

Reclassification

-

9,848

33,070

25,465

(68,383)

-

(34,007) -

Dec.31, 2015 Balance

$

470,621

650,330

2,288,386

430,816

38,300

3,878,453

Jan.1, 2014 Balance

$

470,621

633,506

2,240,571

386,340

25,215

3,756,253

89,498

89,498

-

Disposal

-

(700)

(2,189)

(968)

Reclassification

-

9,861

38,605

30,130

(78,596)

642,667

2,276,987

415,502

36,117

-

263,733

1,687,305

298,509

-

2,249,547

Depreciation of the year

-

21,925

109,431

34,399

-

165,755

Disposal

-

(2,185)

(18,960)

(10,151)

-

(31,296)

Dec. 31, 2014 Balance

$

470,621

-

-

Add

-

-

(3,857) 3,841,894

Depreciation: Jan.1, 2015 Balance

$

Dec.31, 2015 Balance

$

-

283,473

1,777,776

322,757

-

2,384,006

Jan.1, 2014 Balance

$

-

242,431

1,555,298

267,743

-

2,065,472

Depreciation of the year

-

22,002

132,594

31,734

-

186,330

Disposal

-

(700)

(587)

(968)

-

(2,255)

-

263,733

1,687,305

298,509

-

2,249,547

Dec. 31, 2014 Balance

$

Book value: Dec.31, 2015

$

470,621

366,857

510,610

108,059

38,300

1,494,447

Jan.1, 2014

$

470,621

391,075

685,273

118,597

25,215

1,690,781

Dec. 31, 2014

$

470,621

378,934

589,682

116,993

36,117

1,592,347

As of December 31 of year 103 and 104 in Republic of China, they had been used for long-term borrowings and financing credit guarantee, with details seen in Footnote Ⅷ.

135

Elite Material Co., Ltd. Footnotes to Individual Financial Statement

(VI) Short-Term Borrowings Dec.31, 2015

Dec. 31, 2014

Unsecured loans

$

8,329

390,043

Unused credits

$

1,899,994

1,507,453

1.18%

0.99%~2.12%

Interest rate range (VII) Short-Term Notes and Bills Payable

Dec.31, 2015 $

Commercial paper payable Deduction: Unamortized discount Net Amount

$

Interest rate range

Dec. 31, 2014

-

200,000

-

(374)

-

199,626

-

0.95~0.97%

(VIII) Long-term borrowings The details of Long-term borrowings are as follows: Dec.31, 2015 Unsecured loans

$

Secured Loan Deduction: Discount On Long-term Borrowings Current Portion

987,500

900,000

550,000

337,500

(5,300)

(3,281)

(312,500)

(712,500) 521,719

Total

$

1,219,700

Unused credits

$

462,500

Interest rate range Due year

Dec. 31, 2014

-

1.8%

1.8~1.91%

109

106

Please see Footnote Ⅵ (19) for exposure of interest rate, foreign currency and liquidity risks of the Company. 1. Securities for Bank Loans Please see Footnote Ⅷ for mortgage based securities of the Company for bank loans 2. Loan Contract Under the loan contract, before the guaranteed loans of the Company during the duration of the joint loan right or joint credit liabilities are in full settlement, the Company is required to abide by specific accounting ratio in annual and semi-annual reporting, such as current ratio, liabilities ratio and interest cover ratio. The Company hasn’t violated relevant provisions.

136

Elite Material Co., Ltd. Footnotes to Individual Financial Statement

(IX) Unsecured Convertible Debentures Dec. 31, 2014

Dec.31, 2015 Total issuing amount of convertible bonds

$

Bonds payable discount not amortized

400,000 -

Bonds redemption

(99) (6,700)

Total converted amount

(393,300)

Equity component-Transfer right

400,000 (390,100)

$

-

9,801

$

-

1,808

(Listed in Capital Surplus-Transfer right) 2015 Embedded derivative-The gain and loss of the$

2014

-

85

right of redemption and sell back evaluated by fair value principle (The financial asset or liability listed as non-operational revenue or expense ) Financial assets(liabilities) evaluated by fair value

Interest expense

$

83

741

The Company issued the third 5-year unsecured convertible bonds with 0% nominal interest rate on June 22 of the year 99 in the Republic of China, with total amount of TWD 400 million, maturity date on June 22 of the year 104 in the Republic of China and bond discount rate of 1.85%. The creditor should ask the Company to redeem all convertible corporate bonds with cash with the sum of bond denomination and interest compensation when the bonds have been issued for two years or there are 30 days left before the third year, with the conversion price of convertible bonds is based on the issuance contract of the Company. 1. Date and Terms of Principal Repayment: Except those converted into common stock of the Company in advance or redeem by the Company or put by the creditor in advanced, the principal is required to repaid at one time on the due date. 2. Conversion Price and Adjustment: The conversion price when issued is TWD 28.50 per share, which shall be adjusted when the total volume of common stocks of the Company changes or there are negotiable securities with common stock conversion rights re-issued at the conversion price lower than the market value per share. As the Company conducted stock grants on September 3 of the year 103 in the Republic of China as stock granting base date, the

137

Elite Material Co., Ltd. Footnotes to Individual Financial Statement

conversion price is adjusted from TWD 21.10 to TWD 20.00 in accordance with Article 11 of the Measures on the Issuance and Conversion of the Third Unsecured Convertible Debentures at Home of the Company. There are no reset clauses on the bonds.

138

Elite Material Co., Ltd. Footnotes to Individual Financial Statement

3. Redemption Right of the Company on the Convertible Corporate Bonds: (1) From the next day from one month after issuing to 40 days before the expiration of issuance period, when: A. the closing price of the corporate common stock at the over-the-counter center exceeds 30% of the current conversion price on the thirty business day in succession; B. total value of the unconverted bonds is lower than 10% of the total stock issued after convertible corporate bonds are converted as required by the creditor; The Company should send a registered letter to the creditor with a Notice of Bonds Recall with one-month expiry (the foregoing period is calculated from the date of mailing by the Company and takes the expiry date of the period as bonds recall base date), and should write a letter to invite the over-the-counter center to announce to recall all bonds in cash on the expiry date of the period at the recall price calculated in accordance with the interest rate of bonds redemption listed in (B). (2) Redemption Yield: Convertible corporate bonds are required to be redeemed with the bonds denomination from the following day after issuing for one month to 40 days before the expiry date. (3) In case of the failure in replying the stock service agency of the Company in written before the credit receives the bonds recall base date named in the Notice of Bonds Recall (which becomes effective upon the arrival, and mailed reply is based on the postmark date), the Company shall take the expiry date of the notice period to convert the convertible corporate bonds to the new common stocks of the Company at the current conversion price. 4. Put Right of Creditor: The creditor shall ask the Company to redeem all convertible corporate bonds in cash with the sum of bond denomination and interest compensation when the bonds have been issued for two years or there are 30 days left before the third year. The interest compensation for bonds having been issued for two years is 2.01% of bond denomination, and for three years is 3.0301% of bond denomination. The Company accepts the put request and shall redeem the convertible bonds in cash within 5 business days after the put base date. The repayment of the Company due to the expiry of convertible bonds in the year 104 in the Republic of China was TWD 6.7 million and the interest compensation recognized due to expiry was TWD 1.224 million. (X) Provisions

139

Elite Material Co., Ltd. Footnotes to Individual Financial Statement

Allowance for Sales Returns and Discounts Jan.1, 2015 Balance

$

Reversed Provisions for the year

5,446 (1,554)

Dec.31, 2015 Balance

$

3,892

Jan.1, 2014 Balance

$

5,647

Added Provisions for the year

(201)

Dec. 31, 2014 Balance

$

5,446

Liabilities due to goods return and discounts refer to the products return and discounts estimated by the Company based on historical experience, management judgment and other known reasons, and are recognized as operating revenue deduction in the year when the relevant products are sold.

140

Elite Material Co., Ltd. Footnotes to Individual Financial Statement

(XI) Employee Benefits 1. Defined benefit plans Present Value of the Defined Benefit Obligation: Dec.31, 2015 Present

Value

of

the

Defined

Benefit $

Dec. 31, 2014

114,438

136,110

(106,467)

(100,273)

7,971

35,837

Obligation Fair Value of Plan Assets Net Defined benefit liability

$

The defined benefit plan of the Company is contributed to special account of contribution for retirement of Bank of Taiwan. The retirement payment of each employee applicable to Labor Standards Law is calculated in accordance with the base obtained based on the length of service and the average salaries within six months before retirement. (1) Composition of Plan Assets The retirement fund contributed by the Consolidated under the Labor Standards Law shall be controlled by the Labor Funds Operation Bureau of the Ministry of Labor (hereinafter referred to as the Labor Funds Bureau), and under the provisions of Measures on the Management and Application of Labor Retirement Funds, the annual minimum return settled and distributed from the funds operation shall not be lower than the incomes calculated in accordance with the 2-year time certificate of deposit rate of the local banks. As of the reporting date, the balance of the Company in the special account of contribution for retirement of Bank of Taiwan amounts to TWD 106.467 million. The data of the application of the labor retirement funds include funds yield and funds asset allocation, with details to be seen in the information released on the website of the Labor Funds Bureau. (2) Changes in Present Value of the Defined Benefit Obligation 2015 and 2014Present Value of the Defined Benefit Obligation : 2014 2015 Jan.1-Defined Benefit Obligation

$

Current service cost and interest

136,110

145,174

3,497

3,786

(8,254)

(6,434)

973

2,027

Remeasurements of Net Defined benefit liability - Actuarial gains and losses occurred from adjustment -Actuarial gains and losses occurred from demographic - Actuarial gains and losses occurred

(13,656)

-

from financial assumptive adjustment Benefit paid by the plan Dec.31-Defined Benefit Obligation

141

$

(4,232)

(8,443)

114,438

136,110

Elite Material Co., Ltd. Footnotes to Individual Financial Statement

(3)Changes in Fair Value of Plan Assets Changes in Fair Value of Plan Assets: 2015 Jan.1- Fair Value of Plan Assets

$

2014

100,273

99,063

1,504

1,734

1,174

551

7,748

7,368

(4,232)

(8,443)

106,467

100,273

Interest Income Remeasurements of Net Defined benefit liability - Return on plan assets(Not including interest for this term) Amount allocated to the plan Benefits paid by the plan Dec.31- Fair Value of Plan Assets

$

(4)Expenses Recognized as Gain or Loss The 2015 and 2014 Expenses Recognized as Gain or Loss are as follows: 2015 2014 Current service cost

$

1,455

1,245

538

807

$

1,993

2,052

$

1,594

1,487

94

90

Administrative Expenses

204

395

Research and Development Expenses

101

80

1,993

2,052

Net interest of the Net Defined benefit liability

Operating Costs Selling Expenses

$

(5)The Remeasurements of the net defined benefit liability recognized as Other Comprehensive Income The 2014 and 2015 Remeasurements of the net defined benefit liability recognized as Other Comprehensive Income: 2015 Jan.1-Accumulated balance

$

Amounts recognized Dec.31-Accumulated balance

$

142

2014 6,073

11,031

(22,110)

(4,958)

(16,037)

6,073

Elite Material Co., Ltd. Footnotes to Individual Financial Statement

(6)Actuarial Assumption Present Value of the Defined Benefit Obligation: Dec.31, 2015

Dec. 31, 2014

Discount rate

1.88%

1.50%

Future salary increases

1.00%

1.50%

The contribution amount expected to be paid for defined benefit plan within one year after the reporting date of the year 104 in the Republic of China is TWD 1.176 million. The weighted average duration of the defined benefit plan is 17.62 years. (7) Sensitivity Analysis During the calculation of the present value of the defined benefit obligation, the Company is required to determine the actuarial assumption related to the balance sheet with the application of judgment and estimate, including discount rate and future salary changes. Any changes to actuarial assumption may significantly influence the amount of the defined benefit obligations of the Company. The influences of major changes to the actuarial assumption adopted in year 103 and 104 in Republic of China (seeing the notices below for details) on the present value of the defined benefit obligations are as follows: Effects on the Defined Benefit Obligation Increase Decrease Dec.31, 2015 Discount rate (+/-0.25%) Future salary increases (+/-0.25%)

(3,575)

3,730

3,693

(3,556)

The above sensitivity analysis refers to the analysis on the influence of single assumption change based on the situation that other assumptions keep unchanged. In practice, many changes to the assumptions may be linked. The calculation method of sensitivity analysis shall be consistent with that of net defined benefit liabilities of the balance sheet. The method and assumption applied in current sensitivity analysis is consistent with those adopted in early stage. 2. Defined Contribution Plan As to the defined contribution plan, the Company shall contribute the retirement funds of employees to the individual accounts for labor retirement funds of the Bureau of Labor Insurance according to 6% of the monthly salaries of labors under the provisions of Labor Pension Act. Under this plan, after contributing fixed amount to the Bureau of

143

Elite Material Co., Ltd. Footnotes to Individual Financial Statement

Labor Insurance, the Company will not assume the legal or constructive obligations of paying extra amount. The pension expense under the defined contribution retirement funds of the Company in the year of 104 and 103 in the Republic of China are TWD 20.715 million and TWD 25.736 million respectively, which have been contributed to the Bureau of Labor Insurance.

144

Elite Material Co., Ltd. Footnotes to Individual Financial Statement

(XII) Income Tax 1. Tax Expense (Income) 2015 and 2014 Tax expense Details are as follows: 2015

2014

Tax expense-Current term For current term

$

Adjusted current tax

230,001

73,575

1,212

(17)

231,213

73,558

305,061

576

536,274

74,134

Deferred Income Tax Expense The reverse and occurrence of temporary discrepancy Tax expense of Continuing operations

$

2015 and 2014 Recognized Income Tax (expenses) Interest is as follows: 2015 2014 Items that will not be reclassified subsequently to profit or loss: The gain and loss of defined benefit plans

$

(3,758)

8,825

Exchange differences on translation of$

26,833

(43,596)

Items that will be reclassified subsequently to profit or loss: foreign operations 015 and 2014Tax expense(Income) Profit before tax: 2015

2014

Profit Before Tax

$

2,925,513

1,612,830

Income Tax calculated by the local tax rate

$

497,337

274,181

(189)

(202,689)

(22,904)

(16,335)

Non-deductible expenses Exempt income Unrecognized temporary alteration

-

42

Under(over)estimated for the previous term

1,212

(17)

Unappropriated retained earnings plus10%

60,818

18,952

536,274

74,134

Tax expense(Income)

$

145

Elite Material Co., Ltd. Footnotes to Individual Financial Statement

2. Deferred Income Tax Asset and Liability (1)Unrecognized Deferred Tax Liabilities From January 1 to December 31 of year 103 and 104 in Republic of China, the temporary differences related to the investment subsidiaries are recognized as unrecognized deferred tax liabilities as the Company controls the turning time of such temporary differences and such difference are determined not to be turned in the foreseeable future. The relevant amount is as follows: Dec.31, 2015 Total temporary difference amount related to$

Dec. 31, 2014

5,074,438

5,074,438

862,654

862,654

the investment in subsidiary company Unrecognized Deferred Tax Liabilities

$

(2)Recognized Deferred Income Tax Asset and Liability The alteration of 2014 and 2015 Deferred Income Tax Asset and Liability: Defined Benefit Plans

Accumulate exchange adjustment

Foreign Investmen t Income

Other

Total

Deferred Tax Liabilities: Jan.1, 2015 Balance

$

(3,327)

(123,295)

(72,876)

(117)

(199,615)

(306,986)

(738)

(306,272)

Debit ( credit ) Balance

1,452

-

Debit ( credit ) Equity

1,875

-

-

-

1,875

-

26,833

-

-

26,833

-

(96,462)

(379,862)

(855)

(477,179)

(79,699)

(72,876)

(350)

(153,465)

233

(679)

Exchange differences on translation of foreign operations

Dec.31, 2015 Balance

$

Jan.1, 2014 Balance

$

(540)

Jan.1, 2015 Balance Debit ( credit ) Equity

(912)

-

-

(1,875)

-

-

-

(1,875)

-

-

(43,596)

-

Exchange differences on translation

(43,596)

of foreign operations

Dec. 31, 2014 Balance

$

(3,327)

146

(123,295)

(72,876)

(117)

(199,615)

Elite Material Co., Ltd. Footnotes to Individual Financial Statement

Defined Benefit Plans

Allowance for inventory Provisions valuation and obsolescen ce loss

Other

Total

Deferred Income Tax Asset: Jan.1, 2015 Balance

$

10,699

927

3,616

-

15,242

Debit ( credit ) Balance

(2,400)

(264)

3,875

-

1,211

Debit ( credit ) Equity

(5,633)

-

(5,633)

Dec.31, 2015 Balance

$

Jan.1, 2014 Balance

$

663

7,491

-

10,820

-

961

3,479

-

4,440

Debit ( credit ) Balance

-

(34)

137

-

103

Debit ( credit ) Equity

10,699

-

10,699

-

15,242

Dec. 31, 2014 Balance

$

2,666

-

10,699

147

-

927

3,616

Elite Material Co., Ltd. Footnotes to Individual Financial Statement

3. Income Tax Approval The approval on the filing of final income tax return of the Company has lasted till the year 102 in the Republic of China as required by the taxing authority. 4. Relevant Data of Income Tax Integration Relevant data of income tax integration is as follows: Dec.31, 2015

Dec. 31, 2014

Unappropriated retained earnings after 1998

$

4,876,106

3,412,810

Balance of imputation credit account

$

165,344

130,137

2014(expected) Tax deduction ratio for the profit distributed to ROC

2013(Actual)

7.61%

5.71%

residents

The foregoing relevant data of income tax integration shall be the amount disposed in accordance with the provisions of Taiwan Finance and Taxation No. 10204562810 of the Ministry of Finance on October 17 of the year 102 in the Republic of China. (XIII) Capital and Other Equity 1. The issuing of common stocks On December 31 of year 104 and 103 in the Republic China, the total nominal share capitals of the company are both TWD 4,000 million, with a denomination of TWD 10 per share and 400,000,000-share lot. The outstanding common stocks were divided into ordinary share with 317,505,000 -share lot and 315,994,000-share lot, share payment of both of which has been charged. The regulation table of number of outstanding shares in year 104 and 103 in the Republic China is as follows: (Expressed by the unit of 1000-share lot) Common stock 2015 Jan.1-Beginning balance

$

Exercise Employee Stock Warrants The transfer of convertible bond Dec.31-Ending balance

$

2014

315,994

312,414

1,351

1,961

160

1,619

317,505

315,994

On December 31 of year 104 and 103 in the Republic China, subscription right was exercised based on Employee stock option certificates and new shares were issued in numbers of 1,351,000-share lot and 1,961,000-share lot in denomination respectively, with a total amount of money of TWD 24.654 million and TWD 36.884 million, of which legal registration procedures of 1,351,000-share lot and 1,961,000-share lot have

148

Elite Material Co., Ltd. Footnotes to Individual Financial Statement

been already completed, and the share payment of all the share issued has been charged. On December 31 of year 104 and 103 in the Republic China, based on exercising of conversion right of convertible bond holders, new shares were issued in numbers of 160,000-share lot and 1,619,000-share lot in denomination respectively, with a total amount of money of TWD 3.2 million and TWD 16.193 million, of which legal registration procedures of 160 thousand shares and 1.619 million shares have been already completed.

149

Elite Material Co., Ltd. Footnotes to Individual Financial Statement

2. Capital Surplus The balance of capital surplus of the company is as follows: Dec.31, 2015 Additional paid-in capital in excess of par -$

Dec. 31, 2014

69,049

49,067

349,553

347,385

13,947

21,045

common stock The transfer of convertible bond in excess Employee Stock Option Transfer right

$

1,808 432,549

419,305

According to the former share holding proportion of shareholders, corresponding to the capital surplus that has been realized, new shares shall be issued or cash be released after the capital surplus covers losses in priority. The realized capital surplus mentioned above includes the overage of issued shares exceeding the denominational value and the earnings from the gift recipient. As specified in the handling guidelines on raising of issuers and issuing of securities, as to the capital surplus necessary for appropriation of capital, the amount of the total annual appropriation shall not exceed 10% of the paid-in capital. 3. Retained Earnings According to the rules of the company, when the annual total final accounts have a surplus, it should be first used to pay income tax and make up for previous losses, and 10% of the statutory reserve shall be drawn in line with laws, and as needed by the Article 41 of the Securities Exchange Act or in accordance with the shareholders’ resolution, the special surplus reserve shall be drawn or part of surplus shall be retained without distribution. In the case of modification of act or extermination of legal articles based on which special surplus reserve can be drawn, the special surplus reserve drawn in line with laws must be returned back to the distribution of retained earnings. Considering the characteristics of industrial growth and improvement of the company’s financial structure, if annual distribution of surplus is not carried out when there are losses during the year, then the dividend policy will give priority to the future development of the company, financial situations and shareholder remuneration, then the company’s future capital expenditure budget will be considered to distribute share dividend to preserve cash as needed, while other parts will be distributed to shareholders in cash dividends, but the distribution of cash dividends shall not be less than 20% of the total dividends to be released as planned. Taking 10%-70% of the distributable surplus after drawing of all reserves as the standard, the distribution of surplus is done according to the following ratio:

150

Elite Material Co., Ltd. Footnotes to Individual Financial Statement

(1) Employee dividend is 3%-5%, distributed according to the dividend distribution methods developed by the board of directors. Object of distribution of employees’ dividend shall contain employees of subordinate companies in line with certain conditions, which will be separately prescribed by the board of directors. (2) Remuneration of the directors and supervisors is 2%. (3) Varying to performance of the company, the board of directors shall draft a distribution proposal of shareholders’ dividends, which shall then be distributed according to the resolution of shareholders. As to other dividends as well as remaining undistributed surplus in the past years, the board of directors shall draft a distribution proposal and apply for shareholder’s resolution, then they can be distributed.

151

Elite Material Co., Ltd. Footnotes to Individual Financial Statement

According to the Companies Act amended in May, year of 104 in the Republic China, employees’ dividend and remuneration of directors and supervisors were not part of the surplus distribution item, so the Company will amend the provisions of the company under guidance of authorities before the deadline. (1) Legal Reserve The Company determines the 10% of the after-tax net income as the legal reserve until it is equal to the total capital. When there are no losses, after the resolution of shareholders meeting, the legal reserve shall be used to issue new shares or cash, but shall not be more than the amount of reserve that exceeds 25% of the paid-in capital. (2) Distribution of surplus In year of 103 in the Republic China, the actually released dividend amount of employees was TWD 42.496 million, while that of directors and supervisors was TWD 16.998 million. The actual distribution of staff dividend and remuneration of directors and supervisors differed from that of the annual financial reports in year of 103 in the Republic China, with differences of TWD 2,000 and TWD 1,000 respectively, which was included in the annual loss in year of 104 in the Republic China. On June, 15 of year of 104 and June, 9 of year of 103 in the Republic China, the annual surplus distribution plans in year of 103 and 102 in the Republic China were respectively determined in the shareholder’s standing meeting, and the amount of dividend of relevant holders was as follows: 2013 2014 Placing rate(dollars) Dividends

distributed

to

Amount

Placing rate(dollars )

Amount

the

common share holders: Cash

$

2.50

790,425 $

1.80

562,897

4. Other Equity (amount after tax) Exchange differences on translation of foreign operation Jan.1, 2015

$

Exchange differences on translation of foreign operation

587,189 (131,014)

Dec.31, 2015 Balance

$

456,175

Jan.1, 2014

$

374,338

Exchange differences on translation of foreign operation Dec. 31, 2014 Balance

212,851 $

152

587,189

Elite Material Co., Ltd. Footnotes to Individual Financial Statement

(XIV)Share-based payment The Company has the following two Share-based Payment Transactions as of Dec. 31, 2015: Equity transfer Employee share warrant plan

Employee share warrant plan

101.07.06

100.08.09

Offering amount

1,500

6,000

Contract Duration

5 years

5 years

Condition and term

Service in four

Service in four

years in the future

years in the future

2.44%

0%

-

-

Grant date

Actual employee turnover rates Estimated employee turnover rates 1.Fair value on the grant date

Adopting Hull & White and Ritchken option eva;uation model to estamate the fair value of Grant date share-based payment:: 2014

2015 Employee Stock Option To be issued on 2012 Fair value on the grant date

Employee Stock Option To be issued on 2011

Employee Stock Option To be issued on 2012

Employee Stock Option To be issued on 2011

9.285

5.937

9.285

5.937

Stock price of Grant date

27.750

21.350

27.750

21.350

Exercise Price

22.200

17.100

23.000

17.700

Dividend yield

-

Anticipated fluctuating ratio (%) Share warrant period Risk-free interest rate (%)

-

-

-

38.08%

30.67%

38.08%

30.67%

5.00

5.00

5.00

5.00

1.05%

1.17%

1.05%

1.17%

The expected volatility rate was estimated with reference from the annualized standard deviation of the company’s past daily remuneration rate of share price; in the duration period of subscription right, the date specified in the Company’s subscription right methods was called due date while the date difference from the measurement date was called duration period; risk-free interest rate was based on government bonds. In the determining of the fair value, the services contained in the transaction and non-market price performance conditions were not taken into account. When calculating the fair value of subscription rights, in order to take into account the effect of early implementation, it is assumed that employees will exercise the subscription rights when the share price is 2.14 times the exercise price after they obtain the shares.

153

Elite Material Co., Ltd. Footnotes to Individual Financial Statement

2. Employee share purchase plan Details of employee stock option certificates: (Expressed in thousand units) 2015 Weighted average Exercise price

Share warrant amount

(dollars) Jan.1-Outstanding

$

2014 Weighted average Exercise price

Share warrant amount

(dollars)

18.80

2,976

19.83

5,291

Executed in the term

18.25

(1,351)

18.81

(1,961)

Expired in the term

17.10

(16)

21.68

(354)

Dec.31-Outstanding

18.29

1,609

18.80

2,976

Dec.31-executable

17.61

1,370

18.34

1,176

Outstanding option compensation plan: Approve Issue date date

Exercise price

As of Dec.31, 2015outstanding stock options Remaining Weighted average Number of period Exercise outstanding price options

Exercisable stock option Dec.31, 2015 Weighted Number of average exercisable Exercise options price

100.07.07 100.08.09 $

17.10

1,233

8 months

17.10

1,233

17.10

100.07.07 101.07.06

22.20

376

1 years and 7

22.20

137

22.20

18.29

1,370

17.61

months 1,609 Approve Issue date date

100.07.07 100.08.09 $

Exercise price

As of Dec. 31, 2014outstanding stock options Remaining Weighted Number of average period Exercise outstanding price options

17.70

2,356

1 years and 8

Exercisable stock option Dec. 31, 2014 Weighted Number of average exercisable Exercise options price

17.70

1,033

17.70

23.00

143

23.00

18.80

1,176

18.34

months 100.07.07 101.07.06

23.00

620

2 years and 7 months

2,976

3. Employee-related expense and liabilities 2015 and 2014 share-based payment expenses: 2015 Employee stock option certificates expenses

154

$

2014 1,740

4,368

Elite Material Co., Ltd. Footnotes to Individual Financial Statement

(XV) Earnings Per Share 1. Earnings Per Share In the year of 104 and 103 in Republican of China, the basic earnings per share of the Company was a part of the net profit attributable to the equity holders of the company, calculated by the weighted average outstanding ordinary shares as follows: (1)Net profit attributable to the equity holders of our company 2015 Net profit attributable to the equity holders of our$

2014

2,389,239

1,538,696

company

(2)Weighted average outstanding ordinary shares(1000-share lot) 2015 Jan.1-Ordinary shares outstanding

2014

315,994

312,414

Effects of Convertible Securities Conversion

120

253

Conversion of convertible bonds

521

530

316,635

313,197

Dec.31-Weighted

average

outstanding

ordinary shares 2. Diluted Earnings Per Share In the year of 104 and 103 in Republican of China, the diluted earnings per share was a part of the net profit attributable to the equity holders of our company, calculated based on the weighted average outstanding ordinary shares after adjusting the dilution effect of all the potential common stocks as follows: (1)Net profit attributable to the equity holders of our company (Dilution) 2015 Net profit attributable to the equity holders of the$

2014

2,389,239

1,538,696

69

686

2,389,308

1,539,382

parent company(Basic) Convertible bonds influenced by related taxation Net profit attributable to the equity holders of the$ parent company(Dilution)

155

Elite Material Co., Ltd. Footnotes to Individual Financial Statement

(2)Weighted average outstanding ordinary shares (Dilution) (1000-share lot) 2014 2015 Weighted

average

outstanding

ordinary

316,635

313,197

40

1,860

The effects of employee profit sharing

2,009

1,528

Impact of Employee Stock Options

1,661

1,764

320,345

318,349

shares(Basic) Effects of Convertible Securities Conversion

Dec.31

balance-Weighted

average

outstanding ordinary shares (Dilution) When calculating the diluted effect of share options, the average market value was determined on the basis of the Company’s share market price during the outstanding of the option rights.

156

Elite Material Co., Ltd. Footnotes to Individual Financial Statement

3. Earnings Per Share: 2014

2015 Earnings Per Share

$

7.55

4.91

Diluted Earnings Per Share

$

7.46

4.84

(XVI) Revenue 2015 and 2014 Income Details are as follows: Continuing operations 2015 2014 Merchandise sales

$

5,852,231

5,357,007

(XVII) Remuneration of employees and directors and supervisors According to the rules of the Company passed by the board of directors’ meeting but not passed the shareholders’ meeting yet, for any annual profit, 3% of it will be appropriated as the remuneration of employees and not more than 1.2% of it as the remuneration of directors and supervisors. But if there are accumulated losses of the company, certain amount should be reserved in advance to make up. The subjects of the above employees’ remuneration of shares or cash include employees from subordinate companies in line with certain conditions. In year of 104 in Republican of China, the estimated appropriated amount of remuneration of employees, directors and supervisors was respectively TWD 91.422 million and TWD 30.474 million, with an estimated base of the company’s net profit during the period before deducting employees’ remuneration and that of directors and supervisors, multiplied by the proportion prescribed in the Company’s rules for employees’ remuneration and that of directors and supervisors, which is reported as operating costs or operating expenses in year of 104 and the relevant information can be inquired in the public information inquiry stations. If the actual amount of distributed remuneration differs from estimated amount, the way to handle depends on changes in accounting reports, and the differences are recognized and included as gains and losses in year of 105 in the Republic of China. (XVIII) Non-Operating Income and Expenses 1. Other Income 本公司2015 and 2014之Other Income Details are as follows: 2015 Interest Income

$

157

1,452

2014 845

Elite Material Co., Ltd. Footnotes to Individual Financial Statement

2. Other Gains and Losses 2015 and 2014 Other Gains and Losses Details are as follows: 2015 Foreign currency Exchange gain or loss

$

Proceeds From Disposal of Property, Plant and

2014

25,261

7,559

(2,395)

(51)

Equipment interest -

Financial assets at fair value through profit or

(85)

loss(liability)-net loss Other income $

158

5,324

1,204

28,190

8,627

Elite Material Co., Ltd. Footnotes to Individual Financial Statement

3. Financial Costs 本公司2015 and 2014之Financial Costs Details are as follows: 2015 Interest expense

$

2014

30,393

29,774

(XIX) Financial Instruments 1. Credit risk (1)Credit exposures The major financial loss may be owing to the transacting party failing to fulfill the obligation on Dec.31 2014 and 20015: ‧The Financial assets carrying amount in the balance sheet;and ‧The financial guarantee for the Company is USD 54,500 dollars, 69,000,000 dollars, and USD 68,500,000 dollars, and 70,000,000 dollars. 2. Liquidity Risk The following table shows the expiry date of financial liabilities contract, including estimated interest but not including the impact of the net agreement. Carrying amount

Cash flow

Within 6 months

6-12 months

1-2 years

Over 2 years

Dec.31, 2015 Non-derivative financial liabilities Secured Loan

$

Unsecured loans

544,700

585,337

-

69,925

-

515,412

995,829

1,051,021

146,410

108,065

-

796,546

1,390,363

1,390,363

1,390,363

-

-

-

$

2,930,892

3,026,721

1,536,773

177,990

-

$

334,219

346,891

56,708

56,250

115,954

117,979

Accounts Payable

1,311,958

Dec. 31, 2014 Non-derivative financial liabilities Secured Loan Convertible bonds

9,801

9,900

-

-

-

-

199,626

200,000

200,000

-

-

-

Unsecured loans

1,290,043

1,306,356

918,746

75,000

154,876

157,735

Accounts Payable

1,346,673

1,346,673

1,346,673

-

-

-

3,180,362

3,209,820

2,522,127

131,250

270,830

275,714

Commercial paper payable

$

The Company does not expect that analysis of occurring of cash flow on the maturity date will come significantly earlier, or the actual amount will be significantly different.

159

Elite Material Co., Ltd. Footnotes to Individual Financial Statement

3. Exchange rate risk (1) Exposure of exchange rate risk The financial assets and liabilities of the Company that are disclosed to significant foreign exchange rate risk are as follows: Dec.31, 2015 Foreign currency

Exchange rate

Dec. 31, 2014 Foreign currency

TWD

Exchange rate

TWD

Financial assets Monetary item USD

$

39,090

32.825

1,283,129

36,825

31.650

1,165,511

USD

30,291

32.825

994,335

32,182

31.650

1,018,560

JPY

347,020

0.2727

94,632

-

-

Financial liabilities Monetary item

-

(2) Sensitivity analysis The

Company’s

exchange

rate

risk

primarily

comes

from

foreign

currency-denominated cash and cash equivalents, accounts receivable and other receivables, loans, accounts payable and other payables, resulting into gains and losses of conversion of foreign currency when exchanging. In year of 104 in the Republic China, TWD depreciated or appreciated by 1% compared with US dollar, while, when all the other factors remain unchanged, in year of 104 and 103 in the Republic China, after-tax net income in year 104 and 103 will decrease by TWD 1.612 million and TWD 1.21 million, respectively. (3)Exchange gain or loss of monetary item The Exchange gain or loss of monetary item information is as follows: 2015 2014 Exchange gain or loss TWD

$

25,261

Average Exchange rate

Exchange gain or loss

-

7,559

Average Exchange rate -

4. Interest rate analysis The interest rate exposure of the Company’s financial assets and financial liabilities is described in the liquidity risk management in the footnotes. The following sensitivity analysis is dependent on the interest rate exposure risk of derivative and non-derivative instruments on the reported date. For liabilities with a floating interest rate, the way of analysis is to assume the outstanding liabilities on the reported date will be outstanding in the whole year. The fluctuation rate the internal

160

Elite Material Co., Ltd. Footnotes to Individual Financial Statement

workers report to the management staff of the Company is to increase or decrease by 0.5% based on the interest rate, which also shows the evaluation made by management staff on the reasonable fluctuation range of interest rate. If the interest rate increases or decreases by 0.5%, in the case of all the other variables remaining unchanged, the net profit of the Company in year of 104 and 103 in the Republic of China will decreased or increased by TWD 19.067 million and TWD 7.63 million, mainly due to the evaluation on the financial assets of the loans with fluctuation rate of the Company and corporate bonds with risk-free interest rate changes.

161

Elite Material Co., Ltd. Footnotes to Individual Financial Statement

5. Fair value information (1) Type of financial instruments and fair value The carrying amount and fair value of the Company’s financial assets and financial liabilities (including the hierarchy information of the fair value, but excluding the financial tools with a carrying amount reasonably approximate to fair value measured by fair value, the fair value information of which is not needed to be disclosed in accordance with the provisions) are as follows: Carrying amount

Dec. 31, 2014 Fair Value Level 1 Level 2 Level 3

Total

The financial liabilities evaluated by the amortizing cost Convertible

bonds



Liability

9,801

-

9,801

-

9,801

component

(2) Evaluation technique of fair value of financial instruments measured at fair value A. Non-derivative Financial Instruments If financial instruments are subject to active market public quotations, their fair value is taken as the publicly quotations of active market. Market price published in major exchanges and the trading center of central government bond counters of popular bonds, is the basis of fair value of equity tools on the market (counter) and bond tools with public quotations of active market. If the public quotations of financial instruments can be timely and often obtained from exchanges, brokers, underwriters, industry associations, pricing service institutions or regulatory authority, and the quotations represent the actual and frequently-occurring fair market trading, then the financial instruments have a publicly quotation of active market. If the above conditions are not met, then the market is considered not active. In general, those, the bid-ask spread is very large, significantly increases or is extremely small, are all indicators of a non-active market. If the financial instruments held by the Company has no active market indicator, its fair value is shown by category and attributes as follows: Equity instruments without public quotation: use the net asset value-based method, main assumption is to take the net value per share of investees as the basic measurement.

162

Elite Material Co., Ltd. Footnotes to Individual Financial Statement

(XX) Financial risk management 1. Summary Due to usage of financial instruments, the Company is disclosed to the following risks: (1) Credit risk (2) Liquidity Risk (3) Market risk The footnotes describe the disclosure risk information of the Company and the target, policy and procedures of measurement and management risks of the Company. The further quantitative disclosure is seen in the corresponding footnotes of the individual financial statement.

163

Elite Material Co., Ltd. Footnotes to Individual Financial Statement

2. Risk management framework The financial department provides service for other department to analyze the risk of domestic and international market. The company uses financial instruments to avoid risk including Exchange rate risk, interest rate risk, and Credit risk. The Company does not involved in the speculating transaction of financial instruments. 3. Credit risk Credit risk is the risk of financial losses generated from the failure of the counterpart against the customers or financial instruments to fulfill contractual obligations of the Company, mainly from the account receivables from the customers and securities investment of the Company. (1) Accounts Receivable and Other Receivables The credit exposure risk of the Company is mainly affected by the situation of each individual customer. But only management staff considers the basic statistics of customers of the Company, including default risks of industries and countries which customers are engaged in and belong to, all of which may affect the credit risk. The Company has established credit policies, according to which, before the Company offers standard of payment, shipment conditions and articles, individual credit rating analysis for each new customer shall be made. The review of the Company contains, if available, the external ratings, and, in some cases, the bank’s note. Procurement thresholds’ establishment by individual customers means the maximum un-received amount without approval of the board of directors. This threshold is regularly reviewed. Customers without the group’s basic credit ratings can only do transactions with the Company with the basis of receivables in advance. The Company is available with allowance for doubtful accounts to reflect the estimation of losses already occurred of accounts receivable and other receivables and investment. The main component of the allowance account contains specific losses related to certain significant exposure risks and that part of combined losses established for losses that have already occurred but yet not been identified in similar asset group. The allowance account of combined losses is dependent on statistical materials of historical payment of similar financial assets. (2) Bank deposits and trading contracts of foreign exchange derivative instruments Credit risk of bank deposits and trading contracts of foreign exchange derivative instruments is measured and monitored by the financial department of the Company. Because the trading partners and the other parties in compliance of the transactions of the Company were banks with good credit, without major concerns of performance, so there is no significant credit risk.

164

Elite Material Co., Ltd. Footnotes to Individual Financial Statement

4. Liquidity Risk Liquidity risk refers to the risk of the Company’s inability to deliver cash or other financial assets to settle financial liabilities and risk of failure to fulfill relevant obligations. The method of liquidity management of the Company ensures as far as possible that in general case and cases under pressure, there are enough liquidity fund to cope with liabilities that are due, so as to avoid unacceptable losses or the risk of harmed reputation of the Company.

165

Elite Material Co., Ltd. Footnotes to Individual Financial Statement

The Company uses standard cost system to estimate the cost of their products to help the company to supervise cash flow demands. In general, the Company ensures there is enough cash to cope with expected operating expenditure need within ninety days, including the fulfillment of financial obligations, but excluding the potential impact which could not be reasonably expected under extreme circumstances, such as natural disasters. In addition, on December 31, year of 104 and 103 in the Republic China, the total borrowing amount that had not been used of the Company was TWD 2,362.494 million and TWD 1,507.453 million, respectively. 5. Market Risk Market risk refers to the risk of affected earnings of the Company or value of financial instruments held by the company due to market price changes, such as changes of exchange rates, interest rates and equity instrument price. The objective of market risk management is to control the market risk exposure extent within affordable range and optimize investment return. To manage market risks, the Company is engaged in transactions on derivative instruments, and thereby financial liabilities emerge. Performance of all the transactions is executed under the guidelines of the board of directors. (1) Exchange rate risk The Company is disclosed to exchange rate risk that is not generated due to sales, procurement and loan exchanges valuated according to the functional currencies of the companies in the group. TWD and US dollar are the main valuation currencies of these transactions. In addition, under the natural hedge principle, based on the Company’s individual currency demand and net location (and the difference between foreign currency assets and liabilities location), and in accordance with the foreign exchange market situation, hedge is done. The Company hedges exchange rate risks of forward foreign currency, currency exchange contracts within one year from the maturity date as the report date. Interest of borrowings is evaluated by the currency of principal of the borrowings. In general, the currency of borrowings is the same with that of the cash flow generated from operations the company’s operations, mainly TWD and US dollars. In this case, economic hedging does not require entry of derivative instruments; therefore, hedge accounting is not adopted. As to other monetary assets and liabilities valuated in foreign currencies, when the short-term imbalance occurs, the Company is buying or selling foreign currencies in real exchange rates in order to ensure that the net exposure risk is maintained at an acceptable level.

166

Elite Material Co., Ltd. Footnotes to Individual Financial Statement

(2) Interest Rate Risk The borrowings of the Company are based on a floating rate, and the circumstance never occurs that the Company converts fluctuation rate into fixed rate via interest rate conversion contract. The Company should take measures corresponding to interest rate changes, dominated by periodic assessment of banks and currencies’ borrowing rate, and maintaining of good relations with the financial institutions to secure lower-cost financing, together with the strengthening of operating capital management at the same time, to reduce dependence on bank borrowings to disperse the risk of changes in interest rates. (3) Other Price Risks In addition to coping with expected consumption and sales demand of the Company, the Company does not sign commodity contracts; such commodity contracts do not take close-out netting.

167

Elite Material Co., Ltd. Footnotes to Individual Financial Statement

(XXI) Capital Management Policies of board are to maintain a sound capital base, in order to maintain the confidence of investors, creditors and the market and support the future operation and development. The capital comprises share capital, capital surplus, retained earnings and non-controlling interests of the Company. Board of directors controls capital return rate, and also the dividend level of common stocks. Debt-to-capital ratio on the report date is as follows: Dec.31, 2015 Total Liabilities

$

Deduction: Cash and cash equivalents

Dec. 31, 2014

4,128,089

3,925,392

(653,223)

(492,381)

Net Liabilities

$

3,474,866

3,433,011

Total equity

$

9,680,618

8,166,112

35.90%

42.04%

Debt-to-Capital Ratio

Until the December 31, year of 104 in the Republic China, the capital management mode of the Company had not been changed. VII. Transactions of Related Parties (1) The parent company and subsidiary company The details of the subsidiary company of the Company are as follows: Owner equity (share%) Established at EMC

OVERSEAS

HOLDING

Dec.31, 2015

Dec. 31, 2014

BVI

100%

100%

Cayman Islands

100%

100%

99.79%

99.79%

Mainland China

100%

100%

BVI

100%

100%

Mainland China

100%

100%

INCORPORATED Grand Zhuhai Incorporated Grand Shanghai Incorporated

BVI

Elite Electronic Material (Kunshan) Co. Ltd. Grand Zhongshan Incorporated Elite Electronic Material (Zhongshan) Co., Ltd. (2) The parent company and ultimate controller

The Company is the actual controller of the Company and the subsidiary company.

168

Elite Material Co., Ltd. Footnotes to Individual Financial Statement

(3) Major sale to related parties 1. Operating revenue Major sale revenue to related parties are as follows: 2015 subsidiary company $ 61,603

2014 89,556

The sales condition to affiliated company is not significantly different to other company; the payment term is 90-120 days.

169

Elite Material Co., Ltd. Footnotes to Individual Financial Statement

2.Purchase Purchasing amount from Related parties: 2015 subsidiary company

$

2014

137,574

145,700

The purchasing price is not significantly different from other companies; the payment term is 90-120 days. 3. Receivables-Related parties Receivables-Related parties Details are as follows: Item Types of related parties Dec.31, 2015 Accounts

subsidiary company

$

Dec. 31, 2014

16,878

19,449

14,154

6,976

31,032

26,425

Receivable Other

subsidiary company

Receivables $ 4. Related parties payment Details of Related parties payments are as follows: Item Related parties Dec.31, 2015 Accounts

subsidiary company

$

Dec. 31, 2014

76,218

22,994

Payable 5.Property transaction (1)Purchasing Real Estate、Plant and Equipment Purchasing equipment from Related parties: 2014

2015 subsidiary company

$

-

762

6.Endorsement Please refer to note 13 for the endorsement for subsidiary company on Dec.31, 2015. (4) Transactions of major management personnel Remuneration of major management personnel includes: 2015 Short-term employee benefits

$

2014 61,964

38,766

Post-employment benefit

638

408

share-based payment

395

1,033

62,997

40,207

$

The details of description on share-based payment are seen in Footnote VI (15).

170

Elite Material Co., Ltd. Footnotes to Individual Financial Statement

VIII. Collateralization of Assets The book value of assets of the Company to provide pledged security is as follows: Dec.31, 2015 Dec. 31, 2014 Assets Pledged object Real Estate 、 Plant and Equipment Land

Bank Loan Warrant

Buildings (Structures) Guarantee deposits paid

$

" Deposit of dormitory $

470,621

470,621

312,229

330,857

5,429

2,176

788,279

803,654

IX. Significant unrecognized contractual commitments or those with liabilities (1) Significant unrecognized contractual commitments: 1. The credit balance of the Company that has been opened yet not used is as follows: Dec. 31, 2014 Dec.31, 2015 LC not being used TWD

$

USD JPY

85,272

82,212

1,036

4,414

236,769

1,440

2. The non-payment amount of significant contracts of engineering construction and machinery and equipment purchase singed for the expansion of new plant and machinery and equipment are as follows: Dec.31, 2015

Dec. 31, 2014

Total contract value TWD

$

-

16,300

3. According to the option premium contract of environmental-friendly material technology signed between the Company and the Japanese H Company, the payment of option premium is as follows: 2015 $

2014 49,913

49,963

4. On December 31, year of 104 and 103 in the Republic China, entrusted by the Company, Mega International Commercial Bank Zhongli Branch issued a letter of guarantee with TWD 4 million and TWD 5 million granted to the Customs as a guarantee for tariffs for sales on home market and for hiring foreigners to be employed in services. X. Major disaster losses: None. XI. Significant after-date affairs: None.

171

Elite Material Co., Ltd. Footnotes to Individual Financial Statement

XII. Others Function s of Employee Benefits, Depreciation, Depletion and Amortization: 2015

Function

Nature

Operation

Operation

cost

expense

2014 Total

Operation

Operation

cost

expense

Total

Employee benefit expense Salary Expense

494,178

193,818

687,996

449,608

144,746

594,354

Insurance Expense

33,868

10,302

44,170

32,904

9,955

42,859

Pension expense

17,241

5,467

22,708

21,765

6,023

27,788

Other employee benefit

22,864

4,116

26,980

23,065

4,200

27,265

Depreciation Expense

156,963

8,792

165,755

176,999

9,331

186,330

Amortization Expense

136

1,203

1,339

233

1,389

1,622

expense

The company has 799 and 786 employees in 2015 and in 2014. XIII. Other affairs disclosed in the footnotes (1) Information related to significant transactions In year of 104 in the Republic China, according to the provisions in the development guidelines of financial statements for issuers of securities, the Company should disclose the information related to significant transactions as follows: 1. Loans to others: None. 2. Endorsement and guarantee for others: Unit: TWD (IN THOUSANDS) No. Endorse d Compa ny

Highest Endorsem Actual Amount Limited used guarantee ent amount for endorseme d by single nt balance balance for amount property the term endorseme for the term nt

Object

Relati Company on name (Rema (Remark 3) rk 2) 3 4,840,309 0 Elite Grand Material Shanghai Co., Ltd. Incorporate d

Ratio in total amount

Cap.

For For For parent subsidiar endorsem ent in y company company China

(Remark 3) 666,350

655,850

226,534

-

7%

9,680,618

Y

335,146

-

7%

9,680,618

Y

0



Grand Zhongshan Incorporate d

3

4,840,309

712,125

640,088

0



Elite Electronic Material (Zhongshan ) Co., Ltd.

3

4,840,309

759,600

459,550

-

-

5%

9,680,618

Y

Y

0



Elite Electronic Material (Kunshan) Co. Ltd.

3

4,840,309

98,610

98,475

-

-

1%

9,680,618

Y

Y

172

Elite Material Co., Ltd. Footnotes to Individual Financial Statement

Remark 1: 0 indicates the Company. Remark 2: 1. Companies with business relationship. 2. Subsidiary company’s directly-held aggregated common stocks exceed 50%. 3. Investee companies with aggregated common stocks held by the parent company and subsidiary companies exceeding 50%. 4. Common stocks held directly by the parent company or indirectly through a subsidiary company exceed 50%. Remark 3: Under the provisions of endorsement assurance measures of the Company: The total amount of external endorsement and guarantee shall not exceed 100% of the net value in the most recent financial statements of the Company, the limit of endorsement guarantee for an individual enterprise shall not exceed 50% of the net value in the most recent financial statements of the Company.

173

Elite Material Co., Ltd. Footnotes to Individual Financial Statement

3. Holding securities by the end of the period (exclude subsidiary companies with investment, affiliated companies and the part controlled in the joint-venture companies): None. 4. Accumulative buying or selling the same securities amounting to TWD 300 million or more than 20% of paid-in capital: None. 5. Acquisition of property amounting to TWD 300 million or more than 20% of paid-in capital: None. 6. Disposal of property amounting to TWD 300 million or more than 20% of paid-in capital: None. 7. Purchase and sales from and to related parties amounting to TWD 100 million or more than 20% of paid-in capital: Unit: TWD (IN THOUSANDS) Terms of transaction

Transaction status Purchase(Sales)

Name

Relation Purchase(S

Company

ales)

Amount

The Investee company evaluated by equity method

Sales

(1,340,923)



Purchase

Ratio in

Credit

total

period

amount Grand Shanghai Elite Incorporated Electronic Material (Kunshan) Co. Ltd.

〞 Elite Material Co. Ltd.





Grand Zhongshan Elite Incorporated Electronic Material (Zhongshan) Co., Ltd. 〞



Elite Electronic Grand Zhongshan Material (Zhongshan) Co., Incorporated Ltd.

Unit

Loan period

Balance

total amount

Price

(100)% Depending on the finacial status of the subsidiary company

Remark

-

263,804

81%

100%



-

(61,473)

17% Remark 1

Sales

(241,570)

(3)%



-

61,473

2% Remark 1



Purchase

1,340,923

23%



-

(263,804)

14%

The Investee company evaluated by equity method

Sales

(713,584)

(100)%



-

312,076

62%



Purchase

528,349

100%



-

(222,750)

52% Remark 2

The Investee company evaluated by equity method

Sales

(528,349)

(9)%



-

222,750

10% Remark 2

713,584

19%



-

(312,076)

(105,736)

(2)%



-

(47,970)

105,736

3%



-

47,970







Purchase



Elite Material Co., Ltd



Sales

Elite Material Co., Elite Ltd Electronic Material (Zhongshan) Co., Ltd.

Ratio in

241,570

Electronic Grand The (Kunshan) Shanghai Investee Incorporated company evaluated by equity method 〞

Receivables (Payables)

Purchase The Investee company evaluated by equity method

174

22% -

% 3%

Elite Material Co., Ltd. Footnotes to Individual Financial Statement

Remark 1: This transaction is through the parent company---Grand Shanghai Incorporated for resales to customers, without spread. The relevant purchase and sales have been shown by the Grand Shanghai Incorporated in the way of elimination. Remark 2: This transaction is through the parent company---Grand Zhongshan Incorporated for resales to customers, without spread. The relevant purchase and sales have been shown by the Grand Zhongshan Incorporated in the way of elimination.

8. Receivables from the related parties amounting to TWD 100 million or more than 20% of paid-in capital: Unit: TWD (IN THOUSANDS) Name

Transacting party

Overdue Receivables-Related Receivables-Rela Allowance for parties ted parties bad debt

Related parties-accou nt receivable Relation

Turnover(t imes)

Amount

Disposition

Investee Grand Shanghai Elite Electronic The Incorporated company evaluated Material (Kunshan) Co. by equity method Ltd.

263,804

4.18

-

168,524

-

Grand Zhongshan Elite Electronic Incorporated Material (Zhongshan) Co., Ltd.

312,076

1.90

-

237,592

-

222,750

2.30

-

134,591

-



Investee Elite Electronic Grand Zhongshan The Incorporated company evaluated Material by equity method (Zhongshan) Co., Ltd.

9. Engagement in derivative transactions: The detailed information of the company’s engagement in derivative transactions is seen in the description about “financial instruments” in Footnote VI (19) in the financial statements.

175

Elite Material Co., Ltd. Footnotes to Individual Financial Statement

(2) Re-investment business-related information: The information of re-investment business of the Company in year of 104 in the Republic China is as follows (excluding mainland Chinese investee companies): Unit: TWD (IN THOUSANDS) Investment company

Investee company

Located area

Major business

Initial Investment Amount

Share holding in the end of the term

Investee company

Recognized investment gain or loss

End of the period

Investment Elite Material Co., EMC OVERSEAS Offshore Ltd. HOLDING Incorporations INCORPORATED Limited P.O. Box 957, Offshore Incorporations Centre. Road Town, Tortola, British virgin Islands

End of last Number of year shares(Share)

Ratio

Carrying amount

Remar k

2,220,063

2,220,063 subsidia ry compan y

1,160,487

1,160,487

35,656,950

100.00%

Li Cheng Tech Co., No.11, Gongye 5th Electric Rd., Guanyin Dist., equipment 、 LTD. Taoyuan City 328, Telecom Taiwan (R.O.C.) Instruments、 Wholesale 、 Retail Sale、 Battery 、 Electricity generation 、 Power Distribution Machinery Manufacturin g

173,694

173,694

16,412,918

33.50%

EMC OVERSEAS Grand Zhuhai Scotia Centre, Import export HOLDING Incorporated 4thFloor, P.O. Box business and INCORPORATED 2804, George Town, Investment Grand Cayman, Cayman Islands

1,109,446

1,109,446

33,798,821

100.00%

Li Cheng Tech Co., No.11, Gongye 5th Electric Rd., Guanyin Dist., equipment 、 LTD. Taoyuan City 328, Telecom Taiwan (R.O.C.) Instruments、 Wholesale 、 Retail Sale、 Battery 、 Electricity generation 、 Power Distribution Machinery Manufacturin g

7,311

7,311

250,000

1.53%

Grand Zhuhai Grand Zhongshan P.O.Box 957, Import export Incorporated Incorporated Offshore business and Incorporations Investment Centre, Rood Town, Tortola, British Virgin Islands

539,545

539,545

16,437,000

100.00%

3,834,714

828,938

Import export Grand Zhuhai Grand Shanghai Offshore business and Incorporated Incorporated Incorporations Limited P.O. Box Investment 957, Offshore Incorporations Centre. Road Town, Tortola, British virgin Islands

1,084,261

1,084,261

18,161,515

99.79%

5,267,426

1,394,231





9,148,028

Net income or loss for current period

-

9,105,619

-

-

2,219,965

-

-

2,219,965 Invested Compan y

-

828,938 Invested Compan y

1,391,282

Remark 1: Carrying amount refers to the investment balance recognized under the equity law, including investment gains and losses and cumulative translation adjustment, etc. Remark 2: It is required to evaluate with equity method in accordance with the financial statements approved by the accountants of the investee company.

176



Elite Material Co., Ltd. Footnotes to Individual Financial Statement

(3) Mainland China investment-related information: 1. Re-investment business in Mainland China-related information: Unit: TWD (IN THOUSANDS) Name of the

Business scope

invested company

Paid-in

Investm Accumulate

Capital

ent type

Investment

Accumulate

Invested

amount

amount remitted

amount

company

remitted out

or withdrew

remitted out

of Taiwan

Direct or

Recognized Face value of Investment

indirect share gain and loss holding rate

the

interest

investment

withdrew

of Taiwan at

as of this

the end of this

term

term Remit Withdraw

(Remar

(Remark 2)

Net income or

k 1)

loss for current period

(2) Elite

597,415

Electronic The

Material

650,816

-

440,613

-

414,262

236,554

1,421,126

99.79%

1,418,141

5,332,862

440,613

846,006

100.00%

846,006

3,772,668

414,462

manufacturing

(Kunshan) Co. Ltd. and sales of CCL and

Bonding

sheet (2) Elite

Electronic



663,065

Material (Zhongshan)

Co.,

Ltd.

177

-

-

2. Limits of re-investment in Mainland China: Accumulated amount invested in China remitted from Taiwan-to the end of the period 673,494

Amount approved by MOEA Investment Commission 1,141,188

Amount invested in China approved by MOEA Investment Commission 5,808,371

Remark 1: Investment methods are divided into: 1. Directly investing in Mainland China. 2. Re-investing through the company in a third region. 3. Other methods. Remark 2: In the column of gains and losses recognized in the current period: The recognized basis of investment gains and losses is divided into the following three categories. (1) Financial statements audited and certified by international CPA firms working with the Accounting Firm of ROC. (2) Financial statements audited and certified by a certifying CPA from the parent company in Taiwan. (3) Other financial statements self-compiled by investee companies. Remark 3: The difference between paid-in capital and Taiwan remittance is the direct investment of USD6.012 million made by overseas subsidiary companies. Remark 4: The difference between paid-in capital and Taiwan remittance is the capital increase of USD6.255 million converted by surplus of the Company. Remark 5: The difference between paid-in capital and Taiwan remittance is the capital increase of USD800 million converted by surplus of the Company. Remark 6: The difference between paid-in capital and Taiwan remittance is the direct investment of USD110 million made by overseas subsidiary companies. Remark 7: It is converted according to the exchange rates of 32.825 (assets liabilities) and 31.7562 (gains and losses) on December 31, 2015.

3. Major transactions: The significant transactions directly or indirectly engaged by the Company with investee companies in Mainland China in year of 104 in the Republic China (had been written off when the merging report was developed), details of which can be seen in the description of “major transactions-related information”. XIV Department Information Please refer to the 2015 Consolidated Financial Statement.

178

Annex III. The Consolidated Financial Statement of the Parent/Subsidiary Company that is checked and certified by the Accountant of 2015.

Statement In 2015 (from 2015/01/01 to 2015/12/31), the Company included the companies for the preparation of the consolidated financial statements of the affiliated enterprises based on the “Criteria Governing Preparation of Affiliation Reports, Consolidated Business Reports and Consolidated Financial Statements of Affiliated Enterprises”, and the companies for the preparation of the consolidated financial statements of the parent companies based on International Financial Reporting Standards No. 10 recognized by the FSC. The relevant information that shall be disclosed at the consolidated financial statements of the affiliates has already been disclosed at the aforementioned consolidated financial reports of the parent companies, so the consolidated financial statements of the affiliates will not otherwise be prepared. Hereby declared.

Company: Elite Material Co., Ltd.

Chairman of the Board: Tsai Fei Liang Date: March 23rd, 2016

179

Independent Auditors, Report  To the Board of Directors of Elite Material Co.,Ltd:  We  have  audited  the  accompanying  consolidated  balance  sheets  of  Elite  Material  Co.,Ltd.  and  its  subsidiaries  as  of  December  31,  2015  and  2014,  and  the  related  consolidated statements of comprehensive income, changes in equity and cash flows  for  the  years  ended  December  31,  2015  and  2014.  These  consolidated  financial  , statements are the responsibility of the Company s management. Our responsibility  is to issue a report on these consolidated financial statements based on our audits.  We  conducted  our  audits  in  accordance  with  the  “Regulations  Governing  Auditing  and  Attestation  of  Financial  Statements  by  Certified  Public  Accountants”  and  the  auditing  standards  generally  accepted  in  the  Republic  of  China.  Those  standards  require  that  we  plan  and  perform  the  audit  to  obtain  reasonable  assurance  about  whether  the  financial  statements  are  free  of  material  misstatement.  An  audit  includes examining, on a test basis, evidence supporting the amounts and disclosures  in the financial statements. An audit also includes assessing the accounting principles  used  and  significant  estimates  made  by  management,  as  well  as  evaluating  the  overall  financial  statement  presentation.  We  believe  that  our  audits  provide  a  reasonable basis for our opinion.  In our opinion, the consolidated financial statenmnts referred to above present fairly,  in all  material  respects, the consolidated financial  position of Elite  Material  Co.,Ltd.  and its subsidiaries as of December 31, 2015 and 2014, and the consolidated results  of their operations and their consolidated cash flows for the years ended December  31,2015  and  2014,  in  conformity  with  the  Guidelines  Governing  the  Preparation  of  Financial Reports by Securities Issuers and with the IFRSs, IASs, IFRIC Interpretations  and SIC Interpretations endorsed by the FSC.  We have also audited the standalone financial statements of Elite Material Co.,Ltd. as  of  December  31,2015  and  2014,  and  the  related  statements  of  comprehensive  income,  changes  in  equity,  and  cash  flows  for  the  years  ended  December  31,2015  and 2014, on which we have issued an unqualified audit report. 

KPMG Securities Competent Authority’s Approval

(90) Tai Cai Chen(VI) Tzi No. : 166967 Jin Guan Chen Liu Tzi No. 0950161002

March 23rd, 2016

180

181

Current Financial asset or financial liability at fair value through profit(Note 6

1110

Net Trade receivable(Note 6 (3))

Other Receivables(Note 6 (3))

Current Tax Assets

Inventory (Note 6 (4))

Other Current Assets

1170

1200

1220

1310

1470

Real Estate,Plant and Equipment(Note 6 (6))

Intangible Assets

Deferred Income Tax Asset(Note 6 (13))

Other Non-current Assets

Refundable deposit

Long-term prepaid rent

1600

1780

1840

1900

1920

1985

Total Assets

Total Non-current Assets

Non-current Available-for-sale financial assets(Note 6 (2))

1523

Non-current Assets:

Total Current Assets

Net Notes Receivable(Note 6 (3))

1150

(2))

Cash and cash equivalents(Note 6 (1))

1100

Current Assets:

Assets

$

$

16,448

1

2

29

-

-

-

26

-

1

2

34

-

-

-

31

-

66

1

11

-

-

40

1

13 -

Capital Surplus

Non-controlling Interests Total LIABILITIES AND STOCKHOLDERS' EQUITY

Total equity

Other Equity 36XX

Accumulated Earnings/Deficits

3351 3400

Legal Reserve

3310

Retained Earnings:

Capital

3200

Equity attributable to owners of the parent company (Note 6 (14)):

Total liabilities

Total Non-Current Liabilities

Guarantee Deposits Received

Deferred Income Tax Liabilities(Note 6 (13))

Net benefit liability-Non current(Note 6(12))

Long Term Debt(Note 6 (9))

Non-current liabilities:

Total Current Liabilities

Other Current Liabilities-Other

Long Term Debts-Current Portion(Note 6 (9))

Current portion of bond repurchase(Note 6 (10))

Provisions - Current(Note 6 (11))

Current Income Tax Liabilities

Other Payables

Accounts Payable

(Note 6 (2))

Current Financial asset or financial liability at fair value through loss

Short-Term Notes and Bills Payable(Note 6(8))

Short-Term Borrowings(Note 6(7))

Current liabilities:

3100

2645

2570

2551

2540

2399

2322

2321

2250

2230

2200

2170

2120

2110

2100

LIABILITIES AND STOCKHOLDERS' EQUITY

( Please refer to the note attached herein.)

16,703,893 100

5,590,500

107,578

18,598

317,267

27,975

1,614

5,099,578

17,890

11,113,393

86,963

1 71

1,845,941

2,596

63,865

6,715,068

228,614

1,427

2,168,919

103.12.31 Amount %

10

-

-

37

1

22 -

17,707,829 100

5,131,835

102,495

15,674

310,738

24,286

3,286

4,656,802

18,554

12,575,994

85,128

1,790,378

-

6,527,270

245,500

-

3,911,270

104.12.31 Amount %

(English Tranlation of Financial Report Originally Issued In Chinese)

(Amounts Expressed in Thousands of New Taiwan Dollars)

DECEMBER 31, 2015 AND 2014

CONSOLIDATED Balance Sheets

Elite Material Co., Ltd.and subsidiary company

$

$

18,325

12,605

-

2

3

7

3 55

-

28

4

2

18

45

10

-

-

35

-

-

-

2

6

25

-

-

-

17,707,829 100

9,691,780

11,162

456,175

4,876,106

740,737

432,549

3,175,051

8,016,049

1,720,810

15,960

477,179

7,971

1,219,700

6,295,239

13,859

312,500

20,101

311,617

1,132,092

4,474,140

-

104.12.31 Amount %

1

4

1

5

1

4

4 49

-

20

4

2

19

51

-

-

46

-

-

-

6

29

-

5

16,703,893 100

8,175,409

9,297

587,189

3,412,810

586,867

419,305

3,159,941

8,528,484

774,818

17,647

199,615

35,837

521,719

7,753,666

13,962

712,500

9,801

28,555

103,914

1,068,330

4,714,485

-

199,626

902,493

103.12.31 Amount %

Elite Material Co., Ltd.and subsidiary company CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME FOR THE YEARS ENDED DECEMBER 31, 2015 AND 2014 (Amounts Expressed in Thousands of New Taiwan Dollars) (English Tranlation of Financial Report Originally Issued In Chinese) 4000 5000

6100 6200 6300

7010 7020 7050

7951 8300 8310 8311 8349 8360 8361 8399 8300

2015 Amount $ 20,869,717 (15,805,387) 5,064,330

% 100 (76) 24

2014 Amount 18,884,745 (15,454,173) 3,430,572

% 100 (82) 18

(1,183,770) (448,953) (182,457) 1,815,180 3,249,150

(6) (2) (1) 9 15

(1,054,894) (376,278) (167,009) 1,598,181 1,832,391

(6) (2) (1) 9 9

Operating Income(Note 6 (17)) Operating Costs(Note 6 (4)) Gross Income from Operations Operating Expenses: Marketing Expenses Administrative expenses Research and Development Expenses Total Operating Expenses Net Operating Income Non-Operating Income and Expenses(Note 6 (19)): Other Income Other Gains and Losses Financial Costs Non-Operating Income and Expenses Continuing Operations’ Income Before Tax Deduction: Income Tax Expense(Note 6 (13)) Net Income Other Comprehensive Income: Items not to be reclassified into profit or loss Defined benefit plans Remeasurement Income tax related to Items not to be reclassified Items not to be reclassified into profit or loss Items that may be subsequently reclassified into profit or loss Exchange difference in the financial report from operating units aboard Income tax related to Items to be reclassified Items that may be subsequently reclassified into profit or loss Other Comprehensive Income(Amount after tax) Total Comprehensive Income $ Net Income for: Owners of the parent $ Non-controlling Interests $ Aggregate loss and gain attributable to: Owners of the parent company $ Non-controlling Interests $ Earnings Per Share(TWD) (Note 6 (16)) $ Earnings Per Share(Unit:TWD) $ Diluted Earnings Per Share (Unit:TWD)

7,300 109,992 (35,792) 81,500 3,330,650 (938,463) 2,392,187

22,110 (3,758) 18,352 (158,930) 26,833 (132,097) (113,745) 2,278,442

1 1 16 (4) 12

(1) (1) (1) 11

2,389,239 2,948 2,392,187

-

12

2,276,577 1,865 2,278,442

-

12 11 11 7.55 7.46

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

182

4,267 48,660 (47,067) 5,860 1,838,251 (296,618) 1,541,633

-

4,958 8,825 13,783

-

256,855 (43,596) 213,259 227,042 1,768,675

9 (1) 8

1 1 1 9

1,538,696 2,937 1,541,633

-

8

1,765,330 3,345 1,768,675

-

8 9 9 4.91 4.84

183

Jan.1, 2014 Balance Net Income Other Comprehensive Income Total Comprehensive Income Legal Reserve Cash Dividends of Common Stock Convertible Securities Conversion The right to transfer the right of charge of convertible bonds payable converted to common share Advance Receipts for Capital Stock Exercise Employee Stock Warrants Stock-based Payment Transaction Non-controlling Interests Dec.31, 2014 Balance Net Income Other Comprehensive Income for this term Total Comprehensive Income Appropriation and distribution of retained earnings: Legal Reserve Cash Dividends of Common Stock Convertible Securities Conversion The right to transfer the right of charge of convertible bonds payable converted to common share Matured bonds payable Exercise Employee Stock Warrants Stock-based Payment Transaction Dec.31, 2015 Balance $

19,610

13,510

1,600 -

-

36,884 (36,884) -

-

-

-

(1,224) 11,144 1,740 432,549

2,168 (584)

419,305

17,274 4,368

-

-

-

-

740,737

153,870

586,867

4,876,106

(153,870) (790,425) -

3,412,810 2,389,239 18,352 2,407,591

Capital Undistributed Legal Reserve Surplus Earnings 381,700 503,265 2,506,830 1,538,696 13,783 1,552,479 83,602 (83,602) (562,897) 21,918 (5,955) -

Retained Earnings

-

-

456,175

587,189 (131,014) (131,014)

-

36,884

(1,224) 24,654 1,740 9,680,618

(790,425) 2,168 1,016

4,368 8,166,112 2,389,239 (112,662) 2,276,577

-

-

-

11,162

(11,275) 9,297 2,948 (1,083) 1,865

Exchange Differences on Equity Translation of attributable to Foreign owners of the Financial parent Non-controlling Statements company Interest 374,338 6,890,271 17,227 1,538,696 2,937 212,851 226,634 408 212,851 1,765,330 3,345 (562,897) 38,111 (5,955) -

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

3,175,051

-

-

3,159,941 -

-

Common Stock $ 3,124,138 16,193 -

Capital collected in advance -

Capital Stock

Equity attributable to owners of the parent company

(English Tranlation of Financial Report Originally Issued In Chinese)

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY FOR THE YEARS ENDED DECEMBER 31, 2015 AND 2014 (Amounts Expressed in Thousands of New Taiwan Dollars)

Elite Material Co., Ltd. and subsidiary company

36,884

(1,224) 24,654 1,740 9,691,780

(790,425) 2,168 1,016

4,368 (11,275) 8,175,409 2,392,187 (113,745) 2,278,442

-

Total equity 6,907,498 1,541,633 227,042 1,768,675 (562,897) 38,111 (5,955)

Elite Material Co., Ltd. and subsidiary company CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 2015 AND 2014 (Amounts Expressed in Thousands of New Taiwan Dollars) (English Tranlation of Financial Report Originally Issued In Chinese) 2015 Cash Payments for Other Goods and Services: Net Income before Tax Adjustments: Income & Expense Items Depreciation Expense Amortization Expense for bad debts expense (transferred to income) Gains on Financial Assets (Liabilities) at Fair Value through Net Profit or Loss Interest expense Interest revenue Loss on Disposal Of Real Estate, Plant and Equipment Loss Cost for share-based compensastion Convertible bonds issuance discount cost and interest expense Buy back the interests on Bonds Payable Others Total Income & Expense Items Changes In Operating Assets and Liabilities: Net Change In Operating Assets: Notes Receivable Trade receivable Other Receivables Inventory Other Current Assets Other Assets Total Net Change In Operating Assets Net Change In Operating Liabilities: Accounts Payable Other Payables Provisions Other Current liabilities Net Defined benefit liability Total Net Change In Operating Liabilities Changes In Operating Assets And Liabilities Total Adjustments Cash Inflows of Operations Interest Received Classified As Investing Activities Interest Paid Classified As Financing Activities Income taxes paid Cash provided by (used in) operating activities Cash flows from investing activities: Acquisition Of Real Estate, Plant and Equipment Proceeds From Disposal Of Real Estate, Plant and Equipment Acquisition Of Intangible Assets Decrease(Increase) In Refundable deposit Cash provided by (used in) investing activities Cash flows from financing activities: Decrease In Short-Term Borrowings Decrease(Increase) In Short-Term Notes and Bills Payable Proceeds From Long Term Debt Repayments Of Long Term Debt Decrease In Guarantee Deposits Received Cash Dividends Exercise Employee Stock Warrants Bonds buy back Purchase of Non-controlling Interests Cash Flows From Financing Activities Effects of exchange rate change on cash and cash equivalents Increase In Cash And Cash Equivalents Cash And Cash Equivalents At Beginning Of Period Cash And Cash Equivalents At End Of Period

$

2014

3,330,650

1,838,251

535,229 1,767 (2,947) 19,904 35,709 (7,300) 6,209 1,740 83 (1,224)

528,291 2,635 36,351 (1,294) 46,326 (4,267) 1,461 4,368 741

$

589,170

(6,802) 607,810

(17,372) 263,121 39,601 30,065 (6,572) 5,198 314,041

101,737 (1,508,687) (35,896) (190,874) (6,310) (87,444) (1,727,474)

(335,147) 134,226 (8,072) 7,275 (5,756) (207,474) 106,567 695,737 4,026,387 7,310 (36,315) (422,743) 3,574,639

1,350,129 209,773 13,516 134 (5,316) 1,568,236 (159,238) 448,572 2,286,823 4,248 (48,512) (266,781) 1,975,778

(233,854) 1,045 (3,457) 2,664 (233,602)

(486,535) 2,487 (269) (2,756) (487,073)

(885,769) (199,626) 1,535,481 (1,237,500) (1,615) (791,303) 24,654 (6,700) (1,562,378) (36,308) 1,742,351 2,168,919 3,911,270

(716,771) 49,991 581,250 (593,750) (4,474) (562,897) 36,884

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

184

-

-

3,405 (1,206,362) 50,104 332,447 1,836,472 2,168,919

Elite Material Co., Ltd. Footnotes to Consolidated Financial Statement 2015 & December 31, 2014 (Unless otherwise noted, all amounts are stated in thousands of New Taiwan Currency)

Ⅰ. Company History Founded on March 24, 1992 after being approved by the Ministry of Economic Affairs, Elite Material Co., Ltd. (hereinafter referred to as the Company) was engaged in manufacturing and marketing raw materials, semi-finished products and finished products of green sheets, specialty chemicals for electronic industry and electronic components, with green sheets and adhesive sheets as the main operating revenue. The application of the Company for shares over-the-counter was approved on October 3, 1996, and shares were officially listed for sale on December 26, 1996; the application for listing of transferring shares was approved on October 22, 1998, and transferring shares were officially listed for sale on November 27, 1998. Registered address is No.18, Datong 1st Rd., Guanyin Dist., Taoyuan City. Please see Footnotes XIV for main business item of the Company and its subsidiary company (hereinafter referred to as the Consolidated Company). Ⅱ. Date and Procedures of Approval of Financial Statement The Consolidated Financial Statement was approved and released by the Board of Directors on March 23, 2016. Ⅲ. Application of New and Revised Standards and Interpretations (Ⅰ) Influence of the Adoption of New and Revised Standards and Integrations Approved by the Financial Supervisory Commission Since 2015, the Consolidated Company has fully adopted the International Financial Report Standards (2013 Version) (excluding IFRS 9 Financial Instruments) which is approved by the Financial Supervisory Commission (hereinafter referred to as FSC) to come into effect to compile Consolidated Financial Statements, with relevant new, amended and revised standards and interpretations listed as follows: New/Amended/Revised Standards & Interpretations Amendments to IFRS 1 IFRS 7 First-time Adoption Exemption

Effective Date Released by IAS Board July 1 2010

Amendments to IFRS 1 Severe Hyperinflation and Removal of July 1 2011 Fixed Dates for First-time Amendments to IFRS 1 Government Loan

185

January 1, 2013

Amendments to Amendments to IFRS 7 Disclosures-Transfer of July 1 2011 Financial Assets Amendments to IFRS 7 [Disclosures-Offsetting Financial Assets January 1, 2013 and Liabilities] IFRS 10 Consolidated Financial Statement

January 1, 2013 (Individual investor effective date

IFRS 11

Joint Agreement

January 1, 2013

IFRS 12

Disclosures of Rights and Interests of Other Individuals

January 1, 2013

IFRS 13

Fair Value Measurement

January 1, 2013

186

Elite Material Co., Ltd. Footnotes to Consolidated Financial Statement

New/Amended/Revised Standards & Interpretations Amendments to IAS 1Other Comprehensive Income Presentation

Effective Date Released by IAS Board July 1, 2012

Amendments to IAS 12 Deferred Income Tax Asset: Withdrawal of January 1, 2012 Target Assets Revision to IAS 19 Employee Benefits

January 1, 2013

Revision to IAS 27 Separate Financial Report

January 1, 2013

Amendments to IAS 32 Offsetting Financial Assets and Financial January 1, 2014 liabilities IFRI 20 Stripping Costs in the Production Phase of a Surface Mine

January 1, 2013

Nature and impact of major changes to the Consolidated Financial Statement by adopting IFRS (2013 Version) are as follows: 1. IFRS 13 Fair Value Measurement IFRS changes the definition of fair value, sets out in a single framework for measuring fair value and requires disclosures about fair value measurements. The Consolidated Company has added disclosures related to fair value measurement in accordance with the new standards and postponed the provisions on fair value measure applicable to the new standards in accordance with the interim provisions of the new standards but is not required to provide detailed information concerning the provisions on the added disclosures. Although the applicable new measurement provisions had been postponed from 2015, the assets and liabilities of the Consolidated Company haven’t suffered material influences. 2. IAS 1 Financial Report Presentation The Standards makes amendments to the presentation of other comprehensive income and divides the items under other comprehensive income into two categories Subsequent

Non

Reclassification

under

Gains

and

Losses

and

Subsequent

Reclassification under Gains and Losses by nature. The Amendments also stipulates that the relevant taxes of other comprehensive income recognized with pre-tax amounts shall be separately recognized with the foregoing two categories. The Consolidated Company has changed the presentation of other comprehensive income statement in accordance with the Standards, with the comparison matched with the reclassification presentation. 3. IAS 19 Employee Benefits The main amendments to the Standards multiply net defined benefit liability (assets) by discount rate to determine the net interest, uses it to replace the pre-amendment interest costs and the expected returns of the planned assets, removal of actuarial gains 187

Elite Material Co., Ltd. Footnotes to Consolidated Financial Statement

Effective Date Released by IAS New/Amended/Revised Standards & Interpretations Board and losses Corridor Approach or the accounting policy choice of one-time recognized under gains and losses when occurs, and stipulates remeasurements (including actuarial gains and losses) of the defined benefit plans to be recognized as other comprehensive income when occurs, past service costs to be considered as gains and losses when occurs, and stipulates not to recognize the apportion any longer based on the straight line method under the costs during the average period before meeting the defined conditions. In addition, companies could not any longer recognize the earlier of the cancelation of the offer of post-employment benefits or the recognition of relevant re-construction costs under

the

post-employment

benefits,

rather

than

to

always

recognize

the

post-employment under liabilities and costs when defining the premise of relevant post-employment events. Additional disclosures are required in relation to defined benefit plans. Following acccessment, the Standards hasn’t greatly affected the financial status and operation achievements of the Consolidated Company, and will add defined benefit plans related disclosures as stipulated.

188

Footnotes to Consolidated Financial Statement of Elite Material Co., Ltd. (Continued)

(Ⅱ) New and Revised Standards and Interpretation Not Approved by FSC The standards and interpretations listed in the table below have been released by the International Accounting Standards Boards (hereinafter referred to as IASB) but not approved to come effect by FSC: New/Amended/Revised Standards & Interpretations IFRS 9 Financial Instrument

Effective Date Released by IAS Board January 1, 2018

Amendments to IFRS 10 and IAS 28 Sale or Contribution of Assets To be decided between Investor and Its Affiliated Company Amendments to IFRS 10, IFRS 12 and IAS 28 Individual Investor: January 1, 2016 Applicable Exceptions from Consolidated Report Exceptions Amendments to IFRS 11 Accounting for Interests in Joint January 1, 2016 Operations IFRS 14 Regulatory Deferral Accounts

January 1, 2016

IFRS 15 Revenue from Contracts with Customers

January 1, 2018

IFRS 16 Leases

January 1, 2019

Amendments to IAS 1 Disclosures

January 1, 2016

Amendments to IAS 7 Disclosures

January 1, 2017

Amendments to IAS 12 Recognition of Deferred Income Tax Asset January 1, 2017 for Unrealized Loss Amendments to IAS 16 and IAS 38 Clarification of Acceptable January 1, 2016 Methods of Depreciation and Amortizement Amendments to IAS 16 and IAS 41 Agriculture: Bear Plants

January 1, 2016

Amendments to IAS 19 Defined Benefits Plan: Employee July 1, 2014 Promotion Amendments to IAS 27 Equity Method of Separate Financial January 1, 2016 Statements Amendments to IAS 36 Recoverable Amount Disclosure for January 1, 2014 Non-Financial Assets Amendments to IAS 39 Novation of Derivative and Continuation of January 1, 2014 Hedge Accounting 2010‑2012 and 2011‑2013 Annual Improvements

July 1, 2014

2012‑2014 International Financial Report Annual Improvements

January 1, 2016

IFRS 21

January 1, 2014

Course

The Consolidated Company is continuously assessing the influences of the abovementioned standards and interpretation on the financial status and operation results of the Consolidated Company, with the relevant influences to be disclosure upon completion. 189

Elite Material Co., Ltd. Footnotes to Consolidated Financial Statement

Ⅳ.

Summary of Major Accounting Policies

The major accounting policies adopted in this Consolidated Financial Statement are summarized as follows. Unless otherwise noted, the following accounting policies have been applicable for all presentation period of the Consolidated Financial Statement. (Ⅰ) Following Statements The Consolidated Financial Statement was compiled in accordance with the Guidelines Governing the Preparation of Financial Reports by Securities Issuers (thereinafter referred to as the Guidelines Governing the Preparation), IFRS approved by the Financial Supervisory Commission, and IAS, Interpretations and Interpretation Announcement (hereinafter referred to as IFRS approved by the Financial Supervisory Commission). (Ⅱ) Compiling Foundation 1. Measurement Foundation Except the major items in the following balance sheet, the Consolidated Financial Statement was complied based on the historical costs: (1) Financial assets at fair value through profit or loss measured with fair value; (2) Available-for-sale financial assets measured according to fair value; (3) Net defined benefit liability (or asset), is measured according to the fair value of the retirement fund assets deducting present value of the defined benefit obligation and the ceiling influence value listed in Footnotes IV (15) 2. Functional Currency and Presentation Currency Each party of the Consolidated Company takes the currency of major economic environment where its operation is located as its functional currency. The Consolidated Financial Statement is presented in the functional currency of the Company, TWD. All of the financial information expressed herein in TWD is of one thousand per unit. (Ⅲ)

Consolidation Foundation 1. Compiling Principles of the Consolidated Financial Statement The main compliers of the Consolidated Financial Statement are composed of the Company and the individuals controlled by the Company (subsidiary company). When the Company discloses the variable compensations of invested individuals or has rights to enjoy such compensations and is able to influence such compensations with its power on invested individuals, the Company controls the individuals. Since the date of being control, the subsidiary companies have started to integrate

190

Elite Material Co., Ltd. Footnotes to Consolidated Financial Statement

their financial reports to the Consolidated Financial Statement till the date of the cancelation of the control. All trading, balances and any un-realized gains and losses among the consolidated companies have been terminated when the Consolidated Financial Statement is complied. The sum of the integrated gains and losses of subsidiary company are under control of the owner the Company and belong to non-controlling interests, even if when non-controlling interests become losses. The financial reports of subsidiary company have been appropriately adjusted, so as to make their accounting policies consistent with those adopted by the Consolidated Company. The changes made by the Consolidated Company to the ownership interests of subsidiary company, if not giving rise to the loss of control on subsidiary company, are considered as the interest issues with the owner. The difference between the amount of adjusted non-controlling Interests and the payment or charges of consideration fair value is directly recognized to be interests which are attributed to the owner of the Company.

191

Elite Material Co., Ltd. Footnotes to Consolidated Financial Statement

2.Subsidiary company listed in the consolidated financial statement Subsidiary company listed in the consolidated financial statement including: Equity Ratio Dec. 31, 2014 Dec.31, 2015

Business Investment Company The Company

subsidiary company

nature

EMC OVERSEAS HOLDING Investment

100.00%

INCORPORATED

Details

100.00%Established at BVI in Jul. 1996

and

the

Paid-in

capital id USD 35,657,000 dollars as of 2015. export

100.00%

100.00%Established

at

Cayman

EMC OVERSEAS Grand Zhuhai Incorporated

Import

HOLDING

business

islands in Apr. 2004 and

INCORPORATED

andInvestment

the Paid-in capital id USD 33,689,000 dollars as of 2015.

Grand

Zhuhai Grand Shanghai Incorporated

Incorporated

Import business

export

99.79%

99.79%Established at BVI in May 1997

and

and

the

Paid-in

capital id USD 18,200,000

Investment

dollars as of 2015. 〞

Grand Zhongshan Incorporated Import business

export

100.00%

and

100.00%Established at BVI in 2014 and the Paid-in capital id

Investment

USD 16,437,000 dollars as of 2015.

Grand

Shanghai Elite

Incorporated

100.00%

100.00%Established

at

China

Electronic

Material Manufacturing CCL

(Kunshan) Co. Ltd.

and bonding sheet

KETDZ in Sep. 1997 and

for PCB

the Paid-in capital id USD 18,200,000 dollars as of 2015.

Grand

Zhongshan Elite

Incorporated

Electronic

(Zhongshan) Co., Ltd.

Material Manufacturing CCL

100.00%

100.00%Established

at

China

and bonding sheet

Kuandong ZHtorch Zone in

for PCB

jul. 2004 and the Paid-in capital id USD 20,200,000 dollars as of 2015.

3. Subsidiary companies not listed in the Consolidated Financial Statement: no. (Ⅳ) Foreign Currency 1. Foreign Currency Trading Foreign currency is converted into functional currency according to exchange rate on the date of transaction. The monetary items in foreign currency on the date of report are converted into functional currency according to exchange rate on the day. The gains and losses from conversion refer to the difference between the amount after costs after amortization priced in functional currency in the beginning of the period adjust the effective interests and post-payment amount in the current period and the amount of the costs after amortization priced in functional currency is converted according to exchange rate on the report day. 192

Elite Material Co., Ltd. Footnotes to Consolidated Financial Statement

The non-monetary items of foreign currency measured with fair value are converted into functional currency according to exchange rate on the day of measuring the fair value, while the non-monetary items of foreign currency measured by historical costs are converted according to exchange rate on the transaction day. Unless non-monetary equity instruments available for sale are designated to be financial liabilities to hedge for the net investment of foreign operating organizations or qualified cash flow, the foreign currency exchange difference resulting from the conversion is recognized to be other comprehensive Income, otherwise, recognized to be gains and losses. 2. Foreign Operating Organizations The assets and liabilities of foreign operating organizations, including the business reputation and fair value adjustment during the acquisition, are converted to be TWD according to exchange rate on the report day; gains and losses are converted into TWD according to exchange rate in the current period, and the resultant conversion difference is recognized to be other comprehensive Income. In case of the loss of control, joint control or material influences arising from the punishment on foreign operating organizations, the accumulated conversion differences related to the foreign operating organizations shall be fully reclassified as gains and losses. In case of subsidiary company of foreign operating organizations involved in the punishment, the related accumulated conversion differences shall be reclassified as non-controlling interests in proportion. In case of affiliated company or joint ventures of foreign operating organizations involved in some of the punishment, related accumulated conversion differences shall be fully reclassified as gains and losses in proportion. As to the receivable and payable monetary items of foreign operating organizations, if without the repayment plan or the possibility of repayment in foreseeable future, the resultant gains and losses from foreign currency conversion shall be regarded as a part of net investments to the foreign operating organizations as recognized as other comprehensive income. (Ⅴ) Standards for Classifying Current and Non-current Assets and Liabilities Assets meeting one of the following conditions are recognized to be current assets, and other assets not belonging to current assets are recognized to be non-current assets: 1. Those that are expected to be realized during the normal operating period of the Consolidated Company or intended to be sold or consumed. 2. Those held mainly for the purpose of transaction. 3. Those expected to be realized within 12 months after the balance sheet.

193

Elite Material Co., Ltd. Footnotes to Consolidated Financial Statement

4. Cash or cash equivalents, but not including those used for exchange, liquidation of liabilities or those with other restrictions. The liabilities meeting any one of the following conditions are current liabilities, and other liabilities not belonging to current liabilities are recognized to be non-current liabilities: 1. Those expected to be paid off during the normal operating period of the Consolidated Company. 2. Those held mainly for the purpose of transaction. 3. Those expected to be paid off within 12 months after the balance sheet. 4. Those that shall not allow the Consolidated Company to unconditionally extend the liquidation period to at least 12 months. Liabilities for liquidation arising from the issuing of equity instruments in accordance with the clauses chosen by the other party of transaction will not affect their classification.

194

Elite Material Co., Ltd. Footnotes to Consolidated Financial Statement

(Ⅵ) Cash and cash equivalents Cash includes cash on hand and demand deposits. Cash equivalents are the investments which are allowed to be converted into normed cash with few value change risks and short-term high flow ability. Certificate of deposit which satisfy the foregoing definition and with the holding purpose of meeting the short-term cash pledges rather than investment or others shall be recognized as cash equivalents. (Ⅶ)Financial Instruments Financial assets and financial liabilities can be recognized when the Consolidated Company becomes one party stipulated under the conditions of the Financial Instrument. 1. Financial assets Financial assets of the Consolidated Company are classified into: financial assets at fair value through profit or loss, loans, account receivables and available-for-sale financial assets. (1) Financial assets at fair value through profit or loss Such financial assets refer to those held for trading or designated to be financial assets at fair value through profit or loss. Financial assets held for trading are sold or re-purchased within a short period due to the main purpose of obtaining or incurring. In case of any of the following conditions for the Consolidated Company, the financial assets excluding those held for trading are designated to be those measured at fair value through profit or loss at the original recognition: A. Eliminate and greatly reduce the inconsistent measure or recognition arising from the measurement on assets or liabilities on different basis and recognition of relevant gains and losses. B. Financial assets assess the performance based on fair value. C. Composite instruments include embedded derivative. Such financial assets are measured with fair value at the original recognition and the transaction costs are recognized as gains and losses when they occur; the subsequent assessment is measured with fair value and the re-measurement gains or losses (including relevant dividends income and interest income) are recognized as gains and losses, which are then listed under non-operating income and expenses. When purchasing or selling financial assets on the basis of the trade practices, accounting treatment on the trading day will be adopted. If such financial assets belong to the equity investment of Tight Market Public Offer and Unreliable Fair Value Measurement, they shall be measured with costs

195

Elite Material Co., Ltd. Footnotes to Consolidated Financial Statement

deducting impairment loss and recognized as Financial Assets Measured with Costs. (2)Available-for-sale financial assets Such financial assets refer to non-derivative financial assets available for sale or belonging to other categories. Such assets are measured with fair value plus the trading cost which can be directly attributable at original recognition; in subsequent assessment, they are measured with fair value and except the impairment loss, interest income, dividends income and monetary financial assets foreign currency conversion calculated according to effective interest rate method which are recognized as gains and losses, the changes of other carrying amount are recognized as other comprehensive income and accumulated to be the unrealized gains and losses of available-for-sale financial assets under equity. In de-recognition, the accumulated amount of interests or losses under equity is re-classified to be gains and losses, and recognized under non-operating income and expenses. When purchasing or selling financial assets on the basis of the trade practices, accounting treatment on the trading day will be adopted.

196

Elite Material Co., Ltd. Footnotes to Consolidated Financial Statement

If such financial assets belong to the equity investments of Tight Market Public Offer and Unreliable Fair Value Measurement, they shall be measured with costs deducting impairment losses and recognized as Financial Assets Measured with Costs. Dividends income of equity investment is recognized on the day when the Consolidated Company is entitled to receive dividends (generally the ex-dividend date) and listed under non-operating income and interest. (3) Loans and account receivables Loans and account receivables shall be public offer in tight market, and be the financial assets with fixed or decidable payment amount, including account receivables and other receivables. At original recognition, they shall be measured with fair value plus the trading costs which can be directly attributable, and in subsequent assessment, they are measured with post-amortization costs deducting impairment losses according to effective interest rate method, except short-term receivables recognized as those without materiality. When purchasing or selling financial assets on the basis of the trade practices, accounting treatment on the trading day will be adopted. Interest income is recognized under non-operating income. (4) Financial assets impairment As to financial assets or financial liability not measured at fair value through profit or loss, impairment loss shall be assessed on each report day. When there is objective evidence showing single or multiple events happen on financial assets after original recognition which give rise to losses to the estimated future cash flow of the financial assets, the impairment has occurred. The object evident of financial asset impairment includes major financial difficulties of issuers or debtors, default (such as the delay payment or default of interest or non-payment), the greater possibility of debtors’ going bankrupt or other financial re-organization and the disappearance of activated market of financial assets due to financial difficulties. In addition, when the fair value of equity investment available for sale greatly or continuously declines to below the costs, it also belong to objective impairment evidence. If there is no impairment arising from the individual evaluation on the accounts receivables, combined basis shall be adopted to evaluate the impairment. The objective impairment evidence of receivables combination possibly includes the past receivables experience of the Consolidated Company, the increase in delayed payment exceeding the loan period and national or regional economic situation changes related to the

197

Elite Material Co., Ltd. Footnotes to Consolidated Financial Statement

default of receivables. The impairment loss amount measured and recognized with post-amortization costs is the difference between the carrying amount of the assets and the present value of the estimated future cash flow discounted according to the original effective rate of the financial assets. All financial asset impairment losses are directly deducted from the carrying amount of the financial assets, and only the carrying amount of the accounts receivable shall be lowered through the provision accounts. When the accounts receivables are judged to be uncollectible, they are used to offset the provision accounts. The originally offset but later receivable amount can credit the provision accounts. The changes of the carrying amount of the provision accounts are recognized to be gains and losses. In case of the impairment of available-for-sale financial assets, the accumulated interests and losses that originally recognized as other comprehensive income will be re-classified to be gains and losses.

198

Elite Material Co., Ltd. Footnotes to Consolidated Financial Statement

When the financial assets are measured with post-amortization costs, in case of the reduction in subsequent impairment loss and such reduction occurring after the recognition of impairment loss, the impairment losses previously recognized are allowed to re-recognized as gains and losses, and accumulated under other equity interest, but the carrying amount of the investment on the impairment re-recognition date shall not be higher than the post-amortization costs when the impairment losses are not recognized. The impairment loss previously recognized by the equity instruments available for sale under the gains and losses shall not re-recognized to be gains and losses. The increased amount of fair value after being recognized as impairment losses shall be recognized as other comprehensive income and accumulated under other equity items. If the increased amount of the debt instruments available for sale can be objectively considered to be the events after the impairment losses are recognized to be gains and losses, they are allowed to be re-recognized as gains and losses. The bad debts loss of accounts receivable and increased amount shall be recognized under administrative expenses. (5) Financial assets de-recognition When the Consolidated Company only terminates the contractual rights from the cash flow of such assets or has transferred the financial assets and almost all risks and returns of the asset ownership have been transferred to other enterprises, the financial assets shall be de-recognized. When de-recognizing the overall single financial asset, the difference between the carrying amount and the sum of the total of the received or receivable consideration and the amount recognized as other comprehensive income and accumulated under Other Equities – Unrealized Gains and Losses of available-for-sale financial assets shall be recognized as gains and losses and listed under non-operating income and expenses. When not de-recognizing the overall single financial asset, the Consolidated Company takes the relative fair value of each part on the transferring date as basis to apportion the original carrying amount of the financial assets to the parts that is continuously recognized and de-recognized due to continuous participation. The difference between the carrying amount that is apportioned to the de-recognition part and the sum of consideration collected for de-recognition part and the part of any accumulated gains or losses recognized as other comprehensive income that is apportioned to be de-recognition part shall be recognized as gains and losses and listed

199

Elite Material Co., Ltd. Footnotes to Consolidated Financial Statement

under non-operating income and expenses. The accumulated profits and losses recognized as other comprehensive income shall be apportioned to continuously recognized part and de-recognized part in accordance with their relative fair value. 2. Financial Liabilities and Equity Instruments (1) Classification of Liabilities and Equity The liabilities and equity instruments issued by the Consolidated Company shall be classified as financial liabilities or equity instruments in accordance with the essence of the contract the definitions of financial liabilities and equity. Equity instruments shall refer to any contract recognizing the remaining equities of the Consolidated Company after deducting all liabilities from assets. The equity instruments issued by the Consolidated Company shall be recognized as the amount after directly deducting issuing costs from the obtained prices. As to the composite financial instruments issued by the Consolidated Company, the owner has the right of choice, and the instruments can be converted to be convertible bond of capital, with the quantity of outstanding shares not to be changed as their fair value varies. As to the liabilities of composite financial instruments, the original recognition amount shall be measured with fair value of similar equities excluding equity conversion right. The original recognition amount of equities shall be measured with the difference between the overall composite financial instrument fair value and liabilities fair value. Any trading costs which can be directly attributable shall be apportioned to liabilities and equities according to the proportions of carrying amount of original liabilities and equities.

200

Elite Material Co., Ltd. Footnotes to Consolidated Financial Statement

After original recognition, the liabilities of composite financial instruments shall be measured with the costs after apportions according to the effective interest method. The equities of composite financial instruments are not required to be re-measured after original recognition. Interests and losses or profits related to financial liabilities shall be recognized as gains or losses and listed under non-operating income and expenses. Financial liabilities are re-classified as equities during conversion, and the conversion doesn’t generate gains and losses. (2)Financial assets or financial liabilities at fair value through profit or loss Such financial liabilities refer to financial liabilities held for trading or measured with financial assets or financial liabilities at fair value through profit or loss. Financial liability held for trading refer to those with main purpose for obtaining or occurring being sold or re-purchased within a short period. In case of any of the following conditions, the Consolidated Company designates the financial liabilities excluded from the financial assets held for trading to be measured with fair value according to gains and losses: A. Eliminate and greatly reduce the inconsistent measure or recognition arising from the measurement on assets or liabilities on different basis and recognition of relevant gains and losses. B. Financial assets assess the performance based on fair value. C. Composite instruments include embedded derivatives. Such financial assets are measured with fair value at the original recognition and the trading costs are recognized as gains and losses when they occur; the subsequent assessment is measured with fair value and the re-measurement gains or losses (including relevant dividends income and interest income) are recognized as gains and losses, which are then listed under non-operating income and expenses. If financial assets or financial liabilities at fair value through profit or loss belong to unquoted equity investments unreliably measured with selling borrowed fair value and shall deliver such equity investments, they are measured with costs and listed under Financial Liabilities Measured with Costs. The interests or losses of financial guarantee contract and loan pledge measured with fair value designated and issued by the Consolidated Company shall be recognized as gains and losses and listed under non-operating income and expenses. (3) Other Financial Liabilities The financial liabilities which do not belong to those held for trading and are not

201

Elite Material Co., Ltd. Footnotes to Consolidated Financial Statement

designated to be measured with fair value according to gains and loss (including long-term and short-term borrowings, accounts payable and other payables) shall be measured with fair value plus directly attributable trading costs at original recognition; and they are measured with post-apportion costs according to the effective interest method at subsequent evaluation. The interest expense which hasn’t capitalized as capital costs shall be listed under non-operating expense and loss of financial costs. (4) De-recognition of Financial Liabilities The Consolidated Company shall de-recognize financial liabilities when the contract obligations have been performed, canceled or terminated. When de-recognizing financial liabilities, the difference between carrying amount and the sum of paid or payable considerations (including any transferred non-cash capital or assumed liabilities) shall be recognized as gains and losses and listed as the financial assets (liabilities) gains and losses measured with fair value according to gains and losses under non-operating income and expenses.

202

Elite Material Co., Ltd. Footnotes to Consolidated Financial Statement

(5) Offset between Financial Assets and Liabilities Financial assets and financial liabilities can be offset with each other and represented on the balance sheet with net value only when the Consolidated Company has legal rights to offset and has the intention to deliver with net value as well as realize capital and liquidate the liabilities. (6) Financial Guarantee Contract As to financial guarantee contract, it means the issuer must reimburse the losses of the holder with special amount when the specific debtor fails to make payment on due date in accordance with the clauses of liability instruments. The financial guarantee contract issued and designated by the Consolidated Company to be measured with fair value according to gains and losses shall be originally measured with fair value deducting directly attributable trading costs, and subsequently measured with the higher of the following amount: (a) the contract obligation amount determined under IAS 37 Provisions or Contingent Liabilities or Contingent Assets; and (b) original recognition amount deducting the amount appropriately accumulate charged for amortization recognized according to income accounting policy. 3. Derivative Financial Instrument The Consolidated Company holds derivative financial instruments to avoid foreign currency and interest rate risks. They are measured with fair value in original recognition, and the trading costs are recognized to be gains and losses; in subsequent evaluation, they are measured with fair value, and the profits or losses due to re-measurement are directly recognized as gains and losses and listed under non-operating income and expenses, while the derivative instruments designated to the instruments effectively avoiding risks shall be determined according to the nature of the hedging relationship when they are recognized as gains and losses. When the fair value of the derivative instruments is positive, they are recognized as financial assets; when it is negative, they are recognized as financial liabilities. The risks and features of embedded derivative instruments are not closely related with those of host contract, and when the host contract is not measured with fair value according to gains and losses, the derivative instruments are regarded as single derivative instruments. The Consolidated Company designates some hedging instruments (including derivative instruments, embedded derivative and non derivative instruments for avoiding exchange rate risk) for fair value hedging. The determined hedge risk of exchange rate

203

Elite Material Co., Ltd. Footnotes to Consolidated Financial Statement

shall be taken as hedge risk with fair value. At the start of hedging relationship, the Consolidated Company records the hedging instruments and the relationship among the items to be hedged, the purpose of risk management and the strategies responding to different hedging trading in written. In addition, the Consolidated Company shall continuously record in written upon the starting of hedge risk whether the hedging instruments can effectively offset the fair value or cash flow variance of the items to be hedged arising from the hedging risks. The variances of fair value of the hedging instruments designated to meet the fair value hedging and those of fair value arising of the assets to be hedged or liabilities arising from the hedging risks shall be immediately recognized as gains and losses and listed under non-operating income and expenses. When the Consolidated Company cancels the hedging relationship or the hedging instruments are mature, sold, terminated, executed or no longer meet hedging accounting, hedging accounting shall be immediately terminated. When the hedged financial instruments adopting the effective interest method have fair value adjustment due to the hedged risks, the instruments shall be amortized to gains and losses from the date of the termination of hedging accounting. Such amortization is the effective interest rate that shall be re-calculated from the starting date of amortization and can ensure the adjustment amount to be fully amortized on the due date.

204

Elite Material Co., Ltd. Footnotes to Consolidated Financial Statement

(Ⅷ) Inventory Inventory shall be measured with the lower of the costs and net realizable value. The costs include the acquisition, production and processing costs enabling them to arrive at the available places and status and other costs, which are calculated according to the standard cost method, and priced at cost transferring according to weighted mean method. The costs of the inventory of finished products and products in process include the manufacturing costs amortized based on normal production capacity according to proper percentage. Net realizable value refers to the estimated prices under normal operation deducting estimated costs to be needed for estimated completion and estimated costs to be needed for completing selling. (Ⅸ) Investment Affiliated company Affiliated companies refer to the enterprises which the Consolidated Company has great influence on their financial and operation policies but doesn’t control or jointly control. The Consolidated Company adopts equity method to treat the equities of its affiliated companies. Under the equity method, the equities are recognized originally with costs, and the costs of an investment include the trading costs. The carrying amount of investment affiliated company include the business reputation recognized at the original investment deducting any accumulated impairment losses. The Consolidated Finance Report includes the amount of gains and losses of investment affiliated company recognized by the Consolidated Company according to equity percentage and other comprehensive income after the accounting policy consistence adjustment with the Consolidated Company from the date of having significant influence till the date of losing influence. The unrealized profits generated from the trading between the Consolidated Company and its affiliated companies have been eliminated from the equity scope of the Consolidated Company on the investee company. The elimination method of the unrealized losses is the same as that of the unrealized profits, but limited to the situation without impairment evidence. When the loss share of affiliated companies recognized by the Consolidated Company according to percentage is equal to or exceeds the equity of affiliated companies, loss recognition shall be terminated immediately. However, when legal obligations or constructive obligations occur or the Consolidated Company has made payments on the behalf of the investee company, the extra losses and relevant liabilities shall be recognized. (Ⅹ) Real Estate, Plant and Equipment

205

Elite Material Co., Ltd. Footnotes to Consolidated Financial Statement

1. Recognition and Measurement The recognition and measure of real estate, plant and equipment adopt cost mode, and are measured with the costs deducting accumulated depreciation and accumulated impairment. Costs include the expenditure which can be directly attributed to assets. Self-constructed assets costs include raw materials and direct labor costs, any other directly attributable costs which make assets reach the serviceable condition for expected usage, costs of dismantling and removing the items and relocating to the original places and borrowing costs meeting essential asset capitalization. In addition, costs also include real estate, plant and equipment procurement arising from foreign currency denomination. The software purchased for integrating the functions of relevant equipment is also capitalized to be one part of the equipment. When real estate, plant and equipment include different components which belong to major items compared with the overall costs of the project and are appropriate to adopt different depreciation rate or depreciation methods, these components are processed as individual items (major components) of real estate, plant and equipment. The gains and losses from the processing of real estate, plant and equipment are determined by the difference between the carrying amount of real estate, plant and equipment and the processing prices, and recognized with net value to be Other Gains and Losses.

206

Elite Material Co., Ltd. Footnotes to Consolidated Financial Statement

2. Subsequent Costs If the future economic benefits forecast in subsequent expenditure of real estate, plant and equipment items possibly flow into the Consolidated Company and the amount can be reliably measured, the expenditure is recognized as one part of the carrying amount of the project and the reset carrying amount shall be de-recognized. The daily maintenance costs of real estate, plant and equipment are recognized as gains and losses when they occur. 3. Depreciation Depreciation is calculated with costs deducting salvage based on the durable years according to the straight-line method, and evaluated according to the major components of assets. If the durable years of certain component are different from others, the depreciation of the component shall be adjusted separately. The adjustment of depreciation is recognized as gains and losses. Land is not required to make depreciation adjustment. The estimated durable life in the current and comparison periods is as follows: (1)Buildings (Structures)

3~56 years

(2)Machinery and equipment

3~19 years

(3)Other facilities

2~14 years

Depreciation methods, durable years and salvage are inspected at the closing day of each fiscal year, and if the expected value is different from the previously estimated value, make adjustments if necessary and such changes will be processed according to the provisions on accounting estimate changes. (Ⅺ) Intangible Assets Other intangible assets obtained by the Consolidated Company are measured with costs deducting accumulated amortization and accumulated impairment. The subsequent expenditure can be capitalized only when they can increase the future economic benefits of relevant specific assets, and all of other expenditures are recognized as gains and losses when they occur. In amortization, the assets costs deducting salvage are amount available for amortization. Intangible assets are amortized with the straight-line method according to the following estimated durable years from the date when they can be available for using, and the amount available for amortization is recognized as gains and losses: 1.Option Premium 2.Computer software

5 years 2~5 years

It is required to inspect the salvage, amortization period and amortization methods of

207

Elite Material Co., Ltd. Footnotes to Consolidated Financial Statement

the intangible assets at least on the closing date of fiscal year, and any changes are regarded to be accounting estimated changes. (Ⅻ) Non Financial Asset Impairment As to the non financial assets not coming from stocks, deferred income tax asset and employee benefits, the Consolidated Company assesses whether there is impairment on the closing date of every report period, and estimates the recoverable amount of the assets with signs of impairment. In case of the failure in estimating the recoverable amount of some assets, the Consolidated Company estimates the recoverable amount of cash-generating unit where the asset belong to evaluate the impairment. The recoverable amount is subject to the fair value of the higher of individual asset or cash-generating unit deducting the cost of sale and their use value. If the recoverable amount of individual asset or cash-generating unit is lower than the carrying amount, reduce the carrying amount of individual asset or cash-generating unit to the recoverable value and recognize it as impairment loss. The impairment loss shall be immediately recognized as the current gains and losses.

208

Elite Material Co., Ltd. Footnotes to Consolidated Financial Statement

The Consolidated Company re-assesses at the closing date of every report period whether there are signs showing that the impairment loss recognized by the non financial assets excluding business reputation in the previous year might not exist or reduce. If there are any changes to the estimates that determine the recoverable amount, covert the impairment loss to increase the carrying amount of individual asset or cash-generating unit to recoverable amount but not exceeding the carrying amount after amortization or deducting the depreciation expected to be adjusted if the individual asset or cash-generating unit didn’t recognize the impairment loss in the previous year. Business reputation, intangible assets with non-deterministic durable years and intangible assets not available shall be tested on impairment regularly every year, and the difference between the recoverable amount and carrying amount is recognized as impairment losses. (ⅩⅢ) Provisions By the recognition of provisions, it means the Consolidated Company is likely to reserve the resources with economic benefits to liquidate the current obligations arising from the past events and the amount of such obligations can be reliably estimated. Provisions is discounted according to the pre-tax discount rate reflecting the time value of money and liabilities specific risk evaluation in the current market, and the amortization of discount is recognized as interest expense. The provisions of discounts due to the defective goods sold by the Consolidated Company is recognized when the goods is sold. Such provisions is measured and estimated with the relevant probability in accordance with the historical experience data and all possible results. (ⅩⅣ) Income Recognition The incomes from normal goods sales are measured with fair value of paid or payable considerations after taking into account the return, commercial discounts and quantity discounts. Incomes are recognized when there are persuasive evidence (generally the signed sales agreement), major risks and returns of ownership have been transferred to the buyer, the price is likely to be taken back, relevant costs and possible goods return can be reliably estimated, management and income amount of uncontinuous goods can be reliably measured. If discounts are in all possibility and the amount can be reliably measured, they can be recognized at the sales recognition as the deductions of incomes. The time of risk and return transfer is determined based on the individual provisions of sales contract. Export sales mainly adopts free on board shipping point, and risks and returns are transferred to the buyer when loading the goods at the port; as to import sales,

209

Elite Material Co., Ltd. Footnotes to Consolidated Financial Statement

risks and returns are usually transferred upon the arrival of goods at the warehouse of the client for acceptance. (XV) Employee Benefits 1. Defined Contribution Plan Contribution obligations of defined contribution plan are employee benefit expense recognized under gains and losses during the service period of employees. 2. Defined benefit plans Post-employment benefit plan not belonging to the defined contribution plan is defined benefit plan. Net obligations of the Consolidated Company under the defined benefit and pension plans are calculated for various benefit plans by discounting the future benefit amount earned by employees through current or past service to be present value. The fair value of any plan capital shall be deducted. Discount rate is subject to the interest rate of market yield rate of high quality corporate bonds or government bonds with due date close to the net obligation term of the Consolidated Company and valuation currency same as the expected payment benefit funds on the financial report day.

210

Elite Material Co., Ltd. Footnotes to Consolidated Financial Statement

Enterprise net obligations are calculated actuarially annually by qualified actuaries according to the projected unit credit method. When the calculation results are good for the Consolidated Company, the recognized capital is limited to the capital able to be returned from the plan in the future or the sum of the present value of economic benefits able to be obtained through the ways such as the future contribution to this plan. It is supposed to consider the minimum capital contribution needs applicable to any plans of the Consolidated Company when calculating the present value of economic benefits. One benefit which is able to be realized within the plan period or when the plan liabilities are liquidated is with economic benefits for the Consolidated Company. When the benefits of the plan improve, the relevant expenses from the part of benefits increased due to the past services of employees are recognized as gains and losses. The re-measured number of the net defined benefit liabilities (assets) includes (1) actuarial gains and losses; (2) return on plan assets but excluding the amount included in the net interest of the net defined benefit liabilities (assets); and (3) any changes to the influence number of the capital upper limit, but excluding the amount included in the net interest of the net defined benefit liabilities (assets). The re-measured number of the net defined benefit liabilities (assets) is recognized under other comprehensive income. The Consolidated Company recognizes the remeasurement from defined benefit plants to be retained earnings. The Consolidated Company recognizes the deductions and liquidated gains and losses of the defined benefit plan when deductions and liquidations occur. Deductions and liquidated gains include any changes in fair Value of Plan Assets and changes in present value of the defined benefit obligation. 3. Short-term employee benefits Short-term employee benefits are measured according to the undiscounted basis and recognized as expenses in the supply of relevant services. As to short-term cash dividends or the amount expected to be paid under the dividend plan, if current legal or constructive obligations assumed by the Consolidated Company are attributed to the past services of employees and can be reliably estimated, the amount is recognized to be liabilities. (XVI) Stock-based Payment Transaction Share-based payment rewards for employees are recognized as compensation costs and increase relevant equities with fair value on the grant date during the period when employees can get payment unconditionally. The recognized compensation costs are

211

Elite Material Co., Ltd. Footnotes to Consolidated Financial Statement

adjusted according to the reward amount expected to meet the service conditions and non market price vested conditions; the final recognized amount is measured based on the vested reward amount meeting the service conditions and non market price vested conditions. The non vesting conditions of share-based payment rewards have been reflected on the fair value measurement on the grant date of share-based payment, and the difference between the expected and actual results are not required to check and adjust. (XVII) Income Tax Income taxes include current and deferred income tax asset. Except those related to enterprise consolidation and items directly recognized as equities or other comprehensive income, Current tax and deferred income tax asset shall be recognized as gains and losses. Current taxes include expected payable income taxes or receivable tax rebates of the annual taxation (losses) calculated according to the legal tax rate or substantial legal tax rate on the report day, and any unappropriated retained earnings plus 10% income tax recognized as tax expense in the shareholders meeting resolution year calculated according to the adjustments to the payable income taxes in the previous year and the provisions of income tax laws.

212

Elite Material Co., Ltd. Footnotes to Consolidated Financial Statement

Deferred income tax assets are measured and recognized according to the temporary difference between the carrying amount and taxation basis of assets and liabilities with financial report objectives. In case of any of the following situations, the temporary differences will not be recognized as deferred income tax assets: 1. Those not belong to the assets or liabilities originally recognized in the transaction of enterprise consolidation, and not influencing accounting profits and taxation incomes (losses) during the transaction. 2. Those generated due to investment subsidiary company and joint equities and likely to not to be returned in the foreseeable future. 3. Original recognition of business reputation Deferred income tax assets are measured according to the tax rate in the current period when the expected capital is realized or liabilities are liquidated, and based on the legal tax rate or substantial legal tax rate on the report day. Only when the Consolidated Company shall meet the following conditions at the same time, can the deferred income tax assets and deferred tax liabilities offset with each other: 1. Having the legal execution right to make the current income tax assets and the current tax liabilities offset with each other: and 2. Deferred income tax assets and deferred tax liabilities are related to one of the subjects of tax payment from which the same tax authority levies income tax; (1) Same subject of tax payment; or (2) Different subjects of tax payment, but all subjects intend to liquidate the current tax liabilities and assets based on net amount or at the same time realize assets and liquidate liabilities in each of the future periods when deferred income tax assets of major amounts are expected to be recovered and deferred tax liabilities expected to be liquidated. Carry forward of unused taxation losses and unused income tax and deductible temporary differences are recognize as deferred income tax assets within the scope where the possible future taxable incomes are available. They are re-evaluated on each report day and deduct the income tax benefits which are not possible to be realized. (XVIII) Earnings Per Share The Consolidated Company lists the basic and diluted earnings per share of holders of common stock equity of the Company. The basic earnings per share of the Consolidated Company shall be calculated with the gains and losses of the holders of common stock equity of the Company divided by the weighted mean of ordinary shares outstanding. Diluted earnings per share shall be calculated after adjusting the influence of all potential

213

Elite Material Co., Ltd. Footnotes to Consolidated Financial Statement

diluted common shares of the gains and losses of the holders of common stock equity of the Company and the weighted mean of ordinary shares outstanding. The potential diluted common shares of the Consolidated Company include convertible bonds and stock options for employees. (XIX) Department As an integral part of the Consolidated Company, operation departments are engaged in the operating activities which might earn incomes and incur expenditures (including the incomes and expenditures incurred from the transactions with other internal departments of the Consolidated Company). All operation results of operation departments are regularly reviewed by the chief operating decision maker of the Consolidated Company, so as to make decisions of allocating resources to operation departments and assess its performance. All operation departments have separate financial information. Ⅴ.

Primary Sources of Major Accounting Judgment, Estimate and Assumption Uncertainties When compiling the Consolidated Financial Statement under IFRS approved by the Financial Supervisory Commission, the management must make judgment, estimate and assumption, which will influence the adoption of accounting policies and the report amount of assets, liabilities, incomes and expenditures. There may be differences between the actual results and estimate.

214

Elite Material Co., Ltd. Footnotes to Consolidated Financial Statement

The management authority continuously inspects the estimate and basic assumption, and accounting changes are recognized during the period of changes and the period of future to be influenced. The relevant information about the major adjustments for the coming year arising from the major risks of the estimate and assumption uncertainties is seen in the following attachments: (1) Attachment Ⅵ (Ⅲ): Assessment on Accounts Receivable Impairment (2)Attachment Ⅵ (Ⅳ): Inventory Evaluation Ⅵ. Description of Major Accounting Items (Ⅰ)Cash and cash equivalents Dec.31, 2015 Cash

$

Dec. 31, 2014 604

659

3,705,297

1,924,481

Certificate of Deposit

104,803

72,155

Cash equivalents

100,566

171,624

3,911,270

2,168,919

Demand deposits

$

Disclosures of interest rate risks and sensitivity analysis on financial assets and liabilities of the Consolidated Company are seen in Footnote Ⅵ (20). (Ⅱ) Financial assets at fair value through profit or loss and loss 1. Details are as follows: Dec.31, 2015

Dec. 31, 2014

Financial assets at fair value through profit or loss Financial asset held for trading: Forward Exchange Agreement-USD

$

1,427

-

Available-for-sale financial assets Stock investment Proud Star International Limited

$

18,544

17,890

(At the end of 2014, initial investment costs are 561 thousand dollars(USD)) Financial liabilities at fair value through profit or loss Financial liability held for trading Forward Exchange Agreement-USD

215

$

18,325

-

Elite Material Co., Ltd. Footnotes to Consolidated Financial Statement

2. Information on Foreign Currency Equity Investments Information related to major foreign currency equity investments on the report day is as follows:

USD

Foreign currency $ 565

Dec.31, 2015 Exchange rate 32.825

TWD 18,554

Foreign currency 565

Dec. 31, 2014 Exchange rate 31.65

TWD 17,890

3. Non Hedge Derivative Instruments Transaction on derivative financial instruments is designed for avoiding the exchange rate risks exposed from operating activities, and the derivative instruments of financial assets reported by the Consolidated Company as financial asset held for trading due to non hedge accounting on December 31 of year 103 and 104 in Republic of China. Details are as follows: Dec.31, 2015 Contract Amount(In Currency Maturity Thousand) Forward ExchangeUSD 19,000 USD against RMB 105.01~105.05 Sold Dec. 31, 2014

Forward Sold

Contract Currency Amount(In Thousand) ExchangeUSD 17,000 USD against RMB

Maturity 103.12~104.08

The Consolidated Company has disclosed the credit, currency and interest risks related to financial instruments in Footnote Ⅵ (20). As of December 31 of year 103 and 104 in Republic of China, the financial assets of the Consolidated Company hadn’t been used for pledge guarantee. (III)Notes Receivable, Accounts receivable and Other Receivables Dec. 31, 2014 Dec.31, 2015 Notes Receivable $ 245,506 228,729 Accounts Receivable 6,567,369 6,759,901 Other Receivables 16,490 63,865 Deduction:Allowance for impairment loss (40,147) (44,948) $ 6,789,218 7,007,547 Aging analysis of notes receivable, accounts receivable and other receivables of the Consolidated Company is as follows: Dec. 31, 2014 Dec.31, 2015 Not overdue $ 6,710,446 6,695,498 Overdue 1~30 days 71,089 275,044 Overdue 31~120 days 5,500 24,102 Overdue over 121 days 42,330 57,851 $ 6,829,365 7,052,495

216

Elite Material Co., Ltd. Footnotes to Consolidated Financial Statement

Statement of Changes to the allowance for bad debt of notes receivable, accounts receivable and other receivables of the Consolidated Company for year 103 and 104 in Republic of China is as follows: Consolidated Individual Impairment Impairment Total loss loss Jan.1, 2015Balance

$

41,662

3,286

44,948

Reversed Impairment loss

(1,591)

(1,356)

(2,947)

Amount not to be written off for not

(1,059)

-

(1,059)

received for the year Foreign currency translation gains or losses

(770)

(25)

(795)

Dec.31, 2015 Balance

$

38,242

1,905

40,147

Jan.1, 2014 Balance

$

6,451

7,306

13,757

Recognized (reversed) Impairment loss

40,262

(3,911)

36,351

Amount not to be written off for not

(6,596)

-

(6,596)

received for the year Foreign currency translation gains or losses Dec. 31, 2014 Balance

$

1,545

(109)

1,436

41,662

3,286

44,948

The Consolidated Company and financial institutions sign a contract on accounts receivable factoring without recourse, under which the Consolidated Company is not required to bear the risk of inability to recover receivables, but only required to assume the losses arising from commercial disputes, so the accounts receivable meets the conditions of financial assets de-recognition. The information related to undue accounts receivable factoring on the report date is as follows: Sales objects

Derecogniti on

Taipei Fubon

$

Dec. 31, 2014 Credit(thou Advanced sand amount dollars)

54,834 USD

4,000

Interest rate range

Bank credit

-

None

-

Commercial Bank Co., Ltd.

(VI) Inventory Dec.31, 2015 Raw Materials and Supplies

$

Dec. 31, 2014

875,336

955,605

Work in Process

122,272

145,239

Finished Goods

789,378

740,553

3,392

4,544

1,790,378

1,845,941

Goods in Transit $ 217

Elite Material Co., Ltd. Footnotes to Consolidated Financial Statement

The details of the cost of sales sold of the Consolidated Company for year 103 and 104 in Republic of China are as follows: 2015 Cost of sales

$

Loss on obsolete inventory Inventory Valuation and Obsolescence Losses Revenue from sale of scraps Total

$

218

2014

15,955,559

15,672,859

4,103

5,650

22,834

5,521

(177,109)

(229,857)

15,805,387

15,454,173

Elite Material Co., Ltd. Footnotes to Consolidated Financial Statement

As of December 31 of year 103 and 104 in Republic of China, the inventory of the Consolidated Company hadn’t been used for pledge guarantee. (Ⅴ) Investments Accounted for Using Equity Method The investments of the Consolidated Company made by adopting equity method on the closing date during the financial reporting period are listed as follows: Dec.31, 2015 Dec. 31, 2014 Affiliated company-Li Cheng Tech Co., LTD.

$

-

-

(Originally was ELITE IONERGY CO. LTD., Cost of an investment:173,694 thousand dollars) The Consolidated Company approved at the end of year 94 in Republic of China that the investee company Licheng Technology (Stock) Company (the former ELITE IONERGY CO., LTD., with cost of an investment of TWD 173.694 million) had been shut down, whose assets could repay the liabilities and investment value had been impaired, so the investments were all recognized as losses in year 94 in Republic of China and book value was offset to zero. (Ⅵ) Real Estate, Plant and Equipment Changes to costs and depreciation of real estate, plant and equipment of the Consolidated Company for year 103 and 104 in Republic of China are as follows: Land

Buildings (Structur es)

Machiner y and equipmen t

Other facilities

Unfinished Constructio n and Prepayment s for Business Facilities

Total

Cost or Deemed cost: Jan.1, 2015 Balance

$

470,621

1,896,835

6,284,313

955,816

265,374

9,872,959

474

4,924

164,576

169,974

-

(79,522)

Add

-

-

Disposal

-

(2,185)

(53,403)

(23,934)

Reclassification

-

9,847

240,955

51,035

(301,837)

-

(23,897)

(101,102)

(7,355)

5,930

(126,424)

Effects of Changes in

-

Foreign Exchange Dec.31, 2015 Balance

$

470,621

1,880,600

6,371,237

980,486

134,043

9,836,987

Jan.1, 2014 Balance

$

470,621

1,749,611

5,884,917

865,495

302,241

9,272,885

413,416

421,854

-

(22,877)

Add(return)

-

(482)

3,705

5,215

Disposal

-

(700)

(14,600)

(7,577)

Reclassification

-

105,819

295,145

74,533

(475,497)

-

42,587

115,146

18,150

25,214

201,097

1,896,835

6,284,313

955,816

265,374

9,872,959

Effects of Changes in

-

Foreign Exchange Dec. 31, 2014 Balance

$

470,621

219

Elite Material Co., Ltd. Footnotes to Consolidated Financial Statement

Land

Depreciation: Jan.1, 2015 Balance $ Depreciation of the year Disposal Effects of Changes in Foreign Exchange Dec.31, 2015 Balance $ Jan.1, 2014 Balance $ Depreciation of the year Disposal Effects of Changes in Foreign Exchange Dec. 31, 2014 Balance $

Buildings (Structur es)

Machiner y and equipmen t

Other facilities

Unfinished Constructio n and Prepayment s for Business Facilities

Total

-

522,899 79,304 (2,185) (5,455)

3,640,783 350,794 (47,519) (45,389)

609,699 105,131 (22,564) (5,313)

-

4,773,381 535,229 (72,268) (56,157)

-

594,563

3,898,669

686,953

-

5,180,185

-

439,443 75,367 (700) 8,789

3,232,957 354,253 (11,313) 64,886

507,483 98,671 (6,915) 10,460

-

4,179,883 528,291 (18,928) 84,135

-

522,899

3,640,783

609,699

-

4,773,381

Book value: Dec.31, 2015

$

470,621

1,286,037

2,472,568

293,533

134,043

4,656,802

Jan.1, 2014

$

470,621

1,310,168

2,651,960

358,012

302,241

5,093,002

Dec. 31, 2014

$

470,621

1,373,936

2,643,530

346,117

265,374

5,099,578

As of December 31 of year 103 and 104 in Republic of China, they had been used for long-term borrowings and financing credit guarantee, with details seen in Footnote Ⅷ. (VII)Short-Term Borrowings Dec.31, 2015 Dec. 31, 2014 Unsecured loans $ 12,605 459,393 Secured Loan 443,100 Total $ 12,605 902,493 Unused credits

$

Interest rate range

2,917,087

2,045,113

1.18%~1.50%

0.99%~2.33%

(VIII)Short-Term Notes and Bills Payable Dec.31, 2015 Commercial paper payable Deduction: Unamortized discount Net Amount

$ $

Interest rate range

-

220

Dec. 31, 2014 200,000 (374) 199,626 0.95%~0.97%

Elite Material Co., Ltd. Footnotes to Consolidated Financial Statement

(IX)Long-term borrowings Consolidated details of the long-term borrowing of the Company: Dec.31, 2015 Unsecured loans Secured Loan Deduction: Discount On Long-term Borrowings Current Portion Total

$

$

987,500 550,000 (5,300) (312,500) 1,219,700

Unused credits

$

462,500

Dec. 31, 2014 900,000 337,500 (3,281) (712,500) 521,719 -

Interest rate range

1.8%

1.8%~1.91%

Due year

2020

2017

Please see Footnote Ⅵ (20) for exposure of interest rate, foreign currency and liquidity risks of the Consolidated Company. 1. Securities for Bank Loans Please see Footnote Ⅷ for mortgage based securities of the Consolidated Company for bank loans. 2. Loan Contract Under the loan contract, before the guaranteed loans of the Consolidated Company during the duration of the joint loan right or joint credit liabilities are in full settlement, the Consolidated Company is required to abide by specific accounting ratio in annual and semi-annual reporting, such as current ratio, liabilities ratio and interest cover ratio. The Consolidated Company hasn’t violated relevant provisions. (Ⅹ)Unsecured Convertible Debentures Dec. 31, 2014 Dec.31, 2015 Total issuing amount of convertible bonds Bonds payable discount not amortized Bonds redemption Total converted amount Equity component-Transfer right (Listed in Capital Surplus-Transfer right)

$

400,000

400,000 (99)

$

(6,700) (393,300) -

(390,100) 9,801

$

-

-

Embedded derivative-The gain or loss of the$ right of redemption and sell back assessed by fair value(The financial asset or liability listed as non-operational revenue or expense ) Interest expense $ 221

1,808

2015 -

2014 85

83

741

Elite Material Co., Ltd. Footnotes to Consolidated Financial Statement

The Company issued the third 5-year unsecured convertible bonds with 0% nominal interest rate on June 22 of the year 99 in the Republic of China, with total amount of TWD 400 million, maturity date on June 22 of the year 104 in the Republic of China and bond discount rate of 1.85%. The creditor should ask the Company to redeem all convertible corporate bonds with cash with the sum of bond denomination and interest compensation when the bonds have been issued for two years or there are 30 days left before the third year, with the conversion price of convertible bonds is based on the issuance contract of the Company. 1. Date and Terms of Principal Repayment: Except those converted into common stock of the Company in advance or redeem by the Company or put by the creditor in advanced, the principal is required to repaid at one time on the due date. 2. Conversion Price and Adjustment: The conversion price when issued is TWD 28.50 per share, which shall be adjusted when the total volume of common stocks of the Company changes or there are negotiable securities with common stock conversion rights re-issued at the conversion price lower than the market value per share. As the Company conducted stock grants on September 3 of the year 103 in the Republic of China as stock granting base date, the conversion price is adjusted from TWD 21.10 to TWD 20 in accordance with Article 11 of the Measures on the Issuance and Conversion of the Third Unsecured Convertible Debentures at Home of the Company. There are no reset clauses on the bonds. 3. Redemption Right of the Company on the Convertible Corporate Bonds: (1) From the next day from one month after issuing to 40 days before the expiration of issuance period, when: A. the closing price of the corporate common stock at the over-the-counter center exceeds 30% of the current conversion price on the thirty business day in succession; B. total value of the unconverted bonds is lower than 10% of the total stock issued after convertible corporate bonds are converted as required by the creditor; The Company should send a registered letter to the creditor with a Notice of Bonds Recall with one-month expiry (the foregoing period is calculated from the date of mailing by the Company and takes the expiry date of the period as bonds recall base date), and should write a letter to invite the over-the-counter center to announce to recall all bonds in cash on the expiry date of the period at the recall price calculated in accordance with the interest rate of bonds redemption listed in (B). 222

Elite Material Co., Ltd. Footnotes to Consolidated Financial Statement

(2) Redemption Yield: Convertible corporate bonds are required to be redeemed with the bonds denomination from the following day after issuing for one month to 40 days before the expiry date. (3) In case of the failure in replying the stock service agency of the Company in written before the credit receives the bonds recall base date named in the Notice of Bonds Recall (which becomes effective upon the arrival, and mailed reply is based on the postmark date), the Company shall take the expiry date of the notice period to convert the convertible corporate bonds to the new common stocks of the Company at the current conversion price. 4. Put Right of Creditor: The creditor shall ask the Company to redeem all convertible corporate bonds in cash with the sum of bond denomination and interest compensation when the bonds have been issued for two years or there are 30 days left before the third year. The interest compensation for bonds having been issued for two years is 2.01% of bond denomination, and for three years is 3.0301% of bond denomination. The Company accepts the put request and shall redeem the convertible bonds in cash within 5 business days after the put base date.

223

Elite Material Co., Ltd. Footnotes to Consolidated Financial Statement

The repayment of the Company due to the expiry of convertible bonds in the year 104 in the Republic of China was TWD 6.7 million and the interest compensation recognized due to expiry was TWD 1.224 million. (Ⅺ)Provisions Allowance for Sales Returns and Discoutns Jan.1, 2015 Balance

$

Reversed Provisions for the year

28,555 (8,072)

Foreign currency translation gains or losses

(382)

Dec.31, 2015 Balance

$

20,101

Jan.1, 2014 Balance

$

14,260

Added Provisions for the year

13,516

Foreign currency translation gains or losses

779

Dec. 31, 2014 Balance

$

28,555

Liabilities due to goods return and discounts refer to the products return and discounts estimated by the Company based on historical experience, management judgment and other known reasons, and are recognized as operating revenue deduction in the year when the relevant products are sold. (Ⅻ)Employee Benefits 1. Defined benefit plans Present Value of the Defined Benefit Obligation and Assets adjusted by fair value principle: Dec.31, 2015 Present

Value

of

the

Defined

Benefit $

Dec. 31, 2014

114,438

136,110

(106,467)

(100,273)

7,971

35,837

Obligation Fair Value of Plan Assets Net Defined benefit liability

$

The defined benefit plan of the Consolidated Company is contributed to special account of contribution for retirement of Bank of Taiwan. The retirement payment of each employee applicable to Labor Standards Law is calculated in accordance with the base obtained based on the length of service and the average salaries within six months before retirement. (1) Composition of Plan Assets The retirement fund contributed by the Consolidated under the Labor Standards

224

Elite Material Co., Ltd. Footnotes to Consolidated Financial Statement

Law shall be controlled by the Labor Funds Operation Bureau of the Ministry of Labor (hereinafter referred to as the Labor Funds Bureau), and under the provisions of Measures on the Management and Application of Labor Retirement Funds, the annual minimum return settled and distributed from the funds operation shall not be lower than the incomes calculated in accordance with the 2-year time certificate of deposit rate of the local banks. As of the reporting date, the balance of the Consolidated Company in the special account of contribution for retirement of Bank of Taiwan amounts to TWD 106.467 million. The data of the application of the labor retirement funds include funds yield and funds asset allocation, with details to be seen in the information released on the website of the Labor Funds Bureau.

225

Elite Material Co., Ltd. Footnotes to Consolidated Financial Statement

(2)Changes in Present Value of the Defined Benefit Obligation 2015 and 2014Present Value of the Defined Benefit Obligation Alteration: 2015 2014 Defined Benefit Obligation-Jan.1 $ 136,110 145,174 Current service cost and interest 3,497 3,786 Remeasurements of Net Defined benefit liability - Actuarial gains and losses occurred (8,254) (6,434) from adjustment -Actuarial gains and losses occurred from 973 2,027 demographical adjustment - Actuarial gains and losses occurred (13,656) from financial assumptive adjustment Benefits paid by the plan (4,232) (8,443) Defined Benefit Obligation-Dec.31 $ 114,438 136,110 (3)Changes in Fair Value of Plan Assets 2015 and 2014 Consolidated Defined Benefit Plans evaluated by fair value:: 2014 2015 Fair Value of Plan Assets-Jan.1 $ 100,273 99,063 Interest Income 1,504 1,734 Remeasurements of Net Defined benefit liability - Return on plan assets(Not including 1,174 551 interest for this term) Amount allocated to the plan 7,748 7,368 Benefits paid by the plan (4,232) (8,443) Fair Value of Plan Assets-Dec.31 $ 106,467 100,273 (4)Expenses Recognized as Gain or Loss 2015 and 2014 Consolidated Expenses Details are as follows: 2015 Current service cost $ 1,455 Net interest of the Net Defined benefit 538 liability $ 1,993 Operating Costs Selling Expenses Administrative expenses Research and Development Expenses

$

$

226

1,594 94 204 101 1,993

2014 1,245 807 2,052 1,487 90 395 80 2,052

Elite Material Co., Ltd. Footnotes to Consolidated Financial Statement

(5)The Remeasurements of the net defined benefit liability recognized as Other Comprehensive Income The Remeasurements of the 2014 and 2015 net defined benefit liability recognized as Other Comprehensive Income: 2015 Jan.1-Accumulated balance

$

Amounts recognized Dec.31-Accumulated balance

$

2014 6,073

11,031

(22,110)

(4,958)

(16,037)

6,073

(6)Actuarial Assumption Major Actuarial Assumption used at the end date of the statement to determine the Present Value of the Defined Benefit Obligation: Dec.31, 2015

Dec. 31, 2014

Discount rate

1.88%

1.50%

Future salary increases

1.00%

1.50%

The contribution amount expected to be paid for defined benefit plan within one year after the reporting date of the year 104 in the Republic of China is TWD 1.176 million. The weighted average duration of the defined benefit plan is 17.62 years. (7) Sensitivity Analysis During the calculation of the present value of the defined benefit obligations, the Consolidated Company is required to determine the actuarial assumption related to the balance sheet with the application of judgment and estimate, including discount rate and future salary changes. Any changes to actuarial assumption may significantly influence the amount of the defined benefit obligations of the Consolidated Company. The influences of major changes to the actuarial assumption adopted in year 103 and 104 in Republic of China (seeing the notices below for details) on the present value of the defined benefit obligations are as follows: Effects on the Defined Benefit Obligation Increase Decrease Dec.31, 2015 Discount rate (0.25%) Future salary increases (0.25%)

(3,575)

3,730

3,693

(3,556)

The above sensitivity analysis refers to the analysis on the influence of single assumption change based on the situation that other assumptions keep unchanged. In 227

Elite Material Co., Ltd. Footnotes to Consolidated Financial Statement

practice, many changes to the assumptions may be linked. The calculation method of sensitivity analysis shall be consistent with that of net defined benefit liabilities of the balance sheet. The method and assumption applied in current sensitivity analysis is consistent with those adopted in early stage. 2. Defined Contribution Plan As to the defined contribution plan, the Consolidated Company shall contribute the retirement funds of employees to the individual accounts for labor retirement funds of the Bureau of Labor Insurance according to 6% of the monthly salaries of labors under the provisions of Labor Pension Act. Under this plan, after contributing fixed amount to the Bureau of Labor Insurance, the Consolidated Company will not assume the legal or constructive obligations of paying extra amount.

228

Elite Material Co., Ltd. Footnotes to Consolidated Financial Statement

The pension expense under the defined contribution retirement funds of the Consolidated Company in the year of 104 and 103 in the Republic of China are TWD 21.709 million and TWD 26.689 million respectively, which have been contributed to the Bureau of Labor Insurance. The retirement funds recognized by Elite Electronic Material (Zhongshan) Co., Ltd. and Elite Electronic Material (Kunshan) Co. Ltd. in year 103 and 104 in Republic of China under local laws are TWD 32.761 million and TWD 34.414 million as well as TWD 16.917 million and TWD 24.237 million respectively. (13) Income Tax 1. Tax expense (Income) 2015 and 2014 Tax expense Details are as follows: 2015 Tax expense of the current term Expense for current term Adjusted Current tax

$

Deferred Income Tax Expense The reverse and occurrence of temporary discrepancy Tax expense of Continuing operations $

2014

633,221 1,166 634,387

306,039 (2,270) 303,769

304,076

(7,151)

938,463

296,618

2015 and 2014 Other Comprehensive Income Tax(Expense)interest: 2015 Items that will not be reclassified subsequently to profit or loss: Remesaurement from defined benefit plants $ (3,758) Items that will be reclassified subsequently to profit or loss: Exchange differences on translation of$ foreign operations

2014 8,825

26,833

(43,596)

2015 and 2014Tax expense(Income) Profit before tax : 2015 Profit Before Tax $ 3,330,650

2014 1,838,251

Income Tax calculated by the local tax rate $ Income tax influenced by foreign administration Non-deductible expenses Exempt income Unrecognized temporary alteration Under(over)estimate for the term Retained earnings+10% Tax expense $

229

566,211 (53,386) 386,558 (22,904) 1,166 60,818 938,463

312,503 (29,041) 12,767 (16,335) 42 (2,270) 18,952 296,618

Elite Material Co., Ltd. Footnotes to Consolidated Financial Statement

2. Deferred Income Tax Asset and Liability (1)Unrecognized Deferred Tax Liabilities From January 1 to December 31 of year 103 and 104 in Republic of China, the temporary differences related to the investment subsidiaries are recognized as unrecognized deferred tax liabilities as the Consolidated Company controls the turning time of such temporary differences and such difference are determined not to be turned in the foreseeable future. The relevant amount is as follows: Dec.31, 2015 Dec. 31, 2014 5,074,438 5,074,438 Total temporary difference amount related to$ the investment in subsidiary company Unrecognized Deferred Tax Liabilities

$

862,654

862,654

(2)Recognized Deferred Income Tax Asset and Liability 2014 and 2015 Deferred Income Tax Asset and Liability : Defined benefit plans

Deferred Tax Liabilities: Jan.1, 2015 Balance Debit ( credit ) Income Statement Debit ( credit ) Equity Exchange differences on translation of foreign operations

$

(3,327) 1,452

(123,295) -

1,875

26,833

-

Dec.31, 2015 Balance

$

Jan.1, 2014 Balance Debit ( credit ) Income Statement Debit ( credit ) Equity Exchange differences on translation of foreign operations

$

Dec. 31, 2014 Balance

$

Cumulati Overseas ve Investmen Translatio t Income n Adjustme nts

-

Others

(72,876) (306,986) -

(117) (738) -

Total

(199,615) (306,272) 1,875 26,833

(96,462)

(379,862)

(855)

(477,179)

(540) (912)

(79,699) -

(72,876) -

(350) 233

(153,465) (679)

(1,875) -

(43,596)

(3,327)

(123,295)

230

-

(72,876)

-

(1,875) (43,596)

(117)

(199,615)

Elite Material Co., Ltd. Footnotes to Consolidated Financial Statement

Defined benefit plans

Deferred Income Tax Asset: Jan.1, 2015 Balance $ Debit ( credit ) Income Statement Debit ( credit ) Equity Exchange differences on translation of foreign operations Dec.31, 2015 Balance $

Allowance Provisions for inventory valuation and obsolescen ce loss

10,699 (2,400)

4,393 (1,242)

(5,633) -

-

2,666

231

(57) 3,094

Others

6,500 3,880 -

(55)

10,325

-

Total

6,383 1,958

27,975 2,196

(140)

(5,633) (252)

8,201

24,286

Elite Material Co., Ltd. Footnotes to Consolidated Financial Statement

Defined benefit plans Jan.1, 2014 Balance

$

Debit ( credit ) Income

Allowance for inventory valuation and Provisions obsolescen ce loss

Others

Total

-

2,253

5,558

1,635

9,446

-

2,140

942

4,748

7,830

Statement Debit ( credit ) Equity Dec. 31, 2014 Balance

10,699 $

10,699

-

4,393

6,500

10,699 6,383

27,975

3. Income Tax Approval The approval on the filing of final income tax return of the Consolidated Company has lasted till the year 102 in the Republic of China as required by the taxing authority. 4. Relevant Data of Income Tax Integration Relevant data of income tax integration is as follows: Dec.31, 2015

Dec. 31, 2014

Unappropriated retained earnings after 1998

$

4,876,106

3,412,810

Balance of imputation credit account

$

165,344

130,137

2014 (anticipated) Tax deduction ratio for the profit distributed to ROC

2013 (Actual)

7.61%

5.68%

residents

The foregoing relevant data of income tax integration shall be the amount disposed in accordance with the provisions of Taiwan Finance and Taxation No. 10204562810 of the Ministry of Finance on October 17 of the year 102 in the Republic of China.

232

Elite Material Co., Ltd. Footnotes to Consolidated Financial Statement

(XIV) Capital and Other Equity 1. The issuing of common stocks On December 31 of year 104 and 103 in the Republic China, the total nominal share capitals of the company are both TWD 4,000 million, with a denomination of TWD 10 per share and 400,000,000-share lot. The outstanding common stocks were divided into ordinary share with 317,505,000-share lot and 315,994,000-share lot, share payment of both of which has been charged. The regulation table of number of outstanding shares in year 104 an 103 in the Republic China is as follows: (Shown by the unit of 1000-share lot) Common Stock 2015 Beginning balance-Jan.1

$

Exercise Employee Stock Warrants The transfer of convertible bond Ending balance-Dec.31

$

2014

315,994

312,414

1,351

1,961

160

1,619

317,505

315,994

On December 31 of year 104 and 103 in the Republic China, subscription right was exercised based on Employee stock option certificates and new shares were issued in numbers of 1,351,000-share lot and 1,961,000-share lot in denomination respectively, with a total amount of money of TWD 24.654 million and TWD 36.884 million, of which legal registration procedures of 1,351,000-share lot and 1,961,000-share lot have been already completed, and the share payment of all the share issued has been charged.

233

Elite Material Co., Ltd. Footnotes to Consolidated Financial Statement

On December 31 of year 104 and 103 in the Republic China, based on exercising of conversion right of convertible bond holders, new shares were issued in numbers of 160,000-share lot and 1,619,000-share lot in denomination respectively, with a total amount of money of TWD 3.2 million and TWD 16.193 million, of which legal registration procedures of 160 thousand shares and 1.619 million shares have been already completed. 2. Capital Surplus The balance of capital surplus of the company is as follows: Dec.31, 2015 Additional paid-in capital in excess of par -$

Dec. 31, 2014

69,049

49,067

349,553

347,385

13,947

21,045

common stock The transfer of convertible bond premium Employee Stock Option Transfer right

$

1,808 432,549

419,305

According to the former share holding proportion of shareholders, corresponding to the capital surplus that has been realized, new shares shall be issued or cash be released after the capital surplus covers losses in priority. The realized capital surplus mentioned above includes the overage of issued shares exceeding the denominational value and the earnings from the gift recipient. As specified in the handling guidelines on raising of issuers and issuing of securities, as to the capital surplus necessary for appropriation of capital, the amount of the total annual appropriation shall not exceed 10% of the paid-in capital. 3. Retained Earnings According to the rules of the company, when the annual total final accounts have a surplus, it should be first used to pay income tax and make up for previous losses, and 10% of the statutory reserve shall be drawn in line with laws, and as needed by the Article 41 of the Securities Exchange Act or in accordance with the shareholders’ resolution, the special surplus reserve shall be drawn or part of surplus shall be retained without distribution. In the case of modification of act or extermination of legal articles based on which special surplus reserve can be drawn, the special surplus reserve drawn in line with laws must be returned back to the distribution of retained earnings. Considering the characteristics of industrial growth and improvement of the company’s financial structure, if annual distribution of surplus is not carried out when there are losses during the year, then the dividend policy will give priority to the future 234

Elite Material Co., Ltd. Footnotes to Consolidated Financial Statement

development of the company, financial situations and shareholder remuneration, then the company’s future capital expenditure budget will be considered to distribute share dividend to preserve cash as needed, while other parts will be distributed to shareholders in cash dividends, but the distribution of cash dividends shall not be less than 20% of the total dividends to be released as planned. Taking 10%-70% of the distributable surplus after drawing of all reserves as the standard, the distribution of surplus is done according to the following ratio: (1) Employee dividend is 3%-5%, distributed according to the dividend distribution methods developed by the board of directors. Object of distribution of employees’ dividend shall contain employees of subordinate companies in line with certain conditions, which will be separately prescribed by the board of directors. (2) Remuneration of the directors and supervisors is 2%. (3) Varying to performance of the company, the board of directors shall draft a distribution proposal of shareholders’ dividends, which shall then be distributed according to the resolution of shareholders. As to other dividends as well as remaining undistributed surplus in the past years, the board of directors shall draft a distribution proposal and apply for shareholder’s resolution, then they can be distributed.

235

Elite Material Co., Ltd. Footnotes to Consolidated Financial Statement

According to the Companies Act amended in May, year of 104 in the Republic China, employees’ dividend and remuneration of directors and supervisors were not part of the surplus distribution item, so the Company will amend the provisions of the company under guidance of authorities before the deadline. (1)Legal Reserve The Company determines the 10% of the after-tax net income as the legal reserve until it is equal to the total capital. When there are no losses, after the resolution of shareholders meeting, the legal reserve shall be used to issue new shares or cash, but shall not be more than the amount of reserve that exceeds 25% of the paid-in capital. (2) Distribution of surplus In year of 103 in the Republic China, the actually released dividend amount of employees was TWD 42.496 million, while that of directors and supervisors was TWD 16.998 million. The actual distribution of staff dividend and remuneration of directors and supervisors differed from that of the annual financial reports in year of 103 in the Republic China, with differences of TWD 2,000 and TWD 1,000 respectively, which was included in the annual loss in year of 104 in the Republic China. On June, 15 of year of 104 and June, 9 of year of 103 in the Republic China, the annual surplus distribution plans in year of 103 and 102 in the Republic China were respectively determined in the shareholder’s standing meeting, and the amount of dividend of relevant holders was as follows: 2014 2013 Placing rate(dollars)

Amount

Placing rate(dollars )

Amount

Dividends distributed to the common share holders: Cash

$

2.50

790,425 $

1.80

562,897

4. Other Equity

Exchange differences on translation of foreign operations Jan.1, 2015

$

Exchange differences on translation of foreign operations

587,189 (131,014)

Dec.31, 2015 Balance

$

456,175

Jan.1, 2014

$

374,338

Exchange differences on translation of foreign operations Dec. 31, 2014 Balance

212,851 $

236

587,189

Elite Material Co., Ltd. Footnotes to Consolidated Financial Statement

(XV) share-based payment As of Dec.31, 2015, 2 Stock-based Payment Transaction are as follows: Equity transfer Employee Stock Option Plan

Employee Stock Option Plan

101.07.06

100.08.09

Offering quantity

1,500

6,000

Contract Duration

5 years

5 years

Condition and term

Service in four

Service in four

years in the future

years in the future

2.44%

0%

-

-

Grant date

Actual employee turnover rates Estimated employee turnover rates 1.Fair value on the grant date variables

Adopting Hull & White and Ritchken option evaluation model to estimate the fair value of Grant date share-based payment: 2015 Employee share purchase plan issued in 2012 Fair value on the grant date

2014

Employee share purchase plan issued in 2011

Employee share purchase plan issued in 2012

Employee share purchase plan issued in 2011

9.285

5.937

9.285

5.937

Stock price of Grant date

27.750

21.350

27.750

21.350

Exercise Price

22.200

17.100

23.000

17.700

Dividend yield

-

Anticipated fluctuating ratio (%) Share warrant period Risk-free interest rate (%)

-

-

-

38.08%

30.67%

38.08%

30.67%

5.00

5.00

5.00

5.00

1.05%

1.17%

1.05%

1.17%

The expected volatility rate was estimated with reference from the annualized standard deviation of the company’s past daily remuneration rate of share price; in the duration period of subscription right, the date specified in the Consolidated Company’ s subscription right methods was called due date while the date difference from the measurement date was called duration period; risk-free interest rate was based on government bonds. In the determining of the fair value, the services contained in the transaction and non-market price performance conditions were not taken into account. When calculating the fair value of subscription rights, in order to take into account the effect of early implementation, it is assumed that employees will exercise the subscription rights when the share price is 2.14 times the exercise price after they obtain the shares. 237

Elite Material Co., Ltd. Footnotes to Consolidated Financial Statement

2. Employee share purchase plan Details of Employee stock option certificates: 2015

(Expressed in thousand dollars) 2014

Weighted The Weighted The Average number of Average number of Exercise stock Exercise stock Price(TWD Price(TWD) options options ) Jan.1-Outstanding

$

18.80

2,976

19.83

5,291

Executed in the term

18.25

(1,351)

18.81

(1,961)

Expired in the term

17.10

(16)

21.68

(354)

Dec.31-Outstanding

18.29

1,609

18.80

2,976

Dec.31-Executable

17.61

1,370

18.34

1,176

Outstanding optional compensation plan: Approva Issue date l Date

Exercise price

As of Dec.31, 2015outstanding stock options Anticipated Weighted Number of remaining average outstanding Exercise period options price

Exercisable stock option Dec.31, 2015 Weighted Number of average exercisable Exercise options price

100.07.07 100.08.09 $

17.10

1,233

8 months

17.10

1,233

17.10

100.07.07 101.07.06

22.20

376

1 years and 7

22.20

137

22.20

18.29

1,370

17.61

months 1,609 Approva Issue date l Date

100.07.07 100.08.09 $

Exercise price

As of Dec. 31, 2014outstanding stock options Anticipated Weighted remaining average Number of outstanding exercise period options price

17.70

2,356

1 years and 8

Exercisable stock option Dec. 31, 2014 Weighted Number of average exercisable exercise options price

17.70

1,033

17.70

23.00

143

23.00

18.80

1,176

18.34

months 100.07.07 101.07.06

23.00

620

2 years and 7 months

2,976

3. Employee-related expense and liabilities 2015 and 2014 Expenses for share-based payment: 2014

2015 Expenses for the issuance of Employee stock$ option certificates

238

1,740

4,368

Elite Material Co., Ltd. Footnotes to Consolidated Financial Statement

(XVI) Earnings Per Share 1. Earnings Per Share In the year of 104 and 103 in Republican of China, the basic earnings per share of the Consolidated Company was a part of the net profit attributable to the equity holders of the company, calculated by the weighted average outstanding ordinary shares as follows: (1)Net profit attributable to the equity holders of our company 2015 Net profit attributable to the equity holders of our$ company

239

2,389,239

2014 1,538,696

Elite Material Co., Ltd. Footnotes to Consolidated Financial Statement

(2)Weighted average outstanding ordinary shares (1000-share lot) 2015 Jan.1-Ordinary shares outstanding

2014

315,994

312,414

Effects of Convertible Securities Conversion

120

253

Amounts

of

521

530

outstanding

316,635

313,197

influenced

by

Conversion

convertible bonds Dec.31-Weighted

average

ordinary shares 2. Diluted Earnings Per Share In the year of 104 and 103 in Republican of China, the diluted earnings per share was a part of the net profit attributable to the equity holders of our company, calculated based on the weighted average outstanding ordinary shares after adjusting the dilution effect of all the potential common stocks as follows: (1)Net profit attributable to the equity holders of our company (Dilution) 2014

2015 Net profit attributable to the equity holders of the$

2,389,239

1,538,696

69

686

2,389,308

1,539,382

parent company(Basic) Convertible bonds influenced by related taxation Net profit attributable to the equity holders of the$ parent company (Dilution)

(2)Weighted average outstanding ordinary shares (Dilution)(1000-share lot) 2014 2015 Weighted average outstanding ordinary

316,635

313,197

40

1,860

The effects of employee profit sharing

2,009

1,528

Impact of Employee Stock Options

1,661

1,764

320,345

318,349

shares (Basic) Effects of Convertible Securities Conversion

Balance

on

Dec.31-Weighted

average

outstanding ordinary shares (Dilution) When calculating the diluted effect of share options, the average market value was determined on the basis of the Company’s share market price during the outstanding of the option rights. 3. According to the resolution passed by the Company on June 9, year of 104 in the Republic of China, cash dividend is distributed per share, and if this cash dividend

240

Elite Material Co., Ltd. Footnotes to Consolidated Financial Statement

distribution occurs before the releasing of the financial statements, then the retroactive adjustment of surplus per share is as follows: 2015

2014

Earnings Per Share

$

7.55

4.91

Diluted Earnings Per Share

$

7.46

4.84

241

Elite Material Co., Ltd. Footnotes to Consolidated Financial Statement

(XVII) Revenue 2015 and 2014 Revenue Details are as follows: Continuing operations 2015 2014 Merchandise sales

$

20,869,717

18,884,745

(XVIII) Remuneration of employees and directors and supervisors According to the rules of the Company passed by the board of directors’ meeting but not passed the shareholders’ meeting yet, for any annual profit, 3% of it will be appropriated as the remuneration of employees and not more than 1.2% of it as the remuneration of directors and supervisors. But if there are accumulated losses of the company, certain amount should be reserved in advance to make up. The subjects of the above employees’ remuneration of shares or cash include employees from subordinate companies in line with certain conditions. In year of 104 in Republican of China, the estimated appropriated amount of remuneration of employees, directors and supervisors was respectively TWD 91.422 million and TWD 30.474 million, with an estimated base of the company’s net profit during the period before deducting employees’ remuneration and that of directors and supervisors, multiplied by the proportion prescribed in the Company’s rules for employees’ remuneration and that of directors and supervisors, which is reported as operating costs or operating expenses in year of 104 and the relevant information can be inquired in the public information inquiry stations. If the actual amount of distributed remuneration differs from estimated amount, the way to handle depends on changes in accounting reports, and the differences are recognized and included as gains and losses in year of 105 in the Republic of China. (XIX)Non-Operating Income and Expenses 1. Other Income 2015 and 2014 Other Income Details are as follows: 2015 Interest Income

$

242

2014 7,300

4,267

Elite Material Co., Ltd. Footnotes to Consolidated Financial Statement

2. Other Gains and Losses 2015 and 2014 Other Gains and Losses Details are as follows: 2015 Foreign currency exchange gains

$

2014

112,878

19,979

(6,209)

(1,461)

(19,904)

1,294

Other income

24,741

29,581

Other Non-Oper. Exp.

(1,514)

(733)

109,992

48,660

Proceeds From Disposal of Property, Plant and Equipment losses Financial assets at fair value through profit or loss(liability)

$ 3. Financial Costs

2015 and 2014 Financial Costs Details are as follows: 2015 Interest expense

$

243

2014 35,792

47,067

Elite Material Co., Ltd. Footnotes to Consolidated Financial Statement

(XX) Financial Instruments 1. Credit risk (1)Credit exposures The carrying amount of financial assets represents the maximum amount of credit exposures. 2. Liquidity Risk The following table shows the expiry date of financial liabilities contract, including estimated interest but not including the impact of the net agreement. Carrying amount

Contractua l cash flow

Within 6 months

6-12 months

1-2 years

Over 2 years

Dec.31, 2015 Non-derivative financial liabilities Secured Loan

$

544,700

585,337

-

69,925

-

515,412

Unsecured loans

1,000,105

1,055,305

150,694

108,065

-

796,546

Accounts Payable

4,474,140

4,474,140

4,474,140

$

6,018,945

6,114,782

4,624,834

177,990

$

777,319

793,464

311,261

248,270

9,801

9,900

9,900

-

-

-

199,626

200,000

200,000

-

-

-

Unsecured loans

1,359,393

1,375,799

988,188

75,000

Accounts Payable

4,714,485

4,714,485

4,714,485

7,060,624

7,093,648

6,223,834

-

-

1,311,958

Dec. 31, 2014 Non-derivative financial liabilities Secured Loan Convertible bonds Commercial paper

115,954

117,979

payable

$

323,270

154,876 270,830

157,735 275,714

The Consolidated Company does not expect that analysis of occurring of cash flow on the maturity date will come significantly earlier, or the actual amount will be significantly different.

244

Elite Material Co., Ltd. Footnotes to Consolidated Financial Statement

3. Exchange Rate Risk (1) Exposure of Exchange Rate Risk The financial assets and liabilities of the Consolidated Company that are disclosed to significant foreign exchange rate risk are as follows: Dec.31, 2015 Foreign currency

Exchange rate

Dec. 31, 2014 TWD

Foreign currency

Exchange rate

TWD

Financial assets Monetary item 168,657

32.825

5,536,166

163,532

31.650

5,175,788

USD

85,165

32.825

2,795,541

107,405

31.650

3,399,368

JPY

797,682

0.2727

217,528

USD

$

Financial liabilities Monetary item

245

-

-

-

Elite Material Co., Ltd. Footnotes to Consolidated Financial Statement

(2) Sensitivity Analysis The Consolidated Company’s exchange rate risk primarily comes from foreign currency-denominated cash and cash equivalents, accounts receivable and other receivables, loans, accounts payable and other payables, resulting into gains and losses of conversion of foreign currency when exchanging. On December 31, year of 104 and 103 in the Republic China, TWD depreciated or appreciated by 1% compared with US dollar, while, when all the other factors remain unchanged, in year of 104 and 103 in the Republic China, after-tax net income in year 104 and 103 will increase by TWD 20.942 million and TWD 14.744 million, respectively. Because of the wide range of functional currencies of the Consolidated Company, the way of currency integration is used to disclose the gains and losses information of monetary items, and in year of 104 and 103 in the Republic of China, as to the foreign currency exchange gains and losses (including realized and unrealized), the gains were TWD 112.878 million and TWD 19.979 million, respectively. 4. Interest rate analysis The interest rate exposure of the Consolidated Company’s financial assets and financial liabilities is described in the liquidity risk management in the footnotes. The following sensitivity analysis is dependent on the interest rate exposure risk of derivative and non-derivative instruments on the reported date. For liabilities with a floating interest rate, the way of analysis is to assume the outstanding liabilities on the reported date will be outstanding in the whole year. The fluctuation rate the internal workers report to the management staff of the Consolidated Company is to increase or decrease by 0.5% based on the interest rate, which also shows the evaluation made by management staff on the reasonable fluctuation range of interest rate. If the interest rate increases or decreases by 0.5%, in the case of all the other variables remaining unchanged, the net profit of the Consolidated Company in year of 104 and 103 in the Republic of China will increased or decreased by TWD 25.195 million and TWD 8.666 million, mainly due to the evaluation on the financial assets of the loans with fluctuation rate of the Consolidated Company and corporate bonds with risk-free interest rate changes. 5. Fair value information (1) Type of financial instruments and fair value The carrying amount and fair value of the Consolidated Company’s financial assets and financial liabilities (including the hierarchy information of the fair value, but excluding the financial tools with a carrying amount reasonably approximate to 246

Elite Material Co., Ltd. Footnotes to Consolidated Financial Statement

fair value measured by fair value, the fair value information of which is not needed to be disclosed in accordance with the provisions) are as follows: Carrying amount

Dec.31, 2015 Fair-Value Hierarchy Level 1 Level 2 Level 3

Total

Available-for-sale financial assets Stock investment

$

18,554

-

-

18,554

18,554

18,325

-

18,325

-

18,325

Financial liabilities at fair value through profit or loss Non-derivative financial liabilities for transaction

247

Elite Material Co., Ltd. Footnotes to Consolidated Financial Statement

Carrying amount

Dec. 31, 2014 Fair-Value Hierarchy Level 1 Level 2 Level 3

Total

Financial assets at fair value through profit or loss Non-derivative financial assets for $

1,427

-

17,890

-

9,801

-

1,427

-

1,427

transaction Available-for-sale financial assets Stock investment

-

17,890

17,890

The financial liabilities evaluated by the amortizing cost Convertible

bonds



Liability

9,801

-

9,801

component

(2) Evaluation technique of fair value of financial instruments measured at fair value A. Non-derivative financial instruments If financial instruments are subject to active market public quotations, their fair value is taken as the publicly quotations of active market. Market price published in major exchanges and the trading center of central government bond counters of popular bonds, is the basis of fair value of equity tools on the market (counter) and bond tools with public quotations of active market. If the public quotations of financial instruments can be timely and often obtained from exchanges, brokers, underwriters, industry associations, pricing service institutions or regulatory authority, and the quotations represent the actual and frequently-occuring fair market trading, then the financial instruments have a publicly quotation of active market. If the above conditions are not met, then the market is considered not active. In general, those, the bid-ask spread is very large, significantly increases or is extremely small, are all indicators of a non-active market. If the financial instruments held by the Consolidated Company has no active market indicator, its fair value is shown by category and attributes as follows: Equity instruments without public quotation: use the net asset value-based method, main assumption is to take the net value per share of investees as the basic measurement. B. Derivative financial instruments It is evaluated by the model that is widely accepted by the market users, such

248

Elite Material Co., Ltd. Footnotes to Consolidated Financial Statement

as discounting method and option right pricing model. Forward foreign exchange contracts are usually evaluated on the basis of the current forward exchange rate. (3) The Consolidated Company lists in account the available-for-sale financial assets---the measurement of fair value of equity securities investment classified as the third grade, i.e. the previous trading price without adjustment is its fair value. Therefore, when measuring the fair value of the Consolidated Company, the unobservable input is not considered, and the quantitative information of unobservable input value and sensitivity analysis are not intended to be disclosed. (XXI) Financial risk management 1. Summary Due to usage of financial instruments, the Consolidated Company is disclosed to the following risks: (1)Credit risk (2)Liquidity Risk

249

Elite Material Co., Ltd. Footnotes to Consolidated Financial Statement

(3) Market risk The footnotes describe the disclosure risk information of the Consolidated Company and the target, policy and procedures of measurement and management risks of Consolidated Company. The further quantitative disclosure is seen in the corresponding footnotes of the merged financial reports. 2. Risk management framework The board has sole responsibility for the development and control of risk management policies of the Consolidated Company. The building of risk management policies of the Consolidated Company is to identify and analyze the risks faced by the Consolidated Company, and to set appropriate risk limits and controls and supervise the risks and the conformity to the risk limits. Risk management policies and systems involve regular review to reflect market situations and changes of the operation of the Consolidated Company. Through training, management guidelines and operating procedures, the Consolidated Company develops a disciplined and constructive control environment in which all employees understand their roles and obligations. The board of directors of the Consolidated Company supervises how management staffs supervise and manage the company’s risk management policies and conformity to procedures, and review the adequacy of risk management framework relevant to risks faced by the Consolidated Company. Internal audit staff assists the board of directors in playing the role of supervision. Those personnel review regularly and with exceptions risk management control and procedures, and report the result of the review to the board of directors. 3. Credit risk Credit risk is the risk of financial losses generated from the failure of the counterpart against the customers or financial instruments to fulfill contractual obligations of the Consolidated Company, mainly from the accounts receivable from the customers and securities investment of the Consolidated Company. (1) Accounts Receivable and Other Receivables The credit exposure risk of the Consolidated Company is mainly affected by the situation of each individual customer. But only management staff considers the basic statistics of customers of the Consolidated Company, including default risks of industries and countries which customers are engaged in and belong to, all of which may affect the credit risk. The Consolidated Company has established credit policies, according to which, before the Consolidated Company offers standard of payment, shipment conditions

250

Elite Material Co., Ltd. Footnotes to Consolidated Financial Statement

and articles, individual credit rating analysis for each new customer shall be made. The review of the Consolidated Company contains, if available, the external ratings, and, in some cases, the bank’s note. Procurement thresholds’ establishment by individual customers means the maximum un-received amount without approval of the board of directors. This threshold is regularly reviewed. Customers without the group’s basic credit ratings can only do transactions with the Consolidated Company with the basis of receivables in advance. The Consolidated Company is available with allowance for doubtful accounts to reflect the estimation of losses already occurred of accounts receivable and other receivables and investment. The main component of the allowance account contains specific losses related to certain significant exposure risks and that part of combined losses established for losses that have already occurred but yet not been identified in similar asset group. The allowance account of combined losses is dependent on statistical materials of historical payment of similar financial assets. (2) Bank deposits and trading contracts of foreign exchange derivative instruments Credit risk of bank deposits and trading contracts of foreign exchange derivative instruments is measured and monitored by the financial department of the Consolidated Company. Because the trading partners and the other parties in compliance of the transactions of the Consolidated Company were banks with good credit, without major concerns of performance, so there is no significant credit risk.

251

Elite Material Co., Ltd. Footnotes to Consolidated Financial Statement

4. Liquidity Risk Liquidity risk refers to the risk of the Consolidated Company’s inability to deliver cash or other financial assets to settle financial liabilities and risk of failure to fulfill relevant obligations. The method of liquidity management of the Consolidated Company ensures as far as possible that in general case and cases under pressure, there are enough liquidity fund to cope with liabilities that are due, so as to avoid unacceptable losses or the risk of harmed reputation of the Consolidated Company. The Consolidated Company uses standard cost system to estimate the cost of their products to help the company to supervise cash flow demands. In general, the Consolidated Company ensures there is enough cash to cope with expected operating expenditure need within ninety days, including the fulfillment of financial obligations, but excluding the potential impact which could not be reasonably expected under extreme circumstances, such as natural disasters. In addition, on December 31, year of 104 and 103 in the Republic China, the total borrowing amount that had not been used of the Consolidated Company was TWD 3,379.587 million and TWD 2,045.113 million, respectively. 5. Market risk Market risk refers to the risk of affected earnings of the Consolidated Company or value of financial instruments held by the company due to market price changes, such as changes of exchange rates, interest rates and equity instrument price. The objective of market risk management is to control the market risk exposure extent within affordable range and optimize investment return. To manage market risks, the Consolidated Company is engaged in transactions on derivative instruments, and thereby financial liabilities emerge. Performance of all the transactions is executed under the guidelines of the board of directors. (1) Exchange Rate Risk The Consolidated Company is disclosed to exchange rate risk that is not generated due to sales, procurement and loan exchanges valuated according to the functional currencies of the companies in the group. The functional currencies are dominated by TWD, as well as US dollar and RMB, all of which are the main valuation currencies of these transactions. In addition, under the natural hedge principle, based on the Consolidated Company’s individual currency demand and net location (and the difference between foreign currency assets and liabilities location), and in accordance with the foreign exchange market situation, hedge is done. The Consolidated Company hedges exchange rate risks of forward foreign currency,

252

Elite Material Co., Ltd. Footnotes to Consolidated Financial Statement

currency exchange contracts within one year from the maturity date as the report date. Interest of borrowings is evaluated by the currency of principal of the borrowings. In general, the currency of borrowings is the same with that of the cash flow generated from operations the company’s operations, mainly TWD and US dollars, as well as RMB. In this case, economic hedging does not require entry of derivative instruments; therefore, hedge accounting is not adopted. As to other monetary assets and liabilities valuated in foreign currencies, when the short-term imbalance occurs, the Consolidated Company is buying or selling foreign currencies in real exchange rates in order to ensure that the net exposure risk is maintained at an acceptable level. (2) Interest rate risk The borrowings of the Consolidated Company are based on a floating rate, and the circumstance never occurs that the Consolidated Company converts fluctuation rate into fixed rate via interest rate conversion contract. The Consolidated Company should take measures corresponding to interest rate changes, dominated by periodic assessment of banks and currencies’ borrowing rate, and maintaining of good relations with the financial institutions to secure lower-cost financing, together with the strengthening of operating capital management at the same time, to reduce dependence on bank borrowings to disperse the risk of changes in interest rates.

253

Elite Material Co., Ltd. Footnotes to Consolidated Financial Statement

(3) Other price risks In addition to coping with expected consumption and sales demand of the Consolidated Company, the Consolidated Company does not sign commodity contracts; such commodity contracts do not take close-out netting. (XXII) Capital Management Policies of board are to maintain a sound capital base, in order to maintain the confidence of investors, creditors and the market and support the future operation and development. The capital comprises share capital, capital surplus, retained earnings and non-controlling interests of the Consolidated Company. Board of directors controls capital return rate, and also the dividend level of common stocks. Debt-to-capital ratio on the report date is as follows: Dec.31, 2015 Total Liabilities

$

Deduction: Cash and cash equivalents

Dec. 31, 2014

8,020,324

8,528,484

(3,911,270)

(2,168,919)

Net Liabilities

$

4,109,054

6,359,565

Total equity

$

9,691,780

8,175,409

42.40%

77.79%

Debt-to-Capital Ratio

Until the December 31, year of 104 in the Republic China, the capital management mode of the Consolidated Company had not been changed.

VII. Transactions of Related Parties (1) The parent company and ultimate controller The company is the ultimate controller of the Consolidated Company. (2) Transactions of major management personnel Remuneration of major management personnel includes: 2015 Short-term employee benefits

$

Post-employment benefit Share-based payment $

2014

118,782

74,228

6,608

408

395

1,033

125,785

75,669

The details of description on share-based payment are seen in Footnote VI (15).

254

Elite Material Co., Ltd. Footnotes to Consolidated Financial Statement

VIII. Collateralization of Assets The book value of assets of the Consolidated Company to provide pledged security is as follows: Assets

Pledged object

Dec.31, 2015

Dec. 31, 2014

Real Estate, Plant and Equipment Land

Bank loan Warranty

Buildings (Structures) Guarantee deposits paid

$

〞 Rental

or

Mailbox

470,621

470,621

312,229

330,857

15,674

18,598

798,524

820,076

Deposit $

255

Elite Material Co., Ltd. Footnotes to Consolidated Financial Statement

IX. Significant unrecognized contractual commitments or those with liabilities (1) Significant unrecognized contractual commitments: 1. The credit balance of the Consolidated Company that has been opened yet not used is as follows: Dec.31, 2015

Dec. 31, 2014

LC not being used TWD

$

85,272

82,212

9,377

25,828

1,052,251

1,440

USD JPY

2. The significant contracts of engineering construction and machinery and equipment purchase singed for the expansion of new plant and machinery and equipment and non-payment amount are as follows: Dec.31, 2015

Dec. 31, 2014

Total contract value JPY

$

104,500

321,750

RMB

-

11,068

TWD

-

16,300

Unpaid amount JPY

$

RMB

99,430

301,274

-

2,214

3. According to the option premium contract of environmental-friendly material technology signed between the Consolidated Company and the Japanese H Company, the payment of option premium is as follows: 2015 $

163,864

2014 162,113

4. On December 31, year of 104 and 103 in the Republic China, entrusted by the Consolidated Company, Mega International Commercial Bank Zhongli Branch issued a letter of guarantee with TWD 4 million and TWD 5 million granted to the Customs as a guarantee for tariffs for sales on home market and for hiring foreigners to be employed in services. X. Major disaster losses: None. XI. Significant after-date affairs: None.

256

Elite Material Co., Ltd. Footnotes to Consolidated Financial Statement

XII. Others Functions of Employee Benefits, Depreciation, Depletion and Amortization: Function

2015

2014

Operation

Operation

cost

expense

Nature

Total

Operation

Operation

cost

expense

Total

Employee benefit expense Salary Expense

1,037,559

331,385

1,368,944

891,120

247,074

1,138,194

Insurance Expense

49,876

14,188

64,064

45,792

13,456

59,248

Pension expense

74,887

15,990

90,877

56,040

13,855

69,895

Other employee benefit

70,932

30,920

101,852

57,888

27,837

85,725

507,654

27,575

535,229

501,190

27,101

528,291

301

1,466

1,767

393

2,242

2,635

expense Depreciation Expense Amortization

XIII. Other affairs disclosed in the footnotes (1) Information related to significant transactions In year of 104 in the Republic China, according to the provisions in the development guidelines of financial statements for issuers of securities, the Consolidated Company should disclose the information related to significant transactions as follows: 1. Loans to others: None. 2. Endorsement and guarantee for others: Unit: TWD(IN THOUSANDS) NO Name .

Endorsed company

Company

Limitation for one Company

Relati on (Rema rk 2)

(Remark 3)

Highest balance for this term

Actual Guarante ed by Endorsem amount used ent

financial

Balance

name

Ratio in the

For Highest For For limitation parent subsidiar company in China (Remark 3) company y company

statement

0 Elite Grand Material Shanghai Co., Ltd. Incorporate d

3

4,840,309

666,350

655,850

226,534

-

7%

9,680,618

Y

0



Grand Zhongshan Incorporate d

3

4,840,309

712,125

640,088

335,146

-

7%

9,680,618

Y

0



Elite Electronic Material (Zhongshan ) Co., Ltd.

3

4,840,309

759,600

459,550

-

-

5%

9,680,618

Y

Y

0



Elite Electronic Material (Kunshan) Co. Ltd.

3

4,840,309

98,610

98,475

-

-

1%

9,680,618

Y

Y

257

Elite Material Co., Ltd. Footnotes to Consolidated Financial Statement

Remark 1: 0 indicates the Company. Remark 2: 1. Companies with business relationship. 2. Subsidiary company’s directly-held aggregated common stocks exceed 50%. 3. Investee companies with aggregated common stocks held by the parent company and subsidiary companies exceeding 50%. 4. Common stocks held directly by the parent company or indirectly through a subsidiary company exceed 50%. Remark 3: Under the provisions of endorsement assurance measures of the Company: The total amount of external endorsement and guarantee shall not exceed 100% of the net value in the most recent financial statements of the Company, the limit of endorsement guarantee for an individual enterprise shall not exceed 50% of the net value in the most recent financial statements of the Company. Remark 4: Transactions of the above relevant merged subjects have been written off when the merged statements are developed.

3. Holding securities by the end of the period (exclude subsidiary companies with investment, affiliated companies and the part controlled in the joint-venture companies): None.

258

Elite Material Co., Ltd. Footnotes to Consolidated Financial Statement

4. Accumulative buying or selling the same securities amounting to TWD 300 million or more than 20% of paid-in capital: None. 5. Acquisition of property amounting to TWD 300 million or more than 20% of paid-in capital: None. 6. Disposal of property amounting to TWD 300 million or more than 20% of paid-in capital: None. 7. Purchase and sales from and to related parties amounting to TWD 100 million or more than 20% of paid-in capital: Unit: TWD(IN THOUSANDS) Terms of transaction

Transaction status Purchase(Sales)

Trade object Relation Purchase(S

company

ales)

Amount

The Investee company evaluated by equity method

Sales

(1,340,923)



Purchase

Ratio in

Loan

total

period

amount Grand Shanghai Elite Incorporated Electronic Material (Kunshan) Co. Ltd. 〞 Elite Material Co. Ltd.





Grand Zhongshan Elite Incorporated Electronic Material (Zhongshan) Co., Ltd. 〞



Elite Electronic Grand Material Zhongshan (Zhongshan) Co., Incorporated Ltd.

Unit

Loan period

Balance

Price

(100)% 視 subsidiary company財 務狀況而 定

Remark

total amount

-

263,804

81%

100%



-

(61,473)

17% Remark 1

Sales

(241,570)

(3)%



-

61,473

2% Remark 1



Purchase

1,340,923

23%



-

(263,804)

14%

The Investee company evaluated by equity method

Sales

(713,584)

(100)%



-

312,076

62%



Purchase

528,349

100%



-

(222,750)

52% Remark 2

The Investee company evaluated by equity method

Sales

(528,349)

(9)%



-

222,750

10% Remark 2

713,584

19%



-

(312,076)

(105,736)

(2)%



-

(47,970)

105,736

3%



-

47,970







Purchase



Elite Material Co., Ltd



Sales

Elite Material Co., Elite Ltd Electronic Material (Zhongshan) Co., Ltd.

Ratio in

241,570

Electronic Grand The (Kunshan) Shanghai Investee Incorporated company evaluated by equity method 〞

Receivables (Payables)

Purchase The Investee company evaluated by equity method

22% -

% 3%

Remark 1: This transaction is through the parent company---Grand Shanghai Incorporated for resales to customers, without spread. The relevant purchase and sales have been shown by the Grand Shanghai Incorporated in the way of elimination.

259

Elite Material Co., Ltd. Footnotes to Consolidated Financial Statement

Remark 2: This transaction is through the parent company---Grand Zhongshan Incorporated for resales to customers, without spread. The relevant purchase and sales have been shown by the Grand Zhongshan Incorporated in the way of elimination. Remark 3: Transactions of the above relevant merged subjects have been written off when the merged statements are developed.

8. Receivables from the related parties amounting to TWD 100 million or more than 20% of paid-in capital: Unit: TWD(IN THOUSANDS) Company with notes receivable

Trade object

Overdue Receivables-Related Receivables-Rela Allowance for parties ted parties Doubtful Accounts

ReceivablesRelated parties balance Relation

Turnover(t imes)

Amount

Disposition

Grand Shanghai Elite Electronic The Investee Incorporated Material company (Kunshan) Co. evaluated by Ltd. equity method

263,804

4.18

-

168,524

-

Grand Zhongshan Elite Electronic Incorporated Material (Zhongshan) Co., Ltd.

312,076

1.90

-

237,592

-

222,750

2.30

-

134,591

-



Elite Electronic Grand Zhongshan 對 The Investee Incorporated Material company (Zhongshan) Co., evaluated by Ltd. equity method

Note: Transactions of the above relevant merged subjects have been written off when the merged statements are developed.

9. Engagement in derivative transactions: The detailed information of the company’s engagement in derivative transactions is seen in the description about “financial instruments” in Footnote VI (20) in the financial statements.

260

Elite Material Co., Ltd. Footnotes to Consolidated Financial Statement

10. The business relation and important business dealings between the parent company and subsidiary companies: 2015 transaction status NO.

Trade object

(Rem ark 1) 1

3

Amount

Terms of transaction

Rate of Operating revenue in total assets

Sales revenue

713,584

Remark 3

3%

3

Accounts receivable

312,076



1%

Elite Electronic Material Grand Zhongshan (Zhongshan) Co., Ltd. Incorporated

3

Accounts receivable

222,750



1%

Elite Material Co., Ltd

2

Sales revenue

105,736



1%

Shanghai Elite Electronic Material (Kunshan) Co. Ltd.

3

Sales revenue

1,340,923



6%

3

Accounts receivable

263,804



1%



2 3

Subject

3

Zhongshan Elite Electronic Material (Zhongshan) Co., Ltd.

Grand Incorporated

1 2

Business dealings Relation with trade object(R emark 2)

〞 Grand Incorporated







Remark 1: The number shall be filled in as follows: 1. 0 indicates the parent company. 2. The subsidiary companies are numbered sequentially from the Arabic numerals 1. Remark 2: The type of relation with trade object is labeled as follows: 1. The parent company with the subsidiary company. 2. The subsidiary company with the parent company. 3. The subsidiary companies with the subsidiary companies. Remark 3: The sales price is agreed by the seller and the buyer, and payment manner is closed every 90 days or 120 days or determined by the financial situation of the subsidiary company. Remark4: Those with a transaction revenue fails to cover 1% of the aggregated total revenue or assets will not be disclosed.

261

Elite Material Co., Ltd. Footnotes to Consolidated Financial Statement

(2) Re-investment business-related information: The information of re-investment business of the Consolidated Company in year of 104 in the Republic China is as follows (excluding mainland Chinese investee companies): Unit: TWD (IN THOUSANDS) Investment company

Investee company

Region

Main Business Item

Initial Investment Amount

Share holding in the end of the term

Highest share holding or investing status

Investee company Amounts

recognized

profit and loss

on investments End of the period

End of last year

Number of shares(Share)

1,160,487

1,160,487

35,656,950

100.00%

Li Cheng Tech Co., No.11, Gongye 5th Rd., Electric LTD. Guanyin Dist., Taoyuan equipment 、 City 328, Taiwan Telecom (R.O.C.) Instruments 、 Wholesale 、 Retail Sale 、 Battery 、 Electricity generation 、 Power Distribution Machinery Manufacturing

173,694

173,694

16,412,918

33.50%

EMC OVERSEAS Grand Zhuhai Scotia Centre, 4thFloor, Import export HOLDING Incorporated P.O. Box 2804, George business INCORPORATED Town, Grand Cayman, andInvestment Cayman Islands

1,109,446

1,109,446

33,798,821

100.00%

Li Cheng Tech Co., No.11, Gongye 5th Rd., Electric LTD. Guanyin Dist., Taoyuan equipment 、 City 328, Taiwan Telecom (R.O.C.) Instruments 、 Wholesale 、 Retail Sale 、 Battery 、 Electricity generation 、 Power Distribution Machinery Manufacturing

7,311

7,311

250,000

1.53%

Grand Zhuhai Grand Zhongshan P.O.Box 957, Offshore Import export Incorporated Incorporated Incorporations Centre, business Rood Town, Tortola, andInvestment British Virgin Islands

539,545

539,545

16,437,000

100.00%

3,834,714

Grand Zhuhai Grand Shanghai Offshore Incorporations Import export Incorporated Incorporated Limited P.O. Box 957, business Offshore Incorporations andInvestment Centre. Road Town, Tortola, British virgin Islands

1,084,261

1,084,261

18,161,515

99.79%

5,267,426

Elite Material Co., EMC OVERSEAS Offshore Incorporations Investment Ltd. HOLDING Limited P.O. Box 957, INCORPORATED Offshore Incorporations Centre. Road Town, Tortola, British virgin Islands 〞



Ratio

Carrying amount 9,148,028

-

9,105,619

-

Net income or loss for current period 100.00%

33.50%

100.00%

1.53%

2,220,063

-

2,219,965

Remark

2,220,063 subsidiary company

-

2,219,965 Invested company

-

-

100.00%

828,938

828,938 Invested company

99.79%

1,394,231

1,391,282

Remark 1: Carrying amount refers to the investment balance recognized under the equity law, including investment gains and losses and cumulative translation adjustment, etc. Remark 2: It is required to evaluate with equity method in accordance with the investee company and the financial statements approved by the accountants. Remark 3: Transactions of the above relevant merged subjects have been written off when the merged statements are developed.

262



Elite Material Co., Ltd. Footnotes to Consolidated Financial Statement

(3) Mainland China investment-related information: 1. Re-investment business in Mainland China-related information: Unit: TWD (IN THOUSANDS) Investee

Main

Paid-in

Investm Accumulated Investment amount

company in

Business

capital

ent type investment

China

Item

Accumulate

Net income Share holding

Highest

remitted or

amount

or loss of

withdrew

remitted out

investee

or indirect

or investing

of Taiwan

company

investment

status

amount remitted out of Taiwan

for current

from the

period

rate for direct share holding

The gain and Book value Investment loss of

of investment

interest

investment in the end of withdrew recognized

the period

as of this

for the term

term

beginning of the term Remit

(Remar

Withdraw

(Remark 2)

k 1) (2) 597,415

Elite Electronic The Material

650,816

-

440,613

-

414,262

236,554

1,421,176

99.79%

99.79%

1,418,141

5,332,862

440,613

846,006

100.00%

100.00%

846,006

3,772,668

414,262

manufacturin

(Kunshan)

Co. g and sales of

Ltd.

CCL and Bonding sheet (2)

Elite Electronic



663,065

-

Material (Zhongshan) Co., Ltd.

2. Limits of re-investment in Mainland China: Accumulated amount invested in China remitted from Taiwan-to the end of the period The Company 673,494 Company name

Amount approved by MOEA Investment Commission 1,141,188

Amount invested in China approved by MOEA Investment Commission 5,808,371

Remark 1: Investment methods are divided into: 1. Directly investing in Mainland China. 2. Re-investing through the company in a third region. 3. Other methods. Remark 2: In the column of gains and losses recognized in the current period: The recognized basis of investment gains and losses is divided into the following three categories. (1) Financial statements audited and certified by international CPA firms working with the Accounting Firm of ROC. (2) Financial statements audited and certified by a certifying CPA from the parent company in Taiwan.

263

-

Elite Material Co., Ltd. Footnotes to Consolidated Financial Statement

(3) Other financial statements self-compiled by investee companies. Remark 3: The difference between paid-in capital and Taiwan remittance is the direct investment of USD6.012 million made by overseas subsidiary companies. Remark 4: The difference between paid-in capital and Taiwan remittance is the capital increase of USD6.255 million converted by surplus of the Company. Remark 5: The difference between paid-in capital and Taiwan remittance is the capital increase of USD800 million converted by surplus of the Company. Remark 6: The difference between paid-in capital and Taiwan remittance is the direct investment of USD110 million made by overseas subsidiary companies. Remark 7: It is converted according to the exchange rates of 32.825 (assets liabilities) and 31.7562 (gains and losses) on December 31, 2015. Remark 8: Transactions of the above relevant merged subjects have been written off when the merged statements are developed.

3. Major transactions: The significant transactions directly or indirectly engaged by the Consolidated Company with investee companies in Mainland China in year of 104 in the Republic China (had been written off when the merging report was developed), details of which can be seen in the description of “major transactions-related information”. XIV Department Information (I) General information The Consolidated Company has three departments to which report should be delivered: Taiwan department, China department and other sectors; the first covers manufacturing and sales of various types of printed circuit board, special chemicals for electronics industry and electronic components goods; the second covers production and sales of adhesive piece and CCL for printed circuit boards; other sectors cover the engagement in investment and commodity trading business. The Consolidated Company should report to authorities which are strategic sector-based institutions to provide different products and services. Since each strategic institution requires different technologies and marketing strategies, thus they should be administered separately. Most of the institutions secured and retained the then management team, respectively.

264

Elite Material Co., Ltd. Footnotes to Consolidated Financial Statement

(2) Departmental gain and loss reportable, assets, liabilities and their measurement basis and adjustment information of the report-required authorities The Consolidated Company takes the review result by the chief operating decision-maker on the department pre-tax loss of the internal management report (excluding non-recurrent gains and losses and exchange gains and losses) as the basis for the management resources to be allocated and performances be assessed. Since the income tax, non-occurrence gains and losses and exchange gains and losses are under group-based management, the unallocated parts of the above of the Consolidated Company should be reported to required authorities. Moreover, not all the gains and losses to be reported contain significant non-cash items beside depreciation and amortization. The amount in the report is consistent with the amount in the report for operating decision-maker. Except that pension expense of each operating department is paid in cash and recognized and measured according to the pension plan, the accounting policies of the operating departments are the same with the “description on the summary of significant accounting policies” in Footnote IV. The Consolidated Company considers sales and transfer among the departments as transactions with the third party, which are measured with the current market price. The Consolidated Company’s operating departments and regulations are as follows: Taiwan department

2015

China departmen t

Other departmen t

Adjustmen ts and eliminatio ns

Total

Revenue: Revenue from external customers

$

Interdepartmental Revenue Interest Income

5,652,748

15,217,617

2

200,821

84,989

2,068,320

1,452

5,508

340

Total revenue

$

5,855,021

15,308,114

2,068,662

Interest expense

$

30,393

4,805

594

167,094

384,372

Depreciation and amortization Share of profit (loss) of associates and joint

2,220,063

-

-

(2,354,130)

20,870,367 -

(2,354,130) (14,471)

6,707,317

(8,927,380)

6,662,224

(8,927,381)

7,300 20,877,667 35,792 536,995 -

ventures accounted for using equity method Departmental gain and loss reportable

$

2,895,689

$

9,146,840

2,563,146

3,193,678

Assets: Investment recognized under equity method Non-current Assets Capital Expenditure

-

1,586,047

3,464,262

Departmental asset reportable

$ 13,808,708

13,055,602

Departmental liability reportable

$

265

4,128,089

3,938,850

27,235,275 (36,382,115) -

-

(79,483)

4,970,826

28,314,622 (37,471,103)

17,707,829

947,672

(998,563)

8,016,048

Elite Material Co., Ltd. Footnotes to Consolidated Financial Statement

Taiwan department

2014

China departmen t

Other departmen t

Adjustmen ts and eliminatio ns

Total

Revenue: Revenue from external customers

$

Interdepartmental Revenue Interest Income

5,120,887

13,766,157

7,926

237,749

148,172

1,829,330

845

3,208

214

Total revenue

$

5,359,481

13,917,537

1,837,470

Interest expense

$

29,774

15,608

1,685

187,952

356,290

Depreciation and amortization Share of profit (loss) of associates and joint

1,236,630

-

-

-

18,894,970

(2,215,251)

-

-

4,267

(2,215,251)

18,899,237

-

47,067

(13,316)

3,695,079

(4,931,709)

3,705,363

(4,931,709)

530,926 -

ventures accounted for using equity method Departmental gain and loss reportable

$

1,605,271

$

7,497,714

1,418,698

1,797,623

Assets: Investment recognized under equity method Non-current Assets Capital Expenditure

-

1,675,504

3,832,574

Departmental asset reportable

$ 12,091,504

12,178,555

Departmental liability reportable

$

3,925,392

4,754,073

22,243,294 (29,741,008) -

-

(89,619)

5,418,459

23,548,770 (31,114,936)

16,703,893

1,124,441

(1,275,422)

8,528,484

(3) Products and services information The part of Consolidated Company’s revenue from external customers is as follows: Product and service 2015 2014 CCL

$

Bonding sheet ML PRESS FITTING OEM

10,613,293

9,884,296

9,277,723

7,937,969

977,927

1,058,542

774

3,938

20,869,717

18,884,745

Others Total

$

(4) Regional information The relevant regions of the Consolidated Company are as follows, in which the revenue is classified based on the customers’ geographic location, while the non-current assets are classified based on the assets’ geographical location. Area 2015

2014

Revenue from external customers: Taiwan

$

PRC Other countries Total

$ 266

4,585,433

4,551,426

14,230,083

12,522,632

2,054,201

1,810,687

20,869,717

18,884,745

Elite Material Co., Ltd. Footnotes to Consolidated Financial Statement

Area

Dec.31, 2015

Taiwan

$

China Total

$

Dec. 31, 2014

1,586,047

1,675,504

3,384,779

3,742,955

4,970,826

5,418,459

Non-current assets include real estate, plant and equipment, intangible assets and other assets, but do not include such non-current assets of financial instruments, deferred income tax assets and guarantee deposits paid. (5) Information of Major Customers 2015 Customer

2014

Operating

The

revenue amount

proportio

Customer

Operating

The

revenue amount

proportio

n A B

$

n

2,946,457

14%

A

2,459,425

13%

1,878,057

9%

B

1,521,157

8%

267

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Elite Materials Co., Ltd 2015 ANNUAL REPORT

Stock Code:2383 Search 2015 Annual Report Website:http://newmops.tse.com.tw EMC Elite Materials Co., Ltd 2015 ANNUAL REPORT Printed Date:May 20th, ...

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