tatung annual report · building up future growth foundation and continue to improve management...

2015Tatung

Annual ReportStock Code 2371

Published on April 30, 2016Website for reference: http://mops.twse.com.tw/mops/web/indexCorporate Website: http://www.tatung.com/b5/

SPOKESPERSONMr. Lung-chieh WangDepartment chief(02)25925252 ext. [email protected]

DEPUTY SPOKESPERSONMr. Wen-chieh PengDirector-General of finance department(02)25925252 ext. [email protected]

SHARE REGISTRARSecurities Management Section of Tatung CompanyNo. 22, Sec. 3, Chungshan N. Road, Taipei(02)25925252 ext. 3258 / 3259http://www.tatung.com/b5/

INDEPENDENT AUDITORSu-wen, LinLan-ching ChangErnst & Young Taiwan9F, No. 333, Sec. 1, Keelung Road, Taipei(02)27578888http://www.ey.com/tw/zh_tw

OVERSEAS SECURITIES EXCHANGELuxembourg stock exchangeDisclosed information can be found at BLOOMBERG.

WEBSITE FOR REFERENCEMarket Observation Post Systemhttp://mops.twse.com.tw/mops/web/index

CORPORATE WEBSITEhttp://www.tatung.com/b5/

• Noticetoreaders Th i s document i s an Engl i sh

translation of a report originally written in Chinese.

If there is any difference between the two versions, the Chinese one shall prevail.

Published on April 30, 2016

MANUFACTURINGPLANTSHEADQUARTERSNo. 22, Sec. 3, Chungshan N. Road, TaipeiTel: (02) 25925252 (100 lines)Fax: (02) 25915185 / 25921813www.tatung.com

POWERBUSINESSGROUP •PowerEquipmentBusinessUnit * Industrial Appliance Plant No. 102, Min Sheng Road, Neihai Village, Tayuan District, Taoyuan City Tel:(03)3863123/Email:[email protected] * Wire & Cable Plant No. 106, Min Sheng Road, Neihai Village, Tayuan District, Taoyuan City Tel:(03)3863111/Email:[email protected] •MotorBusinessUnit No. 352, His Tung Road, Sanhsia, New Taipei City Tel:(02)86766888/Email:[email protected]

CONSUMERBUSINESSGROUP •AdvancedElectronicsBusinessUnit No. 22, Sec. 3, Chungshan N. Road, Taipei Tel:(02)25925252/Email:[email protected] •ApplianceBusinessUnit No. 38, Lane 1119, Takuan Road, Tayuan District, Taoyuan City Tel:(03)3861111/Email:[email protected]

SYSTEMBUSINESSGROUP •SmartSolutionBusinessUnit No. 22, Sec. 3, Chungshan N. Road, Taipei Tel:(02)25925252/Email:[email protected] * AdvancedMeterPlant No. 102, Min Sheng Road, Neihai Village, Tayuan District, Taoyuan City Tel:(03)3863123/Email:[email protected] •SystemIntegrationBusinessUnits No. 22, Sec. 3, Chungshan N. Road, Taipei Tel:(02)25984299/Email:[email protected]

REALESTATEASSETMANAGEMENTDIVISION No. 22, Sec. 3, Chungshan N. Road, Taipei Tel:(02)25925252/Email:[email protected]

EXPORTDEPARTMENT No. 22, Sec. 3, Chungshan N. Road, Taipei Tel: (02) 25925252 •ExportDepartmentofIndustrialAppliancePlant Email:[email protected] •ExportDepartmentofWire&CablePlant Email:[email protected] •ExportDepartmentofMotor Email:[email protected] •ExportDepartmentofAdvancedElectronic Email:[email protected] •ExportDepartmentofAppliance Email:[email protected] •ExportDepartmentofSmartSolution Email:[email protected] •ExportDepartmentofNewEnergySystem Email:[email protected]

TATUNG 2015 Annual Report

CONTENTS

01 Letter to Shareholders 02 Bussiness Report of 2015 03 Corporate Chronicle 03 Corporate Value 04 Company Milestones 07 Global Network

09 Corporate Governance 09 Organization Chart 11 Profileofboardofdirectors,supervisors,andmanagement 20 Statusofcorporategovernance 33 Informationonindependentauditors 34 Informationonchangeofindependentauditors 35 Changeofshareholdingbydirectors,management,andmajorshareholders 36 Informationonthetop10shareholderswhoarerelatedpartiestoeachother 36 Long-terminvestmentsownership

37 Financial Information 37 Sourceofcapital 37 Shareholder structure 37 Distributionprofileofshareholderownership 38 Majorshareholders 38 Majorinstitutionalshareholders 39 Marketprice,networth,earningsanddividendspercommonshare 39 Dividendpolicyandimplementationstatus 40 Employeebonusesandremunerationtodirectors 41 Issuanceofcorporatebonds 41 Issuanceofglobaldepositoryreceipt 41 Statusofemployeestockoptionplan(ESOP) 41 Financial plans and implementation

42 Operation Overview 43 Power business group 49 Consumer business group 53 System business group 57 RealEstateAssetManagementDivision 58 Operation summary 59 Workforcestructure 59 Expenditureonenvironmentalprotection 60 Labor relations 62 Important contracts

65 Financial Overview 65 Condensed balance sheet and income statement 73 Financial analysis 77 AuditCommittee'sreviewreport 77 Consolidated statements 77 Parent company only statements

78 Analysis on Financia Status and Financial Performance and Risk as Sessment

78 Financial status 79 Financialperformance 80 Cashflow 80 Investmentpoliciesandplans 80 Risk assessment and analysis

82 Special Disclosures 82 InformationonInvestees 95 Holdingsandsaleofsharesbysubsidiaries

96 Appendix 96 Consolidated statements 281 Parent company only statements

Letter to Shareholders

TATUNG 2015 Annual Report1

Dear shareholders,Affected by the volatile global economy in 2015, while the management team of Tatung Company (“the Company”) continues to engage in corporate and operational transformations, the overall operation failed to make profits due to losses in core businesses and investments. The Company however will continue to implement essential strategies, adjust core businesses, rectify investments, and focus business management on its conglomerate. We expect more substantial improvements with all the adjustments made and efforts put in over the years. Meanwhile, we are building up future growth foundation and continue to improve management performance as well as corporate governance for shareholders.

I. 2015 Business Results2015TatungstandalonerevenuewasNT$18.2billion,operatinglosswasNT$0.97billion,togetherwithnon-operatingincomefrom investments, thenet lossafter taxwasNT$3.08billionwhichwasNT$1.35 losspershare.Tatung2015consolidatedrevenuewasNT$94.7billion,theoperationlosswasNT$9.4billion.

II. Direction and Strategy for 2016 and beyondThe Company’s strategies for future development are as below:1. Wehavebeen takingglobal trends inenergy savingandcarbon reductionasourcorporate responsibil ities.

Accordingly,energysavingandeco-friendlinesshavealwaysbeencoretoourcompany’smanagementvaluesandculture.All theproductsdesignedandmanufacturedbyourcompanyhavebeenorientedtowardssuchnotionsasenergysaving, frequencyconversion,highefficiency,andwaterconservation.With respect tosystem integrationservices,wearecontinuallyworkingtowardssuchareasassmartgrid,smartIoTbusiness,electrical-mechanicalsystems,andsolarenergysystems.Intheconsumermarket,weareworkingontheresearchanddevelopmentofourproductsbyapplyingourtechnologyinIoT,sothatwewillbeabletomanufactureaproductlineofsmarthouseholdappliancesthatcanliveuptothewholespectrumofenergysaving,eco-friendliness,andgoodhealth.Integratingourexpertiseinmicrogrid systems, smart grid, and smart solar power management systems with our communications technology and developingenergymanagementcloudsystems,weexpecttoenhanceourbrandvalueandcorporatereputationbyprovidingthegovernmentinfrastructuresandenterprisesmoreuser-friendlyandsmartenergyservices.

2. Expandingourglobalmarketshare Wewill re-positionouroverseasaffiliates inordertoconduct regionalmergersofmanufacturingfacilitiesandtheir

transitions.Workingunderthemarketdevelopmentstrategiesbytheheadquarters,wewilladjust regionalbusinessoperationsasourbeststrategytogetintolocalmarketsandstrengthenourmarketingandservices.

3. RestructuringinvestmentportfolioA. Wewillcontinuetosellandreshapetheinvestmentportfolioanddrivetheinvestmentcompanieswhichareinlosses

toimproveoperations;toupholdalongrangeplanningstrategyastheinvestmentguidingprinciple;andtoactivelyimprovethestrategicpartnershiptofulfiltheshort-andmid-termgoals.Wewilladoptthefocusedandprogressivestrategiestodevelopandinvestthenewmarkets.

B. Wewill integratetheGroup’sresources,tofocusonthebusinessofsmartappliance,smartgrid,smart IoTsystem,andsolarenergysystem.Wewillexpandglobalmarketsandimprovemarginratestopursuegrowthofrevenuesandprofits.

C. TheROAhasincreasedbyspeedinguptheassetactivation,andwewillcontinuetoexpeditetheprocess.

Lastbutnottheleast,wearewholeheartedlygratefulforthe long-termsupportofshareholdersandbankers,contributionoffellowcolleagues,thesupportandrecognitionofclients,suppliers.TheCompanywillcontinuetoengageincorporateandoperationaltransformations,toachievethestrategicobjectives,topassonTatungtraditions,andtocarryoutcorporatesocialresponsibility;pursuegrowthinrevenueandearningstomaximizeshareholders’interest.Wishyoujoyfulandhealthyprosperous.

Sincerely yours,

Chairman

Bussiness Report of 2015

TATUNG 2015 Annual Report 2

Tatung Business Report Affectedbytheglobaleconomyin2015,whileTatungCompany (“the Company”) continues to engage in corporateandoperationaltransformations,theoveralloperation failedtomakeprofitsdueto losses incorebusinessesand investments. TheCompanyhoweverexpects improvementswithall theadjustmentsmadeandeffortsput inover theyears.Below isa reportontheoperationperformanceofcorebusinessesandinvestments foryear2015andthe futureplansof theCompany.

I. 2015 Business ReviewTatung2015consolidated revenuewasNT$94.7billion,the operation losswasNT$ 9.4 bi l l ion. 2015 Tatungstandalone revenuewasNT$18.2billion,operating losswasNT$0.97billion,togetherwithnon-operating incomefrominvestments,thenetlossaftertaxwasNT$3.08billionwhichwasNT$1.35losspershare.1. Regardless of the decl ination in industr ial

appl iance and sys tem group bus inesses, crediting the efforts to reduction of costs and low-gross prof it production lines, the overall gross margin remained close to that of the year before, although recognition of one-off loss was made during the process of adjusting the low-gross prof it production which led to losses in core businesses.

2. Despite Green Energy Technologies' reduction of losses compared to year 2014, the recognition o f p ro f i t s o f severa l overseas investment businesses from asset mobil ization, and the profits earned by Elitegroup Computer Systems along with other investments, the losses in Chunghaw Picture Tubes increased compared to year 2014 which led to NT$1.43 billion net loss in investments in 2015, a comparatively larger difference from year 2014 in which investment profits were recognized.

2015 Strategies for Core BusinessCarbon reduction has become a global trend and the corporate social responsibilityof theCompany. Tobein linewith this trend,allproductsof theCompanyareaimed tobedesignedandmanufacturedasenergy-saving,with inverterfunction,highlyefficient,andwater-saving. The system solutionsbusinesswil l continue todevelopitssmartgrid, IoTbusiness,mechatronicssystem,and solar power system

• Consumer BG:Basedonthetheme“Energy-Saving,Eco,andHealth,”theConsumer BG introducedandapplied the IoTtechnologies into itsproductdevelopmentof smartappliancesandhas receivedpositive feedback fromthemarket.TheConsumerBGwilldevelopdifferentiatedandspecially-designedenergy-savingappliancesandpromotesuchproductsandTatungbrand ineachofthe targetedmarkets throughTaiwan’svirtual-realitycommercechannelsandoverseas subsidiaries in itsrespectivelocalmarket.

• System BG: Basedonthetheme“Energy-Saving,Eco,andHealth,”theConsumer BG introducedandapplied the IoTtechnologies into itsproductdevelopmentof smartappliancesandhas receivedpositive feedback fromthemarket.TheConsumerBGwilldevelopdifferentiatedandspecially-designedenergy-savingappliancesandpromotesuchproductsandTatungbrand ineachofthe targetedmarkets throughTaiwan’svirtual-realitycommercechannelsandoverseas subsidiaries in itsrespectivelocalmarket.

• Power BG: ThePower BGadjusted strategy in 2015 to removelowgrossprofitproduction l ineand relocate somemanufacturingbasetoTatungThailandCo.,Ltdforthepurposeof reducingcostsandenteringtheSoutheastAsiamarket. The Power BG is also in the processofdevelopingnewenergy-saving, highly eff icienttransformersandmotorgeneratorswhichareexpectedtoentermassproduction in2016.Withtheadjustmentsonproductsandproductionlinein2016,theSystemBGexpects tohighlyefficientandsmart systemsolutionstoprovidemoreenergy-savingandsaferpowerandengineering products to expand the mark share in power plants, business buildings and public construction projects.

II. Major investments: Major investments are described as

below:1. ChunghwaPicturesTubesCo.,Ltd.(CPT)

Intheyearof2015,CPTkeptfocusonsmartphones,carelectronic panels and other better margin products. While the industry is highlycompetitive, thedeficitbecamebigger.Consequently, the4thgenerationproduction lineandproductioncapabilityofCPTsolda 4th generation production line and phased out a 4.5generationproduction l ine, for thepurposeofenhancingtheproductiveness.In2016,CPTwillfocusingonvehicledisplay, leanproductportfolio,decreasetheoperationexpensesand thecost.Oneof oursubsidiaries,CPTTechnology(Group)Co.,Ltd. InFujian,China,hasimplementedandofferedprivateplacementforthe6thgenerationproduction line. It’sgoingtobeanimportantmilestoneforCPTin2016andthenextfewyears,andwelookforwardtoimprovingthebusinessbyimplementing and carrying out the operation strategies ofenterprisetransformation.

2. GreenEnergyTechnologies(GET)Intheyearof2015thesolarindustryconditionsshowedconstantly changes, but gradually become sturdy. Startingfromthethirdseasonof2015,theadvantagesofsolargreenenergyandcostefficiencyhaveemerged,theUnitedNationsClimateChangeConferencehasannounced its support on the clean energy policy, the demandforsolarenergyhasincreasedinChina,theUS,and the emerging markets, the industry has shown an upturninbusiness,andthecorebusinessofGET—wafermanufacturingmadeprofitbytheendof2015. In2015,GETwillendeavortoturnlossintoprofit.

Corporate Chronicle - Corporate Value


3. SanChihAssetsDevelopmentCo.,Ltd.(SCAD)Theconstructionproject,“TatungPalacemansion”,whichhaspresoldfor80%,hadbrokenthegroundintheendofNovember,2015.TheprojecthaswontheAPIGBAAwards,andthat’sthemainreasonwhyithasgoodsalesperformance insucharecessionperiod.Theresidentialandcommercialconstructionprojectswi l l becarr iedout in thenear ly futureafter theplanninghascompleted,forthepurposeofachievingthebestvaluefortheconstruction.

III. Enforcement of Corporate GovernanceIndependentdirectors havehelped to strengtheninternalcontrolsystems,includingrevisionsofOperationProcedures, reviews of investment strategies andexecutions, etc. The Compensation Committee has alsoestablishedbetter linkagebetweenperformanceKPIand thecompensation system fordirectorsandmanagement teams. The management team has strengthened management in internal control and investmentaccordingtotheaboveguidelines.

IV. Refocus to create shareholders’ value1. Continuouslyreducenon-coreinvestmentportfolio: In2015,wedownsizedtheoperationforTatungWire

andCableTechnology(Wujiang)Co.,LtdandSanChihwireandCableTechnology(Wujiang)Co.,Ltdandcompletedactivatingassetsprocess.Wewillcontinuetodownsizetheinvestmentswhichcannotbeimproved.Forthoseinvestmentsthatcannotbeimprovedordonotmeetthecompany’smid-andlong-termstrategies,wewillcontinuetolookfortheopportunities to merge, to bring to market, or to put intoliquidation.

2. In the future,wewil l keepon (1) strengtheningthebrand imageofTatung;(2) focusingonsmartgr id, smart IoT system, electronic system, and solarenergysystem;(3)activatingassets;and(4)adjustingthe investmentportfolio.Looking intothefuture,wewillexpandglobalmarketsandimprovemarginratesforallcompanies intheGroup.We’regoingtogoalloutforenhancingcorporatevalue.Thecompany transformationhas shown initialsuccess.Wesincerelyappreciateall shareholders’continuedsupport.WewillexpeditetheCompany’sandGroup’stransformationtopassonthecompanyspirit, to implement corporate social responsibility initiatives,and toenhance shareholders’value.Again,weappreciateall shareholders’continuedsupport.

President

Corporate ValueEstablished in1918, TatungCompany(formerlyknownasXieChihBusinessEnterprise)hasevolvedandgrownoverthedecades intooneofTaiwan’s leadingconglomerates.ThefoundationoftheCompanyisbuiltonfourfundamentalva lues— Integr i t y, Honesty, Indust r y, and F rugal i t y.DevelopedbyTatung’s founderandformerchairman,Mr.Shan-chihLin,theyrepresenttheessenceoftheCompany’scommitments to our customers , shareholder s , and employees.

Mr.T.S.Lin,ChairmanEmeritusofTatung,furtherextendedthepreceptsbehind thesecorevalues to serveas theguidel ines for theCompany’s continued successandprosperity.

∆ Industry - education cooperationTocultivateyoungengineering talentand to lendef fo r t s to research and development th roughcooperation between the Company and Tatung HighSchoolaswellas TatungUniversity. Realizingthe importanceofeducation ina societywithaknowledge-based economy, Tatung sponsors the schools’major projectswhi le also contr ibut ingi ndus t r ia l ex pe r ience to the teach i ng. A s a responsible corporate citizen, Tatung regards its dedicationtoeducationasamanifestationof long-term commitment to social well being.

∆ Shareholder responsibilityTopursuemaximumreturnsforourshareholdersandtomaintainastabledividendpolicy.

∆ Employee harmonyTo encourage self-motivation and cooperationamongstemployees through theorganizationofprofitcenterstoensurefaircompensation, incentives,welfarebenefits,aswellas toprovideon-the-jobtraining.

∆ Customer satisfactionTore-investprofits inpursuitofbetterproductqualitysoastocreatevalueforourcustomers.

Company Milestones


Company Milestones 1918• Establ ishment of XieChih Business Enterpr ise, the

forerunner of TatungCompany, by Founder andChairman,Mr. Shan-chih LinCompletedover 600constructions, includingtheSindianRiverembankmentprojectandtheExecutiveYuanbuilding

1942• Mr.T.S.LinsucceededaschairmanofTatungandalso

actedasprincipalofboth TatungHighSchoolandTatungUniversity

• EstablishmentofTatungHighSchool

1949• Pioneeredproductionofelectricfansunderthename

Tatung• Massproductionofelectricfans&motors (Pioneering in Home Appliance & Motor industries)

1956• EstablishmentofTatungUniversity

1960• MassproductionofTatungricecookers,arevolutionary

stepforhousewivesinTaiwan

1962• TheCompanybecamepublicly listedon theTaiwan

StockExchange

1963• Mass p roduct ion of t rans fo rmers & sw itchgears

(Pioneering in Industrial Appliance industry)

1964• Massproductionofblack-and-whiteTVs

1966• EstablishmentofWire&CablePlantinTaoyuanCounty

1968• The Company renamed f rom Tatung Stee l and

MachineryCompanytoTatungCompanyandofficiallyregistered as so

1969• Companymascot ( Tatung Boy) and song were

launched• MassproductionofcolouredTVs

1970• RevenuesexceededNT$2.2billion,makingTatung Taiwan’sforemostprivatecompany• EstablishmentofForwardElectronicsCompany

1972• Mr.W.S.LinappointedaspresidentofTatung

1977• ParticipatedintheTenMajorInfrastructureProjectswith

theconstructionofaslagtreatment facility forChinaSteelCorp.andprovisionoftheturnkeysolutionfortheCKSInternationalAirport’spowercontrolstation

1980• Rankedas Taiwan’sNo.1 exporter of electr icand

electronics products • Recipientof the “Premier’sAward forOutstanding

ExportPerformance”• CRTplantbyChunghwaPictureTubesrampedup

1990• ConstructedCommunicationCablePlantandPower

Cable Plant

1994• Es tabl i sh ing computer i zed sys tem of household

registration&conscriptionfortheMinistryoftheInterior

1998• Tatung (Shanghai) Co., Ltd. was es tab l i shed to

manufacturemotors,generators, transformers,andswitchgears

1999• Tatung Instituteof Technology renamedas Tatung

University

2001• ChunghwaPictureTubeswaslistedontheTaiwanStock

Exchange

2005• ConsolidatedTatung’sDesktopPCBusinessUnitwith

ElitegroupComputerSystems(ECS),makingTatungthelargestshareholderofECS

• The second hous ing project by ShanChih AssetDevelopmentforurbanrenewalwasapprovedbyTaipeiCityGovernment,whichcontributedsignificantlytotheurbanizationofDatongdistrict

2006• Mr.T.S.Lin,ChairmanEmeritus,passedawayon10May

and aged 88• Mr.W.S.Linwaselectedaschairmanandpresidentof

Tatung• The U rban Renewal Pro ject by Shan Ch ih Asset

DevelopmentwasapprovedbyTaipeiCityGovernmentfor itscontributiontowardsDatongDistrict, inwhichacommunityactivitycenterwouldbebuiltforthelocals

2007• TheIndustrialApplianceBusinessUnitwasrewardedthe

“CorporateSustainabilityandExcellenceAward”byTaoyuanCountyGovernment

Company Milestones


2008• TatungCompanycelebrated its 90thanniversaryof

establishmentinNovember• GreenEnergyTechnologywaslistedontheTaiwanStock

Exchangeon25thJanuary• RankedNo.1 inTaiwanbytheEnvironmentalProtection

Administrationasthemostproactivecorporationforthepromotionofgreenconsumption

• ShanChihAssetDevelopmentCo. introducedits luxurycondominium,“TatungTomorrowWorld”,amasterpieceofgreenarchitecture, tocommemorateTatung’s90th

anniversary

2009• TatungFineChemicalsstartedtradingontheemerging

stockmarketinSeptember• ShanChihSemiconductorCo.was listedontheTaiwan

StockExchangeon23thDecember

2010• Tatungelectric fan,aclassicof itskindnationwide, is

enjoyingits60thanniversary• TatungBoy,themascotofTatungCo., iscelebrating its

40thbirthday• Luxury condominium, “TatungNoble Residences”,

the 2nd project in Nangang by ShanChih AssetDevelopment,wasunderconstruction

• Tatung21.5”LEDbacklightdisplaywasawarded2011iFdesignawardinaudioandvideocategory

2011• Ms.W.Y.LinwasappointedPresidentofTatung• 999setsofdesignerlimitededitionricecookers,winner

of IDEA “Gold” forpackagingandgraphics,wereintroduced tocommemorate its50thanniversary. AseriesofricecookersincoloursofindigenousTaiwanesefruits,watermelonred(Siluo),bananayellow(Cishan),andguavagreen (Yenchao),werealso introducedtocelebrate thecentenary foundationof theR.O.C.andastheCompany’sattemptto relatethetouchofTaiwan’slocalspecialitiesintoCEproductline

• Winnerof“TopGreenBrand2011”and“Qualityaward”in thecategoryofhomeappliancebyBusinessNextmagazine

• Winnerof“Yahoo!EmotiveBrandAwards”• Winnerof “Top100 TaiwanBrand”by theMinistryof

EconomicAffairs

2012• Winnerof “TopGreenBrand2012”byBusinessNext

magazineawarded“AdvancedAward”inthecategoryofhomeappliance

• WinnerofTaiwanExcellenceAward2012(SilverAward)&GoodDesignAward2012forthericecookerof50thanniversary limitededition.Both theproductand itspackagingwereselectedas2012GoodDesignBest100.

• NewEnergyBUwonTaiwanPowerCompany’sfirstbidofLowVoltageAMIPilotProject,arevolutionarymilestonefor the intelligentmanagement systemofelectricityusageforhouseholdsinTaiwan

• WonthebidofHualien-TaitungRailwayElectrificationP ro ject by the M in i s t r y o f T ran spo r ta t i on andCommunicationstakingpartinthenationalmomentousinfrastructureprojectforthegreentransportationoftheEast

• Tatung3CobtainedGoldAwardinthecategoryof3CretailchannelinthecontestoftheBestServiceinTaiwan2012

2013• AwardedBestCorporateGovernance,Taiwan,2013by

WorldFinance,a financialmagazinebyWorldNewsMediabasedintheUK

• Winnerof the13th“GoldenQualityAward forPublicConstruction”indesignandconstruction

• TatungandChunghwaPictureTubes(CPT)werebothawardedHonorableMentioninthe2013TaiwanTop50CSRAwardsinthecategoryofmanufacturingindustry

• Winnerof “TopGreenBrand2013”byBusinessNextMagazineawarded”AdvancedAward”inthecategoryofhomeappliance

• WonthebidforNewTaipeiCity’sGreenCampusProject,inwhich solarpanel systemand intell igentenergymanagementsystemaretobe installed in16selectedschoolsinNewTaipeiCity

• Tocelebrate its95thanniversaryofestablishment, theCompanyheldanopen-aircharityconcert inPinxidistrictwhereTatungBoyFlyingLanternsmade theirdebut

• TatungConsumerProductsCo.(TCPC),Tatung’sbrandchannel, set upanoff icialaccounton LINEalongwith the releaseofTatungBoycharacter stickersandemoticonswhich,within24hoursofonlineintroduction,attractedmore thanonemil l ionactive users andthedownloadvolume itcreatedbroke the record tobecomeNo.1intheofficialaccountcategoryofLINE

• ChunghwaPictureTubes(CPT)launchedapublictenderofferofGiantplus Technology’scommon shares toenhance itscompetitiveedge in smallandmedium-sizemobilemodulesexpendingitsbusinessscaletototalsolutionservice

2014• Winnerof2014TaiwanCorporateSustainabilityAward,

bronzemedal, for largeenterprises intechnologyandelectronicsmanufacturingindustry

• Winnerof “TopGreenBrand2014”byBusinessNextMagazineawarded”AdvancedAward”inthecategoryofhomeappliance

• As theonly localbrandwinningPowerBrands2014award in thecategoryofhomeappliances, TatungwasawardedBronzeMedalAwardbythemagazineofMANAGERtoday

• Unveiling“TatungBoyHalleyRider”Lantern inthe2014TaiwanLanternFestival

• Co-organiz ing “Smar t City Summit and Expo” topromoteTatung’suniquetotalsolutionforsmartenergysavingsystem

• Won thebid forNewTaipeiCity’sGreenMarketandCampusProject, inwhich smartmetersandenergysavingmonitoring systemare installed to theenergy

Corporate Chronicle


management system sett ing theproject thebestexample to PV-ESCO rooftop solar systemal ike inNorthern Taiwan

• AccomplishedmicrogridsystemonTaiping Island,thesouthernmostterritoryofTaiwan,tosetthebenchmarkfor theapplicationofmicrogrid system inoffshoreislandsofTaiwan

• Further to thewinningof solar system roofingbidsforgovernment-ownedbuildings inNewTaipeiCity,Nantou, Taichung, Pingtung, Tainan, and Kaohsiung, theCompanyagainwon thebid forPenghuCountyGovernment’s solar system roofingprojectmakingTatung themost exper ienced PV energy servicecompany(PV-ESCO)inTaiwan

• TheCompany, as an impor tant suppl ie r of h ighefficiencymotorsandcables,was invitedbySteelAsiaManufacturingCorporation,the largeststeelcompanyin the Phi l ippines, to its newplant’s inaugurationceremonyinDavao

• Accompl ishing Rai lway E lectr i f ication Project forHualian–TaitungLinewiththeintroductionofTatungBoyEasyCardasawayofcelebration

• All newbrand—“in fresh”— introduceshydroponicvegetables thatare fresh,healthy,andpollution freeto providecustomersanewhealthychoicebyutilizingoptoelectronic technology in agriculture

• TatungGroupdonated12milliondollars toKaohsiungCity Government tohelpthevictims in thedisasterofexplosion

• Acquired thecertif icateof registrationof ISO / IEC27001:2013 by Br it i sh Standards Inst itut ion for theinformationsecuritymanagementsystemofbothTatungandeTungGo,Tatung’sonlineshop

2015• TheresultoftheTop100InfluentialBrandinTaiwan2014

survey,carriedoutbyBusinessWeeklyandIpsos,Taiwan,ranked TatungNo.4 in thecategoryofelectronicsindustry,No.24 in themainchartofmixedcategories,andNo.8 in thecategoryofTaiwannative influentialbrand.Thesurveyisthefirstofitskindtobeconductedfromtheviewpointofgeneralconsumers in respectofthemostinfluentialbrandintheirdailylife

• TatungBoy lantern,GreetingDragonwithGoodLuck,madeitsdebutinthe2015TaiwanLanternFestival

• EstablishingeTungGo,Tatung’sonlineshop,toinvolveine-commerce business

• TatungHealthyLifeStorebeganitsofficialoperation• Applyingcloudcomputingand Internet of Things

technology tocomeupwith solutions for smart life,smartgrid,andsmartfactory&buildingtoshowcasein2015SmartCitySummit&Expo

• EstablishingTaiwan'sfirstsmartmicrogriddemonstrationPark inLinbian forPingtungCountyGovernment. Theworkwon "SmartEnergyConservation"award in the2015SmartCity InnovativeApplicationCompetitionorganizedby theBoardof ScienceandTechnology(BOST), theExecutiveYuan,andalsowasawardedasilvermedal in themicrogridcategoryofAPEC's2015EnergyandSmartCommunityApplicationCompetition

• Shan-ChihAssetDevelopment launched its flagship

smart green community, "Tatung Smart Manor", which wasawardedagoldmedal in designof the 2015Taiwan'sExcellentSmartGreenBuildingandSystem

• Tatungwon the BronzeMedal in the category ofelectronics industryofTaiwanCorporateSustainabilityAwardsfor3consecutiveyears

• Tatungutilizedthetechnologyof InternetofThingsonsmartappliancesandcooperatedwithSIGMUtocreateall-roundedsmartliving

• Tatungwon thebiddingof solarPV roofingplan forthepublicbuildings inKinmenCounty. TheprojectenablesKinmenCountyGovernmenttogetthetrendsinelectricityconsumptionandgaugereportableeventsonreal-timepowergenerationviaTatung’ssmartmetersandenergysavingmonitoringsystemsothatelectricitylosses can be reduced and ef f iciency on powergeneration can be enhanced

• Tatung r ice cooker, an impor tant cu ltu ra l asset representing Taiwan's everyday l ife,wasexhibitedanddemonstratedasacultural&creativeartifact inTsutayaBooks(Japan),oneofthetwentymostbeautifulbookstores in the world

• TatungwonthebiddingofsolarPVpowergenerationsystemforPratas Island. Theproject includes40kWpofsolarenergyandfuelcontrol systemtomonitor theoperationofgeneratorand loadstatussothatoutputofsolarPVcanbecontrolledanduninterruptedpowersupply in Pratas Island can be expected

• Tatung cooperated with ITRI and Toshiba to promote microgridwithinsmartgrid inPenghu.Theprojectnotonly implements regionalapplicationofmicrogrid inTaiwanbutalso raises theproportionof renewableenergy hoping to maintain stable power supply and optimizetheregulationfordemandandsupply

2016• TatungwonthebiddingofsolarPVroofingsystemforthe

publicbuildingsinNewTaipeiCity.Systemofmicrogridis introducedtotheprojecttoenabletheemergencysupplyofelectricitywhenwithoutpowersupply fromstategridinaneventofnaturaldisasters

• TatungBoycreativelantern,theheroseries:TransformerandEarthGuardian,madeitsdebutinthe2016TaiwanLanternFestival

• Tatung waterless easy cooker won 2016 iF Design Award

Global Network


Czech

Tatung Czech s.r.o.

China

Tatung Information Technology (Jiangsu) Co., Ltd.

Tatung (Shanghai) Co., Ltd.

Tatung Wire and Cable (Wujiang) Co., Ltd.

Tatung Compressors (Zhongshan) Co., Ltd.

Japan

Tatung Company of Japan, Inc.Thailand

Tatung (Thailand) Co., Ltd.

Myanmar

Myanmar Tatung Co., Ltd.

Dubai

(The new investment company in Dubai is setting up.)

Singapore

Tatung Electronics (Singapore) Pte. Ltd.

Tatung Information (Singapore) Pte. Ltd.

Tatung Electric (Singapore) Pte. Ltd.

Corporate Chronicle


Taiwan Tatung Co.

Power Business Group

Consumer Business Group

System Business Group

Real Estate Asset Management Division

Investments

Chunghwa Picture Tubes, Ltd.

Forward Electronics Co., Ltd.

Shan Chih Semiconductor Co., Ltd. (Reinvest GET)

Shan Chih Asset Development Co., Ltd.

Tatung Consumer Products (Taiwan) Co., Ltd.

Chunghwa Electronics Development Co., Ltd.

Tatung System Technologies Inc.

Tatung Fine Chemicals Co., Ltd.

Toes Opto-Mechatronics Co., Ltd.

Tatung Medical & Healthcare Technologies Co., Ltd.

Shan Chih Investment Co., Ltd.

Chih Sheng Investment Co., Ltd.

Others

U.S.A

Tatung Co. of America, Inc.

Tatung Electric Co. of America, Inc.

Mexico

Tatung Mexico S.A. de C.V.

Corporate Governance - Organization Chart


Organization ChartTatungCompanydevotes tobusinessofgreenenergyandenergysaving-relatedproducts,systems,andservice.Threebusinessgroups(BGs)provideeverykindofenergy-savingandhighefficiencyproductsandsystems(consumerelectronicsandhomeappliances,motors,powerfacilitiesandautomaticcontrolequipment,aswellasICT-integratedsystems)forsmarthome, smart community, and smart grid. Additionally, the BGsalsoprovidecompleteand in-timeserviceforallofourproducts and system solutions.For smart gr idbusiness, Power BGand SystemBGworktogether toprovideproducts, systemsolutionsandservicefor al l k inds of smar tmeters, communicationmodulesandconcentrators, FTU/FRTUs, high eff iciency/energy-savingmotors and t ransformers, switchgears, aswel las AMI communicat ion systems and contro l centers, advanceddistributionautomationsystems,aswellassmartsubstationsandgeneration.TatungCompany iscapableofprovidingsystemsolutionsandservice,withallkindsofcoretechnologies and key products.In terms of Smar t Community, System BGprovide thecomplete solutionand technical servicewhich includingMicro-grid(PV,Energystoragesystem,andotherrenewableenergy), SHMS,SmartHomeManagementSystem,(EnergySaving,Security,andHealthcareSystem),andSBMS,SmartBui ldingManagement System, (Energy Saving, Bui ldingAutomation).For the smarthomebusiness,ConsumerBGcollaborateswithSystemBUtoprovideenergy-savingandenvironmentalfriendlyproductsandsolutions forsmarthomeapplicationsincludingsmarthomeappliances, IPcamera&surveillancesys tem, smar t home gateway, smar t power monito r, environment&wellnesssensor,and innovativesmarthomesolutions. Incorporatingwithcloudservices,productsandsystemscanbeeasi lymanagedviaAppsof hand-helddevices todeliveranenergy-saving,convenient, secure&safe,andhealthylifestyle.Andwewillcooperatecloselywithstrategicpartnerstoservethe worldwide market.

Shareholders' Meeting

BoardofDirectors

Audit Committee

Chairman

President

Corporate Governance


Administration GeneralAdministrationDivision,Finance&AccountingDivision,OperationSupportDivision,HumanResourcesDivision,ManagementInformationSystemDivision,LegalDivision,Environmental&SafetyDivision

POWERBU

SINESSG

ROUP

Power Equipment BU

Industrial Appliance:Researching,developingandmanufacturingallkindsoftransformersrated345kV1000MVAandunder,allkindsofreactorsrated345kV100MVARandunder,161kVclassofgasinsulatedswitchgearsandgascircuitbreakers,36kVseriesofswitchgear,powerdistributionequipment,andotherindustrialequipment.Wire & Cable:Withnearlyfiftyyearsoftechnicalexperience,thisbusinessunitisresponsibleformanufacturingandsaleofvariouswires,cables,opticalfibercablesandbuswaywhicharewidelyusedintelecommunication,powertransmissionanddistributionsystem,industrialequipment,homeapplianceandITnetwork&electronicdevice.

Motor BUTatung’smotorsbusinesshasbeenoperatingforoversixdecadeswithsalesworldwide.With“TatungMotorsDrivetheWorld”as itstheme. Integratingofallaspectsofelectricmachinewhichcoveredfordesigning,manufacturing,andsellingofelectricmotors,immersiblepumpmotors,PMmotors,EVmotors,drives,waterjacketmotors,generatorsets,andtotalsolutionsofpowersystems.

CONSUMERBU

SINESSG

ROUP

Advanced Electronics BU

TheAdvancedElectronicsBusinessUnit(AEBU)focusesonprovidingglobalODMcustomerswithdesignandmanufacturingproducts&solutions.Theproductlinesinclude2mainlines:digitalentertainmentandInternet-of-Things (IoT) products. The digital entertainment line includes electronic gaming and imaging accessories.TheIoTproductsincludeIPcamera,smartenergymanagementandsensing-&-controldevicesandsolutions.Tatung’scustomerscanbenefit fromTatung’sfastreactiontoaccommodatemarketneedsandflexibilityindesigncustomization.Theon-going researchanddevelopmentwill furtherenhancethecustomers’competitivenessintheirproducts.

Appliance BU

TatunglaunchesSmartHomeEnergyManagementSystemtoprovideefficient,convenientandcomfortablegreenlife.TatungSmartHEMSisusefulforanyonewhowantstoreducehomeenergyconsumptionandsavemoneytoofferuserstotalmanagementofhomeenergyconsumptionwithappliancecontrol,energyconsumptionmonitoring,andselfmonitoringfunctionsanytime,anywhere,throughanyinternet-enabledpersonaldevice.Fornewproductdevelopments,thenewlaunchedgolden6°4KcurvedDisplaysignificantlyreducingthestandarderrorof6°elevationdesigninthevisualreflectionoflightgenerated,meanwhiletoimprovescreencontrastimagestocreatethebestviewingperspective;theframe-typedesignwithcurvedbasemetalmaterialfinishdeliverstheextraordinarytaste.Largehomeappliancesparts,Tatungcontinuouslydevotesitselftothedevelopmentsofgrade1energylabelair-conditioningproductsandrefrigerators,andenergy-savingwatermarkwashingmachines.Forsmallhomeappliances,withtherisingawarenessofenvironmentalprotectionandenergy,TatungintroducesClassicDCfanproductswhichequippedwithDCmotorandDCinverter.Comparingwithtraditionalfans,thenewgenerationClassicDCfanscansignificantlysaveenergyandreducenoisewhileretainingthehigh-qualityandgreenlife!TatunghomeappliancesproductshavebeenawardedtheTAIWANExcellenceforover22yearstodemonstratesuperiordesignandinnovationcapability.

SYSTEMBU

SINESSG

ROUP

Smart Solution BU

IoTbusinessopportunityis increasingthereforeTatung’sSmartSolutionsBusinessUnitintegratesenergy-savingproducts,ICTtechnologies,bigdataanalysisandenergymanagementsystemstoprovidecustomerswiththebest applications.TatungprovidestheSmartBuildingManagementSystem,toanalyzeenergydatatohelpyousetareasonableenergycapacity,uninstallorimprovedinsufficientequipmenttogetherwithamanagementsystemthatoptimizesthebestenergy-savingeffect.Tatungalsohasthesmartbuildingknow-howtoprovideacompleteSmartHomeSolutionandmakecustomersenjoytheintimateexperienceinhomelife.TheSmartGridSolutions includeallkindsofsmartmetersandAMIsystem.Inaddition,wearecapableofintegratingtheMicroGridsystem,developinganddesigningthesolarsystemandrelatedsolarsolutionsforworldwidepowerutilities,governments,andresidentialusers.

System Integration BU

SystemIntegrationBUmainlyprovidesICT(InformationCommunicationTechnology)system,solarenergysystemandinfrastructureservices.IntheICTsystem,BUprimarilyfocusonICTsystemintegrationservicesandsoftwaredevelopment, includingTatung’ssmartenergymanagementsystem,documentmanagementsystem,attendancemanagementsystem,enterpriseresourcemanagementsystemandvariousinformationmanagementsystems,etc.Theservicesareacrossgovernmentagencies,schoolsandrelatedbusinesses.Besides,asearlyas1992,BUhasalreadywontheachievementofCMMI(CapabilityMaturityModelIntegration)maturitylevel3.Inthesolarenergysystem,fromnorthtosouthinTaiwan,therearehundredsofpublicbuildingsandcases,integratedwithTatung’shigh-performancesolarenergyproducts,toprovideprofessionalenergycreationmanagementandestablishmentservices.Themainservicesareelectricitygridsystems,stand-alonesolarenergysystemsandrelatedapplications.WithrichexperienceinTaiwan,BUactivelyexpandsforeignmarketscurrently,liketheareasoftheSoutheastAsiaandtheMiddleEastmarkets.Inthe infrastructure,BUprovideshigh-qualitytotalsolutiontocustomers,combinedwithmultidisciplinaryprofessionalswhichconsistsof the fieldsofpower,electronics,mechanics, smartcontrol, information,communication,transportationandprojectmanagement,coordinatescrossinterfaceandintegrateddesign,implementation,projectmanagementwithrelatedtechnicalsupport.


RealEstateAssetManagementDivisionprovidesspecializedinvestmentservicesfromentirerealestatelifecycleassociatedwithplanning,analyzing,developing,operatingandmanagingonbehalfoftheTatungCorporatetomaximizeassetvalueandachieveoptimalassetperformancethroughvalueaddedrealestatestrategy.Recenton-goingprojects include:RealEstateAssetActivation,ConstructionProjectManagementandSelf-ownedBuildingRenovation.



Profile of board of directors, supervisors, and management(I) Board of directors and supervisors

AsofApril30,2016

Title

Nationality or

corporate seat

Name

Dateofappointment (assumptionof

post)

Termofoffice

Dateofinitialappointment

Shares held upon appointment Shares held currentlyShares held by

spouse and underage children currently

Shares held in another person’sname

Work / educational experience JobtitleassumedintheCompanyandanyothercompany

Otherhead,director,orsupervisorwhoishis/herspouseoriswithin2nddegreeofkinship

NumberofsharesShareholding percentage

(%)Numberofshares

Shareholding percentage

(%)

Numberofshares


(%)

Numberofshares


(%)Jobtitle Name Relationship

Chairman Republic ofChina(Taiwan)

Wei-shan Lin 2014.06.06 3 years 1972.04.14 10,505,173 0.45 17,655,173 0.76 16,004,173 0.68 - - MasterofManagement,WashingtonUniversityPresidentofTatungCompany

ChairmanofChunghwaPictureTubes,Ltd.ChairmanofForwardElectronicsCo.,Ltd.ChairmanofShanChihSemiconductorCo.,Ltd.ChairmanofGreenEnergyTechnologyInc.,ChairmanofTatungConsumerProducts(Taiwan)Co.,Ltd.ChairmanofShanChihAssetDevelopmentCo.,Ltd.ChairmanofTatungFineChemicalsCo.,Ltd.ChairmanofToesOpto-MechatronicsCo.,Ltd.ChairmanofTatungSM-CycloCo.,Ltd.ChairmanofChunghwaElectronicsDevelopmentCo.,Ltd.ChairmanofTatungDieCastingCo.,Ltd.ChairmanofTatungMedical&HealthcareTechnologiesCo.,Ltd.ChairmanofShanChihInvestmentCo.,Ltd.ChairmanofTatungCompanyofJapan,Inc.ChairmanofTatungElectronics(Singapore)Ptd.Ltd.ChairmanofTatungElectric(Singapore)Pte.Ltd.ChairmanofTaiwanTelecommunicationIndustryCo.,Ltd.

Director

Director

Wen-yen K. LinWei-tung Lin

Spouse

2nd degree ofkinship

Director Republic ofChina(Taiwan)

Wen-yen K. Lin 2014.06.06 3 years 1996.06.06 3,052,173 0.13 16,004,173 0.68 17,655,173 0.76 - - MasterofEconomics,MarylandUniversityAssistantProfessorofMarylandUniversityLecturerofNationalTaiwanUniversityLecturerofTatungUniversityChairman’sSpecialAssistantofTatungCo., Ltd.ExecutiveVicePresidentofTatungCompany

PresidentofTatungCompany,ChairmanofTatungSystemTechnologiesInc.ChairmanofTatungInformation(Singapore)Pte.Ltd.ChairmanofTatungMexicoS.A.deC.V.,ChairmanofTatungCzechs.r.o.ChairmanofElitegroupComputerSystemsCo.,Ltd.

Chairman

Director

Wei-shanLinWei-tung Lin

Spouse

2nd Degree ofkinship


I-hua Chang 2014.06.06 3 years 1997.07.17 227,615 0.01 227,615 0.01 6,353 - - - BachelorofMechanicalEngineering,TatungUniversityPresidentofTatungConsumerProducts (Taiwan) CompanySecretarygeneralofTatungcompany’sSecretariat

Chairman&PresidentofShanChihAssetDevelopmentCo.,Ltd.DirectorofTatungIndustryCompanyDirectorofChengShengBroadcastingCorp.DirectorofChunghwaElectronicsDevelopmentCo.,Ltd.Chairman&PresidentofChihShengRealtyCo.,Ltd.DirectorofKuenderCo.,Ltd.

None None None


Wei-tung Lin 2014.06.06 3 years 1996.06.06 10,192,401 0.44 10,192,401 0.44 373,788 0.02 - - Ph.D.ofEducation,PepperdineUniversityPresidentofTatung(U.K.)Ltd.

DirectofTatungIndustryCompany. Chairman

Director

Wei-shanLinWen- yen K. Lin

2nd degree ofkinship2nd degree ofkinship


Lung-ta Lee 2014.06.06 3 years 2011.06.24 367 - 367 - - - - - Ph.D.ofChemicalEngineering,TatungUniversityR&DSectionManagerofTatungFineChemicals Co., Ltd.PresidentofShangChihChemicalIndustryCo., Ltd.

Director&PresidentofShanChihSemiconductorCo.,Ltd.DirectorofTatungFineChemicalsCo.,Ltd.,DirectorofGreenEnergyTechnologyInc.,ChairmanofGreaterPowerLtd.DirectorofTatungCompanyofJapan,Inc.DirectorofPhecdaTechnologyCo.,Ltd.Chairman&PresidentofChihDeInvestmentCo.,Ltd.ChairmanofUltraEnergyHoldingsLtd.ChairmanofUltraEnergy(Weifang)TechnologyCo.Ltd.ChairmanofShangChihInternationalChemicalIndustry Co., Ltd. ChairmanofHuaianTatungAdvancedTechnologyMaterialsCo., Ltd.ChairmanofWujiangShanghuaMaterialTechnologyCo.,Ltd.ChairmanofWujiangShangHuahPlasticCo.,Ltd.ChairmanofDongguanTongliTradingCo.,Ltd.DirectorofChihShengInvestmentCo.,Ltd.DirectorofChunghwaElectronicsDevelopmentCo.,Ltd.

None None None



Profile of board of directors, supervisors, and management(I) Board of directors and supervisors

AsofApril30,2016

Title

Nationality or

corporate seat

Name


post)

Termofoffice








(%)Numberofshares


(%)

Numberofshares


(%)

Numberofshares



Chairman Republic ofChina(Taiwan)

Wei-shan Lin 2014.06.06 3 years 1972.04.14 10,505,173 0.45 17,655,173 0.76 16,004,173 0.68 - - MasterofManagement,WashingtonUniversityPresidentofTatungCompany

ChairmanofChunghwaPictureTubes,Ltd.ChairmanofForwardElectronicsCo.,Ltd.ChairmanofShanChihSemiconductorCo.,Ltd.ChairmanofGreenEnergyTechnologyInc.,ChairmanofTatungConsumerProducts(Taiwan)Co.,Ltd.ChairmanofShanChihAssetDevelopmentCo.,Ltd.ChairmanofTatungFineChemicalsCo.,Ltd.ChairmanofToesOpto-MechatronicsCo.,Ltd.ChairmanofTatungSM-CycloCo.,Ltd.ChairmanofChunghwaElectronicsDevelopmentCo.,Ltd.ChairmanofTatungDieCastingCo.,Ltd.ChairmanofTatungMedical&HealthcareTechnologiesCo.,Ltd.ChairmanofShanChihInvestmentCo.,Ltd.ChairmanofTatungCompanyofJapan,Inc.ChairmanofTatungElectronics(Singapore)Ptd.Ltd.ChairmanofTatungElectric(Singapore)Pte.Ltd.ChairmanofTaiwanTelecommunicationIndustryCo.,Ltd.

Director

Director

Wen-yen K. LinWei-tung Lin

Spouse

2nd degree ofkinship


Wen-yen K. Lin 2014.06.06 3 years 1996.06.06 3,052,173 0.13 16,004,173 0.68 17,655,173 0.76 - - MasterofEconomics,MarylandUniversityAssistantProfessorofMarylandUniversityLecturerofNationalTaiwanUniversityLecturerofTatungUniversityChairman’sSpecialAssistantofTatungCo., Ltd.ExecutiveVicePresidentofTatungCompany

PresidentofTatungCompany,ChairmanofTatungSystemTechnologiesInc.ChairmanofTatungInformation(Singapore)Pte.Ltd.ChairmanofTatungMexicoS.A.deC.V.,ChairmanofTatungCzechs.r.o.ChairmanofElitegroupComputerSystemsCo.,Ltd.

Chairman

Director

Wei-shanLinWei-tung Lin

Spouse

2nd Degree ofkinship


I-hua Chang 2014.06.06 3 years 1997.07.17 227,615 0.01 227,615 0.01 6,353 - - - BachelorofMechanicalEngineering,TatungUniversityPresidentofTatungConsumerProducts (Taiwan) CompanySecretarygeneralofTatungcompany’sSecretariat

Chairman&PresidentofShanChihAssetDevelopmentCo.,Ltd.DirectorofTatungIndustryCompanyDirectorofChengShengBroadcastingCorp.DirectorofChunghwaElectronicsDevelopmentCo.,Ltd.Chairman&PresidentofChihShengRealtyCo.,Ltd.DirectorofKuenderCo.,Ltd.

None None None


Wei-tung Lin 2014.06.06 3 years 1996.06.06 10,192,401 0.44 10,192,401 0.44 373,788 0.02 - - Ph.D.ofEducation,PepperdineUniversityPresidentofTatung(U.K.)Ltd.

DirectofTatungIndustryCompany. Chairman

Director

Wei-shanLinWen- yen K. Lin

2nd degree ofkinship2nd degree ofkinship


Lung-ta Lee 2014.06.06 3 years 2011.06.24 367 - 367 - - - - - Ph.D.ofChemicalEngineering,TatungUniversityR&DSectionManagerofTatungFineChemicals Co., Ltd.PresidentofShangChihChemicalIndustryCo., Ltd.

Director&PresidentofShanChihSemiconductorCo.,Ltd.DirectorofTatungFineChemicalsCo.,Ltd.,DirectorofGreenEnergyTechnologyInc.,ChairmanofGreaterPowerLtd.DirectorofTatungCompanyofJapan,Inc.DirectorofPhecdaTechnologyCo.,Ltd.Chairman&PresidentofChihDeInvestmentCo.,Ltd.ChairmanofUltraEnergyHoldingsLtd.ChairmanofUltraEnergy(Weifang)TechnologyCo.Ltd.ChairmanofShangChihInternationalChemicalIndustry Co., Ltd. ChairmanofHuaianTatungAdvancedTechnologyMaterialsCo., Ltd.ChairmanofWujiangShanghuaMaterialTechnologyCo.,Ltd.ChairmanofWujiangShangHuahPlasticCo.,Ltd.ChairmanofDongguanTongliTradingCo.,Ltd.DirectorofChihShengInvestmentCo.,Ltd.DirectorofChunghwaElectronicsDevelopmentCo.,Ltd.

None None None



AsofApril30,2016

Title

Nationality or

corporate seat

Name


post)

Termofoffice








(%)Numberofshares


(%)

Numberofshares


(%)

Numberofshares




RepresentativeofTatungUnviersity

2014.06.06 3 years 1987.05.24 144,798,047 6.19 144,798,047 6.19 - - - - - - - - -


RepresentativeofTatungUniversityHuo-yen Chen

2014.06.06 3 years 2007.02.15 13,604 - 13,604 - - - - - Ph.D.ofMathematics,NationalTaiwanNormalUniversityAppliedMathematicsChairpersonofTatungUniversityAppliedMathematicsAssociateProfessorofTatungUniversity

PresidentofTatungHighSchool None None None

Independent Director

Republic ofChina(Taiwan)

Peng-feiSu 2014.06.06 3 years 2011.06.24 - - - - - - - - B.S.inDepartmentofElectricalandControlEngineering,NationalChiao-TungUniversityM.S.inGraduateInstituteofBusinessAdministration, National Chengchi UniversityDepartmentofEnterprisesandFinanceDirectorofSUNNETCo.,Ltd.AVPofInvestmentDepartment,DevelopmentTechnologyConsultantCo.,Ltd.

SeniorViceGeneralManagerinInvestmentDepartment,ChengYeAssetsManagementCo.,Ltd.Independent Director, San Chih Semiconductor Co., Ltd.IndependentDirector,VectoriteBiomedicalInc.

None None None



Tzong-der Liou 2014.06.06 3 years 2012.06.12 - - - - - - - - Ph.D.,NagoyaUniversity,JapanChairProfessor,NagoyaUniversity,Japan.Vice Commissioner, National Communications CommissionChairperson,DepartmentofLaw,NationalChengchiUniversityDean,CollegeofLaw,NationalChengchiUniversityDeanofAcademicAffairs,NationalChengchiUniversity

Professor,CollegeofLaw,NationalChengchiUniversityDirectorofTaiwanAdministrativeLawAssociation

None None None



Chi-ming Wu 2014.06.06 3 years 2013.06.13 - - - - - - - - BBA,DepartmentofBusinessAdministration, National Chengchi UniversityMBA,GraduateInstituteofBusinessAdministration,NationalTaiwanUniversityPh.D.inFinance,UniversityofMississippi,U.S.A.Non-Member Director, Securities InvestmentTrust&ConsultingAssociationoftheR.O.C.MemberofManagementBoard,PublicServicePensionFundCharteredFinancialAnalyst, CFAChiefofTrainingSection,CenterofPublic&BusinessAdministrationEducation,NationalChengchiUniversity

AssociateProfessor,DepartmentofFinance,NationalChengchiUniversityIndependent Director, TSC Auto ID TechnologyIndependentDirector,EnnoconnCorporation

None None None

Note1: Pleaserefertopages89-94 forthejobassumedbythedirectorsandsupervisorsinotherinvesteesconcurrently.

(II) Major institutional shareholdersAsofApril30,2016

Institutional shareholder Majorshareholders

TatungUniversity None

Note : The school has no shareholders.



AsofApril30,2016

Title

Nationality or

corporate seat

Name


post)

Termofoffice








(%)Numberofshares


(%)

Numberofshares


(%)

Numberofshares




RepresentativeofTatungUnviersity

2014.06.06 3 years 1987.05.24 144,798,047 6.19 144,798,047 6.19 - - - - - - - - -


RepresentativeofTatungUniversityHuo-yen Chen

2014.06.06 3 years 2007.02.15 13,604 - 13,604 - - - - - Ph.D.ofMathematics,NationalTaiwanNormalUniversityAppliedMathematicsChairpersonofTatungUniversityAppliedMathematicsAssociateProfessorofTatungUniversity

PresidentofTatungHighSchool None None None



Peng-feiSu 2014.06.06 3 years 2011.06.24 - - - - - - - - B.S.inDepartmentofElectricalandControlEngineering,NationalChiao-TungUniversityM.S.inGraduateInstituteofBusinessAdministration, National Chengchi UniversityDepartmentofEnterprisesandFinanceDirectorofSUNNETCo.,Ltd.AVPofInvestmentDepartment,DevelopmentTechnologyConsultantCo.,Ltd.

SeniorViceGeneralManagerinInvestmentDepartment,ChengYeAssetsManagementCo.,Ltd.Independent Director, San Chih Semiconductor Co., Ltd.IndependentDirector,VectoriteBiomedicalInc.

None None None



Tzong-der Liou 2014.06.06 3 years 2012.06.12 - - - - - - - - Ph.D.,NagoyaUniversity,JapanChairProfessor,NagoyaUniversity,Japan.Vice Commissioner, National Communications CommissionChairperson,DepartmentofLaw,NationalChengchiUniversityDean,CollegeofLaw,NationalChengchiUniversityDeanofAcademicAffairs,NationalChengchiUniversity

Professor,CollegeofLaw,NationalChengchiUniversityDirectorofTaiwanAdministrativeLawAssociation

None None None



Chi-ming Wu 2014.06.06 3 years 2013.06.13 - - - - - - - - BBA,DepartmentofBusinessAdministration, National Chengchi UniversityMBA,GraduateInstituteofBusinessAdministration,NationalTaiwanUniversityPh.D.inFinance,UniversityofMississippi,U.S.A.Non-Member Director, Securities InvestmentTrust&ConsultingAssociationoftheR.O.C.MemberofManagementBoard,PublicServicePensionFundCharteredFinancialAnalyst, CFAChiefofTrainingSection,CenterofPublic&BusinessAdministrationEducation,NationalChengchiUniversity

AssociateProfessor,DepartmentofFinance,NationalChengchiUniversityIndependent Director, TSC Auto ID TechnologyIndependentDirector,EnnoconnCorporation

None None None

Note1: Pleaserefertopages89-94 forthejobassumedbythedirectorsandsupervisorsinotherinvesteesconcurrently.

(II) Major institutional shareholdersAsofApril30,2016

Institutional shareholder Majorshareholders

TatungUniversity None

Note : The school has no shareholders.



(III) Professional qualifications and independence analysis of directors AsofApril30,2016

Qualification

Name (Note 1)

Whethertheypossessworkexperienceofmorethanfiveyearsandthefollowingprofessionalqualifications Independence criteria (Note 3)

Numberofother public companies in which he/sheserves

concurrentlyas

independent director

An instructor orhigher position in adepartmentofcommerce, law,

finance,accounting,or other academic

department related to company businessinapublicorprivatejuniorcollege,college,

oruniversity

Ajudge,publicprosecutor, attorney,

certifiedpublicaccountant, or

otherprofessionalortechnical

specialist who has passed a national examination and

has been awarded acertificateinaprofessional

capacitynecessaryforcompany business

Havingworkexperience in theareaofcommerce,law,financeoraccounting, or

otherwisenecessaryforcompany business 1 2 3 4 5 6 7 8 9 10

Wei-shan Lin √ √ √ √ 0

Wen-yen K. Lin √ √ √ √ √ √ 0

I-hua Chang √ √ √ √ √ √ √ 0

Wei-tung Lin √ √ √ √ √ √ √ 0

Lung-ta Lee √ √ √ √ √ √ √ 0

Huo-yen Chen √ √ √ √ √ √ √ √ √ 0

Peng-feiSu √ √ √ √ √ √ √ √ √ √ √ 2

Tzong-der Liou √ √ √ √ √ √ √ √ √ √ √ √ 0

Chi-ming Wu √ √ √ √ √ √ √ √ √ √ √ √ 2

Note1: Pleasetickthecorrespondingboxesifdirectorsorsupervisorshavebeenanyofthefollowingduringthetwoyearspriortobeingelectedorduringthetermofoffice:(1) NotanemployeeoftheCompanyoranyofitsaffiliates;(2) NotadirectororsupervisoroftheCompanyoritsaffiliates(excludingbeinganindependentdirectoroftheCompanyoritsparent

company,orsubsidiariesinwhichtheCompanyholds,directlyorindirectly,morethan50%oftheshareswithvotingrights);(3) Neitherashareholderwhoholdsshares,togetherwiththoseheldbytheperson’sspouseorunderagechildren,orheldbytheperson

underothers’nameinanaggregateamountof1%ormorethanthetotalnumberofissuedsharesoftheCompany,noroneoftheCompany’stop10individualshareholders;

(4) Notaspouse, relativewithin the2nddegreeofkinship,or lineal relativewithin the5thdegreeofkinshipofanyof thepeoplespecifiedintheprecedingthreesubparagraphs;

(5) Neitheradirector,supervisororanemployeeofthe institutionalshareholdersdirectlyholding5%ormoreoftheCompany’stotalissuedshares,noradirector,supervisororanemployeeoftheCompany’stopfiveinstitutionalshareholders;

(6) Notadirector,supervisor,managerorshareholderholding5%ormoreofthesharesofanyspecificcompaniesororganizationswhichhavefinancialorbusinessrelationshipwiththeCompany;

(7) Notpersonallyormarriedtoanowner,apartner,professional individual,director,supervisor,ormanagerofasoleproprietorship,partnership,companyoranorganizationwhichprovidescommercial,legal,financial,oraccountingservicesorconsultationtotheCompanyoranyofitsaffiliates;

(8) Notaspouseorrelativewithinthe2nddegreeofkinshiptoanyotherdirectorsoftheCompany;(9) NotincontraventionofArticle30oftheCompanyLaw;(10) Notanygovernments,institutionalshareholdersortheirrepresentativespursuanttoArticle27oftheCompanyLaw.



(IV) The managementAsofMay17,2016

Title Nationality Name

Dateofappointment (assumption ofpost)

Shareholding

Shares held by his/her spouse and minor children

currently

Shares held in another

person’snameWork / educational

experience (Note 1)

Jobtitleassumedinany other company

Manager who is his/her spouse or is within 2nd

degreeofkinship

Num

bero

fsh

ares

Shar

ehol

ding

pe

rcen

tage

(%)

Num

bero

fsh

ares

Shar

ehol

ding

pe

rcen

tage

(%)

Num

bero

fsh

ares

Shar

ehol

ding

pe

rcen

tage

(%)

Jobtitle

Nam

e

Rela

tions

hip

President Republic ofChina(Taiwan)

Wen-yen K. Lin 2011.7.5 16,004,173 0.68 17,655,173 0.76 - - MasterofEconomics,MarylandUniversityAssistantProfessorofMarylandUniversityLecturerofNationalTaiwanUniversityLecturerofTatungUniversityChairman’sSpecialAssistantofTatung Co., Ltd.ExecutiveVicePresidentofTatung Company

DirectorofTatungCompanyChairmanofTatungSystemTechnologies Inc.ChairmanofElitegroupComputer Systems Co., Ltd.ChairmanofTatungMexicoS.A. de C.V.ChairmanofTatungCzechs.r.o.ChairmanofTatungInformation(Singapore)Pte. Ltd.

None None None

ChiefStrategy Officer& Vice President


Tai-jiPan 2012.1.20 39,779 - - - - - Ph.D.ofElectricalEngineering,NorthCarolinaStateUniversityComputer Science and EngineeringAssociateProfessorofTatungUniversitySeniorGeneralManagerofTatungCompany’sAdvancedElectronicsBU

DirectorofTatungTechnologies, Inc.

None None None

Senior General Manager


Wen-chieh Peng

2013.06.24 10,000 - - - - - Masterofinsurance,FengChiaUniversityGeneralManagerofTatungCompany’sInvestmentDivision&President’sSpecialAssistan

DirectorofChunghwaPicture Tubes, Ltd.ChairmanofChihShengInvestmentCo.,Ltd.DirectorofTatungMedical& Healthcare Technologies Co., Ltd.DirectorofAbsoluteAlphaLimitedDirectorofChihShengRealty Co., Ltd.DirectorofWu-jiangTatungElectronicsTradingCo.,Ltd.DirectorofShanChihAssetDevelopmentCo.,Ltd.

None None None

Financial Officer


Ruei-kaiJhang 2013.06.24 - - - - - - EMBA,TamkangUniversityAssistantManagerofChinfonBankManagerofJihSunBankSeniorManagerofTatungCompany’sAccountingDivision

Director&PresidentofChihShengInvestmentCo.,Ltd.Director&PresidentofChunghwaElectronicsDevelopmentCo.,Ltd.

None None None

Accounting Officer


Shu-fenChen 2011.01.27 23,330 - - - - - BachelorofManagement,TatungUniversitySeniorManagerofTatungCompany’sAccountingDivision

DirectorofTatungElectronics(Singapore)Pte.Ltd.

None None None

Note 1: VicePresidentofYing-cheHuanghadresignedmanageronMay17,2016.Note 2: Pleaserefertopages89-94 itemed(IV) Informationaboutdirectors,supervisorsandpresidentsofaffiliatesforthe jobassumedbythe

managersinotherinvesteesconcurrent.

Otherinformationofimportantmanagement

Name Unit Educationalbackground Work experience

Hur-lon Lin SystemBusinessGroup,TatungCompany MasterofMaterialsScienceandEngineering,NationalTsingHuaUniversity

AssociateProfessorofMaterialsEngineering,TatungUniversityPresidentofSanChihSemiconductorCo.,Ltd.President&CEOofGreenEnergyTechnologyInc.,Ltd.

Tzu-te Chen SystemIntegrationBusinessUnit,SystemBusinessGroup,TatungCompany

BachelorofInformationManagement,ChienkuoTechnologyUniversity

SeniorGeneralManagerofICT&EnergySolutionBusinessUnit,Tatung Company

Shen-chiang Chen

SmartSystemDivision,SmartSolutionBusinessUnit,SystemBusinessGroup,Tatung Company

BachelorofElectricalEngineering,NationalTaiwanOceanUniversity

VicePresidentofGreenEnergyBusinessUnit,FirstInternationalComputer Inc.PresidentofCitySmartTechnologiesCorp.

Shueei-tian Shiue

PowerBusinessGroup,TatungCompany BachelorofElectricalEngineering,TatungUniversity SeniorPlantManagerofMotorBusinessUnit,TatungCompany

YueKao RealEstateAssetManagementDivision,Tatung Company

MasterofScienceinArchitecture,PrattInstitute,USAMasterofScienceinArchitectureandUrbanDesign,ColumbiaUniversity,USA

VicePresidentofRealEstateDepartment,NanShanLifeInsuranceCo., Ltd.



(V) Remuneration paid to directors, president and vice presidents in 20151. Remuneration to directors

Unit:NT$Thousand

Jobtitle Name

Remuneration to directors Percentageofthetotalof

A,B,CandDtoincome

aftertax(%)

RelevantremunerationreceivedbydirectorswhoarealsoemployeesPercentageof

totalofA,B,C,D,E,F and G to income

aftertax(%)Whether

remuneration fromanyreinvestedcompanies other than

subsidiaries is received?

Remuneration (A) Retirementpension(B) Remuneration allocated fromearnings(C)

Businessexecutionexpenses (D)

Salary, bonus and specialallowance(E) Retirement pension (F) Employees’bonusallocatedfrom

earnings (G)NumberofESOP

exercisable shares

Numberofnew restricted

employee shares

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Chairman Wei-shan Lin 13,559 14,459 – – – 110 – 2,494 – – – 5,200 – – – – 200 – – – – – – – –

Director Wen-yen K. Lin – 600 – – – – 120 2970 – – 11,782 11,782 151 151 – – – – – – – – – – –

Director I-hua Chang – – – – – – 120 270 – – – 8,549 – 108 – – 7,000 – – – – – – – –

Director Wei-tung Lin – – – – – – 120 270 – – – – – – – – – – – – – – – – –

Director Lung-ta Lee – 60 – – – – 120 600 – – – 2,879 – – – – – – – – – – – – –

Director Huo-yen Chen(RepresentativeofTatungUniversity)

– – – – – – 120 120 – – – – – – – – – – – – – – – – –

Independent-DirectorPeng-feiSu

3,200 3,632 – – – – – – – – – – – – – – – – – – – – – – –

Independent-DirectorTzong-der Liou

2,620 2,620 – – – – – – – – – – – – – – – – – – – – – – –

Independent-Director Chi-ming Wu 2,400 2,400 – – – – – – – – – – – – – – – – – – – – – – –

Note1: Provisionforexpensedretirementpension:NT$151,000bytheCompany(NT$259,000byallcompaniesundertheconsolidatedfinancial statements).Note 2: Remuneration allocatedfromearningsandEmployees'bonusallocatedfromearningsareaproposedfigure.



(V) Remuneration paid to directors, president and vice presidents in 20151. Remuneration to directors

Unit:NT$Thousand

Jobtitle Name

Remuneration to directors Percentageofthetotalof

A,B,CandDtoincome

aftertax(%)

RelevantremunerationreceivedbydirectorswhoarealsoemployeesPercentageof

totalofA,B,C,D,E,F and G to income

aftertax(%)Whether

remuneration fromanyreinvestedcompanies other than


Remuneration (A) Retirementpension(B) Remuneration allocated fromearnings(C)

Businessexecutionexpenses (D)

Salary, bonus and specialallowance(E) Retirement pension (F) Employees’bonusallocatedfrom

earnings (G)NumberofESOP

exercisable shares


employee shares

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Chairman Wei-shan Lin 13,559 14,459 – – – 110 – 2,494 – – – 5,200 – – – – 200 – – – – – – – –

Director Wen-yen K. Lin – 600 – – – – 120 2970 – – 11,782 11,782 151 151 – – – – – – – – – – –

Director I-hua Chang – – – – – – 120 270 – – – 8,549 – 108 – – 7,000 – – – – – – – –

Director Wei-tung Lin – – – – – – 120 270 – – – – – – – – – – – – – – – – –

Director Lung-ta Lee – 60 – – – – 120 600 – – – 2,879 – – – – – – – – – – – – –

Director Huo-yen Chen(RepresentativeofTatungUniversity)

– – – – – – 120 120 – – – – – – – – – – – – – – – – –

Independent-DirectorPeng-feiSu

3,200 3,632 – – – – – – – – – – – – – – – – – – – – – – –

Independent-DirectorTzong-der Liou

2,620 2,620 – – – – – – – – – – – – – – – – – – – – – – –

Independent-Director Chi-ming Wu 2,400 2,400 – – – – – – – – – – – – – – – – – – – – – – –

Note1: Provisionforexpensedretirementpension:NT$151,000bytheCompany(NT$259,000byallcompaniesundertheconsolidatedfinancial statements).Note 2: Remuneration allocatedfromearningsandEmployees'bonusallocatedfromearningsareaproposedfigure.



2. Remuneration to the management teamUnit:NT$Thousand

Jobtitle Name

Salary (A) Retirement pension(B)

Bonusandspecial

allowance (C)

Employees’bonusallocatedfromearnings(D)

Percentage oftotalofA,B,CandDtoincomeafter

tax(%)

NumberofESOP

exercisable shares


employee shares

Whether remuneration fromanyreinvestedcompanies other than


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President Wen-yen K. Lin

15,989 19,052 281 281 – – – – – – – – – – – – –Vice President Ying-cheHuang

ChiefStrategyOfficer Tai-jiPan

Note1: VicePresidentofYing-cheHuanghadresignedmanageronMay17,2016.Note2: Provisionforexpensedretirementpension:NT$281,000bytheCompany(NT$281,000byallcompaniesundertheconsolidatedfinancial

statements).

RemunerationtoindividualpresidentsandvicepresidentsoftheCompany

Nameofpresidentsandvicepresidents

The Company All companies included in Financial statements

UnderNT$2,000,000 Ying-cheHuang –

FromNT$2,000,000toNT$5,000,000 Tai-jiPan Ying-cheHuang,Tai-jiPan

FromNT$5,000,000toNT$10,000,000 – –

FromNT$10,000,000toNT$15,000,000 Wen-yen K. Lin Wen-yen K. Lin

FromNT$15,000,000toNT$30,000,000 – –

FromNT$30,000,000toNT$50,000,000 – –

FromNT$50,000,000toNT$100,000,000 – –

OverNT$100,000,000 – –

Total 3 3

3. Employee bonus granted to the management teamAsofApril30,2016

Jobtitle Name Stock dividend

Cash dividend Total Percentageoftotalto

incomeaftertax(%)

Managers

President Wen-yen K. Lin

- - - -Vice President Ying-cheHuang

ChiefStrategyOfficer Tai-jiPan

4. The percentage of total remuneration paid by the Company and by all companies included in the consolidated financial statements for the most recent two fiscal years to directors, presidents and vice presidents of the Company, to the income after tax, and the policies, standards, and portfolios for the payment of remuneration, the procedures for determining remuneration, and the correlation with business performance.

Jobtitle

Percentageoftotalremuneration,whichispaidbytheCompanyandbyallcompaniesincludedintheconsolidatedfinancialstatementstodirectors,presidents

andvicepresidentsoftheCompany,totheincomeaftertax

2014 2015

Directors29.1% (2.4%)

President / Vice President

TheBoardofDirectors isauthorizedtodeterminethetransportationallowanceandremunerationtodirectorsoftheCompanybasedontheircontributiontotheCompany’soperationandbytakingintoconsiderationthelocalandforeignstandardsasappliedinthesameindustry.PresidentsandvicepresidentsmanagetheCompany’sbusinessontheorderoftheBoardofDirectors.Theappointment,dismissalandremunerationofpresidentsandvicepresidentsshallbesubjecttotheCompanyLaw.Furthermore,remunerationwillalsobeallocatedfromtheCompany’searnings,ifany,inaccordancewithArticle24oftheCompanyRegulations.



Status of corporate governance(I) Status of Board of Directors’meeting

TheBoardofDirectorshasheld5meetingsin2015.Thestatusfortheattendanceofdirectorsisasfollows:

Title Name Attendance in person

Attendance by proxy

Attendance rate(%) Notes

Chairman Wei-shan Lin 5 0 100

Director Wen-yen K. Lin 5 0 100

Director I-hua Chang 4 1 80 Actualattendancerate:100%

Director Wei-tung Lin 4 1 80 Actualattendancerate:100%

Director Lung-ta Lee 4 1 80 Actualattendancerate:100%

Director TatungUniversity/Huo-yenChen 5 0 100

Independent Director Peng-feiSu 5 0 100

Independent Director Tzong-der Liou 5 0 100

Independent Director Chi-ming Wu 5 0 100

Othernotestobespecified:I. InthecaseofthecircumstancesreferredtoinArticle14-3oftheSecuritiesandExchangeLawandotherresolutionsmade

bytheBoardofDirectors,towardwhichanyindependentdirectorhasadissentingorqualifiedopinion,eitherbyrecordedstatementor inwriting,thedateandsessionofthedirectors’meeting,contentsofmotions,all independentdirectors’opinionsandtheCompany’sreactiontotheopinionsofindependentdirectorsshallbespecified:None

II. Withreferencetodirectors’withdrawingfromanymotionduetoconflictof interest, thedirectors’names,contentsofmotions,causesforthewithdrawal,andparticipationinvotingshallbespecified:theBoardofDirectorsdidnotencounteranymotionswithconflictinginterestsagainsttheCompanyintheyear:None

III. Objectives to strengthen the functionsof theBoardofDirectors in thecurrentyearandmost recentyear (e.g.,establishmentofAuditCommitteeandupgradinginformationtransparency)andevaluationoftheexecutionthereof:1. Incompliancewiththecompetentauthority'spromotionofrobustcorporategovernancepolicies,theCompanyhad

established independent directors, Audit Committee, and Remuneration Committee.2. Upgrading informationtransparency, internet-basedreportingsystem,anddisclosureof informationoncorporate

governance:(1) TheCompanyperformsitsobligationsfaithfully inaccordancewiththerelevant lawsandtherelatedTWSErules.

Establishingan internet-basedreportingsystemforpublic informationthatappointpersonnel responsible forgatheringanddisclosingtheinformation,andestablishingaspokespersonsystemsoastoensuretheproperandtimelydisclosureofinformationaboutpoliciesthatmightaffectthedecisionsofshareholdersandstakeholders.

(2) Inorder tokeepshareholdersandstakeholders fully informed, theCompanyutilizes theconvenienceof theinternetandsetupawebsitecontaining the information regarding its finances,operations,andcorporategovernance.Ifnecessary,furnishthefinancial,corporategovernance,andotherrelevantinformationinEnglish.Toavoidmisleadinginformation,theaforesaidwebsiteshallbemaintainedbyspecifiedpersonnel,andtherecordedinformationshallbeaccurate,detailedandupdatedonatimelybasis.

(3) TheCompanyshallholdan investorconference incompliancewiththeregulationsof theTWSE,andkeepanaudioorvideorecordofthemeeting.ThefinancialandbusinessinformationdisclosedintheinvestorconferenceshallbedisclosedonthedesignatedinternetinformationpostingsystembyTWSEandprovidedforinquirythroughtheCompany’swebsite.

(4) TheCompanyshalldisclosetheinformationregardingcorporategovernanceinthefiscalyearinaccordancewithlawsandregulationsandTWSErules.Accordingtotheactualperformanceofthecorporategovernancesystem,disclosetheplansandmeasurestoimproveitscorporategovernancesystemthroughappropriatemechanisms.



(II) Participation by Audit CommitteeAtotalof6AuditCommitteemeetingswereheldinthepreviousperiod.Independentdirectorattendancewasasfollows:

Title Name Attendance in person

Attendance by proxy

Attendance rate(%) Notes

Independent Director Peng-feiSu 6 0 100

Independent Director Tzong-der Liou 6 0 100

Independent Director Chi-ming Wu 6 0 100

Other mentionable items: 1. IftherearethecircumstancesreferredtoinArticle14-5ofSecuritiesandExchangeActandresolutionswhichwerenotapproved

bytheAuditCommitteebutwereapprovedbytwothirdsormoreofalldirectors,thedatesofmeetings,sessions,contentsofmotions,resolutionsofAuditCommitteeandtheCompany’sresponsetoAuditCommittee’sopinionshouldbespecified:None

2. IfthereisIndependentDirectors’avoidanceofmotionsinconflictofinterest,theIndependentDirectors’names,contentsofmotions,causesforavoidanceandvotingshouldbespecified:None

3. Communicationsbetweentheindependentdirectors,theCompany'sChiefInternalAuditorandCPAs(e.g.theitems,methodsandresultsofauditsofcorporatefinanceoroperations,etc.):

FortheCAE(ChiefAuditExecutive):InadditiontosubmittingtheauditreporttotheChairman,itisalsoneededtohandovertheauditreporttotheindividualdirectorswhocandiscussandcommunicatewiththeCAEdirectlywithregardtothecontentsoftheauditreportwhileneeded.Iftheindividualdirectorshaveanycommentsontheauditreport,theinternalauditunithastofollowupandreplytotheindividualdirectorswiththecountermeasures,moreover,iftheindividualdirectorshaveanyinstructions,theCAEhastoreporttotheindividualdirectorsaccordinglyaftertheauditprojectisfinalized.

FortheCPA:Afterthequarter,half-yearandannualfinancialstatementsarefinalized,theindividualdirectorscallaMeetingofCommunicationwithManagementandGoverningbodyofAuditClientstoinvitetheCPAonlytothemeetingforfullydiscussionsandforinterchangingopinionswithregardtotheissueswhichtheCPAhasdiscoveredfromtheinternalcontrolsystemsorfromthefinancialstatementsduringtheauditingperiod.

(III) Corporate Governance Implementation Status and Deviations from “the Corporate Governance Best-Practice Principles for TWSE/TPEx Listed Companies”

EvaluationItem

Implementation StatusDeviationsfrom“the Corporate GovernanceBest-PracticePrinciplesfor

TWSE/TPExListedCompanies” and

ReasonsYes No Abstract Illustration

(I) Does the Company establish and disclosetheCorporateGovernanceBes t - P ract ice P r i nc ip les basedon "CorporateGovernanceBest-PracticePrinciplesforTWSE/TPExListedCompanies”?

√ Inaccordancewith“CorporateGovernanceBestPrac-ticesPrinciples forTWSE/GTSMListedCompanies”, theCompany has adopted and made public its corporate governancebestpracticesprinciplesatitsofficialwebsiteandattheMarketObservationPost.

None

(II) Shareholdingstructure&shareholders’rights

1. Does the Company establish an internal operating procedure to dea l w i t h s ha reho lde r s ’suggestions, doubts, disputes and litigations, and implement based on the procedure?

√ 1. Shareholders’suggestionsandquestionsaredirectlyaddressed to the departments held accountable as wellastakencareofbytheCompany’sspokesmanordeputy spokesman.

1. None

2. Does the Company possess the listofitsmajorshareholdersaswellas theultimateownersof thoseshares?

√ 2. Fair interactionbetweentheCompanyanditsmajorshareholders;reportinganychangestotheCompanyinaccordancewiththeRulesGoverningDisclosureofInformationforTSE/GTSMListedCompanies.

2. None

3. Does the Company establish and execute the r isk management and f i rewal l systemwith in i tsconglomerate structure?

√ 3. TheCompanyhas setup rules for supervising itssubsidiariesandperiodicreviewsoftheiroperations.

3. None

4. Does the Company establish internal rules against insiders trading with undisclosedinformation?

√ 4. The Company has established the Management Procedures for thePreventionof InsiderTrading inTatungCo.,Ltd. toprohibitcompany insiders fromtradingsecuritiesusinginformationnotdisclosedtothemarket.

4. None



EvaluationItem




(III)CompositionandResponsibilitiesoftheBoardofDirectors

1. Does the Boarddevelopandimplementadiversifiedpolicyforthecompositionofitsmembers?

√ 1. TheCompanyhasstipulateddiversity inthecompo-sitionof theboardofdirectors inArticle20of itsCorporateGovernanceBestPracticesPrinciples,andhasincludeddirectorswithdiverseexpertiselikelawandfinanceandfromvariousindustries.

1. None

2. Does theCompanyvoluntari lye s tab l i s h o t he r f u nc t i o na lcommittees in addition to the Remuneration Committee and the Audit Committee?

√ 2. TheCompanyhasnotadoptedother functionalcommittees yet.

2. The Company has not adopted other functionalcommittees yet.

3. Does the Company establ i sh a s ta n d a rd to m e a s u re t h e performanceof theBoard,andimplement it annually?

√ 3. TheCompanywillnotadoptaperformanceassess-mentfortheboardofdirectors.

3. The Company has not adopted performanceassessmentfortheboardofdirectors yet.

4. Does the Company regular ly evaluate the independenceofCPAs?

√ 4. Toimplementcorporategovernanceandtoevaluatethe independenceof thepartner incharge, theCompanyevaluatesandverifiestheindependenceoftheengagementpartnerintheboardmeetingeveryyear.

4. None

(IV) Does the Company es tab l i sh a communication channel and build a designated section on its website for stakeholders,aswellashandlealltheissuestheycarefor intermsofcorporate social responsibilities?

√ The Company has established a communication channel withshareholders,setupanareaforshareholdersattheofficialwebsite,andproperlyrespondedtotheissuesofcorporate social responsibilities about which shareholders are concerned.

None

(V) D o es t h e Co m p a ny a p p o i nt a profess ional shareholder serviceagency to deal with shareholder affairs?

√ The Company handles shareholders meeting matters by itself.

The Company handles shareholders meeting mat-tersbyitself.

(VI)InformationDisclosure

1. Does the Company have acorporate website to disclose both financialstandingsandthestatusofcorporategovernance?

√ 1. TheCompanyand itssubsidiarieshavesetuptheirwebsites for releasingtheir financial,businessandcorporategovernanceinformation.

1. None

2. Does theCompanyhaveotherinformationdisclosurechannels(e.g.buildinganEnglishwebsite,appointing designated people to handleinformationcollectionanddisclosure, creating a spokesman sys tem, webcast ing investo rconferences)?

√ 2. TheCompanyhas setupanEnglishwebsite,as-signedpersonnel tohandle informationcollectionand disclosure, appointed a spokesperson as well as a deputyspokesperson,andpostedinformationaboutinstitutionalinvestorconferenceonitsofficialwebsite.

2. None

(VII)IsthereanyotherimportantinformationtofacilitateabetterunderstandingoftheCompany’scorporategovernancepractices (e.g., including but not limited to employee rights, employee wellness, investor relations, supplierre lat ions, r ights of s takeholder s ,directors’and supervisors’ trainingreco rds , the imp lementat ion ofr i s k m a n a g e m e nt p o l i c i e s a n d r i s k eva l ua t i o n mea s u re s , t h eimplementationofcustomerrelationspolicies, and purchasing insurance fo r d i recto r s and supe r v i so r s)?

√ 1. Rightsandtreatmentofemployees: All TatungCompany’semployees,applicants,and

contractworkersareequally treatedwithdignityregardlessof their races, religions,colors,genders,and nationalities. The Company has set up working regulations,welfare,salary,andsubsidiesaccordingtothelaborandgender-equalityrelatedregulationspromulgatedbythegovernment.TheCompanyalsoreviewsemployees’performanceannuallytoensurereasonablealignmentbetweenemployees’salaryandlabor,sothattheywillbecontendedwiththeir jobs.

1. None



EvaluationItem




2. Investorrelations: TheCompany has appointed Investor Relations

departmenttocollectanddiscloseinformationandtocommunicatewithstakeholders,investorsandthepublic.TheCompanyalsoattendsdomesticandoverseainvestor forums sporadically todeliver informationregardingcorporatefinancials,businessstrategiesandoperationdirections.Moreover,theCompanyhassetupthe investorserviceonthecorporatewebsiteforstakeholders, investorsandthepublic todownloadmaterialinformationofmonthlysalesrevenues,financialstatements,annualreportsandconferencebooklets,financialratiosandinvestorconferencepresentations,etc.FinancialandbusinessinformationoftheCompanywouldbereleasedonTaiwanStockExchangeMarketObservationPostSystem.

2. None

3. Supplier management: Tatung isanenvironmentally friendlycompanywith

acallingtoupholdtheglobalenvironmentalism,sothatwerequestsuppliers tosigncontracts inwhichtheywouldabidebythegovernment’senvironmentalprotection laws and regulations in reducing waste, preventingpollution,anddisposingwastes.ThesupplierswillbeauditeduponTatung’s requestandTatunghas the right to suspend or terminate the partnership, shouldanymattersviolatingthelawbefound.Besides,inordertocomplywithcustomers’greenprocurementdemandandinternational legalrequirementssuchasRoHSdirective,Tatunghasbeenactivelypromotingthe green supply chain. Through building up the green supplychain,wecanreviewoursuppliers’performanceandtostrengthentheexistingsupplychain.Asforthesafetyofsuppliers’workingenvironment,Tatunghasalsoimplementedevaluationin-dicatorsinthesupplierreviews/evaluations.

Inaddition,“Tatunghealthandsafetymanagementmethodforconstructionsuppliers”hasbeenestablishedtoreducetheprobabilityofanaccident.

3. None

4. R ight s of i nves to r s : The Company has set upcommunicationchannelswithinvestorsandsetasideanareaattheofficialwebsitespecificallyforinvestors.

4. None

5. Statusofdirectorsandtrainingrecords:TheCompanyandSubsidiaryCompanycontinually informs thedirectors and managers about training courses designed bycompetentauthorityorprofessional institutions.Directorsandmanagershaveopinionstotaketheseclasses.

5. None

6. Riskmanagementpoliciesandimplementationofriskassessment measures.

6. None

7. Enforcementofconsumers’protectionpolicies: TheCompanyalwaysstrictlyobservesthecontractswithour clients so as to sustain a steady and harmonious relationship,arrivingatbetterprofitsasaresult.

7. None

8. Coverageof l iabi l ity insurance fordirectorsandsupervisors: TheCompanyhaspurchased liabil ityinsurancefordirectorsandsupervisors.

8. None

(VIII) Has the Company implemented a selfevaluation report2oncorporategovernance or has i t author i zedanyotherprofessionalorganizationtoconduct suchevaluation? If so,pleasedescribetheopinionfromtheBoard,theresultofselforauthorizedevaluation, themajordeficiencies,suggestions,orimprovements.

√ The Company has conducted an internal assessment of its corporategovernancepractices inorder togradually improve itsgovernanceandupgrade itscorporate image.

None



(IV) The composition, duties, and operation of the Compensation Committee:(1) Members of the Remuneration Committee

AsofApril30,2016

Title

Qualification

Name

Whethertheypossessworkexperienceofmorethanfiveyearsandthefollowingprofessional

qualificationsIndependence criteria (Note 1)

Numberofother publiccompaniesin which he/sheserves

concurrentlyas

Compensation Committee

Notes

An instructor orhigher position

in a departmentofcommerce,law,finance,

accounting, orother academic

departmentrelated tocompany business

in a public orprivatejunior

college, college,oruniversity

Ajudge,publicprosecutor,attorney,

certifiedpublicaccountant, or

other professionalor technical

specialist who has

passed a national

examination and

has been awarded

acertificateinaprofessional

capacitynecessaryfor

company business

Havingworkexperience in

theareaof

commerce,law,financeor

accounting,or otherwisenecessaryfor

company business

1 2 3 4 5 6 7 8

Independent Director Tzong-der Liou √ √ √ √ √ √ √ √ √ √ 0

Independent Director Peng-feiSu √ √ √ √ √ √ √ √ √ 2

Independent Director Chi-ming Wu √ √ √ √ √ √ √ √ √ √ 4

Note 1: Pleasetickthecorrespondingboxes ifCompensationCommitteehavebeenanyofthefollowingduringthetwoyearspriortobeingelectedorduringthetermofoffice:(1) NotanemployeeoftheCompanyoranyofitsaffiliates;(2) NotadirectororsupervisoroftheCompanyoritsaffiliates(excludingbeinganindependentdirectoroftheCompanyoritsparent

company,orsubsidiariesinwhichtheCompanyholds,directlyorindirectly,morethan50%oftheshareswithvotingrights);(3) Neitherashareholderwhoholdsshares,togetherwiththoseheldbytheperson’sspouseorunderagechildren,orheldbytheperson

underothers’nameinanaggregateamountof1%ormorethanthetotalnumberofissuedsharesoftheCompany,noroneoftheCompany’stop10individualshareholders;

(4) Notaspouse, relativewithin the2nddegreeofkinship,or lineal relativewithin the3rddegreeofkinshipofanyof thepeoplespecifiedintheprecedingthreesubparagraphs;

(5) Neitheradirector,supervisororanemployeeofthe institutionalshareholdersdirectlyholding5%ormoreoftheCompany’stotalissuedshares,noradirector,supervisororanemployeeoftheCompany’stopfiveinstitutionalshareholders;

(6) Notadirector,supervisor,managerorshareholderholding5%ormoreofthesharesofanyspecificcompaniesororganizationswhichhavefinancialorbusinessrelationshipwiththeCompany;

(7) Notpersonallyormarriedtoanowner,apartner,professional individual,director,supervisor,ormanagerofasoleproprietorship,partnership,companyoranorganizationwhichprovidescommercial,legal,financial,oraccountingservicesorconsultationtotheCompanyoranyofitsaffiliates;

(8) NotincontraventionofArticle30oftheCompanyLaw.



(2) Operation of Compensation Committee1. Thecompensationcommitteecomposedofthreemembers.2. ThetermofofficeofthesecondcommitteebeganfromJune17,2014toJune5,2017. Thecommitteehasconvenedthemeetingstwotimeslastyear(A);thequalificationsandattendancesofthemembers

areshownasfollows:

Title Name Attendance in person(B)

Attendance by proxy

Attendancerate(%)(B/A) Notes

Convenor Tzong-der Liou 2 0 100

Committee Peng-feiSu 2 0 100

Committee Chi-ming Wu 2 0 100

Other notable items:1. If theboardofdirectorsdeclinetoadoptormodifyarecommendationofthecompensationcommittee, it is

imperativetonotedowntheboardmeeting’sdate,session,motion, resolutionaswellasTatungCompany’sdispositionof thecompensationcommittee’s recommendation. (If the remunerationpassedby theboardexceedstherecommendationofthecompensationcommittee,thecircumstancesandcausesforthedifferenceshallbespecified):None.

2. As toa resolutionof thecompensationcommittee, ifacommitteememberexpressesanyobjectionorreservationrecordedorinawrittenstatement,itisimperativetospecifythecommittee’sdate,session,dispositionofthecomments:None.

(V) Corporate Social Responsibility

EvaluationItem

Implementation StatusDeviationsfrom“the

Corporate Social Responsibility Best-PracticePrinciplesfor


Reasons

Yes No AbstractExplanation

1. CorporateGovernanceImplementation

(1) Does the Company declare its corporate social responsibility policy and examine the results oftheimplementation?

√ (1) The Company establishes the social responsibility policies and the social responsibility practice principles and also publishes “TatungCorporateSocialResponsibilityReport”everyyear,disclosingitseffortsatandcontributionstomanagement,qualityservices,socialresponsibility,andtheenvironment.Meanwhile,Tatunghasalsoformulatedpoliciesbeneficialtosociety,laborers,qualitycontrol,researchanddevelopment,theenvironment,safetyandhealth,anddividend,asthehighest principle.

(1) None

(2)DoestheCompanyprovideeducat iona l t ra i n i ng on corporate social responsibility on a regular basis?

√ (2) TheCompanyactivelypromotesandcarriesout socialresponsibi l ity. In addition to l inkage to internal and external training resources, Tatung Co. also regularly cooperateswith the socialwelfare institutions in theChildren'sDay, summervacation,Christmas,companycelebrationactivities,etc., topromote theprogressofeconomic,environmentandsocietyachievingthegoalsofsustainablemanagementanddevelopment.

(2) None

(3) Does the Company establish exclusively(orconcurrently)dedicatedfirst-linemanagersauthorized by the board to beinchargeofproposingthecorporate social responsibility policies and reporting to the board?

√ (3) TheCompanyhassettheGeneralAdministrationDivisionandEnvironment&SafetyDivisionastheresponsibleunitforthecorporatesocial responsibility.TheCompanyhasreportedtotheboardofdirectorstheimplementationofcorporate social responsibility on 23.3.2016.

(3) None

(4) Does the Company declare a r e a s o n a b l e s a l a r y remuneration pol icy, and i nteg rate the em p l oyee pe r fo rmance app ra i sa lsystem with its corporate

√ (4) TheCompanyprotectsthecompensationandbenefitsforher employees and enacts its salary rules in compliance withregulationsthroughtheimplementationoftheinternalcontrolpoliciesandtherelevantsalariesregulations.AndTatungCo.establishesperformancemanagementmethodand reward and punishment regulations. Everyemployee’s

(4) None



EvaluationItem




Reasons


social responsibility policy, as wellasestablishaneffectiverewa rd and d i sc i p l i na r y system?

performanceisreviewedregularlybasedonperformancemanagementmethod. Employees’behaviorwith theinclusionof theperformanceappraisal standards,andaccording to theirperformance togive rewardandpunishment.

2. S u s t a i n a b l e E n v i r o nmen tDevelopment

(1) DoestheCompanyendeavorto utilize all resources more efficientlyanduserenewablemater ialswhich have lowimpactontheenvironment?

√ (1) Tatung Co. has implemented the corporate -wide “Pol lution Prevention Pays, 3P”program since 1993.3Pprogramhelps the factoriesand subsidiar ieswithmanufacturing functionachievingthegoalsofcleanerproductionandgreenproducts bydeveloping theinnovated technologies, improving themanufacturingprocesses, introducingconceptsofgreenmaterialsandproductdesign,andreusingthewastes.PowerEquipmentBUwas awardedwith “18th TheAnnual Enterpr isesEnvironmentalProtectionAward”byEPA.Manyproductsof theCompanyhaveacquired“GreenMark”,“EnergyLabel” and/or “Water Label”.

(1) None

(2) Does the Company establish p r o p e r e n v i r o nme n ta lmanagement systems based onthecharacteristicsoftheirindustries?

√ (2) TatungCo.has implemented ISO14001environmentalmanagement system in the factoriesand subsidiariessince1996 tocontinually improve theirenvironmentalperformances.So far,all thefactorieshaveestablishedthemanagementsystemandcertifiedbythethirdparties.SubsidiariessuchasCPT,GET,ForwardElectronicsandothersalsoestablishedthemanagementsystemandcertifiedbythethirdparties. In2005“TatungElectricalandElectronicEquipmentRestrictionofHazardousSubstance(RoHS)TestLaboratory” (testing and analyzing the hazardous substances in materials, parts and products) is established to assist in building “Green Supply Chain” which contributes in exporting theproductstoEU,USA,Japanandothercountries.

(2) None

(3) Does the Company monitor theimpactofclimatechangeon its operations and conduct greenhouse gas inspections, as well as establish company s t r a t e g i e s f o r e n e r g yconservationandcarbonreduction?

√ (3) EveryBUcontinuestoenhanceenergymanagementandraiseenergyefficiencyinordertoreduceGHGemissions.Tatung Co. carries out corporate-wide GHG management educationsince2009andconductsGHGemissioninventorybasedontherequirementsofISO14064-1andreceivethirdpartyverification.Sofar,threeoutoffourfactoriesandCPT,GETcarryGHGinventoryannually.

(3) None

3. PreservingPublicWelfare

(1) D o e s t h e C o m p a n y f o rmu l a te app rop r i a temanagement policies and procedures according to relevantregulationsandtheInternationalBil lofHumanRights?

√ (1)AllTatungCompany’semployees,applicants,andcontractworkersareequallytreatedwithdignityregardlessoftheirraces, religions, colors, genders, and nationalities. The Companyhassetupworkingregulations,welfare,salary,andsubsidiesaccordingtothelaborandgender-equalityrelatedregulationspromulgatedbythegovernment.TheCompanyalsoreviewsemployees’performanceannuallytoensurereasonablealignmentbetweenemployees’salaryandlabor,sothattheywillbecontendedwiththeirjobs.

(1) None

(2) Has the Company set up a n em p l oyee h ot l i n e o r gr ievancemechanism toh a n d l e co m p l a i nt s w i th appropriate solutions?

√ (2) TheCompanyestablishes theRegulationofProcessingEmployees’Complaints inplace for theemployees tocomplainaboutanydisputeandprovidesachanneltodealwith.

(2) None

(3) DoestheCompanyprovideahealthyandsafeworkingenvironmentandorganizetrainingonhealthandsafety

√ (3) 1. TatungCo.establishedthegovernmentandTAFcertified“TatungEnvironmentResearchCenter”andgovernmentcertified“TatungSamplingCenter” tocarryout thesamplingandtestingfromtheoperationsitesregularlytoevaluatetheconditionsofexposureandprovidethe

(3) None



EvaluationItem




Reasons


foritsemployeesonaregularbasis?

recommendations to resolve the hazards to theemployees.

2. Enhancingthemanagementonthehazardousmachinesandequipments,aswellasorganizingtrainingamongtheemployees.

3. CarryingoutthetrainingofJobSafetyAnalysis inthefactoriesandsubsidiaries inorder toenhanceeachoperation to comply with S.O.P.

4. EstablishingOHSAS18001andTOSHMSmanagementsystemtocontinually improve thehealthandsafetyperformances.

5. Enforcingtheemployees’abilityandawarenessonthepreventionof fireaccidentbyprovidingfireaccidentpreventioncoursesandregularchecks.

(4) Does the Company setup a communication channel with employees on a regular basis, aswellasreasonably informemployeesofanysignificantchanges in operations that may have an impact onthem?

√ (4) 1. TheCompanysetupatangible“BoardChairmanMailBox”andelectronic“HumanResourceServicesMailBox”foremployeestobilaterallycommunicatewithsupervisorsdirectlyandgetswiftfeedbacks.

2. Accordingtothe“Regulationsfor ImplementingLabor-Management Meeting,” the Company holds a labor-managementmeetingregularly,hopingtohaveabettercommunicationandresolvedifferenceswithoneanother.

3. TheCompanyhasamechanismofprocessingcomplaintsofemployees—settinguptheRegulationsofProcessingComplaintsofEmployeesaswellaspublishingabi-weeklye-paper to communicate with employees.

(4) None

(5) DoestheCompanyprovideits employees with career developmentand trainingsessions?

√ (5)The Company’s employees w ith p rofess ional anddevelopment advantages, to take thedual careerdevelopmentpathofmanagementandprofessionalpositions throughvariousphysical trainingandhumanresourcemeasurestoallowemployeestochooseadifferentcareer planning according to their interests and abilities thereby assisting the Company and colleagues to pursue progress.

(5) None

(6) Does the Company establish any consumer protection mechanisms and appealing p r o c e d u r e s r e g a r d i n g re sea rch deve l opment,p u rch a s i n g , p ro d u c i n g , operatingandservice?

√ (6)~(9)TheTatung’squalifiedsuppliershouldsignboth“MasterContract” and “Suppl ier Commitment Letter”, the Undersignedundertakes that theproductsor servicesprovidedby it shallcomplywith the laws& regulationsand international standards related to safety andenvironmentalprotectionand its labor services shallcomply with domestic and international laws, policies or regulations relatedtohumanrightsand laborservices.Whereit isprovenasafactthattheproductsorservicesprovidedby theUndersignedare l ikely toendangerthesafetyandhealthofconsumersorother interestedparties, Tatung could terminate the Agreement and Purchase Order immediately.According to Consumer Rights Policy, (1) Theinfo.ofProductsandServiceshaveshowedonthe

website http://www.tatung.com/Customer/Index?langCN=TW(2) ThecomplaintmailboxforSupplieris [email protected]

(6)~(9)None

(7) DoestheCompanyadvertiseand labe l i t s goods and servicesaccordingtorelevantregulations and international standards?

√

(8) DoestheCompanyevaluatethe records of suppl ie r s’impactontheenvironmentandsocietybeforetakingonbusiness partnerships?

√

(9) Do the contracts between theCompanyand itsmajorsuppliers include termination clauseswhichcomeintoforceonce the suppliers breach the corporate social responsibility policy and cause appreciable impactontheenvironmentand society?

√



EvaluationItem




Reasons


4. EnhancingInformationDisclosure

(1) Does the Company disclose r e l e va n t a n d r e l i a b l einformation regarding i t scorporate social responsibility on its website and the Market Obser vat ion Post Sys tem(MOPS)?

√ (1) Tatung Co. issued Tatung Corporate Social Responsibility Report annually. The report is used as a tool not only to present theperformanceson thebusinessoperation,environmentalprotection,healthandsafety,andsocialresponsibility but also to communicate with stakeholders. The latestversion,"2015TatungCorporateSocialResponsibilityReport",waspublished inJune,2015(http://www.tatung.com/en/responsibility_rp.asp), and disclosed on the MOPS. SubsidiariessuchasCPTandGETpublishtheirCSRReportsannually,too.Thereportsareavailabletothepublicanddownloadablefromthecompanies’websites.

(1) None

5. If theCompanyhasestablished thecorporate social responsibil ityprinciplesbasedon“theCorporate SocialResponsibilityBest-PracticePrinciplesforTWSE/TPExListedCompanies”,pleasedescribeanydiscrepancybetweenthePrinciples and their implementation:

TheCompanyhaspromulgatedtheprinciples inaccordancewiththe“CorporateSocialResponsibilityBest-PracticePrinciplesforTWSE/GTSMListedCompanies.”Thereisnomajordifferencebetweenthetwo.

6. OtherimportantinformationtofacilitatebetterunderstandingoftheCompany’scorporatesocialresponsibilitypractices:(1) ThecorporatesocialresponsibilitybestpracticeisdevelopedbytheboardofdirectorsoftheCompanyon11.12.2014,and

itwasamendedinaccordancewiththerevisionof“CorporateSocialResponsibilityBestPracticePrinciplesforTWSE/GTSMListed Companies” on 12.30.2014.

(2) TheCompany,throughcommercialactivities,non-cashpropertyendowments,volunteerserviceorotherfreeprofessionalservices,participatesincommunitydevelopmentandcharitiesevents.a. Supportingtraditionalartandinnovation,theCompanyinvitedpapercarvingartistsforfiveconsecutiveyearstodesign

TatungBoysmalllanternswhosedesignwasbasedupontheanimalsrepresentingChinesezodiac.b. Supportingtheinheritanceandinnovationoffolkart,theCompanyinvitedlocallanternartiststocreateTatungBoy

lanternswhichwereexhibitedinthe2015TaiwanLanternFestivalinTaichungCityandTaipeiLanternFestival.c. In thehopeofcultivatingpositive thinking for thosedisadvantaged teenagers, theCompany invited400

underprivilegedchildrenfrom19charitablegroupstoparticipateinthe6th Tatung Charity Soccer Summer Camp hopingtoplantseedsofteamworkspiritandsportsmanshipinchildren’smindthroughpracticeofsports.

d. Toencourageoriginalityofcreation,theCompanyinvitedperformingartgroupforthreeconsecutiveyearstoworktogetherproducingachildrendrama,"TatungBoyLovestheEarth",andtouredattheelementaryschoolsaroundtheisland.Byinfusingintheideasofsavingenergy,healthandenvironmentalprotectioninthestory,childrencanlearngoodhabitsfromtheplay.

e. Supportingthedevelopmentoflocalcommercialdistrict,TatungBoyparticipatedinthe2015HappyHalloweeninTianmuorganizedbytheTianmuMarketplaceDevelopmentAssociation.

f. Tohelptopromotecommunityconstructionaswellasencouragethemasspublic’sinterest inartisticandculturalactivities,TatungBoyparticipatedinthe2015NewTaipeiCityInternationalEnvironmentalArtsFestival.

g. Participatingintheenergy-savingmovement,theCompanytookpartinthesmartenergy-savingprogrammebytheTaoyuanCityGovernment.

(3) ForotherimportantinformationtofacilitatebetterunderstandingoftheCompany’simplementationofcorporatesocialresponsibility,pleaserefertotheCompany’swebsite(http://www.tatung.com/b5/).

7. Aclearstatementshallbemadebelowifthecorporatesocialresponsibilityreportswereverifiedbyexternalcertificationinstitutions:

"2015TatungCorporateSocialResponsibilityReport"followstherequirementsofAA1000AS:2008andGRIG4guidelineswithCoreinaccordance.ThereportwasverifiedwithconditionofAA1000Type2,HighlevelassurancebyTUVNORD.



(VI) Ethical Corporate Management

EvaluationItem

Implementation StatusDeviationsfrom“theEthicalCorporate

Management Best-PracticePrinciplesfor


Reasons

Yes No Abstract Illustration

1. Establishmentofethicalcorporatemanagement policies and programs

(1) Does the Company declare its ethical corporate management pol icies and procedures in i t s guidelines and external documents, aswellasthecommitmentfromitsboard to implement the policies?

√ (1) The Company continues to enhance core corporate philosophy – “Integrity, Honesty, Industry, and Frugality,” andstatesthattheemployeesareprohibitedtoperformmalpracticesoracceptgiftsofothers in regardingto their jobsonCompanyRules,EthicalCorporateManagementBestPracticePrinciplesandBusinessEthicsStatementforGroupEmployees.

(1) None

(2) Does the Company establish policies topreventunethicalconductwithclearstatementsregardingrelevantprocedures,guidelinesofconduct,punishment forviolation, rulesofappeal, and the commitment to implement the policies?

√ (2) To implement ethical corporate management policies andactivelypreventunethicalconducts,theCompanyestablishes Procedures for EthicalManagementandGuidelines forConductandpromulgatetoallemployees.

(2) None

(3) Does the Company es tab l i sh appropriate precautions against high-potential unethical conducts or listedactivitiesstated inArticle2, Paragraph 7 of the Eth ica lCorporateManagement Best-PracticePrinciples for TWSE/TPExListed Companies?

√ (3) TheCompanyestablishes r igorousandeffectiveaccounting system and internal control system to preventbriberyandacceptanceofbribes, illegalcampaign contributions.

(3) None

2. Fulfilloperationsintegritypolicy

(1) Does the Company eva luatebusinesspartners’ethical recordsand include ethics-related clauses in business contracts?

√ (1) The Tatung’squalif ied supplier should signboth“Master Contract” and “Suppl ier Commitment Let ter”, the Unders igned under takes that theproductsorservicesprovidedbyitshallcomplywiththe laws & regulations and international standards relatedtosafetyandenvironmentalprotectionandits labor services shallcomplywithdomesticandinternational laws, policies or regulations related to humanrightsand laborservices.Where it isprovenasafactthattheproductsorservicesprovidedbytheUndersignedare likely toendanger thesafetyandhealthofconsumersorother interestedparties,Tatung could terminate the Agreement and Purchase Order immediately.

(1) None

(2) Does the Company es tab l i sh anexclusively (orconcurrently)dedicatedunitsupervisedbytheBoardtobeinchargeofcorporateintegrity?

√ (2) The Company has set the General Administration D i v i s i on and Human Re sou rce s D i v i s i on a sthe dedicated un i t fo r the eth ica l corporatemanagement.

TheCompanyhasreportedtotheboardofdirectorsthe implementationof ethicalmanagementon5.5.2015.

(2) None

(3) Does the Company es tab l i sh pol icies toprevent confl icts ofinterestandprovideappropriatecommunication channels, and implement it?

√ (3) TheCompanyestablishesthe”Conflictsof InterestsPreventionClause”onCompanyRulesandtheRulesGoverningProcedureforBoardofDirectorsMeetings,and has stipulated and promulgated the “Internal Signif icant Information ProcessingOperationalProcedures”fordirectors,managersandemployeesinordertoavoidinsidertrading.

(3) None



EvaluationItem




Reasons


(4) Has the Company establ ished e f f e c t i ve s y s t em s f o r b o t haccounting and internal control to faci l i tate ethical corporatemanagement, and are theyaudited by either internal auditors or CPAs on a regular basis?

√ (4) TheCompanyhasestablishedeffectiveaccountingandinternalcontrolsystemsforensuringtheimplementationofpolicies,andtheinternalauditorsformulateannualauditplansbasedontheresultsoftheriskassessmentandreporttotheBoarditsauditreport.

(4) None

(5) Does the Company regularly hold internal and external educational trainings on operational integrity?

√ (5) TheCompany'strainingderivedfromcorecorporatephi losophy – “ Integr ity, Honesty, Industr y, and Frugality,”anddevelops“HonestyandIntegrity"corecompetenciesasthedesignbasisoforientationtraining,managementtrainingandprofessionaltraining.TheCompany expects the ethical corporate management policies toachievesustainablemanagementandemphasize the importanceof“Integrity,Honesty,Industry, and Frugality,” in the internal and external website.

(5) None

3. Operationoftheintegritychannel

(1) Does the Company establish both a reward/punishment system and an integrity hotline? Can the accused be reached by an appropriate personforfollow-up?

√ (1) TheCompany has amechanismof process ingemployees’complaints foremployees’ feedback,foundviolationsof lawlessness(includingcorruption),and reported unethical conducts.

(1) None

(2) Does the Company es tab l i sh standard operating procedures fo r conf ident ia l repor t ing oninvestigatingaccusationcases?

√ (2) The Company maintains secrecy and inspects the reportedcontentsaswellasprotectsinformants’rightsand interests.

(2) None

(3) DoestheCompanyprovideproperwhistleblower protection?

√ (3) TheCompanyhasobligationtomaintainsecrecyofinformantsandproperlyprotectsinformants.

(3) None

4. Strengtheninginformationdisclosure

(1) Does the Company disclose its ethical corporate management pol ic ies and the resu l t s of i t simplementationontheCompany’swebsite and MOPS?

√ (1) The Company has disclosed on its website and the MarketObservationPostSystemtheethicalcorporatemanagement best practice principles.

(1) None

5. IftheCompanyhasestablishedtheethicalcorporatemanagementpoliciesbasedontheEthicalCorporateManagementBest-PracticePrinciplesforTWSE/TPExListedCompanies,pleasedescribeanydiscrepancybetweenthepoliciesandtheirimplementation:

TheCompanyhaspromulgatedtheprinciplesinaccordancewiththe“EthicalCorporateManagementBestPracticeprinciplesforTWSE/GTSMListedCompanies.”Thereisnomajordifferencebetweenthetwo.



EvaluationItem




Reasons


6. OtherimportantinformationtofacilitateabetterunderstandingoftheCompany’sethicalcorporatemanagementpolicies(e.g.,reviewandamenditspolicies).(1) ThecorporateethicalmanagementbestpracticeprinciplesweredevelopedbytheboardofdirectorsoftheCompanyon

11.12.2014,anditwasamendedinaccordancewiththerevisionof“EthicalCorporateManagementBestPracticeprinciplesforTWSE/GTSMListedCompanies”on12.30.2014.

(2) TheCompanyatalltimestakesnoticeofthedevelopmentofrelevantlocalandinternationalregulationsconcerningethicalcorporatemanagementsoastoreviewandimproveitsethicalcorporatemanagementbestpracticeprinciplesandachievesbetterresultsfromimplementingtheprinciples.

(3) TheCompanycomplieswiththeCompanyAct,SecuritiesandExchangeAct,BusinessEntityAccountingAct,PoliticalDonationsAct,Anti-CorruptionAct,GovernmentProcurementAct,ActonRecusalofPublicServantsDuetoConflictsofInterest,TWSE/GTSM-listeningrules,orotherlawsorregulationsregardingcommercialactivities,astheunderlyingbasicpremisetofacilitateethicalcorporatemanagement.

(VII) Corporate Governance Guidelines and Regulations: 1. ApprovedbytheBoardofDirectors in2014,theCompanyhasadoptedCorporateGovernanceBestPracticePrinciples,

CorporateSocialResponsibilityBestPracticePrinciples,EthicalCorporateManagementBestPracticePrinciples,ProceduresforEthicalManagementandGuidelines forConduct,andEthicalConductPrinciples.TheCompanyhasdisclosedtheaforesaidrelevantcorporategovernanceregulationsontheMarketObservationPostSystemandits internalandexternalwebsitesforstakeholders’reference.

2. Please refer tothewebsitesof the investmentcompanies for theirCorporateGovernanceBestPracticePrinciplesandrelevantregulations.

(VIII) Other Important Information Regarding Corporate Governance: 1. AwardedBestCorporateGovernance,Taiwan,2013byWorldFinance,afinancialmagazinebyWorldNewsMediabasedin

theUK.2. ForinformationonTatung'scorporategovernance,pleaserefertotheTatungwebsiteathttp://www.tatung.com/b5/.3. TheSubsidiaryCompany's facilitateunderstandingofcorporategovernance,please refer to theSubsidiaryCompany

website.



(IX) Execution of internal control system1. Internal control statement

Tatung Company Limited by SharesInternal Control System Statement

Date: March 23, 2016TheCompanystatesthefollowingwithregardtoitsinternalcontrolsystemduringfiscalyear2015,basedonthefindingsofaself-assessment:

I. TheCompany is ful lyaware thatestablishing,operatingandmaintainingan internalcontrol systemare theresponsibilitiesof itsBoardofDirectorsandmanagement.TheCompanyhasestablishedsuchasystemtoprovidereasonableassuranceoftheeffectivenessandefficiencyof itsoperations(includingprofitability,performanceandsafeguardingofassetssecurity),reliabilities,timeliness,transparencyofreporting,andcompliancewithapplicablelawsand regulations.

II. An internalcontrol systemhas inherent limitations.Nomatterhowperfectlydesigned,aneffective internalcontrolsystemcanprovideonlyreasonableassuranceofaccomplishingthethreegoalsmentionedabove.Furthermore,theeffectivenessofaninternalcontrolsystemmayvaryalongwithchangesintheoperatingenvironmentorcircumstances.TheCompany’s internalcontrol system featuresa self-monitoringmechanism,however,and theCompany takescorrectiveactionsassoonasadeficiencyisidentified.

III. TheCompanyjudgesthedesignandoperatingeffectivenessofitsinternalcontrolsystembasedonthecriteriaprovidedintheRegulationsGoverningtheEstablishmentof InternalControlSystemsbyPublicCompanies(hereinbelow,“theRegulations”).The internalcontrol system judgmentcriteriaadoptedbytheRegulationsdivide internalcontrol intofivekeyelementsbasedontheprocessofmanagementcontrol:1)controlenvironment,2)riskassessment,3)controlactivities,4) informationandcommunications,and5)monitoringactivities,eachoftheseelements inturncontainscertainaudititems.PleaserefertotheRegulationsfordetails.

IV. TheCompanyhasevaluatedthedesignandoperatingeffectivenessof its internalcontrol systemaccordingtotheaforesaidcriteria.

V. Basedontheaforementionedaudit findings, theCompanybelievesthatonDecember31,2015, its internalcontrolsystem(includingsupervisionofsubsidiaries),aswellas internalcontrols tomonitor theattainmentof itsobjectivesconcerningoperationaleffectivenessandefficiency,reliability,timeliness,transparencyofreporting,andcompliancewithapplicablelawsandregulationswereeffectiveindesignandoperationandreasonablyassuredtheachievementoftheabove-statedobjectives.

VI. ThisStatementwillbecomeamajorpartof thecontentof theCompany’sAnnualReportandProspectus,andwillbepublicized.Anyfalsehood,concealment,orother illegality inthepublicizedcontentwillentail legal liabilityunderArticles20,32,171and174oftheSecuritiesandExchangeAct.

VII.ThisStatementhasbeenunanimouslyapprovedbythe9attendingdirectors intheBoardofDirectorsMeetingoftheCompany on March 23, 2016.

Tatung Co., Ltd.

W. S. Lin Chairman

Wen-yen K. Lin President

2. This statement is issued in accordance with the criteria for “Regulations Governing the Establishment of Internal Control Systems of Public Companies” promulgated by the Financial Supervisory Commission (“FSC”), Executive Yuan.

3. Where CPAs are retained to audit the internal control systems as required by the FSC, please disclose the CPAs' audit report: N/A.



(X) Any penalties imposed upon the Company or its in-house personnel in accordance with the law, or punishment imposed by the Company on its in-house personnel for violation of the Company’s internal control system regulations, and the major defects and corrective action thereof: None.

(XI) Major resolutions of the Shareholders’ Meeting

Summaryofmajormotions Resolution Subsequentdevelopment

1. Resolut ion on rat if ication of the 2014businessreportandfinancialstatements.

1,713,180,666(96.02%)sharesinfavor.Motionpassedasproposed.

Completed.

2. Resolutiononratificationof theProposalforDistributionof2014Profits (Recognizespecialreserve).


Completed.

3. ProceduresforAcquisitionandDisposalofAssets—CurrentProceduresandProposedAmendments.


Completedinaccordancewiththeresolution.

4. Procedures for Shareholders'Meeting—Cur rent Procedures and ProposedAmendments.


Completedinaccordancewiththeresolution.

(XII) Major resolutions of the Board of Directors

Date Majorresolutions

2015/03/24 TheBoardofDirectorsresolvedtoconvenethe2015RegularShareholder’sMeeting.

2015/05/05 Directors’resolvednodividenddistributioninyear2015.

2016/03/23 TheBoardofDirectorsresolvedtoconvenethe2016RegularShareholder’sMeeting.

2016/05/04

Directors’resolvednodividenddistributioninyear2016.

Directors’resolvednodividendemployees'compensationanddirectors'remunerationinyear2016.

SupplementaryinformationontheCompany’s2016AnnualGeneralShareholder’sMeeting.

(XIII) Major issues of record or written statements made by any director dissenting to important resolutions passed by the Board of Directors: None.

(XIV) Resigned or discharged officers statements of Chairman, President, financial and accounting managers, and internal auditing managers, etc: None.

Information on independent auditorsAccountingfirm CPA’sname CPA’sauditperiod Remark(Note)

Ernst&YoungTaiwanSu-WenLin

2015LanChingChang

UnitNT$Thousand

TitleRange

Auditfees Non-auditfees Totalamount

1 UnderNT$2,000 – – –

2 FromNT$2,000toNT$4,000 – 2,010 2,010

3 FromNT$4,000toNT$6,000 – – –

4 FromNT$6,000toNT$8,000 – – –

5 FromNT$8,000toNT$10,000 – – –

6 OverNT$10,000 14,690 – 14,690



1. Thenon-auditprofessional feespaidtoCPAs,CPAs’officesandaffiliatesaccountingformorethanone-quarterof totalauditprofessionalfeesshouldbedisclosed.Thedisclosureitemsshouldincludetheamountsofauditandnon-auditprofessionalfeesaswellasnon-auditservicecontent.

UnitNT$Thousand

Accountingfirm CPA’sname Audit fees

Non-auditfees CPA’saudit

periodRemarkManagement

system designCompany registration HR Others

(Note) Subtotal

Ernst&YoungTaiwan

Su-Wen Lin

14,690 0 0 0 2,010 2,010 2015

Note: The item “non-audit fee-other”consistsoftransferpricingreports, consulting andservicefeetotalingNT$2,010thousand dollars.

Lan Ching Chang

2. TheauditprofessionalfeesofreplacingCPAs’firmwithinthecurrentfiscalyearlessthanthatofthepreviousfiscalyearshouldbedisclosed.Thedisclosureitemsshouldincludethereductionamount,percentageandreasonforthereplacement:None.

3. Theauditprofessionalfeewithinthecurrentfiscalyearthatis15%lessthanthatofthepreviousfiscalyearshouldbedisclosed.Thedisclosure items should include the reduction amount, percentage and reason: None.

Information on change of independent auditors1. Regarding the former CPA:

Replacement date December, 2015

Reasonforreplacement

Ernst&Young, theaccountingfirm, replacedMs.SuWenLinandMs.LanChingChangwithMs.SuWenLinandMr.YiChangLianginthefirstquarterof2016asaresultofitsreshuffle.TheBoardofDirectorsalsopassedtheresolutionforthechangeofcertifiedpublicaccountantsforthecompany.

SpecifyingwhethertheCompanyterminatedortheCPAdeclinedfurtherengagement

TitleSituation CPA The Company

Voluntarily ended the engagement N/A N/A

Discontinued the engagement N/A N/A

Issued an audit report expressing other than an unqualifiedopinionduringthetwomostrecentyears,furnishtheopinionandreason

None

Whether there was any disagreement between theCompanyandtheformerCPA

Disagreement

-- Accounting principles or practices

-- Financial report disclosure

-- Auditing scope or procedure

-- Others

Agreement √

Explanation

Other matters that shall be disclosed None

2. Regarding the successor CPA:

Accountingfirm Ernst&YoungTaiwan

CPA,s name Ms. Su Wen Lin andMr.YiChangLiang

Dateofengagement December, 2015

IfpriortotheformalengagementofthesuccessorCPA,theCompanyconsultedthenewlyengagedaccountant regardingtheaccounting treatmentoforapplicationofaccountingprinciples toaspecifiedtransaction,orthetypeofauditopinionthatmightberenderedontheCompany’sfinancialreport, theCompanyshallstateand identifythesubjectsdiscussedduringthoseconsultationsandconsultation results

N/A

WrittenviewsofthediscrepancybetweenformerCPAandsuccessorCPA N/A



3. The previous auditor’s reply to issues regarding Articles 10, Subsection 5, Item 1 and Paragraph 3 of Item 2 of the Regulation: Not applicable.

Information on the Company’s chairman, president, financial or accounting managers holding positions in the auditor’s firm or its affiliates within the previous year: None.

Change of shareholding by directors, management, and major shareholders

Title Name

2015 Asof30April2016

Increase (decrease) in shares held

Increase (decrease) in

pledged shares

Increase (decrease) in shares held

Increase (decrease) in

pledged shares

Chairman Wei-shan Lin 4,550,000 shares -- 2,600,000 shares --

Director & President Wen-yen K. Lin 11,089,000 shares -- 1,863,000 shares --

Director I-hua Chang -- -- -- --

Director Wei-tung Lin -- -- -- (7,200,000) shares

Director Lung-ta Lee -- -- -- --

Director RepresentativeofTatungUniversity:Huo-yenChen -- -- -- --

Independent Director Tzong-der Liou -- -- -- --

Independent Director Peng-feiSu -- -- -- --

Independent Director Chi-ming Wu -- -- -- --

Vice President Ying-cheHuang -- -- -- --

ChiefStrategyOfficer& Vice President Tai-jiPan -- -- -- --

Director-Generaloffinancedepartment Wen-chieh Peng -- -- -- --

Financialofficer Ruei-kaiJhang -- -- -- --

AccountingOfficer Shu-fenChen -- -- -- --

Note1: VicePresidentofYing-cheHuanghadresignedmanageronMay17,2016.Note2: TheCompanyhasnomajorshareholdersowningmorethan10%ofitstotalshares.Note3: ThecounterpartsoftransferorpledgeoftheCompany’sequityarenotrelatedparties.



Information on the top 10 shareholders who are related parties to each other

NameShares held personally Shares held by spouse and

minor childrenTotal shares held in another

person’sname

Informationontop10shareholdersinproportionofshareholding and who are

related to one another under their names and Relationship. Remark

Share(s) Shareholding(%) Share(s) Shareholding

(%) Share(s) Shareholding(%) Name Relationship

TatungUniversityRepresentative:Liang-de Li

144,798,047 6.19 - - - - None None

China Trust Commercial Bank’strustdivisionincustodyforTatungCompany’semployeestockholding trust account Representative:JessicaWang

119,630,257 5.11 - - - - None None

Sunplus Technology Co., Ltd.Representative:Zhou-jieHuang

46,094,400 1.97 - - - - None None

Hsiu-luan Chen 43,443,192 1.86 - - - - Wei-shan Lin

1stdegreeofconsanguinity

Tatung High School Representative:Liang-de Li

32,050,074 1.37 - - - - None None

TatungJointWorkers’WelfareCommissionRepresentative:Wei-shan Lin

31,863,298 1.36 - - - - None None

Li-ching Chen 30,318,880 1.30 - - - - Hsiu-luan Chen

1stdegreeofconsanguinity

DimensionalEmergingMarkets Value Fund 22,072,342 0.94 - - - - None None

JPMorganChaseBankN.A.,TaipeiBranchincustodyforVanguard Total International StockIndexFund,aseriesofVanguard Star Funds

21,090,738 0.90 - - - - None None

Pei-chi Luo 17,993,000 0.77 - - - - None None

Long-term investments ownershipUnit:share;%

ReinvestedcompaniesInvestedbytheCompany

Direct/indirectinvestmentsbytheCompany’sdirectors,supervisors,andmanagement

Total ownership

Shares % Shares % Shares %

Chunghwa Picture Tubes, Ltd. 548,385,630 8.46 918,997,723 14.19 1,467,383,353 22.65

Shan Chih Semiconductor Co., Ltd. 49,913,576 43.18 17,646,454 15.27 67,560,030 58.44

GreenEnergyTechnology Inc. - - 150,181,294 36.25 150,181,294 36.25

Financial Information


Source of capital (I) Capitalization

AsofApril30,2016

Month / year

Par alue

Authorized capital Paid-in capital Remark

Share(s) Amount(NT$) Share(s) Amount(NT$) Sourcesofcapital

Capital increase by assets

other than cash

Others

February 2011

NT$10 10,000,000,000 100,000,000,000 2,339,536,685 23,395,366,850Conversionofsharesbystock option NT$8,545,000capital reductionNT$32,134,271,970

No OfficialletterunderChing-Shou-Sheng-Tze No. 10001035060 dated February 22, 2011ofMinistryofEconomicAffairs

(II) Type of stock

TypeofstockAuthorized capital

RemarkOutstanding shares Un-issuedshares Total

Common stock 2,339,536,685 shares 7,660,463,315 shares 10,000,000,000 shares Listedcompany’sstock

(III) Shelf registration: None.

Shareholder structureAsofJune17,2016

Typeofshareholders

Quantity

Governmentagencies

Domestic financial

institutionsOther domestic

institutions IndividualsForeign

institutions and individuals

Total

Numberofshareholders 4 6 223 219,263 246 219,742

Shareholding 88,700 133,698,759 317,436,079 1,605,758,516 282,554,631 2,339,536,685

Holdingpercentage(%) 0.00 5.71 13.57 68.64 12.08 100.00

Distribution profile of shareholder ownershipAsofJune17,2016

Rangeofshareholding(unit: share)

Numberofshareholders Ownership Holdingpercentage(%)

1 ~ 999 128,760 33,047,106 1.411,000 ~ 5,000 58,831 138,758,501 5.935,001 ~ 10,000 13,612 104,633,138 4.4710,001 ~ 15,000 4,903 60,778,113 2.6015,001 ~ 20,000 3,251 59,484,452 2.5420,001 ~ 30,000 3,468 86,025,691 3.6830,001 ~ 50,000 2,957 118,006,485 5.0450,001 ~ 100,000 2,162 155,673,497 6.65

100,001 ~ 200,000 961 136,556,453 5.84200,001 ~ 400,000 397 113,201,475 4.84400,001 ~ 600,000 143 70,755,106 3.02600,001 ~ 800,000 78 55,098,612 2.36

800,001 ~ 1,000,000 49 44,193,900 1.891,000,001above 170 1,163,324,156 49.73

Total 219,742 2,339,536,685 100.00

Note: TheCompanydoesnotissuepreferredstock.



Major shareholdersAsofJune17,2016

SharesName

Total shares owned Ownership(%)

TatungUniversity 144,798,047 6.19

ChinaTrustCommercialBank’strustdivisionincustodyforTatungCompany’semployeestockholding trust account 119,630,257 5.11

Sunplus Technology Co., Ltd. 46,094,400 1.97

Hsiu-luan Chen 43,443,192 1.86

Tatung High School 32,050,074 1.37

TatungJointWorkers’WelfareCommission 31,863,298 1.36

Li-ching Chen 30,318,880 1.30

DimensionalEmergingMarketsValueFund 22,072,342 0.94

JPMorganChaseBankN.A.,TaipeiBranchincustodyforVanguardTotalInternationalStockIndexFund,aseriesofVanguardStarFunds 21,090,738 0.90

Pei-chi Luo 17,993,000 0.77

Major institutional shareholdersInstitutional shareholder Majorshareholders Ownership

Sunplus Technology Co., Ltd.

Zhou-jieHuang 15.67%

De-jhongLiu 2.20%

Global View Co., Ltd. 1.70%

Chih-hao Kung 1.46%

Wen-chin Lee 1.18%

JPMorganChaseBankN.A.,TaipeiBranchincustodyforVanguardTotalInternationalStockIndexFund,aseriesofVanguardStarFunds 0.89%

SynerInvestmentCo.,Ltd. 0.60%

Ritek Corporation 0.49%

PreferredInvestmentAdvisors(HK)ValueFund 0.48%

VanguardEmergingMarketsStockIndexFund 0.46%



Market price, net worth, earnings and dividends per common shareFiscal year

Item2014 2015 AsofApril30,

2016 (Note 8)

Market price (Note 1)

High 10.5 9.35 5.81

Low 7.99 4.43 4.85

Average 9.2 6.81 5.32

Net worth per share (Note 2)

Beforedistribution 15.15 13.49 13.12

Afterdistribution 15.15 13.49 13.12

EarningspershareWeightedaverageofshares 2,268,605,341 2,268,605,341 2,268,605,341

Earningspershare (Note 3) 0.16 (1.35) (0.35)

Dividendspershare

Cashdividends No No No

StockdividendsRetained earnings No No No

Additional paid-in capital No No No

Accumulatedundistributeddividends (Note 4) No No No

Return on investment

Pricetoearnings(P/E)ratio (Note 5) 57.50 (5.04) (15.20)

Pricetodividend(P/D)ratio (Note 6) No No No

Cashdividendyield (Note 7) No No No

* Informationonretroactiveadjustments inmarketpriceandcashdividendsshallbedisclosed ifanydividendsweredistributedduetoanincrease in retained earnings or capital surplus.

Note1: Pertainstothehighestandlowestmarketpricesofeachcommonshareinthefiscalyearspecified.Theaveragemarketpriceforeachfiscalyeariscalculatedbasedonthetransactionvalueandvolumefortheyear.

Note2: Figuresbasedonthenumberofshares issuedat theendof theprevious fiscalyearandtheresolutionpassedat theshareholders’meetinginthefollowingfiscalyear.

Note3: Earningspersharebeforeandafteradjustmentshallbedisclosedifstockdividendsweredistributed.Note4: Regulationsgoverningtheissuanceofsecuritiesprovidethatun-appropriateddividendsinthecurrentyearmaybeaccumulatedand

distributedwhentheCompanypostsaprofit,andonlytheaccumulatedamountofdividendsneedstobedisclosed.Note5: P/Eratio=Averageclosingpricepershare/Earningspershare.Note6: P/Dratio=Averageclosingpricepershare/Cashdividendpershare.Note7: Cashdividendyield=Cashdividendpershare/Averageclosingpricepershareinthecurrentyear.Note8: Auditednetworthpershareandearningspersharefiguresbasedonthelatestquarterprecedingthepublicationoftheannualreport;

otherfiguresbasedonthelatestdataavailablepriortothepublicationoftheannualreport.

Dividend policy and implementation status(I) Dividend policy

1. TheCompany iscommittedtoensuresteadybusinessgrowth inorder toprovidestableprofits for its shareholdersandgreaterreturnsforitslong-termshareholders.

2. IftheCompany’sauditedfinancialstatementsshowaprofit,theearningsshallfirstbeusedtopayitsincometaxandrecouppreviouslossespursuanttothelaw,afterwhich10%shallbesetasideaslegalandspecialreservesandtheremainder,ifany,shallbeallocatedfordistribution.

3. TheCompanyshallallocatenomorethan1%ofearningsavailablefordistributionasabonustodirectorsandnotlessthan1%asaprofit-sharingbonustoemployeesinaccordancewiththelaw.

4. Totaldistributedearningsshallnotbelessthan60%ofaccumulateddistributableearnings.5. StockandcashdividenddistributionratiosshallbedeterminedbasedontheCompany’sprofitsandfundingplans inthe

currentyear,withtheprovisothatthecashdividendratioshallbenolessthan10%ofdistributableearnings.

(II) Implementation1. Tosetasidespecialreserve,nodividendsweredistributedin2014.2. Torecouplosses,nodividendsweredistributedin2015.AbreakdownonRecoupingLossesin2015follows:



(III) Recouping lossesUnit:NT$Thousand

Fiscal yearItem 2015

Accumulateddeficitsbroughtforward 0

1. Net loss in 2015 (3,075,015)

2.Reversalofspecialreserve 52,180

3.Changeinshareofassociatesandjointventuresaccountedforusingtheequitymethod (49,175)

4.Othercomprehensiveloss (25,980)

5.Acquisitionordisposalonsubsidiaryshares (3,005)

6. Change in subsidiaries' ownership 727

Thetotalamountofthedeficityettobecompensated (3,100,268)

Itemforcompensatingthedeficit:Specialreservetocompensatetheaccumulateddeficits 3,100,268

Accumulateddeficitscarriedforward 0

Dividenddistribution 0

Impact of stock dividend distribution on business performance and EPS: Not applicable.

Employee bonuses and remuneration to directors(I) The percentage and scope of employee bonuses and remuneration to directors as

contained in the Company’s Articles of Incorporation.TheCompanyoperates inarapidlychangingbutsteadilygrowing industry. Inconsiderationof its long-termfinancialplansandfuturefundingrequirements,aswellastoprotectshareholders’equity,theCompanyshallemployearningsfortheyear,ifany,torecoupthepreviousyear’s lossesandthensetaside10%as legalandspecial reservesandallocatetheremainderfordistribution.TheCompanyshallallocatenomorethan1%asremunerationtodirectorsandno lessthan1%asemployeebonuses.Totaldistributedearningsshallbenolessthan60%ofaccumulateddistributableearnings.TheratiosofstockandcashdividenddistributionshallbedeterminedbasedontheCompany’sprofitandfundingplans inthecurrentyear,providedthattheratioofcashdividendshallbenolessthan10%ofthedistributedearnings.

(II) The basis for estimating the amount of employee bonuses and director compensation, the basis for calculating the number of shares to be distributed as stock bonuses, and the accounting treatment of the discrepancy, if any, between the actual distributed amount and the estimated figure, for the current period.TheCompanydidnotdistributeanyemployeebonusesanddirectorcompensationin2015.DuetotheCompany’slossestoberecouped, it did not estimate employee bonuses and director compensation and distribute stock bonuses.

(III) Employee bonuses and remuneration to directors distributed from earnings of the previous year: None.

(IV) The actual distribution of employee bonuses and director compensation for the previous fiscal year (with an indication of the number, dollar amount, and stock price, of the shares distributed), and, the cause and treatment of discrepancy, if any, between the actual distribution and the recognized employee bonuses and director compensation:Because theCompanypostedearnings in2014, theprovisionsof legal reserveandspecial reserve shouldbemade inaccordancewithrelevantregulationsissuedbytheSecuritiesandFuturesBureau,FinancialSupervisoryCommissionwithrespecttomakinggoodofdeficitandprovisioningspecialreserves.

Share buyback: None.



Issuance of corporate bonds: None.Issuance of preferred shares: None.

Issuance of global depository receipt: Issuing Date 10/2/2009

Issuance & Listing LuxembourgStockExchange

Total Amount US$197,500,000

OfferingPricePerGDR US$3.95

UnitsIssued 50,000,000

UnderlyingSecurities Capitalincreaseforcashbyissuingnewcommonshares

Common Shares Represented 1,000,000,000

Rights&ObligationofGDRHolders SameasthoseofCommonShareHolders

Trustee Not Applicable

DepositaryBank TheBankofNewYorkMellon

CustodianBank MegaInternationalCommercialBank

GDRs Outstanding 112,569

ApportionmentofExpensesforIssuance&Maintenance Tatung

Terms and Conditions in the Deposit Agreement & Custody Agreement -

Closing Price Per GDR

2015

Highest US$5.792

Lowest US$2.781

Average US$4.262

1/1/2016 - 4/30/2016

Highest US$3.545

Lowest US$2.968

Highest US$3.181

Status of employee stock option plan (ESOP): None.

Status of new restricted employee shares plan: None.

ESOP granted to management team and to the top 10 employees: None.

New restricted employee shares plan granted to management team and to the top 10 employees: None.

Status of new share issuance in connection with mergers and acquisitions: None.

Financial plans and implementation: None.

Operation Overview


Revenue breakdownFor management purposes, the Group is organized into business units basedon their products and services and has four reportable operating segments asfollows:(1) Opticaldepartment: Thisdepartment is responsible forCRT, TFT-LCDbacklightmodulemanufacturingandproduction,

developmentofliquidcrystaldisplaymodules,electronicswitchesandsensorsandsolarmodulesvirus,manufacturingandsales. (2) Machineryandenergydepartment:Thedepartment is responsiblefor theresearch,manufactureandsalesof intelligentgrid,

smart-gridportal,photovoltaics,LEDlighting,motorandmachineryandenergycontrolsystem. (3) Consumerproductsdepartment:Thisdepartment is responsible fordigital television, flatpaneldisplaymanufacturing,digital

mediadevices,digitalaudio-visualandhomeappliances,etc.. Nooperatingsegmentshavebeenaggregatedtoformtheabovereportableoperatingsegments.

For the year ended December 31, 2015

Optical sector Machinery and energy sector

Consumerproducts sector

Others Total

Revenue $47,276,283 $29,895,652 $11,680,317 $5,892,101 $94,744,353

Revenue distribution of Tatung

Category %

POWER BUSINESS GROUP 51.73%

SYSTEM BUSINESS GROUP 17.03%

CONSUMER BUSINESS GROUP 30.62%

OTHER 0.62%

Operation Overview


POWER BUSINESS GROUP

Power Equipment Business Unit - Industrial appliance

(Transformers and switchgears)Business ActivitiesI. Business scope

(I) Main lines of business and sales breakdown

Category %

Transformers 70%

Switchgears 30%

(II) Current products1. Transformers

Allkindsofpower transformers,distributiontransformers,shuntreactors,transformerpartialdischargediagnosisdeviceand testing&certificationservicesoftransformers.

2. SwitchgearsControl panel, gas insulated switchgears (GIS), underground 2-way and 4-way switches, switchgear components, capacitors, reactors, potentialtransformersandcurrenttransformers.

II. Technology and R&D(I) Product development

1. Transformers•500kVPowerTransformers/Expectedtimeto

hit the market: 2017•PowertransformerforKEMAtest/Expected

time to hit the market: 2016•Smartcast-resintransformers/Expectedtime

to hit the market: 20162. Switchgears•Underground4-wayAutomatic switches/Expectedtimetohitthemarket:2016

(II) Research & development Asfortransformerproducts,theCompanyhasbeendevelopinghigh-capacityshuntreactors,maintransformerswithultra-highvoltage&ultrahigh-capacity,highefficiencytransformersforSolarsystem,smartdistributioncubicleandsmartcast-resintransformers.

III. Industry overview(I) Current status and development

1. In year 2015, the demands of industr ia lappl iance is in recession. Taiwan Power Companyandprivatecompanies reducedinvestment.

AccordingtothestudyofTIER(TaiwanInstituteofEconomicResearch), theoutputvalueofindustrial appliance declined in 2014.

2. Look into2016,accordingtotheanalysisofDGBASof ExecutiveYuan, theeconomicgrowthrateisabout1.47%in2016,0.75%highercompares with 2015. Taiwan Power company announced to invest NTD400bi l l ion intoRenewable energy, and it would help create thedemandsoftherelatedindustrials.

(II) Relationship between the upstream, midstream,

and downstream sectors of the industry

Upstream

Important components / parts, insulating material, switchgear componentsandrawmaterialofmetal.

MidstreamDesign&manufacturingoftheindustrial appliance.

Downstream Governmentandprivateenterprises.

(III) Product development trend and competition status

DuetotheimprovementofTaipower’sFinancialstatus,thereplacingprojectsofoldpowerplantswillbe released.MinistryofEconomicAffairspromotestheexportofTurnkey.Bothwillhelpthedomesticmanufactureystoexpandtheoverseasmarket.

(IV) Important certifications

2306

China Compulsory Certification

TaiwanExcellenceAwardfromMinistryof

EconomicAffairs

CED TAFCertification

EnvironmentalProtection Label

fromtheEnvironmental

Protection Department

ISO9001 ISO14001 OHSAS 18001 CNS Mark

IV. Long-term and short-term business development plans(I) Short-term plan Toutilizethenewlybuiltelectricplanttoreinforce

themanufacturingabilityandtheproductioncapabilityofpowertransformerstowinoverthe

Operation Overview


ordersofextra-highvoltageandcapacityofpowertransformers.

(II) Long-term plan BytakingTaiwanasanR&Dbase,Tatungwillbuild

itsworldwidemarketingnetworksoftheindustrialapplianceproductsbyenhancingtheinnovationandupgradingthequality.

Market and product statusI. Market analysis

(I) Domestic market share, future supply & demand and potential growth in year 20151. Market share:Transformersaccountedfor35%;

Switchgearsaccountedfor10%.2. Future supply & demand condit ions and

potential growth: Tatung’sindustrialapplianceproductshavebeensolddomesticallyandinternationally and won an excellent reputation fortheirquality,performanceandservice.Sincethedemandof localmarket isslowingdown,Tatungwillbedirectlypromotingoverseaspotential markets such as, the Americas, Australia,Japan,South-EastAsia,MainlandChina,Middle East, etc. continuously toincrease the product sales.

(II) Favorable and unfavorable factors and countermeasures 1. Vision plan of Industrial Appliance SBU Inresponsetothetrendofglobalenvironmental

protection,wewillcontinuetodevelopnewproductswithhigh-efficiency,energy-saving,lownoise levelandmeetRoHS-conscioustoenhance its green product image.

2. Favorable factors(1) Tatung has an enti re ser ies of power

productsincludingthepowerequipmentofgenerations, transmission and distribution, power cables, electric motors, solar power plant, etc.

(2)Taiwanesegovernmentwillbe releasingvar ious publ ic infrastructure projectscontinuously.AllofthesewillbringbusinessopportunitiesofpowerequipmentforlocalvendorsinTaiwan.

(3)Coo rd i nat i ng w i th the s t ra tegy o fMOE’s Industry4.0, Tatungwillpromotecustomization and IoT products.

3. Unfavorable factors(1) LimitedtoTaiwannotjointheInternational

tariffsunion, theexport sales isaffectedbycustomduties, it isnotconducive toexpanding export business

(2) InvestmentofTaiwanPowerCompanyisstillconservative.Itlimitsthedomesticsales.

4. Countermeasures(1) TechnologyCooperateswithoverseas

companies and expands the market with the partners together.

(2)Sincetheinvestmentoflocalprivatesectorsand infrastructureare increasing,Highdemandsofrelatedpowerequipmentareexpected. Tatung will promote the business opportunity by the customized and high qualityproducts.

II. Purpose and manufacturing processes of main products(I) Purpose Transformersandswitchgearsaremainlyusedfor

thegovernment’smajor infrastructureprojectssuch as power plants, transmission and distribution systemsandforprivateenterprisesprojectssuchasfactoryconstructions,buildingconstructions,traditionalmechanical&electricalmanufacturingindustries, etc.

(II) Manufacturing processes Through the procurement system, raw materials

andparts /componentsarepurchased fromwell reputedlocalandoverseassuppliers.Costreductionandstandardizationofproductshavebeendevelopingcontinuously.Tatungindustrialapplianceproductsarewidelyandtrustfullyusedby customers at home and abroad.

III. Procurement of major materials(I) Items of major materials SiliconSteel,Copperwires,Insulatingoil,Bushing,

Insulating material, Mild steel, Tap Changers, Radiators, Circuit breakers and Protection relays.

(II) Major suppliers (1) Overseas supplies: ABB,NGK,MR,JFE,Siemens,

Kitashiba, Toshiba, Hitachi Metal, Mitsubishi, etc.(2) Domestic Suppliers: ChinaSteelCorporation,Yi

Chiu Chemical & Technical Co., Ltd., Minchali Metal Industry Co., Ltd., Tatung Wire and Cable, etc.

(III) Various suppliers provide the materials with reasonable prices, good quality and appropriate delivery time. Through B2B procurement, it improves the ability of both strains.

Operation Overview


Power Equipment Business Unit - Wire & Cable Business ActivitiesI. Business scope


CategoryPercentage of product sales

%

Enameledwire,tinnedwire&barecopper wire, tailor-made copper wire

66%

Power cable 17%

Communication cable, electronic cable,opticalfibercable 17%

(II) Current products 1. Enameled wire, tinned wire, bare copper wire

Enameled wire:enameledcopperwire, inverterdutymotorwire(PEIV),compressorwire,enameledcopperwirefor300°C&400°Cgradesmokeandheatexhaustventilatorsmotor.Strandedenameledwire, enameled aluminum wire, enameled copper cladaluminumwire,enameledrectangularwire.fineenameledrectangularwire,USTC.Tinned copper wire:Highlysolderableevenly-thicklead-free tinnedcopperwire,Highly solderableevenly-thicklead-freetinnedcoppercladsteelwire.Bare copper wire:Barecopperwire,oxygen-freecopperwire,copper-alloywireofallvarieties,tailor-made copper wire.

2. Power cablePower cable: 600V~161kVhigh&low-voltageXLPEcable,PVCwireandcable,Rubbercable(EPR,Hypalon, Neoprene), Fire- resistant cable, Heat-resistantcable,Lowsmokehalogen-freecable.Busway distribution system: Insulation type (IP66), waterproof typeandfire-resistant typebuswaydistribution system.

3. Communication cable, electronic wire, optical fiber cable(1) Communication cable, electronic wire products Communication cable, PV wire, LAN cable,

notebookwire,RG type,CNS, JISetc.highfrequencycoaxialcable,extra finecoaxialcable,earphonecable,extrafineHDMIandextrafineUSBcable.

(2) Opticalfibercable Slotted,single-modeoptical loose-tubeBJFSM

opticalcable,opticalfiberpatchcord/pigtail,singleloosetubeopticalfibercable, jelly-filledopticaldropcable,Bend-Insensitiveopticalfibercable.,microbundleopticalcable,flatopticalcable.

Corrugated Steel Tape Armoured optical Cable.


1. Enameled wire & tinned wireHighly solderableevenly-thick lead-free tinnedcoppercladsteelwire,200°Chightemperatureenameledwire, fineenameledrectangularwire,extra f ineenameled rectangularwire,paperinsulated rectangular wire.

2. Power cablePV-CCSolarcable,WNCT-S flexiblecable,URDcable.,BKSbusduct,insulatedsegmentalconductorcableandopticalfibercompositepowercables.

3. Communication cable & electronic wire150°C/600VEPDMMotorLeadWire,2kV/90°CPVWire.


1. Enameled wire : Theprospects forenameledwireare increasingwithupgradesintheindustryandtherequirementforhighfrequencytransmission, improvements inheat resistance,developmentsof inverter surgeresistantmagnetwireused ineco-friendlypowerefficient inverter-drivenhomeappliances,andthediversificationofenameledcoilssuchasfineenameled rectangular wire, litz wire.Marketdemandforenameledwirestaysstable.

2. Power cable: Demandrisessteadilyinmajorpublicinfrastructureprojects,suchasTaipower,CPCCorporation,ChinaSteelCompany,massrapidtransit railwayprojectandthecountry'svariouscivilconstructionandextensionproject.

3. Communication cable: Tomeet thedemandofChunghwa TelecomCo. and other Telecom Co. in constructing next generationnetwork(NGN)and4G,procurementofcommunication cable and optical cable gradually increases.

(II) Relationship between the upstream, midstream, and downstream sectors of the industry

UpstreamSuppliersofrawmaterialssuchasplastic pellets, copper aluminum, tin opticfiber,steelwireetc.

Midstream Wire&Cablemanufacturers

Downstream Power, electrical engineering, and communicationelectronicsproviders

(III) Product development trend and competition status1. Enameled wire:

Enameledwireisbecoming,self-bonding,highheatresistant,Rectangularwire,finerectangularwireandsurge resistant.

2. Power cable: In response to smar t gr id pol icy of TPC, theEHVpower cable combinedwith f iber optictemperature sensor system, will be able to monitor the system load changes and proceed regulation, enablethecablelinestomaximizeitsperformance.Forthetrendsofenvironmentalprotection,cablesthatareenvironmentally friendly,ecocableandLSHFcablehaveallacquiredcertifications.Regardinggreenenergy,TATUNGdevelopsthePVwireandcableforsolarenergygenerationsystemandgetsthethirdpartycertificationsuccessively.

Operation Overview


3. Communication cables: BroadbandopticfiberandindooropticfiberhavebeenadoptedbyChunghwaTelecomtofulfillthepolicyofFTTH(FiberToTheHome).MicrobundleopticalcableandflatopticalcablecertifiedbyChunghwa Telecom. and now continue to supply to Chunghwa Telecom. We hope to enlarge the scale sothatsalesandprofitswouldincrease.



EUnetworksystemverification

ETLverification JapanPSECertification

2306

ProductSafetyofElectricalAppliance&

Materials

ULCertification TAFCertification

IV. Long-term and short-term business development plans(I) Short-term plan TaoyuanplantsupplycopperwiretoTatungoverseas

plants.Afterfabrication,theoverseasplantsdelivertheproductsbacktoTaoyuanplantforsales.Taoyuanplantwillmakefulluseoftheadvantagesoftheoverseasmanufacturingplants through jointlymarketing toestablishawin-winstrategy.Ontheotherhand,fortheunfavorableproducts,TaoyuanplantwillmanipulatetheOEMstrategytoutilizethesubcontractorresourcestoenhancethecompetitivenessoftheirproductsandtoincreaseperformanceandprofits.Atthesametime,Tatung’swireandcableplantswillexpandmarketsinJapan,India,SoutheastAsia,andMiddle-East

(II) Long-term plan Topurchaseenvironmentally fr iendlyhigh speed

machine, lookingfornewtechnologytosimplifytheproductionprocess, improveproductionefficiencyanddevelopthesecondsourcematerial,reducerawmaterialcostsandenhanceproductcompetitiveness.

Strengtheningproductqualityandmarketingnetworksfor the Thai,ChineseandVietnamplants, andexpandingmarketsinJapan,SoutheastAsia,theUnitedStates,India,andEuropeaswellasconstructingdeeperandwiderproductlines.Theintegratedoperationof“4sites,4plants”makesthemostprofitableinvestment.


1. Demand fromTaipower Linkou,Dalin, Tunghsiao,Shenaoupdatedworksofpowerplantunits,TaipeiandTaichungmass rapidtransit railwayprojectandthecountry'svariouscivilconstructionwork.

2. Demandforbarecopperwireandenameledwireis stable in Asia. Currently the Company adopts the integratedoperationof“3sites,3plants”andstrategyofflexibledelivery.

3. Favorablefactors:DemandforEPRcablefromTaipowerLinkou,Dalin,Tunghsiao,Shenaoupdatedworksofpowerplantunits,demandfor,25&15kVXLPEcablefromTaipower.

4. Unfavorablefactors:Underthepressureofoil&electricfees riseandpublicopinionabout reducingcapitalexpenditures,totaldemandofTaipowerpowercablesisgreatlyreducedcomparedwithpreviousyearsandcostsofrawmaterialsincreaseaspricesofcopperandoilrise.

II. Purpose and manufacturing processes of main productsEnameledwire,tinnedwireandbarecopperwire1. Purpose of enameled wire:transformers,vehicleelectric

products, motors, compressors, wireless charging coil, voicecoils,smartcardandchokecolietc.

Purpose of oxygen-free copper wire: solar ribbon wire, electronicflexibleflatcable,rectangularcopperwire,High-speedLANcable,qualitystereowire,extremefine-drawnwirecoppermaterials.,diodepins.

Purpose of tinned wire: resistor and capacitor wire.2. Production process: copper rod → drawing → annealing →varnish (or

tin coating) →finishedproducttest→ packaging → delivery

Powercable1. Various types of power cables, from600Vto161KV,

suppliedtoTPC,military,thepublic,andprivatesectorsand exported to other countries around the world.

2. Production process: copper rod drawing → stranding → insulated extrusion

→ wrapping → sheath extrusion →finishedproducttest→ packaging →delivery

Communicationcable1. Purpose: 3Cproductsforindoorvoiceanddatacommunication,

electronicdeviceconnection, signal transmission,power supply, (LAN)cables,broadband forhighfrequencydata transmission,andcable for long-distance high-capacity transmission.

2. Production process: Drawing → insulation → stranding → sheath extrusion →

inspection → packaging →delivery

III. Procurement of major materialsEnameledwire,tinnedwireandbarecopperwire1. Main materials: Copperplates,copperwire,varnish,tin,

aluminum wire, copper clad steel wire.2. Sources: Contractors at home and abroad.Powercable1. Main materials:copper,cross-linkedPE,rubber,PVC

pellets, LSHF compound.2. Sources: Contractors at home and abroad.Communicationcable1. Main materials:Copperwire,PEpellets,PVCpellets,

petroleumjellyandopticalfiber,LSHFcompoundetc.2. Sources: Contractors at home and abroad.

IV. Development strategy 1. Environmentalprotectionisaresponsibilityforall.Tatung

ismakinganall-outefforttodevelopitsproductsinthedirectionofbeinglow-lead,cadmium-free,low-smoke,andhalogen-free.

2. ContinuingtodevelopvariousLANcables,notebookwires, cell phone cables, satellite communication cables,andfiber-opticimagetransmissionmodules.

3. Enameledwire,barecopperwireandtinnedwirearebeingdevelopedtobeheat-resistant,rectangular,self-bonding,surge-resistant,highfrequencytransmission,suitable forheat-resistantandhumidity-resistantsurroundings.

Operation Overview


Motor Business UnitDescription of BusinessI. Business scope


Category %

Motors 84%

Generators 15%

Other products 1%

(II) Current products 1. Motors

With66yearsoftechniquesandexperienceinR&Dandproducingforallkindsofenergy-savinghigh-efficiency, single-phase,andthree-phasehigh-low-voltagemotorfrom1/8~30,000HP,fullspecificationincludedavarietyofspecialmotorandapplicationofthesystemsuchaspremiumhigh-efficiencymotors,high-temperatureresistantmotors,electricvehiclemotors,explosionproofmotor,newautomaticbrush l i f tingdeviceequippedwoundrotormotor,verticalhighthrustpumpmotor,gearreducer,invertermotor,aluminumframemotor,brake motor, oil well motor, water pump motor, immersible pump motor, built-in type spindle motor, rollingmotor,elevatormotors,cranemotors, permanent magnet motors, traction motors, inverters,controlpanel,eachtypeofventilators,etc;aswellasprovidingfullsolutionstoserveforwholeplantpowerequipmentandsystems engineering industries.

2. GeneratorsDieselgeneratorsetforlandandmarineuses,hydroelectric power group, motor generator setsforspecialpurposes.

3. Other productsAvarietyofcastings,etc.


Formedium-highvoltagemotors,thefocuswillbeonreducingframesize, increaseratingandtheintroductionofnewseriesoffintypecastingsseries,fintypeexplosionproofseriesandnewtophatsteelfabricatedframeseries.Forlowvoltagemotor,thefocuswillbeonthedevelopmentof

high-efficiencymotorsseriesandPMmotorsetc.1. Motors :

A. Developing2400kW/750kW6P/8P;largeLow-VoltageinverterMotorformarineduty.(Europeanmarket)

B. BrushlesssynchronousMotorC. HighvoltageExdIICExplosionProofmotor

Series D. AdvancedIE3MotorSeries(IncludingJapan

3spreadvoltage/HZratingsandexplosionproofmotorseries)

E. WPIPremiumEfficiencyverticalhighthrustmotor series

F. VerticalHollowShaftFirePumpMotorseriesG. AustralialowvoltageIE3seriesH. Northern America IP68 submersible motorI. PMservomotorseriesJ. LowvoltageExe;Exdexplosionproofmotor

series.(withIEC/ATEXcertificate)2. Generators:

Developmentof1060kW14Phydro-electricturbinedrivengenerator(ForJapan,Thailand,etc.)

3. Others:Cast iron castings, reducer, and gearbox


Sincethedrivingforcesofglobaltradegrowthshas being in its stagnancy, the annual sales turneddown30%ascomparedto2014.Lookingaheadtoward2016,eventhoughtheeconomicstatus may be better than 2015, the outlook of thedemandofelectricmotor tends tobeconservative.

(II) Relationship between the upstream, midstream and downstream sectors of the industry

UpstreamImportant parts, insulation materials, and metal raw materials, and power distributionequipment.

Midstreammotor product design and manufacturing.B2Bsystem,SAPsystem and PDM system.

Downstream

Government,privateenterprises.(Power plant, Steel plant, Petrochemical, Mining, Water treatment, ship, etc.)

(III) Product development trend and competition statusEnergysavingandenvironmentalprotection,high-endequipmentmanufacturing,newenergy,newmaterials; newenergycarsandgreenenvironmentalprotectionasacorevalueofthe

Operation Overview


commonpursuitinrecentyears,energysavingisthemainissuenowadays,newenergy-savingandelectricitysavingproductsarepopular(suchasinjectionmoldingindustry,electricvehicle).


2613

Canadian Standards

Association (CSA)


Compliance withthe

EuropeanDirectives

Compliance with American

safetystandards

Compliance with

American safety

standards

TAFCertification

IV. Long-term and short-term business development plans(I) Short-term plan

Continuousresearchandthedevelopmentonthenewseriesofmotor,high-efficiencymotorswillbethecorerequirementwhichamounted60%of thedevelopment thatenableTatungShanghaicapableoffullyutilizingitsresourcesandtheproductioncapacity.Byre-configurationoffavorableproductcombinationforsalesstrategyadjustmenttoachievethesalestarget.

(II) Long-term plan1. To integrate global production, enhancing

production capabi l i ty and al ign it with advancedglobalservicenetwork.Eventually;to establish the global sales channels around the world.

2. Energy saving technologies advancedcontinuously.Oneofthefocusesofresearchanddevelopmentwi l l beon lowenergyand low material consumption motors. High voltagemotorswillbetargetedonlarge-scale,customized,moreefficient,energy saving,lownoiseand lowvibrationfeaturesofhighvalueaddedmotorseriestokeepabreastofcompetitiveness.


(I) Year 2014, future supply and demand conditions with growth for domestic and overseas market share:Eventheglobaleconomybeing in recession,motordemanddecreased,andhavingmoreseverecompetition,Currentlydomesticmarketshare formajorproducts30%,andGeneratorproducts25%.1. Favorable factors

Thingshasbeenchanged, thedemandforenergysaving,highefficiencymotorincreased.Butcustomerizedproductsstillpromising.

2. Unfavorable factorsThe domestic motor market is saturated, the market size has not been expanded in many years.Moreover ; newcompetitors keepenteringthemarket,limitedgrossprofitwhich

led the competition to become more and more severe.

3. Countermeasure Enhancementofvariousmotorproductsdesigntomeetcustomerdemand,adjustmentofprofitableproductsalescombination,quickresponseandshortperiodoftimedeliverytomeet customer need, upgrade and up to date of thesuper largemotormaintenanceandservicetechnology.

II. Purpose and manufacturing processes of main products

Motor products are mainly used in power plants, t ransm i s s ions , d i s t r ibut ion sy s tems, p r i vateenterpr ises toengage in factorybuilt up,andconstruction industries. Small and medium sized motor is mainly used in the mechanical industries, waterpumps, liquidpumps, fans,aircompressors,refrigerantcompressors,elevators, forklifts,cranes,l ifts, l ift ladders. Largemotor ismainlyused forpower plants, cement, chemical, and industrial equipment,etc.

III. Procurement of major materials(I) Main material for motor:

1. Magneticmaterialandconductivematerial:silicon steel, copper, wire, insulating material, iron material.

2. Cast iron motor parts3. Motor peripheral: the control electronics, each

kindofaccessoriesfortemperaturecontrolandperipherals.

Operation Overview


CONSUMER BUSINESS GROUP

Advanced Electronics Business Unit

Business ActivitiesI. Business scope


Category %

Digital entertainment products 79.91%

Internet-of-Thingsproducts 20.09%

(II) Current products1. Digital entertainment product lines

Wired&wirelessheadsetsforgaming,Skypecertif iedwired&wirelessheadsets,headmounteddevices,andgamingaccessories.

2. Internet-of-Things smart devices product linesIP camera, baby camera and parent unit, Skype cer t if ied USB camera, IoT servicegateway, IoT smart controller and module, electronicvehiclesmartchargingcontrollerand sensing-and-control products.


1. Digital entertainment productsDevelopwiredandwirelessheadset,headmounteddevices,andgamingaccessoriesforentertainments.Thedigitalentertainmentproductlinesarewithstylishdesigns,anddeliverhighdefinitionaudioandvideo.

2. IP camerasIP cameras can support high compression rate forhighdefinitionvideoquality,andfurtherlyintegrate temperature, light, sound, and motion sensorsforenvironmentalmonitoring.Cameraproduct linesarecertifiedbyglobal leadingcloudserviceproviderstoprovidebestaudioandvideoperformance.

3. IoT Smart devices and sensing-&-control productsEmbeddedleading–edgetechnologies,seriesofTatungIoTsmartdevicesincludeIoTservicesgateway, IoT smart controller and module, electronicvehiclesmartchargingcontrollerand sensing-and-control products which innovateuserexperiencesandarethecoredevicessupportingsmarthome,office,factory,building, campus and city applications.

(II) Research & development 1. Head set product l ines are designed with

ergonomicandmodish form factorsandequippedwithwidebandaudioandultimatesoundquality.

2. Develophighdefinitionbuilt- inandadd-oncamerasforsmartTV.ProductsarecertifiedbySkypeandleadingserviceproviders.Supportleadingfeaturesincludinghighdefinitionvideoshooting,highcompressedvideoformat,noisesuppression,ease-of-use,andinteroperability.

3. DevelopIPcameraswithadvancedfeaturesincludingnightvision,environmentmonitoring,eventdetection,andeasyinstallation.

4. Incorporatedwithcloudservices, IoT smartdevicesfocusonenergy-saving&efficiencymanagement,security&safety,andwellnessmonito r ing appl icat ions . P roducts a re environmentalfriendly, lowpowerconsuming,and compliant to international standards.

(III) Important certifications

Compliance withthe

EuropeanDirectives


safetystandards


CompliancewithU.S.Federal

Communications Commission

fortelecommunications

Product Inspection LabelfromBSMI,

MinistryofEconomicAffairs

WEEE Compliance with German

&Europeansafetyrequirements

Compliance with Japaneseemissions

control standards by VCCI

RoHS EnergyConservation

Label

EnergyStar


Asthepenetrationrateofconnecteddevicesgoing high, broad band Internet accesses becoming ubiquitous, cloud services andbig data analytics and applications getting mature,thesefactorspullhighthedemandsofconnected products and IoT applications. New businessmodelsandapplicationareinnovatedby alliances among branders, channels and operators for newappl icat ions. Foreseenemerging products & solutions include accessories forentertainments, IoTdevices,sensors,energysaving&efficiencymanagement,environmentmonitoring,securitysurveillancesystemandetc.


Upstream

System-on-a-chip, memory, communication IC/module, digital signal processor, sensor component, power IC/module, mechanical parts, andsoftwarevenders.

Midstream Headset,IPcamera,IoTdevicedesignersandmanufacturers.

DownstreamODM/OEMcustomersincludebranders,channelsandoperators.Endusersarehome,office,corporate,andgovernmentusers.

Operation Overview


(III) Product development trend and competition status1. Digital entertainment products

Toechothetrendofenvironmentalprotection,theon-goingproductdevelopmentwillenablewidebandaudio,HDvideo,RFtechnologies,fashiondesigns,andpowersavingfeaturesfordigitalentertainmentproductlinestoprovidecustomersbestprice/performanceproductsinline with the most updated and standardized model requiredby thecorecloud serviceclients.

2. IoT Smart devices & solutionsProducts are designed with easy installation, bundledwithcloudservicesorprivatecloudprojects,andincorporatedwithsmarthandhelddevices, TV&PC foreasyuse. Their smartrelevantapplicationscanbeextendedfromhomes,offices,buildings, factories,campus,communities to cities.

(IV) Plans for developments1. Al l iedwith global leadingplatformand

solutionproviders,Tatungengages itseffortson advanced technology researchanddevelopmenttoprovidenewproductswithcutt ing edged features and enhancedcompetiveness.

2. To adapt the most updated technology and application, Tatung has long-term partnerships withkeycomponentvendersforco-developingtime-to-marketproductstoboostprofitsandsalesperformance.

3. Advancedtechnologiesaredevelopedandappliedtoprovideusers smart,convenient,energysaving,safe,andenvironmentfriendlylifestyles.


(I) Future supply & demand conditions and growth potential1. According toan international forecasting

report, theglobal salesof IoTproducts&solutions isaboutUS$97.6billion in2015,andwillgrowenormouslytoUS$362billionin2020.MinistryofEconomicAffairsalsoengagesitsefforts tosupport Taiwanesevenders fordevelopingIoTcoretechnologiesandproducts.It isestimatedthatthesalesofIoTproducts&solutionsbyTaiwanesevenderswillbeoverUS$14billionin2020.

2. The market research company estimates that therewillbeover15billionconnecteddevicesworldwidein2020.Demandsofcloudbaseddeviceswithenergy-saving features for IoTapplications keep tremendous growth.

(II) Favorable & unfavorable factors and countermeasures1. Favorable factors

With in - house experienced R&D teams, Tatungleveragesgloballeadingplatformsforadvancedsolutionstodeliverproductswith

competitivenessandfulfillmarketneeds.2. Unfavorable factors

Products suffer fromtheshort lifecycleandintense price competition.

3. CountermeasuresEfforts& investmentsarecontinuously tobe made to enhance product planning capability,developmentexpertise,productquality,manufacturingefficiency,andglobaloperating.

(III) Competitive niches and strategies for growthWitheffectiveandflexibledesigns,customizations,and manufactu r i ng se r v ices on d ig i ta lentertainment and smart application products, Tatungprovidescustomers fast reactions toaccommodate market needs. Customers and Tatungbenefitfromthisstrategyandhavetightlypartnershipsforcontinuousgrowthonbusiness.

(IV) Mission, core values, and vision1. Mission:Tofacilitateworkandenrichlifewith

advancedtechnologies.2. Corevalues:Innovation,teamwork,quality,and

humanity.3. Vis ion: Tobecustomers’ best choiceby

integratingproductsandsolutionswithvalue–addedapplicationsandservices.

II. Purpose and manufacturing processes of main products(I) Purpose

Productlinesmainlyfocusondigitalentertainmentandsmart livingapplications includingvideo&audio entertainment, networking, automation, energymanagement,assistedlivingandsecuritysurveillance.

(II) Manufacturing processesTatungoffersglobalcustomerscompetitiveproductsandcompleteservicesthroughproductresearch,design,validation,manufacturing,testing,packaging,warehousing,delivery,logisticsandservice.

III. Supply of main raw materialsToassureproductqualityanddelivery,Tatunghaslong-termpartnershipwithrawmaterialvendersfortimelysupplies.Tatungmainlymanufacturesin-house,andalsoout-sourcessomecomponents/partsfromqualifiedvenders.

Operation Overview


Appliance Business UnitBusiness ActivitiesI. Business scope


Category %

Air conditioners 37.58%

Small home appliances 10.88%

Large home appliances 35.85%

LEDTVs 14.18%

Compressors 1.51%

(II) Current products1. Air conditioners: Window-type air conditioners,

split type air conditioners, commercial air conditioners,chillersforcentralairconditioning,heatpump,covertdehumidifier,dehumidifiersandair-purifiers,

2. Home appliances: Refr igerators,washers,coolers/freezers,electricfans,electricthermalkettles, steaming irons, hair dryers and electric kettles.

3. Kitchen appliances: Multi-functionalcookers,hotpots, inductioncookers,ovens,microwaveovens,blenders.

4. LED TVs: Digital TV with embedded Hi-HD tuner, LEDbacklightLCDTV,4KUHDTVandsmartTV.

5. Compressors: Compressorsforvariousappliancessuchasrefrigeratorsanddehumidifiers.


1. Air conditioners: R&Dof inverter-controlledairconditioningdrivermodules,APPsmartkit,remote monitor system.

2. Home appliances: R&Dof inverter-controllertechnologies,developmentofenvironmental-friendlycoolantsystems,plasmasterilizationanddeodorization systems.

3. Kitchen appliances: Developawiderangeofuniqueandmulti-functionalproductsbasedonenergy-saving,environmental-friendlyandhealthy concepts.

4. LED TVs: Increasethe ratioofenergy-savingLEDbacklightproduct lineswith innovativeUltra,HD,4K,2K,curvedDisplayandsmartTV

technology, while adding superior crystal image technologytoenhancetheperformanceofdisplay products.

5. Compressors: Refr igerant compressors ofenvironmentalprotectionstandard, inverter-controlledenergy-savingcompressorsandoil-less compressors.


1. Strengthenthefunctionofbrandoperation;useinnovativeproductdesignsandqualityproductstoenhancebrandvalue.

2. ExpandoverseassalesandChinamarketingactivities.

3. Improvethemanufacturingprocesscapability,qualitycapabilityandproductcompetitiveness.


Upstream

Memory, integrated IC processors, LCD panels,software/hardwaredevelopment,plastic resin, copper, aluminum, iron, packing materials, electronic substrates, motor, compressors.

Midstream LEDTV,homeapplianceproductsmanufacturers.

Downstream

Retailers,franchisestores,servicestations,wholesalers, clients, businesses, public places,governmentagencies,medical,educational,financialandinsuranceinstitutions.

(III) Product development trend and competition status1. LED TVs:

There’llbetwotrendsforthefuturedevelopmentonLEDTV: larger sizeandhigher resolutiontechnology (ex: ultra-highdefinition). ThepenetrationrateofsmartTVpredictstoreach40%marketsharein2014,andTatungwilltrytoprovidemorevideocontentsand improveabetteruserinterfacetoenhanceourproducts’competitiveness.

2. Home appliances:Ashomeappliancefield isamaturemarket,facingtheseverecompetitionfromoverseasandlocalvendors,Tatungneedstofocusitsproductdevelopmentondesigningsmart, innovative,multi-functional, refined,andenergysavingproducts.TatungSmartHEMSAppcreatesamoreefficientandeffectivewayofmanagingtheelectricalappliancesanddeviceswithoutsacrificingcurrentlivingcomforts.TatungSmartHEMSisusefulforanyonewhowantstoreducehomeenergyconsumptionandsavemoney;itoffers users totalmanagementofhomeenergy consumption with appliance control, energyconsumptionmonitoring,andself-monitoringfunctionsanytime,anywhere,throughanyinternet-enabled personaldevice.

Operation Overview



Compliance withthe

EuropeanDirectives


safetystandards


ISO9001 ISO14001 EnergyConservation

Label

CertificationBodies'

Schemer

Saudi Arabian Standards

Organization

GMP certificationfromthe

Department ofHealth,

ExecutiveYuan

EnvironmentalProtection

Label fromthe

EnvironmentalProtection

Department

Taiwan ExcellenceAwardfromMinistryofEconomicAffairs

CompliancewithU.S.Federal

Communications Commission

fortelecommunications

Product Inspection Labelfrom

BSMI,MinistryofEconomicAffairs

WEEE Compliance with German &European

safetyrequirements

Compliance with

Japaneseemissionscontrol

standards by VCCI

RoHS EnergyStar

MIT JapanPSECertification

RCM (Regulatory Compliance

Mark)

IV. Long-term and short-term business development plans(I) Tatung’sInnovationR&DCenterrecruitsoverseas

andlocalexpertstoprovidetechnicalassistanceandguidance,anddevotesitselftothein-depthdevelopmentofforwardlookingtechnologiestodistinguishfeaturesofforthcomingnewproducts.

(II) Tatungwillcontinueeinforceitscollaborationwithmajorsuppliersofkeypartsandcomponentsforraisingtheprofits.

(III) LEDTVandhomeappliance industrybotharesaturatedandmature.Tatungwill improvethemanufacturingprocess, reducemanufacturingcost,anddevelopinnovativeproductstoenhanceitsoverallcompetitiveness.


(I) Domestic market LEDTVsandhomeappliancesmarket inTaiwanin2015:1126KunitsofLEDTVs;748Kunitsofairconditioners;57Kunitsofwashers;522Kunitsofrefrigerators;1134Kofmultifunctionalcookers;223Kunitsofmicrowaves.

(II) Overseas market Theoverseassalesofhomeappliancesin2015;35Kunitsofmulti-functionalcookerssoldtoAmerica,China, Hong Kong, Philippines, Australia and NewZealand;55Kunitsofcompressorsforfridgesandwatercoolers; salesamountUS$3.64Mofair conditioners including residential type and commercial type.

(III) Future demand and growth potentialThe expected growth rate will be more than about 5%in2016.

(IV) Competitive niches1. Good brand reputation, superb logistic system,

fastandexcellentservicenetwork.

2. Automated production, products with high stability and reliability.

3. Outstanding R&D capability.4. Tatung owns distribution channels and global

supply chain system.(V) Favorable / unfavorable factors and

countermeasures1. Favorable factors: Withthesignof improving

economy,Tatungaggressivelyworksonbothdomesticandoverseasprojectstoseizebusinessopportunities.Meanwhile,wekeepimprovingtheservicesofalldistributionchannelstofurtherenhance brand reputation.

2. Unfavorable factors: The shor t l i fe cycleand intensepricecompetitionofconsumerelectronicproducts;traditionalstoresfacefiercecompetitionfromITshops,chainstores,discountstores,on-lineshoppingandtelevisionshoppingchannels.

3. Countermeasures: Efficienthumanresourceplanning, strengthening R&D and production capabi l i t ies , p rov id ing innovat ive anddifferentiatedproductstoboostsales.Strategicallianceswithmajorwholesalers to increasesales.

(VI) Mission, core values, and vision1. Mission: Toenrichpeople’sworkandlifewith

cutting edge technologies.2. Core values:Innovation,teamwork,quality,and

humanity.3. Vision: Tobecomeconsumer’sbestchoiceby

deliveringqualityproductswithvalue-addedapplicationandcustomerservice.

II. Purpose and manufacturing processes of main products(I) Purpose

Tatungoffersconvenient,healthy,comfortable,energy saving and envi ronmental -f r iendlyhousehold electric appliances to customers. The products are used by businesses, public locations, governmentagencies,educationalinstitutionsfordisplaying, informationtransmitting,enhancingefficientworking,andprovidingentertainment.

(II) Production processes FromR&D,design,molding,manufacturing,testing,packaging, warehousing to transportation, Tatung providescustomerscompleteproduct lineandafter-salesservicethrough itsnationwidesales/servicenetworkandlogisticssystems.

III. Supply of main raw materialsMainrawmaterialsarepurchasedfromandsuppliedbyreputableoverseasordomesticvendors.Tatungestablished steady supply-demand relationship with themtoensureproductstabilityand,throughtheB2Bsystem,tofurther lower its inventoriesandmaterialcosts.

Operation Overview


SYSTEM BUSINESS GROUP

Smart Solution Business UnitBusiness ActivitiesI. Business scope


CategoryOperating Revenue

%

MajorscopeofSSBUshallbetwomajorareassuchasInternetofThings(IoT)andSmartGrid,includingSmartBuildingManagement System, Smart Home Management System, AMI and Micro Grid System.

100%

(II) Current products■ IoT - Smart Building, Smart Home and

Electromechanical Systems1. Smart Building Management Systems (SBMS) /

Smart Home Management Systems (SHMS) / Smart Energy Management Systems (SEMS)

Energymonitoring,bill ingandmanagementsystems which could be appl ied to power plants,communities,factories,buildings,schools,dormitories and etc.

■ Smart Grid - AMI and Micro Grid System1. Smart Meters and AMI System FullseriesofANSI/IEC/MID/JISsmartmeters,

prepayment meters, electronic meters, home andbusinessusepowermonitoringmeters;MeterInterfaceUnit(MIU),dataconcentratorunit,andconsumption data collection and management systemsoftware.

2. Micro Grid System Micro grid system which could be applied to grids,

cities,communities,factories,military,off-shoreislandsandetc.Productsincludesmart inverter,renewable energy and energy storage system.


Specializing inSBMSand intelligentgateway;SHMS,In-HomeDisplay(IHD)andpowermonitor;electricitycontrol, metrology technology and communication protocol, products include smart meters, communication module,MIU,dataconcentratorunit,communicationserver,aswellasconsumptiondatacollectionandmanagement system software;energydiagnosis,monitoring and management system, prepayment metering system, and micro grid system.


■ IoT - Smart Building, Smart Home and Electromechanical Systems

Inresponsetotheriseof IoTbusinessopportunities,Tatungintegratedenergy-savingequipment,ICT,bigdata analytics, and energy management systems, providingcustomerscompleteandconvenientapplications.

■ Smart Grid - AMI and Micro Grid System1. Constructionofsmartgridhasbeenoneofthe

worldgovernments’energypolicies;whereinAMIisthemostcriticalinfrastructure.

2. The trend in electricity meters market shows that smart meters gradually replace mechanical meters and electronic meters.


Upstream MeteringIC,MCU,communicationmodule,inverterandenergystorage

MidstreamSBMS,SHMS,microgridsystem,AMISystem, smart meters, IHD and power monitor

Downstream Utilities,factories,enterprises,residentialand military areas

(III) Product development trend and competition status■ IoT - Smart Building, Smart Home and

Electromechanical Systems1. IoT is theworlddevelopment trends. Taiwan

shouldgradual lymove towards theeraofprovidingvalue-addedsolutions fromthatofmanufacturing,therefore,howto integratethevariousverticalmarketresources insideTatungGroupandtoprovideacompleteprogramareourBusinessUnit’spriorities.

2. SmartbuildingmarketmostlyadoptsBMS(BuildingManagement System) as the main control system currently.Itsshortcomingisbeingindependentofinter-systems’controlandunabletocommunicatewitheachother, thus the future trendwillbetheinputofIoTtechnology,sothatconstructionbecomes not only building automation, but smart buildings.

■ Smart Grid - AMI and Micro Grid System1. SSBU is theonlyAMIsystemsupplier forTPC in

Taiwan,whichhadalreadybuiltuphigh-voltageand low-voltageAMIsystems forTPC(TaiwanPowerCompany). Inordertomeetcustomers’requirements,wedevelopvariouscustomizedapplicationstofurtherimprovetheperformanceandefficiency.

2. In response to market demand at home and abroad,wedevelopvarioustypesofcompetitivefundamental-formelectronicmeters,high-endmodel with a communication module, and were globally recognized.

(IV) Important certifications and awards■ IoT - Smart Building, Smart Home and

Electromechanical Systems “Diamond-LevelSmartBuildings”and“Gold-Level

GreenBuildings”two-itemcertificationcandidate’sTatung Smart Manor won “Taiwan's excellent Smart GreenBuildingcumSystemProductAward2015”GoldAward in Design Category.

■ Smart Grid - AMI and Micro Grid System ANSIcertificate in2011; IECcertificate,andDLMS/

COSEMConformancetest in2012;JIScertificateandMIDcertificate in2014.Tatungiscurrentlytheonlyrelatedinternationallycertifieddomesticmetermanufacturer.

Operation Overview


03-EM-F0404 Issue: 1.0Copyright UL LLC. All rights reserved. May not be reproduced without permission. UL PROPRIETARY AND CONFIDENTIAL. FOR UL INTERNAL USE ONLY. This document is controlled and has been released electronically. The version on the UL intranet is the up-to-date document. Hard copies are uncontrolled and may not be up-to-date. Users of hard copies should confirm the revision by comparing it with the electronically controlled version.

UL METER PERFORMANCE COMPLIANCE REPORT FOR:

Tatung Co.22 Chungshan N Rd, Sec 3, Taipei, 104, TW

Product: E3 Electricity Meter New Nic

ANSI C12.20 0.2 and 0.5 Accuracy Classes for Static Meter Test Report

American National Standard Institute, Inc.

Date: July 12, 2012Project: 11CA59939

Job: 1001448768Report: R11CA59939

NATIONALLY RECOGNIZED TESTING LABORATORY:

Underwriters Laboratories Inc.12 Laboratory Drive, RTP, NC 27709

DLMS User Association

Bahnhofstrasse 28 Tel. +36 28 514065 CH-6304 Zug Fax +36 28 514066 Switzerland [email protected]

device

languagemessagespecification

Certification No. 1285 This is to certify that the metering equipment identified as:

Type: ETD-21Mgmt. SAP = 1, "54415445544432313030303030303031" (TATETD2100000001)

manufactured by: TATUNG

has successfully passed the DLMS/COSEM Conformance test, under the following conditions: CTT version: CTT version 2.5 Licensed to: ITRI_Taiwan (2011/06/28) COSEM object definitions file version: Object_defs_v2.6_120912.dat Media identifiers used: [ABSTRACT, ELECTRICITY]

Testperformed

Communication profile

Opening mode Application context

Date and time Digital signature of the test report

Test 1 3-layer HDLC DIRECT_HDLC LN 29th Nov 2012 1FF5757E12FAD54ED20A0A5726EA5B4B

The authenticity of the test report(s) has been verified by the DLMS User Association and the metering equipment identified above is listed on its web site at: http://www.dlms.com. With this, the manufacturer is entitled to display the DLMS/COSEM Compliant mark – shown below – on its product duly identified and on its product literature.

The test reports are filed by the DLMS UA. Copies are available from the manufacturer. This Certificate is only valid for the functions successfully tested. The test has been executed on one specimen of the product, as identified by the Management Logical Device Name reported. Results may not be applicable for other test specimens.

Date: Zug, the 30th November 2012

Paul Fuchs General Secretary

COSEM Compliant

ANSI IEC DLMS/COSEM

JIS MID

IV. Long-term and short-term business development plans(I) Short-term plan

■ IoT - Smart Building, Smart Home and Electromechanical Systems1. Participatingactivelywithalliancepartners in

exhibitions at home and abroad, promoting system concepts containing smart building solutions.

2. Understandingdomesticand internationalconstruction industry patterns, negotiating with relevant industriesand implementingProofofConcept (POC).

3. ProvidingsmartsystemsofIoTtechnology.Settingupinfrastructurefirst,andthenmakingeffectiveuseofthefollow-upavailable informationandanalysis.

■ Smart Grid - AMI and Micro Grid System Strengthen the relationship with main customers, build

effective retailchannel fordomesticmarket,anddevelopSoutheastAsia,MiddleEast,Japan,Europeand America markets.

(II) Long-term plan■ IoT - Smart Building, Smart Home and

Electromechanical Systems1. InputTatungsmartbuildingandhomesystemfor

thecaseoflarge-scaleconstruction(commercialofficeandresidence).

2. Participate in domestic and international smart city-related tenders.

3. DevelopandexpandmarketsinSoutheastAsia,Japan,EuropeandtheUnitedStates.

■ Smart Grid - AMI and Micro Grid System Participate in domestic and international smart grid

plan,strengthenandimproverelevanttechnologyand research&development capabi l it ies, toaccelerate product automat ion and system development,andactivelydevotealotofefforttothemicrogriddevelopmentofkeytechnologies.


(I) Domestic market■ IoT - Smart Building, Smart Home and

Electromechanical Systems

1. SBMS• CompletedsmartbuildingprojectofElitegroup

ComputerSystemsCo.,Ltd.attheendof2014.• TheECSproject saved13%on itselectr icity

consumption in 2015 compared to the same period in 2014.

2. SHMS• “Diamond-LevelSmartBuildings”and“Gold-

LevelGreenBuildings” two-itemcertificationcandidate’sTatungSmartManorgotan80%salesrate.

■ Smart Grid - AMI and Micro Grid System1. Low-voltage (LV) AMI plan by TPC• 2012-2015:Completethe installationofLVAMI

system and 10,000 LV AMI smart meters.2. Micro Gr id Demonst rat ion Park in L inbian

Township, Pingtung• Wasgranted “Smart Energy Saving”award

in the “SmartCity” InnovativeAppl icationAwardsponsoredbytheBoardofScienceandTechnology,ExecutiveYuanin2015.

• In2015,obtainedasilvermedalofsmartgridfieldproposedbyAPECEnergySmartCommunitiesInitiative.

(II) Overseas market■ IoT - Smart Building, Smart Home and

Electromechanical Systems Softwareandserviceshavereachedahighlevelof

growthinglobalIoTapplicationsdevelopment,andthemarketisexpectedtoreach$120billionby2018.

■ Smart Grid - AMI and Micro Grid System TheEuropeanUnionhasannouncedtheVision2020

developingandpromotingsmartgridthereafterandforgingtowardsitsgoalofdeployingsmartmetersto80%,andthemarketcontinuestogrow.

II. Purpose and manufacturing processes of main products1. Purpose

PowerCompany’sbillingmeters, factoryandhomeenergy-savingmonitoringandloadingandunloadingdevicecontrolsystem.

2. Manufacturing processes Currently, design, mold making, assembly, testing and packaging,allareperformedinTaiwanlocally.

III. Supply of main raw materialsMaterialsaremanufacturedeitherin-houseorfromqualifieddomestic or international suppliers to ensure product stability and reliability.

IV. Development strategyIoThasbeen the trendofglobaldevelopment. TatungadoptsanentirelynewIoTtechnology,developingacloudmanagementplatform,SBMS,allyingwithIntelCorporationtointegratetheGroup'sinternalresourcesofECSintelligentgateway,andmonitor ing thebuilding’sAC, l ighting,elevators,fireprotection,parkingandotherfacilities,whereininputting thisbusiness’SmartEnergy -AMIandenergygenerating - micro grid solution, hoping to build a smart greencommunity.Inaddition,SSBUalsoactivelyplanssmarthomesolutionwhichleveragehumanizedIHDtointegratesmartappliancesdevelopedby theHomeApplianceBU,remotecaresystemsconductedbyTatungMedical&HealthcareTechnologiesCo.,Ltd,aswellasthesensorsforenvironmentalhealthandsecurity. It isdesirabletogiveresidentsasafeandcomfortablehome.

Operation Overview


System Integration Business UnitBusiness ActivitiesI. Business scope


Category %

ICT applications 52%

NewEnergysystems 7.44%

Infrastructuresystems 40.56%

(II) Current productsSales areas are all located in Taiwan. Main product categories are:■ ICT applications

Distr ibutemajorbrandsof ITproducts,NEC IP/PBXsystemand telecommunicationequipment.Developsmartenergymanagementsystem,officialdocuments management system, attendance system andavarietyofgovernmentprojects.

■ New Energy systemsNew energy sys tems conta in Tatung's so la r photovoltaicsystemsengineering,public/privaterooftop leasing,portable solarenergy storagesystems, and integrated planning on renewable energyandgreenenergyfacilities.

■ Infrastructure systemsInfrastructuresystemsconsistofpumpingstationelect romechan ica l sys tems, t ranspor tat ion andelectro-mechanical integration services,including trafficcontrol& transmission system,track electromechanical systems, and intelligent recognition system, etc.


■ ICT applicationsVi r tua l i zat ion, c loud comput ing, WAN/L AN implementation, heterogeneous integrated systems, officialdocumentsmanagement system, socialwelfaremanagementsystem,theBLI informationmanagement system, accounting system, logistic management system,andquestionnaire surveysystem.

■ New Energy systemsPV system design, PV monitoring system, and PV home energy storage system.

■ Infrastructure systemsTrack E&M sys tem, communicat ion sys tem,intersection preemption signal system, automated toll collectionsystem,andintelligentidentificationsystem,etc.

(II) Research & Development■ ICT applications

Governmaentofficialdocumentsmanagementsystem,whichhasbeenoperatedforovertenyears,hasbeenconvertedintostreamlineenterpriseversion.Inaddition,Tatungismovingtowardthedevelopmentofprofessionalsolarmonitoringsystem.

■ New Energy systemsTatungprovides electr icity equipment,waterpumpingandotherfacilitiesrequiredbylivelihoodoragricultureforMiddleEastcountriesandremoteareastoimprovethequalityofenvironment.

■ Infrastructure systems

Thedevelopmentdirection ismainly focusedontrafficelectro-mechanicalintegration.Thedivisionwillalsodevelopintellectualcontrolsystems.


■ ICT applicationsFacedwiththeneweraofcompetition,itisnecessarytofindpatternstointegrateresourcesquicklyinorderto create new business opportunities.

■ New Energy systemsWiththeMillion-Solar-Rooftop-PVsprojectspromotedbyBureauofEnergy,MinistryofEconomicAffairs,Tatungprovidesplanningandinstallationtechnologyfor solarpower systemsandefforts topromoterenewable energy.

■ Infrastructure systemsTransportationininfrastructureisquiteacomplicatedsystem.Therefore,providingintelligenttransportationintegratedsolutions isan importantdirection forindustrydevelopment.

(II) Relationship between the upstream, midstream, and downstream sectors of the industry■ ICT applications

Upstream suppliersforPCs,mainframes,networkfacilities,anddevelopingtools

Midstreamagents/providersfornetworkinfrastructure,systemsintegration,applicationsoftware

Downstream endusersforgovernmentinstitutions,schools,public/privatesectorsandsoon

■ New Energy systems

Upstream siliconmaterialsandsolarwafers

Midstream solar cells and solar modules

Downstream solar system integrators

■ Infrastructure systems

Upstream manufacturersforelectro-mechanics/communications

Midstreamprovidersforcabledeployment,applicationsoftwaredevelopmentandsystem integrations

Downstream endusersforgovernmentinstitutions,public utilities, etc.

(III) Product development trend and competition status■ ICT applications

This year can be said to be an important year to accelerateIoTdevelopment.Itbeginstoseekmuchmore innovativeapplicationsandservicesontheplatformthisyear.Bigdataanalysiswillgraduallybecomethemainkeyfactortobusinessinnovation.

■ New Energy systemsWecooperatewiththe localgovernmentactivelythroughprofessionaladvicesandsupport.Weexpectourselvestobethelargestgreenenergyinvestorsinthecomingfewyears.Wealsointegratetechnicalresources with Tatung's group and national research unitstoprovidethebest integratedsolutiontotheworld.

■ Infrastructure systemsControlexternal factors, likepreventingpeopleto

Operation Overview


cross the railway routes or reducing extreme climate threatsandimproveproblems,suchasrailvehicles,tracks andoldelectr ic equipment.And thenenhancetheoperationofrailwaysafetyandreduceequipmentfailure.

IV. Development strategy■ ICT applications

1. Differentiategoodsandservices2. Strengthen the existing customer relationships, and

gain new clients / new business opportunities3. Provideabroaderproductlinetomeetcustomers'

needs4. Increasethehighgross-profitportfolios5. Replicate solutions, and stimulate customers' demand6. Developcloudservicesand informationsecurity

solutions7. Buildgoodrelationshipswithsupplierstoextendthe

productservices■ New Energy systems

Tatung can customize the best program according tocustomers' special requirementsandbetter lifeconsideration.

■ Infrastructure systems1. Fight for trackelectromechanicalengineering

business. 2. Tatungcombinedwith ICTdivision's technical

expertise,performsSuhuaHighwaytrafficcontrolsystem improvementsandexpands thehighwaytrafficcontrolmarket.

3. Expand pumping stat ion electromechanicalintegrationservicesmarket.


(I) Domestic market■ ICT applications IDCpredictsthatinformationsecurityinTaiwanisthe

mostimportantinvestmentinthesubsequentyears.■ New Energy systems Withthegovernmentpolicysupport,theypromote

theconstructionof solarphotovoltaic systems inprivateenterprisesand residentialareas throughmatchmaking business which expands the solar PV systems market in Taiwan substantially.

■ Infrastructure systems Theimplementationscheduleoftherailwaytraffic

safety improvement six-yearplanapprovedbyMinistryofTransportationandCommunicationsstartsfrom2015to2020.Itisexpectedtofund27.522billionyuan.

(II) Factors for Development Visions and Response Strategies■ ICT applications IDC expects that in 2016 Taiwan enterprises will

acceleratethedigital transformation,continuetoincrease their IT budgets and expenditure, and import moreinnovativetechnologyandbusinessmodeltoenhancetheircompetitiveness.

■ New Energy systems1. Advantages:

•Provide the best ver t ical integrat ion ofresources.

•TatunghasestablishedphotovoltaicsystemsalloverthecitiesandcountriesinTaiwan.Tatunghasofferedreliableservicesandsupport.

2. Disadvantages:• Thegrowthoftheorganizationisveryrapid.

• Theoverseasmarketisgoingtobedeveloped.3. Response Strategies:

• It is thegoal to trainandcooperatewithpartners.

•Set upoverseasbranchoff ices, andgetinvolvedinlocalconstructiondirectly.

■ Infrastructure systems1. Advantages:Governmentpromotesthepolicyplans.

Thedemand for themechanicalandelectr icalintegrationininfrastructurehasincreased.

2. Disadvantages: In transportationconstruction, thesubsequentmechanicalandelectricalengineeringoftenbehindscheduleduetotheuncertaintyofcivilengineering.

3. ResponseStrategies:Strengthenprojectriskassessmentandchoosesuitableprojectscarefully.

(III) Competitive niche and Growth Strategy■ ICT applications

1. Competitiveniche•Beawell-knownbrand,providenationwideservices

•Possess rich large-scale system integrationexperience in the public sector

2. Growth Strategy•Leancustomerservices•Reinforceprofessionalprojecttechnologies

■ New Energy systems1. Competitiveniche

•Own rich implementationexperiences forhundredsofpublicbuildingsandcases inTaiwan.

•Provideadequateandcompletesolarproductsline.

2. Growth Strategy•Expandoverseasmarketsactively.•EngageinEPCbrandmanagement.

■ Infrastructure systems1. Long-termgoodreputationfromthecustomer

trust.2. Professionalelectromechanical integration

experiences.(IV) Mission, Core Values and Vision

Providecomprehensivesystem integrationsolutions.Suit the action to the word with cautious commitment. Become themostprofessionaland largest systemintegrationstrategicpartnerforthepublicsectorinthedomestic market.

II. Development Direction and Processes Control(I) Development Direction

1. Official Documents System — Allow enterprises to improve theefficiencyofofficialdocumentsmanagementandtosolvethefileaccessneeds.

2. Tatung’ Smart Energy Management System — Assist the enterprise to implement energy management andtomakethemostefficientusageofelectricity/energy.

3. PV Monitoring System — Allofinformationwillbesentbacktotheclouddatabase.Userscankeeptrackofallinformationofthesolarpowersystemanytime.

4. Fromrelatedinstallationofsolarsystemstocreatingnewenergyandenergy-saving.

(II) Processes ControlHigh-valuedproductsandservicesaredeliveredtocustomersvianationwideservicenetwork.

III. Supply OverviewIntegrate Tatung group's complete product chain and high qualityofproductsathomeandabroadinordertoensurerigorousproductionprocessesandwell-warrantyservices.

Operation Overview



Business Activities/ContentsI. Business Scope

(1) Developandimplementinvestmentstrategies.(2) Conductdevelopment feasibil ity studyand

investmentfinancialanalysis.(3) Planandexecuteconstructionandproject

management.(4) Proactivelymanageassetsto increase income

and reduce operation expenses.(5) D i rect and mon ito r th i rd par t y p roper t y

management company. (6) Achieveinvestmentfinancialtarget.(7) Evaluateoperationperformance.(8) Identifyand improveunderperformedand

obsolete assets.(9) Maximizeoperationsynergiesacrossportfolio.

II. Research and Development(1) BoutiqueHotel(2) Senior Citizen Housing / Community(3) Cosmetics Surgeon and Medical Center(4) Logistic Industry(5) Smart Industrial Park(6) OverseasRealEstateDevelopmentandOperation

Management(7) BOT/SuperficiesofPublicLandsProjectSOP

III. Market Overview

(1) RealEstatetransactionmarket(2) Real estate leasing market

IV. Business Development Plan(1) Short Term: Performasset inventorycheckandproactively

activatetheunderperformedassets.(2) Long Term: Conductcomprehensive studyoncorporate

owned as set s to ensu re inves tment andmanagement strategies are integrated and reinforceportfolioinvestmentobjectives.

Industry AnalysisI. Real Estate Market Analysis

Lookingat thewholeyear’sperformance, retailpropertiesamounted toNT$31.9bill ionworthofinvestmentsalesvalue,rankingfirstwith45%ofthetotalsalesvalue.Industrialofficepropertiescameinsecond,withNT$24.5billionworthofinvestmentsalesor34%ofthetotal2015salesvalue.Thenextpropertytypeswereofficeand“other”,accountingforNT$10.8

and4.2billion,respectively,or15%and6%ofthetotal2015investmentsalesvalue.Over thewholeof2015, thetotal salesvaluewasNT$71.4billionand3%lessthanlastyear.

II. Professional ServicesActivelyactivatingcompanyidleassets,creatingrealestatenewbusinessandmanageassetswithteam’smulti-professionalexpertiseandcollaboratingwithexternal consultants to maximize short-term return on equityandincreaselong-termeconomicvalue.

III. Market CompetivenessEmployingtheexpertiseofrealestatemanagementprofessionalstoensueproperty-levelmanagementstrategiesare totally integratedand reinforcedportfolioinvestmentobjectives.

IV. Development StrategyMaximizetheoperatingsynergiesacrossportfoliowithnewdevelopmentpositioning,acquisitions,assetmanagementandportfoliomanagement.

Operation Overview


Operation summary(I) Suppliers / customers accounting for 10% or more of the Company’s total purchase / sales

amount in 2014 and 20151. Procurement

Unit:NT$Thousand2014 2015 AsofMarch31,2016

Name Procurement amount

Percentage oftotalnet

procurement

Relationship with the

CompanyName Procurement

amount


procurement


CompanyName Procurement

amount


procurement


Company

Others 96,362,983 100% Inapplicable Others 86,072,981 100% Inapplicable Others 18,780,641 100% Inapplicable

Net purchases 96,362,983 100% Net

purchases 86,072,981 100% Net purchases 18,780,641 100%

Note: Thesecustomerspurchaselessthanthecurrentyearasaresultofitsnetpurchasemorethan10%ofcompany,itwillnotbedisclosed.

2. SalesUnit:NT$Thousand

2014 2015 AsofMarch31,2016

Name Sales amountPercentage oftotalnet

sales


CompanyName Sales

amount


sales


CompanyName Sales

amount


sales


Company

Others 112,609,278 100% Inapplicable Others 94,744,353 100% Inapplicable Others 22,029,509 100% Inapplicable

Net sales 112,609,278 100% Net sales 94,744,353 100% Net sales 22,029,509 100%

Note: Netincomefortheyearonthesecustomersasaresultofitsnetoperatingincomelessthan10%oftheCompany,itwillnotbedisclosed.

(II) Production in 2014 and 2015Output: Set

[Unit]Amount:NT$ThousandFiscal year

OutputMajorproducts(or by departments)

2014 2015

Capacity Output Amount Capacity Output Amount

Optical sector 507,063 484,873 50,909,666 423,940 404,997 46,565,138

Machinery and energy sector 362,953 1,696,354 17,367,687 330,406 1,136,619 14,466,940

Consumer products sector 4,493,475 3,188,671 4,147,876 5,573,671

Others 11,716 4,162 406,645 11,350 4,155 399,245

Total 881,732 6,678,864 71,872,669 765,696 5,693,647 67,004,994

(III) Shipments and sales amount in 2014 and 2015[Unit]Amount:NT$Thousand

Fiscal year 2014 2015 Shipments & sales Domestic Export Domestic Export

Majorproducts(orbydepartments) Quantity Amount Quantity Amount Quantity Amount Quantity Amount

Optical sector 17,488 2,398,338 439,426 53,993,039 3,238 1,983,052 393,332 45,336,659

Machinery and energy sector 877,451 23,615,727 277,031 13,035,113 903,199 18,898,573 6,660,991 11,203,096

Consumer products sector 962,488 15,662,725 4,142,119 5,221,136 1,545,441 12,167,691 3,058,867 3,449,685

Others 712 11,271,423 2,566 292,846 1,278 599,512 3,013 459,036

Total 1,858,139 52,948,213 4,861,142 72,542,134 2,453,156 33,648,828 10,116,203 60,448,476

(IV) Tatung and Subsidiaries, R&D expenses totaled NT$6,230,116 thousand dollars in 2015 up to the publishing date of the annual report

Operation Overview


Workforce structureFiscal year 2014 2015 April 30, 2016

The Company

Numberofemployees

Management&staff 1679 1568 1515

Technicians 2136 1915 1786

Total 3815 3483 3301

Averageage 41.04 41.04 41.06

Averageyearsofservice 13.03 13.07 13.08

Educationlevel

Ph.D. 13 14 12

Master 420 398 379

Bachelor&otherhighereducation 1916 1799 1699

Senior high school 903 804 761

Belowseniorhighschool 563 468 450

All companies included in Financial statements 35355 31765 23367

Expenditure on environmental protectionTocopewiththetrendofinternationalenvironmentalprotectionand government laws and regulat ions, theCompany i sdedicated to thepreventionofpollutionandenvironmentalprotection for thebetterworkingenvironmentofemployees,better livingenvironmentforthepublicandbetterfulfillmentofsocial responsibilities.

(I) Environmental protection measures1. Actions:

ISO 14001

ISO 14064 Green Products

Green Mark/Energy Label/

Water Conservation Label

EnvironmentalTest

Energy Auditing

Product CarbonFootprint

RoHS Test

GreenSupply Chain

Eco-Efficiency

Disposal ofWaste

Design forthe Environment

(DfE)

CorporateSocial Responsibility

Report(CSR)

EnvironmentalPerformance

Evaluation

Life CycleAssessment

Energy Saving

ImplementPollution

Prevention

ISO 50001

Promotion ofEducation and

Training

PollutionPreventionPays (3P)

2. Results:(1) A l l manufactur ing factor ies have received

andmaintained ISO 14001 cer t i f icat ion forenvironmentalmanagementsystem.

(2) Mostofmodelsofairconditioners,amorphouscast-resindry typetransformerandamorphousoil-immersedtypetransformer, refrigeratorshaveacquiredGreenMarkbyEnvironmentalProtectionAdministrationof ExecutiveYuan.Meanwhile,manymodelsofairconditioners,dehumidifiers,washingmachines,electric fans, refrigerators,monitors,warm-hotwaterdispensershavebeenacquiredEnergyLabelbyBureauofEnergyofMinistryofEconomicAffairs. Inaddition,manymodelsofwashingmachinehaveacquiredWaterLabelbyWaterResourcesAgencyofEnergyof

MinistryofEconomicAffairs. Besides,onemodelofA.C.motors(3hp)completedproductcarbonfootprintcalculationandtheresultwasverifiedbyDNV in 2010. The Company also has completed theestablishmentofTaiwanEPAcarbonfootprintPCRsfor“RiceCookers”and“ElectricCookers”.

(3) TheCompanyencouragesenergysaving in thefactoriesandestablishes ISO50001gradually.CurrentlyMotorBusinessUnithasestablishedISO50001andreceivedcertification.

(II) Losses incurred from environmental pollution in the recent year and up to the publishing date of the annual reportFrom2015andup to thepublishingdateof theannualreport,MotorBusinessUnitwasfinedNTD$100,000duetoviolationof“AirPollutionControlAct”. ApplianceBusinessUnitwasfinedNTD$100,000duetoviolationof“AirPollutionControl Act”.

(III) Information about RoHSInordertocomplywiththecustomers’greenprocurementandEU’sRoHSrequirementstoensuresuccessfuldomesticandexportmarkets, theCompany’s factories, startingfromtheyear2004,havebeendedicatedtopromotingagreen supply chainwhich covers product design,procurementandproduction,andhasalsoavoidedusinghazardous substances formaking theCompanyawell-established green supply enterprise. In 2005, the Company established“TatungElectricalandElectronicEquipmentRestrictionofHazardousSubstance(RoHS)TestLaboratory”toassist in thetestandanalysisofhazardoussubstancesbyvarious factoriesand related industryaswellas toprovide relatedprofessional technologies.TheRoHSTestLaboratorysuccessfullycompletedcertificationforboththeAuthenticatedChemicaltestLaboratoryoftheTAFandtheElectricalandElectronicEquipmentTestLaboratoryoftheBureauofStandards,MetrologyandInspectionofMinistryofEconomicAffairs in2007. On4th September 2015, the Laboratory passed the annual audit conducted by the TAF.

Operation Overview


Labor relations(I) Tatung pioneered the “labor and management united as one” concept to promote

operational autonomyTheCompanysetuptheTatungEmployees’WelfareCommitteein1947andthe“TatungUnitedWelfareCommittee”in1969aspartoftheCompany’seffortstopromotethedelegationofresponsibilitytolowerhierarchiesintheorganizationsandtodevelopnew management talent.

Employees’welfare Implementation

1. Stock ownership TheCompanysubsidizedemployees tobuycorporatestocks since1992aspartof theirsavings.

2. Subsidies Educationsubsidies foremployees’children inseniorhighschoolandcollege/university;funeralsubsidiesforcolleaguesortheirspousesandimmediaterelatives; financialgiftsfordeathofcolleagues;subsidiesforemployees’birthday,travel,andretirement;cashgiftsforweddingsofemployeesortheirchildrenaswellasforbirthofemployees’children.

3. Benefits EmployeescanpurchaseCompanyproductsviazero-interestinstallmentsandpricediscountsongroceriesincorporatestores.FreemovieshowsandspecialtrainsinSpringFestival.

4. Clubactivities Education, recreation,physicaleducation, languages,hiking/mountainclimbingandphotography

5. Healthandsafetyplan Labor insurance,health insurance,groupinsurance,retirementpension,freeannualhealthcheck-up

Educationandtraining Implementation

Employeetraining Encouragingemployeestostudyandtobecomeatalentof“intelligence, integrityandability”.Offeringemployeediverse trainingcourses includinggeneral,professional,management,environmental, healthand safety, information securitycoursesandonlinee-learning.Constructingorganizationaland lifelong learningculture.Efficientlystrengtheningtalentdevelopmentbysystematicmanagement.Atotalof6,162employeesattended30,518hoursoftrainingin2015.

Retirement system Implementation

Retirement plans Inaccordancewiththerequirementsbylawsandordinancesconcerned,appropriate6%oftheirmonthlypaysintotheindividualaccountfornewlyemployeesnewlyhiredstartingfromJuly1,2005andemployeeswhohavechosennewsystemLaborPensionAct.Fortheexistentemployeeswhocontinuallychoosetheoldpensionsystemregulationsandfortheserviceseniority retainedundertheoldsystemofemployeeswhochoosenewpensionregulations,weappropriate thepension reserve fundsat the rightamounts into thespeciallydesignatedaccountinBankofTaiwanbasedontheretirementregulations.

Management / labor relations Measures

Channelforemployeestovoicedissentorcommunicate with management

“Employees’SuggestionMailBox”issetupatcompanywebsite,alongwith“RegulationsofProcessingEmployees’Complaints.”Employeescanvoiceouttheiropinionsduringtrainingcourses,orpresent theirproposalsduringQCactivities.Regularandspecialmeetingsbetweenmanagementandthelaborunionsarealsoheldtofacilitatecommunications.

Protectionofemployees’interests and rights Measures

Safeandhappyworkingenvironment

ImplementedinaccordancewiththeLaborLaw,GenderEqualityinEmploymentActandinsomecasesbetterthanregulationsforworkers.

Operation Overview


(II) Strategy and objective: Developing the Company’s most valuable asset - peopleLabor and management are committed to work ing togetherforthegoodoftheCompanyanditsworkers.Bothsidesoperateontheprincipleofpromotingaharmonious,safeandhappyworkingenvironment.Serious lossesdueto laborandmanagementdisputes from2015up to thepublicationoftheannualreport:None.Estimateofcurrentand potential losses due to labor and management serious disputesandpreventivepolicies:Lossesdueto laborandmanagementmajordisputesnotforeseeninthenearfuture.

(III) Employees’ code of ethicsTheCompany’semployeesabidebyCompanyruleswhicharedesignedtoupholdtheprinciplesof“honesty, integrityanddiligence.”Allemployeesfollowacodeofethicsandare dedicated to contributing to the stability, continuity and prosperityoftheCompanyandworkersalike.Managementleads under the principle “Do not do unto others what you do not want others do unto you,” treating workers like their ownfamilyandguidingthembypersonalexample.(PleaserefertoPage3fordetailedinformation.)

(IV) The protection measures on the working environment and the health and safety of the employees1. Targets and Measures

Visitor Safety Guideline

Contractor management

Education and promotion on regulations

Tatung Health and Safety Guidebook

Disaster Prevention Pays

Working Condition Monitoring,Health Management and Promotion

Occupational Health andSafety Management System

Health andSafety Policy

DisasterFree

2. Action(1) Announces“HealthandSafetyPolicy”andpromotes

“DisasterPreventionPays”programinthefactoriesandsubsidiaries,andlooksforwardtothetargetof“DisasterFree”byreviewingitsperformancesandconductingthecontinualimprovements.

(2) OccupationalHealthandSafetyManagementSystem

Allmanufacturing factorieshave receivedandmaintainedOHSAS18001certifications.Inaddition,TayuanPlantandSan-HsiaFactoryalsoacquiredOccupational SafetyandHealthManagementSystems (CNS15506:2011). Tatung Co. has established theprocedurestoimprovetheissuesofhealthandsafety,aswellassetobjectivesandreformprojects.These are accomplished through the execution ofreformprojectsandperiodicalassessments,aswellasreviewedbythemanagement,andaidedinthecontinuedimprovementofhealthandsafetyperformances.

(3) Educationandpromotiononregulations ESDopens“HealthandSafetyTrainingClass”fornew

recruits.Thefactoriesandsubsidiariesalsoorganizetrainingcourses for theneedsof thebusinessoperations such as VOCs & Designated Chemicals class, JobSafetyAnalysisclass, Forklifters,andStationary Cranes training classes, etc.

Regardingtoregulationpromotion,ESDorganizes“TatungCo.HealthandSafetySeminar”everyyearto promote newly updated or published regulations aswellasassists thefactoriesandsubsidiaries toimplementChemicalControlBandingand laborphysical and mental health protection measures.

(4) Working Condition Monitoring, Health Management and Promotion

TatungCo.setsworkingenvironmentmonitoringplanand conducts monitoring on work sites. The results frommonitoringareavailabletotheemployees.

TatungCo.believesthatthehealthoftheemployeesandtheirfamiliesisakindofassetstothecompany.Tatung Co. organizes numerous health speeches, seminars, health checks to let the employees understand the importanceof theirhealthandpromotetotheirfamilies.

(5) Contractor management TatungCo.promotes“Contractorhealthandsafety

management method” and conducts irregular site inspection during the operation period. Tatung Co. alsopromotes“VisitorSafetyGuideline”toensurethesafetyamongvisitors.Allvisitorsmustreadthisguidelineandwearpropersafetygearsaccordingtotherequirementsofthefactoryorsubsidiary.

Operation Overview


Important contractsImportantcontractsuptothepublishingdateoftheannualreport

Nature Counterpart Duration Description Restriction clause

Investmentcooperation Japan SumitomoHeavy

Industries, Ltd. October 13, 1995

IncorporationofTatungSM-CycloCo.,Ltd.underjointventureProductionofgear-reducers

NO

Investmentcooperation Japan Okuma December 12, 1996

IncorporationofTatungOkumaCo.,Ltd.underjointventureProductionofworkingmachines

NO

Investmentcooperation Japan Mitsui Mining &

Smelting Co, Ltd. October 13, 1975

IncorporationofTatungDieCastingCo.underjointventureProductionofdiecastingproducts

NO

Technology cooperation U.S.A. IBMCorporation November28,1992 Patentlicenseofinformation

processing systems NO

Technology cooperation Japan Toshiba Corporation March 26, 2013~

March 25, 2018

Design and production technologyof161kv(contain)~345kv(contain)Oil-typetransformers,andmanufactureabove66kv(contain)GasTransformer

1. Authorize to manufactureinTaiwan

2. ActivitiesofsalesexceptJapan

Technology cooperation U.S.A. Landis + Gyr Inc.

March 11, 2011~March 11, 2017

Technologytransferofthree-phaseandfour-linedigitalwatthour meters

Activitiesofsalesarelimited to the R.O.C.

Technology cooperation Korea Chardon Korea

CorporationJune1,2015~May 31, 2021

Technologytransferoffourways underground switches automatic line

NO

Technology cooperation Japan NissinElectricCO.,

Ltd.May 28, 2013~ May 28, 2018

Technologytransferof25.8kVGIS

Activitiesofsalesarelimited to the Taiwan Power Cpmpany

Patent License U.S.A.RoviInternationalSolutions SarlCorporation

November15,2005PatentlicenseofDetectandEncodecopyprotectiontechnology

NO


December 07, 2008 Patentlicenseofcopyprotection process NO


December 07, 2008

PatentlicenseofRTLAProducts(1) Non-videoO/P(2) analogvideoO/Pwithout

copy protection process

NO

Patent License U.S.A.,Italy AudioMPEG&Sisvel

October 01, 2005~ June30,2017

PatentlicenseofISO/IEC11172-3and 13818-3 (MP3) technology NO

Patent License Japan FunaiElectricCo.,Ltd.

January01,2007~December 31, 2016

PatentlicenseofATSCstandard(A/65B)andTV NO

Patent License Japan Sony CorporationJanuary01,2014~December 31, 2018

PatentlicenseofTV(on-screendisplay/4K TV) NO

Operation Overview



Patent License Japan Sony CorporationJanuary01,2013~December 31, 2017

PatentlicenseofPCMonitor(HDMI, HDCP, on- screen display)

NO

Patent License U.S.A. Thomson Licensing L.L.C.

January01,2015~December 31, 2019 PatentlicenseofLCDMonitor NO

Patent License Canada Wi-LAN V-CHIP CORP.

December 31, 2007~ December 04, 2016 PatentlicenseofV-chip2.0 NO

Patent License U.S.A. MPEGLA,L.L.C. June01,1994 PatentlicenseofMPEG-2Codec NO

Patent License U.S.A. MPEGLA,L.L.C. January01,2016~December 31, 2020

PatentlicenseofMPEG-2Systems NO

Patent License U.S.A. MPEGLA,L.L.C. August 01, 2016~ December 31, 2020

PatentlicenseofAVC/H.264(MPEG-4Part10) NO

Patent License U.S.A. MPEGLA,L.L.C. January01,2006~December 31, 2017 PatentlicenseofVC-1 NO

Patent License U.S.A. MicrosoftLicensing,GP

November01,2004~December 31, 2017 PatentlicenseofWMA/WMV NO

Mid-term loan contract

Hua-Nan CommercialBank

May 22, 2015~May 22, 2017

Revolvinglimit(2years)LimitofNT$3,400,000,000 NO


Taishin International Bank

December 25, 2015~ December 25, 2017

Revolvinglimit(2years)LimitofNT$200,000,000

Non-consolidatedfinancialstatementoftheissuingcompany: a. Current ratio shall be no

lessthan95%.b. Percentageofliability

shall be no more than 140%.

c. Net worth shall be no less than 30 billion NTD.

Mid-term loan contract ChangHwaBank December 21, 2015~

December 21, 2017Revolvinglimit(2years)LimitofNT$1,500,000,000 NO


Mega International CommercialBank

Jan12,2016~Jan11,2018

Revolvinglimit(2years)LimitofNT$2,500,000,000andUS$25,000,000

NO


FirstBank(to sponsor)

September 16, 2013~ September 16, 2018

Syndicated credit extension (5 years)LimitofNT$2,750,000,000





Mid-term loan contract CooperativeBank December 01, 2015~

December 01, 2017Revolvinglimit(2years)LimitofNT$1,300,000,000 NO

Operation Overview




BankSinopac(to sponsor)

September 30, 2015~September 30, 2017






Mid-term loan contract BankofTaiwan

August 04, 2011~July28,2016

Non-revolvinglimit(5years)LimitofNT$480,000,000 NO


FarEasternInternationalBank


Revolvinglimit(3years)LimitofNT$1,000,000,000 NO


TheExport-ImportBankoftheRepublicofChina

December 11, 2013~ May 13, 2016

Non-revolvinglimit(2.5years)LimitofNT$300,000,000 NO


BankofTaiwan(to sponsor)

March 31, 2014~March 31, 2017







Taishin International Bank(to sponsor)

June13,2014~June13,2018






Mid-term loan contract BankSinopac

July09,2014~July09,2023


Mid-term loan contract BankSinopac

April 27, 2015~April 27, 2027



Taishin International Bank


Non-revolvinglimit(4years)LimitofNT$3,000,000,000 NO

Mid-term loan contract EnTieBank November24,2015~

November24,2017Non-revolvinglimit(2years)LimitofNT$200,000,000 NO

Mid-term loan contract King'sTownBank January26,2016~

January26,2018Non-revolvinglimit(2years)LimitofNT$1,500,000,000 NO

Mid-term loan contract BankSinopac December 31, 2015~

December 31, 2017Revolvinglimit(2years)LimitofNT$500,000,000 NO

Financial Overview


Condensed balance sheet and income statement(I) Condensed balance sheet - IFRSs - Tatung And Subsidiaries

Unit:NT$Thousand

YearItem

2012 2013 2014 2015 Asof31March2016 (Note 3)

Current assets 70,582,506 78,618,067 86,006,738 86,960,951 93,731,615

Property,plantandequipment (Note 2) 101,027,526 94,621,225 86,205,789 77,800,166 76,133,295

Intangible assets 2,665,773 2,207,785 2,113,480 1,792,921 1,749,292

Other assets (Note 2) 31,866,838 28,207,914 39,501,311 35,364,580 32,173,551

Total assets 206,142,643 203,654,991 213,827,318 201,918,618 203,787,753

Current liabilitiesBeforedistribution 91,224,586 104,943,233 93,801,791 104,017,444 117,313,741

Afterdistribution 91,224,586 104,943,233 93,801,791 (Note 5) (Note 5)

Liabilities 51,944,292 36,462,038 58,155,003 48,989,315 40,648,043

Total liabilitiesBeforedistribution 143,168,878 141,405,271 151,956,794 153,006,759 157,961,784


Equityattributabletoshareholdersoftheparent 33,910,253 33,301,195 34,366,587 30,599,156 29,770,420

Capital stock 23,395,367 23,395,367 23,395,367 23,395,367 23,395,367

Capital surplus 727,529 767,970 750,641 785,376 823,295

Retained earningsBeforedistribution 12,014,781 9,975,000 10,135,587 6,983,139 6,186,045


Unrealizedgainorlossonfinancialinstruments (733,594) (30,272) 891,862 242,114 172,583

Treasury stock (1,493,830) (806,870) (806,870) (806,870) (806,870)

Non-controlling interests 29,063,512 28,948,525 27,503,937 18,312,703 16,055,549

Totalshareholders’equity

Beforedistribution 62,973,765 62,249,720 61,870,524 48,911,859 45,825,969


Note1: TheCompany'sfinancialstatementsforthetwoyearshavebeendulyauditedbyindependentauditors.Since2013useIFRSs,Data2011-2012 can consult Condensed balance sheet-The Domestic Financial Accounting Principle-Tatung and Subsidiaries.

Note2: TheCompanydidnotcarryoutlandvalere-appraisalin2015.Note3: ThefinancialstatementsforQ1of2016wereunderreviewbyindependentauditorswhenthisannualreportisprinted.Note4: Theappropriationproposalsaresubjecttoaresolutionoftheshareholders'meetinginthefollowingyear.Note 5: Not yet distributed.

Financial Overview


(II) Condensed balance sheet - IFRSs - TatungUnit:NT$Thousand

YearItem

2012 2013 2014 2015

Current assets 20,146,521 20,790,760 17,105,841 17,089,003

Property,plantandequipment(Note 2) 2,235,284 2,156,405 2,701,758 3,060,707

Intangible assets 114,109 83,100 101,370 72,033

Other assets (Note 2) 52,093,950 49,907,133 51,524,778 48,909,888

Total assets 74,589,864 72,937,398 71,433,747 69,131,631

Current liabilitiesBeforedistribution 17,870,761 21,719,482 15,452,202 14,344,527

Afterdistribution 17,870,761 21,719,482 15,452,202 (Note 5)

Liabilities 22,808,850 17,916,721 21,614,958 24,187,948

Total liabilitiesBeforedistribution 40,679,611 39,636,203 37,067,160 38,532,475


Owners'equity 33,910,253 33,301,195 34,366,587 30,599,156

Capital stock 23,395,367 23,395,367 23,395,367 23,395,367

Capital surplus 727,529 767,970 750,641 785,376

Retained earningsBeforedistribution 12,014,781 9,975,000 10,135,587 6,983,139


Unrealizedgainorlossonfinancialinstruments (733,594) (30,272) 891,862 242,144

Treasury stock (1,493,830) (806,870) (806,870) (806,870)

Non-controlling interests - - - -


Beforedistribution 33,910,253 33,301,195 34,366,587 30,599,156


Note1: TheCompany'sfinancialstatementsforthetwoyearshavebeendulyauditedbyindependentauditors.Since2013useIFRSs,Data2011-2012 can consult Condensed balance sheet-The Domestic Financial Accounting Principle-Tatung.

Note2: TheCompanydidnotcarryoutlandvalere-appraisalin2015.Note3: 2016Q1onlyprovideconsolidationreport.Note4: Theappropriationproposalsaresubjecttoaresolutionoftheshareholders'meetinginthefollowingyear.Note 5: Not yet distributed.

Financial Overview


(III) Condensed balance sheet - The Domestic Financial Accounting Principle - Tatung And SubsidiariesUnit:NT$Thousand

YearItem

2011 2012

Current assets 84,300,246 72,061,452

Fundsandlong-terminvestments 13,320,272 13,205,688

Fixed assets (Note 2) 116,270,641 105,993,886

Intangible assets 3,062,541 3,480,839

Other assets 7,582,159 6,540,177

Total assets 224,535,859 201,282,042

Current liabilitiesBeforedistribution 86,778,033 92,103,576

Afterdistribution 86,778,033 92,103,576

Long-term liabilities 46,681,242 35,984,942

Other liabilities 14,979,321 13,440,074

Total liabilitiesBeforedistribution 148,438,596 141,528,592


Capital stock 23,395,367 23,395,367

Capital surplus 5,958,455 5,944,602

Retained earningsBeforedistribution (2,595,800) (6,377,504)

Afterdistribution (2,595,800) (6,377,504)

Unrealizedgainorlossonfinancialinstruments (1,060,569) (812,988)

Cumulativetranslationadjustments 1,060,477 622,884

Net loss unrecognized as pension cost (1,089,054) (1,113,251)

Otherstockholder'sequity 7,089,690 8,881,813

Minority stockholder's interest 43,338,697 29,212,527


Beforedistribution 76,097,263 59,753,450


Note1: TheCompany'sfinancialstatementsforthefiveyearshavebeendulyauditedbyindependentauditors.Since2013useIFRSs,Data2013-2015 can consult Condensed balance sheet-IFRSs-Tatung and Subsidiaries.

Note2: TheCompanydidnotcarryoutlandvalere-appraisalin2012.Note3: Theappropriationproposalsaresubjecttoaresolutionoftheshareholders'meetinginthefollowingyear.

Financial Overview


(IV) Condensed balance sheet - The Domestic Financial Accounting Principle - TatungUnit:NT$Thousand

YearItem

2011 2012

Current assets 21,447,593 20,146,521

Fundsandlong-terminvestments 52,831,043 47,213,674

Fixed assets (Note 2) 2,443,957 2,248,129

Intangible assets 70,782 114,109

Other assets 1,653,147 1,846,278

Total assets 78,446,522 71,568,711

Current liabilitiesBeforedistribution 18,585,187 17,806,636


Long-term liabilities 21,922,516 17,402,416

Other liabilities 5,176,835 5,815,318

Total liabilitiesBeforedistribution 45,687,956 41,027,788


Capital stock 23,395,367 23,395,367

Capital surplus 5,958,455 5,944,602

Retained earningsBeforedistribution (2,595,800) (6,377,504)

Afterdistribution (2,595,800) (6,377,504)

Unrealizedgainorlossonfinancialinstruments (1,060,569) (812,988)

Cumulativetranslationadjustments 1,060,477 622,884

Net loss unrecognized as pension cost (1,089,054) (1,113,251)

Minority stockholder's interest 7,089,690 8,881,813


Beforedistribution 32,758,566 30,540,923


Note1: TheCompany'sfinancialstatementsforthefiveyearshavebeendulyauditedbyindependentauditors.Since2013useIFRSs,Data2013-2015 can consult Condensed balance sheet-IFRSs-Tatung.

Note2: TheCompanydidnotcarryoutlandvalere-appraisalin2012.Note3: Theappropriationproposalsaresubjecttoaresolutionoftheshareholders'meetinginthefollowingyear.

Financial Overview


(V) Condensed income statement - IFRSs - Tatung And SubsidiariesUnit:NT$Thousand

YearItem 2012 2013 2014 2015

Asof31March 2016

(Note 2)

Operatingrevenue 106,098,543 112,926,870 112,609,278 94,744,353 22,029,509

RealizedGrossprofit 524,985 12,278,166 15,884,074 6,044,416 2,137,429

Incomefromoperations (15,393,847) (3,766,105) (733,880) (9,374,511) (1,467,394)

Non-operating income and expenses 125,032 (1,178,070) (1,671,284) (284,455) (1,012,547)

Lossbeforeincometax (15,268,815) (4,944,175) (2,405,164) (9,658,966) (2,479,941)

Netlossfromoperationsofcontinuedsegments (15,208,626) (5,319,552) (2,987,049) (10,794,519) (2,645,804)

Incomefromdiscontinueddepartments - - - - -

Net loss (15,208,626) (5,319,552) (2,987,049) (10,794,519) (2,645,804)

Othercomprehensiveincome(netoftax) (1,290,912) 830,492 2,363,644 (1,333,044) (472,318)

Totalcomprehensiveincome (16,499,538) (4,489,060) (623,405) (12,127,563) (3,118,122)

Netlossattributetoequityattributabletoownersofparent (4,018,631) (1,611,408) 363,539 (3,075,015) (795,461)

Net loss attribute to non controlling interest (11,189,995) (3,708,144) (3,350,588) (7,719,504) (1,850,343)

Totalcomprehensiveincomeattributetoequityattributabletoownersofparent (4,415,092) (1,364,192) 1,288,947 (3,750,958) (865,022)

Totalcomprehensiveincomeattributetononcontrollinginterest (12,084,446) (3,124,868) (1,912,352) (8,376,605) (2,253,100)

Loss per share (Note 3) (1.74) (0.70) 0.16 (1.35) (0.35)

Note1: TheCompany'sfinancialstatementsforthetwoyearshavebeendulyauditedbyindependentauditors.Since2013useIFRSs,Data2011-2012 can consult Condensed Income statement-The Domestic Financial Accounting Principle-Tatung and Subsidiaries.

Note2: ThefinancialstatementsforQ1of2016wereunderreviewbyindependentauditorswhenthisannualreportisprinted.Note3: Allinformationoftheearningspershareforthepreviousyearsiscalculatedonafullydilutedbasis.

Financial Overview


(VI) Condensed income statement - IFRSs - TatungUnit:NT$Thousand

YearItem 2012 2013 2014 2015

Operatingrevenue 32,185,089 24,087,818 21,295,466 18,151,104

RealizedGrossprofit 2,960,479 2,394,002 1,846,739 1,581,503

Incomefromoperations 160,055 (257,408) (874,725) (966,334)

Non-operating income and expenses (4,200,912) (1,490,473) 1,209,308 (2,107,282)

Lossbeforeincometax (4,040,857) (1,747,881) 334,583 (3,073,616)

Netlossfromoperationsofcontinuedsegments (4,018,631) (1,611,408) 363,539 (3,075,015)

Incomefromdiscontinueddepartments - - - -

Net loss (4,018,631) (1,611,408) 363,539 (3,075,015)

Othercomprehensiveincome(netoftax) (396,461) 247,216 925,408 (675,943)

Totalcomprehensiveincome (4,415,092) (1,364,192) 1,288,947 (3,750,958)

Netlossattributetoequityattributabletoownersofparent (4,018,631) (1,611,408) 363,539 (3,075,015)

Net loss attribute to non controlling interest - - - -

Totalcomprehensiveincomeattributetoequityattributabletoownersofparent (4,415,092) (1,364,192) 1,288,947 (3,750,958)

Totalcomprehensiveincomeattributetononcontrollinginterest - - - -

Loss per share(Note 3) (1.74) (0.70) 0.16 (1.35)

Note1:TheCompany'sfinancialstatementsforthetwoyearshavebeendulyauditedbyindependentauditors.Since2013useIFRSs,Data2011-2012 can consult Condensed Income statement-The Domestic Financial Accounting Principle-Tatung.

Note2:2016Q1onlyprovideconsolidationreport.Note3:Allinformationoftheearningspershareforthepreviousyearsiscalculatedonafullydilutedbasis.

Financial Overview


(VII) Condensed income statement - The Domestic Financial Accounting Principle - Tatung And SubsidiariesUnit:NT$Thousand

YearItem

2011 2012

Operatingrevenue 146,250,179 107,356,308

RealizedGrossprofit 7,126,742 611,851

Incomefromoperations (11,550,490) (15,338,203)

Non-operating income and gains 8,637,807 4,947,664

Non-operating expenses and losses (8,277,959) (4,751,131)

Incomefromoperationsofcontinuedsegments-beforetax (11,190,642) (15,141,670)

Incomefromoperationsofcontinuedsegments-aftertax (11,993,514) (15,084,036)

Incomefromdiscontinueddepartments - -

Extraordinarygainorloss - -

Cumulativeeffectofaccountingprinciplechanges - -

Net income (11,993,514) (15,084,036)

Minority interest 1,379,850 (3,512,312)

Shareholdersoftheparent (13,373,364) (11,571,724)

Earnings(loss)pershare (Note 2) 0.60 (1.52)

Note 1: The Company'sfinancialstatementsforthefiveyearshavebeendulyauditedbyindependentauditors.Since2013useIFRSs,Data2013-2015 can consult Condensed Income statement-IFRSs-Tatung and Subsidiaries.

Note2: Allinformationoftheearningspershareforthepreviousyearsiscalculatedonafullydilutedbasis.

Financial Overview


(VIII) Condensed income statement - The Domestic Financial Accounting Principle - TatungUnit:NT$Thousand

YearItem

2011 2012

Operatingrevenue 38,408,478 32,185,089

RealizedGrossprofit 3,180,288 2,866,708

Incomefromoperations 378,650 (64,092)

Non-operating income and gains 2,002,871 885,385

Non-operating expenses and losses 1,136,354 4,355,831

Incomefromoperationsofcontinuedsegments-beforetax 1,245,167 (3,534,538)

Incomefromoperationsofcontinuedsegments-aftertax 1,379,850 (3,512,312)

Incomefromdiscontinueddepartments - -

Extraordinarygainorloss - -

Cumulativeeffectofaccountingprinciplechanges - -

Net income 1,379,850 (3,512,312)

Earnings(loss)pershare (Note 2) 0.60 (1.52)

Note 1: TheCompany'sfinancialstatementsforthefiveyearshavebeendulyauditedbyindependentauditors.Since2013useIFRSs,Data2013-2015 can consult Condensed Income statement-IFRSs-Tatung.

Note 2: All informationoftheearningspershareforthepreviousyearsiscalculatedonafullydilutedbasis.

(IX) Auditors’ opinions from 2011 to 2015:

Year Firm CPA Opinion

2011 Ernst&YoungYi-changLiang Anunqualifiedopinionwith

explanatoryLan-ching Chang

2012 Ernst&YoungYi-changLiang Anunqualifiedopinionwith


2013 Ernst&YoungSu-Wen Lin Anunqualifiedopinionwith






Financial Overview


Financial analysisFinancial analysis - IFRSs - Tatung And Subsidiaries

YearItem (Note 2) 2012 2013 2014 2015

Asof31March

2016 (Note 1)

Financial structure (%)

Debt ratio 69.45 69.43 71.07 75.78 77.51

Long-termfundstoProperty,plantandequipmentratio 113.75 104.32 139.23 125.84 113.58

LiquidityAnalysis(%)

Current ratio 77.37 74.91 91.69 83.6 79.90

Quickratio 48.29 49.9 63.51 62.16 61.65

Times interest earned - - 0.33 - -

Operating performance

Averagecollectionturnover(times) 6.55 6.61 6.04 5.92 6.84

Days sales outstanding 56 55 60 61 53

Averageinventoryturnover(times) 4.51 4.44 4.41 4.34 4.29

Averagepaymentturnover(times) 5.2 4.72 4.38 4.49 4.88

Averageinventoryturnoverdays 81 82 82 84 85

Fixedassetsturnover(times) 0.99 1.15 1.25 1.16 1.14

Totalassetsturnover(times) 0.48 0.55 0.54 0.46 0.43

Profitability

Returnontotalassets(%) (5.75) (1.31) 0.00 (3.48) (0.85)

Returnonequity(%) (21.06) (8.50) (4.81) (19.49) (5.59)

IncombeforetaxPercentagetopaid-incapital(%) (65.26) (21.13) (10.28) (41.29) (10.60)

Netmargin(%) (14.33) (4.71) (2.65) (11.39) (12.01)

Earningspershare(NT$) (1.74) (0.70) 0.16 (1.35) (0.35)

Cashflow

Cashflowratio(%) 5.98 5.53 6.19 0.93 (2.25)

Cashflowadequacyratio(%) 55.34 42.78 59.49 43.54 83.97

Cashflowreinvestmentratio(%) 1.92 2.03 1.93 0.34 (0.93)

LeverageOperatingleverage (5.64) (25.15) (130.80) (8.81) (13.80)

Financialleverage 0.83 0.54 0.17 0.69 0.57

Note1: ThefinancialstatementsforQ1of2016wereunderreviewbyindependentauditorswhenthisannualreportisprinted.Otherfinancialreportshavebeenauditedbycertifiedpublicaccountants.DuetotheuseofIFRSin2013,pleaserefertoTheDomesticFinancialAccountingPrinciple-TatungAndSubsidiariesfordatain2010~2012.

Note2: Formulasfortheabovetablearespecifiedasfollows:1. Capital structure analysis

(1) Debts ratio = Total liabilities / Total assets(2)Long-term funds toProperty,plantandequipment,

net=(Shareholders’equity+ long-termliabilities)/NetProperty,plantandequipment

2. Liquidityanalysis(1) Current ratio = Current assets / Current liabilities(2)Quickratio=(Currentassets-inventories-prepayment)

/ Current liabilities (3)Times interestearned=Earningsbefore interestand

taxes / Interest expenses 3. Operatingperformanceanalysis(1)Average col lect ion tu rnover ( including account

receivablesandnotesreceivablesfromoperation)=Netsales/Averagetradereceivables(includingaccountsreceivablesandnotesreceivablesfromoperation)

(2)Days salesoutstanding= 365 /Averagecol lectionturnover

(3)Average inventory turnover=Costof sales/Averageinventory

(4)Averagepaymentturnover(includingaccountpayablesandnotespayables fromoperation)=Costof sales/Averagetradepayables(includingaccountpayablesandnotespayablesfromoperation)

(5)Average inventory turnover days = 365 /Averageinventoryturnover

(6)Property,plantandequipment turnover=Net sales/Property,plantandequipmentnet.

(7)Totalassetsturnover=Netsales/Totalassets4. Profitabilityanalysis

(1) Return on total assets = [Net income + interest expenses *(1–effectivetaxrate)]/Averagetotalassets

(2)Returnonequity=Netincome/Averageshareholders’equity

(3) Percentage to paid-in capital ~ operating income = Operating income / Paid-in capital

(4)Percentagetopaid-incapital~ incomebefore tax=Incomebeforetax/Paid-incapital

(5) Net margin = Net income / Net sales(6)Earningsper share= (Net income -preferred stock

dividends) /Weightedaverage number of sharesoutstanding

5. Cashflow(1)Cash flowratio=Netcash fromoperatingactivities/

Current liabilities(2)Cash flowadequacy ratio= Five-year sumofcash

fromoperation/Five-yearsumofcapitalexpenditures,inventoryadditions,andcashdividends

(3)Cash flow reinvestment ratio= (Cash fromoperatingactivities-cashdividends)/(Grossfixedassets+ long-terminvestment+otherassets+workingcapital)

6. Leverage(1)Operating leverage= (Net sales – var iablecosts +

expenses) / Operating income (2)Financial leverage=Operating income/ (Operating

income - interest expenses)

Financial Overview


Financial analysis - IFRSs - TatungYear

Item (Note 2) 2012 2013 2014 2015

Financial structure (%)

Debt ratio 54.54 54.34 51.89 55.74

Long-termfundstoProperty,plantandequipmentratio 2,537.45 2,375.15 2,072.04 1,790.01


Current ratio 112.73 95.72 110.70 119.13

Quickratio 82.69 74.87 78.89 88.51

Times interest earned - - 1.46 -

Operatingperformance

Averagecollectionturnover(times) 4.24 3.13 2.81 2.76

Days sales outstanding 86 117 129 132

Averageinventoryturnover(times) 4.93 4.69 4.57 3.95

Averagepaymentturnover(times) 5.51 4.73 4.22 4.17

Averageinventoryturnoverdays 74 78 80 92

Fixedassetsturnover(times) 13.83 10.97 8.77 6.30

Totalassetsturnover(times) 0.41 0.33 0.30 0.26

Profitability

Returnontotalassets(%) (4.05) (1.11) 1.34 (3.67)

Returnonequity(%) (11.07) (4.80) 1.07 (9.47)

IncombeforetaxPercentagetopaid-incapital(%) (17.27) (7.47) 1.43 (13.14)

Netmargin(%) (12.49) (6.69) 1.71 (16.94)

Earningspershare(NT$) (1.74) (0.70) 0.16 (1.36)

Cashflow

Cashflowratio(%) 27.73 14.20 7.02 9.42

Cashflowadequacyratio(%) 298.29 298.62 230.49 224.95

Cashflowreinvestmentratio(%) 8.11 5.52 1.83 2.33

LeverageOperatingleverage 168.18 (74.50) (18.94) (13.83)

Financialleverage (0.20) 0.21 0.55 0.62

Note 1: Since 2013 use IFRSs, Data 2011~2012 can consult Financial analysis The Domestic Financial Accounting Principle - Tatung.Note2: 2016Q1onlyprovideconsolidationreport.Note3: Formulasfortheabovetablearespecifiedasfollows:

1. Capital structure analysis(1) Debts ratio = Total liabilities / Total assets(2)Long-term funds toProperty,plantandequipment,

net=(Shareholders’equity+ long-termliabilities)/NetProperty,plantandequipment

2. Liquidityanalysis(1) Current ratio = Current assets / Current liabilities(2)Quickratio=(Currentassets-inventories-prepayment)








(6)Property,plantandequipment turnover=Net sales/Property,plantandequipmentnet.

(7)Totalassetsturnover=Netsales/Totalassets

4. Profitabilityanalysis(1) Return on total assets = [Net income + interest expenses

*(1–effectivetaxrate)]/Averagetotalassets(2)Returnonequity=Netincome/Averageshareholders’

equity(3) Percentage to paid-in capital ~ operating income =

Operating income / Paid-in capital (4)Percentagetopaid-incapital~ incomebefore tax=

Incomebeforetax/Paid-incapital(5) Net margin = Net income / Net sales(6)Earningsper share= (Net income -preferred stock









Financial Overview


Financial analysis - The Domestic Financial Accounting Principle - Tatung And SubsidiariesYear

Item (Note 2) 2011 2012

Financialstructure(%)Debt ratio 66.11 70.31

Long-termfundstofixedassetsratio 105.60 90.32


Current ratio 97.14 78.24

Quickratio 64.97 48.12

Times interest earned - -


Averagecollectionturnover(times) 7.95 6.84

Days sales outstanding 46 53

Averageinventoryturnover(times) 5.56 4.39

Averagepaymentturnover(times) 6.21 5.26

Averageinventoryturnoverdays 66 83

Fixedassetsturnover(times) 1.22 0.97

Totalassetsturnover(times) 0.63 0.5

Profitability

Returnontotalassets(%) (4.15) (5.91)

Returnonequity(%) (15.15) (22.21)

Percentage to paid-in capital(%)

Operating income (49.37) (65.56)

Incomebeforetax (47.83) (64.72)

Netmargin(%) (8.20) (14.05)

Earningspershare(NT$) (5.19) (6.53)

Cashflow

Cashflowratio(%) (2.61) 4.75

Cashflowadequacyratio(%) 70.20 53.23

Cashflowreinvestmentratio(%) (0.74) 1.50

LeverageOperatingleverage (10.72) (5.77)

Financialleverage 0.80 0.84

Note1:TheCompany’sfinancialstatementsforthepastfiveyearshavebeendulyauditedbyindependentauditors.Since2013useIFRSs,Data2013~2015 can consult Financial analysis - IFRSs - Tatung And Subsidiaries.

Note2:Formulasfortheabovetablearespecifiedasfollows:1. Capital structure analysis

(1) Debts ratio = Total liabilities / Total assets(2)Long-termfundstofixedassets=(Shareholders’equity+

long-termliabilities)/Netfixedassets2. Liquidityanalysis

(1) Current ratio = Current assets / Current liabilities(2)Quickratio=(Currentassets-inventories-prepayment)








(6)Fixedassetsturnover=Netsales/Fixedassets(7)Totalassetsturnover=Netsales/Totalassets














Financial Overview


Financial analysis - The Domestic Financial Accounting Principle - TatungYear

Item (Note 2) 2011 2012

Financialstructure(%)Debt ratio 58.24 57.33

Long-termfundstofixedassetsratio 2,237.40 2,132.59


Current ratio 115.4 113.14

Quickratio 77.26 82.99

Times interest earned 2.57 -


Averagecollectionturnover(times) 5.21 4.27

Days sales outstanding 70 85.48

Averageinventoryturnover(times) 5.23 4.83

Averagepaymentturnover(times) 6.22 5.00

Averageinventoryturnoverdays 70 76

Fixedassetsturnover(times) 19.28 13.72

Totalassetsturnover(times) 0.50 0.43

Profitability

Returnontotalassets(%) 2.67 (3.72)

Returnonequity(%) 4.34 (11.10)

Percentage to paid-in capital(%)

Operating income 1.62 (0.27)

Incomebeforetax 5.32 (15.11)

Netmargin(%) 3.59 (10.91)

Earningspershare(NT$) 0.60 (1.52)

Cashflow

Cashflowratio(%) (0.99) 23.60

Cashflowadequacyratio(%) 3.52 49.48

Cashflowreinvestmentratio(%) (0.28) 7.12

LeverageOperatingleverage 95.46 (474.59)

Financialleverage (0.92) 0.07

Note1:TheCompany’sfinancialstatementsforthepastfiveyearshavebeendulyauditedbyindependentauditors.Since2013useIFRSs,Data2013~2015 can consult Financial analysis - IFRSs - Tatung.

Note2:Formulasfortheabovetablearespecifiedasfollows:

1. Capital structure analysis(1) Debts ratio = Total liabilities / Total assets(2)Long-termfundstofixedassets=(Shareholders’equity+

long-termliabilities)/Netfixedassets2. Liquidityanalysis

(1) Current ratio = Current assets / Current liabilities(2)Quickratio=(Currentassets-inventories-prepayment)








(6)Fixedassetsturnover=Netsales/Fixedassets(7)Totalassetsturnover=Netsales/Totalassets














Financial Overview


Audit Committee's review reportTheBoardofDirectorshaspreparedandsubmittedtheCompany’s2015BusinessReport,FinancialStatements(includingConsolidatedFinancialStatements),andlossmake-upproposal.TheCPAfirm,Ernst&Young,hasauditedtheFinancialStatementsandissuedanauditopinionreport.We,theAuditCommittee,hasagreedupontheCPA’sauditopinion,anddulyreviewedtheBusinessReportandlossmake-upproposal.WeherebysubmitthisreportaccordingtoArticle14-4oftheSecuritiesandExchangeActandArticle219ofthe Company Act.

Sincerely,ToTatungCo.2016AnnualGeneralShareholders’Meeting

TheconveneroftheAuditCommittee3rd May, 2016

Consolidated statements and report of Independent Auditor : PleaserefertoPage96~280. Parent company only statements and report of Independent Auditor: PleaserefertoPage281~385.

Occurrence of financial difficulties: None.

Analysis on Financia Status and Financial Performance and Risk as Sessment


Financial statusUnit:NT$Thousand

YearItem

2015 2014Difference

Amount %

Current assets 86,960,951 86,006,738 954,213 1.11

Non-current assets 114,957,667 127,820,580 (12,862,913) (10.06)

Total assets 201,918,618 213,827,318 (11,908,700) (5.57)

Current liabilities 104,017,444 93,801,791 10,215,653 10.89

Non-current liabilities 48,989,315 58,155,003 (9,165,688) (15.76)

Total liabilities 153,006,759 151,956,794 1,049,965 0.69

Capital stock 23,395,367 23,395,367 0 0.00

Capital surplus 785,376 750,641 34,735 4.63

Retained earnings 6,983,139 10,135,587 (3,152,448) (31.10)

Otherequities 242,144 891,862 (649,718) (72.85)

Treasury stock (806,870) (806,870) 0 0.00

Non-controlling interests 18,312,703 27,503,937 (9,191,234) (33.42)

Totalshareholders’equity 48,911,859 61,870,524 (12,958,665) (20.94)

Analysisofdeviationover20%andexceedingNT$10million:1. Retainedearnings:Deviationwasresultedfromlossaftertax.2. OtherEquity:Deviationwasresultedfromexchangeratesandpricesofsecuritiesheld.Therefore,otherequityhasdecreased

compared to 2014.3. Non-controlling interestandthetotalamountofequity:Comparedto2014,deviationwasresultedfromloss increaseof

subsidiariesconsolidatedinthefinancialstatementsof2015.

Analysis on Financia Status and Financial Performanceand Risk as Sessment


Financial performanceUnit:NT$Thousand

YearItem

2015 2014Difference Percentage

(%)Subtotal Total Subtotal Total

Salesrevenue 96,736,477 114,650,347 (17,913,870) (15.62)

Less: sales returns 924,111 912,784 11,327 1.24

Sale allowances 1,068,013 1,128,285 (60,272) (5.34)

Netsalesrevenues 94,744,353 112,609,278 (17,864,925) (15.86)

Costofgoodssold 88,699,937 96,725,204 (8,025,267) (8.30)

Grossprofits 6,044,416 15,884,074 (9,839,658) (61.95)

Operating expenses 15,418,927 16,617,954 (1,199,027) (7.22)

Operatingprofits(losses) (9,374,511) (733,880) (8,640,631) (1,177.39)

Non-operating income and expense (284,455) (1,671,284) 1,386,829 82.98

Lossfromcontinuingoperatingunitsbeforeincometax (9,658,966) (2,405,164) (7,253,802) (301.59)

Income tax 1,135,553 581,885 553,668 95.15

Netlossfromcontinuingoperations (10,794,519) (2,987,049) (7,807,470) (261.38)

Net loss (10,794,519) (2,987,049) (7,807,470) (261.38)

Othercomprehensiveincome(loss),netofincometax (1,333,044) 2,363,644 (3,696,688) (156.40)

Totalcomprehensiveloss (12,127,563) (623,405) (11,504,158) (1,845.37)

Footnote:1. Grossprofit,operatinglossesandthenetloss:Grossprofitdecreased,operatinglossandnetlossincreasedbecauserevenue

ofconsolidatedsubsidiariesdecreasedduetotherecenteconomicrecession.2. Non-operating incomeand loss:Netnon-operating lossdecreasedcomparedto2014becausegain fromdisposalof

property,plantandequipmentofconsolidatedsubsidiarieshasincreasedcomparedto2014.3. Othercomprehensive income:Othercomprehensive incomedecreasedcompared to2014due to the influenceof

exchangeratefluctuationsandpricesofsecuritiesheld.

Note:Ifthedifferencedoesnotexceed20%,theanalysisisnotrequired.



Cash flowUnit:NT$Thousand

Balanceof cash-beginning(1)

Netcashflowfromoperatingactivitiesin

the year(2)

Netcashflowfrominvestingand

financingactivitiesinthe year (3)

Remaining(Shortfall)ofcash(1)+(2)+(3)

Measuresforcoveringtheshortfallofcash

Investmentplan Financing plan

30,140,282 966,774 (3,975,598) 27,131,458 - -

1. Analysisofchangeincashflowinthecurrentyear:(1) Operatingactivities:Netcashinflowfromoperatingactivitiesin2014wasNT$5,804,458thousand.Netcashinflowfromoperatingactivities

in2015wasNT$966,774thousand.Thenetinflowfromoperatingactivitiesin2015wastheresultofworsenetincomethanthatof2014.(2)Investingactivities:Netcashoutflowfrominvestingactivitiesin2014wasNT$10,913,168thousand.Netcashoutflowfrominvestingactivitiesin

2015wasNT$10,451,038thousand.Thenetcashoutflowfrominvestingactivitiesin2015wastheresultofacquisitionsofthebondinvestmentwithintheinactivemarket,andtheproperty,plantandequipment.

(3)Financingactivities:Netcashinflowfromfinancingactivitiesin2014wasNT$11,649,116thousand.Netcashinflowfromfinancingactivitiesin2015wasNT$6,420,456thousand.Thenetcashinflowfromfinancingactivitiesin2015wastheresultofincreasinglong-termbankloans.

2. Measuresforcoveringtheshortfallofcash:Notapplicable3. Analysisofcashflowforthecomingyear:

Unit:NT$Thousand

Balanceof cash-beginning(1)

Netcashflowfromoperatingactivitiesin

the year(2)

Netcashflowfrominvestingand

financingactivitiesinthe year (3)

Remaining(Shortfall)ofcash(1)+(2)+(3)

Measuresforcoveringtheshortfallofcash

Investmentplan Financing plan

27,131,458 2,420,038 (3,489,980) 26,061,516 - -

Impactsofmajorcapitalexpendituresonfinancialpositionandoperations:None.

Long-term investment policy, main reasons for profits or losses, improvement plans and the investment plan for the coming year: Themaininvestmentstrategyatcompanyisenergyconservationandserviceindustryoriented.Inaddition,theCompanyfocusonenergysaving,healthcare,andgreenenergyfields.TheCompanypositivelycoordinateswithoverseassalesinexpandinganddevelopingthebrandtomainobjective.Inthefuture,theeffectofinvestmentproposalwillbeevaluatedseriouslybyinvestmentreviewcommittee.Afterthat,itwillbepreceded.Finally,itwillcreatethecorevalueoftheCompanyandallshareholders.

Risk assessment and analysis(I) Structure of risk management:

Risk management Bodiesincharge Responsibilities

Strategy & operation risk 1. BoardofDirectors2. High-levelmanagement(Chairman,president)3. Managementof eachplantanddivision

(General manager, di rector, and center manager)

1. Stipulation& implementationofmanagementpolicies

2. Assessment&analysisofoperationperformance

Market risk Salesunitofeachplantanddivision Business&salespromotionaswellasmarketresearchandevaluation

Financial&Liquidityrisk FinanceDivision Finalaccountingofcost,fundsallocationandcontrol,andhedgingofinterestandexchangerates

Legal risk LegalDivision Processoflitigationandnon-litigationcases

(II) Impact of interest rate and exchange rate fluctuations and inflation on the Company’s earnings and countermeasures:1. Interest rate:

(1) DerivativescanbeenusedasahedgeagainstinterestratefluctuationsfortheCompany’slong-termdebts.(2) Whenconsideringmidtolong-termbondissues,theCompanycarefullysetsitstargetinterestratetoloweritsinterestraterisksas

muchaspossible.Forexample,theCompany’soffshoreexchangeablecorporatebondissueoffersafixedinterestrate,whileitsdomesticsecuredconvertiblebondoffersazerocouponrate.

2. Exchange rate:TheCompanyhasanaturalhedgeagainstcurrencyfluctuationasitsbusinessinvolvesimportsandexports.Italsoutilizesderivativesto



hedgetheremainderof itsforeignexchangepositionthatisexposedtocurrencyexchangerisks.ThemanagementofrisksinvolvingsuchderivativesaresetforthintheCompany’s“OperationalProcedures forDerivatives Treading.” TheCompanyalsohasaninternalcontrolsystemtosupervisethelosslimitofforeigncurrencytransactions.

3. Inflation:Inflation in thepastyearhadnoadverse impactontheCompany’soperationsandprofitability.

(III) Investment policy and reasons for gains and losses on high-risk and high - leverage investments, loans to a third party, derivative trades, and countermeasures:TheCompanyengagesinderivativetrades,suchasoperationalhedgingofforeignexchange,forthesolepurposeofloweringitsfinancialriskandconductsalltransactionsinaccordancewiththeCompany’sinternalcontrolprocedure.

(IV) R&D plans, development, expenditure, commercialization, and factors to success:TheCompanysetsaside3%ofannualsalesforinvestmentinR&Dtodevelopnewproducts,technologiesandmarketstobetterservecustomersaroundtheworld.TheCompanywillcontinuetocloselyfollowtheprogress,developmentandresultsofitsvariousdevelopmentprojects.

(V) Major changes in domestic and foreign government policies and laws which may impact on the financial position and operation of the Company, and countermeasures:TheCompanycarefullymonitorsanychangesinlocalandforeignpoliciesandmakesappropriateadjustments intheCompany’sinternal control system and operations when necessary.TheCompany’sR&Dunitsandfinancialdepartmentcontinuestoavailofandseekvariousinvestmentincentives,suchastaxcredit,grantedbytheMinistryofEconomicAffairsandothergovernmentagencies.

(VI) Impact of changes in technologies on the financial position and operation of the Company, and countermeasures:1. With themassdemand forenergyefficiency&carbon

reductiontechniquetocopewithglobalwarming,PowerEquipmentBusinessUnitandSmartSolutionBusinessUnitoftheCompanyhavedevelopeddeeptechnicalfoundation,keptputtingeffortson research&development,andexpandedthebusinessofkeyproductsaswellassystemaggressivelyinsmartgridtoensureitstechnologyandmarketleading position in domestic electricity generation, power transmission & distribution and energy management. The Companymarches intooverseamarketandaimsat theenergy technology industry leader.

2. Withthetrendofenergyefficiencyandcarbonreduction,HomeApplianceBusinessUnithasstrivedtocarryonfinetradition,andreinforcedtodevelophigh-qualitygreenhomeapplianceswithhealth,environmentprotection,energy-savingandhighefficiencyconceptsto increasethesalesperformanceandprofit.

3. With theadvent of thedigital era, theCompany isaggressivelypursuingR&D,productionandmarketingofproductsthat integrate information,communicationsandhomeappliancefunctionstocatertothedemandofthedigital-agefamily.

4. TheCompany’sfocusisondevelopingvisualproducts,suchasLCDTVsandLCDmonitors,whichofferbrightmarketprospects.

5. With thecomingofageofpersonal high-frequencyradiocommunication,theCompany isactivelyexploringopportunities in 4th generation wireless communications business.

(VII) Impact by changes of corporate image on the Company’s risk management policies, and countermeasures:TheCompanywas foundedonphilosophy thatemphasizes“integrity,honesty,industryandfrugality.”ThesefourcorevaluesarestrictlyfollowedbyeachandeveryindividualintheCompanyandhavewonpublicrecognition.TheCompanywillstrivetocarryonthistradition,while,activelypursuenewideastoensurebettercorporategovernance.TheCompanyhasalsoappointedaspecialtaskforcetorespondtounforeseensituations inorderto reduceuncertaintiesandensure smooth business operations.

(VIII) Expected benefits and potential risks from mergers and acquisitions and countermeasures:TheCompanyhasnoongoingmergerandacquisitionactivities.In consider ing futureM&As, theCompanywi l l evaluatetheirefficiency, risks,vertical integrationandother factors inaccordance with its internal control system.

(IX) Expected benefits and risks related to plant expansion and countermeasures:AnyexpansionoftheCompany’s facilitiesshallbesubjecttocarefulevaluationbyaspecialtaskforceinaccordancewiththeCompany’sinternalcontrolsystem.

(X) Risk from concentration of purchase or sales, and countermeasures:TheCompanywillarrangeforalternativesourcesforpurchase,andwilldiversify itscustomerbase inorder to reduce theconcentrationofsales.

(XI) Risk from major transfer or swap of stocks by Tatung’s directors or major shareholders with over 10% of Tatung’s total outstanding shares, and countermeasures:TheshareholdingsoftheCompany’sdirectorshavebeenstableduringthepastyears,andtherewasnomajortransferorswapofstocks.

(XII) Risk from the change in management of the Company, and countermeasures:The Company has a strong and stable management team, andthereisnoriskfromthechangeinthemanagementoftheCompany.

(XIII) Major litigations, non-contentious matters or administrative actions, concluded or pending, involving any of the directors, presidents, responsible persons in fact , shareholders holdings more than 10% of the outstanding shares and subsidiaries, the result of which may significantly affect shareholders’ equity or the stock price of the Company. Disclosure shall be made with the facts in dispute, course of action, commencing date of the legal proceeding, principal litigants and the status up to the publication date of the annual report:The financial statementshave fullydisclosed the relevantlitigations,non-contentiousmatters,andtheeffectthereof.

(XIV) Other major risks, and countermeasures: None.

Other significant matters: None.

Special Disclosures


Information on Investees(I) List of investees

Tatu

ng C

omp

any

* C

hung

hwa

Pi

ctur

e Tu

bes,

Ltd

.D

omes

tic S

ubsi

dia

ries

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rsea

s Su

bsid

iarie

s

Chu

nghw

a P

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re

Tubes(W

ujiang

)Ltd.

CPTTPV

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al(Fujian)

Co.

, Ltd

.

CPT

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lay

Tech

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gy

(Fujian)Ltd.

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ptr

oni

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DevelopmentCo.,Ltd.

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DevelopmentCo.,Ltd.

ShanChihInve

stment

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, Ltd

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Companyof

Japan,Inc.

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ga

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re) P

te. L

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Sale

s Lo

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Note1:*Listed/O

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Emergingcompanies

Note2:Tatung

Inform

atio

nTechn

ology(Jiang

su)Co.,Ltd.,Tatung

Compressors(Zhong

shan)C

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Tatung

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Cable(Wujiang

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vestedbyTatung

Inform

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(Sha

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Electric

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Note3:W

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Tatung

ElectronicsTradingCo.,Ltd.w

asinve

stedbyChihSheng

HoldingHKLtd.

Special Disclosures


(II) Shareholdings, profile and operating highlights of investeesAsof31December2015Unit:NT$Thousand

NameofinvesteesLong-terminvestment Indirectinvestment Total consolidated

shareholdings Dateof incorporation Address Main business or products

Capital Total assets Total liabilities Net worth Sales

revenueOperating

income Net income EPS

Share(s) % Share(s) % Share(s) % (Note 1) (Note 2)

Chunghwa PictureTubes, Ltd.

548,385,630 8.46 918,733,408 14.18 1,467,119,038 22.64 May, 1971 No.1, HuayingRd., Longtan Dist., Taoyuan City

ManufacturingandsellingCRTtubes and TFT-LCD

64,794,541 55,790,960 52,183,839 3,607,121 31,574,270 -9,367,780 -8,761,984 -1.35

Tatung SystemTechnologies Inc.

36,018,121 53.60 540,621 0.80 36,558,742 54.40 May, 2000 22, Chungshan North Road, Sec.3, Taipei

Providingcomputersoftware/hardwareservices,voice/networkingequipmentandsystemintegration

672,000 1,982,776 1,023,442 959,334 3,029,656 109,943 87,532 1.30

ForwardElectronicsCo.,Ltd.

18,955,623 12.05 45,122,880 28.70 64,078,503 40.75 August, 1970

22, Chungshan North Road, Sec.3, Taipei

Manufacturingandsellingofbacklight modules, switches, potentiometers, encoders, wireless devicesandLEDlightings.

1,572,572 3,167,756 2,165,594 1,002,162 1,010,408 -115,393 -184,971 -1.18

Shan Chih Semiconductor Co., Ltd.

49,913,576 43.18 17,362,651 15.02 67,276,227 58.20 July,1995 22, Chungshan North Road, Sec.3, Taipei

Manufacturingandsellingofthematerialsofsemiconductors

1,155,973 3,690,694 632,797 3,057,897 301,877 -135,352 -960,416 -8.31

Central Research Technology Co., Ltd.

6,612,155 100.00 - - 6,612,155 100.00 August, 1997


OfferingEMC/RFtestingandcertificationservices

66,122 74,589 14,588 60,001 52,913 -3,326 -3,305 -0.50


49,650,000 99.10 - - 49,650,000 99.10 October, 2000


Sales,installation,andserviceofhomeappliancesanddigitalconsumer products

501,000 1,669,068 2,313,809 -644,741 6,274,706 -184,071 -163,792 -3.27

TatungSM-CYCLOCo.,Ltd.

6,400,000 85.33 - - 6,400,000 85.33 April, 1996 22, Chungshan North Road, Sec.3, Taipei

Designing,manufacturingandsellingofspeedreducersandspeedvariators

75,000 257,720 56,443 201,277 332,961 76,281 66,382 8.85


37,458,319 48.27 4,935,497 6.36 42,393,816 54.63 March, 1980 22, Chungshan North Road, Sec.3, Taipei

Industrial coatings, electroposition coatings, resistor coatings, photocatalyst,ink,JetinkABSplastic, color dyes

775,960 806,172 291,986 514,186 327,420 -37,873 -65,809 -0.85

Shan Chih Asset DevelopmentCo.,Ltd.

5,220,064 100.00 - - 5,220,064 100.00 June,1966 22, Chungshan North Road, Sec.3, Taipei

Developmentofrealestate 5,220,064 42,557,438 9,534,127 33,023,311 2,312,185 1,040,131 1,146,428 219.62

ChunghwaElectronicsDevelopmentCo.,Ltd.

262,626,267 93.27 18,562,355 6.59 281,188,622 99.86 February, 1970


Businessinvestment 2,815,737 2,201,310 1,420,409 780,901 0 -7,724 -949,831 -3.37

Tatung Die Casting Co., Ltd.

153,000 51.00 - - 153,000 51.00 November,1971


Die casting mould and parts 30,000 198,043 115,950 82,093 360,311 19,157 17,208 57.36


27,555,990 95.02 - - 27,555,990 95.02 July,2004 4F., No.136, Sec. 3, Ren’aiRd.,Da’anDist., Taipei

Medicalhealthcareinformationsystemintegrationdevelopmentservices.Designandtradeofmedicaltreatmentfacilities

290,013 341,480 135,454 206,026 234,637 -21,829 -23,127 -0.80

Toes Opto- Mechatronics Co., Ltd.

17,000,000 85.00 - - 17,000,000 85.00 May, 2004 22, Chungshan North Road, Sec.3, Taipei

Designingandmanufacturingofvariousautomaticequipment

200,000 226,617 100,914 125,703 152,280 -46,326 -44,508 -2.23

ShanChihInvestmentCo., Ltd.

77,627,119 95.83 3,376,213 4.17 81,003,332 100.00 November,1990


BusinessInvestment 810,033 384,201 20,764 363,437 - -4,683 -69,576 -0.86

ChihShengInvestmentCo., Ltd.

150,000,000 100.00 - - 150,000,000 100.00 June,2008 No.160, Sec. 1, Fuxing South Road., Taipei

BusinessInvestment 1,500,000 931,066 150,304 780,762 - -3,994 -241,337 -1.61

TatungForeverEnergyCo., Ltd.

10,000,000 100.00 - - 10,000,000 100.00 February,2015

No.160, Sec. 1, FuxingSouth Road., Taipei

Solar power business 100,000 107,780 7,939 99,841 19,618 -217 -159 -0.02


97,400,000 92.23 8,200,000 7.77 105,600,000 100.00 October, 1989

Amata Nakorn, IndustrialEstate.Bangna-TradRoad, KM.57, 700/50,52,54, Moo 6, T. Nongmaidang, A.Muang, Chonburi 20000, Thailand

EMS,IndustrialAppliances,WireandCable,ElectronicsandHomeAppliances, Air Conditioning product, Smart Meter, Solar Module,LEDTV,LEDlightingproduct assembly

965,818 575,863 156,864 418,999 237,357 -65,540 -14,346 -0.13

Special Disclosures


(II) Shareholdings, profile and operating highlights of investeesAsof31December2015Unit:NT$Thousand




revenueOperating



Chunghwa PictureTubes, Ltd.

548,385,630 8.46 918,733,408 14.18 1,467,119,038 22.64 May, 1971 No.1, HuayingRd., Longtan Dist., Taoyuan City

ManufacturingandsellingCRTtubes and TFT-LCD

64,794,541 55,790,960 52,183,839 3,607,121 31,574,270 -9,367,780 -8,761,984 -1.35

Tatung SystemTechnologies Inc.

36,018,121 53.60 540,621 0.80 36,558,742 54.40 May, 2000 22, Chungshan North Road, Sec.3, Taipei

Providingcomputersoftware/hardwareservices,voice/networkingequipmentandsystemintegration

672,000 1,982,776 1,023,442 959,334 3,029,656 109,943 87,532 1.30

ForwardElectronicsCo.,Ltd.

18,955,623 12.05 45,122,880 28.70 64,078,503 40.75 August, 1970


Manufacturingandsellingofbacklight modules, switches, potentiometers, encoders, wireless devicesandLEDlightings.

1,572,572 3,167,756 2,165,594 1,002,162 1,010,408 -115,393 -184,971 -1.18


49,913,576 43.18 17,362,651 15.02 67,276,227 58.20 July,1995 22, Chungshan North Road, Sec.3, Taipei

Manufacturingandsellingofthematerialsofsemiconductors

1,155,973 3,690,694 632,797 3,057,897 301,877 -135,352 -960,416 -8.31

Central Research Technology Co., Ltd.

6,612,155 100.00 - - 6,612,155 100.00 August, 1997


OfferingEMC/RFtestingandcertificationservices

66,122 74,589 14,588 60,001 52,913 -3,326 -3,305 -0.50


49,650,000 99.10 - - 49,650,000 99.10 October, 2000


Sales,installation,andserviceofhomeappliancesanddigitalconsumer products

501,000 1,669,068 2,313,809 -644,741 6,274,706 -184,071 -163,792 -3.27

TatungSM-CYCLOCo.,Ltd.

6,400,000 85.33 - - 6,400,000 85.33 April, 1996 22, Chungshan North Road, Sec.3, Taipei

Designing,manufacturingandsellingofspeedreducersandspeedvariators

75,000 257,720 56,443 201,277 332,961 76,281 66,382 8.85


37,458,319 48.27 4,935,497 6.36 42,393,816 54.63 March, 1980 22, Chungshan North Road, Sec.3, Taipei

Industrial coatings, electroposition coatings, resistor coatings, photocatalyst,ink,JetinkABSplastic, color dyes

775,960 806,172 291,986 514,186 327,420 -37,873 -65,809 -0.85


5,220,064 100.00 - - 5,220,064 100.00 June,1966 22, Chungshan North Road, Sec.3, Taipei

Developmentofrealestate 5,220,064 42,557,438 9,534,127 33,023,311 2,312,185 1,040,131 1,146,428 219.62


262,626,267 93.27 18,562,355 6.59 281,188,622 99.86 February, 1970


Businessinvestment 2,815,737 2,201,310 1,420,409 780,901 0 -7,724 -949,831 -3.37

Tatung Die Casting Co., Ltd.

153,000 51.00 - - 153,000 51.00 November,1971


Die casting mould and parts 30,000 198,043 115,950 82,093 360,311 19,157 17,208 57.36


27,555,990 95.02 - - 27,555,990 95.02 July,2004 4F., No.136, Sec. 3, Ren’aiRd.,Da’anDist., Taipei

Medicalhealthcareinformationsystemintegrationdevelopmentservices.Designandtradeofmedicaltreatmentfacilities

290,013 341,480 135,454 206,026 234,637 -21,829 -23,127 -0.80

Toes Opto- Mechatronics Co., Ltd.

17,000,000 85.00 - - 17,000,000 85.00 May, 2004 22, Chungshan North Road, Sec.3, Taipei

Designingandmanufacturingofvariousautomaticequipment

200,000 226,617 100,914 125,703 152,280 -46,326 -44,508 -2.23

ShanChihInvestmentCo., Ltd.

77,627,119 95.83 3,376,213 4.17 81,003,332 100.00 November,1990


BusinessInvestment 810,033 384,201 20,764 363,437 - -4,683 -69,576 -0.86

ChihShengInvestmentCo., Ltd.

150,000,000 100.00 - - 150,000,000 100.00 June,2008 No.160, Sec. 1, Fuxing South Road., Taipei

BusinessInvestment 1,500,000 931,066 150,304 780,762 - -3,994 -241,337 -1.61

TatungForeverEnergyCo., Ltd.

10,000,000 100.00 - - 10,000,000 100.00 February,2015

No.160, Sec. 1, FuxingSouth Road., Taipei

Solar power business 100,000 107,780 7,939 99,841 19,618 -217 -159 -0.02


97,400,000 92.23 8,200,000 7.77 105,600,000 100.00 October, 1989

Amata Nakorn, IndustrialEstate.Bangna-TradRoad, KM.57, 700/50,52,54, Moo 6, T. Nongmaidang, A.Muang, Chonburi 20000, Thailand

EMS,IndustrialAppliances,WireandCable,ElectronicsandHomeAppliances, Air Conditioning product, Smart Meter, Solar Module,LEDTV,LEDlightingproduct assembly

965,818 575,863 156,864 418,999 237,357 -65,540 -14,346 -0.13

Special Disclosures


Asof31December2015Unit:NT$Thousand




revenueOperating



TatungCompanyofJapan,Inc.

15,000 100.00 - - 15,000 100.00 August, 1975 AKstarBldg.4F,6-14-7, Soto-Kanda, Chiyoda-Ku, Tokyo, 101-0021,Japan

Saleandserviceofequipmentand instruments, materials, electronics, home appliances and IT products

4,091 2,909,306 2,315,544 593,762 3,464,529 20,488 -10,734 -715.60

TatungElectronics(Singapore) Pte. Ltd.

3,600,000 90.00 - - 3,600,000 90.00 September, 1972

4, First Lok yang Road,Jurong,Singapore 629729

Saleandserviceofmaterialsandparts

93,000 95,764 30,376 65,388 85,105 -10,033 -3,297 -0.82

TatungInformation(Singapore) Pte. Ltd.

86,049,842 100.00 - - 86,049,842 100.00 December, 1999

50,RafflesPlace#32-01 Singapore Land Tower, Singapore 048623

BusinessInvestment 1,654,216 639,450 260 639,190 - -348 -345 -0.00

TatungElectric(Singapore) Pte. Ltd.

31,598,675 100.00 - - 31,598,675 100.00 April, 1998 50,RafflesPlace#32-01 Singapore Land Tower, Singapore 048623

BusinessInvestment 623,675 625,796 435 625,361 - -241 -241 -0.01

TatungCo.ofAmerica,Inc.

1,750,000 50.00 - - 1,750,000 50.00 September, 1972

2850ElPresidioStreet,LongBeach,CA90810,U.S.A.

Saleandserviceofelectronicproducts and home appliances

114,888 719,135 440,984 278,151 1,544,754 -28,588 -28,672 -8.19


1,597,248 100.00 - - 1,597,248 100.00 November,1997

Calle Miguel Catalan No. 420 ParqueIndustrialRioBravoCiudadJuarez,Chih.C.P.322557 Mexico

ManufacturingofElectronicproducts

189,890 377,168 91,794 285,374 301,420 29,331 33,767 21.14

TatungElectricCo.ofAmerica, Inc.

1,000,000 100.00 - - 1,000,000 100.00 July,1988 14381 Chambers Road Tustin CA 92780U.S.A.

Saleandserviceofheavy-industryproducts

131,300 346,446 138,378 208,068 647,166 1,156 777 0.78

Tatung Czech s.r.o. - 100.00 - - - 100.00 December, 2003

Na Radosti 184/59, 155 21 Prague 5, Czech Republic

EUSalesofficeforSmartmeter,IoTandenergysavingproducts

298,858 45,553 12,211 33,342 8 -20,438 -18,322 -

Tatung Global Strategy InvestmentandTrading(BVI)Inc.

72,000,000 100.00 - - 72,000,000 100.00 January,2006

P.O.Box957,OffshoreIncorporations Centre, Road Town, Tortola, BritishVirginIslands

BusinessInvestment 2,352,501 112,314 963,909 -851,595 0 -842 -320,151 -4.45

Absolute Alpha Limited 50,000 100.00 - - 50,000 100.00 December, 2009


BusinessInvestment 3,190 20,573 0 20,573 0 -25 -434 -8.68

TatungInformationTechnology(Jiangsu)Co., Ltd.

- - - 100.00 - 100.00 December, 1999

No.555,JiangxingE.Rd.,Song-LingTown,Wu-jiangCity,Jiangsu,P.R.C.

Manufacturingandsellingofelectronics and home appliances

1,062,596 118,486 559,709 -441,223 115,611 -56,632 -87,246 -


- - - 100.00 - 100.00 September, 2004

No.38, Sheng Hui N. Rd., Nantou Town, Zhongshan City, Guangdong, P.R.C.

Manufacturingandsellingofreciprocatingcompressorsforfreezingandrefrigeration

459,369 549,981 138,312 411,669 611,688 13,693 19,959 -


- - - 100.00 - 100.00 December, 1995

No.5299,BeisongRd., Chedun Town, SongjiangDistrict,Shanghai , P.R.C.

Motors,generators,transformers 897,736 2,287,843 1,286,238 1,001,605 1,150,990 -13,460 -36,485 -

Tatung Wire and Cable Technology(Wujiang)Co., Ltd.

- - - 100.00 - 100.00 February, 2004

No. 885, Fenhu Main Rd, Fenhu economic developmentzone,WujiangDistrict, Suzhou City,JiangsuProvince,China(P.R.C.)

Wireandcablemanufacturers 543,894 261,437 94,299 167,138 90,622 -85,060 211,513 -

Special Disclosures






revenueOperating




15,000 100.00 - - 15,000 100.00 August, 1975 AKstarBldg.4F,6-14-7, Soto-Kanda, Chiyoda-Ku, Tokyo, 101-0021,Japan

Saleandserviceofequipmentand instruments, materials, electronics, home appliances and IT products

4,091 2,909,306 2,315,544 593,762 3,464,529 20,488 -10,734 -715.60


3,600,000 90.00 - - 3,600,000 90.00 September, 1972

4, First Lok yang Road,Jurong,Singapore 629729

Saleandserviceofmaterialsandparts

93,000 95,764 30,376 65,388 85,105 -10,033 -3,297 -0.82


86,049,842 100.00 - - 86,049,842 100.00 December, 1999

50,RafflesPlace#32-01 Singapore Land Tower, Singapore 048623

BusinessInvestment 1,654,216 639,450 260 639,190 - -348 -345 -0.00

TatungElectric(Singapore) Pte. Ltd.

31,598,675 100.00 - - 31,598,675 100.00 April, 1998 50,RafflesPlace#32-01 Singapore Land Tower, Singapore 048623

BusinessInvestment 623,675 625,796 435 625,361 - -241 -241 -0.01

TatungCo.ofAmerica,Inc.

1,750,000 50.00 - - 1,750,000 50.00 September, 1972

2850ElPresidioStreet,LongBeach,CA90810,U.S.A.

Saleandserviceofelectronicproducts and home appliances

114,888 719,135 440,984 278,151 1,544,754 -28,588 -28,672 -8.19


1,597,248 100.00 - - 1,597,248 100.00 November,1997

Calle Miguel Catalan No. 420 ParqueIndustrialRioBravoCiudadJuarez,Chih.C.P.322557 Mexico

ManufacturingofElectronicproducts

189,890 377,168 91,794 285,374 301,420 29,331 33,767 21.14

TatungElectricCo.ofAmerica, Inc.

1,000,000 100.00 - - 1,000,000 100.00 July,1988 14381 Chambers Road Tustin CA 92780U.S.A.

Saleandserviceofheavy-industryproducts

131,300 346,446 138,378 208,068 647,166 1,156 777 0.78

Tatung Czech s.r.o. - 100.00 - - - 100.00 December, 2003

Na Radosti 184/59, 155 21 Prague 5, Czech Republic

EUSalesofficeforSmartmeter,IoTandenergysavingproducts

298,858 45,553 12,211 33,342 8 -20,438 -18,322 -


72,000,000 100.00 - - 72,000,000 100.00 January,2006


BusinessInvestment 2,352,501 112,314 963,909 -851,595 0 -842 -320,151 -4.45

Absolute Alpha Limited 50,000 100.00 - - 50,000 100.00 December, 2009


BusinessInvestment 3,190 20,573 0 20,573 0 -25 -434 -8.68

TatungInformationTechnology(Jiangsu)Co., Ltd.

- - - 100.00 - 100.00 December, 1999

No.555,JiangxingE.Rd.,Song-LingTown,Wu-jiangCity,Jiangsu,P.R.C.

Manufacturingandsellingofelectronics and home appliances

1,062,596 118,486 559,709 -441,223 115,611 -56,632 -87,246 -


- - - 100.00 - 100.00 September, 2004

No.38, Sheng Hui N. Rd., Nantou Town, Zhongshan City, Guangdong, P.R.C.

Manufacturingandsellingofreciprocatingcompressorsforfreezingandrefrigeration

459,369 549,981 138,312 411,669 611,688 13,693 19,959 -


- - - 100.00 - 100.00 December, 1995

No.5299,BeisongRd., Chedun Town, SongjiangDistrict,Shanghai , P.R.C.

Motors,generators,transformers 897,736 2,287,843 1,286,238 1,001,605 1,150,990 -13,460 -36,485 -

Tatung Wire and Cable Technology(Wujiang)Co., Ltd.

- - - 100.00 - 100.00 February, 2004

No. 885, Fenhu Main Rd, Fenhu economic developmentzone,WujiangDistrict, Suzhou City,JiangsuProvince,China(P.R.C.)

Wireandcablemanufacturers 543,894 261,437 94,299 167,138 90,622 -85,060 211,513 -

Special Disclosures






revenueOperating



Wu-JiangTatungElectronicsTradingCo.,Ltd.

- - - 100.00 - 100.00 November,2009

No.555, JiangxingE.Rd.,Song-Ling Town, Wu-jiangCity,Jiangsu,P.R.C.

Wholesale and import/export businessofelectronicproducts,instrumentation, home appliances and oxygen concentrators

178,668 31,252 45,816 -14,564 30,527 -16,972 -16,397 -

Giantplus Technology Co., Ltd.

- - 236,981,757 53.67 236,981,757 53.67 December, 1997

No.15, Gongye Rd., ToufenTownship,Miaoli County 35145, Taiwan (R.O.C.)

Research,development,productionandsalesofLCDmonitors and LCD panel

4,415,449 13,930,724 6,261,144 7,669,580 10,719,747 281,110 447,237 1.01

ChunghwaP.T.(Wujiang)Ltd.

- - - 100.00 - 100.00 March, 2001 No.88,JiangXingEastRd.,WujiangEconomicTechnology DevelopmentZone,JiangsuProvince,China

Research,development,productionandsalesofLCDpanel

4,885,309 9,614,798 2,458,516 7,156,282 5,248,738 394,130 607,212 -

CPTTPVOptical(Fujian)Co., Ltd.

- - - 80.00 - 80.00 September, 2005

Shangzheng, YuanhongRd.,FuqingCity,FujianProvince,China

Development,design,productionandsalesofnewflatpaneldisplaycomponents, LCD products, modules and components

919,594 962,252 61,328 900,924 384,294 -75,934 -71,573 -

CPT Display Technology(Fujian)Ltd.

- - - 100.00 - 100.00 February, 2004

No.6,RujiangWestRd., Mawei Hi-techDevelopmentZone, FuZhou, FujianProvince,China

RresearchanddevelopmentdesignedtoproducesalesofLCDdisplay modules and components

1,255,158 6,525,896 3,620,936 2,904,960 1,624,281 534,547 607,343 -

CPTF Optronics Co., Ltd. - - 2,325,526,100 100.00 2,325,526,100 100.00 January,1994 No.1,XingYeRd.,Mawei Hi-tech DevelopmentZone, FuZhou, FujianProvince,China

Development,designandproductionofflatpaneldisplayproducts;flatpaneldisplayproducts and related parts wholesale.

11,755,488 25,819,662 12,960,418 12,859,244 15,131,663 2,092,238 1,380,817 0.59

CPTF Visual Display (Fuzhou) Ltd.

- - - 100.00 - 100.00 November,2003

No1.XinYeRoad,Mawei Hi-tech DevelopmentZone, Fuzhou , FujianProvince,China

Assembly,development,design,andsalesofdisplayproducts.

206,811 1,814,807 1,384,836 429,971 2,037,044 31,344 16,062 -

Kornerstone Materials Technology CO., Ltd.

- - - 100.00 - 100.00 August,2011

No.12RujiangWestRoad, Mawei Hi-techDevelopmentZone, Fuzhou Fujian,China

Development,design,productionandsalesofmaterialoftouchcomponents

4,139,659 7,014,919 4,735,481 2,279,438 103,670 -1,155,236 -949,762 -

Note1: Exchangerateforbalancesheetitems(currentrate):USD(32.82500)SGD(23.25000)THB(0.91460)JPY(0.27270)MXN(1.88788)CZK(1.32742)VND(0.00146)RMB(5.05498)

Note2: Exchange rate for incomestatement items (average rate):USD(31.73726)SGD(23.09744) THB(0.93250)JPY(0.26244)MXN(1.99918)CZK(1.31747)VND(0.00145)RMB(5.08921)

(III) Business scope of Tatung and its investees and the correlation of their business activitiesTheCompanyand itsaffiliatesareprimarilyengaged inelectronic information,homeappliances,and industrialappliancebusinesses.Ingeneral,thecorrelationofourbusinessactivitiesisformedbymutualsupportinproduction,sales,marketingandservicetomaximizethesynergyofTatungGroupensuringasuccessfuldeliveryofthebestandmostefficientservicetoourcustomers.

Special Disclosures






revenueOperating



Wu-JiangTatungElectronicsTradingCo.,Ltd.

- - - 100.00 - 100.00 November,2009

No.555, JiangxingE.Rd.,Song-Ling Town, Wu-jiangCity,Jiangsu,P.R.C.

Wholesale and import/export businessofelectronicproducts,instrumentation, home appliances and oxygen concentrators

178,668 31,252 45,816 -14,564 30,527 -16,972 -16,397 -

Giantplus Technology Co., Ltd.

- - 236,981,757 53.67 236,981,757 53.67 December, 1997

No.15, Gongye Rd., ToufenTownship,Miaoli County 35145, Taiwan (R.O.C.)

Research,development,productionandsalesofLCDmonitors and LCD panel

4,415,449 13,930,724 6,261,144 7,669,580 10,719,747 281,110 447,237 1.01


- - - 100.00 - 100.00 March, 2001 No.88,JiangXingEastRd.,WujiangEconomicTechnology DevelopmentZone,JiangsuProvince,China

Research,development,productionandsalesofLCDpanel

4,885,309 9,614,798 2,458,516 7,156,282 5,248,738 394,130 607,212 -

CPTTPVOptical(Fujian)Co., Ltd.

- - - 80.00 - 80.00 September, 2005

Shangzheng, YuanhongRd.,FuqingCity,FujianProvince,China

Development,design,productionandsalesofnewflatpaneldisplaycomponents, LCD products, modules and components

919,594 962,252 61,328 900,924 384,294 -75,934 -71,573 -

CPT Display Technology(Fujian)Ltd.

- - - 100.00 - 100.00 February, 2004

No.6,RujiangWestRd., Mawei Hi-techDevelopmentZone, FuZhou, FujianProvince,China

RresearchanddevelopmentdesignedtoproducesalesofLCDdisplay modules and components

1,255,158 6,525,896 3,620,936 2,904,960 1,624,281 534,547 607,343 -

CPTF Optronics Co., Ltd. - - 2,325,526,100 100.00 2,325,526,100 100.00 January,1994 No.1,XingYeRd.,Mawei Hi-tech DevelopmentZone, FuZhou, FujianProvince,China

Development,designandproductionofflatpaneldisplayproducts;flatpaneldisplayproducts and related parts wholesale.

11,755,488 25,819,662 12,960,418 12,859,244 15,131,663 2,092,238 1,380,817 0.59


- - - 100.00 - 100.00 November,2003

No1.XinYeRoad,Mawei Hi-tech DevelopmentZone, Fuzhou , FujianProvince,China

Assembly,development,design,andsalesofdisplayproducts.

206,811 1,814,807 1,384,836 429,971 2,037,044 31,344 16,062 -

Kornerstone Materials Technology CO., Ltd.

- - - 100.00 - 100.00 August,2011

No.12RujiangWestRoad, Mawei Hi-techDevelopmentZone, Fuzhou Fujian,China

Development,design,productionandsalesofmaterialoftouchcomponents

4,139,659 7,014,919 4,735,481 2,279,438 103,670 -1,155,236 -949,762 -

Note1: Exchangerateforbalancesheetitems(currentrate):USD(32.82500)SGD(23.25000)THB(0.91460)JPY(0.27270)MXN(1.88788)CZK(1.32742)VND(0.00146)RMB(5.05498)

Note2: Exchange rate for incomestatement items (average rate):USD(31.73726)SGD(23.09744) THB(0.93250)JPY(0.26244)MXN(1.99918)CZK(1.31747)VND(0.00145)RMB(5.08921)

(III) Business scope of Tatung and its investees and the correlation of their business activitiesTheCompanyand itsaffiliatesareprimarilyengaged inelectronic information,homeappliances,and industrialappliancebusinesses.Ingeneral,thecorrelationofourbusinessactivitiesisformedbymutualsupportinproduction,sales,marketingandservicetomaximizethesynergyofTatungGroupensuringasuccessfuldeliveryofthebestandmostefficientservicetoourcustomers.

Special Disclosures


(IV) Directors, supervisors and presidents of investeesAsof30April2016

Nameofinvestees Title NameorrepresentativeShareholding

Shares %Chunghwa Picture Tubes, Ltd.

RepresentativesofChunghwaElectronicsDevelopmentCo.,Ltd.:

483,363,519 7.46%

Chairman Wei-Shan Lin 79,172 -

Director Wen-yen K. Lin 79,124 -

Director Wen-chieh Peng - -

Director Ho-long Lin - -

Director Yung-chiChang 185 -

Independent Director Chien-Ho Chao - -

Independent Director Chien-chungYuan - -

Independent Director Yuh-YuanTsai - -

President Sheng-chang Lin 20,732 -

Tatung System Technologies Inc.

Chairman Wen-yen K. Lin 2,904 -

Director Wei-Shan Lin 4,357 0.01%

RepresentativesofTatungCompany: 36,018,121 53.60%

Director Tzu-Te Chen - -

Director and President Bo-yenShen 301,346 0.45%

Director Shih-kuang Tsai - -

Director Chi-wei Chen - -

Independent Director Ho-pingYen - -

Independent Director Po-sheng Lin - -

Independent Director Chao-Tung Wen - -

ForwardElectronicsCo.,Ltd. RepresentativesofTatungCompany: 18,955,623 12.05%

Chairman Wei-shan Lin - -

Director Wen-yen K. Lin - -

Directors and President Meng-Chi Hsu - -

Director Sheng-chang Lin - -

Director Yung-FengWang - -

Director Ju-PingYuan - -

Independent Director Yang-pingShen - -

Independent Director Chia-nan Wang - -


Chairman Wei-shan Lin 162,584 0.14%

Director Wen-yen K. Lin 40,645 0.04%


Director Ho-long Lin 498 -

Director and President Lung-ta Lee 105,578 0.09%

Director Chia-ying Ma - -

Independent Director Han-qingLin - -

Independent Director Peng-feiSu - -

Special Disclosures


Asof30April2016


Shares %Central Research Technology Co., Ltd.


Chairman and President Ke-chi Chan - -

Director Wei-shan Lin - -

Director Fu-lai Chu - -

Director Chi-fangHuang - -

Director Chien-hsin Lee - -

Supervisor Jui-KaiChang - -





Director Kao-Chung Chang - -

Director Shu-Li Chen - -

Director and President Chung-chi Chang - -

Supervisor Po-Han Lee - -

Tatung SM-Cyclo Co., Ltd. RepresentativesofTatungCompany: 6,400,000 85.33%


Director and President Tzyy-perng Wu - -

RepresentativeofSM-Cyclo: 1,100,000 14.67%

Director Nakamura Atsushi - -

Supervisor Jung-changHsieh - -


Chairman Wei-Shan Lin 381,085 0.49%

Director Wen-yen K.Lin 153,102 0.20%


Director and President Yung-chiChang 57,493 0.07%

Director Lung-ta Lee - -

Director Jian-PyngSheu - -

Director Chia-ying Ma - -

Independent Director Ya-huiWu - -

Independent Director Jhan-jingJuang - -

Independent Director Fu-chang Huang - -





Director Lung-chieh Wang - -

Director and President I-hua Chang - -


Supervisor Wen-kang Hsu - -





Director I-hua Chang - -

Director and President Jui-KaiChang - -


RepresentativesofShanChihAssetDevelopmentCo., Ltd.:

562,355 0.20%

Supervisor Yu-shengSu - -

Supervisor Yi-chunChen - -

Special Disclosures


Asof30April2016


Shares %Tatung Die Casting Co., Ltd. RepresentativesofTatungCompany: 153,000 51.00%


Director and President Rong-chang Hsieh - -

Director Chia-Tien Lin - -

RepresentativesofMitsuiMining&SmeltingCo.,Ltd.: 147,000 49.00%

Director KenjiOkubo - -

Director Hiroyuki Nakazawa - -

Supervisor Chien-chengYu - -

Supervisor Tomoyuki Kurozumi - -





Director and President Li-min Chen - -

Director Po-Han Lee - -


Supervisor Pei-chun Hsieh - -

Toes Opto-Mechatronics Co., Ltd.




Director Wen-jinnLiang - -

Director Chia-Tien Lin - -

Director Kuan-min Lu - -

Supervisor Shu-Li Chen - -

President Tang-YuanSun - -

ShanChihInvestmentCo.,Ltd.



Director Cheng-chiehYang - -

Director Lung-chieh Wang - -

RepresentativesofChunghwaElectronicsDevelopmentCo.,Ltd.

3,376,213 4.17%


President Shu-Li Chen - -

ChihShengInvestmentCo.,Ltd.


Chairman Wen-chieh Peng - -



Director and President Jui-KaiChang - -


Supervisor Shu-fenChen - -

TatungForeverEnergyCo.,Ltd.


Chairman Ho-long Lin - -


Director Wen-yen K.Lin - -

Director Tzu-Te Chen - -

Director Tse-hsinYang - -

Supervisor Shu-hua Liao - -

President Ming-Hsiun Lai - -

Special Disclosures


Asof30April2016


Shares %Tatung (Thailand)Co., Ltd. RepresentativesofTatungCompany: 97,400,000 92.23%

Chairman Ming-yuan Hsieh - -


Director Shueei-tian Shiue - -

Director Shu-Li Chen - -

Director Yu-ChinHuang - -

Director Chung-chi Chang - -

President Chun-rong Lu - -


RepresentativesofTatungCompany: 15,000 100.00%


Vice Chairman Ying-cheHuang - -

Director Wen-yen K.Lin - -

Director Huei-JihnJih - -


Director Meng-Chi Hsu - -


Supervisor Cheng-chiehYang - -

Supervisor Shu-Li Chen - -

President Hsieh-jangChang - -




Director Shu-fenChen - -

Director Chee-chergYang - -



Chairman Wen-yen K. Lin - -


TatungElectric(Singapore)Pte. Ltd.




TatungCo.ofAmerica,Inc. Director Andrew L. Sun 102,967 2.94%

Director Christina Sun 102,967 2.94%

Director Ta-kuan Huang Lin - -

RepresentativesofEstateofLun-kuanLin: 1,544,066 44.12%

Director Ching-kuan Chan Lin - -



Director and President Huei-JihnJih - -

Tatung Mexico S.A de C.V RepresentativesofTatungCompany: 1,005,836 100.00%

Chairman Wen-yen K. Lin - -


Director Po-Han Lee - -

Director Chang-ping Lin - -

Director Chi-hua Lan - -

Supervisor Wen-kang Hsu - -

TatungElectricCo.,ofAmerica, Inc.


Chairman Shueei-tian Shiue - -

Director Ming-Tse Hsu - -

Director Yung-FengWang - -

Director Kwo-shun Chen - -

Director Cheng-chiehYang

President Chi-hua Lan - -

Special Disclosures


Asof30April2016


Shares %Tatung Czech s.r.o. RepresentativesofTatungCompany: - 100.00%

Chairman Wen-yen K.Lin - -

Director Ho-long Lin - -




Director Shu-fenChen - -


Absolute Alpha Limited RepresentativesofTatungCompany: 50,000 100.00%



Director Cheng-chienYang - -

Director Min-JouChou - -

TatungInformationTechnology(Jiangsu)Co.,Ltd.

RepresentativesofTatungInformation(Singapore) Pte. Ltd.:

- 100.00%

Chairman Kuo-hua Chung - -

Director Wei-Shan Lin - -


Director Chung-chi Chang - -

Director Hung-tao Chien - -



- 79.89%

ShanChihInvestmentCo.,Ltd.: - 20.11%

Chairman Kuo-hua Chung - -

Director and President Hong-shiun Pan - -

Director Chao-Ching Chen - -

Director Tsan-chuan Wu - -


Supervisor Yu-shengSu - -

Tatung (Shanghai) Co.,Ltd. RepresentativesofTatungElectric(Singapore)Pte. Ltd.:

- 86.36%

ShanChihInvestmentCo.Ltd.: - 13.64%

Chairman Ho-long Lin - -


Director and President Kwo-shun Chen - -


Director An Chao - -


Tatung Wire and Cable Technology(Wujiang)Co.,Ltd.


- 100.00%

Chairman and President Hui-Chieh Ho - -

Director Wei-Shan Lin - -


Director Cheng-yiYu - -

Director An Chao - -

Supervisor Chien-chengYu - -

Wu-JiangTatungElectronicsTrading Co., Ltd.

RepresentativesofChihShengHoldingHKLtd.: - 100.00%

Chairman Chung-chi Chang - -



Director Shih-ling Chang - -

Director Chun-shih Ho - -

Supervisor Shing-jyeTsai - -

Special Disclosures


Asof30April2016


Shares %Giantplus Technology Co., Ltd.

RepresentativesofChunghwaPictureTubes,Ltd.: 236,981,757 53.67%

Chairman Sheng-chang Lin - -

Director Hsueh-lung Li - -

Director Jia-hongWang - -

Director Yi-TasiHsu - -

Independent director Yao-hsunHung - -

Independent director Ying-chyiChou - -

Independent director Kuang-ming Wu - -


RepresentativesofCPTTechnology(Group)Co.,Ltd.: - 75.00%

RepresentativesofChunghwaP.T.(Labuan)Ltd.: - 25.00%

Chairman Chih-chun Liu - -

Director Kuo-ling Chi - -

Director Wei-JungChang - -

CPTTPVOptical(Fujian)Co.,Ltd.


RepresentativesofChunghwaP.T.(Bermuda)Ltd.: - 5.00%

Chairman Ping-chang Wu - -


Director Chih-chun Liu - -

CPT Display Technology (Fujian)Ltd.


Chairman Chih-chun Liu - -


Director Tuo-chung Huang - -

Director Buo-hsunChung - -

CPTF Optronics Co., Ltd. RepresentativesofCPTTechnology(Group)Co.,Ltd.: 1,744,144,575 75.00%

RepresentativesofChunghwaP.T.(Wujiang)Ltd.: 348,828,915 15.00%

RepresentativesofCPTDisplayTechnology(Fujian)Ltd.: 232,552,610 10.00%

Chairman and President Chih-chun Liu - -



Director Buo-hsunChung - -

Director Chin-huiYang - -


RepresentativesofCPTFOptronicsCo.,Ltd.: - 61.73%

RepresentativesofNewKingstonEnterpriseLimited: - 13.46%

Chairman Wei-JungChang - -

Director Meng-Chi Hsu - -


Kornerstone Materials Technology Co., Ltd.

RepresentativesofCPTTechnology(Group)Co.,Ltd.: - 91.16%RepresentativesofGoldmaxAsiaPacificLtd.: - 8.84%

Chairman Hsueh-lung Li - -Director Wei-Shan Lin - -Director Sheng-chang Lin - -Director Chih-chun Liu - -Director Yuan-jieDing - -

Special Disclosures


Securities issuance through private placement: None.

Holdings and sale of shares by subsidiariesUnit:NT$Thousand

Name Paid-in capital Sourceoffunding

Shareholding percentage by the

Company

Dateofacquisitionor

disposal

Shares and amountofacquisition

Shares and amountof

disposal

Investmentincome

Shares and amount held

up to the publishing date oftheannual

report

Balanceofpledged

shares

Amountofendorsement/

guarantee made by the Company

Amountoffinancing

providedbythe Company

Chunghwa ElectronicsDevelopmentCo., Ltd.

2,815,737 Own capital

93.27% - - - - 333,586 shares1,681 thousand NTD

- - -


64,794,541 Own capital

8.46% - - - - 10,944,773 shares55,162 thousand NTD

- 3,000,000 -

Other necessary supplementary information: None.

Events of significant impact on shareholders’ right or security prices: None.

Appendix - Consolidated statements




TATUNG CO., LTD. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED December 31, 2015 and 2014 (Expressed in Thousands of New Taiwan Dollars unless otherwise specified)

1. Organization Operations

Established in 1918, Tatung Company (the “Company”) was incorporated under the CompanyAct of the Republic of China (“R.O.C.”) and underwent reorganization in 1939. The total capitalat that time was Taiwan Yuan $180,000, later increased to Taiwan Yuan $20,000,000 afterseveral capital injections. After the reformation of monetary system in 1949, the total capital wasconverted to the equivalent of New Taiwan dollars (“NTD”) 200,000. As of December 31, 2015,the issued and registered capital was NTD 23,395,367 thousand. The main activities of theCompany are as follows:

(1) The design, manufacture, sale, installation, network system, automation system, lease,service maintenance, import and export as agency of the following products:

○1 Steel manufacturing machinery ○2 Industrial appliances○3 Household appliances ○4 Refrigerators○5 Air conditioners ○6 Metal processing machinery○7 Electronic products ○8 Wire and cable○9 Chemical industry ○10 Cookware○11 Wood-made products ○12 Plastic products○13 Office equipment ○14 Audio products○15 Precision meters ○16 Transmission equipment○17 Transportation facilities ○18 Healthcare products○19 Microbe fermentation ○20 Construction○21 Furniture ○22 Solar wafers○23 Water treatment engineering ○24 Telecommunication equipment○25 Parking facilities ○26 Automation machinery○27 Semiconductors ○28 Real estate development and leasing

(2) Magazine publishing

(3) Customs brokerage

(4) General import/export (excluding permitted business)

(5) Development and leasing (excluding construction industry) of industrial parks on behalf ofthe competent authority.




(Expressed in Thousands of New Taiwan Dollars unless otherwise Specified)

11

The investment plans should be approved by the Board of Directors; however, the totalinvestment amount is not limited to the amount provided by Article 13 of Company Act, whichstates that the total investment amount shall not exceed 40% of the amount of its own paid-incapital.

The Company’s common shares were publicly listed on the Taiwan Stock Exchange (TWSE) on9 February 1962. The Company’s registered office and the main business location locate at No.22, Zhongshan North Road, Section 3, Taipei, Republic of China (R.O.C.).

2. Date and procedures of authorization of financial statements for issue

The consolidated financial statements of the Company and its subsidiaries (“the Group”) for theyear ended December 31, 2015 and 2014 were authorized for issue in accordance with aresolution of the Board of Directors’ meeting on March 23, 2016.

3. Newly issued or revised standards and interpretations

(1) Changes in accounting policies resulting from applying for the first time certain standardsand amendments

The Group applied for the first time International Financial Reporting Standards,International Accounting Standards, and interpretations issued, revised or amended whichare recognized by Financial Supervisory Commission (“FSC”) and became effective forannual periods beginning on or after 1 January 2015. The nature and the impact of each newstandard and amendment that has a material effect on the Group is described below:

IAS 19 Employee Benefits

The revised IAS 19 brought about the following changes to defined benefit plans which aresummarized below:

(a) The interest cost and expected return on plan assets used in the previous version of IAS19 are replaced with a net-interest amount under the revised IAS 19, which is calculatedby applying the discount rate to the net defined benefit liability or asset at the start ofeach annual reporting period.





12

(b) In the previous version of IAS 19, past service cost is recognized as an expenseimmediately to the extent that the benefits are already vested, or on a straight-line basisover the average period until the benefits become vested. Under the revised IAS 19,all past service costs are recognized at the earlier of when the amendment/curtailmentoccurs or when the related restructuring or termination costs are recognized. Thereforeunvested past service cost is no longer deferred over future vesting periods.

(c) The revised IAS 19 required more disclosure; please refer to Note 6 for more details.

IFRS 12 Disclosure of Interests in Other Entities

IFRS 12 Disclosure of Interests in Other Entities sets out the requirements for disclosuresrelating to an entity’s interests in subsidiaries, joint arrangements, associates and structuredentities. The requirements in IFRS 12 are more comprehensive than the previouslyexisting disclosure requirements, for example, summarized financial information about theassociate or disclosure on subsidiaries with material non-controlling interests. Please referto Note 6 for more details.

IFRS 13 Fair Value Measurements

IFRS 13 establishes a single source of guidance under IFRS for all fair value measurements.IFRS 13 does not change when an entity is required to use fair value, but rather providesguidance on how to measure fair value under IFRS. The Group re-assessed its policies formeasuring fair values. Application of IFRS 13 has not materially impacted the fair valuemeasurements of the Group.

Additional disclosures where required under IFRS 13, are provided in the individual notesrelating to the assets and liabilities whose fair values were determined. Fair valuehierarchy is provided in Note 12. According to the transitional provisions of IFRS 13,IFRS 13 is applied prospectively as of 1 January 2015; the disclosure requirements of IFRS13 need not be applied in comparative information before 1 January 2015.

IAS 1 Presentation of Financial Statements – Presentation of items of other comprehensiveincome

Beginning 1 January 2014, the Group presented its items of other comprehensive incomethat will be reclassified to profit or loss separately from items that will not be reclassified inaccordance with the amendments to IAS 1. The amendments affect presentation ofstatement of comprehensive income only and have no impact on the Group’s financialposition or performance.





13

IAS 1 Presentation of Financial Statements – Clarification of the requirement forcomparative information

Beginning 1 January 2014, according to the amendments to IAS 1, when an entity applies anaccounting policy retrospectively or makes a retrospective restatement of items in itsfinancial statements, or when it reclassifies items in its financial statements, the openingstatement of financial position does not have to be accompanied by comparative informationin the related notes. The amendments affect notes accompanying the financial statementsonly and have no impact on the Group’s financial position or performance.

(2) Standards or interpretations issued by IASB but not yet endorsed by FSC at the date whenthe Group’s financial statements were authorized for issue are listed below:

(a) IAS 36 “Impairment of Assets” (Amendment)

This amendment relates to the amendment issued in May 2011 and requires entities todisclose the recoverable amount of an asset (including goodwill) or a cash-generatingunit when an impairment loss has been recognized or reversed during the period. Theamendment also requires detailed disclosure of how the fair value less costs of disposalhas been measured when an impairment loss has been recognized or reversed, includingvaluation techniques used, level of fair value hierarchy of assets and key assumptionsused in measurement. The amendment is effective for annual periods beginning on orafter January 1, 2014.

(b) IFRIC 21 “Levies”

This interpretation provides guidance on when to recognize a liability for a levyimposed by a government (both for levies that are accounted for in accordance with IAS37 Provisions, Contingent Liabilities and Contingent Assets and those where the timingand amount of the levy is certain). The interpretation is effective for annual periodsbeginning on or after January 1, 2014.

(c) IAS 39 “Financial Instruments: Recognition and Measurement” (Amendment)

Under the amendment, there would be no need to discontinue hedge accounting if ahedging derivative was novated, provided certain criteria are met. The interpretation iseffective for annual periods beginning on or after January 1, 2014.





14

(d) IAS 19 “Employee Benefits” (Defined benefit plans: employee contributions)

The amendments apply to contributions from employees or third parties to definedbenefit plans. The objective of the amendments is to provide a policy choice for asimplified accounting for contributions that are independent of the number of years ofemployee service, for example, employee contributions that are calculated according toa fixed percentage of salary. The amendment is effective for annual periods beginningon or after July 1, 2014.

(e) Improvements to International Financial Reporting Standards (2010-2012 cycle):

IFRS 2 “Share-based Payment”

The annual improvements amend the definitions of 'vesting condition' and 'marketcondition' and add definitions for 'performance condition' and 'service condition' (whichwere previously part of the definition of 'vesting condition'). The amendmentprospectively applies to share-based payment transactions for which the grant date is onor after July 1, 2014.

IFRS 3 “Business Combinations”

The amendments include: (1) deleting the reference to "other applicable IFRSs" in theclassification requirements; (2) deleting the reference to “IAS 37 Provisions,Contingent Liabilities and Contingent Assets or other IFRSs as appropriate”, othercontingent consideration that is not within the scope of IFRS 9 shall be measured at fairvalue at each reporting date and changes in fair value shall be recognized in profit orloss; (3) amending the classification requirements of IFRS 9 Financial Instruments toclarify that contingent consideration that is a financial asset or financial liability canonly be measured at fair value, with changes in fair value being presented in profit orloss depending on the requirements of IFRS 9. The amendments apply prospectively tobusiness combinations for which the acquisition date is on or after July 1, 2014.

IFRS 8 “Operating Segments”

The amendments require an entity to disclose the judgements made by management inapplying the aggregation criteria to operating segments. The amendments also clarifythat an entity shall only provide reconciliations of the total of the reportable segments’assets to the entity's assets if the segment assets are reported regularly. The amendmentis effective for annual periods beginning on or after July 1, 2014.





15

IFRS 13 “Fair Value Measurement”

The amendment to the Basis for Conclusions of IFRS 13 clarifies that when deletingparagraph B5.4.12 of IFRS 9 Financial Instruments and paragraph AG79 of IAS 39Financial Instruments: Recognition and Measurement as consequential amendmentsfrom IFRS 13 Fair Value Measurement, the IASB did not intend to change themeasurement requirements for short-term receivables and payables.

IAS 16 “Property, Plant and Equipment”

The amendment clarifies that when an item of property, plant and equipment isrevalued, the accumulated depreciation at the date of revaluation is adjusted to equal thedifference between the gross carrying amount and the carrying amount of the asset. Theamendment is effective for annual periods beginning on or after July 1, 2014.

IAS 24 “Related Party Disclosures”

The amendment clarifies that an entity providing key management personnel services tothe reporting entity or to the parent of the reporting entity is a related party of thereporting entity. The amendment is effective for annual periods beginning on or afterJuly 1, 2014.

IAS 38 “Intangible Assets”

The amendment clarifies that when an intangible asset is revalued, the accumulatedamortization at the date of revaluation is adjusted to equal the difference between thegross carrying amount and the carrying amount of the asset. The amendment is effectivefor annual periods beginning on or after July 1, 2014.

(f) Improvements to International Financial Reporting Standards (2011-2013 cycle):

IFRS 1 “First-time Adoption of International Financial Reporting Standards”

The amendment clarifies that an entity, in its first IFRS financial statements, has thechoice between applying an existing and currently effective IFRS or applying early anew or revised IFRS that is not yet mandatorily effective, provided that the new orrevised IFRS permits early application.





16

IFRS 3 “Business Combinations”

This amendment clarifies that paragraph 2(a) of IFRS 3 Business Combinationsexcludes the formation of all types of joint arrangements as defined in IFRS 11 JointArrangements from the scope of IFRS 3; and the scope exception only applies to thefinancial statements of the joint venture or the joint operation itself. The amendment iseffective for annual periods beginning on or after July 1, 2014.

IFRS 13 “Fair Value Measurement”

The amendment clarifies that paragraph 52 of IFRS 13 includes a scope exception formeasuring the fair value of a group of financial assets and financial liabilities on a netbasis. The objective of this amendment is to clarify that this portfolio exception appliesto all contracts within the scope of IAS 39 Financial Instruments: Recognition andMeasurement or IFRS 9 Financial Instruments, regardless of whether they meet thedefinitions of financial assets or financial liabilities as defined in IAS 32 FinancialInstruments: Presentation. The amendment is effective for annual periods beginning onor after July 1, 2014.

IAS 40 “Investment Property”

The amendment clarifies the interrelationship of IFRS 3 and IAS 40 when classifyingproperty as investment property or owner-occupied property; in determining whether aspecific transaction meets the definition of both a business combination as defined inIFRS 3 Business Combinations and investment property as defined in IAS 40Investment Property, separate application of both standards independently of each otheris required. The amendment is effective for annual periods beginning on or after July 1,2014.

(g) IFRS 14 “Regulatory Deferral Accounts”

IFRS 14 permits first-time adopters to continue to recognize amounts related to rateregulation in accordance with their previous GAAP requirements when they adoptIFRS. However, to enhance comparability with entities that already apply IFRS and donot recognize such amounts, the Standard requires that the effect of rate regulation mustbe presented separately from other items. IFRS 14 is effective for annual periodsbeginning on or after January 1, 2016.





17

(h) IFRS 11 “Joint Arrangements” (Accounting for Acquisitions of Interests in JointOperations)

The amendments provide new guidance on how to account for the acquisition of aninterest in a joint operation that constitutes a business. The amendments require theentity to apply all of the principles on business combinations accounting in IFRS 3“Business Combinations”, and other IFRS (that do not conflict with the guidance inIFRS 11), to the extent of its share in a joint operation acquired. The amendment alsorequires certain disclosure. The amendment is effective for annual periods beginning onor after January 1, 2016.

(i) IAS 16 “Property, Plant and Equipment and IAS 38 “Intangible Assets” —Clarification of Acceptable Methods of Depreciation and Amortization

The amendment clarified that the use of revenue-based methods to calculatedepreciation of an asset is not appropriate because revenue generated by an activity thatincludes the use of an asset generally reflects factors other than the consumption of theeconomic benefits embodied in the asset, such as selling activities and change in salesvolumes or prices. The amendment also clarified that revenue is generally presumed tobe an inappropriate basis for measuring the consumption of the economic benefitsembodied in an intangible asset. This presumption, however, can be rebutted in certainlimited circumstances. The amendment is effective for annual periods beginning on orafter January 1, 2016.

(j) IFRS 15 “Revenue from Contracts with Customers”

The core principle of the new Standard is for companies to recognize revenue to depictthe transfer of promised goods or services to customers in amounts that reflect theconsideration to which the company expects to be entitled in exchange for those goodsor services. An entity recognises revenue in accordance with that core principle byapplying the following steps:Step 1: Identify the contract(s) with a customerStep 2: Identify the performance obligations in the contractStep 3: Determine the transaction priceStep 4: Allocate the transaction price to the performance obligations in the contractStep 5: Recognise revenue when (or as) the entity satisfies a performance obligation





18

The new Standard includes a cohesive set of disclosure requirements that would resultin an entity providing users of financial statements with comprehensive informationabout the nature, amount, timing and uncertainty of revenue and cash flows arising fromthe entity's contracts with customers. The Standard is effective for annual periodsbeginning on or after 1 January 2018.

(k) IAS 16 “Property, Plant and Equipment and IAS 41 “Agriculture” — Agriculture:Bearer Plants

The IASB decided that bearer plants should be accounted for in the same way asproperty, plant and equipment in IAS 16 Property, Plant and Equipment, because theiroperation is similar to that of manufacturing. Consequently, the amendments includethem within the scope of IAS 16, and the produce growing on bearer plants will remainwithin the scope of IAS 41. The amendment is effective for annual periods beginning onor after January 1, 2016.

(l) IFRS 9 “Financial Instruments”

The IASB has issued the final version of IFRS 9, which combines classification andmeasurement, the expected credit loss impairment model and hedge accounting. Thestandard will replace IAS 39 Financial Instruments: Recognition and Measurement andall previous versions of IFRS 9 Financial Instruments (which include standards issuedon classification and measurement of financial assets and liabilities and hedgeaccounting).

Classification and measurement: Financial assets are measured at amortized cost, fairvalue through profit or loss, or fair value through other comprehensive income, basedon both the entity’s business model for managing the financial assets and the financialasset’s contractual cash flow characteristics. Financial liabilities are measured atamortized cost or fair value through profit or loss. Furthermore, there is requirementthat ‘own credit risk’ adjustments are not recognized in profit or loss.

Impairment: Expected credit loss model is used to evaluate impairment. Entities arerequired to recognize either 12-month or lifetime expected credit losses, depending onwhether there has been a significant increase in credit risk since initial recognition.

Hedge accounting: Hedge accounting is more closely aligned with risk managementactivities and hedge effectiveness is measured based on the hedge ratio.

The new standard is effective for annual periods beginning on or after January 1, 2018.





19

(m) IAS 27 “Separate Financial Statements” — Equity Method in Separate Financial

Statements

The IASB restored the option to use the equity method under IAS 28 for an entity to

account for investments in subsidiaries and associates in the entity’s separate financial

statements. In 2003, the equity method was removed from the options. This amendment

removes the only difference between the separate financial statements prepared in

accordance with IFRS and those prepared in accordance with the local regulations in

certain jurisdictions.

The amendment is effective for annual periods beginning on or after January 1, 2016.

(n) IFRS 10 “Consolidated Financial Statements” and IAS 28 “Investments in Associates

and Joint Ventures” — Sale or Contribution of Assets between an Investor and its

Associate or Joint Ventures

The amendments address the inconsistency between the requirements in IFRS 10

Consolidated Financial Statements and IAS 28 Investments in Associates and Joint

Ventures, in dealing with the loss of control of a subsidiary that is contributed to an

associate or a joint venture. IAS 28 restricts gains and losses arising from contributions

of non-monetary assets to an associate or a joint venture to the extent of the interest

attributable to the other equity holders in the associate or joint ventures. IFRS 10

requires full profit or loss recognition on the loss of control of the subsidiary. IAS 28

was amended so that the gain or loss resulting from the sale or contribution of assets

that constitute a business as defined in IFRS 3 between an investor and its associate or

joint venture is recognized in full. IFRS 10 was also amended so that the gains or loss

resulting from the sale or contribution of a subsidiary that does not constitute a business

as defined in IFRS 3 between an investor and its associate or joint venture is recognized

only to the extent of the unrelated investors’ interests in the associate or joint venture.

The effective date of this amendment has been postponed indefinitely, but early

adoption is allowed.





20

(o) Improvements to International Financial Reporting Standards (2012-2014 cycle):

IFRS 5 “Non-current Assets Held for Sale and Discontinued Operations”

The amendment clarifies that a change of disposal method of assets (or disposal groups)from disposal through sale or through distribution to owners (or vice versa) should notbe considered to be a new plan of disposal, rather it is a continuation of the originalplan. The amendment also requires identical accounting treatment for an asset (ordisposal group) that ceases to be classified as held for sale or as held for distribution toowners. The effective date of this amendment has been postponed indefinitely, but earlyadaption is allowed.

IFRS 7 “Financial Instruments: Disclosures”

The amendment clarifies that a servicing contract that includes a fee can constitutecontinuing involvement in a financial asset and therefore the disclosures for anycontinuing involvement in a transferred asset that is derecognized in its entirety underIFRS 7 Financial Instruments: Disclosures is required. The amendment also clarifiesthat whether the IFRS 7 disclosure related to the offsetting of financial assets andfinancial liabilities are required to be included in the condensed interim financial reportwould depend on the requirements under IAS 34 Interim Financial Reporting. Theamendment is effective for annual periods beginning on or after January 1, 2016.

IAS 19 “Employee Benefits”

The amendment clarifies the requirement under IAS 19.83, that market depth of highquality corporate bonds is assessed based on the currency in which the obligation isdenominated, rather than the country where the obligation is located. The amendment iseffective for annual periods beginning on or after January 1, 2016.

IAS 34 “Interim Financial Reporting”

The amendment clarifies what is meant by “elsewhere in the interim financial report”under IAS 34; the amendment states that the required interim disclosures must either bein the interim financial statements or incorporated by cross-reference between theinterim financial statements and wherever they are included within the greater interimfinancial report. The other information within the interim financial report must beavailable to users on the same terms as the interim financial statements and at the sametime. The amendment is effective for annual periods beginning on or after January 1,2016.





21

(p) Disclosure Initiative － Amendment to IAS 1 “Presentation of Financial Statements”:

The amendments contain (1) clarifying that an entity must not reduce theunderstandability of its financial statements by obscuring material information withimmaterial information or by aggregating material items that have different natures orfunctions. The amendments reemphasize that, when a standard requires a specificdisclosure, the information must be assessed to determine whether it is material and,consequently, whether presentation or disclosure of that information is warranted, (2)clarifying that specific line items in the statement(s) of profit or loss and OCI and thestatement of financial position may be disaggregated, and how an entity shall presentadditional subtotals, (3) clarifying that entities have flexibility as to the order in whichthey present the notes to financial statements, but also emphasize that understandabilityand comparability should be considered by an entity when deciding on that order, (4)removing the examples of the income taxes accounting policy and the foreign currencyaccounting policy, as these were considered unhelpful in illustrating what significantaccounting policies could be, and (5) clarifying that the share of OCI of associates andjoint ventures accounted for using the equity method must be presented in aggregate asa single line item, classified between those items that will or will not be subsequentlyreclassified to profit or loss. The amendment is effective for annual periods beginningon or after January 1, 2016.

(q) IFRS 10 “Consolidated Financial Statements”, IFRS 12 “Disclosure of Interests inOther Entities”, and IAS 28 “Investments in Associates and Joint Ventures” —Investment Entities: Applying the Consolidation Exception

The amendments contain (1) clarifying that the exemption from presenting consolidatedfinancial statements applies to a parent entity that is a subsidiary of an investment entitywhen the investment entity measures all of its subsidiary at fair value, (2) clarifying thatonly a subsidiary that is not an investment entity itself and provides support services tothe investment entity is consolidated when all other subsidiaries of an investment entityare measured at fair value, and (3) allowing the investor, when applying the equitymethod, to retain the fair value measurement applied by the investment entity associateor joint venture to its interests in subsidiaries. The amendment is effective for annualperiods beginning on or after January 1, 2016.





22

(r) IFRS 16 “Leases”

The new standard requires lessees to account for all leases under a single on-balancesheet model (subject to certain exemptions). Lessor accounting still uses the dualclassification approach: operating lease and finance lease. The Standard is effective forannual periods beginning on or after January 1, 2019.

(s) IAS 12 “Income Taxes” — Recognition of Deferred Tax Assets for Unrealized Losses

The amendment clarifies how to account for deferred tax assets for unrealized losses.The amendment is effective for annual periods beginning on or after January 1, 2017.

(t) Disclosure Initiative — Amendment to IAS 7 “Statement of Cash Flows”:

The amendment relates to changes in liabilities arising from financing activities and torequire a reconciliation of the carrying amount of liabilities at the beginning and end ofthe period. The amendment is effective for annual periods beginning on or afterJanuary 1, 2017.

The abovementioned standards and interpretations issued by IASB have not yet endorsedby FSC at the date when the Group’s financial statements were authorized for issue, thelocal effective dates are to be determined by FSC. As the Group is still currentlydetermining the potential impact of the standards and interpretations listed under (a),(c)~(f), (i)~(j), (l)~(t), it is not practicable to estimate their impact on the Group at thispoint in time. All other standards and interpretations have no material impact on the Group.

4. Summary of significant accounting policies

(1) Statement of compliance

The consolidated financial statements of the Group for the years ended December 31, 2015and 2014 have been prepared in accordance with the Regulations Governing the Preparationof Financial Reports by Securities Issuers (“the Regulations”) and International FinancialReporting Standards, International Accounting Standards, and interpretations developed bythe International Financial Reporting Interpretations Committee or the former StandingInterpretations Committee as endorsed by the FSC.





23

(2) Basis of preparation

The consolidated financial statements have been prepared on a historical cost basis, exceptfor financial instruments that have been measured at fair value. The consolidated financialstatements are expressed in thousands of New Taiwan Dollars (“NTD”) unless otherwisestated.

(3) Basis of consolidation

Preparation principle of consolidated financial statement

Control is achieved when the Group is exposed, or has rights, to variable returns from itsinvolvement with the investee and has the ability to affect those returns through its powerover the investee. Specifically, the Group controls an investee if and only if the Group has:

(a) power over the investee (i.e. existing rights that give it the current ability to direct therelevant activities of the investee)

(b) exposure, or rights, to variable returns from its involvement with the investee, and(c) the ability to use its power over the investee to affect its returns

When the Group has less than a majority of the voting or similar rights of an investee, theGroup considers all relevant facts and circumstances in assessing whether it has power overan investee, including:

(a) the contractual arrangement with the other vote holders of the investee(b) rights arising from other contractual arrangements(c) the Group’s voting rights and potential voting rights

The Group re-assesses whether or not it controls an investee if facts and circumstancesindicate that there are changes to one or more of the three elements of control.

Subsidiaries are fully consolidated from the acquisition date, being the date on which theCompany obtains control, and continue to be consolidated until the date that such controlceases. The financial statements of the subsidiaries are prepared for the same reportingperiod as the parent company, using uniform accounting policies. All intra-group balances,income and expenses, unrealized gains and losses and dividends resulting from intra-grouptransactions are eliminated in full.





24

A change in the ownership interest of a subsidiary, without a change of control, is accountedfor as an equity transaction.

Total comprehensive income of the subsidiaries is attributed to the owners of the parent andto the non-controlling interests even if this results in the non-controlling interests having adeficit balance.

If the Company loses control of a subsidiary, it:

(a) derecognizes the assets (including goodwill) and liabilities of the subsidiary;(b) derecognizes the carrying amount of any non-controlling interest;(c) recognizes the fair value of the consideration received;(d) recognizes the fair value of any investment retained;(e) recognizes any surplus or deficit in profit or loss; and(f) reclassifies the parent’s share of components previously recognized in other

comprehensive income to profit or loss.

a. The consolidated entities are listed as follows:

Investor Subsidiary Main businesses

December 31,

2015

December 31,

2014

The Company, Chunghwa

Electronics Development Co., Ltd.,

Green Energy Technology Inc., Chih

Sheng Realty Co., Ltd. and Tatung

Global Strategy Investment and

Trading (BVI) Inc.


(“CPT”)

Manufacture and sale of

picture tubs and TFT-LCD

products

24.22% 24.22%

The Company, Shan-Chih Investment

Co., Ltd. and Shan-Chih Asset

Development Co.

Tatung System Technologies

Inc. (“TSTI”)

Manufacture of data storage 54.40% 54.40%

The Company, Chunghwa Picture

Tubes, Ltd., San-Chih Semiconductor

Co., Ltd. and Chunghwa Electronics

Development Co., Ltd

Forward Electronics Co., Ltd.

(“FD”)


electronics

40.75% 41.30%

The Company Taiwan Telecommunication

Industry Company Ltd.

Telecommunication devices. 100.00% 100.00%

The Company and Chunghwa

Electronics Development Co., Ltd.

San-Chih Semiconductor Co.,

Ltd.(“SCSC”)

Manufacture and sales of

semiconductors and chips

58.20% 58.20%

The Company Central Research Technology EMCIRF testing and 100.00% 100.00%





25


December 31,

2015

December 31,

2014

Co. certification services

The Company Tatung Consumer Products

(Taiwan) Co., Ltd.

Sales, installation and service

of home appliances and digital

computer products

99.10% 99.10%

The Company Tatung SM-Cycle Co. Manufacture of speed

reducers, speed variators

85.33% 85.33%

The Company, Chunghwa


and Chih-Sheng Investment Co., Ltd.

Tatung Fine Chemicals Co., Ltd. Industrial coatings,

electrocution coatings resistor

coatings, photo-catalyst, inkjet

ink

54.63% 54.63%

The Company Shan-Chih Asset Development

Co. (“SCAD”)

Development and leasing of

real estate

100.00% 100.00%

The Company, Shan-Chih Asset

Development Co. and Chih Sheng

Investment Co., Ltd.

Chunghwa Electronics

Development Co., Ltd.

Investment holding 99.86% 99.86%

The Company Tatung DIE Casting Co. Manufacture and sales of zinc

/aluminum parts and mold.

51.00% 51.00%

The Company Tatung (Thailand) Co., Ltd. Manufacturing of IT products 100.00% 100.00%

The Company Tatung Co. of Japan, Inc. Sales and purchase of

electronic parts

100.00% 100.00%

The Company Tatung Electronics(S) Pte. Ltd. Sales and services of Tatung

products in Singapore

90.00% 90.00%

The Company Tatung Wire & Cable (Thailand)

Co., Ltd.

Manufacture and sales of wire

and cable

100.00% 100.00%

The Company Tatung Information (Singapore)

Pte. Ltd.


The Company Tatung Electric (Singapore) Pte.

Ltd.


The Company Tatung Co. of America Inc. Sales and service of IT and

household electronics products

in the US

50.00% 50.00%

The Company Tatung Mexico S.A de C.V. Manufacture of IT products 100.00% 100.00%

The Company Tatung Science and Technology,

Inc.

Sale and purchase of IT

products

100.00% 100.00%

The Company Tatung Electric Company of

America, Inc.


motor products in America

100.00% 100.00%

The Company Tatung Netherlands B.V. Sales of digital information 100.00% 100.00%





26


December 31,

2015

December 31,

2014

products

The Company Tatung (U.K.) Ltd. Sales of digital consumer

products.

- 100.00%

The Company TATUNG CZECH s.r.o Manufacture of IT products 100.00% 100.00%

The Company Tatung Medical Healthcare

Technologies Co., Ltd.

Design and sales of medical

instruments.

95.02% 95.41%

The Company Toes Opto-Mechatronics Co. Manufacture of data storage

and process equipment

85.00% 85.00%

The Company Tatung Vietnam Co., Ltd. Manufacture and sales of home

appliances

100.00% 100.00%

The Company Tatung Electric Technology

(VN) Co., Ltd.


and cable

100.00% 100.00%

The Company Chih Sheng Investment Co., Ltd. Investment holding 100.00% 100.00%



Shan Chih Investment Co., Ltd. Investment holding 100.00% 100.00%



Tisnet Technology Inc. Design and development of

computer software and

equipment

- 100.00%

The Company Tatung Global Strategy

Investment and trading (BVI)

Inc.


The Company Absolute Alpha Limited Investment holding 100.00% 100.00%

The Company Tatung Forever Energy Co., Ltd. Solar energy related business 100.00% -

CPT Giantplus Technology Co., Ltd.

(“Giantplus”)

Research, development,

production and sales of LCD.

53.67% 53.67%

CPT Chunghwa Picture Tubes

(Bermuda) Ltd. (“CPTB”)


CPT and CPTB Chunghwa Picture Tubes

(Labuan) Ltd. (“CPTL”)

Investment holding and sales

of TFT-LCD

100.00% 100.00%

CPTB and CPTL Chunghwa Picture Tubes

Technology (Group) Co., Ltd.

(“CPTTG”)


CPTB Dalemont Investment Ltd. Investment holding 100.00% 100.00%

CPTB Daliant Investment Ltd. Investment holding 100.00% 100.00%

CPTB Bangalor Investment Ltd. Investment holding 100.00% 100.00%





27


December 31,

2015

December 31,

2014

CPTB Bensaline Investment Ltd. Investment holding 100.00% 100.00%

CPTB New Kingston Enterprises

Limited (“NKEL”)


CPTB, CPTL,CPTM and CPTTG Chunghwa Picture Tubes

(Wujiang) Ltd. (“CPTW”)

Assembly final module of

TFT-LCD

100.00% 100.00%

CPTB, CPTL and CPTTG Chunghwa Pictures Display

Technology (Fujian)

Ltd.(“FDT”)

Assembly final module of

TFT-LCD

100.00% 100.00%

CPTB, CPTL and CPTTG CPTF Optronics Co., Ltd. Assembly final module of

TFT-LCD

100.00% 100.00%

CPTB Chunghwa Picture Tubes

(Malaysia) Sdn. Bhd. (“CPTM”)

Manufacture and sale of CRT 100.00% 100.00%

CPTF Optronics Co., Ltd., NKEL,

and Forward Development Co., Ltd.

CPTF Visual Display (Fuzhou)

Ltd.(“FVD”)

Manufacture components of

TFT-LCD

100.00% 100.00%

CPTF Optronics Co., Ltd. Huallar Optronics (Fuzhou) Co.

Ltd.


TFT-LCD

51.00% 51.00%

CPTTG Chunghwa Picture Tubes

(Labuan) Ltd. (“CPTL”)

Investment holding and sales

of TFT-LCD

100.00% 100.00%

CPTTG Fuzhou YingYuan Equity

Investment Management Co.,

Ltd.

Investment 100.00% -

CPTTG Vibrant Display Technology

CO., Ltd.

R&D, design and manufacture

components of TFT-LCD

100.00% -

CPTB and CPTTG CPT TPV Optical (Fujian) Co.,

Ltd.


TFT-LCD

80.00% 80.00%

CPTB CPTF Optronics (Shen-Zhen)

Co., Ltd.

Sales and service of flat-panel

display

100.00% 100.00%

CPTTG, CPTF Optronics Co., Ltd.,

and Goldmax Asia Pacific Ltd

Kornerstone Materials

Technology Co. Ltd.

R&D, design and manufacture

components of TFT-LCD

100.00% 100.00%

CPTF Optronics Co., Ltd CPTF Optronics (HK) Co., Ltd. Sales of TFT-LCD 100.00% 100.00%

Giantplus Technology Co., Ltd. Giantplus (Samoa) Holding Co.,

Ltd.

Investment 100.00% 100.00%

Giantplus Technology Co., Ltd. Hsh Heng Investment Co., Ltd. Investment 100.00% 100.00%

Giantplus (Samoa) Holding Co., Ltd. Giantplus Holding L.L.C Investment 100.00% 100.00%

Giantplus Holding L.L.C Kunshan Giantplus Manufacture components of 100.00% 100.00%





28


December 31,

2015

December 31,

2014

Optoelectronics Technology Co.,

Ltd.

LCD display

Giantplus Holding L.L.C Shenzhen Giantplus

Optoelectronics Display Co., Ltd.


LCD display

100.00% 100.00%

Giantplus Holding L.L.C Kunshan Giantplus Optronics

Display Technology Co., Ltd

Sales of touch panel 100.00% 100.00%

Forward Electronics Co., Ltd. Forward Development Co., Ltd. Investment holding 100.00% 100.00%

Forward Electronics Co., Ltd., Green

Energy Technology Inc. and Toes

Opto-Mechatronics Co.

Gintung Energy Co., Ltd. Manufacture and sale of solar

module and related component

45.82% 45.82%

Forward Development Co., Ltd. Forward Electronics Equipment

(Dong Guan) Co., Ltd

Manufacture and sale of tuner,

keyboard, mouse, remote

controller, switch, socket and

potentiometer.

100.00% 100.00%

Forward Development Co., Ltd. Suzhou Forward Electronics

Technology Co., Ltd.


backlight unit for TFT-LCD,

driving board, tuner, keyboard,

mouse, switch, socket and

connector.

100.00% 100.00%

Taiwan Telecommunication Industry

Company Ltd.

Taiwan Telecommunication

Investments Limited.

Investment holding - 100.00%




(Fujian) Company Ltd.

Manufacture of fax machine

and printers

- 60.00%



Shan Chih (Hong Kong) Co.,

Ltd.

International trading. - 100.00%

San Chih Semiconductor Co., Ltd.,

Shan Chih Investment Co., Ltd .and

Shan-Chih Asset Development Co.,

Chih Sheng Investment Co., Ltd.

Green Energy Technology Inc.

(“GET”)


electronic parts and devices.

36.57% 33.00%

San Chih Semiconductor Co., Ltd. Greater Power Limited Investment holding 100.00% 100.00%

San Chih Semiconductor Co., Ltd. Chih De Investment Co., Ltd. Investment holding 100.00% 100.00%

Green Energy Technology Inc. Energy Well International

Limited


Green Energy Technology Inc. Green Energy Global Investment Investment holding 100.00% 100.00%

Greater Power Limited and Energy Ultra Energy Holdings Limited Investment holding 100.00% 100.00%





29


December 31,

2015

December 31,

2014

Well International Limited

Energy Well International Limited Golden Sunny Limited Investment holding 100.00% 100.00%

Ultra Energy Holdings Limited Ultra Energy (WEIFANG)

Technology Co. Ltd

Solar silicon wafer slicing. 100.00% 100.00%

Tatung Fine Chemicals Co., Ltd. Tatung Coatings (Kunshan) Co.,

Ltd.


industry coating and

electro-deposition coating.

100.00% 100.00%

Tatung Fine Chemicals Co., Ltd. Huaian Tatung Advanced

Technology Materials Co., Ltd.


positive material of lithium

battery, printer ink,

electro-deposition high

performance coating.

100.00% 100.00%

Tatung Fine Chemicals Co., Ltd. Shang Chih International

Chemical Industry Co., Ltd.


Tatung Fine Chemicals Co., Ltd. Wujiang Shang Huah Plastic

Co., Ltd.

ABS plastic, color dyes 100.00% 100.00%

Shang Chih International Chemical

Industry Co., Ltd.

Wujiang Shanghua Material

Technology Co., Ltd

Manufacture and sale of ABS

plastic.

100.00% 100.00%

Shang Chih International Chemical

Industry Co., Ltd.

Dongguan Tongli Trading Co.,

Ltd.

Wholesale of painting, coating

and chemical products.

100.00% 100.00%

Tatung Information (Singapore) Pte.

Ltd.

Tatung Information Technology

(Jiangsu) Co., Ltd.

Manufacture and sales of TV,

monitor and PCs.

100.00% 100.00%


Ltd.

Tatung Wire And Cable

Technology (Wujiang) Co., Ltd.


and cable

100.00% 100.00%


Ltd. and Shan-Chih International

Holding Corporation

Tatung Compressors

(ZHONGSHAN) Co., Ltd.


reciprocating compressors.

100.00% 100.00%

Tatung Electric (Singapore) Pte. Ltd.

and Shan-Chih International Holding

Corporation

Tatung (Shanghai) Co., Ltd Manufacture and sales of

motors, generators, diesel

engine generators, variable

speed motors, inverters and

PLCs, transformers and

switchboards.

100.00% 100.00%

Tatung Mexico S.A de C.V. TMX Logistics, Inc. Hub service 100.00% 100.00%





30


December 31,

2015

December 31,

2014

Tatung Mexico S.A de C.V. TMX Technologies Inc. Technologies & business

development

100.00% 100.00%

Shan Chin Investment Co.Ltd Shan-Chih International Holding

Corporation


Shan-Chih International Holding

Corporation

Shan-Chih Wire&Cable

Technology (Wujiang) Co. ,

Ltd.


and cable

100.00% 100.00%

Tatung System Technologies Inc. Chyun Huei Business

Technology Inc.

Information software

Service

100.00% 100.00%

Tatung System Technologies Inc. Tatung System Technologies

Holding Ltd.


Tatung System Technologies Inc. Tisnet Technology Inc. Software design and

development

100.00% -

Tatung System Technologies Holding

Ltd.

TSTI Technologies (Shanghai)

Co., Ltd.

Information software

Service

94.00% 94.00%

Chih Sheng Investment Co., Ltd. Chih Sheng Investment (BVI) Investment holding 100.00% 100.00%

Chih Sheng Investment Co., Ltd. HEDA Biotechnology Co., Ltd. Produce, food retail and

wholesale industry

52.17% 52.17%

Chih Sheng Investment (BVI) Co.,

Ltd

Chih Sheng Holding Co., Ltd. Investment holding 100.00% 100.00%

Chih Sheng Holding Co., Ltd. Goldmax Asia Pacific Ltd Investment holding 51.26% 55.05%

Chih Sheng Holding Co., Ltd. Chih Sheng Holding HK Limited Investment holding 100.00% 100.00%

Absolute Alpha Limited Tatung Information Technologies

Corp.

Sales of electronic products 100.00% 100.00%

Chih Sheng Holding HK Limited Wu-jiang Tatung Electronics

Trading Co. LTD

Sales of information products 100.00% 100.00%

Shan-Chih Asset Development Co.

and Taipei Industry Corporation

Tatung Forestry and

Construction Co.

Design and construction of

structural engineering.

99.87% 99.87%

Shan-Chih Asset Development Co. Taipei Industry Corporation Production and sales of mixing

concrete.

50.61% 50.61%

Shan-Chih Asset Development Co. Chih Sheng Realty Co., Ltd. Realty management 100.00% 100.00%

Shan-Chih Asset Development Co. Shan-Chih Asset International

Holding Corporation

Investment Holding 100.00% 100.00%

Shan-Chih Asset International Tatung Management Consultant Realty and Leasing Service 100.00% 100.00%





31


December 31,

2015

December 31,

2014

Holding Corporation (Shanghai) Co., Ltd.

Shan-Chih Asset International

Holding Corporation

Shan-Chih Asset International

(Hong Kong) Holding Limited

Realty and Leasing Service 100.00% 100.00%

Shan-Chih Asset International (Hong

Kong) Holding Limited

Suqian Zhiwei Real Estate Co.,

Ltd.

Realty management 100.00% 100.00%

Tatung Forever Energy Co., Ltd. Sheng Yang Energy Co., Ltd. Battery Material Retail 100.00% -

In the first half of 2015, Chunghwa Electronics Development Co., Ltd disposed ofpartial shareholdings of FD for 874,000 shares. Therefore, the shareholdingpercentage was decreased to 40.75%.

Tatung (U.K.) Ltd. was liquidated in December 2015.

The Group did not participate in the capital injections of Tatung Medical HealthcareTechnologies Co., Ltd. in August 2015. Therefore, the Group’s shareholdingpercentage in this company has dropped to 95.02%

In order to establish an overall investment strategy framework, on May 26, 2015, theboard of directors of TSTI resolved to purchase the shares of Tisnet Technology Inc.held by the Company and Chunghwa Electronics Development Co. This resolutionmade TSTI the parent company of Tisnet Technology Inc., with a shareholdingpercentage of 100%. The consolidation date was June 30, 2015. This transaction wasan organizational restructure in the Group and thus Tisnet Technology Inc. remaineda subsidiary of the Group.

The Group invested NTD 100,000 thousand in February 2015 to establish TatungForever Energy Co., Ltd., as a 100% shareholder.

In the second quarter of 2015, CPTTG invested RMB 10,000 thousand and RMB1,000 thousand to establish Fuzhou YingYuan Equity Investment Management Co.,Ltd. and Vibrant Display Technology CO., Ltd., respectively. In the third quarter of2015, CPTTG invested RMB 36,500 thousand to increase the capital of VibrantDisplay Technology CO., Ltd.





32

The Group participated in the private placement of Green Energy Technology Inc. inthe second quarter of 2015. In addition, the Group disposed of partial shares of GreenEnergy Technology Inc. starting from the third quarter of 2015. The totalshareholding percentage as of balance sheet date was 36.57%.

The Group disposed of all the shares of Taiwan Telecommunication InvestmentsLimited in December 2015. Therefore, Taiwan Telecommunication InvestmentsLimited and its subsidiaries, Taiwan Telecommunication (Fujian) Company Ltd. andShan Chih (Hong Kong) Co. Ltd, were not included in the consolidated financialstatements of the Group in 2015. Please refer to Note 6 (11) and 35 for more details.

The Group did not participate in the capital injections of Goldmax Asia Pacific Ltdin July 2015. Therefore, the shareholding percentage has dropped to 51.26%

The Group invested NTD 60,000 thousand in September 2015 to establish ShengYang Energy Co., Ltd., as sole owner.

b. Although the percentages of ownership interests in some companies, such as CPT,FD, Gintung Energy Co., Ltd., are less than 50%, the Group determined that it hascontrol over these companies. This is due to a combination of factors including thefact that the Group has been the single largest shareholder of these companies sincethe inception of the investment; the remaining shareholding of other shareholders isdispersed; in the absence of contractual arrangement, the Group could obtain proxiesto achieve relative majority and the Group is able to appoint or approve the keymanagement personnel of these companies who have the ability to direct the relevantactivities.

c. Subsidiaries that are not included in the consolidated financial statement are asfollows:

Percentage of ownership

Investor Subsidiary Business nature

December 31,

2015

December 31,

2014

The Company, Shan-Chih Asset

Development Co., Tatung Forestry

and Construction Co. and Tatung

Fine Chemicals Co., Ltd.

Hsieh Chih Industrial Library

Publishing Co.

The publishing and sales of

Hsieh Chih Industrial Library

98.80% 98.80%

The Company Lansong International Co., Ltd Forestry 98.33% 98.33%

All the above subsidiaries were of insignificant percentage to the Company’s totalassets and operating revenue and therefore not consolidated by the Company.





33

(4) Foreign currency transactions

The Group’s consolidated financial statements are presented in NTD, which is also theCompany’s functional currency. Each entity in the Group determines its own functionalcurrency and items included in the financial statements of each entity are measured by thefunctional currency.

Transactions in foreign currencies are initially recorded by the Group entities at theirrespective functional currency rates prevailing at the date of the transaction. Monetaryassets and liabilities denominated in foreign currencies are translated at the functionalcurrency closing rate of exchange ruling at the reporting date. Non-monetary itemsmeasured at fair value in a foreign currency are translated by the exchange rates at the datewhen the fair value is determined. Non-monetary items that are measured at historical costin a foreign currency are translated by the exchange rates at the dates of its initialtransactions.

All exchange differences arising from the settlement or translation of monetary items aretaken into profit or loss in the period which they arise except for the following:

(a) Exchange differences arising from foreign currency borrowings for an acquisition of aqualifying asset. If the differences are regarded as an adjustment to interest costs, whichwill be capitalize and take as part of the cost of the borrowing.

(b) Foreign currency items within the scope of IAS 39 Financial Instruments: Recognitionand Measurement are accounted for based on the accounting policy for financialinstruments.

(c) Exchange differences arising on a monetary item that forms part of a reporting entity’snet investment in a foreign operation is recognized initially in other comprehensiveincome and reclassified from equity to profit or loss on disposal of the net investment.

When a gain or loss on a non-monetary item is recognized in other comprehensive income,any exchange component of that gain or loss is recognized in other comprehensive income.When a gain or loss on a non-monetary item is recognized in profit or loss, any exchangecomponent of that gain or loss is recognized in profit or loss.





34

(5) Translation of financial statements in foreign currency

The assets and liabilities of foreign entities are translated into NTD at the closing exchangerate at the balance sheet date. Income and expenses are translated at an average rate withinthe period. The exchange differences arising on the translation are recognized in othercomprehensive income. On the disposal of a foreign operation, the cumulative amount of theexchange differences relating to that foreign operation, recognized in other comprehensiveincome and accumulated in the separate component of equity, is reclassified from equity toprofit or loss when the gain or loss on disposal is recognized.

The following are accounted for as disposals even if an interest in the foreign operation isretained by the Group: the loss of control over a foreign operation, the loss of significantinfluence over a foreign operation, or the loss of joint control over a foreign operation.

On the partial disposal of a subsidiary that includes a foreign operation that does not resultin a loss of control, the proportionate share of the cumulative amount of the exchangedifferences recognized in other comprehensive income is re-attributed to the non-controllinginterests in that foreign operation. In partial disposal of an associate or jointly controlledentity that includes a foreign operation that does not result in a loss of significant influenceor joint control, only the proportionate share of the cumulative amount of the exchangedifferences recognized in other comprehensive income is reclassified to profit or loss.

Any goodwill and any fair value adjustments to the carrying amounts of assets and liabilitiesarising on the acquisition of a foreign operation are treated as assets and liabilities of theforeign operation and expressed in its functional currency.

(6) Current and non-current distinction for assets and liabilities

An asset is classified as current when:

(a) The Group expects to realize the asset, or intends to sell or consume it, in its normaloperating cycle

(b) The Group holds the asset primarily for the purpose of trading(c) The Group expects to realize the asset within twelve months after the reporting period(d) The asset is cash or cash equivalent unless the asset is restricted from being exchanged

or used to settle a liability for at least twelve months after the reporting period.

All other assets are classified as non-current.





35

A liability is classified as current when:

(a) The Group expects to settle the liability in its normal operating cycle(b) The Group holds the liability primarily for the purpose of trading(c) The liability is due to be settled within twelve months after the reporting period(d) The Group does not have an unconditional right to defer settlement of the liability for at

least twelve months after the reporting period. Terms of a liability that could, at theoption of the counterparty, result in its settlement by the issue of equity instruments donot affect its classification.

All other liabilities are classified as non-current.

(7) Cash and cash equivalents

Cash and cash equivalents comprises cash on hand, demand deposits and short-term, highlyliquid time deposits (including ones that have maturity within 12 months) or investmentsthat are readily convertible to known amounts of cash and which are subject to aninsignificant risk of changes in value.

(8) Financial instruments

Financial assets and financial liabilities are recognized when the Group becomes a party tothe contractual provisions of the instrument.

Financial assets and financial liabilities within the scope of IAS 39 Financial Instruments:Recognition and Measurement are recognized initially at fair value plus or minus, in the caseof investments not at fair value through profit or loss, directly attributable transaction costs.

(a) Financial assets

The Group accounts for regular may purchase or sales of financial assets on the tradedate.

Financial assets of the Group are classified as financial assets at fair value through profitor loss, held-to-maturity investments, available-for-sale financial assets and loans andreceivables. The Group determines the classification of its financial assets at the initialrecognition.





36

Financial assets at fair value through profit or loss

Financial assets at fair value through profit or loss include financial assets held fortrading and financial assets designated upon initial recognition at fair value throughprofit or loss.

A financial asset is classified as held for trading if:

it is acquired or incurred principally for the purpose of selling or repurchasing it inthe near term;

on initial recognition it is part of a portfolio of identified financial instruments thatare managed together and for which there is evidence of a recent actual pattern ofshort-term profit-taking;

it is a derivative (except for a derivative that is a financial guarantee contract or adesignated and effective hedging instrument).

If a contract contains one or more embedded derivatives, the entire hybrid (combined)contract may be designated as a financial asset at fair value through profit or loss; or afinancial asset may be designated as at fair value through profit or loss when doing soresults in more relevant information, because either:

it eliminates or significantly reduces a measurement or recognition inconsistency; or a group of financial assets, financial liabilities or both is managed and its

performance is evaluated on a fair value basis, in accordance with a documented riskmanagement or investment strategy, and information about the group is providedinternally on that basis to the key management personnel

Financial assets at fair value through profit or loss are measured at fair value withchanges in fair value recognized in profit or loss. Dividends or interests on financialassets at fair value through profit or loss are recognized in profit or loss (including thosereceived during the period of initial investment). If financial assets do not have quotedprices in an active market and their fair value cannot be reliably measured, then they areclassified as financial assets measured at cost on balance sheet and carried at cost net ofaccumulated impairment losses, if any, as at the reporting date.

Available-for-sale financial assets

Available-for-sale investments are non-derivative financial assets that are designated asavailable-for-sale or those not classified as financial assets at fair value through profit orloss, held-to-maturity financial assets, or loans and receivables.





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Foreign exchange gains and losses and interest calculated using the effective interestmethod relating to monetary available-for-sale financial assets, or dividends on anavailable-for-sale equity instrument, are recognized in profit or loss. Subsequentmeasurement of available-for-sale financial assets at fair value is recognized in equityuntil the investment is derecognized, at which time the cumulative gain or loss isrecognized in profit or loss.

If equity instrument investments do not have quoted prices in an active market and theirfair value cannot be reliably measured, then they are classified as financial assetsmeasured at cost on balance sheet and carried at cost net of accumulated impairmentlosses, if any, as at the reporting date.

Held-to-maturity financial assets

Non-derivative financial assets with fixed or determinable payments and fixedmaturities are classified as held-to-maturity when the Group has the positive intentionand ability to hold it to maturity, other than those that are designated asavailable-for-sale, classified as financial assets at fair value through profit or loss, ormeet the definition of loans and receivables.

After initial measurement held-to-maturity financial assets are measured at amortizedcost using the effective interest method, less impairment. Amortized cost is calculatedby taking into account any discount or premium on acquisition and fee or transactioncosts. The effective interest method amortization is recognized in profit or loss.

Loans and receivables

Loans and receivables are non-derivative financial assets that quoted without activemarket and with fixed or determinable amounts. Moreover, the following conditionsmust be met: the initial recognition not designates as available for sale, classified as atfair value through profit or loss, or those for which the holder may not recoversubstantially all of its initial investment.

Loans and receivables are separately presented on the balance sheet as receivables orbond investments for which no active market exists. After initial measurement, suchfinancial assets are subsequently measured at amortized cost using the effective interestrate method, less impairment. Amortized cost is calculated by taking into account anydiscount or premium on acquisition and fee or transaction costs. The effective interestmethod amortization is recognized in profit or loss.





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Impairment of financial assets

The Group assesses at each reporting date whether there is any objective evidence that afinancial asset other than the financial assets at fair value through profit or loss isimpaired. A financial asset is deemed to be impaired if there is objective evidence ofimpairment as a result of one or more loss events that has occurred after the initialrecognition of the asset and that loss event has an impact on the estimated future cashflows of the financial asset. The carrying amount of the financial asset impaired, otherthan receivables impaired which are reduced through the use of an allowance account, isreduced directly and the amount of the loss is recognized in profit or loss.

A significant or prolonged decline in the fair value of an available-for-sale equityinstrument below its cost is considered a loss event.

Other loss events include:

significant financial difficulty of the issuer or obligor; or a breach of contract, such as a default or delinquency in interest or principal

payments; or it becoming probable that the borrower will enter bankruptcy or other financial

reorganization; or the disappearance of an active market for that financial asset because of financial

difficulties.

For held-to-maturity financial assets and loans and receivables measured at amortizedcost, the Group first assesses individually whether objective evidence of impairmentexists individually for financial asset that are individually significant, or collectively forfinancial assets that are not individually significant. If the Group determines that noobjective evidence of impairment exits for an individually assessed financial asset,whether significant or not, it includes the asset in a group of financial assets with similarcredit risk characteristics and collectively assesses them for impairment. If there isobjective evidence that an impairment loss has been incurred, the amount of the loss ismeasured as the difference between the assets carrying amount and the present value ofestimated future cash flows. The present value of the estimated future cash flows isdiscounted at the financial assets original effective interest rate. If a loan has avariable interest rate, the discount rate for measuring any impairment loss is the currenteffective interest rate. Interest income is accrued based on the reduced carryingamount of the asset, using the rate of interest used to discount the future cash flows forthe purpose of measuring the impairment loss.





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Receivables together with the associated allowance are written off when there is norealistic prospect of future recovery. If, in a subsequent year, the amount of theestimated impairment loss increases or decreases because of an event occurring after theimpairment was recognized, the previously recognized impairment loss is increased orreduced by adjusting the allowance account. If a future write-off is later recovered, therecovery is credited to profit or loss.

In the case of equity investments classified as available-for-sale, where there is evidenceof impairment, the cumulative loss - measured as the difference between the acquisitioncost and the current fair value, less any impairment loss on that investment previouslyrecognized in profit or loss - is removed from other comprehensive income andrecognized in profit or loss. Impairment losses on equity investments are not reversedthrough profit or loss; increases in their fair value after impairment are recognizeddirectly in other comprehensive income.

In the case of debt instruments classified as available-for-sale, the amount recorded forimpairment is the cumulative loss measured as the difference between the amortizedcost and the current fair value, less any impairment loss on that investment previouslyrecognized in profit or loss. Future interest income continues to be accrued based onthe reduced carrying amount of the asset, using the rate of interest used to discount thefuture cash flows for the purpose of measuring the impairment loss. The interestincome is recognized in profit or loss. If, in a subsequent year, the fair value of a debtinstrument increases and the increase can be objectively related to an event occurringafter the impairment loss was recognized in profit or loss, the impairment loss isreversed through profit or loss.

Derecognition of financial assets

A financial asset is derecognized when:

The rights to receive cash flows from the asset have expired; The Group has transferred the asset and substantially all the risks and rewards of the

asset have been transferred; The Group has neither transferred nor retained substantially all the risks and rewards

of the asset, but has transferred control of the asset.

Once the financial asset are derecognized entirety, the difference between the carryingamount and the consideration received or receivable including any cumulative gain orloss that had been recognized in other comprehensive income is recognized in profit orloss.





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(b) Financial liabilities and equity

Classification between liabilities and equity

The Group classifies the instrument issued as a financial liability or an equityinstrument in accordance with the substance of the contractual arrangement and thedefinitions of a financial liability, and an equity instrument.

Equity instruments

An equity instrument is any contract that evidences a residual interest in the assets of anentity after deducting all of its liabilities. The transaction costs of an equity transactionare accounted for as a deduction from equity (net of any related income tax benefit) tothe extent they are incremental costs directly attributable to the equity transaction thatotherwise would have been avoided.

Compound instruments

The Group evaluates the terms of the convertible bonds issued to determine whether itcontains both a liability and an equity component. Furthermore, the Group assesses ifthe economic characteristics and risks of the put and call options contained in theconvertible bonds are closely related to the economic characteristics and risk of the hostcontract before separating the equity element.

For the liability component excluding the derivatives, its fair value is determined basedon the rate of interest applied at that time by the market to instruments of comparablecredit status. The liability component is classified as a financial liability measured atamortized cost before the instrument is converted or settled.

For the embedded derivative that is not closely related to the host contract (for example,if the exercise price of the embedded call or put option is not approximately equal oneach exercise date to the amortized cost of the host debt instrument), it is classified as aliability component and subsequently measured at fair value through profit or lossunless it qualifies for an equity component. The equity component is assigned theresidual amount after deducting from the fair value of the instrument as a whole theamount separately determined for the liability component. Its carrying amount is notremeasured in the subsequent accounting periods. If the convertible bond issued doesnot have an equity component, it is accounted for as a hybrid instrument in accordancewith the requirements under IAS 39 Financial Instruments: Recognition andMeasurement.





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Transaction costs are apportioned between the liability and equity components of theconvertible bond based on the allocation of proceeds to the liability and equitycomponents when the instruments are initially recognized.

On conversion of a convertible bond before maturity, the carrying amount of theliability component being the amortized cost at the date of conversion is transferred toequity.

Financial liabilities

Financial liabilities within the scope of IAS 39 Financial Instruments: Recognition andMeasurement are classified as financial liabilities at fair value through profit or loss orfinancial liabilities measured at amortized cost upon initial recognition.

Financial liabilities at fair value through profit or loss

Financial liabilities at fair value through profit or loss include financial liabilities heldfor trading and financial liabilities designated upon initial recognition as at fair valuethrough profit or loss.

A financial liability is classified as held for trading if:

it is acquired or incurred principally for the purpose of selling or repurchasing it inthe near term;

on initial recognition it is part of a portfolio of identified financial instruments thatare managed together and for which there is evidence of a recent actual pattern ofshort-term profit-taking;

it is a derivative (except for a derivative that is a financial guarantee contract or adesignated and effective hedging instrument).

If a contract contains one or more embedded derivatives, the entire hybrid (combined)contract may be designated as a financial liability at fair value through profit or loss; ora financial liability may be designated as at fair value through profit or loss when doingso results in more relevant information, because either:

it eliminates or significantly reduces a measurement or recognition inconsistency; or a group of financial assets, financial liabilities or both is managed and its

performance is evaluated on a fair value basis, in accordance with a documented riskmanagement or investment strategy, and information about the group is providedinternally on that basis to the key management personnel.





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Gains or losses on the subsequent measurement of liabilities at fair value through profitor loss, including interest paid, are recognized in profit or loss.

If the financial liabilities at fair value through profit or loss do not have quoted prices inan active market and their fair value cannot be reliably measured, then they areclassified as financial liabilities measured at cost on balance sheet and carried at cost asat the reporting date.

Financial liabilities at amortized cost

Financial liabilities measured at amortized cost include interest bearing loans andborrowings that are subsequently measured using the effective interest rate method afterinitial recognition. Gains and losses are recognized in profit or loss when the liabilitiesare derecognized as well as through the effective interest rate method amortizationprocess.

Amortized cost is calculated by taking into account any discount or premium onacquisition and fees or transaction costs.

Derecognition of financial liabilities

A financial liability is derecognized when the obligation under the liability is dischargedor cancelled or expires.

When an existing financial liability is replaced by another from the same lender onsubstantially different terms, or the terms of an existing liability are substantiallymodified (whether or not attributable to the financial difficulty of the debtor), such anexchange or modification is treated as a derecognition of the original liability and therecognition of a new liability, and the difference in the respective carrying amounts andthe consideration paid, including any non-cash assets transferred or liabilities assumed,is recognized in profit or loss.

(c) Offsetting of financial instruments

Financial assets and financial liabilities are offset and the net amount reported in thebalance sheet if, and only if, there is a currently enforceable legal right to offset therecognized amounts and there is an intention to settle on a net basis, or to realize theassets and settle the liabilities simultaneously.





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(9) Derivative financial instrument

The Group uses derivative financial instruments to hedge its foreign currency risks andinterest rate risks. A derivative is classified in the balance sheet as financial assets orliabilities at fair value through profit or loss (held for trading) except for derivatives that aredesignated effective hedging instruments which are classified as derivative financial assetsor liabilities for hedging.

Derivative financial instruments are initially recognized at fair value on the date on which aderivative contract is entered into and are subsequently remeasured at fair value.Derivatives are carried as financial assets when the fair value is positive and as financialliabilities when the fair value is negative. Any gains or losses arising from changes in thefair value of derivatives are taken directly to profit or loss, except for the effective portion ofcash flow hedges, which is recognized in equity.

Derivatives embedded in host contracts are accounted for as separate derivatives andrecorded at fair value if their economic characteristics and risks are not closely related tothose of the host contracts and the host contracts are not held for trading or designated at fairvalue though profit or loss. These embedded derivatives are measured at fair value withchanges in fair value recognized in profit or loss.

(10)Fair value measurement

Fair value is the price that would be received to sell an asset or paid to transfer a liability inan orderly transaction between market participants at the measurement date. The fair valuemeasurement is based on the presumption that the transaction to sell the asset or transfer theliability takes place either:

(a) In the principal market for the asset or liability, or(b) In the absence of a principal market, in the most advantageous market for the asset or

liability

The principal or the most advantageous market must be accessible to by the Group.

The fair value of an asset or a liability is measured using the assumptions that marketparticipants would use when pricing the asset or liability, assuming that market participantsin their economic best interest.





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A fair value measurement of a non-financial asset takes into account a market participant’sability to generate economic benefits by using the asset in its highest and best use or byselling it to another market participant that would use the asset in its highest and best use.

The Group uses valuation techniques that are appropriate in the circumstances and for whichsufficient data are available to measure fair value, maximizing the use of relevant observableinputs and minimizing the use of unobservable inputs.

(11)Inventories

Inventories are valued at lower of cost and net realizable value item by item.

Costs incurred in bringing each inventory to its present location and condition are accountedfor as follows:

Raw materials – purchase cost on weighted average cost formula.

Work in progress and finished goods – cost of direct materials and labor and a proportion ofmanufacturing overheads based on normal operatingcapacity on weighted average cost formula.

Net realizable value is the estimated selling price in the ordinary course of business, lessestimated costs of completion and the estimated costs necessary to make the sale.

(12)Construction contract

When the outcome of a construction contract can be estimated reliably, contract revenue andcontract costs associated with the construction contract shall be recognized as revenue andexpenses respectively by reference to the stage of completion of the contract activity at theend of the reporting period. The recognition of revenue and expenses by reference to thestage of completion of a contract is often referred to as the percentage of completionmethod. Under this method, contract revenue is matched with the contract costs incurred inreaching the stage of completion, resulting in the reporting of revenue, expenses and profitwhich can be attributed to the proportion of work completed.

When the outcome of a construction contract cannot be estimated reliably, revenue shall berecognized only to the extent of contract costs.

When it is probable that total contract costs will exceed total contract revenue, the expectedloss shall be recognized as an expense immediately.





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(13)Non-current assets held for sale and discontinued operations

Non-current assets and disposal groups are classified as held for sale if their carryingamounts will be recovered through a sale transaction that is highly probable within one yearfrom the date of classification and the asset or disposal group is available for immediate salein its present condition. Non-current assets and disposal groups classified as held for saleare measured at the lower of their carrying amount and fair value less costs to sell.

In the consolidated statement of comprehensive income of the reporting period, and of thecomparable period of the previous year, income and expenses from discontinued operationsare reported separately from income and expenses from continuing operations, down to thelevel of profit after taxes, even when the Group retains a non-controlling interest in thesubsidiary after the sale. The resulting profit or loss (after taxes) is reported separately inthe statement of comprehensive income.

Property, plant and equipment and intangible assets once classified as held for sale are notdepreciated or amortized.

(14)Investments under equity method

The Group’s investment in its associate is accounted for using the equity method other thanthose that meet the criteria to be classified as held for sale. An associate is an entity overwhich the Group has significant influence. A joint venture is a type of joint arrangementwhereby the parties that have joint control of the arrangement have rights to the net assets ofthe joint venture.

Under the equity method, the investment in the associate or an investment in a joint ventureis carried in the balance sheet at cost and adjusted thereafter for the post-acquisition changein the Group’s share of net assets of the associate. After the interest in the associate orjoint venture is reduced to zero, additional losses are provided for, and a liability isrecognized, only to the extent that the Group has incurred legal or constructive obligationsor made payments on behalf of the associate or joint venture. Unrealized gains and lossesresulting from transactions between the Group and the associate or joint venture areeliminated to the extent of the Group’s related interest in the associate or joint venture.

When changes in the net assets of an associate or a joint venture occur and not those that arerecognized in profit or loss or other comprehensive income and do not affects the Group’spercentage of ownership interests in the associate or joint venture, the Group recognizessuch changes in equity based on its percentage of ownership interests. The resulting capitalsurplus recognized will be reclassified to profit or loss at the time of disposing the associateor joint venture on a pro-rata basis.





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When the associate or joint venture issues new stock, and the Group’s interest in anassociate or joint venture is reduced or increased as the Group fails to acquire shares newlyissued in the associate or joint venture proportionately to its original ownership interest, theincrease or decrease in the interest in the associate or joint venture is recognized inadditional paid in capital and investment accounted for using the equity method. When theinterest in the associate or joint venture is reduced, the cumulative amounts previouslyrecognized in other comprehensive income are reclassified to profit or loss or otherappropriate items. The aforementioned capital surplus recognized is reclassified to profitor loss on a pro rata basis when the Group disposes the associate or joint venture.

The financial statements of the associate or joint venture are prepared for the same reportingperiod as the Group. Where necessary, adjustments are made to bring the accountingpolicies in line with those of the Group.

The Group determines at each reporting date whether there is any objective evidence that theinvestment in the associate or an investment in a joint venture is impaired in accordancewith IAS 39 Financial Instruments: Recognition and Measurement. If this is the case theGroup calculates the amount of impairment as the difference between the recoverableamount of the associate or joint venture and its carrying value and recognizes the amount inthe ‘share of profit or loss of an associate’ in the statement of comprehensive income inaccordance with IAS 36 Impairment of Assets. In determining the value in use of theinvestment, the Group estimates:

(a) Its share of the present value of the estimated future cash flows expected to be generatedby the associate, including the cash flows from the operations of the associate or joinventure and the proceeds on the ultimate disposal of the investment; or

(b) The present value of the estimated future cash flows expected to arise from dividends tobe received from the investment and from its ultimate disposal.

Because goodwill that forms part of the carrying amount of an investment in an associate orjoint venture is not separately recognized, it is not tested for impairment separately byapplying the requirements for impairment testing goodwill in IAS 36 Impairment of Assets.

Upon loss of significant influence over the associate or joint venture, the Group measuresand recognizes any retaining investment at its fair value. Any difference between thecarrying amount of the associate or joint venture upon loss of significant influence and thefair value of the retaining investment and proceeds from disposal is recognized in profit orloss. Furthermore, if an investment in an associate becomes an investment in a joint ventureor an investment in a joint venture becomes an investment in an associate, the entitycontinues to apply the equity method and does not remeasure the retained interest.





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(15)Property, plant and equipment

Property, plant and equipment are stated at acquisition cost, net of accumulateddepreciation and accumulated impairment losses, if any. Such cost includes the cost ofdismantling and removing the item and restoring the site on which it is located andborrowing costs for construction in progress if the recognition criteria are met. Each partof an item of property, plant and equipment with a cost that is significant in relation to thetotal cost of the item is depreciated separately. When significant parts of property, plantand equipment are required to be replaced in intervals, the Group recognized such parts asindividual assets with specific useful lives and depreciation, respectively. The carryingamount of those parts that are replaced is derecognized in accordance with thederecognition provisions of IAS 16 Property, plant and equipment. When a majorinspection is performed, its cost is recognized in the carrying amount of the plant andequipment as a replacement if the recognition criteria are satisfied. All other repair andmaintenance costs are recognized in profit or loss as incurred.

Depreciation is calculated on a straight-line basis over the estimated economic lives of thefollowing assets:

Buildings 3～50 yearMachinery and equipment 1～35 yearTransportation equipment 2～10 yearOffice equipment 2～10 yearLeased assets 3～50 yearLeasehold improvements The shorter of lease terms or economic useful livesOther equipment 2～10 year

An item of property, plant and equipment and any significant part initially recognized isderecognized upon disposal or when no future economic benefits are expected from its useor disposal. Any gain or loss arising on derecognition of the asset is recognized in profitor loss.

The assets’ residual values, useful lives and methods of depreciation are reviewed at eachfinancial year-end and adjusted prospectively, if appropriate.





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(16)Investment property

Investment properties are measured initially at cost, including transaction costs. Thecarrying amount includes the cost of replacing part of an existing investment property atthe time that cost is incurred if the recognition criteria are met and excludes the costs ofday-to-day servicing of an investment property. Subsequent to initial recognition,investment properties are measured using the cost model in accordance with therequirements of IAS 16 for that model, other than those that meet the criteria to beclassified as held for sale (or are included in a disposal group that is classified as held forsale) in accordance with IFRS 5 Non-current Assets Held for Sale and DiscontinuedOperations.

Depreciation is calculated on a straight-line basis over the estimated economic lives of thefollowing assets:

Buildings 30～50 years

Investment properties are derecognized when either they have been disposed of or whenthe investment property is permanently withdrawn from use and no future economicbenefit is expected from its disposal. The difference between the net disposal proceedsand the carrying amount of the asset is recognized in profit or loss in the period ofderecognition.

Assets are transferred to or from investment properties when there is a change in use.

(17)Leases

Group as a lessee

Finance leases which transfer to the Group substantially all the risks and benefits incidentalto ownership of the leased item, are capitalized at the commencement of the lease at thefair value of the leased property or, if lower, at the present value of the minimum leasepayments. Lease payments are apportioned between finance charges and reduction of thelease liability so as to achieve a constant rate of interest on the remaining balance of theliability. Finance charges are recognized in profit or loss.

A leased asset is depreciated over the useful life of the asset. However, if there is noreasonable certainty that the Group will obtain ownership by the end of the lease term, theasset is depreciated over the shorter of the estimated useful life of the asset and the leaseterm.

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





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Group as a lessor

Leases in which the Group does not transfer substantially all the risks and benefits ofownership of the asset are classified as operating leases. Initial direct costs incurred innegotiating an operating lease are added to the carrying amount of the leased asset andrecognized over the lease term on the same basis as rental income. Rental revenuegenerated from operating lease is recognized over the lease term using the straight linemethod. Contingent rents are recognized as revenue in the period in which they areearned.

(18)Intangible assets

Intangible assets acquired separately are measured on initial recognition at cost. The costof intangible assets acquired in a business combination is its fair value as at the date ofacquisition. Following initial recognition, intangible assets are carried at cost less anyaccumulated amortization and accumulated impairment losses, if any. Internallygenerated intangible assets, excluding capitalized development costs, are not capitalizedand expenditure is reflected in profit or loss for the year in which the expenditure isincurred.

The useful lives of intangible assets are assessed as either finite or indefinite.

Intangible assets with finite lives are amortized over the useful economic life and assessedfor impairment whenever there is an indication that the intangible asset may be impaired.The amortization period and the amortization method for an intangible asset with a finiteuseful life is reviewed at least at the end of each financial year. Changes in the expecteduseful life or the expected pattern of consumption of future economic benefits embodied inthe asset is accounted for by changing the amortization period or method, as appropriate,and are treated as changes in accounting estimates.

Intangible assets with indefinite useful lives are not amortized, but are tested forimpairment annually, either individually or at the cash-generating unit level. Theassessment of indefinite life is reviewed annually to determine whether the indefinite lifecontinues to be supportable. If not, the change in useful life from indefinite to finite ismade on a prospective basis.





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Gains or losses arising from derecognition of an intangible asset are measured as thedifference between the net disposal proceeds and the carrying amount of the asset and arerecognized in profit or loss when the asset is disposed.

Research and development costs

Research costs are expensed as incurred. Development expenditures, on an individualproject, are recognized as an intangible asset when the Group can demonstrate:

(a) The technical feasibility of completing the intangible asset so that it will be availablefor use or sale

(b) Its intention to complete and its ability to use or sell the asset(c) How the asset will generate future economic benefits(d) The availability of resources to complete the asset(e) The ability to measure reliably the expenditure during development

Following initial recognition of the development expenditure as an asset, the cost model isapplied requiring the asset to be carried at cost less any accumulated amortization andaccumulated impairment losses. During the period of development, the asset is tested forimpairment annually. Amortization of the asset begins when development is completeand the asset is available for use. It is amortized over the period of expected futurebenefit.

Patents

The patent is amortized over the period of useful life.

Technology cooperation costs

Technical cooperation costs have been granted the use of right 3 to 10 years depending ondifferent project.

Computer software

The cost of computer software is amortized on a straight-line basis over the estimateduseful life (3 years).





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A summary of the policies applied to the Group’s intangible assets is as follows:

Patents

Technology

Cooperation Costs Computer software

Useful lives Finite Finite Finite

Amortization method used Amortized on a

straight-line basis

over the period of the

patent

Amortized on a

straight-line basis

over the period of the

technology

cooperation terms

Amortized on a

straight- line basis

over the estimated

useful life

Internally generated or

acquired

Acquired Acquired Acquired

(19)Impairment of non-financial assets

The Group assesses at the end of each reporting period whether there is any indication thatan asset in the scope of IAS 36 Impairment of Assets may be impaired. If any suchindication exists, or when annual impairment testing for an asset is required, the Groupestimates the asset’s recoverable amount. An asset’s recoverable amount is the higher of anasset’s or cash-generating unit’s (“CGU”) fair value less costs to sell and its value in use andis determined for an individual asset, unless the asset does not generate cash inflows that arelargely independent of those from other assets or groups of assets. Where the carryingamount of an asset or CGU exceeds its recoverable amount, the asset is considered impairedand is written down to its recoverable amount.

For assets excluding goodwill, an assessment is made at each reporting date as to whetherthere is any indication that previously recognized impairment losses may no longer exist ormay have decreased. If such indication exists, the Group estimates the asset’s orcash-generating unit’s recoverable amount. A previously recognized impairment loss isreversed only if there has been an increase in the estimated service potential of an assetwhich in turn increases the recoverable amount. However, the reversal is limited so thatthe carrying amount of the asset does not exceed its recoverable amount, nor exceed thecarrying amount that would have been determined, net of depreciation, had no impairmentloss been recognized for the asset in prior years.





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A cash generating unit, or groups of cash-generating units, to which goodwill has beenallocated is tested for impairment annually at the same time, irrespective of whether thereis any indication of impairment. If an impairment loss is to be recognized, it is firstallocated to reduce the carrying amount of any goodwill allocated to the cash generatingunit (group of units), then to the other assets of the unit (group of units) pro rata on thebasis of the carrying amount of each asset in the unit (group of units). Impairment lossesrelating to goodwill cannot be reversed in future periods for any reason.

An impairment loss of continuing operations or a reversal of such impairment loss isrecognized in profit or loss.

(20)Provisions

Provisions are recognized when the Group has a present obligation (legal or constructive) asa result of a past event, it is probably that an outflow of resources embodying economicbenefits will be required to settle the obligation and a reliable estimate can be made of theamount of the obligation. Where the Group expects some or all of a provision to bereimbursed, the reimbursement is recognized as a separate asset but only when thereimbursement is virtually certain. If the effect of the time value of money is material,provisions are discounted using a current pre-tax rate that reflects the risks specific to theliability. Where discounting is used, the increase in the provision due to the passage of timeis recognized as a finance cost.

Provision for decommissioning, restoration and rehabilitation costs

The provision for decommissioning, restoration and rehabilitation costs arose onconstruction of a property, plant and equipment. Decommissioning costs are provided atthe present value of expected costs to settle the obligation using estimated cash flows andare recognized as part of the cost of that particular asset. The cash flows are discounted ata current pre-tax rate that reflects the risks specific to the decommissioning liability. Theunwinding of the discount is expensed as incurred and recognized as a finance cost. Theestimated future costs of decommissioning are reviewed annually and adjusted asappropriate. Changes in the estimated future costs or in the discount rate applied areadded to or deducted from the cost of the asset.





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Maintenance warranties

A provision is recognized for expected warranty claims on products sold, based on pastexperience, management’s judgment and other known factors.

Sales returns and allowances

A provision has been recognized for sales returns and allowances based on past experienceand other known factors.

(21)Treasury shares

Own equity instruments which are reacquired (treasury shares) are recognized at cost anddeducted from equity. Any difference between the carrying amount and the considerationis recognized in equity.

(22)Revenue recognition

Revenue is recognized to the extent that it is probable that the economic benefits will flowto the Group and the revenue can be reliably measured. Revenue is measured at the fairvalue of the consideration received or receivable. The following specific recognitioncriteria must also be met before revenue is recognized:

Sale of goods

Revenue from the sale of goods is recognized when all the following conditions have beensatisfied:

(a) the significant risks and rewards of ownership of the goods have passed to the buyer;(b) neither continuing managerial involvement nor effective control over the goods sold

have been retained;(c) the amount of revenue can be measured reliably;(d) it is probable that the economic benefits associated with the transaction will flow to

the entity; and(e) the costs incurred in respect of the transaction can be measured reliably.





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Rendering of Services

Revenue from Information systems integration services is recognized by reference to thestage of completion. Stage of completion is measured by reference to the proportion thatcontract cost incurred for work performed to date bear to the estimated total contract costs.Where the contract outcome cannot be measured reliably, revenue is recognized only to theextent that the expenses incurred are eligible to be recovered.

Interest income

For all financial assets measured at amortized cost (including loans and receivables andheld-to-maturity financial assets) and available-for-sale financial assets, interest income isrecorded using the effective interest rate method and recognized in profit or loss.

Dividends

Revenue is recognized when the Group’s right to receive the payment is established.

Rent Income

Rental income from operating lease is accounted by straight-line basis on the period oflease.

(23)Borrowing costs

Borrowing costs directly attributable to the acquisition, construction or production of anasset that necessarily takes a substantial period of time to get ready for its intended use orsale are capitalized as part of the cost of the respective assets. All other borrowing costsare expensed in the period they occur. Borrowing costs consist of interest and other coststhat an entity incurs in connection with the borrowing of funds.

(24)Government grants

Government grants are recognized where there is reasonable assurance that the grant willbe received and all attached conditions will be complied with. Where the grant relates toan asset, it is recognized as deferred income and released to income in equal amounts overthe expected useful life of the related asset. When the grant relates to an expense item, it isrecognized as income over the period necessary to match the grant on a systematic basis tothe costs that it is intended to compensate.





55

Where the Group receives non-monetary grants, the asset and the grant are recorded grossat nominal amounts and released to the statement of comprehensive income over theexpected useful life and pattern of consumption of the benefit of the underlying asset byequal annual installments. Where loans or similar assistance are provided by governmentsor related institutions with an interest rate below the current applicable market rate, theeffect of this favorable interest is regarded as additional government grant.

(25)Post-employment benefits

All regular employees of the Company and its domestic subsidiaries are entitled to apension plan that is managed by an independently administered pension fund committee.Fund assets are deposited under the committee’s name in the specific bank account andhence, not associated with the Company and its domestic subsidiaries. Therefore fundassets are not included in the Group’s consolidated financial statements. Pension benefitsfor employees of the overseas subsidiaries and the branches are provided in accordancewith the respective local regulations.

For the defined contribution plan, the Company and its domestic subsidiaries will make amonthly contribution of no less than 6% of the monthly wages of the employees subject tothe plan. The Company recognizes expenses for the defined contribution plan in theperiod in which the contribution becomes due. Overseas subsidiaries and branches makecontribution to the plan based on the requirements of local regulations.

Post-employment benefit plan that is classified as a defined benefit plan uses the ProjectedUnit Credit Method to measure its obligations and costs based on actuarial assumptions.Re-measurements, comprising of the effect of the actuarial gains and losses, the effect ofthe asset ceiling (excluding net interest) and the return on plan assets, excluding netinterest, are recognized as other comprehensive income with a corresponding debit orcredit to retained earnings in the period in which they occur. Past service costs arerecognized in profit or loss on the earlier of:

(a) the date of the plan amendment or curtailment, and(b) the date that the Group recognizes restructuring-related costs

Net interest is calculated by applying the discount rate to the net defined benefit liability orasset, both as determined at the start of the annual reporting period, taking account of anychanges in the net defined benefit liability (asset) during the period as a result ofcontribution and benefit payment.





56

(26)Share-based payment transactions

The cost of equity-settled transactions between the Group and its employees is recognizedbased on the fair value of the equity instruments granted. The fair value of the equityinstruments is determined by using an appropriate pricing model.

The cost of equity-settled transactions is recognized, together with a correspondingincrease in other capital reserves in equity, over the period in which the performanceand/or service conditions are fulfilled. The cumulative expense recognized forequity-settled transactions at each reporting date until the vesting date reflects the extent towhich the vesting period has expired and the Group’s best estimate of the number of equityinstruments that will ultimately vest. The income statement expense or credit for a periodrepresents the movement in cumulative expense recognized as at the beginning and end ofthat period.

No expense is recognized for awards that do not ultimately vest, except for equity-settledtransactions where vesting is conditional upon a market or non-vesting condition, whichare treated as vesting irrespective of whether or not the market or non-vesting condition issatisfied, provided that all other performance and/or service conditions are satisfied.

Where the terms of an equity-settled transaction award are modified, the minimum expenserecognized is the expense as if the terms had not been modified, if the original terms of theaward are met. An additional expense is recognized for any modification that increasesthe total fair value of the share-based payment transaction, or is otherwise beneficial to theemployee as measured at the date of modification.

Where an equity-settled award is cancelled, it is treated as if it vested on the date ofcancellation, and any expense not yet recognized for the award is recognized immediately.This includes any award where non-vesting conditions within the control of either theentity or the employee are not met. However, if a new award is substituted for thecancelled award, and designated as a replacement award on the date that it is granted, thecancelled and new awards are treated as if they were a modification of the original award,as described in the previous paragraph.

The dilutive effect of outstanding options is reflected as additional share dilution in thecomputation of diluted earnings per share





57

The cost of restricted stocks issued is recognized as salary expense based on the fair valueof the equity instruments on the grant date, together with a corresponding increase in othercapital reserves in equity, over the vesting period. The Group recognized unearnedemployee salary which is a transitional contra equity account; the balance in the accountwill be recognized as salary expense over the passage of vesting period.

(27)Income taxes

Income tax expense (revenue) is the aggregate amount of current and deferred taxes whichincluded in the determination of current profit or loss.

Current income tax

Current income tax assets and liabilities for the current and prior periods are measured atthe amount expected to be recovered from or paid to the taxation authorities, using the taxrates and tax laws that have been enacted or substantively enacted by the end of thereporting period. Current income tax relating to items recognized in other comprehensiveincome or directly in equity is recognized in other comprehensive income or equity and notin profit or loss.

The 10% surtax on undistributed retained earnings is recognized as income tax expense inthe subsequent year when the distribution proposal is approved by the Shareholders’meeting.

Deferred tax

Deferred tax is provided on temporary differences at the reporting date between the taxbases of assets and liabilities and their carrying amounts for financial reporting purposes.

Deferred tax liabilities are recognized for all taxable temporary differences, except:

(a) Where the deferred tax liability arises from the initial recognition of goodwill or of anasset or liability in a transaction that is not a business combination and, at the time ofthe transaction, affects neither the accounting profit nor taxable profit or loss

(b) In respect of taxable temporary differences associated with investments in subsidiaries,associates and interests in joint ventures, where the timing of the reversal of thetemporary differences can be controlled and it is probable that the temporarydifferences will not reverse in the foreseeable future.





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Deferred tax assets are recognized for all deductible temporary differences, carry forwardof unused tax credits and unused tax losses, to the extent that it is probable that taxableprofit will be available against which the deductible temporary differences, and the carryforward of unused tax credits and unused tax losses can be utilized, except:

(a) Where the deferred tax asset relating to the deductible temporary difference arisesfrom the initial recognition of an asset or liability in a transaction that is not a businesscombination and, at the time of the transaction, affects neither the accounting profitnor taxable profit or loss

(b) In respect of deductible temporary differences associated with investments insubsidiaries, associates and interests in joint ventures, deferred tax assets arerecognized only to the extent that it is probable that the temporary differences willreverse in the foreseeable future and taxable profit will be available against which thetemporary differences can be utilized.

Deferred tax assets and liabilities are measured at the tax rates that are expected to apply inthe year when the asset is realized or the liability is settled, based on tax rates and tax lawsthat have been enacted or substantively enacted at the reporting date. The measurementof deferred tax assets and deferred tax liabilities reflects the tax consequences that wouldfollow from the manner in which the Group expects, at the end of the reporting period, torecover or settle the carrying amount of its assets and liabilities.

Deferred tax relating to items recognized outside profit or loss is recognized outside profitor loss. Deferred tax items are recognized in correlation to the underlying transactioneither in other comprehensive income or directly in equity. Deferred tax assets arereassessed at each reporting date and are recognized accordingly.

Deferred tax assets and deferred tax liabilities are offset, if a legally enforceable rightexists to set off current income tax assets against current income tax liabilities and thedeferred taxes relate to the same taxable entity and the same taxation authority.

(28)Business combinations and goodwill

Business combinations are accounted for using the acquisition method. The considerationtransferred, the identifiable assets acquired and liabilities assumed are measured atacquisition date fair value. For each business combination, the acquirer measures anynon-controlling interest in the acquiree either at fair value or at the non-controllinginterest’s proportionate share of the acquiree’s identifiable net assets. Acquisition-relatedcosts are accounted for as expenses in the periods in which the costs are incurred and areclassified under administrative expenses.





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When the Group acquires a business, it assesses the assets and liabilities assumed forappropriate classification and designation in accordance with the contractual terms,economic circumstances and pertinent conditions as at the acquisition date. This includesthe separation of embedded derivatives in host contracts by the acquiree.

If the business combination is achieved in stages, the acquisition date fair value of theacquirer’s previously held equity interest in the acquiree is remeasured to fair value at theacquisition date through profit or loss.

Any contingent consideration to be transferred by the acquirer will be recognized at theacquisition-date fair value. Subsequent changes to the fair value of the contingentconsideration which is deemed to be an asset or liability, will be recognized in accordancewith IAS 39 Financial Instruments: Recognition and Measurement either in profit or lossor as a change to other comprehensive income. However, if the contingent considerationis classified as equity, it should not be remeasured until it is finally settled within equity.

Goodwill is initially measured as the amount of the excess of the aggregate of theconsideration transferred and the non-controlling interest over the net fair value of theidentifiable assets acquired and the liabilities assumed. If this aggregate is lower than thefair value of the net assets acquired, the difference is recognized in profit or loss.

After initial recognition, goodwill is measured at cost less any accumulated impairmentlosses. Goodwill acquired in a business combination is, from the acquisition date,allocated to each of the Group’s cash-generating units that are expected to benefit from thecombination, irrespective of whether other assets or liabilities of the acquiree are assignedto those units. Each unit or group of units to which the goodwill is so allocated representsthe lowest level within the Group at which the goodwill is monitored for internalmanagement purpose and is not larger than an operating segment before aggregation.

Where goodwill forms part of a cash-generating unit and part of the operation within thatunit is disposed of, the goodwill associated with the operation disposed of is included inthe carrying amount of the operation. Goodwill disposed of in this circumstance ismeasured based on the relative recoverable amounts of the operation disposed of and theportion of the cash-generating unit retained.





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5. Significant accounting judgments, estimates and assumptions

The preparation of the Group’s consolidated financial statements require management to makejudgments, estimates and assumptions that affect the reporting amounts of revenues, expenses,assets and liabilities, and the disclosure of contingent liabilities, at the balance sheet date.However, uncertainty about these assumption and estimate could result in outcomes that requirea material adjustment to the carrying amount of the asset or liability affected in future periods.

(1) Judgment

In the process of applying the Group’s accounting policies, management has made thefollowing judgments, which have the most significant effect on the amounts recognized inthe consolidated financial statements:

(a) Investment properties

Certain properties of the Group comprise a portion that is held to earn rentals or forcapital appreciation and another portion that is owner-occupied. If these portionscould be sold separately, the Group accounts for the portions separately as investmentproperties and property, plant and equipment. If the portions could not be soldseparately, the property is classified as investment property in its entirety only if theportion that is owner-occupied is under 10% of the total property.

(b) Operating lease commitment-Group as the lessor

The Group has entered into commercial property leases on its investment propertyportfolio. The Group has determined, based on an evaluation of the terms andconditions of the arrangements, that it retains all the significant risks and rewards ofownership of these properties and accounts for the contracts as operating leases.

(c) De facto control without a majority of the voting rights in subsidiaries

The Company does not have majority of the voting rights in certain subsidiaries.However, after taking into consideration factors such as absolute size of the Company’sholding, relative size of the other shareholdings, how widely spread is the remainingshareholding, contractual arrangements between shareholders, potential voting rights,etc., the Company reached the conclusion that it has de facto control over thesesubsidiaries. Please refer to Note 4 for further details.





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(2) Estimates and assumptions

The key assumptions concerning the future and other key sources of estimation uncertaintyat the reporting date, that have a significant risk of causing a material adjustment to thecarrying amounts of assets and liabilities within the next financial year are discussed below.

(a) Fair value of financial instruments

Where the fair value of financial assets and financial liabilities recorded in the balancesheet cannot be derived from active markets, they are determined using valuationtechniques including the income approach (for example the discounted cash flows model)or market approach. Changes in assumptions about these factors could affect thereported fair value of the financial instruments. Please refer to Note 12 for more details.

(b) Impairment of non-financial assets

Impairment exists when the carrying value of an asset or cash generating unit exceedsits recoverable amount, which is the higher of its fair value less costs to sell and itsvalue in use. The fair value less costs to sell calculation is based on available datafrom binding sales transactions in an arm’s length transaction of similar assets orobservable market prices less incremental costs that would be directly attributable to thedisposal of the asset. The value in use calculation is based on a discounted cash flowmodel. The cash flows projections are derived from the budget for the next five yearsand do not include restructuring activities that the Group is not yet committed to orsignificant future investments that will enhance the asset’s performance of the cashgenerating unit being tested. The recoverable amount is most sensitive to the discountrate used for the discounted cash flow model as well as the expected future cash-inflowsand the growth rate used for extrapolation purposes. Please refer to Note 6 for moredetails.

(c) Pension benefits

The cost of post-employment benefit and the present value of the pension obligationunder defined benefit pension plans are determined using actuarial valuations. Anactuarial valuation involves making various assumptions. These include thedetermination of the discount rate and future salary increases. Please refer to Note 6for more details.





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(d) Share-based payment transactions

The Company measures the cost of equity-settled transactions with employees basedon reference to the fair value of the equity instruments at the date at which they aregranted. Estimating fair value for share-based payment transactions requiresdetermination of the most appropriate valuation model, which is dependent on theterms and conditions of the grant. This estimate also requires determination of themost appropriate inputs to the valuation model including the expected life of the shareoption, volatility and dividend yield and making assumptions about them.

(e) Revenue recognition - sales returns and allowance

The Group estimates sales returns and allowance based on historical experience andother known factors at the time of sale, which reduces the operating revenue. Pleaserefer to Note 6.

(f) Income tax

Uncertainties exist with respect to the interpretation of complex tax regulations and theamount and timing of future taxable income. Given the wide range of internationalbusiness relationships and the long-term nature and complexity of existing contractualagreements, differences arising between the actual results and the assumptions made,or future changes to such assumptions, could necessitate future adjustments to taxincome and expense already recorded. The Group establishes provisions, based onreasonable estimates, for possible consequences of audits by the tax authorities of therespective counties in which it operates. The amount of such provisions is based onvarious factors, such as experience of previous tax audits and differing interpretationsof tax regulations by the taxable entity and the responsible tax authority. Suchdifferences of interpretation may arise on a wide variety of issues depending on theconditions prevailing in the respective Group's domicile.

Deferred tax assets are recognized for all carryforward of unused tax losses, unusedtax credits and deductible temporary differences to the extent that it is probable thatfuture taxable profit will be available or there are sufficient taxable temporarydifferences against which the unused tax losses, unused tax credits or deductibletemporary differences can be utilized. The amount of deferred tax assets determined tobe recognized is based upon the likely timing and the level of future taxable profitsand taxable temporary differences together with future tax planning strategies. Pleaserefer to Note 6 for more details on unrecognized deferred tax assets as of December31, 2015.





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(g) Property, Plant and Equipment

The Group inspected the estimated useful lives of its property, plant and equipment onbalance sheet date. At the end of 2013, Green Energy Technology Inc. determined thatthe real economic lives of underlying property, plant and equipment had exceeded itsoriginal estimated useful lives. Therefore, Green Energy Technology Inc. appointed anappraisal company to conduct comprehensive industrial, functional, and economicanalysis. The management of Green Energy Technology Inc. decided to extend part ofthe economic lives of equipment from 2~8 years to 6~12 years, and part of economiclives of leasehold improvements from 8 to 14 years since 1 January 2014.

Green Energy Technology Inc. estimated the depreciation effects resulting from abovechanges in estimated economic lives of property, plant and equipment for 2014 and thecoming five years as follows:

Year 2014 $590,110Year 2015 563,984Year 2016 458,228Year 2017 314,412Year 2018 242,175Year 2019 106,220

6. Contents of significant accounts


As of December 31,

2015 2014

Cash on hand & petty cash $390,197 $439,205

Cash in banks 24,804,170 26,385,651Time deposits 1,931,403 3,309,048

Cash in transit 5,688 6,378

Total $27,131,458 $30,140,282





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(2) Financial assets at fair value through profit or loss

As of December 31,2015 2014

Held for trading:Derivatives not designated as hedging instruments

Forward foreign exchange contracts $26,235 $86,767Swaps - 5,018Subtotal 26,235 91,785

Non-derivative financial assetsCapital-Guaranteed financial products 404,398 602,586Open-end funds 104,337 30,254Stock (Note) 1,827,536 1,454,553Subtotal 2,336,271 2,087,393

Total $2,362,506 $2,179,178

Current $2,362,506 $2,168,532Non-current - 10,646

Total $2,362,506 $2,179,178

(Note: Please refer to Note 6 (20) for more details)

Please refer to Note 8 for more details on financial assets at fair value through profit or lossunder pledge.

(3) Available-for-sale financial assets


Stocks $3,824,051 $3,821,172

Current $394,114 $505,530Non-current 3,429,937 3,315,642

Total $3,824,051 $3,821,172





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(a) The Group disposed of 633,000 common shares of Crystal Applied Technology Inc. in2014, and recognized gain on disposal of investments in the amount NTD 8,012thousand.

(b) Formosa Epitaxy Incorporation merged with Epistar Corporation by share exchange atthe end of June 2014 and Epistar Corporation was the surviving company. Therefore,the Group had converted all shares of Formosa Epitaxy Incorporation, totaling12,121,000 shares, to 3,364,140 shares of Epistar Corporation in December 2014.

(c) The Group recognized impairment losses amounted to NTD 8,000 thousand for the yearended December 31, 2014 as a result of impairment assessment on the investees.

(d) Please refer to Attachment 3 of Note 13 and Note 8 for more details onavailable-for-sale financial assets under pledge.

(4) Held-to-maturity financial assets


Bonds $20,000 $20,000

Current $20,000 $-Non-current - 20,000Total $20,000 $20,000

Held-to-maturity assets were not pledged.

(5) Financial assets measured at cost


Stocks $358,549 $391,401

Current $29,238 $29,238Non-current 329,311 362,163Total $358,549 $391,401





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Financial assets measured at cost were not pledged. Please refer to Attachment 3 of Note 13 for the breakdown.

CPTTG established Huachuang (Fujian) Equity Investment Enterprise (Limited Partnership)in 2014. CPTTG planned to invest RMB 100,000 thousand. CPTTG had paid RMB 40,000thousand as of December 31, 2015.

The above investments in the equity instruments of unlisted entities are measured at cost asthe fair value of these investments are not reliably measurable due to the fact that thevariability in the range of reasonable fair value measurements is significant for thatinvestment and that the probabilities of the various estimates within the range cannot bereasonably assessed and used when measuring fair value.

The Group recognized impairment losses amounted to NTD 10,285 thousand for the yearended December 31, 2014 as a result of impairment assessment on the investees.

(6) Debt instrument investments for which no active market exists


Cash in banks-Reserve Account $844,089 $177,497Time deposits (Note) 21,083,317 15,388,394Total $21,927,406 $15,565,891

Current $18,144,386 $6,799,213Non-current 3,783,020 8,766,678Total $21,927,406 $15,565,891

Please refer to Note 8 for more details on debt instrument investments for which no activemarket exists that were pledged as collateral.

Note: Chunghwa Electronics Development Co., Ltd. transferred its shares of CPT to CreditSuisse in January 2010 and acquired proceeds of NTD 1,047,800 thousand, whichwas recognized in other current liabilities – other. The Group then pledged the aboveamount to Credit Suisse, which was recognized in bonds investments for which noactive market exists – current. The Group guaranteed to buy-back the above shares ina certain period. The above transactions had remained unchanged as of December 31,2015 and 2014.





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(7) Notes receivables

As of December 31,

2015 2014

Notes receivables arising from operating activities $644,968 $583,058Less: allowance for doubtful debts (43) (54)

Subtotal 644,925 583,004

Notes receivables-related parties - -Less: allowance for doubtful debts - -

Subtotal - -

Total $644,925 $583,004

Notes receivables were not pledged.

(8) Accounts receivable and Accounts receivable-related parties

As of December 31,

2015 2014Accounts receivable $11,656,116 $15,761,219Less: allowance for doubtful debts (859,477) (866,470)Allowance for sales returns and discounts (23,248) (12,725)

Net 10,773,391 14,882,024

Installment accounts receivable 576,049 585,461Less: allowance for doubtful debts - -Unrealized interest revenue - trade receivables from

installment sales(3,777) (3,306)

Net 572,272 582,155

Subtotal 11,345,663 15,464,179

Accounts receivable-related parties 81,216 135,520Less: allowance for doubtful debts (913) (1,329)

Net 80,303 134,191

Total $11,425,966 $15,598,370





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The expected recovery of the accounts receivables from installment sales is as follows:

As of December 31,

2015 2014

Not later than one year $221,123 $273,841

Later than one year and not later than two years 182,870 145,357

Later than two years 172,056 166,263

Total $576,049 $585,461

Due to the contracts of accounts receivable factoring with recourse, account receivables

amounted NTD 18,873 thousand and 49,452 thousand were pledged as collateral for the

years ended December 31, 2015 and 2014, respectively. As of the years ended December 31,

2015 and 2014, the Group offered USD 2,000 thousand as secured promissory notes.

Please refer to Note 8 for pledged trade receivables.

The Group’s credit terms are generally 30-180 day. The movements in the provision for

impairment of accounts receivable and accounts receivable-related parties are as follows:

Individually

impaired

Collectively

impaired Total

As of January 1, 2015 $843,310 $24,489 $867,799

Charge (reversal) for the current period (129,735) 131,256 1,521

Write off (5,906) (7,919) (13,825)

Other 45 6,712 6,757

Effect of exchange rate changes (760) (1,102) (1,862)

As of December 31, 2015 $706,954 $153,436 $860,390





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Individuallyimpaired

Collectivelyimpaired Total

As of January 1, 2014 $343,482 $222,292 $565,774Charge (reversal) for the current period 549,847 (194,321) 355,526Write off (52,148) (5,881) (58,029)Effect of exchange rate changes 2,129 2,399 4,528

As of December 31, 2014 $843,310 $24,489 $867,799

Impairment loss, that was individually determined for the years ended December 31, 2015and 2014, arose due to the fact that the counterparty was in financial difficulties. Theamount of impairment loss recognized was the difference between the carrying amount ofthe trade receivable and the present value of its expected recoverable amount. The Group didnot hold any collateral for such trade receivables.

Ageing analysis of account receivables and account receivables-related parties that were pastdue as at the balance sheet date but not impaired is as follows:

Past due but not impaired

As of

Neither past

due nor

impaired 1 to 6 months

6 months to 1

year

More than 1

year Total

December 31, 2015 $10,267,833 $1,107,785 $19,327 $31,021 $11,425,966

December 31, 2014 14,194,793 1,299,004 74,156 30,417 15,598,370

(9) Construction receivables

As of December 31,

2015 2014

Accumulated cost incurred $3,755,603 $4,174,530

Accumulated recognized project profit (loss) 229,176 382,543

Accumulated billed amounts based on construction progress (3,600,196) (2,963,364)

Construction receivables $384,583 $1,593,709





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As of December 31, 2015

Items (Note 1)

Contract

proceeds

Contract costs

incurred

Accumulated

recognized total

project

profit(loss)

Percentage of

completion

(Note 2)

Amounts billed

based on

Construction

progress

Construction

contracts

receivable

Percentage of

completion method

Category A $82,700 $67,012 $7,045 25%~100% $52,703 $21,354

Category B 174,979 136,933 9,905 0%~100% 42,760 104,078

Category C 5,322,993 3,551,658 212,226 0%~100% 3,504,733 259,151

Total $5,580,672 $3,755,603 $229,176 $3,600,196 $384,583


Items (Note 1)

Contract

proceeds

Contract costs

incurred

Accumulated

recognized total

project

profit(loss)

Percentage of

completion

(Note 2)

Amounts billed

based on

construction

progress

Construction

contracts

receivable

Percentage of

completion method

Category A $585,406 $490,850 $43,746 0%~100% $291,458 $243,139

Category B 759,656 561,303 65,150 0%~100% 309,847 316,605

Category C 4,709,007 3,101,896 263,551 20%~100% 2,362,059 1,003,388

Category D 40,000 20,481 10,096 76% - 30,577

Total $6,094,069 $4,174,530 $382,543 $2,963,364 $1,593,709

(Note 1: Projects involving similar products have been combined as a single item.)(Note 2: The percentage of completion varied in each project, it is therefore presented as a

range.)

As of December 31, 2015 and 2014, the above construction projects had not generatedconstruction retainage of construction contracts.





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(10)Inventory

(a) The details of inventories are as follows:


Raw materials $3,529,820 $4,145,973Work in progress 4,226,182 4,892,169Finished good 7,476,755 9,740,224Inventories in transit 103,722 240,654Buildings and land held for sale 518,564 1,161,390Property under construction 2,801,880 1,555,334Property used for construction 451,865 -Total $19,108,788 $21,735,744

(b) Property under construction:

As of December 31,Name of developing projects 2015 2014

Project D $1,202,129 $131,738Project F1 1,599,751 1,423,596Total $2,801,880 $1,555,334

December 31, 2015

ProjectsTotal valueof contract

Totalestimated

costsCompletedpercentage

Scheduledyear of

completionAdvancedreceipts

Project D $6,640,970 $4,767,753 12.69% 107 $1,026,027

According to domestic regulations, the installments of advance payments received frombuyers should be deposited in related trust accounts and used according to constructionprogress. As of December 31, 2015, the above advance payments were still deposited inthe trust accounts and recognized as other current assets – other financial assets.

Project F1 has not yet started preselling as of December 31, 2015.





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(c) The cost of inventories recognized in expenses amounted to NTD 84,584,815 thousandand NTD 92,627,916 thousand, including the gain from price recovery of inventoryamounted to NTD 675,181 thousand and NTD 535,733 thousand for the years endedDecember 31, 2015 and 2014, respectively.

As the cause that led to the net realizable value of inventory to be lower than the costhad vanished, the cost of goods sold also decreased due to the gain from price recoveryof inventory.

(d) Please refer to Note 8 for pledged inventories.

(11)Non-current assets held for sale

On October 1, 2015, Green Energy Technology Inc. (“GET”) entered into an equity transferagreement with a joint venture partnership in Thailand. GET planned to sell 50% of GreenEnergy Technology Holding Co., Ltd. shares to said joint venture partnership. The disposaltransaction was completed in January 2016, and the selling price was THB 130,000thousand. As of December 31, 2015, the remaining balance resulted from the book value ofNTD 129,651 thousand, less impairment loss of NTD 10,946 thousand, was NTD 118,705thousand which was reclassified from investment under equity method to non-current assetsheld for sale.

Taiwan Telecommunication Industry Company Ltd, a subsidiary of the Group, sold all of itsshares in Taiwan Telecommunication Investments Limited to a non-related party, SunwayInformation Technology Company Limited. The selling price was USD 2,650 thousand andthe share transfer was completed in the first quarter of 2016. According to IFRS 5“Non-current Assets Held for Sale and Discontinued Operations”, the Group reclassified thenet amount of NTD 111,857 thousand to non-current assets held for sale after deducting theimpairment loss of NTD 24,871 thousand from the carrying value of its subsidiaries, TaiwanTelecommunication (Fujian) Company Ltd. and Shan Chih (Hong Kong) Co., Ltd.

The FD Group agreed to dispose of 35% shares of its related party, Hefei FuyingOpto-electronic Co., Ltd., to Highbroad Science & Technology (Beijing) Co., Ltd. The totalamount of this transaction was RMB 12,000 thousand. According to IFRS 5 “Non-currentAssets Held for Sale and Discontinued Operations”, the Group reclassified the carryingamount of NTD 57,536 thousand (RMB 11,124 thousand) of investment under equitymethod to non-current assets held for sale.

On December 25, 2013, the board of directors of Ultra Energy (WEIFANG) Technology Co.Ltd resolved to dispose of 24% shares in ShiLin Energy Development Co. Since the sellingprice was higher than the book value, the Group reclassified the carrying amount of NTD109,784 thousand of investment under equity method to non-current assets held for sale. Thetransaction was completed in January 2014, and the disposal price was RMB 24,600thousand (NTD 121,730 thousand), generating gain on disposal in the amount of NTD10,602 thousand.





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(12)Investments under equity method

(a) The following table lists the investments under equity method of the Group:

As of December 31,

2015 2014

Investees

Carrying

amount

Percentage of

ownership (%)

Carrying

amount

Percentage of

ownership (%)

Investments in associates:

Listed companies

Elitegroup Computer Systems Co., Ltd. $4,543,168 27.35 $5,017,072 27.38%

Unlisted companies

Tatung Okuma Co., Ltd. 956,486 49.00 867,278 49.00

Kuender Co., Ltd. 439,824 50.00 219,572 50.00

Hsieh-Chih Industrial Library Publishing Co. 12,715 98.80 12,378 98.80

Chung-Tai Technology Development Engineering Co. 14,646 22.00 15,669 22.00

Lansong International Co., Ltd. - 98.23 - 98.33

Tatung Telecom Corporation (Note 1) - - (1,577) 55.00

Tatung Cranes (Shanghai) Co., Ltd 30,777 45.00 30,354 45.00

Taiwan Nissei Display System Co., Ltd 46,637 20.00 43,495 20.00

Ufeco (Wujiang) Technology Inc. 34,288 40.00 37,375 40.00

Nature Worldwide Technology Corp. (Note 2) (19,970) 85.36 (19,970) 85.36

D&Y Intelligent Co., Ltd. (Note 3) - 23.27 - 23.27

Hefei Fuying Opto-electronic Co., Ltd. (Note 4) - - - -

Yunbao Co., Ltd 1,999 40.00 - -

Subtotal 1,517,402 1,204,574

Jointly Controlled Entity:

Green Energy Technology Holding Co., Ltd.(GETH)

(Note 5)

- 50.00 142,818 50.00

Panshiyiyuant Mgmt. Investment (Fuzhou) Co.

(Note 6)

505,498 50.00 - -

Net of long-term investments accounted for under

equity method

6,566,068 6,364,464

Add: Long-term equity investments, credit balance 19,970 21,547

Total $6,586,038 $6,386,011





74

Note 1: The liquidation process of Tatung Telecom Corporation has been completed in2015.

Note 2: San Chih Investment Co., Ltd., the subsidiary of the Company, did not intendto support Nature Worldwide Technology Corp. from April 2010. NatureWorldwide Technology Corp. was still under liquidation process as ofDecember 31, 2015.

Note 3: Giantplus Technology Co., Ltd. expected the recoverable amount of D&YIntelligent Co., Ltd. shares was lower than the book value of the investment,therefore Giantplus Technology Co., Ltd. recognized an impairment loss ofNTD 9,975 thousand in 2014. In addition, D&Y Intelligent Co., Ltd. wrote offits treasury stocks in September 2014, thus, the shareholding ratio of GiantplusTechnology Co., Ltd. increased from 18.35% to 23.27%.

Note 4: The Group reached an agreement with other shareholders of Hefei FuyingOpto-electronic Co., Ltd. (“Hefei”). In the agreement, other shareholders ofHefei would appoint the major management members, including the chairmanand the chief financial officer, to control the operation and finance of Hefeifrom January 16, 2014. Therefore, the Group had lost the substantial controlover Hefei, however still has significant influence over Hefei. Starting fromJanuary 2014, Hefei becomes an associate of the Group and the investment wasaccounted under the equity method. As of December 31, 2015, the Group haddisposed of all of its shareholding in Hefei. Please refer to Note 6 (35) for themore details.

Note 5: In September 2011, to engage in the operations of solar power plants inThailand, GET co-founded GETH, which was defined as a joint-venturecompany, with other investors through its subsidiary, Green Value InvestmentCo., Ltd. As of December 31, 2015 and 2014, GET invested THB 147,862thousand (equivalent to NTD 146,470 thousand, including other necessaryexpenditures) in GETH. In addition, prepayments for long-term investment inGETH amounting to NTD 2,140 thousand in 2012 were recognized as othernon-current assets since the issuance date of the new common stocks had notbeen resolved by GETH as of December 31, 2015. GET disposed of 50% ofGETH shares along with the prepayment for long-term investment in January2016, therefore, GET reclassified its shares of GETH as non-current assets heldfor sale on December 31, 2015. Please refer to Note 6(11).





75

Note 6: Panshiyiyuant Mgmt. Investment (Fuzhou) Co. is a limited partnershipco-founded by Fuzhou YingYuan Equity Investment Management Co., Ltd.,CPTF Optronics Co., Ltd. and ZhongHengYiYuan Co. Its business scopeincludes consulting services of non-security investments and security relatedinvestments. Fuzhou YingYuan Equity Investment Management Co., Ltd. andCPTF Optronics Co., Ltd. invested RMB 10,000 thousand and RMB 90,000thousand from their own funds, respectively. ZhongHengYiYuan Co. investedRMB 100,000 from its own funds or from funds of specific investors. Therewere five members in the investment decision committee, consisting of 3members assigned by the CPT group and 2 members assigned byZhongHengYiYuan Co. All decisions must be agreed by two thirds of thecommittee members, and ZhongHengYiYuan Co. has one veto vote. Therefore,PanShiYiYuan Mgmt. Investment (Fuzhou) Co. is a joint venture controlled bythe CPT group and ZhongHengYiYuan Co.

(b) Investments in associates:

Information on the material associate of the Group:

Company name: Elitegroup Computer Systems Co., Ltd.

Nature of the relationship with the associate: Elitegroup Computer Systems Co., Ltd.is engaged in manufacturing and selling related products in the Group’s industrychain. The Group invested in Elitegroup Computer Systems Co., Ltd. for thepurpose of upstream/downstream integration.

Principal place of business (country of incorporation): Taiwan

Fair value of the investment in the associate when there is a quoted market price forthe investment: Elitegroup Computer Systems Co., Ltd. is a listed entity on theTaiwan Stock Exchange (TWSE). The fair value of the investment in ElitegroupComputer Systems Co., Ltd. was NT$3,087,627 thousand and NT$4,063,469thousand, as of 31 December 2015 and 2014, respectively.

Reconciliation of the associate’s summarized financial information presented to thecarrying amount of the Group’s interest in the associate:





76

The summarized financial information of the associate is as follows:


Current assets $19,240,314 $24,728,602Non-current assets 7,003,961 7,744,389Current liabilities (11,158,840) (15,644,972)Non-current liabilities (631,634) (610,010)Equity 14,453,801 16,218,009

Proportion of the Group’s ownership 27.35% 27.38%Subtotal 3,953,115 4,440,491Goodwill 614,638 614,638

Other adjustments (24,585) (38,057)Carrying amount of the investment $4,543,168 $5,017,072

For the years endedDecember 31,

2015 2014Operating revenue $48,386,567 $55,895,307Profit from continuing operations 1,111,205 1,302,128Other comprehensive income, net of income tax (95,198) 470,897Total comprehensive income 1,016,007 1,773,025

Except the associate mentioned above, other associates were not individuallymaterial. The aggregate carrying amount of the Group’s interests in other associateswas NT$1,517,402. The aggregate financial information based on Group’s share ofother associates is as follows:


2015 2014Profit or loss from continuing operations $72,031 $189,050Other comprehensive income (post-tax) - -Total comprehensive income 72,031 189,050





77

The associates had no contingent liabilities or capital commitments as of December

31, 2015 and 2014, nor did the associates provide collaterals.

The investments in associates of the Group were not pledged as collateral.

(c) Investments in jointly controlled entities

Investments in jointly controlled entities are not individually material. The aggregate

financial information of the Group’s investments in jointly controlled entities is as

follows:

As of December 31,

2015 2014

Profit from continuing operations $7,075 $(6,992)

Other comprehensive income, net of income tax (6,257) 16,090

Total comprehensive income $818 $9,098

The investments in jointly controlled entities were not pledged as collateral.

(d) The balances of certain investments accounted for under the equity method that were

audited by other independent accountants were NTD 4,543,168 thousand and NTD

5,159,890 thousand as of December 31, 2015 and 2014, respectively. The balances of

share of profit of associates accounted for using equity method that were audited by

other independent accountants were NTD 691,897 thousand and NTD 628,801 thousand

for the years ended December 31, 2015 and 2014, respectively. The balances of share of

other comprehensive income (loss) of associates and joint ventures that were audited by

other independent accountants were NTD (25,936) thousand and NTD 126,320

thousand as of December 31, 2015 and 2014, respectively.





78

(13)Property, plant and equipment

(a) The details of property, plant and equipment are as follows:

Land and land

Improvements Buildings

Machinery

and equipment

Office

equipment

Transportation

equipment Leased assets

Leasehold

improvements

Other

Equipment

Construction

in progress

and

equipment

awaiting

examination Total

Cost:

As of January 1, 2015 $22,699,989 $47,850,764 $166,026,752 $3,453,696 $444,755 $217,727 $5,067,122 $48,488,055 $3,961,281 $298,210,141

Additions 236 39,444 713,815 246,767 17,095 107,202 94,775 947,176 4,220,482 6,386,992

Disposals (864,236) (3,825,177) (2,049,617) (124,531) (26,323) (9,974) (20,695) (847,439) (90) (7,768,082)

Other changes (Note) (973,883) (3,835) 2,365,201 (217,185) (5,420) 162,421 25,002 127,777 (3,900,706) (2,420,628)

As of December 31, 2015 $20,862,106 $44,061,196 $167,056,151 $3,358,747 $430,107 $477,376 $5,166,204 $48,715,569 $4,280,967 $294,408,423

As of January 1, 2014 $25,339,779 $48,969,483 $165,127,863 $3,326,564 $439,217 $194,696 $4,616,996 $48,112,661 $5,223,788 $301,351,047

Additions 79,898 96,793 1,108,732 84,795 13,857 - 112,646 203,483 3,097,588 4,797,792

Disposals - (1,274,171) (4,906,986) (148,284) (22,467) (2) (37,220) (999,844) (3,870) (7,392,844)

Other changes (Note) (2,719,688) 58,659 4,697,143 190,621 14,148 23,033 374,700 1,171,755 (4,356,225) (545,854)

As of December 31, 2014 $22,699,989 $47,850,764 $166,026,752 $3,453,696 $444,755 $217,727 $5,067,122 $48,488,055 $3,961,281 $298,210,141

Depreciation and impairment:

As of January 1, 2015 $(7,348) $(18,587,590) $(146,105,452) $(2,857,496) $(356,680) $(168,184) $(2,234,375) $(41,687,227) $- $(212,004,352)

Depreciation - (1,553,010) (6,018,681) (186,286) (25,249) (45,655) (406,438) (2,613,021) - (10,848,340)

Disposals - 3,158,305 1,883,775 103,776 23,971 9,974 19,698 640,214 - 5,839,713

Other changes (Note) 396 133,024 113,701 91,297 897 (86,625) 55,371 96,661 - 404,722

As of December 31, 2015 $(6,952) $(16,849,271) $(150,126,657) $(2,848,709) $(357,061) $(290,490) $(2,565,744) $(43,563,373) $- $(216,608,257)

As of January 1, 2014 $- $(17,695,707) $(144,391,264) $(2,750,944) $(337,558) $(121,115) $(1,794,744) $(39,638,490) $- $(206,729,822)

Depreciation - (1.658,380) (5,442,319) (206,014) (30,461) (33,613) (385,963) (2,742,567) - (10,499,317)

Disposals - 573,533 4,601,439 128,119 17,015 2 22,174 820,739 - 6,163,021

Other changes (Note) (7,348) 192,964 (873,308) (28,657) (5,676) (13,458) (75,842) (126,909) - (938,234)

As of December 31, 2014 $(7,348) $(18,587,590) $(146,105,452) $(2,857,496) $(356,680) $(168,184) $(2,234,375) $(41,687,227) $- $(212,004,352)

Net carrying amount as at:

December 31, 2015 $20,855,154 $27,211,925 $16,929,494 $510,038 $73,046 $186,886 $2,600,460 $5,152,196 $4,280,967 $77,800,166

December 31, 2014 $22,692,641 $29,263,174 $19,921,300 $596,200 $88,075 $49,543 $2,832,747 $6,800,828 $3,961,281 $86,205,789

Note: Other changes including transfer from advance payments of equipment, changesin exchange rates, reclassification, impairment losses and effects on the changesof consolidated entities.





79

Capitalized borrowing costs of property, plant and equipment are as follows:

Item

For the years ended December 31,

2015 2014

Construction in progress $39,239 $86,917

Capitalization rate of borrowing costs 5.30%~5.50% 5.51%~8.00%

Components of buildings, including main building structure, electronic engineering,electrical engineering, fire engineering, air conditioning units and elevators weredepreciated by useful lives.

Leased assets under finance leases were pledged solely as security for the bank loans.

Please refer to Note 8 for more details on property, plant and equipment underpledge.

Certain consolidated subsidiaries of the Group located in Wujiang, Jiansu enteredinto agreements and property demolition resettlement compensation contracts withDevelopment General Company of Wujiang Economic Technological DevelopmentZone (“Headquarters”) and agreed to relocate to other places by 2014 and 2015,while the Headquarters would compensate each subsidiary for the resettlement.Pursuant to the agreement, the Group could receive RMB 503,812 thousand. As ofDecember 31, 2015, the Group had received the full amount, RMB 503,812thousand, for compensation. Additionally, the related relocation expenses and losseswere recognized as non-operating expense of each year, respectively.

The Group entered into a realty transaction contract with Toppan ChunghwaElectronics Co., Ltd. on December 23, 2013 to sell part of its Taoyuan plant and landto Toppan Chunghwa Electronics Co., Ltd. and Gi-Jin Construction Co., Ltd. Theassets were transferred in 2015, and the selling price of the transaction was NTD2,799,567 thousand. The Group recognized gain on disposal for NTD 1,433,557thousand as gain on disposal of property, plant and equipment in 2015.





80

Some subsidiaries of the Group has written down the carrying value of property,

plant and equipment, patents, and prepaid equipment to the recoverable amount. The

recoverable amount was based on net realizable value and was determined at the

level of the cash generating unit. The projected cash flows that were used to calculate

value in use reflected the demand for products and services. In determining value in

use for the cash-generating unit, the cash flows were discounted at a rate of

12.40~15.06% on a pre-tax basis. The net realizable value was determined by

referencing the appraisal reports from external independent professional associations.

The appraisal uses cost method to evaluate the fair value of asset by taking into

account factors such as physical depreciation, functional depreciation and economic

depreciation (depreciated by 85%~90% from approximate estimates). As of

December 31, 2015 and 2014, the Group recognized the impairment loss of NTD

458,346 thousand and NTD 427,005 thousand for non-financial assets, respectively.

Assets related to Tatung University are described as follows:

As of December 31, 2015, the carrying amount of Hsin-She-Gong Building (“the

Building”) was NTD 145,051 thousand. As of the audit report date of these

consolidated financial statements, the ownership registration was still in progress,

however, pursuant to R.O.C. Civil Code, the ownership of the Building belongs to

the Company.

Execution of specific development plan for the Building

Hsin-She-Gong Building is located within the Company’s premises. The overall

development plan involved the registration of land use change and urban planning,

thus the long-term plans are still in the communication and planning stage.

Hsin-She-Gong Building will continue to be used as it is. In addition, the Company

had conducted building safety inspections and fire inspections according to the

relevant laws in order to maintain the safety and the optimum utilization of the

Building.

○9 Due to other unnamed reasons, partial land and prepayment for land purchases

owned by the Group are held in others’ names for the time being. Related asset

protection measures have been taken.





81

(14) Investment property

Land Buildings TotalCost:January 1, 2015 $12,280,535 $2,081,426 $14,361,961Additions 81,943 136,334 218,277Reclassification (Note) (37,036) 73,062 36,026Exchange differences - (491) (491)December 31, 2015 $12,325,442 $2,290,331 $14,615,773January 1, 2014 $9,564,653 $1,268,129 $10,832,782Additions - 432,631 432,631Reclassification (Note) 2,715,882 380,666 3,096,548December 31, 2014 $12,280,535 $2,081,426 $14,361,961

Depreciation and impairment: $- $(435,887) $(435,887)January 1, 2015 - (68,821) (68,821)Depreciation - (41,332) (41,332)Transfer (Note) - 293 293December 31, 2015 $- $(545,747) $(545,747)January 1, 2014 $- $(329,914) $(329,914)Depreciation - (59,304) (59,304)Transfer - (46,669) (46,669)December 31, 2014 - $(435,887) (435,887)

Net carrying amount as at:December 31, 2015 $12,325,442 $1,744,584 $14,070,026December 31, 2014 $12,280,535 $1,645,539 $13,926,074

Note: Reclassification including transfer in (out) from inventory, property, plant andequipment.


2015 2014Rental income from investment property $411,377 $303,250Less: Direct operating expenses from investment property

generating rental income (not including depreciation)(84,147) (84,439)

Direct operating expenses from investment propertynot generating rental income (not includingdepreciation)

- -

Total $327,230 $218,811

No investment property was pledged.





82

The fair values of investment properties were NTD 22,326,370 thousand and NTD23,070,291 thousand as of December 31, 2015 and 2014, respectively. The fair value wasbeen determined based on valuations performed by an independent appraiser. The valuationmethod used is direct capitalization, and the parametersused are as follows:

December 31, 2015

December 31, 2015

Discount rate 1.985%~2.878% 2.125%~3.53%Growth rate 1%~5% 0.75%~5%

(15)Intangible assets

GoodwillPatents and

licensesComputersoftware

OthersIntangible

asset TotalCost:January 1, 2015 $314,781 $4,528,318 $692,406 $322,671 $5,858,176Addition-acquired separately - 111,427 111,698 6,743 229,868Deduction-tax refund - (71,925) - - (71,925)Disposals - - (75,660) - (75,660)Effect of exchange rate changes - (246) (1,783) (410) (2,439)Other - 486 (4,597) - (4,111)December 31, 2015 $314,781 $4,568,060 $722,064 $329,004 $5,933,909Cost:January 1, 2014 $314,781 $4,407,298 $458,194 $289,172 $5,469,445Addition-acquired separately - 120,400 311,563 34,171 466,134Disposals - - (82,990) (1,206) (84,196)Effect of exchange rate changes - 620 4,415 534 5,569Other - - 1,224 - 1,224December 31, 2014 $314,781 $4,528,318 $692,406 $322,671 $5,858,176

Amortization and impairment:January 1, 2015 $- $3,290,993 $383,642 $70,061 $3,744,696Amortization - 231,040 196,728 26,473 454,241Impairment - 16,897 - - 16,897Disposals - - (75,660) - (75,660)Effect of exchange rate changes - 2 815 (3) 814December 31, 2015 $- $3,538,932 $505,525 $96,531 $4,140,988Amortization and impairment:January 1, 2014 $- $2,958,997 $282,878 $19,785 $3,261,660Amortization - 331,996 180,095 43,325 555,416Impairment - - 8 - 8Disposals - - (81,700) - (81,700)Effect of exchange rate changes - - 2,361 6,951 9,312December 31, 2014 $- $3,290,993 $383,642 $70,061 $3,744,696

Net carrying amount as at:December 31, 2015 $314,781 $1,029,128 $216,539 $232,473 $1,792,921December 31, 2014 $314,781 $1,237,325 $308,764 $252,610 $2,113,480





83


2015 2014Operating costs $55,076 $79,613

Operating expense (including research and development costs) $399,165 $475,803

The above patents include the patent license agreement between LiFeP04+C Licensing AGand Tatung Fine Chemicals Co., Ltd to produce Lithium iron phosphate material. The costfor Tatung Fine Chemicals Co., Ltd (“TFC”) to obtain the patent was NTD 359,625thousand and will be amortized during the license period (from July 1, 2011 to April 9,2023).

Additionally, according to the agreement, when TFC sells the licensed products, it shallallocate certain portions of the gross sales of those products as royalties for the patent. Evenif the actual sale does not meet the minimum quantity sold, TFC still has to pay theminimum royalty. As of the end of the years, 2015 and 2014, TFC had recognized NTD15,449 and NTD 30,460 thousand in 2015 and 2014, respectively, as the current expense.The unpaid balance of royalty as of December 31, 2015 and 2014 were NTD 5,047 and NTD25,464 thousand, respectively.

When TFC paid the aforementioned royalties at the first time, it also paid the relatedwithholding tax in accordance with the tax regulation effective then. Later, in accordancewith the amended tax rules pursuant to Ministry of Finance Letter Tai-Cai-Shui-Zi-No.10304503280 issued on January 29, 2014, TFC applied for tax refund of the first payment ofroyalties. The total amount applied for refund was NTD 71,925 thousand, which werecollected on February 2, 2015 and booked as the deduction of the cost of intangible assets.

(16)Other non-current assets


Long-term prepaid rent $885,804 $845,296Advance payments in equipment 227,261 619,809Advance payments in materials 1,986,287 1,091,250Refundable deposits 609,132 539,910Other non-current assets - other 578,459 438,959Total $4,286,943 $3,535,224





84

As of December 31, 2015 and 2014, long-term prepaid rents are for land use rights.

Please refer to Note 9 (7) for prepayment from purchases reclassification to long-termprepayment of materials.

With respect to the above other non-current assets – other, part of the lands and landprepayment in the amount of NTD 105,828 thousand and NTD 4,669 thousand were heldtemporarily under third parties’ names because of regulatory requirements or other reasonsas of December 31, 2015 and 2014. In order to secure the Group’s right over the lands, theGroup has adopted relevant security measures, including having the lands pledged to theGroup. Yet, there are still some pieces of land that the Group has not secured its right overthem. The Group continues handling the issue eagerly.

Please refer to Note 8 for more details on other non-current assets – other that were pledgedas collateral.

(17)Long-term receivables-net

As of December 31,

2015 2014

Tatung InfoComm Co., Ltd. $632,972 $591,367

Loss: Allowance for bad debts (508,972) (308,864)

Others 13,708 19,432

Total $137,708 $301,935

On March 30, 2012, the Company entered into a share purchase contract with Vee TelecomMultimedia Co., Ltd. Under the contract, the Company would sell all of its shares of itssubsidiary, Tatung InfoComm Co., Ltd., to Vee Telecom Multimedia Co., Ltd. Moreover,the Company’s financing to Tatung InfoComm Co., Ltd in the amount of NTD 557,980thousand would be repaid by Tatung InfoComm Co., Ltd. However, Tatung InfoComm co.,Ltd. was not able to repay the Company as contracted. In addition to taking measures tosecure creditor rights, the Company evaluated the financial condition of Tatung InfoCommco., Ltd. and the likelihood to recover, to recognize allowance for bad debts.





85

(18)Short-term loans

As of December 31,Interest Rates (%) 2015 2014

Unsecured bank loans 0.76%~8.50% $29,141,024 $32,348,381Secured bank loans 2.00%~5.34% 16,267,637 7,289,737Subtotal 45,408,661 39,638,118Due to employees 0.17%~0.17% 18,264 18,419Total $45,426,925 $39,656,537

The Group’s unused short-term lines of credits amounted to NTD 21,772,035 thousand andNTD 23,389,374 thousand, as of December 31, 2015 and 2014, respectively.

Please refer to Note 8 for more details on available-for-sale financial assets and property,plant and equipment pledged as security for short-term borrowings.

(19)Short-term notes and bills payable

As of December 31,Guarantors Interest Rates (%) 2015 2014

Unsecured domestic bills payable 0.85%~8.00% $1,610,996 $5,772,410Less: Unamortized discount (3,881) (13,244)Net $1,607,115 $5,759,166

(20)Financial liabilities at fair value through profit or loss


Designated financial liabilities at fair value through profitor loss:Derivatives financial liabilities $931,102 $849,059Subtotal 931,102 849,059Held for trading:Derivatives not designated as hedging Instruments

Foreign currency option $806 $14,400Foreign exchange forward contracts 778 387

Subtotal 1,584 14,787Total $932,686 $863,846

Current $932,686 $863,846





86

CPT entered into a voting trust agreement with Xiamen Xinhui Co. Ltd (hereinafter referredto as Xiamen Xinhui Co. Ltd) on November 6, 2013 to entrust Xiamen Xinhui Co. Ltd toexercise voting rights of the 41,977,943 shares of Xiamen Overseas Chinese Electronic Co.,Ltd. (“XOCE”) it holds. In addition, to implement risk management, CPT also entered into ashareholding cooperation agreement with Xiamen Xinhui Co. Ltd. Pursuant to theagreement, Xiamen Xinhui Co. Ltd provided market value management services based onXOCE’s underlying 104,761,903 shares. On December 31, 2015, if the projected marketvalue of the underlying shares is higher than the target value of the shares, CPT shall payXiamen Xinhui Co. Ltd 40% of the total difference as service fee; and CPT charges XiamenXinhui Co. Ltd 40% of the total difference as compensation if vice versa. As of December31, 2015 and 2014, the shares CPT entrusted Xiamen Xinhui Co. Ltd to exercise votingrights were recognized under financial assets at fair value through profit or loss in theamount of NTD 1,827,022 thousand and NTD 1,454,552 thousand. An amount of NTD931,102 thousand and NTD 849,059 thousand, respectively, resulting from the derivativesfactor embedded in the market value management service agreement was recognized underfinancial liabilities at fair value through profit or loss as of December 31, 2015 and 2014.

(21)Long-term deferred revenue

(a) Government grants


Beginning balance $263,409 $266,185Received during the period 106,751 77,524Released to the statement of comprehensive income (92,363) (94,638)Exchange differences (5,895) 14,338Ending balance $271,902 $263,409

Government grants had been received for the purchase of particular items of property,plant and equipment which were amortized during the useful life of the acquired assets.


Unearned rent from operating lease $85,000 $-





87

As of December 31,

2015 2014

Non-current deferred revenue $356,902 $263,409

(21)Bonds payable

CPT

Liability component:

As of December 31,

2015 2014

Domestic secured Corporate Bond $600,000 $1,200,000

Less: current portion (600,000) (600,000)

Bonds payable, net of current portion $- $600,000

CPT

Domestic secured bonds payable

On July 22, 2014, CPT issued domestic secured bonds with total par value of NTD

1,500,000 thousand. The duration is 26 months from issuance. The first payment of NTD

300,000 thousand was made on September 22, 2014, and the remaining amount will be paid

every six month on installment basis after the first payment date.

The interest is 3.30% per annum. Interest payment will be made semi-annually. The interest

rate resets every six months.

The bonds are secured by CPT’s property, plant and equipment. Refer to Note 8 for more

details.



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1,82

9,37

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,the

repa

ymen

tis

NTD

50,0

00th

ousa

ndev

ery

quar

ter.

From

Sept

embe

r30,

2016

toJu

ne30

,201

9,

the

repa

ymen

tis

NTD

100,

000

thou

sand

ever

yqu

arte

r.Fr

omSe

ptem

ber

30,2

019

toJu

ne30

,202

0,th

e

repa

ymen

tisN

TD15

0,00

0th

ousa

ndev

ery

quar

ter.

Secu

red

long

-term

loan

from

Kin

g’sT

own

bank

483,

000

-2.

9300

The

first

repa

ymen

tdat

eis

six

mon

ths

afte

rth

edr

awdo

wn

date

,and

the

rest

ofth

ere

paym

ents

will

be

mad

eon

each

ofth

eei

ghte

ensu

cces

sive

quar

terly

date

sth

erea

fter.

From

Apr

il7,

2016

toJu

ly7,

2020

,the

repa

ymen

tis

NTD

8,00

0th

ousa

ndev

ery

quar

ter.

NTD

339,

000

thou

sand

will

bere

paid

onO

ctob

er7,

2020

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TATU

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CO

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D.A

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from

Chi

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Ban

k

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39,3

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51Th

ere

paym

enti

sdiv

ided

into

nine

succ

essi

veda

tes.

USD

0.6

mill

ion

will

bere

paid

onN

ovem

ber9

,201

3.

USD

0.21

mill

ion

will

bere

paid

onA

pril

30,2

014.

USD

0.31

mill

ion

will

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paid

onO

ctob

er30

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4.

USD

1.49

mill

ion

will

bere

paid

onA

pril

30,a

ndO

ctob

er30

,201

5.U

SD2.

37m

illio

nw

illbe

repa

idon

Apr

il30

,and

Oct

ober

30,2

016.

USD

3.08

mill

ion

will

bere

paid

onA

pril

30,a

ndN

ovem

ber8

,201

7.

Secu

red

long

-term

loan

from

Agr

icul

tura

lBan

kof

Chi

na

556,

048

879,

311

6.00

~8.0

0Th

ere

paym

enti

sdiv

ided

into

six

succ

essi

veda

tes.

RM

B30

mill

ion

will

bere

paid

pers

ixm

onth

sfro

m

July

31,2

016

toJa

nuar

y31

,201

7.R

MB

40m

illio

nw

illbe

repa

idon

July

31,2

016

toJa

nuar

y16

,201

7,

resp

ectiv

ely.

Secu

red

long

-term

loan

from

Chi

na E

verb

right

Ban

k-

51,7

247.

68Th

ere

paym

enti

sdi

vide

din

tofiv

esu

cces

sive

date

s.R

MB

5m

illio

nw

illbe

repa

idbe

fore

Sept

embe

r20

,

and

Dec

embe

r20

,201

3.R

MB

15m

illio

nw

illbe

repa

idbe

fore

June

20,2

014.

RMB

15m

illio

nw

illbe

repa

idbe

fore

Dec

embe

r20,

2014

.RM

B10

mill

ion

will

bere

paid

befo

reJa

nuar

y19

,201

5.

Secu

red

long

-term

loan

from

Chi

na M

insh

eng

Ban

k-

129,

310

7.07

The

repa

ymen

tisd

ivid

edin

tosi

xsu

cces

sive

date

s.R

MB

2.5

mill

ion

will

bere

paid

befo

reJa

nuar

y25

,and

Apr

il25

,20

13.

RM

B5

mill

ion

will

bere

paid

befo

reO

ctob

er25

,201

3an

dA

pril

25,

2014

.RM

B10

mill

ion

will

bere

paid

befo

reO

ctob

er25

,201

4.RM

B25

mill

ion

will

bere

paid

befo

re M

arch

25,2

015.

Secu

red

Long

-term

loan

from

Chi

na M

erch

antB

ank

342,

922

434,

746

7.00

~8.0

0Th

ere

paym

enti

sdi

vide

din

tote

nsu

cces

sive

date

s.5%

will

bere

paid

fort

he 1

stto

4th

six

mon

thsp

erio

ds,

10%

will

bere

paid

for

the

5thto

8th

six

mon

ths

perio

ds,a

nd20

%w

illbe

repa

idfo

rth

e 9th

to10

thsi

x

mon

thsp

erio

ds.T

hem

atur

ityda

teis

July

31,2

017.

Secu

red

long

-term

loan

from

Exp

ort-I

mpo

rtB

ank

of

Chi

naFu

jian

bran

ch

309,

769

446,

276

6.72

The

repa

ymen

tis

divi

ded

into

eigh

tsu

cces

sive

date

s.R

MB

5m

illio

nw

illbe

repa

idon

June

21,

and

Dec

embe

r21

,20

14.

RM

B12

.5m

illio

nw

illbe

repa

idon

June

21,

and

Dec

embe

r21

,20

15.

RMB

15

mill

ion

will

bere

paid

onJu

ne21

,and

Dec

embe

r21,

2016

.RM

B17

.5m

illio

nw

illbe

repa

idon

June

21,

2017

.RM

B13

.78

mill

ion

will

bere

paid

onD

ecem

ber1

7,20

17.



TATU

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loan

from

Ban

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Com

mun

icat

ions

Fin

anci

alLe

asin

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o.,L

td.

$183

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$286

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The

repa

ymen

tis

divi

ded

into

twel

vein

stal

lmen

ts.T

hefir

stpa

ymen

tRM

B5,

421

thou

sand

was

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eon

Dec

embe

r15,

2014

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mM

arch

15,2

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ptem

ber1

5,20

15,t

here

paym

ento

fRM

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514

thou

sand

will

bem

ade

ever

yqu

arte

r.Fr

omD

ecem

ber

15,2

015

toSe

ptem

ber

15,2

016,

the

repa

ymen

tof

RM

B

5,44

5th

ousa

ndw

illbe

mad

eev

ery

quar

ter.

From

Dec

embe

r15

,20

16to

Sept

embe

r15

,20

17,

the

repa

ymen

tof

RM

B5,

436

thou

sand

will

bem

ade

ever

yqu

arte

r.To

tala

mou

ntof

the

repa

ymen

tsw

illbe

RM

B65

,488

thou

sand

,inc

ludi

ngpr

inci

palo

fRM

B60

,000

thou

sand

and

inte

rest

ofR

MB

5,48

8th

ousa

nd.

Adm

inis

tere

dby

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aIn

tern

atio

nalC

omm

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al

Ban

k(s

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9,89

11.

98~2

.01

Star

ted

from

Apr

il20

12,p

rinci

pali

sre

paid

in8

sem

i-ann

ually

paym

ents

inth

eam

ount

ofN

TD12

5,00

0

thou

sand

each

paym

ent.

Uns

ecur

edlo

ng- te

rmlo

anfro

m T

aiw

anC

oope

rativ

e

Ban

k

-68

,495

1.80

Star

ted

from

Oct

ober

2011

,prin

cipa

lisr

epai

din

60m

onth

lypa

ymen

tsin

the

amou

ntof

NTD

3,26

2th

ousa

nd

each

paym

ent.

Secu

red

long

-term

loan

from

Taiw

anC

oope

rativ

e

Ban

k

216,

667

26,0

051.

80~1

.93

Star

ted

from

July

2015

,prin

cipa

lis

repa

idin

36m

onth

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ymen

tsin

the

amou

ntof

NTD

7,22

2th

ousa

nd

each

paym

ent.

Secu

red

long

-term

loan

from

Meg

aIn

tern

atio

nal

Com

mer

cial

Ban

k

83,1

0014

9,90

02.

15~2

.16

The

repa

ymen

tis

divi

ded

into

twel

vein

stal

lmen

ts.N

TD16

.7m

illio

nw

illbe

repa

idea

chof

the

first

elev

en

quar

ters

star

ting

in M

ay20

14.T

hefin

alre

paym

enti

sNTD

16.3

mill

ion.

Secu

red

long

-term

loan

from

Tais

hin

Inte

rnat

iona

l

Ban

k

200,

000

200,

000

2.07

~2.5

4Th

ere

paym

ent

isdi

vide

din

tofiv

ein

stal

lmen

ts.N

TD44

mill

ion

will

bepa

idev

ery

quar

ter

star

ting

in

Apr

il20

16.

Secu

red

long

-term

loan

from

Chi

naD

evel

opm

ent

Ban

k

357,

792

-5.

60Th

ere

paym

enti

sdiv

ided

into

nine

succ

essi

veda

tes.

USD

0.6

mill

ion

will

bere

paid

onN

ovem

ber9

,201

3.

USD

0.21

mill

ion

will

bere

paid

onA

pril

30,2

014.

USD

0.31

mill

ion

will

bere

paid

onO

ctob

er30

,201

4.

USD

1.49

mill

ion

will

bere

paid

onA

pril

30,a

ndO

ctob

er30

,201

4.U

SD2.

37m

illio

nw

illbe

repa

idon

Apr

il30

,and

Oct

ober

30,2

016.

USD

3.08

mill

ion

will

bere

paid

onA

pril

30,a

ndN

ovem

ber8

,201

7.

Uns

ecur

edlo

ng-te

rmlo

anfro

m T

aC

hong

Ban

k16

7,00

0-

2.13

The

repa

ymen

tis

divi

ded

into

sixin

stal

lmen

ts.N

TD33

,000

thou

sand

will

bepa

idse

mi- a

nnua

llyst

artin

g

inA

ugus

t201

5.Th

ela

stre

paym

entw

illbe

NTD

35,0

00th

ousa

nd.



TATU

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2015

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Uns

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$75,

572

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96Th

ere

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din

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inst

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ents

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8,09

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8,56

2th

ousa

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illbe

paid

quar

terly

star

ting

inJu

ne20

15.

Secu

red

long

-term

loan

from

Cha

ngH

wa

Ban

k40

0,00

0-

1.81

The

repa

ymen

tis

divi

ded

into

twel

vein

stal

lmen

ts.N

TD33

,333

thou

sand

will

bepa

idqu

arte

rlyst

artin

gin

Febr

uary

2016

.

Secu

red

long

-term

loan

from

Kin

g’sT

own

Ban

k31

5,00

0-

2.88

The

repa

ymen

tis

divi

ded

into

twen

tyin

stal

lmen

ts.N

TD15

,750

thou

sand

will

bepa

idqu

arte

rlyst

artin

gin

Mar

ch20

16.

Secu

red

long

-term

loan

from

Qua

nzho

uR

ural

Com

mer

cial

Ban

k

-72

4,13

77.

90Th

ere

paym

ent

isdi

vide

din

toth

ree

inst

allm

ents

.R

MB

60m

illio

nw

asre

paid

inSe

ptem

ber

2015

and

Mar

ch20

16,r

espe

ctiv

ely.

RM

B80

mill

ion

will

bere

paid

in S

epte

mbe

r201

6.

Secu

red

long

-term

loan

from

Ping

An

Ban

k,

Shan

ghai

bran

ch

-4,

086,

204

9.50

The

one-

time

repa

ymen

twill

bedu

eon

Mar

ch18

,201

6.

Secu

red

long

-term

loan

from

Chi

naC

onst

ruct

ion

Ban

k

-1,

862,

068

9.00

The

one-

time

repa

ymen

twill

bedu

eon

Sep

tem

ber3

0,20

16.

Secu

red

long

-term

loan

from

Ping

An

Ban

k,

Offs

hore

busi

ness

serv

ices

3,28

2,50

03,

165,

000

3.00

~3.5

6Th

eon

e-tim

ere

paym

entw

illbe

due

on M

arch

10,2

016.

Secu

red

long

-term

loan

from

Chi

naC

onst

ruct

ion

Ban

k

1,57

6,09

21,

519,

675

2.00

~2.2

4Th

eon

e-tim

ere

paym

entw

illbe

due

on S

epte

mbe

r15,

2016

Secu

red

long

-term

loan

from

Chi

naC

onst

ruct

ion

Ban

k

-2,

586,

205

7.50

The

one-

time

repa

ymen

twill

bedu

eon

Dec

embe

r10,

2016

Secu

red

long

-term

loan

from

Chi

naC

onst

ruct

ion

Ban

k

-72

4,13

77.

50Th

eon

e-tim

ere

paym

entw

illbe

due

onD

ecem

ber1

0,20

16.

Secu

red

long

-term

loan

from

Chi

naC

onst

ruct

ion

Ban

k

3,07

2,58

43,

165,

222

2.00

~2.2

4Th

eon

e-tim

ere

paym

entw

illbe

due

onD

ecem

ber1

2,20

16.



TATU

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2015

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Secu

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long

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loan

from

Chi

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ortu

ne

Inte

rnat

iona

lTru

st

$3,9

93,4

34$-

9.50

The

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time

repa

ymen

twill

bedu

eon

Apr

il18

,201

6.

Secu

red

long

-term

loan

from

Chi

na F

ortu

ne

Inte

rnat

iona

lTru

st

1,21

3,19

5-

9.00

The

one-

time

repa

ymen

twill

bedu

eon

Oct

ober

29,2

016.

Secu

red

long

-term

loan

from

Chi

na F

ortu

ne

Secu

ritie

s

3,23

5,17

9-

7.50

The

one-

time

repa

ymen

twill

bedu

eon

Janu

ary

10,2

017.

Secu

red

long

-term

loan

from

Chi

naC

onst

ruct

ion

Ban

k

210,

146

-2.

00Th

eon

e-tim

ere

paym

entw

illbe

due

on S

epte

mbe

r15,

2016

.

Secu

red

long

-term

loan

from

Chi

na F

ortu

ne

Secu

ritie

s

1,01

0,99

6-

7.50

The

one-

time

repa

ymen

twill

bedu

eon

Feb

ruar

y18

,201

7.

Secu

red

long

-term

loan

from

Chi

naC

onst

ruct

i on

Ban

k

955,

208

-2.

00Th

eon

e-tim

ere

paym

entw

illbe

due

onJa

nuar

y30

,201

7.

Secu

red

long

-term

loan

from

Chi

na M

insh

eng

Ban

k1,

516,

494

-9.

00Th

eon

e-tim

ere

paym

entw

illbe

due

onJa

nuar

y13

,201

7.

Secu

red

Long

-term

loan

from

Chi

na M

erch

antB

ank

1,39

5,06

3-

1.94

The

one-

time

repa

ymen

twill

bedu

eon

Janu

ary

13,2

017.

Secu

red

Long

-term

loan

from

Chi

naR

ailw

ayTr

ust

1,51

6,49

4-

8.90

The

one-

time

repa

ymen

twill

bedu

eon

Janu

ary

27,2

017.

Secu

red

Long

-term

loan

from

Chi

na M

erch

antB

ank

1,47

7,12

5-

1.80

The

one-

time

repa

ymen

twill

bedu

eon

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ary

20,2

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Subt

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33,6

41,6

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105

(23)Post-employment benefits

Defined contribution plan

The Company and its domestic subsidiaries adopt a defined contribution plan inaccordance with the Labor Pension Act of the R.O.C. Under the Labor Pension Act, theCompany and its domestic subsidiaries will make monthly contributions of no less than 6%of the employees’ monthly wages to the employees’ individual pension accounts. TheCompany and its domestic subsidiaries have made monthly contributions of 6% of eachindividual employee’s salaries or wages to employees’ pension accounts.

Subsidiaries located in the People’s Republic of China will contribute social welfarebenefits based on a certain percentage of employees’ salaries or wages to the employees’individual pension accounts.

Pension benefits for employees of overseas subsidiaries and branches are provided inaccordance with the local regulations.

Expenses under the defined contribution plan for the years ended December 31, 2015 and2014 were NT$644,539 thousand and NT$599,794 thousand, respectively.

Defined benefits plan

The Company and its domestic subsidiaries adopt a defined benefit plan in accordancewith the Labor Standards Act of the R.O.C. The pension benefits are disbursed based onthe units of service years and the average salaries in the last month of the service year.Two units per year are awarded for the first 15 years of services while one unit per year isawarded after the completion of the 15th year. The total units shall not exceed 45 units.Under the Labor Standards Act, the Company and its domestic subsidiaries contribute anamount equivalent to 2% of the employees’ total salaries and wages on a monthly basis tothe pension fund deposited at the Bank of Taiwan in the name of the administered pensionfund committee. Before the end of each year, the Company and its domestic subsidiariesassess the balance in the designated labor pension fund. If the amount is inadequate to paypensions calculated for workers retiring in the same year, the Company and its domesticsubsidiaries will make up the difference in one appropriation before the end of March thefollowing year.





106

The Ministry of Labor is in charge of establishing and implementing the fund utilizationplan in accordance with the Regulations for Revenues, Expenditures, Safeguard andUtilization of the Labor Retirement Fund. The pension fund is invested in-house or undermandates, based on a passive-aggressive investment strategy for long-term profitability.The Ministry of Labor establishes checks and risk management mechanism based on theassessment of risk factors including market risk, credit risk and liquidity risk, in order tomaintain adequate manager flexibility to achieve targeted return without over-exposure ofrisk. With regard to utilization of the pension fund, the minimum earnings in the annualdistributions on the final financial statement shall not be less than the earnings attainablefrom the amounts accrued from two-year time deposits with the interest rates offered bylocal banks. Treasury Funds can be used to cover the deficits after the approval of thecompetent authority. As the Company does not participate in the operation andmanagement of the pension fund, no disclosure on the fair value of the plan assetscategorized in different classes could be made in accordance with paragraph 142 of IAS19. The Group expects to contribute NTD 698,407 thousand to its defined benefit planduring the 12 months beginning after December 31, 2015.

As of December 31, 2015 and 2014, the durations of the defined benefits plan obligation ofthe subsidiaries under the Group were different. The latest years of maturity are 2025 and2033, respectively.

Pension costs recognized in profit or loss for the years ended December 31, 2015 and2014:


2015 2014Current period service costs $78,606 $98,760Interest income or expense 72,323 79,670Past service cost (413) 188Payments from the plan (58) (625)Total $150,458 $177,993

Changes in the defined benefit obligation and fair value of plan assets are as follows:

As of2015.12.31 2014.12.31 2014.1.1

Defined benefit obligation $5,763,237 $6,067,862 $6,642,474Plan assets at fair value (613,347) (385,696) (454,174)Subtotal 5,149,890 5,682,166 6,188,300Other 36,212 5,571 24,252Other non-current liabilities - Accrued

pension liabilities recognized on theconsolidated balance sheets $5,186,102 $5,687,737 $6,212,552





107

Reconciliation of liability (asset) of the defined benefit plan is as follows:

Definedbenefit

obligationFair value ofplan assets

Benefitliability(asset)

As of January 1, 2014 $6,642,474 $(454,174) $6,188,300Current period service costs 98,760 - 98,760Net interest expense (income) 85,303 (6,360) 78,943Past service cost and gains and lossesarising from settlements 290 - 290Subtotal 6,826,827 (460,534) 6,366,293Remeasurements of the net definedbenefit liability (asset):

Actuarial gains and losses arising fromchanges in demographic assumptions 5,968 - 5,968Actuarial gains and losses arising fromchanges in financial assumptions (9,033) - (9,033)Experience adjustments (10,788) (413) (11,201)Return on plan assets (7,009) (2,875) (9,884)Subtotal (20,862) (3,288) (24,150)

Payments from the plan (738,103) 738,103 -Contributions by employer - (659,977) (659,977)As of December 31, 2014 6,067,862 (385,696) 5,682,166Current period service costs 78,606 - 78,606Net interest expense (income) 78,384 (6,043) 72,341Past service cost and gains and lossesarising from settlements (489) - (489)Subtotal 6,224,363 (391,739) 5,832,624Remeasurements of the net definedbenefit liability (asset):

Actuarial gains and losses arising fromchanges in demographic assumptions 3,635 - 3,635Actuarial gains and losses arising fromchanges in financial assumptions (64,830) - (64,830)Experience adjustments 127,637 - 127,637Return on plan assets - (4,402) (4,402)Subtotal 66,442 (4,402) 62,040

Payments from the plan (520,784) 520,784 -Contributions by employer - (744,774) (744,774)As of December 31, 2015 $5,770,021 $(620,131) $5,149,890





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The following significant actuarial assumptions are used to determine the present value of

the defined benefit obligation:

As of December 31,

2015 2014

Discount rate 0.50%~1.50% 0.75%~2.25%

Expected rate of salary increases 1.00% 1.00%

A sensitivity analysis for significant assumption as at December 31, 2015 and 2014 is, as

shown below:

Effect on the defined benefit obligation

2015 2014

Increase

defined

benefit

obligation

Decrease

defined

benefit

obligation

Increase

defined

benefit

obligation

Decrease

defined

benefit

obligation

Discount rate increase by 0.5% $- $73,375 $- $88,581

Discount rate decrease by 0.5% 66,375 - 81,124 -

The sensitivity analyses above are based on a change in the actuarial assumption (for

example: change in discount rate or future salary), keeping all other assumptions constant.

The sensitivity analyses may not be representative of an actual change in the defined

benefit obligation as it is unlikely that changes in assumptions would occur in isolation of

one another.

There was no change in the methods and assumptions used in preparing the sensitivity

analyses compared to the previous period.





109

(25)Provisions

Sales returns

and allowances

Maintenance

warranties

Reserve for

lawsuit

Decommission

ing reserve Total

As of January 1, 2015 $- $157,033 $461,349 $74,779 $693,161

Arising during the period 775 25,973 - 1,368 28,116

Utilized - (1,624) (37,347) - (38,971)

Unused provision reversed - (65,871) (16,412) - (82,283)

Effect of exchange rate changes - 210 15,741 - 15,951

As of December 31, 2015 $775 $115,721 $423,331 $76,147 $615,974

Current-December 31, 2015 $775 $115,721 $- $- $116,496

Non-current-December 31, 2015 - - 423,331 76,147 499,478

As of December 31, 2015 $775 $115,721 $423,331 $76,147 $615,974

Current-December 31, 2014 $- $157,033 $- $- $157,033

Non-current-December 31, 2014 - - 461,349 74,779 536,128

As of December 31, 2014 $- $157,033 $461,349 $74,779 $693,161

Sales returns and allowances

A provision has been recognized for sales returns and allowances based on other knownfactors. The provision is recognized and the corresponding entry is made against operatingrevenue at the time of sales.


A provision is recognized for expected warranty claims on products sold, based on pastexperience, management’s judgment and other known factors.

Reserve for lawsuit

Provisions have been recognized for estimated legal obligations and relevant cost based onpast experience. If the existing obligation is mostly likely to incur and the amount may bereasonably estimated, the provisions for legal matters is to be recognized.





110

Decommissioning, restoration and rehabilitation reserve

A provision has been recognized for decommissioning costs associated with a factoryowned by GET. The Group is committed to decommissioning the site as a result of theconstruction of the factory.

(26)Equities

(a) Common stock

As of December 31, 2015 and 2014, the Company’s authorized capital were both NTD100,000,000 thousand, and issued capital both were NTD 23,395,367 thousand, with apar value of NTD 10 dollar. Each share is entitled to one voting right and the right toreceive dividends.

(b) Capital surplus


Share of changes in net assets of associates and jointventures under equity method

$680,241 $645,506

Other 105,135 105,135Total $785,376 $750,641

According to the Company Act, the capital reserve shall not be used except for makinggood the deficit of the company. When a company incurs no loss, it may distribute thecapital reserves related to the income derived from the issuance of new shares at apremium or income from endowments received by the Company. The distributioncould be made in cash or in the form of dividend shares to its shareholders inproportion to the number of shares being held by each of them.

(c) Treasury stock

As of December 31, 2015 and 2014 the Company’s subsidiaries, CPT and itssubsidiaries, and Chunghwa Electronics Investment Co., held 70,598 thousand sharesand 333 thousand shares of the Company’s stock. The stocks mentioned above wereheld for financing purpose before the amendments of the Company Act on November12, 2001. As of December 31, 2015 and 2014, the carrying value of treasury shares isNTD 806,870 thousand.





111

(d) Retained earnings and dividend policies:

According to the Company’s Articles of Incorporation, current year’s earnings, if any,shall be distributed in the following order:

Payment of all taxes and dues; Offset prior years’ operation losses; Appropriate 10% of the remaining amount after deducting items and as a legal

reserve; Appropriate or reverse special reserve in accordance with relevant laws or

regulations, and Appropriate no more than 2% and no less than 1% of the remaining amount after

deducting items , , and as directors’ remuneration and employee’s bonus,respectively; and

After deducting items , , and above from the current year’s earnings, thedistribution of the remaining portion, if any, will be recommended by the board ofdirectors and resolved in the stockholders’ meeting. The distribution of earningscould not be less than 60% of the accumulated distributable earnings.

However, according to the addition of Article 235-1 of the Company Act announcedon May 20, 2015, the Company shall provide a fixed amount or percentage of theactual profit for a year to be distributed as “employees’ compensation”, after deductingand setting aside an amount equal to the cumulative losses (if any). Theaforementioned employees’ compensation may be made in the form of stocks or cash,which shall be determined by a resolution adopted by a majority vote at a board ofdirectors meeting attended by two-thirds or more of the directors and be reported at ashareholders’ meeting. Furthermore the Articles of Incorporation may stipulate thatthe employees’ compensation could be distributed to employees of affiliatedenterprises meeting certain criteria. The Articles of Incorporation are to be amendedin accordance with the aforementioned recent amendment to the Company Act in theshareholders’ meeting in 2016.

The policy of dividend distribution should reflect factors such as the current operatingresults and fund requirements. However at least 10% of the dividends must be paid inthe form of cash.





112

According to the Company Act, the Company needs to set aside amount to legalreserve unless where such legal reserve amounts to the total authorized capital. Thelegal reserve can be used to make good the deficit of the Company. When theCompany incurs no loss, it may distribute the portion of legal reserve which exceeds25% of the paid-in capital by issuing new shares or by cash in proportion to thenumber of shares being held by each of the shareholders.

When distributing earnings, the Company has to set aside special reserve, for other netdeductions from shareholders’ equity of the period. For any subsequent reversal ofother net deductions from shareholders’ equity, the amount reversed may bedistributed.

Following the adoption of T-IFRS, the FSC on April 6, 2012 issued Order No.Jin-Guan-Zheng-Fa-Zi-No. 1010012865, which sets out the following provisions forcompliance:

On a public company's first-time adoption of the T-IFRS, for any unrealizedrevaluation gains and cumulative translation adjustments (gains) recorded toshareholders’ equity that the company elects to transfer to retained earnings byapplication of the exemption under IFRS 1, the company shall set aside an equalamount of special reserve. Following a company’s adoption of the T-IFRS for thepreparation of its financial reports, when distributing distributable earnings, it shall setaside special reserve, from the profit/loss of the current period and the undistributedearnings from the previous period, an amount equal to “other net deductions fromshareholders’ equity for the current fiscal year, provided that the company has alreadyset aside special reserve according to the requirements in the preceding point, it shallset aside supplemental special reserve based on the difference between the amountalready set aside and other net deductions from shareholders’ equity. For anysubsequent reversal of other net deductions from shareholders’ equity, the amountreversed may be distributed.

As of January 1, 2014, special reserve set aside for the first-time adoption of T-IFRSamounted to NTD 15,894,690 thousand. Moreover, the Company resolved to offset itslosses by using special reserves of NTD 5,919,690 thousand in the shareholdersmeeting on June 6, 2014. The Company resolved to recover the special reserveamounted to NTD 124,233 thousand in the shareholders’ meeting on June 15, 2015. Inthe fourth quarter of 2015, the Company disposed of related assets and reversedspecial reserves of NTD 52,180 thousand. As of December 31, 2015 and 2014, specialreserve set aside for the first-time adoption of T-IFRS amounted to NTD 10,047,053thousand and 9,975,000 thousand, respectively.





113

Details of the 2014 deficit compensation as approved by the shareholders’ meeting onJune 15, 2015 are as follows:

Appropriation of earnings2014

Legal reserve $36,354Special reserve 124,233

Please refer to Note 6 (30) for more details about provision for employees’ bonusesand compensation for directors and supervisors.

(e) Non-controlling interests:

2015 2014Balance as of January 1 $27,503,937 $28,948,525Loss attributable to non-controlling interests (7,719,504) (3,350,588)Other comprehensive income, attributable to

non-controlling interests, net of tax:Actuarial gain (loss) from defined benefit plans (30,136) 14,929Exchange differences resulting from translating the

financial statements of a foreign operation (1,083,556) 1,050,997Unrealized gains (losses) from available-for-sale

financial assets 459,671 357,676Other comprehensive income from investment of

associates and joint ventures under equitymethod (3,080) 14,634

Subsidiaries equity change 99,668 467,764Cash dividends distributed by the subsidiaries (914,297) -Balance as of December 31, $18,312,703 $27,503,937

(27)Share-based payment plans

Employees of the Group are entitled to share-based payment as part of their remunerations;employees provide services in consideration of the equity instruments granted. These plansare accounted for as equity-settled share-based payment transactions.





114

The expense recognized for employee services received during the years ended December31, 2015 and 2014, is shown in the following table:

2015 2014Total expense arising from equity-settled share-based

payment transactions $- $27,562

(28)Operating revenue

2015 2014Sale of goods $90,052,110 $103,188,788Less: sales returns, discounts and allowances (1,992,124) (2,041,069)Subtotal 88,059,986 101,147,719Revenue from sale of properties (included lands and

buildings) 1,857,147 6,563,226Revenue arising from rendering of services 3,552,519 3,641,378Other operating revenues 1,274,701 1,256,955Total $94,744,353 $112,609,278

(29)Operating leases

Operating lease commitments – the Group as lessee

The Group has entered into commercial leases on certain motor vehicles and items ofmachinery. These leases have an average life of three to five years with no renewal optionincluded in the contracts. There are no restrictions placed upon the Group by entering intothese leases.

Future minimum rentals payable under non-cancellable operating leases as of December 31,2015 and December 31, 2014 are as follows:


Not later than one year $341,159 $197,863Later than one year and not later than five years 509,957 536,014Later than five years 155,291 266,480Total $1,006,407 $1,000,357

Operating lease expenses recognized are as follows:


2015 2014Minimum lease payments $603,265 $636,452Contingent rents - -Total $603,265 $636,452





115

The commercial leases on items of machinery also contain contingent rent clauses; thelessee has to make contingent rent payment calculated on a basis of a specified percentageover the monthly sales revenue.

Operating lease commitments – the Group as lessor

The Group has entered into commercial property leases with remaining terms of betweenfive and twenty years. All leases include a clause to enable upward revision of the rentalcharge on an annual basis according to prevailing market conditions.

Future minimum rentals receivable under non-cancellable operating leases as of December31, 2015 and December 31, 2014 are as follows:


Not later than one year $365,439 $197,379Later than one year and not later than five years 1,162,787 883,356Later than five years 1,238,157 1,250,666Total $2,766,383 $2,331,401

There was no contingent rent recognized as income for the years ended December 31, 2015and December 31, 2014, respectively.

(30)Summary statement of employee benefits, depreciation and amortization expenses byfunction during the years ended December 31, 2015 and 2014:

2015 2014

Operating

costs

Operating

expenses Total amount

Operating

costs

Operating

expenses Total amount

Employee benefits expense

Salaries $8,658,099 $5,149,572 $13,807,671 $8,578,010 $5,245,528 $13,823,538

Labor and health insurance 698,161 444,130 1,142,291 696,823 435,158 1,131,981

Pension 512,999 281,998 794,997 503,846 273,941 777,787

Other employee benefits

expense

472,264 359,238 831,502 463,736 230,695 694,431

Depreciation 9,621,741 1,295,420 10,917,161 9,217,445 1,341,176 10,558,621

Amortization 55,090 399,151 454,241 79,613 475,803 555,416





116

The Company planned to propose in May 2016 to amend the Article of Incorporation inaccordance with the addition of Article 235-1 of the Company Act announced on May 20,2015. The amendment to the Articles of Incorporation will be resolved in the shareholders’meeting in 2016. Information on the Board of Directors’ resolution regarding theemployees’ compensation and remuneration to directors and supervisors can be obtainedfrom the “Market Observation Post System” on the website of the TWSE.

The Company suffered net loss in 2015 and thus did not estimate employee compensationand remuneration for the directors and supervisors.

As of December 31, 2014, there was unrecovered special reserves. Therefore, the Companydid not estimate employee compensation and remuneration for the directors and supervisors.

(31)Non-operating income and expenses

(a) Other income


2015 2014Dividend income $59,003 $65,267Interest income 921,594 434,967Relocation income (Note) - 1,952,697Others 1,708,180 687,119Total $2,688,777 $3,140,050

(b) Other gains and losses


2015 2014Gains on disposal of property, plant and equipment $1,788,850 $172,838Gains on disposal of investments 122,383 419,229Foreign exchange gains, net 220,220 (796,381)Gains (losses) on financial assets / financial liabilitiesat fair value through profit or loss

272,996 220,810

Impairment losses from non-financial assets (484,336) (427,005)Relocation expense and loss (Note) - (349,564)Excise tax dispute loss (385,188) -Other gains and losses (892,245) (1,074,900)Total $642,680 $(1,834,973)





117

(c) Finance costs


2015 2014Interest on borrowings from bank $4,169,178 $3,445,519Interest on bonds payable 29,082 153,024Other 85,270 -Total finance costs $4,283,530 $3,598,543

Note: Please refer to Note 6 (13) for detail information of the transaction.

(32)Components of other comprehensive income

For the year ended December 31, 2015:

Arising during theperiod

Reclassificationadjustments

during the period

Othercomprehensive

income, before tax

Income tax benefit(expense) relating

to componentsof other

comprehensiveincome

Othercomprehensive

income, net of taxNot to be reclassified to profit or loss

in subsequent periods:Remeasurements of defined benefit

plans $(62,040) $- $(62,040) $7,306 $(54,734)Share of other comprehensive

income of associates and jointventures accounted for using theequity method (1,382) - (1,382) - (1,382)

To be reclassified to profit or loss insubsequent periods:Exchange differences resulting

from translating the financialstatements of a foreign operation (1,592,691) - (1,592,691) 200,338 (1,392,353)

Unrealized gains (losses) fromavailable-for-sale financialassets 187,887 (13,824) 174,063 (29,386) 144,677

Share of other comprehensiveincome of associates and jointventures accounted for using theequity method (29,252) - (29,252) - (29,252)

Total of other comprehensive income $(1,497,478) $(13,824) $(1,511,302) $178,258 $(1,333,044)





118


Arising during theperiod

Reclassificationadjustments

during the period

Othercomprehensive

income, before tax

Income tax benefit(expense) relating

to componentsof other

comprehensiveincome

Othercomprehensive

income, net of taxNot to be reclassified to profit or loss

in subsequent periods:Remeasurements of defined benefit

plans $24,150 $- $24,150 $- $24,150Share of other comprehensive

income of associates and jointventures accounted for using theequity method - - - - -

To be reclassified to profit or loss insubsequent periods:Exchange differences resulting from

translating the financial statementsof a foreign operation 1,602,931 - 1,602,931 (175,590) 1,427,341

Unrealized gains (losses) fromavailable-for-sale financial assets 1,078,120 (238,576) 839,544 (90,535) 749,009

Share of other comprehensiveincome of associates and jointventures accounted for using theequity method 171,493 - 171,493 (8,349) 163,144

Total of other comprehensive income $2,876,694 $(238,576) $2,638,118 $(274,474) $2,363,644

(33)Income tax

The major components of income tax expense (income) are as follows:

Income tax expense (income) recognized in profit or lossFor the years ended

December 31,2015 2014

Current income tax expense (income):Current income tax charge $1,600,163 $896,107Adjustments in respect of current income tax of prior periods (72,446) 20,677

Deferred tax expense (income):Deferred tax expense (income) relating to origination

and reversal of temporary differences 48,993 (77,599)Deferred tax expense (income) relating to origination

and reversal of tax loss and tax credit (96,499) (257,380)Deferred tax liability write-off (344,658) -Other - 80

Total income tax expense $1,135,553 $581,885





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Income tax relating to components of other comprehensive income


2015 2014Deferred tax expense (income):

Exchange differences resulting from translating thefinancial statements of a foreign operation

$(200,338) $175,590

Unrealized gains (losses) from available-for-salefinancial assets

29,386 90,535

Actuarial (gains) losses on defined benefits plan (7,306) 4,216

Other comprehensive income from investment ofassociates and joints under equity method - 4,133

Income tax relating to components of othercomprehensive income $(178,258) $274,474

Reconciliation between tax expense and the product of accounting profit multiplied byapplicable tax rates is as follows:


2015 2014Accounting loss before tax from continuing operations $(9,658,966) $(2,405,164)

Tax at the domestic rates applicable to profits in thecountry concerned $(1,544,463) $(258,706)Tax effect of revenues exempt from taxation 93,030 (450,163)Tax effect of expenses not deductible for tax purposes 535,397 243,425Tax effect of deferred tax assets/liabilities 2,115,474 979,69910% surtax on undistributed retained earnings 494 1,153Adjustments in respect of current income tax of prior periods (72,446) 20,677Alternative Minimum Tax Act - 38,737Others 8,067 7,063Total income tax expense recognized in profit or loss $1,135,553 $581,885





120

Deferred tax assets (liabilities) relate to the following:


Beginning

balance

Deferred tax

income

(expense)

recognized in

profit or loss

Deferred tax

income

(expense)

recognized in

other

comprehensive

income

Exchange

differences Ending balance

Temporary differences

Deferred tax assets

Revaluations of available-for-sale investments

to fair value $342,924 $- $(29,386) $- $313,538

Impairment on property, plant and equipment 207,912 (176,847) - - 31,065

Gain on disposal of property, plant and equipment - 57,774 - - 57,774

Loss from investment accounted for using the

equity method 411,227 20,204 - - 431,431

Unrealized intragroup profits and losses 19,604 (7,760) - - 11,844

Provisions 84,528 (8,454) - - 76,074

Accrued pension liabilities 32,249 (170) 6,826 - 38,905

Allowance for doubtful accounts 202,084 (31,852) - (4,554) 165,678

Unrealized loss on market decline of inventories 124,707 (30,585) - (10,619) 83,503

Employee benefits 4,547 (173) - - 4,374

Impairment on prepayments 25,054 (11,020) - - 14,034

Impairment on non-current assets held for sale - 1,861 - - 1,861

Other 360,658 128 10,047 (6,828) 364,005

Unused tax losses 1,061,444 96,499 - (10,432) 1,147,511

Subtotal 2,876,938 (90,395) (12,513) (32,433) 2,741,597

Deferred tax liabilities

Profit from investments accounted for using the

equity method (1,039,158) 169,868 - - (869,290)

Unrealized (gain) loss on foreign exchange 17,980 (50,223) - - (32,243)

Exchange differences resulting from translating

the financial statements of a foreign operation (756,025) - 190,771 - (565,254)

Reserve for land revaluation (5,765,567) 344,658 - - (5,420,909)

Other (202,735) 18,256 - - (184,479)

Subtotal (7,745,505) 482,559 190,771 - (7,072,175)

Deferred tax income/ (expense) $392,164 $178,258 $(32,433)

Net deferred tax assets/(liabilities) $(4,868,567) $(4,330,578)

Reflected in balance sheet as follows:

Deferred tax assets $2,876,938 $2,741,597

Deferred tax liabilities $(7,745,505) $(7,072,175)





121


Beginning

balance

Deferred tax

income

(expense)

recognized in

profit or loss

Deferred tax

income

(expense)

recognized in

other

comprehensive

income

Exchange

differences Ending balance


Deferred tax assets

Revaluations of available-for-sale investments

to fair value $433,459 $- $(90,535) $- $342,924

Impairment on property, plant and equipment 197,619 10,293 - - 207,912

Loss from investments accounted for using the

equity method 424,389 (13,162) - - 411,227

Unrealized intragroup profits and losses 7,231 15,564 (3,191) - 19,604

Provisions 263,100 (178,572) - - 84,528

Accrued pension liabilities 36,808 (197) (4,362) - 32,249

Allowance for doubtful accounts 106,692 92,001 - 3,391 202,084

Unrealized loss on market decline of inventories 72,626 48,368 - 3,713 124,707

Employee benefits 4,669 (122) - - 4,547

Impairment on prepayments 19,084 5,970 - - 25,054

Other 276,677 112,899 (30,735) 1,817 360,658

Unused tax losses 774,478 252,254 - 34,712 1,061,444

Subtotal 2,616,832 345,296 (128,823) 43,633 2,876,938


Profit from investments accounted for using the

equity method (586,427) (452,731) - - (1,039,158)

Unrealized gain (loss) on foreign exchange (206,241) 224,221 - - 17,980

Exchange differences resulting from translating

the financial statements of a foreign operation (616,406) 6,032 (145,651) - (756,025)

Reserve for land revaluation (5,765,567) - - - (5,765,567)

Other (414,816) 212,081 - - (202,735)

Subtotal (7,589,457) (10,397) (145,651) - (7,745,505)

Deferred tax income/ (expense) $334,899 $(274,474) $43,633

Net deferred tax assets/(liabilities) $(4,972,625) $(4,868,567)


Deferred tax assets $2,616,832 $2,876,938

Deferred tax liabilities $(7,589,457) $(7,745,505)





122

The following table contains information of the unused tax losses of the Group:

YearTax losses for the

period

Unused tax losses as ofDecember 31,

Expiration year2015 20142015 $10,433,378 $10,433,378 $- 20252014 8,031,172 7,695,229 7,291,611 20242013 5,430,581 5,202,427 8,678,172 20232012 15,042,080 14,486,743 15,084,950 20222011 13,765,839 12,791,442 13,772,828 20212010 18,740,029 18,202,239 18,301,447 20202009 33,354,197 33,199,308 33,440,091 20192008 4,446,296 4,446,296 4,446,296 20182007 923,774 795,408 766,889 20172006 16,289,548 10,404,396 10,850,229 2016

$126,456,894 $117,656,866 $112,632,513

Details of the Group’s unused tax credit are as follows:

Unused balance as of

December 31,

Laws and regulations Items 2015 2014 Expiration year

The Act for Upgrading

Industries

Investment tax credit relates

to investing in certain

industries in certain areas

$28,919 $28,919 2017

The Act for Upgrading

Industries

Emerging, important and

strategic industries

48,299 48,299 2015

〃 9,449 9,449 2016

$86,667 $86,945

Unrecognized deferred tax assets

As of December 31, 2015 and December 31, 2014, the Group’s unrecognized deferred taxassets amounted to NTD 22,374,667 thousand and NTD 20,919,354 thousand, respectively,as the Group may not incur any taxable income in the related period.





123

Imputation credit information


Balances of imputation credit amounts $1,443,132 $1,315,767

The actual creditable ratio for 2015 and 2014 both were 0%.

The Company’s earnings generated in the year ended December 31, 1997 and prior yearshave been fully appropriated.

The assessment of income tax returns

As of December 31, 2015, the assessment of the income tax returns of the Company and itssubsidiaries is as follows:

The assessment of income taxreturns by tax authorities Notes

The Company Assessed and approved up to 2012 2011 has not been assessed orapproved.

Subsidiary-SCADAssessed and approved up to 2012 2011 has not been assessed or

approved.Subsidiary-CPT Assessed and approved up to 2012Subsidiary-SCSC Assessed and approved up to 2013Subsidiary-FD Assessed and approved up to 2012 2011 has not been assessed or

approved.Subsidiary-TSTI Assessed and approved up to 2012Subsidiary-TFC Assessed and approved up to 2012

(34)Earnings per share

Basic earnings per share amounts are calculated by dividing net profit for the yearattributable to ordinary equity holders of the parent entity by the weighted average numberof ordinary shares outstanding during the year.





124

Diluted earnings per share amounts are calculated by dividing the net profit attributable toordinary equity holders of the parent entity (after adjusting for interest on the convertiblepreference shares) by the weighted average number of ordinary shares outstanding duringthe year plus the weighted average number of ordinary shares that would be issued onconversion of all the dilutive potential ordinary shares into ordinary shares.

For the years ended2015 2014

Basic and diluted earnings (loss) per share:Income (loss) attributable to ordinary equity holders of the

Company (in thousands of NTD) $(3,075,015) $363,539

Weighted average number of ordinary shares outstandingfor basic and diluted earnings per share (in thousands) 2,268,605 2,268,605

Basic and diluted earnings (loss) per share $(1.35) $0.16

There have been no other transactions involving ordinary shares or potential ordinary sharesbetween the balance sheet date and the issuance date of the financial statements.

(35)Changes in parent’s interest in subsidiaries

Information of derecognition of subsidiaries:

The Group disposed of all the shares of Taiwan Telecommunication Investments Limited inDecember 2015. Therefore, Taiwan Telecommunication Investments Limited and itssubsidiaries, Taiwan Telecommunication (Fujian) Company Ltd. and Shan Chih (HongKong) Co. Ltd, were reclassified to non-current assets held for sale as of December 31, 2015and the related assets, liabilities and non-controlling interests were derecognized.

The Group failed to acquire the majority of the voting right of Hefei Fuying Opto-electronicCo., Ltd. Therefore, Forward Electronics Co., Ltd. has lost control over the company and therelated assets, liabilities and non-controlling interest were excluded from the consolidatedfinancial statements since January 2015. The related assets, liabilities and non-controllinginterest were derecognized.

(1) Disposal of consideration

Please refer to Note 6 (11) for estimated consideration regarding the disposal of TaiwanTelecommunication Investments Limited. Additionally, Hefei Fuying Opto-electronicCo., Ltd. did not make any consideration.





125

(2) Analysis of assets and liabilities of losing control

As of December31, 2015

As of January 1, 2014

Current assetsCash and equivalents $72,899 $94,814Debt instrument investments for which no activemarket exists 95,675 -Account receivable 21,123 417,371Other receivable 1,168 15,379Inventory 30 98,255Advanced receipts 793 633

Non-current assetInvestments accounted for using the equitymethod 122,010 -Property, plant and equipment 13,507 63,953Other 5,178 5,543

Current liabilitiesShort-term borrowings - (109,086)Account payable (20,377) (404,104)Other payables (168) (52,087)Others 2,264 (6,846)

Non-current liabilitiesDeposits received - (98)

Net derecognition assets $314,102 $123,727

(3) Gain on derecognition of subsidiary


Fair value of investment retained $240,660 $43,305Less：Book value of investment retained

Net derecognition assets 314,102 123,727Non-controlling interest (73,442) (80,422)

240,660 43,305Gain on derecognition of subsidiary $- $-





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(4) Cash flow of derecognition of subsidiary

As of December31, 2015

As of January 1, 2014

Balance of Cash and equivalents of derecognition $72,899 $94,814

Acquisition of new shares in a subsidiary not in proportionate to ownership interest

Kornerstone Materials, a subsidiary of CPT, held a capital injection amounting to RMB300,000 thousand in 2015. However, CPTF Optronics Co., Ltd and CPTTG failed to acquirenew shares proportionate to their ownership interests, which resulted in changes inownership interest of CPTF Optronics Co., Ltd and CPTTG in its subsidiaries amounting toNTD (53,191) thousand. The change was recognized as a deduction of retained earnings ineach company. The Company therefore recognized the change according to the proportionof ownership interest in CPT.

On September 25, 2014, CPTTG increased its capital out of capital reserve. CPT Group didnot subscribe the new shares, as a result, decreased their combined ownership interest from75.06% to 67.49%. As a result, CPT recognized an increase of NTD 952,118 thousand innon-controlling interests. The Company recognized the related non-controlling interestsaccordingly.

CPTF Optronics Co., Ltd., acquired new shares of Kornerstone Materials Technology Co.Ltd., at RMB50,000 thousand on December 11, 2014. Chunghwa Picture Tubes Technology(Group) Co., Ltd., a subsidiary of CPT, did not subscribe the new shares in proportion to itsownership interest. The CPT Group’s ownership interest increased from 55.88% to 57.82%accordingly. As a result, CPT recognized an increase of NTD 44,903 thousand innon-controlling interests. The Company recognized the related non-controlling interestsaccordingly.

GET issued new shares of NTD 950,060 thousand in February 2014 and SCSC purchased allof the new shares, which resulted in a difference of NTD (89,310) thousand between theconsideration and the carrying value of the interest acquired and were recognized inadditional paid-in-capital by SCSC. Then, the Company recognized the related equity inaccordance with its combined proportion of ownership interest in SCSC.





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Gintung Energy Co., Ltd. issued new shares of NTD 150,000 thousand in June 2014. GETdid not acquire new shares in proportion to the ownership interest, therefore, its ownershipinterest decreased to 30.05%. The net cash inflow increased by NTD 138,457 thousandbecause of the amount, NTD 138,457 thousand, acquired by non-controlling interest. Thedifference of NTD 2,754 thousand between the consideration and the carrying value of theinterest acquired had been recognized in additional paid-in-capital by GET. Then, theCompany recognized the related equity in accordance with its combined proportion ofownership interest in GET.

Acquisition of shares issued by subsidiaries

CPTB and CPTL, subsidiaries of CPT, transferred their shares of Chunghwa PicturesDisplay Technology (Fujian) to CPTTG in the third quarter of 2015. CPTB and CPTLrecognized changes in ownership in subsidiaries amounting to NTD (17,592) thousand in therelated equity accounts.

CPTB, subsidiary of CPT, transferred its voting shares of CPTF Optronics Co., Ltd. toChunghwa Pictures Display Technology (Fujian) and CPTW in the third quarter of 2015.The total equity changes of CPTB, CPTL, Chunghwa Pictures Display Technology (Fujian),CPTW and CPTTG amounted to NTD 82,663 thousand, which was recognized in the relatedequity accounts.

The changes of retained earnings and additional paid-in capital generated by the acquisitionof shares issued by subsidiaries mentioned above are recognized according to its combinedproportion of ownership interest.

Disposal shares of subsidiary without losing control

SCSC disposed of shares of GET in 2014. SCSC received consideration of the disposal inthe amount of NTD 468,708 thousand. The difference of NTD 107,260 thousand betweenthe consideration and increase of the carrying value of the non-controlling interest had beenrecognized in equity by SCSC. Then, the Company recognized the related equity inaccordance with the combined proportion of ownership interest.





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(36)Subsidiaries that have material non-controlling interests

Financial information of subsidiaries that have material non-controlling interests is providedbelow:

Proportion of equity interest held by non-controlling interests:


Name Country of Incorporation and operation 2015 2014CPT Group Taiwan 76.87% 76.91%SCSC Group Taiwan 41.82% 41.82%

Accumulated balances of material non-controlling interest:


CPT Group $11,474,904 $18,572,470SCSC Group 6,054,761 7,498,436

Profit/(loss) allocated to material non-controlling interest:


2015 2014CPT Group $(6,488,217) $(2,811,181)SCSC Group (901,527) (906,315)

The summarized financial information of these subsidiaries is provided below. Thisinformation is based on amounts before inter-company eliminations.

Summarized information of profit or loss for the year ended December 31, 2015:

CPT Group SCSC GroupOperating revenue $47,319,711 $15,807,590Profit (loss) for the period from continuing operations (8,440,495) (2,155,032)Total comprehensive income for the period $(9,306,774) $(2,434,990)





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Summarized information of profit or loss for the year ended December 31, 2014:

CPT Group SCSC GroupOperating revenue $56,391,377 $15,948,182Profit or loss for the period from continuing operations (3,655,057) (2,167,127)Total comprehensive income for the period $(1,970,572) $(2,065,453)

Summarized information of financial position as of December 31, 2015:

CPT Group SCSC GroupCurrent assets $46,134,182 $7,788,597Non-current assets 53,764,886 14,665,754Current liabilities 68,403,461 12,900,931Non-current liabilities 19,186,379 1,719,606

Summarized information of financial position as of December 31, 2014:

CPT Group SCSC GroupCurrent assets $41,224,615 $10,630,648Non-current assets 64,127,427 15,918,910Current liabilities 54,348,339 14,162,973Non-current liabilities 29,387,701 2,448,567

Summarized cash flow information for the year ended December 31, 2015:

CPT Group SCSC GroupOperating activities $(1,948,316) $3,661,222Investing activities (5,981,731) (344,475)Financing activities 7,068,072 (2,518,465)Net increase/(decrease) in cash and cash equivalents (1,316,489) 781,882

Summarized cash flow information for the year ended December 31, 2014:

CPT Group SCSC GroupOperating activities $2,350,562 $(1,760,165)Investing activities (12,614,840) 165,898Financing activities 16,185,966 815,416Net increase/(decrease) in cash and cash equivalents 7,024,339 (751,125)





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(37)Significant purchase agreements of technology and materials

Contracting partyThe term ofthe contract The content of repayment

Technology agreementSamsung Display Co.,

Ltd. (SDC)January 2014

｜

December2023

1. CPT is required to pay licensing fees oninstallment basis for using the technologies.

2. The Company is required to pay royalty feesduring the effective period of the contract.

Mitsubishi ElectricCorporation (MELCO)

July 2015｜

June 2020


2. CPT is required to pay royalty fees based on apre-determined percentage of net sales of therelated products for continuing use ofexclusive technology.

Sharp Corporation July 2011｜

June 2016

1. CPT is required to pay licensing fees (one-time payment) for using the technologies.


Japan Display Inc. January 2010｜

December2016



Japan Display Inc.(TMD)

March 2012｜

February2017



LG. Display Co., Ltd. March 2015｜

March 2022



Semiconductor EnergyLaboratory Co., Ltd(SEL)

January 2009|

December2018







131

Contracting partyThe term ofthe contract The content of repayment

Hydis Technology Co.,Ltd.

November2012

|October 2022



Industrial TechnologyResearch Institute

August 5, 2015

|August 4,

2030

1. The Company is authorized to use the patent.2. The Company is required to pay licensing

fees on installment basis in the effectiveperiod.

3. The Company is required to pay licensingfees according to a specific proportion of theproduct’s selling price.

Purchase agreement ofmaterials

Corning DisplayTechnologies TaiwanCo., Ltd (CorningTaiwan)

April 2005｜

March 2016

1. Corning Taiwan will guarantee to supplymaterials of TFT-LCD to CPT for the 6th

generation fabrication.2. CPT is required to make prepayments on

installment basis to Corning Taiwan to bededucted from subsequent purchase.

Please refer to Note 9 for other purchase agreements.

7. Related party transactions

Significant related party transactions

(1) Sales (including leasing revenue)


Entity with joint control or significant influence over theCompany $41,538 $21,351Associates 848,238 1,245,315Other related parties 554,719 176,473Total $1,444,495 $1,443,139





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(a) The Company

The sales price to related parties was determined through mutual agreement based onmarket conditions. The collection terms for domestic related parties were 90 days,equivalent to those for domestic third parties; the collection terms for foreign relatedparties were 30-180 days, equivalent to these for foreign third parties.

(b) Significant subsidiaries

There were no significant differences between selling prices to related parties and pricesto arm’s length customers. The comparison of collection terms between related partiesand arm’s length customers is summarized as follows:

2015 2014

Company Region Related parties General supplier Related parties General supplier

CPT and its

subsidiaries

Oversea O/A 30-90 days Cash payment with

120 days

O/A 30-90 days Cash payment with

120 days

Internal O/A 30-90 days Cash payment with

60 days

L/C 30-75 days at

sight

O/A 30-90 days Cash payment with

60 days

L/C 30-75 days at

sight

SCSC and its

sub-subsidiari

es

Oversea O/A 60-90 days O/A 30-90 days O/A 60-90 days O/A 30-90 days

Internal O/A 30-120 days O/A 45-60 days O/A 30-120 days O/A 45-60 days

FD and its

subsidiaries

Oversea O/A 30-150 days O/A 60-150 days

Or L/C SIGHT

O/A 30-150 days O/A 60-150 days

Or L/C SIGHT

Internal O/A or TT 30-150

days

O/A 30-120 days O/A or TT 30-150

days

O/A 30-120 days

Tatung

System

Technologies

Inc. and its

subsidiaries

Oversea O/A 30-120 days O/A 30-120 days O/A 30-120 days O/A 30-120 days






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(2) Purchase


Entity with joint control or significant influence over theCompany $239 $-Associates 23,905 176,988Other related parties 36,965 225,495Total $61,109 $402,483

(a) The Company

The purchase price from related parties was determined through mutual agreementbased on market conditions. The payment terms to related parties and third parties fordomestic purchases were both net 30-150 days, while the terms for overseas purchaseswere both net 30-120 days.

(b) Significant subsidiaries

There are no significant differences between purchasing prices from related parties andprices to arm’s length suppliers. The comparison of payment terms between relatedparties and arm’s length suppliers is summarized as follows:

2015 2014Company Region Related parties General supplier Related parties General supplier

CPT and itssubsidiaries

Oversea T/T 30-360 days L/C 30-180 daysT/T 30-360 days

T/T 30-360 days L/C 30-180 daysT/T 30-360 days

Internal 30-90 days afterQC

30-210 days afterQC

30-90 days afterQC

30-210 days afterQC

FD and itssubsidiaries

Oversea T/T 30-150 days afterQC or DA 120 days

T/T or L/C 30-150days after QC

T/T 30-150 days afterQC or DA 120 days

T/T or L/C 30-150days after QC

Internal 30-120 days after QC 30-120 days after QC 30-120 days after QC 30-120 days after QC

TatungSystem

TechnologiesInc. and itssubsidiaries

Oversea 30-60 days afterQC

30-60 days afterQC

30-60 days afterQC

30-60 days afterQC






134

(3) Accounts receivable – related parties


Entity with joint control or significant influence over theCompany $227 $367

Associates 12,309 103,606Other related parties 67,767 30,218

Net $80,303 $134,191

(4) Accounts receivable –construction contract


Associates $- $30,577

(5) Others receivable – related parties (current or non-current)



Associates 2,658 69,739Other related parties - 378

Net 2,665 70,150Non-current portion (417) (16,842)Current portion $2,248 $53,308

(6) Accounts payable – related parties



Associates 17,844 10,430Other related - 7,436

Total $17,853 $18,033





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(7) Other payable

As of December 31,

2015 2014

Entity with joint control or significant influence over theCompany $653 $1,498

Associates 506,742 2,132Other related parties 15,004 17,569

Total $522,399 $21,199

(8) Plants and Office leased – related parties

For the years ended

2015 2014

Entity with joint control or significant influence over theCompany $35,481 $16,941

Associates 12,065 14,273

Other related 10,324 6,220

Total $57,870 $37,434

(9) Compensation of key management personnel

For the years ended

2015 2014

Short-term employee benefits $157,816 $145,298

Post-employment benefits 2,417 1,479

Termination benefits - -

share-based payment awards 305 7,828

Total $160,538 $154,605

(10)The chairman of Tatung Company, Wei-Shan Lin, guaranteed part of the bank loans for theCompany and its subsidiaries.





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8. Assets pledged as collateral

The following table lists assets of the Group pledged as collateral:

Carrying amounts as of

December 31,

2015 2014 Purpose of the pledge

Land $3,970,213 $3,642,881 Loans

Buildings 19,233,317 19,960,205 Loans

Lease improvement 931,373 1,493,901 Loans

Machines and other Equipment 5,859,586 9,951,474 Loans

Debt instrument investments for

which no active market exists

21,763,337 15,215,990 Various guarantees

Financial assets at fair value

through profit or loss shares

721,666 549,578 Performance guarantee

Investments accounted using the

equity method

2,303,290 - Loans

Other non-current assets –

deposit-out

42,061 33,100 Lawsuit deposits

Rent prepaid (current and

non-current)

312,311 326,846 Loans

Available-for-sale financial assets

- shares

2,111,302 1,774,905 Loans, performance guarantee

Construction in progress &

prepaid for equipment

- 192,464 Various guarantees

Accounts receivable 18,873 49,452 Loans

Inventory 2,049,421 1,455,096 Loans, lawsuits of constructions

Total $59,316,750 $54,645,892

As of December 31, 2015 and 2014, part of the Group subsidiaries’ shares amounting to NTD

34,596,382 thousand and 1,571,283 thousand, respectively, were pledged for loans. The related

amounts of the pledged shares were eliminated during the consolidation process.





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9. Commitments and contingencies

(1) Promissory notes issued by the Group and subsidiaries to secure bank loans, constructionperformance bond and tariff guarantee amounted to USD 2,000 thousand and NTD21,880,998 thousand.

(2) The Company and its subsidiaries’ unused letters of credit for importing raw materials andmachinery amounted to USD 16,977 thousand, JPY 28,015 thousand, RMB 39,927thousand, SEK 498 thousand, EUR 6,721 thousand, NTD 223,086 thousand and CHF 284thousand.

(3) Performance bond issued by financial institutions amounted to USD 25,880 thousand andNTD 18,515,439 thousand.

(4) Collaterals for account receivable factoring amounted to USD 2,000 thousand. Collateralsfor financing amounted to NTD 1,841,981 thousand.

(5) As of December 31, 2015, the Company had commitments and contingencies as follows:

(a) The Company applied to Mega International Commercial Bank and Bank of Taiwan fora credit line to be issued for Tatung Co., of Japan, Inc. The promissory notes of creditamounted to NTD 972,400 thousand and NTD 800,000 thousand.

The Company applied to Industrial Bank of Taiwan, Taipei Fubon Bank and Far EasternInternational Bank for credit lines to be issued for CPT, amounting to NTD 1,000,000thousand, NTD 500,000 thousand and NTD 1,500,000 thousand, respectively.

(b) King Pro Group (“King Pro”) and Ka Hung Exhibition Co., Ltd. (“Ka Hung”)contracted with the Company as subcontractors to construct part of the Talin PowerPlant, for which tender the Company contracted with Kai Yuan Construction Co., Ltd.However, King Pro and Ka Hung failed to complete the construction upon deadline andboth parties claimed to terminate the contract. King Pro and Ka Hung claimed that theCompany had not paid construction examination fees, prepayments and advances andfiled an action against the Company to claim NTD 23,610 thousand. The Courtscheduled a preliminary proceeding on April 19, 2016. In addition, the Company filedfor provisional seizure against King Pro and Ka Hung on March 21, 2016 and plannedto claim indemnities resulted from advances and contract termination after receiving theruling of the provisional seizure.





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(c) United Aerotech System Corporation filed a legal action against the Company onJanuary 6, 2010, claiming payments of consultant fees amounted to NTD 1.49 million.The court of first and second instance ruled in favor of the Company but UnitedAerotech System Corporation appealed. United Aerotech System Corporation claimed ahigher amount of NTD2 million in the oral arguments. This case is now in the remandsecond instance and the result of the trial is uncertain. United Aerotech SystemCorporation did not file an action against the remaining balance, and both courts in thefirst and second instance found the evidence supporting the claim in the amount of NTD60 million to be invalid. United Aerotech System Corporation filed a legal action ofthird instance on March 29, 2014. The Company received remand judgment from theSupreme Court on November 5, 2014 and the next court session will be March 24,2016.

(d) The Company engaged in a construction project with Taiwan Railways Administration,MOTC (“Taiwan Railways”). Taiwan Railways failed to complete the inspectionprocess after the construction was finished. The Company has filed an action againstTaiwan Railways to claim payments of NTD 233,888 thousand in January 2013. OnOctober 16, 2014, the action was settled and both parties agreed to inspect theconstruction quality with qualified tools from March 17 to 26, 2015. On April 20, 2015,Taiwan Railways decided that the rails the Company exchanged the first time wereunqualified. On July 3, 2015, Taiwan Railways notified the Company for the secondexchange according to the purchase agreement. On November 3, 2015, the Companyreceived a notice from Taiwan Railways agreeing to change suppliers and hadcontracted with the new suppliers. The new suppliers had finished manufacturing theproducts and the new rails had arrived in Taiwan on January 11, 2016 and had beendelivered to five stations. However two of these stations, Dadu and Fugang, did notreceive the rails due to causes attributable to Taiwan Railways. The Company is stillnegotiating with Taiwan Railways for the delivery process.

(e) Yung Loong Engineering Corp. (Yung Loong) engaged in a construction project,“BI-HAI machinery installing project”, with the Company, however, Yung Loongclaimed that the Company’s power generation set was defective and caused delay in theconstruction. Therefore, Yung Loong claimed payment of NTD 56,997 thousand fromthe Company. After failing a mediation on July 22, 2014, the action is pending at thecourt of first instance. On January 25, 2016, Yung Loong requested for an appraisal forthe items in dispute on court and currently the items are appraised by TaiwanProfessional Electrical Engineers Association.





139

(f) Compal Electronics, Inc. (“Compal”) made a public announcement on March 29, 2013to request the Company to purchase the CPT shares held by Compal and it filed forarbitration to the Arbitration Association of the Republic of China. The Companyreceived the arbitration appeal submitted by Compal from the Association on April 3,2013. An arbitration tribunal was formed on August 20, 2013.

The Company received the arbitration award 102-Chung-Sheng-He-Zi No. 25Arbitration Judgment, from the Arbitration Association of the Republic of China onMay 19, 2014. The main context is as follows:

The counterparty (“the Company”) shall make a payment to the petitioner(“Compal”) for NTD 2,118,607 thousand. The first payment of NTD 718,604thousand shall be paid within a month after the arbitration award is delivered to thecounterparty. The second payment of NTD 700,000 thousand shall be paid withinfour months after the arbitration award is delivered to the counterparty. The thirdpayment of NTD 700,000 thousand shall be paid within seven months after thearbitration award is delivered to the counterparty. In addition, the Company shall paythe interest at an annual rate of 5% from April 3, 2013 to full repayment day.

Petitioner shall deliver the private shares for the corresponding payment for374,274,704 shares, 364,583,334 shares and 364,583,333 shares.

Other claims from Compal are dismissed Two thirds of the arbitration fees shall be borne by the petitioner while the rest is

borne by the counterparty.

The Company issued requests to Compal for acknowledging the payments (i.e.,NTD718,607 thousand, NTD700,000 thousand and NTD700,000 thousand) andmeanwhile delivering the corresponding numbers of shares (374,274,704 shares,364,583,334 shares and 364,583,333 shares) on June 17, 2014, September 12, 2014 andDecember 14, 2014. However, as of the financial statement date, Compal neitheraccepted the payment nor handed over the shares. In addition, Compal has filed anaction at Taiwan Taipei District Court to compulsory enforce the the arbitrationmentioned above. On July 31, 2014, the Company had received 2014 Zhong-Zhi-Zi No.3 Civil Judgment, which granted the compulsory enforcement of the arbitration awardon July 28, 2014. The Company has not received the order of the compulsoryenforcement from Taiwan Taipei District Court.





140

On June 13, 2014, Compal has filed an action at Taiwan Taipei District Court to revokethe unfavorable part of the arbitration award. The case was ruled by Taiwan TaipeiDistrict Court in 2014 Zhong-Zhi-Zi No. 4 Civil Judgment which revoked Compal’sfiling and demanded Compal to pay all the litigation costs. Compal appealed and thecase was handled by their attorneys. The case is ruled by Taiwan High Court and theoral arguments had been ended on March 8, 2016. The judgment will be made on March29, 2016.

(6) As of December 31, 2015, CPT and its subsidiaries had commitments and contingencies asfollows:

Material litigation

Lawsuits related to patent

Eidos Display, LLC and Eidoes III, LLC filed a patent infringement action in the UnitedStates District Court of Texas against the Company and three other Taiwanese LCDcompanies. The Company has engaged United States attorneys to defend the case.

Other litigations

Regarding violation of antitrust laws, CPT has paid fines with respect to the verdicts of theUS Department of Justice (DOJ), European Commission (EC) and the Korean Fair TradeCommission (KFTC) from 2008 to 2012. Japan Fair Trade Commission (JFTC), CanadianCompetition Bureau (CCB), and the Taiwan Fair Trade Commission terminatedinvestigations after 2009. Regarding civil actions, CPT settled with HP, Bestbuy, Costco,Home Depot, Target, TracFone, and nine plaintiffs represented by Boise Schiller, in theopt-out action and civil class action filed by state prosecutors in the U.S. In addition, CPTalso settled the civil class actions filed by state prosecutors in Oklahoma and South Carolina.The Company has engaged professional attorneys to handle other litigations prudently.

Regarding the antitrust cases under the official investigation in various countries, includingJapanese Fair Trade Commission, Korean Fair Trade Commission (“KFTC”) and EuropeanCommission, CPT had been cooperative with the investigations. The Company has not beensubject to any fines. The Czech Republic had reached a final judgment and the fines werepaid on 2011. The government of Hungry had finished its investigation in August 2014 andconcluded that CPT did not engaged in any illegal activities. Regarding the opt-out actionunder civil action, CPT settled with the plaintiffs, Target, Sears and K-mart. CPT alsosettled with nine plaintiffs represented by Boise Schille in the opt-out action. The Companyhas retained professional attorneys to handle other litigations prudently.





141

(7) As of December 31, 2015, SCSC and its subsidiaries had commitments and contingencies asfollows:

(a) To secure an ample supply of silicon raw material to produce diodes, SCSC has enteredinto a silicon raw material supply contract with Cargill in December 2007, which wasamended in December 2013 with the contract term starting from April 1, 2013 to March31, 2020. Under the contract, Cargill has made commitment to providing certainquantity of silicon raw material to Green Energy Technology Inc. during the contractperiod and at the total contract price of JPY 4,268,592 thousand. In addition, SCSC isrequired to pay a minimum purchase amount of JPY 275,724 thousand. As of December31, 2015, the amount of prepayment was JPY 76,140 thousand (or the equivalent ofapprox. NTD 21,966 thousand), which was classified under the prepayments andlong-term prepayments.

(b) As of December 31, 2015, the significant unfinished or undelivered contracts of SCSCwere related to crystal growth furnace equipment. As of the audit report date of theseconsolidated financial statements, the function and quality of those equipment had notyet meet the purchasing standard of SCSC. Therefore, SCSC could not inspect norutilize those equipment. The total amount of purchasing price was NTD 799,701thousand, of which NTD 486,880 thousand has been paid. The payment was recorded asprepayments. Considering that the prepayments will be used for manufacturing in thefuture, SCSC classified the impairment of the prepayments under property, plant andequipment. Please refer to Note 6 (13) for further details.

(c) Hemlock Semiconductor Corporation, a supplier of silicon raw material, has filed anaction against GET and Tatung Co. of America Inc. (“TUS”). GET and TUS havedenied all causes of actions, and the litigation is in the early stages of discovery.Currently, the legal proceeding is suspended. Hemlock proposed that both sides hold ameditation in New York with a meditator at around June 16. According to the attorneyof Hemlock, they proposed a settlement because verdicts in the US are difficult to carryout in Taiwan, and thus they hope to reach a solution by negotiation. In order to securethe position in terms of litigation, this disclosure does not comply with IAS 37“Provisions, Contingent Liabilities and Contingent Assets Issued”. GET and TUS haveengaged legal counsel for the legal matter.





142

(d) As of December 31, 2015, a supplier of silicon raw material sent a notice of interest

payable amounting to USD 26,067 thousand (or the equivalent of NTD 855,664

thousand) to GET for interests resulting from overdue advances and payments. GET has

assessed that the possibility of paying the interest payable is low, based on the ongoing

business nature with both parties. Therefore, GET did not recognize the payable.

(e) On June 26, 2015, GET amended the long-term purchase contract for materials with one

of its suppliers. The amendment was to extend the contract period from 2009 to 2016 to

July 2015 to 2025. With respect to the insufficient purchase as of June 30, 2015, both

parties modified the minimum amount and purchase price each year according to the

extended term. In addition, both parties increased the total purchase amount and set

amounts that could be deducted from advance payments each year. Thus, GET

recognized advance payments that would be deducted in one year as prepayments under

current assets, while the remaining amount was recognized as long-term prepaid

materials. As of the second quarter in 2015, the amount was USD 60,160 thousand and

thus was classified to long-term prepaid materials.

(f) As of December 31, 2015, GET and its subsidiaries signed a purchase contract for

materials and paid USD 63,614 thousand and EUR 19,366 thousand (or the equivalent

of approx. NTD 2,808,062 thousand), which was classified under prepayments and

long-term prepayments. Additionally, as of December 31, 2015, GET and its

subsidiaries had recognized loss provision for prepayment of NTD 82,552 thousand.

(g) GET, in a move to expand their long-term business, have cooperated with downstream

clients in Taiwan through long-term strategic alliance by entering into contracts with

them to supply multi-crystalline wafer. A total of USD 1,448 thousand (or the

equivalent of NTD 47,736 thousand) was accounted for under the advance receipts

(current and non-current) resulting from the cooperation as of December 31, 2015.





143

(h) In order to fund the plant construction in Luzhu, Southern Taiwan Science Park,purchase the equipment in Luzhu plant and improve working capital, GET resolved atits board meeting held on January 25, 2011 to borrow syndicated loans from Bank ofTaiwan, Cathay United Bank, Land Bank, Agriculture Bank, HSBC Taiwan, IndustrialBank of Taiwan and Yuanta Bank. The amount of the 5-year loan was NTD 3.2 billionand the loan agreement was signed on February 1, 2011. The line of credit and thepurpose of use of every item are listed as follows:

Item Line of Credit PurposeItem A NTD 0.8 billion to construct the Luzhu plantItem B NTD 1.7 billion to construct the Luzhu plantItem C-1(Note) USD 22 million to develop foreign creditItem C -2 (Note) USD 22 million to improve working capital

Note: The total balance of the credit line drawn from Item C-1 and Item C-2 cannotexceed the principal, NTD 0.7 billion or USD 22 million (lower of the two).

As of December 31, 2015, each line of credit had been fully drawn.

(i) In order to provide financing to purchase equipment and improve working capital, GETresolved at its board meeting on May 19, 2011 to borrow syndicated loans from FubonBank, Mega Bank, First Bank, Far Eastern International Bank, Chang Hwa Bank andTaiwan Business Bank. The amount of the 5-year loan was USD 70 million and the loanagreement was signed on May 30, 2011. The line of credit and the purpose of use ofevery item are listed as follows:

Item Line of Credit PurposeItem A USD 56 million to purchase equipment or improve working capital.Item B USD 14 million to purchase equipment or improve working capital.

As of December 31, 2015, each line of credit had been fully drawn.

10. Significant disaster loss

None.

11. Significant subsequent events

(1) On February 16, 2016, the board of directors of the Company resolved to invest inChunghwa Picture Tubes (Labuan) Ltd. for NTD 968,560 thousand.





144

(2) On March 23, 2016, the Company’s board of directors resolved to purchase securedcorporate bonds of Chunghwa Picture Tubes (Bermuda) Ltd. for USD 25,000 thousand.

(3) In March 2016, CPTF Optronics (Shen-Zhen) Co., Ltd., a subsidiary of CPT, acting as aproxy for Chunghwa Picture Tubes (Bermuda) Ltd., entered into a liability investment trustagreement with Electronic Information Industry (Fujian) Venture Capital Partnership Co.,Ltd. and Xing Ye Zheng Quan Co., Ltd. The trust is to be purchased by ElectronicInformation Industry (Fujian) Venture Capital Partnership Co., Ltd. for a duration of oneyear in the amount of NTD 8,000,000 thousand.

(4) In 2016, the board of directors of Shan-Chih Asset Co., a subsidiary of the Company,resolved to authorize the chairmen to purchase two pieces of lands in Zhongshan district,Taipei City. The amount of the transaction was NTD 1,084,948 thousand.

12. Other

(1) Categories of financial instruments

Financial assetsAs of December 31,

2015 2014Financial assets at fair value through profit or loss:

Held for trading (including the non - current) $2,362,506 $2,179,178Available-for-sale financial assets (including Financial assets

measured at cost) ($358,549, $391,401) (includingnon-current) 4,182,600 4,212,573

Held-to-maturity financial assets 20,000 20,000Loans and receivables:

Cash and cash equivalents(without cash on hand) 26,741,260 29,701,077Debt instrument investments for which no active market exists

(including non - current)21,927,406 15,565,891

Notes receivable (including related parties) 644,925 583,004Accounts receivable (including related parties) (including the

construction receivable)11,810,549 17,192,079

Other receivables (including related parties) (including the non- current)

2,507,656 2,087,035

Other non - current assets－deposits-out 609,132 539,910subtotal 64,240,928 65,668,996Total $70,806,034 $72,080,747





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Financial liabilitiesAs of December 31,

2015 2014Financial liabilities at amortized cost:

Short-term loan $45,426,925 $39,656,537Short-term notes and bills payable 1,607,115 5,759,166Payables (including related parties)(including non-current) 27,492,006 31,099,025Bonds payables (including current portions) 600,000 1,200,000Loan (including current portions) 58,784,094 52,301,466Deposits in 510,134 496,509

Subtotal 134,420,274 130,512,703

Financial liabilities at fair value through profit or loss:

Held-for-trading - 14,787

Designated at fair value through profit or loss at initial recognition 932,686 849,059

Subtotal 932,686 863,846

Total $135,352,960 $131,376,549

(2) Financial risk management objectives and policies

The Group’s risk management objectives are to manage market risk, credit risk and liquidityrisk related to its operating activities. The Group identifies measures and manages theaforementioned risks based on policy and risk preference. The Group has establishedappropriate policies, procedures and internal controls for financial risk management. Beforeentering into significant financial activities, due approval process by the board of directorsand audit committee must be carried out based on related protocols and internal controlprocedures. The Group complies with its financial risk management policies at all times.

(3) Market risk

Market risk is the risk that the fair value or future cash flows of a financial instrument willfluctuate because of changes in market prices. Market risks comprise of currency risk,interest rate risk, and other price risk (such as equity price risk).

In practice, it is rarely the case that a single risk variable will change independently fromother risk variables. There are usually connections between risk variables. However thesensitivity analysis disclosed below does not take into account the interdependenciesbetween risk variables.





146

Foreign currency risk

The Group’s exposure to the risk of changes in foreign exchange rates relates primarily tothe Group’s operating activities (when revenue or expense are denominated in a differentcurrency from the Group’s functional currency) and the Group’s net investments in foreignsubsidiaries.

The Group’s certain foreign currency receivables are denominated in the same foreigncurrency with foreign currency payables, therefore natural hedge is received. The Group alsouses forward contracts to hedge the foreign currency risk on items denominated in foreigncurrencies. Hedge accounting is not applied as they did not qualify for hedge accountingcriteria. Furthermore, as net investments in foreign subsidiaries are for strategic purposes,they are not hedged by the Group.

The foreign currency sensitivity analysis is performed on significant monetary itemsdenominated in foreign currencies at the end of the reporting period. The analysis mainlyfocuses on foreign currency’s appreciation and depreciation, which will affect the Group’sprofit. The Group’s foreign currency risk is mainly related to the volatility in the exchangerates for USD, JPY and RMB.

The information of the sensitivity analysis is as follows:

(a) When NTD appreciates or depreciates against USD by 1%, the profit for the yearsended December 31, 2015 and 2014 will increase (decrease) by NTD 117,475 thousandand NTD 253,607 thousand respectively.

(b) When NTD appreciates or depreciates against JPY by 1%, the profit for the years endedDecember 31, 2015 and 2014 will increase (decrease) by NTD 30,548 thousand andNTD31,698 thousand respectively.

(c) When NTD appreciates or depreciates against RMB by 1%, the profit for the yearsended December 31, 2015 and 2014 will increase (decrease) by NTD 91,553 thousandand NTD 8,146 thousand respectively.

Interest rate risk

Interest rate risk is the risk that the fair value of future cash flows of a financial instrumentwill fluctuate because of changes in market interest rates. The Group’s exposure to the riskof changes in market interest rates relates primarily comes from the Group’s loans andreceivables at variable interest rates, bank borrowings with fixed interest rates and variableinterest rates.





147

The Group manages its interest rate risk by having a balanced portfolio of fixed and variableloans and borrowings and entering into interest rate swaps. Hedge accounting does not applyto these swaps as they do not qualify for it.

The interest rate sensitivity analysis is performed on items exposed to interest rate risk as atthe end of the reporting period, including investments and borrowings with variable interestrates and interest rate swaps. At the balance sheet date, an increase/decrease of 10 basispoints of interest rate could cause the profit for the years ended December 31, 2015 and2014 to decrease/increase by NTD 83,882 thousand and NTD 82,811 thousand, respectively.

Equity price risk

The Group’s listed and unlisted equity securities are susceptible to market price risk arisingfrom uncertainties about future values of the investment securities. The Group’s listed equitysecurities are classified under held for trading financial assets or available-for-sale financialassets, while unlisted equity securities are classified as available-for-sale. The Groupmanages the equity price risk through diversification and placing limits on individual andtotal equity instruments. Reports on the equity portfolio are submitted to the Group’s seniormanagement on a regular basis. The Group’s board of directors reviews and approves allequity investment decisions.

At the balance sheet date, a change of 1% in the price of the listed equity securities held fortrading could increase/decrease the Group’s profit for the years ended 31 December 2015and 2014 by NTD 4,978 thousand and NTD 1,624 thousand, respectively.

At the balance sheet date, a decrease of 1% in the price of the listed equity securitiesclassified under available-for-sale could have an impact of NTD 36,110 and NTD (33,102)thousand dollars on the Company’s equity for the years ended December 31, 2015 and 2014,respectively.

Please refer to Note 12.8 for sensitivity analysis information of other equity instruments orderivatives that are linked to such equity instruments whose fair value measurement iscategorized under Level 3.





148

(4) Credit risk management

Credit risk is the risk that counterparty will not meet its obligations under a contract, leadingto a financial loss. The Group is exposed to credit risk from operating activities (primarilyfor accounts receivables and notes receivables) and financing activities, including bankdeposits and other financial instruments.

Customer credit risk is managed by each business unit subject to the Group’s establishedpolicy, procedures and control relating to customer credit risk management. Credit limits areestablished for all customers based on their financial position, rating from credit ratingagencies, historical experience, prevailing economic condition and the Group’s internalrating criteria etc. Certain customer’s credit risk will also be managed by taking creditenhancing procedures, such as requesting for prepayment or insurance.

As of December 31, 2015 and December 31, 2014, top ten customer receivables represented23.35% and 30.28% of the total accounts receivables of the Group, respectively. The creditconcentration risk of other accounts receivables is insignificant.

Credit risk from balances with banks, fixed income securities and other financial instrumentsis managed by the Group’s treasury in accordance with the Group’s policy. The Group onlytransacts with counterparties approved by the internal control procedures, which are banksand financial institutions, companies and government entities with good credit rating andwith no significant default risk. Consequently, there is no significant credit risk for thesecounter parties.

(5) Liquidity risk management

The Group’s objective is to maintain a balance between continuity of funding and flexibilitythrough the use of cash and cash equivalents, highly liquid equity investments, bankborrowings, convertible bonds and finance leases. The table below summarizes the maturityprofile of the Group’s financial liabilities based on the contractual undiscounted paymentsand contractual maturity. The payment amount includes the contractual interest. Theundiscounted payment relating to borrowings with variable interest rates is extrapolatedbased on the estimated interest rate yield curve as of the end of the reporting period.





149

Non-derivative financial instruments

Less Than 1

Year 2-3 Years 4-5 Years

More than 5

Years Total

December 31, 2015

Loans $70,461,887 $32,841,238 $2,691,284 $38,080 $106,032,489

Short-term notes and bills payable 1,607,115 - - - 1,607,115

Payables (including relates parties)

(including non-current)

27,492,006 - - - 27,492,006

Convertible bonds payable (including

current)

619,807 - - - 619,807

Deposit-in 510,134 6,258 - 980 517,372

December 31, 2014

Loans $52,293,346 $39,199,744 $3,744,574 $277,032 $95,514,696

Short-term notes and bills payable 5,759,166 - - - 5,759,166

Payables (including relates parties)

(including non-current)

31,099,025 - - - 31,099,025

Convertible bonds payable (including

current)

639,000 619,500 - - 1,258,500

Deposit-in 496,509 6,074 - 980 503,563

Derivative financial instruments

Less Than 1


More than 5

Years Total

December 31, 2015

Flow-in $699,114 $- $- $- $699,114

Flow-out (696,208) - - - (696,208)

Net $2,906 $- $- $- $2,906

December 31, 2014

Flow-in $91,398 $- $- $- $91,398

Flow-out (14,400) - - - (14,400)

Net $76,998 $- $- $- $76,998

Tables above about the disclosures of derivative financial instruments were disclosed by theundiscounted net cash flow.





150

(6) Fair value of financial instruments

(a) the methods and assumptions applied in determining the fair value of financialinstruments:

Fair value is the price that would be received to sell an asset or paid to transfer aliability in an orderly transaction between market participants at the measurement date.The following methods and assumptions were used by the Group to measure or disclosethe fair values of financial assets and financial liabilities:

The carrying amount of cash and cash equivalents, accounts receivables, accountspayable and other current liabilities approximate their fair value due to their shortmaturities.

For financial assets and liabilities traded in an active market with standard terms andconditions, their fair value is determined based on market quotation price (includinglisted equity securities, beneficiary certificates, bonds and futures, etc.) at thereporting date.

Fair value of equity instruments without market quotations (including privateplacement of listed equity securities, unquoted public company and private companyequity securities) are estimated using the market method valuation techniques basedon parameters such as prices based on market transactions of equity instruments ofidentical or comparable entities and other relevant information (for example, inputssuch as discount for lack of marketability, P/E ratio of similar entities andPrice-Book ratio of similar entities).

Fair value of debt instruments without market quotations, bank loans, bonds payableand other non-current liabilities are determined based on the counterparty prices orvaluation method. The valuation method uses DCF method as a basis, and theassumptions such as the interest rate and discount rate are primarily based onrelevant information of similar instrument (such as yield curves published by theTaipei Exchange, average prices for Fixed Rate Commercial Paper published byReuters and credit risk, etc.)





151

The fair value of derivatives which are not options and without market quotations, isdetermined based on the counterparty prices or discounted cash flow analysis usinginterest rate yield curve for the contract period. Fair value of option-basedderivative financial instruments is obtained using on the counterparty prices orappropriate option pricing model (for example, Black-Scholes model) or othervaluation method (for example, Monte Carlo Simulation).

(b) Fair value measurement hierarchy for financial instruments

Please refer to Note 12.8 for fair value measurement hierarchy for financial instrumentsof the Group.

(7) Derivative financial instruments

The Group’s derivative financial instruments include forward currency contracts andembedded derivatives. The related information for derivative financial instruments notqualified for hedge accounting and not yet settled as at December 31, 2015 and 2014 is asfollows:

The Company

Forward exchange contracts

Forward foreign exchange contracts to manage exposure part partial transactions, but notdesignated as hedging instruments:

December 31, 2015

Currency PeriodAmount

(thousands)Buying currencyexchange forward

Buy USD Sell NTD April 2015-February 2016

USD9,300

December 31, 2014

Currency PeriodAmount

(thousands)Buying currencyexchange forward

Buy USD sell NTD January 2015-August 2015

USD 50,000





152

Exchange options

December 31, 2015

The following table refers to the related conditions with regard to the Company’s

unamortized exchange options on December 31, 2015.

(Amount: thousands)

Counterparty

bank

Foreign

exchange

rate

Foreign exchange

rate on the date of

settlement FX

Term of settlement

A USD/JPY FX < 120.5 Executing price at 120.5 to buy USD 1,000

A USD/JPY FX > 124 Executing price at 124 to sell USD 1,000

A USD/TWD FX < 32.28 Executing price at 32.28 to buy USD 1,000

A USD/TWD FX < 32.4 Executing price at 32.4 to buy USD 1,000

B USD/JPY FX < 120.5 Executing price at 120.5 to buy USD 1,000

B USD/JPY FX < 120.8 Executing price at 120.8 to buy USD 1,000

B USD/JPY FX > 124.5 Executing price at 124.5 to sell USD 1,000

B USD/TWD FX < 32.39 Executing price at 32.39 to buy USD 1,000

B USD/TWD FX < 32.4 Executing price at 32.4 to buy USD 1,000

C USD/TWD FX < 32.45 Executing price at 32.45 to buy USD 1,000

D USD/TWD FX < 31.6 Executing price at 31.6 to buy USD 1,000



E USD/TWD FX < 31.55 Executing price at 31.55 to buy USD 1,000

As of December 31, 2015, foreign exchange options contracts that had been settled

amounted to USD 233,800 thousand, EUR 500 thousand, and the remaining unsettled

contracts amounted to USD 14,000 thousand, with a fair value of NTD 807 thousand

(including royalties amounted to NTD 1,645 thousand and unrealized loss amounted to NTD

838 thousand), recognized as financial liabilities carried at fair value through profit or loss -

current.





153

December 31, 2014

Counterpartybank

Foreignexchange

rate

Foreign exchangerate on the date of

settlement FXTerm of settlement

A USD/JPY FX > 108.50 Executing price at 108.50 to sell USD 400 A USD/JPY FX > 108.50 Executing price at 108.50 to sell USD 400 A USD/JPY FX > 108.50 Executing price at 108.50 to sell USD 400 A USD/JPY FX > 108.50 Executing price at 108.50 to sell USD 400 A USD/JPY FX > 108.50 Executing price at 108.50 to sell USD 400 A USD/JPY FX > 108.50 Executing price at 108.50 to sell USD 400 A USD/JPY FX > 108.50 Executing price at 108.50 to sell USD 400 A USD/JPY FX > 108.50 Executing price at 108.50 to sell USD 400 A USD/JPY FX > 108.50 Executing price at 108.50 to sell USD 400 A USD/JPY FX > 108.50 Executing price at 108.50 to sell USD 400 A USD/JPY FX > 108.50 Executing price at 108.50 to sell USD 400 A USD/JPY FX > 108.50 Executing price at 108.50 to sell USD 400 A USD/JPY 103.5 > FX > 108.5 Executing price at 108.50 to sell USD 200A USD/JPY 103.5 > FX > 108.5 Executing price at 108.50 to sell USD 200A USD/JPY 103.5 > FX > 108.5 Executing price at 108.50 to sell USD 200A USD/JPY 103.5 > FX > 108.5 Executing price at 108.50 to sell USD 200A USD/JPY 103.5 > FX > 108.5 Executing price at 108.50 to sell USD 200A USD/JPY 103.5 > FX > 108.5 Executing price at 108.50 to sell USD 200A USD/JPY 103.5 > FX > 108.5 Executing price at 108.50 to sell USD 200A USD/JPY 103.5 > FX > 108.5 Executing price at 108.50 to sell USD 200A USD/JPY 103.5 > FX > 108.5 Executing price at 108.50 to sell USD 200A USD/JPY 103.5 > FX > 108.5 Executing price at 108.50 to sell USD 200A USD/JPY 103.5 > FX > 108.5 Executing price at 108.50 to sell USD 200A USD/JPY FX < 100.00 Executing price at 100.00 to buy USD 400A USD/JPY FX < 100.00 Executing price at 100.00 to buy USD 400A USD/JPY FX < 100.00 Executing price at 100.00 to buy USD 400A USD/JPY FX < 100.00 Executing price at 100.00 to buy USD 400A USD/JPY FX < 100.00 Executing price at 100.00 to buy USD 400A USD/JPY FX < 100.00 Executing price at 100.00 to buy USD 400A USD/JPY FX < 100.00 Executing price at 100.00 to buy USD 400A USD/JPY FX < 100.00 Executing price at 100.00 to buy USD 400A USD/JPY FX < 100.00 Executing price at 100.00 to buy USD 400A USD/JPY FX < 100.00 Executing price at 100.00 to buy USD 400





154

Counterpartybank

Foreignexchange

rate

Foreign exchangerate on the date of

settlement FXTerm of settlement

A USD/JPY FX < 100.00 Executing price at 100.00 to buy USD 400A USD/JPY 100 > FX > 103.5 Executing price at 100.00 to buy USD 200A USD/JPY 100 > FX > 103.5 Executing price at 100.00 to buy USD 200A USD/JPY 100 > FX > 103.5 Executing price at 100.00 to buy USD 200A USD/JPY 100 > FX > 103.5 Executing price at 100.00 to buy USD 200A USD/JPY 100 > FX > 103.5 Executing price at 100.00 to buy USD 200A USD/JPY 100 > FX > 103.5 Executing price at 100.00 to buy USD 200A USD/JPY 100 > FX > 103.5 Executing price at 100.00 to buy USD 200A USD/JPY 100 > FX > 103.5 Executing price at 100.00 to buy USD 200A USD/JPY 100 > FX > 103.5 Executing price at 100.00 to buy USD 200A USD/JPY 100 > FX > 103.5 Executing price at 100.00 to buy USD 200A USD/JPY 100 > FX > 103.5 Executing price at 100.00 to buy USD 200B USD/TWD FX < 29.520 Executing price at 29.520 to buy USD 1000B USD/TWD FX < 29.550 Executing price at 29.550 to buy USD 1000C USD/TWD FX < 29.880 Executing price at 29.880 to buy USD 1000C USD/TWD FX < 29.890 Executing price at 29.890 to buy USD 1000D USD/TWD FX < 29.530 Executing price at 29.530 to buy USD 1000D USD/TWD FX < 30.23 Executing price at 30.230 to buy USD 1000D USD/TWD FX < 30.150 Executing price at 30.150 to buy USD 1000D USD/TWD FX < 29.890 Executing price at 29.890 to buy USD 1000D USD/TWD FX < 29.970 Executing price at 29.970 to buy USD 1000D USD/TWD FX < 30.900 Executing price at 30.900 to buy USD 1500E USD/TWD FX < 29.550 Executing price at 29.550 to buy USD 1000E USD/TWD FX < 29.590 Executing price at 29.590 to buy USD 1000E USD/TWD FX < 29.950 Executing price at 29.950 to buy USD 1000E USD/TWD FX < 29.940 Executing price at 29.940 to buy USD 1000E USD/TWD FX < 30.050 Executing price at 30.050 to buy USD 1000E USD/TWD FX < 30.950 Executing price at 30.950 to buy USD 1200F USD/TWD FX < 29.500 Executing price at 29.500 to buy USD 500G USD/JPY FX < 116.8 Executing price at 116.80 to buy USD 1000

As of December 31, 2014, foreign exchange options contracts that have been settledamounted to USD 583,100 thousand, EUR 38,000 thousand and JPY 30,990 thousand, andthe remaining unsettled contracts amounted to USD 27,400 thousand, with a fair value ofNTD 14,400 thousand (including royalties amounted to NTD 1,541 thousand and unrealizedloss amounted to NTD 12,859 thousand), recognized as financial liabilities carried at fairvalue through profit or loss - current.





155

CPT and its subsidiaries

Forward foreign exchange contracts

Forward foreign exchange contracts aimed at managing risk exposures of certaintransactions, but not designated as hedging instruments. Forward foreign exchange contractsentered into by CPT and its subsidiaries are listed as follows:

Item Contract amount PeriodDecember 31, 2015

Buy JPY sell USD USD 6,000 thousand 2016.01~2016.02Buy USD sell NTD USD 6,038 thousand 2016.03~2016.06

December 31, 2014Buy JPY sell USD USD 22,000 thousand 2015.01~2015.02Buy USD sell NTD USD 32,367 thousand 2015.03~2016.06

Swaps

Forward foreign exchange contracts aimed at managing risk exposures of certaintransactions, but not designated as hedging instruments. The swaps are listed as follows:


None

December 31, 2014Buy USD sell NTD USD 19,000 thousand 2015.03~2015.04

SCSC and its subsidiaries


Forward foreign exchange contracts aimed at managing exposures of certain transactions,but not designated as hedging instruments. Forward foreign exchange contracts entered intoby SCSC and its subsidiaries are listed as follows:


Forward foreign exchange contracts None NoneDecember 31, 2014

Forward foreign exchange contracts Buy USD 1,500 thousand 2014.07-2015.01





156



Forward foreign exchange contracts aim at managing exposures of certain transactions, butnot designated as hedging instruments. Forward foreign exchange contracts entered into byTatung Compressors (Zhongshan) Co., Ltd. are listed as follows:

December 31, 2015

Currency Period

Contract amount(thousands of

dollars)Sell out the forwardforeign exchange

Buy RMB sell USD 2016.01~2016.04 USD2,400

December 31, 2014

Currency Period

Contract amount(thousands of

dollars)Sell out the forwardforeign exchange

Buy RMB sell USD 2015.12~2015.12 USD 10,330

The counterparties of the aforementioned derivative transactions are reputable financialinstitutions with satisfactory credit ratings; hence, credit risk is relatively low.

The forward foreign exchange contracts aim at hedging exchange rate risk of net assets ornet liabilities with cash inflows or outflows upon maturity. The Company also has sufficientworking capital so there’s no significant cash flow risk.

(8) Fair value measurement hierarchy

(a) Fair value measurement hierarchy

All asset and liabilities for which fair value is measured or disclosed in the financialstatements are categorized within the fair value hierarchy, based on the lowest levelinput that is significant to the fair value measurement as a whole. Level 1, 2 and 3inputs are described as follows:





157

Level 1 – Quoted (unadjusted) market prices in active markets for identical assets orliabilities that the entity can access at the measurement date

Level 2 – Inputs other than quoted prices included within Level 1 that are observablefor the asset or liability, either directly or indirectly

Level 3 – Unobservable inputs for the asset or liability

For assets and liabilities that are recognized in the financial statements on a recurringbasis, the Group determines whether transfers have occurred between levels in thehierarchy by re-assessing categorization at the end of each reporting period.

(b) Fair value measurement hierarchy of the Group’s assets and liabilities

The Group does not have assets that are measured at fair value on a non-recurring basis.Fair value measurement hierarchy of the Group’s assets and liabilities measured at fairvalue on a recurring basis is as follows:

December 31, 2015Level 1 Level 2 Level 3 Total

Financial assetsFinancial assets at fair value through

profit or loss:Share $515 $- $- $515Forward exchange contracts - 26,235 - 26,235Capital-guaranteed financial product - - 404,398 404,398Open-end funds 104,337 - - 104,337Designated financial assets at fair

value through profit or loss- 1,827,021 - 1,827,021

Available-for-sale financial assets:Share 3,611,028 - 213,023 3,824,051

Financial liabilitiesFinancial liabilities at fair value

through profit or loss:Forward exchange contracts - 778 - 778Exchange options - 806 - 806Designated financial liabilities at

fair value through profit or loss- 931,102 - 931,102





158

December 31, 2014Level 1 Level 2 Level 3 Total

Financial assetsFinancial assets at fair value through

profit or loss:Forward exchange contracts $- $86,767 $- $86,767Swap - 5,018 - 5,018Capital-guaranteed financial product - - 602,586 602,586Open-end funds 30,254 - - 30,254Designated financial assets at fair

value through profit or loss- 1,454,553 - 1,454,553

Available-for-sale financial assets:Share 3,310,191 - 510,981 3,821,172

Financial liabilitiesFinancial liabilities at fair value

through profit or loss:Forward exchange contracts - 387 - 387Exchange options - 14,400 - 14,400Designated financial liabilities at

fair value through profit or loss- 849,059 - 849,059

Transfers between Level 1 and Level 2 during the period

There were no transfers between Levels 1 and 2 for the years ended December 31, 2015and 2014.

Reconciliation for fair value measurements in Level 3 of the fair value hierarchy formovements during the period is as follows:

Measurement at fairvalue throughincome/loss Available- for-sale

Capital-guaranteedfinancial product Share Total

January 1, 2015 $602,586 $510,981 $1,113,567Recognized in other comprehensive

income, 2015- (297,958) (297,958)

Acquisition/Issuance, 2015 2,144,905 - 2,144,905Disposal/Liquidation, 2015 (2,330,662) - (2,330,662)Exchange differences (12,431) - (12,431)December 31, 2015 $404,398 $213,023 $617,421





159

Measurement at fair

value through

income/loss Available- for-sale

Capital-guaranteed

financial product Share Total

January 1, 2014 $134,435 $361,243 $495,678Recognized in other comprehensive

income, 2014

- 149,738 149,738

Acquisition/Issuance, 2014 3,147,860 - 3,147,860Disposal/Liquidation, 2014 (2,708,739) - (2,708,739)Exchange differences 29,030 - 29,030December 31, 2014 $602,586 $510,981 $1,113,567

Information on significant unobservable inputs to valuation

Description of significant unobservable inputs to valuation of recurring fair valuemeasurements categorized within Level 3 of the fair value hierarchy is as follows:

As at December 31, 2015:

Valuation

techniques

Significant

unobservable inputs

Quantitative

information

Relationship

between inputs

and fair value

Sensitivity of the input

to fair value

Available-for-sale

Shares Market approach discount for lack of

marketability

25%~30% The higher the

discount for lack

of marketability,

the lower the fair

value of the stocks

1% increase (decrease)

in the discount for lack

of marketability would

result in increase

(decrease) in the

Group’s equity by NTD

2,037 thousand

Capital Protected

Investment

Deposit

Market approach Price of the

Investment Product

- - Since the transactions

were settled in cash, the

value is the same as fair

value.





160


Valuationtechniques

Significantunobservable inputs

Quantitativeinformation

Relationshipbetween inputsand fair value

Sensitivity of the inputto fair value

Available-for-saleShares Market approach discount for lack of

marketabilityN/A N/A 1% increase (decrease)

in the discount for lackof marketability wouldresult in increase(decrease) in theGroup’s equity by NTD5,993 thousand

Capital ProtectedInvestmentDeposit

Market approach Price of theInvestment Product

N/A N/A Since transactions aredone with cash, thevalue is the same as fairvalue.

Valuation process used for fair value measurements categorized within Level 3 of thefair value hierarchy

The Group’s Accounting Department is responsible for validating the fair valuemeasurements and ensuring that the results of the valuation are in line with marketconditions, based on independent and reliable inputs which are consistent with otherinformation, and represent exercisable prices. The Department analyses the movementsin the values of assets and liabilities which are required to be re-measured or re-assessedas per the Group’s accounting policies at each reporting date.

(c) Fair value measurement hierarchy of the Group’s assets and liabilities not measured atfair value but for which the fair value is disclosed


Level 1 Level 2 Level 3 TotalInvestment properties (please refer to Note6(14)) $- $- $22,326,370 $22,326,370Investments accounted for using the equitymethod(please refer to Note 6(12)) 3,087,627 - - 3,087,627


Not applicable.





161

(9) Significant assets and liabilities denominated in foreign currencies

Information regarding the significant assets and liabilities denominated in foreign currencies

is listed below:


Foreign currency Exchange rate NTD

Financial Assets -

Monetary items

USD $428,968,960 32.8250 $14,080,906

JPY 900,954,051 0.2727 245,690

RMB 6,237,853,400 5.0550 31,532,224

HKD 2,788,000 4.2350 11,807

EUR 187,610 35.8800 6,731

CHF 650 33.1850 22

Investment under equity

method

RMB 142,362,524 5.0550 719,640

THB 129,789,000 0.9146 118,705

Financial Liabilities -

Monetary items

USD 786,851,346 32.8250 25,828,395

JPY 12,090,643,194 0.2727 3,297,118

RMB 8,048,975,623 5.0550 40,687,411

EUR 2,841,231 35.8800 101,943

CHF 26,540 33.1850 881

HKD 16,859 4.2350 71

GBP 5,996 48.6700 292

SEK 1,073,053 3.9100 4,196

THB 7,438,070 0.9146 6,803





162



Financial Assets -Monetary items

USD $543,542,402 31.65000 $16,570,117JPY 1,409,995,699 0.26460 373,085RMB 3,151,339,529 5.17240 16,300,020HKD 3,187,000 4.08000 13,003EUR 85,212 38.47000 3,278CHF 7,974 31.97500 255

Investment under equitymethod

USD (51,818) 31.65000 (1,640)RMB 53,950,253 5.17240 279,053THB 298,838,244 0.96700 288,977

Financial Liabilities -Monetary items

USD 777,144,296 31.65000 24,596,617JPY 13,371,669,543 0.26460 3,538,144RMB 7,867,672,250 5.17240 40,694,827SGD 32,000 23.94000 766EUR 1,306,074 38.47000 50,245CHF 38,000 31.97500 1,215HKD 218,000 4.08000 889GBP 3,687 49.27000 182SEK 1,073,500 4.09000 4,391CZK 8,440 1.38750 12

Because the subsidiaries used a wide range of functional currencies, the Group could notdisclose the foreign exchange gain or loss of financial asset and liability by each foreigncurrency with significant effect. The net gain (loss) from foreign exchange currencies of theGroup were NTD 220,220 thousand and NTD (796,381) thousand for the years endedDecember 31, 2015 and 2014, respectively.





163

(10)Capital management

The primary purpose of the Group’s capital management is to ensure the Group can maintaina strong credit rating and healthy capital ratios in order to support its business and maximizeequity value. The Group manages and adjusts its capital structure in accordance withchanges in economic conditions. To maintain or adjust the capital structure, the Group mayadjust dividend payment, return capital or issue new shares.

(11)On December 7, 2015, Taiwan Supreme Court revoked the judgment made by Taiwan HighCourt on the Nature Worldwide Technology Co., case and remanded the case to the TaiwanHigh Court. Chairman Lin has appointed an attorney to assist him in the legal issues of thejudgment and he hopes the court can discover the truth that he is innocent. The Company'soperations, finance and business were not affected by the case and will continue as usual .

(12)As of December 31, 2015, there was liquidity risk that the balance of the Group’s currentliabilities exceeded the balance of its current assets, which resulted from the consolidatedfinancial positions of CPT and GET.

GET planned to extend its short-term loans and other related procedures. The managementof GET considered that the above strategy will reduce the liquidity risk of the consolidatedfinancial statements substantially on December 31, 2015.

CPT had a loss in 2015 amounting to NTD 8,440,495 thousand. As of December 31, 2015,CPT’s current liabilities exceeded its current assets by NTD 22,269,279 thousand. Theequity attributed to CPT was NTD 3,607,121 thousand. There is liquidity risk that currentliabilities exceeded current assets. To improve its financial standing and working capital,CPT planned to take the following actions:

(a) Extend the short-term loans. CPT planned to extend the short-term loans upon maturityto meet the short-term operation funding needs. As of March 2016, CPT has completedall the extension procedures.

(b) CPT had received support from the syndicated loan banks and has signed an extensionagreement in March 2016, which postponed the payment deadline to May 17, 2019.





164

(c) In March 2016, CPT signed a share purchase agreement with the Company to sell41.03% shares of Chunghwa Picture Tubes (Labuan) Ltd., a subsidiary of CPT. Thetotal shares to be sold were 8,000 thousand shares and the total transaction amountapproximated NTD 968,560 thousand.

(d) In March 2016, CPTF Optronics (Shen-Zhen) Co., Ltd., a subsidiary of CPT, acting as aproxy of Chunghwa Picture Tubes (Bermuda) Ltd., entered into a liability investmenttrust agreement with Electronic Information Industry (Fujian) Venture CapitalPartnership Co., Ltd. and Xing Ye Zheng Quan Co., Ltd. The trust is purchased byXing Ye Zheng Quan Co., Ltd. and the duration is one year.

(e) The Company is committed to supervising the operation and management of CPT andtake suitable measures to assist CPT in acquiring funds in order to maintain its normaloperations.

The consolidated financial statements of the Group for the year ended December 31,2015 was not adjusted due to the uncertainty of whether the strategies mentioned abovecan be achieved.

13. Other disclosure

(1) Information at significant transactions:

(a) Financing provided to others: refer to Attachment 1.

(b) Endorsement/Guarantee provided to others: refer to Attachment 2.

(c) Securities held: refer to Attachment 3.

(d) Individual securities acquired or disposed of with accumulated amount exceeding thelower of NTD300 million or 20% of the capital stock: refer to Attachment 4.

(e) Acquisition of real estate in the amount exceeding the lower of NTD300 million or 20%of capital stock: refer to Attachment 5.





165

(f) Disposal of real estate up to the amount exceeding the lower of NTD300 million or 20%of capital stock: refer to Attachment 6.

(g) Related party transactions for purchases and sales amounts exceeding the lower ofNTD100 million or 20% of capital stock: refer to Attachment 7.

(h) Receivables from related parties with amounts exceeding the lower of NTD100 millionor 20% of capital stock: refer to Attachment 8.

(i) Engaging in derivative transactions: refer to Note 6 and Note 12 in the consolidatedfinancial statements.

(j) Intercompany Relationships and Significant Intercompany Transactions: refer toAttachment 11.

(2) Information on investees:

Of the investee company directly or indirectly has significant influence or control over, theirinvestee companies’ information: refer to Attachment 9.

(3) Information on investments in China:

(a) The investee company name, main business, paid-in capital, type of the investment,capital inflow and outflow, ownership, investment gains and losses, ending balance ofinvestment, repatriation of investment income and the mainland investment limitscenario: refer to Attachment 10.

(b) with the investee companies directly or indirectly through a third country following theoccurrence of significant transactions, prices, payment terms and unrealized gains andlosses were as follows :

Ending balance and percentage of purchase and related payables: refer to Attachment6.

Ending balance and percentage of sales and related receivables: refer to Attachment6.





166

Gains and loss on the transaction of property: refer to Attachment 5.

Ending balance and purpose of endorsement guarantees or collateral: refer toAttachment 2.

Ending balance, maximum limit, interest rates range and current interest amount offinancing: refer to Attachment 1.

Other investments that have significant impact on current profit or financialcondition, such as the services provided or received: refer to Attachment 6.

14. Segment information

For management purposes, the Group organized its business units based on their products andservices and has four reportable operating segments as follows:

(1) Optical department: This department is responsible for CRT, TFT-LCD backlight modulemanufacturing and production, development of liquid crystal display modules, electronicswitches and sensors and solar modules virus, manufacturing and sales.

(2) Machinery and energy department: The department is responsible for the research,manufacture and sales of intelligent grid, smart-grid portal, photovoltaics, LED lighting,motor and machinery and energy control system.

(3) Consumer products department: This department is responsible for digital television, flatpanel display manufacturing, digital media devices, digital audio-visual and homeappliances, etc.

No operating segments have been aggregated to form the above reportable operating segments.

Management monitors the operating results of its business units separately for the purpose ofmaking decisions about resource allocation and performance assessment. Segment performanceis evaluated based on operating profit or loss and is measured based on accounting policiesconsistent with those in the consolidated financial statements. However income taxes aremanaged on a group basis and are not allocated to operating segments.





167

Transfer prices between operating segment are on an arm’s length basis in a manner similar totransactions with third parties.

(1) Information on profit or loss, assets and liabilities of the reportable segment:


Optical

Machinery

and energy

Consumer

products

Other

operating

segments

Adjustment and

elimination Consolidated

Revenue

External customer $47,276,283 $29,895,652 $11,680,317 $5,892,101 $- $94,744,353

Inter-segment 43,428 3,069,845 7,555,679 16,889 (10,685,841) -

Total revenue $47,319,711 $32,965,497 $19,235,996 $5,908,990 $(10,685,841) $94,744,353

Segment profit (loss) $(8,440,495) $(2,625,223) $(387,063) $(3,528,583) $4,186,845 $(10,794,519)


Optical

Machinery

and energy

Consumer

products

Other

operating

segments

Adjustment and

elimination Consolidated

Revenue

External customer $56,376,959 $32,002,168 $12,713,722 $11,516,429 $- $112,609,278

Inter-segment 14,418 4,648,672 8,170,138 47,840 (12,881,068) -

Total revenue $56,391,377 $36,650,840 $20,883,860 $11,564,269 $(12,881,068) $112,609,278

Segment profit (loss) $(3,655,057) $(2,599,651) $80,627 $5,406,091 $(2,219,059) $(2,987,049)

1 Revenue was from information software and real estate development that are operatingsegments that did not meet the quantitative thresholds for reportable segments.

2 Inter-segment revenue are eliminated on consolidation and recorded under the“adjustment and elimination” column, all other adjustments and eliminations aredisclosed below.





168

(2) Geographical information

Revenue from external customersFor the years ended

2015 2014Taiwan $34,508,464 $43,147,192China 33,494,843 44,117,086Asia 6,318,773 5,632,835Europe 650,579 186,506America 4,064,763 3,178,438Southeast Asia 15,272,955 15,521,145Other countries 433,976 826,076

Total $94,744,353 $112,609,278

The revenue information above is based on the location of the customer.

Non-current assetsAs of December 31,

2015 2014Taiwan $80,783,157 $87,458,319China 16,095,864 17,452,119Asia 24,169 23,112Europe 5,673 23,411America 806,779 228,605Southeast Asia 372,122 896,936Total $98,087,764 $106,082,502

Non-current assets included property, plant and equipment, investment property, intangibleassets, other non-current assets and long-term receivable.

(3) Information about major customers

The Company’s sales to any single customer did not account for more than 10% of its netconsolidated sales of 2015 and 2014. No disclosure is required.



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n th

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f the

econ

omic

subs

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rans

actio

nsar

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anci

ng to

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egar

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esan

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rein

.N

ote 3

: Max

imum

bal

ance

offin

anci

ng p

rovi

ded

toot

hers

for t

hecu

rrent

year

.N

ote 4

: Nat

ureo

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anci

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code

das

follo

ws:

oper

atio

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undi

ng is

code

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;sh

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e 5:

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ount

of th

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rein

if th

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ng is

rela

ted

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otal

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er to

thea

mou

nt th

e len

der p

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des t

o th

e bor

row

er w

ithin

the p

asty

ear.

Not

e 6: T

here

ason

sand

coun

terp

artie

sof t

hefin

anci

ngar

eadd

ress

ed h

erei

nas

thef

inan

cing

was

asso

ciat

ed w

ith sh

ort-t

erm

capi

tal n

eeds

.N

ote 7

: Fin

anci

ng to

indi

vidu

alco

unte

r-par

tysh

all n

otex

ceed

10%

~40%

of th

e net

asse

tsva

lues

from

the l

ates

tfin

anci

alsta

tem

ents.

Tota

lfin

anci

ngam

ount

shal

l not

exce

ed 4

0%of

thea

udite

d/re

view

ed n

etas

sets

valu

eof t

he m

ostc

urre

nt p

erio

d.N

ote 8

: Ifa

pub

licco

mpa

ny b

rings

thef

inan

cing

pro

posa

l to

the b

oard

of d

irect

orsa

ccor

ding

to A

rticl

e 14-

1, th

eReg

ulat

ions

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erni

ngLo

anin

gof

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sand

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ing

ofEn

dors

emen

ts/G

uara

ntee

s by

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icCo

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nies

,N

ote0

9: th

ecom

pany

still

need

s to

disc

lose

thea

mou

ntre

solv

ed b

y th

e boa

rd in

the b

alan

ce to

disc

lose

ther

isk,e

ven

if th

efun

dsar

e not

appr

opria

ted

yet.

Not

e09:

Whe

n th

efun

dsar

erep

aid

afte

rwar

ds, t

heco

mpa

nysh

ould

disc

lose

thea

mou

ntre

turn

ed to

refle

ct th

erisk

adju

stmen

t.N

ote0

9:If

a pu

blic

com

pany

auth

oriz

es th

echa

irman

of th

e boa

rdof

dire

ctor

s to

appr

opria

teor

use

certa

in li

mits

of th

efun

dsse

vera

l tim

es in

the p

erio

dof

aye

arac

cord

ing

to A

rticl

e 14-

2,Re

gula

tions

Gov

erni

ngLo

anin

gof

Fund

sand

Mak

ing

ofN

ote0

9:En

dors

emen

ts/G

uara

ntee

s by

Publ

icCo

mpa

nies

, the

com

pany

still

need

s to

disc

lose

thea

mou

ntre

solv

ed b

y th

e boa

rd in

the b

alan

ce.

Not

e 9: S

han-

Chih

Ass

et D

evel

opm

entC

o.,L

td.'s

rece

ivab

lesf

rom

Nat

ureW

orld

wid

eTec

hnol

ogy

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. wer

ecol

lect

ed in

thea

mou

ntof

$12

0,00

0 th

ousa

ndon

June

10,

201

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here

mai

ning

clai

m is

still

pend

ing

in th

ecou

rt.N

ote 1

0: T

heam

ount

offin

anci

ng to

Nat

ureW

orld

wid

eTec

hnol

ogy

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.fro

m th

eCom

pany

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bsid

iary

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n-Ch

ihIn

vestm

entC

o.,L

td. i

sexc

eedi

ng th

e lim

it. N

atur

eWor

ldw

ideT

echn

olog

yCo

rp. i

s in

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roce

ssof

liqu

idat

ion.

Thec

ompa

ny's

finan

cial

pos

ition

will

be i

mpr

oved

once

the l

iqui

datio

n is

com

plet

ed.

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e 11:

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Mar

ch 3

0, 2

012,

theC

ompa

nysig

ned

aSh

areP

urch

aseC

ontra

ct w

ith V

eeTe

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ultim

edia

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er th

econ

tract

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pany

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ldse

llal

lof i

tssh

ares

of it

ssub

sidia

ry,T

atun

gIn

foCo

mm

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, to

Vee

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com

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timed

iaCo

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d..

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ll sh

ares

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n tra

nsfe

rred.

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eove

r, th

eorig

inal

amou

nt t

hat t

heCo

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ny h

asfin

ance

d to

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ngIn

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mm

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ber

epai

d by

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ngIn

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in fi

veye

ars.

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fer t

o N

ote 6

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etai

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ote 1

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asfin

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itss

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ngG

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e bee

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e.Th

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rdof

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ctor

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asre

solv

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ceed

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aniz

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turin

g to

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e the

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e.Th

efin

anci

ng w

ill b

eset

tled

upon

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rgan

izatio

nre

struc

ture

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ote 1

3: T

heCo

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ny h

asfin

ance

d to

itss

ubsid

iary－

Tatu

ng V

ietn

amCo

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e loa

ns h

ave b

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oard

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irect

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f the

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pany

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lved

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rmin

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ts liq

uida

tion.

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ter t

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ted

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ount

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d its

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e cod

ed as

follo

ws:

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eCom

pany

is co

ded

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esub

sidiar

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e cod

ed co

nsec

utiv

ely b

egin

ning

from

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nth

e ord

er p

rese

nted

inth

etab

le ab

ove.

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e 2:A

ccor

ding

toth

e"G

uide

lines

Gov

erni

ngth

e Pre

para

tion

of F

inan

cialR

epor

ts by

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uriti

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uers"

issue

d by

theR

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uriti

es an

d Fu

ture

sBur

eau,

rece

ivin

g pa

rties

shou

ld b

e disc

lose

d as

one

oft

hefo

llow

ing:

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inve

stee c

ompa

nyth

at ha

s a b

usin

essr

elatio

nshi

pw

ithTa

tung

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Ltd

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subs

idiar

yin

whi

chTa

tung

hol

ds d

irectl

y ove

r 50%

of e

quity

inter

est.

3.An

inve

steei

nw

hich

Tatu

ng an

d its

subs

idiar

ies h

old

over

50%

of e

quity

inter

est.

4.An

inve

steei

nw

hich

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ng h

olds

dire

ctly a

nd in

dire

ctly o

ver 5

0% o

f equ

ityin

teres

t.5.

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veste

etha

t has

pro

vide

d gu

aran

teest

oTa

tung

Co.,L

td, a

nd v

iceve

rsa, d

ue to

cont

ractu

alre

quire

men

ts.6.

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veste

ein

whi

chTa

tung

conj

unctl

yinv

ests

with

oth

ersh

areh

olde

rs, an

d fo

rwhi

chTa

tung

has

pro

vide

d en

dorse

men

t/gua

rant

eein

pro

porti

onto

itssh

areh

oldi

ng p

erce

ntag

e.N

ote 3

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ivid

ual e

ndor

sem

ent o

r gua

rant

eesh

all n

ot ex

ceed

20%

to 5

0% o

fthe

pro

vide

r's n

et as

sets

valu

e, ho

wev

er, n

o lim

itsfo

rthe

coun

ter-p

arty

who

is a c

ompa

ny 1

00%

dire

ctly o

rind

irectl

y ow

ned

byCP

T.To

tal en

dorse

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t or g

uara

ntee

for o

ther

ssha

ll no

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eed

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rovi

der's

net

asse

tsva

lue.

valu

efro

mth

efin

ancia

lstat

emen

ts of

lasty

ear.

Not

e 4:A

com

pany

is co

ded

"Y"w

hen

a sub

sidiar

yis e

ndor

sed

byth

elist

ed p

aren

t com

pany

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liste

d pa

rent

com

pany

is en

dorse

d by

a su

bsid

iary,

or a

com

pany

with

an en

dorse

men

tin

Main

land

Chin

a.

Shan

-Chi

hAs

setD

evelo

pmen

tCo.

:Tot

al en

dorse

men

t or g

uara

ntee

fort

he p

aren

t com

pany

shall

not

exce

ed 3

00%

oft

he p

rovi

der's

net

asse

tsva

luef

rom

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inan

cials

tatem

ents

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tyea

r;To

tal en

dorse

men

t or g

uara

ntee

fort

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bsid

iarys

hall n

ot ex

ceed

50%

oft

he p

rovi

der's

net

asse

ts

Gua

rant

eepr

ovid

ed b

ypa

rent

com

pany

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e 4)

Gua

rant

eepr

ovid

ed b

y a

subs

idiar

y(N

ote 4

)

Gua

rant

eepr

ovid

edto

subs

idiar

iesin

Main

land

Chin

a(N

ote 4

)

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rsem

ent/G

uara

ntee

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vide

dto

oth

ersf

orth

eyea

r end

ed D

ecem

ber 3

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e 1

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ount

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mth

elate

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ancia

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temen

t

Lim

it of

total

guar

antee

/en

dorse

men

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ount

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e 3)

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172



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2

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ltra

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tions

are e

limin

atedi

nthe

cons

olid

atedf

inan

cials

tatem

ents.

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2:No

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ket

Note

3:No

activ

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ket,

able

tom

easu

refa

irva

lue

Book

valu

e

Endi

ng ba

lance

Relat

ions

hip

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held

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ber 3

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rolle

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Note

Units

(thou

sand

)/bo

nds/s

hare

sM

arke

tvalu

e/ne

t ass

etsva

lue

(Am

ount

sinT

hous

ands

ofNe

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iwan

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lesss

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herw

ise)

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tage o

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ip(%

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nanc

ialsta

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t acc

ount

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and n

ame o

fsec

uriti

es

173



ATTA

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ount

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Note

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adin

gpr

ices

Note

2:Th

e tra

nsac

tions

amon

g th

econ

sold

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entit

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reeli

min

ated

in th

econ

solid

ated

finan

cial s

tate

men

ts.No

te3:

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eofi

ncom

eofa

ssoc

iates

,joi

ntve

ntur

es a

nd su

bsid

iries

.No

te4:

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ange

diffe

renc

es re

sulti

ngfro

m tr

ansla

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inan

cial s

tate

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atio

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te5:

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new

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otin

prop

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n to

owne

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tere

stNo

te6:

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alize

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ins (

loss

es)f

rom

avail

able-

for-s

alefin

ancia

lass

ets

Note

7:In

fluen

ceof

reco

gnizi

ng su

bsid

iaries

'cha

ngei

nad

ditio

nalp

aid

inca

pita

lNo

te8:

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eofo

ther

com

preh

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omeo

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oint

vent

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and

subs

idiri

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te9:

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ty re

lated

tono

n-cu

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asse

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for s

aleNo

te10

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osal

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ssis

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ecog

nize

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e to

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zatio

n

Disp

osal

Endi

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pe a

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meo

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uriti

esFi

nanc

ials

tatem

ent a

ccou

ntCo

unte

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tyRe

latio

nshi

pBe

ginn

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174



ATTA

CHM

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ount

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prais

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sclo

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erty

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aisal

is re

quire

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law.

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pital

stock

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rsto

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aren

tcom

pany

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hesto

cksw

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ssue

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ldsh

allbe

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ofth

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ity at

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table

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aren

t.

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3:Tr

ansa

ction

date

refe

rsto

cont

ract

date,

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entd

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losin

gda

te,tra

nsfe

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ctors

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ther

dates

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ty an

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ount

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ever

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ount

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175



ATT

ACH

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nt-s

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s(1

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nt-s

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s(1

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46,8

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apan

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hung

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ure

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1,66

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rent

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Tech

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Pict

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ure

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00)

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129,

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us T

echn

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ure

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s,Lt

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516,

091

10.0

0

-

-

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Not

e1:

The

trans

actio

nsam

ong

the

cons

oldi

ated

entit

iesw

ere

elim

inat

edin

the

cons

olid

ated

finan

cial

stat

emen

ts.

Not

e2:

Reco

rded

inpa

yabl

esin

subs

idia

ry's

book

.N

ote

3: T

hisi

sdep

osits

-info

r rew

ork

ofm

ater

ials

whi

chw

as re

cord

edin

othe

rcur

rent

liabi

litie

sin

subs

idia

ry's

book

.N

ote

4: T

heam

ount

incl

uded

the

raw

mat

eria

lsso

ldto

Fuhu

a El

ectro

nic

Tech

nolo

gyCo

.,Lt

d.,S

uzho

ufo

rfur

ther

proc

essa

ndso

ldba

ckto

FDan

del

imin

ated

anam

ount

of$1

9,39

3th

ousa

ndin

acco

rdan

cew

ith re

gula

tion.

Not

e(N

ote

1)Pu

rcha

ses

(Sal

es)

Am

ount

(Not

e1)

Perc

enta

geof

tota

lpur

chas

es(s

ales

)Cr

edit

Term

Uni

tpric

eC

redi

t Ter

mBa

lanc

e(N

ote

1)Pe

rcen

tage

ofto

tal

rece

ivab

les (

paya

ble)

Purc

hase

r (se

ller)

Rela

ted

party

Rela

tions

hip

Tran

sact

ions

Det

ails

ofno

n-ar

m's

leng

thtra

nsac

tion

Not

esan

dac

coun

ts re

ceiv

able

(pay

able

)

177



ATTA

CHM

ENT

8:Re

ceiv

ables

from

relat

edpa

rties

with

amou

nts e

xcee

ding

NT$1

00m

illio

nor2

0%of

capi

tal st

ock

Amou

ntCo

llecti

on st

atus

Tatu

ngCo

.,Ltd

1.Ac

coun

tsre

ceiv

able-

Relat

edpa

rtyGr

eenE

nerg

yTec

hnol

ogyI

nc.

Pare

nt-su

bsid

iary

$503

,651

1.06

--

$-$-

Tatu

ngCo

nsum

erPr

oduc

ts(T

aiwan

)Co.

,Ltd

.Pa

rent

-subs

idiar

y1,

421,

293

2.60

--

--

Tatu

ngEl

ectri

cCom

pany

ofAm

erica

,Inc.

Pare

nt-su

bsid

iary

118,

125

4.78

--

--

2.Ot

her a

ccou

ntsr

eceiv

able-

Relat

edpa

rty(in

cludi

nglo

ng-te

rm)

Gree

nEne

rgyT

echn

olog

yInc

.Pa

rent

-subs

idiar

y24

1,33

1-

--

--

Shan

-Chi

hAss

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velo

pmen

tCo.

Pare

nt-su

bsid

iary

382,

290

--

--

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tung

Info

rmati

onTe

chno

logy

(Jian

gsu)

Co.,L

td.

Pare

nt-su

bsid

iary

1,12

1,96

9-

--

--

Tatu

ng(T

haila

nd)C

o.,L

td.

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nt-su

bsid

iary

95,7

72-

--

--

3.Co

nstru

ction

rece

ivab

lesCh

ungh

waPi

cture

Tube

s,Lt

d.Pa

rent

-subs

idiar

y46

9,31

8-

--

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ngCo

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apan

,Inc

.Ch

ungh

waPi

cture

Tube

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mpa

nyin

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ciates

1,66

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90.

521,

072,

572

--

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ngCo

.,Ltd

Pare

nt-su

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iary

140,

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15.1

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traEn

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nerg

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ting.

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ntly,

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oth

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fund

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eGro

upha

snot

pres

sure

dth

eoth

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rtyto

pay.

--

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ard

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lopm

entC

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td.

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alDi

splay

(Fuz

hou)

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nt-su

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138,

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721

9

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ectro

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Tech

nolo

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ungh

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cture

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rent

-subs

idiar

y12

4,16

01.

8621

,902

-16

,273

-Co

.,Ltd

.

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Pictu

reTu

bes,

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tplu

sTec

hnol

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o.,L

td.

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nt-su

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iary

143,

348

5.06

--

142,

047

-

CPTF

Optro

nics

Co.,L

td.

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Pictu

reTu

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nt-su

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iary

4,69

8,28

6-

--

--

Chun

ghwa

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iang)

Ltd.

Chun

ghwa

Pictu

reTu

bes,

Ltd.

Pare

nt-su

bsid

iary

2,46

0,84

7-

--

--

Chun

ghwa

Pictu

resD

isplay

Tech

nolo

gy(F

ujian

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.Ch

ungh

waPi

cture

Tube

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d.Pa

rent

-subs

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y76

7,30

9-

--

--

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alDi

splay

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ghwa

Pictu

reTu

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Pare

nt-su

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iary

256,

140

--

--

-CP

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troni

csCo

.,Ltd

.Pa

rent

-subs

idiar

y62

2,49

0-

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--

Chun

ghwa

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iang)

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nt-su

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iary

129,

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--

--

-

Kuns

hanG

iantp

lusO

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lectro

nics

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tplu

sTec

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o.,L

td.

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nt-su

bsid

iary

445,

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--

-39

0,94

3-

Shen

zhen

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tplu

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troni

csGi

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echn

olog

yCo.

,Ltd

.Pa

rent

-subs

idiar

y47

4,09

1-

--

474,

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-

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hanG

iantp

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ptro

nics

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layTe

chno

logy

Co.,L

tdGi

antp

lusT

echn

olog

yCo.

,Ltd

.Pa

rent

-subs

idiar

y20

1,85

8-

--

201,

858

-

Note

1:Th

etra

nsac

tions

amon

gthe

cons

oldi

ated

entit

ieswe

re el

imin

ated

inth

e con

solid

ated

finan

cial s

tatem

ents.

Both

parti

es ar

e stil

lneg

otiat

ingp

ayba

ckm

ethod

s and

theG

roup

still

hasn

otpa

idba

ck.

Amou

ntre

ceiv

edin

subs

eque

ntpe

riod

Allo

wanc

efor

doub

tful

acco

unts

Com

pany

reco

rded

as re

ceiva

ble

Relat

edpa

rtyRe

latio

nshi

pEn

ding

balan

ce(N

ote1

)Tu

rnov

erra

te

Over

duer

eceiv

ables

178



ATTA

CHM

ENT

9:Na

mes,

locati

onsa

ndrel

atedi

nform

ation

ofinv

estee

comp

anies

(exclu

dingi

nvest

ment

inM

ainlan

d Chin

a)

Endin

gbala

nce

Begin

ningb

alanc

eNu

mber

ofsh

ares

(intho

usan

ds)

Perce

ntage

ofow

nersh

ip(%

)

Book

value

Tatun

g Co.,

Ltd

Chun

ghwa

Pictur

eTub

es,Lt

d.Ta

oyua

n City

,Taiw

anTh

eman

ufactu

ringa

nd sa

leof

pictur

etub

esan

dTFT

-LCD

produ

cts.

$4,29

3,025

$4,29

3,025

548,3

85,63

08.4

6($6

44,34

3)($8

,440,4

95)

($722

,865)

San C

hihSe

mico

nduc

tor C

o.,Lt

d.Ta

ipei C

ity,T

aiwan

Them

anufa

cturin

gand

sale

of sem

icond

uctor

sand

chips

920,9

8192

0,981

49,91

3,576

43.18

1,218

,386

(960,4

16)

(447,9

88)

Forw

ardEl

ectron

ics C

o.,Lt

d.Ne

wTa

ipei C

ity,T

aiwan

Them

anufa

cturin

gand

sale

ofele

ctron

ics31

4,095

314,0

9518

,955,6

2312

.0512

2,290

(154,4

24)

(18,61

4)Ta

tungS

ystem

Tech

nolog

iesInc

.Ta

ipei C

ity,T

aiwan

Them

anufa

cturin

gofd

ata st

orage

.24

7,655

247,6

5536

,018,1

2153

.6049

3,761

87,53

146

,915

Tatun

gFin e

Che

mica

ls Co

.,Ltd.

Taipe

i City

,Taiw

anInd

ustri

alco

ating

s,elec

trocu

tionc

oatin

gsres

istor

coati

ngs,p

hoto-

catal

yst,in

kjetin

k39

2,316

392,3

1637

,458,3

1948

.2724

3,270

(57,04

0)(27

,852)

Chih

Shen

gInv

estme

nt Co

.,Ltd.

Taipe

i City

,Taiw

anInv

estme

ntho

lding

1,500

,000

1,500

,000

150,0

00,00

010

0.00

824,6

86(24

1,337

)(23

8,792

)Sh

an C

hihInv

estme

nt Co

.,Ltd.

Taipe

i City

,Taiw

anInv

estme

ntho

lding

2,119

,350

2,119

,350

77,62

7,119

95.83

461,9

71(69

,576)

(70,67

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179



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185

Appendix - Parent company only statements


1

TATUNG CO., LTD. PARENT COMPANY ONLY FINANCIAL STATEMENTS

WITH INDEPENDENT AUDITORS’ REPORT

DECEMBER 31, 2015 AND 2014

Address: 22, Sec. 3, Chung-shan N. Rd., Taipei city, Taiwan R.O.C.

Telephone: 886-2-2592-5252

The reader is advised that these financial statements have been prepared originally in Chinese. In the event of a conflict between these financial statements and the original Chinese version or difference in interpretation between the two versions, the Chinese language financial statements shall prevail.



2

eport of Independent Auditors English Translation of a Report Originally Issued in Chinese

The Board of Directors and Shareholders Tatung Co., Ltd. We have audited the accompanying parent company only balance sheets of Tatung Co., Ltd. (“the Company”) as of December 31, 2015 and 2014, the related parent company only statements of comprehensive income, changes in equity and cash flows for the years ended December 31, 2015 and 2014. These parent company only financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these parent company only financial statements based on our audits. Certain investments, which were accounted for under the equity method based on the financial statements of the investees, were audited by other auditors. Our audit insofar as it related to the investments amounted to NT$5,610,127 thousand and NT$6,255,066 thousand, which represented 8% and 9% of the total assets as of December 31, 2015 and 2014, respectively; and the related share of profits (losses) of subsidiaries, associates and joint ventures of NT$207,718 thousand and NT$289,860 thousand which represented (7)% and 87% of the income (loss) before income tax for the years ended December 31, 2015 and 2014, respectively; and the related share of other comprehensive income (loss) of subsidiaries, associates and joint ventures of NT$565 thousand and NT$235,359 thousand, which represented 0% and 25% of the total comprehensive income (loss) for the years ended December 31, 2015 and 2014, respectively; are based solely on the reports of the other auditors. We conducted our audits in accordance with “Rules Governing Auditing and Certification of Financial Statements by Certified Public Accountants” and the auditing standards generally accepted in the Republic of China, which require that we plan and perform the audit to obtain reasonable assurance about whether the parent company only financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the parent company only financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall parent company only financial statement presentation. We believe that our audits and the reports of the other auditors provide a reasonable basis for our opinion. In our opinion, based on our audits and the reports of the other auditors, the parent company only financial statements referred to above present fairly, in all material respects, the financial position of Tatung Co., Ltd. as of December 31, 2015 and 2014, and the results of its operations and its cash flows for the years then ended December 31, 2015 and 2014, were in conformity with the Guidelines Governing the Preparation of Financial Reports by Securities Issuers. Ernst & Young Taipei, Taiwan Republic of China March 23, 2016 Notice to Readers The accompanying consolidated financial statements are intended only to present the consolidated financial position and results of operations and cash flows in accordance with accounting principles and practices generally accepted in the Republic of China on Taiwan and not those of any other jurisdictions. The standards, procedures and practices to audit such financial statements are those generally accepted and applied in the Republic of China on Taiwan.



Notes Amount Amount

Current assets

Cash and cash equivalents 4,6 $2,205,980 3 $2,805,241 4Financial assets at fair value through profit or loss, current 4,6 24,200 - 67,040 -Available-for-sale financial assets, current 4,6 382,528 1 483,365 1Financial assets in held-to-maturity, current 4,6 20,000 - - -Financial assets carried at cost, current 4,6 29,238 - 29,238 -Debt instrument investments for which no active market exists, current 4,6,8 3,170,899 4 94,263 -Notes receivable, net 4,6 296,180 - 356,041 -Notes receivable - related parties, net 4,6,7 1,775 - 28,141 -Accounts receivable, net 4,6 2,448,480 4 2,819,050 4Accounts receivable - related parties, net 4,6,7 1,996,509 3 2,104,888 3Construction receivables 4,6,7 853,901 1 2,005,968 3Other receivables 4 29,605 - 36,119 -Other receivables - related parties 4,7 1,224,455 2 1,340,352 2Current tax assets 12,942 - 20,818 -Inventories 4,6 4,042,959 6 4,340,991 6Prepayments 7 349,352 1 574,326 1

Total current assets 17,089,003 25 17,105,841 24Non-current assets

Available-for-sale financial assets, non-current 4,6 12,284 - 56,241 -Financial assets in held-to-maturity, non-current 4,6 - - 20,000 -Financial assets carried at cost, non-current 4,6 300 - 300 -Debt instrument investments for which no active market exists, non-current 4,6 30,770 - - -Investments accounted for under the equity method 4,6,8 44,776,579 66 47,822,114 68Property, plant and equipment 4,6,8 3,060,707 4 2,701,758 4Intangible assets 4,6 72,033 - 101,370 -Deferred tax assets 4,6 510,064 1 512,959 1Other non-current assets 6 228,983 - 237,058 -Deposit-out 219,228 - 206,026 -Long-term receivables 4,6 124,000 - 282,504 -Long-term receivables - related parties 4,6,7 3,007,680 4 2,387,576 3

Total non-current assets 52,042,628 75 54,327,906 76Total assets $69,131,631 100 $71,433,747 100

Contents

Assets

December 31, 2015 and December 31, 2014

English Translations of Financial Statements Originally Issued in Chinese

TATUNG CO., LTD.

PARENT COMPANY ONLY BALANCE SHEETS

December 31, 2015 December 31, 2014

(Expressed in Thousands of New Taiwan Dollars)

3



Liabilities and Equity

Notes Amount Amount

Current liabilities

Short-term loans 6,8 $5,524,603 8 $6,539,705 9Short-term notes and bills payable 6 549,759 1 599,744 1Financial liabilities at fair value through profit or loss, current 4,6 807 - 14,400 -Accounts payable 2,986,747 5 4,279,958 6Accounts payable - related parties 7 285,616 - 401,944 1Other payables 1,366,453 2 1,114,153 2Other payables - related parties 7 49,205 - 142,648 -Provision, current 4,6 45,146 - 91,916 -Advanced receipts 187,293 - 349,365 -Current portion of long-term loans 6,8 3,321,520 5 1,885,579 3Other current liabilities - others 27,378 - 32,790 -

Total current liabilities 14,344,527 21 15,452,202 22Non-current liabilities

Long-term loans 6,8 17,932,259 26 16,184,097 23Deferred tax liabilities 4,6 288,748 - 271,643 -Long-term deferred revenues 4 85,000 - - -Net defined benefit liability 4,6 2,592,851 4 2,892,333 4Deposits in 4,270 - 2,454 -Deferred credit for investments accounted for under the equity method 4,6 3,284,820 5 2,264,431 3

Total non-current libilities 24,187,948 35 21,614,958 30Total liabilities 38,532,475 56 37,067,160 52Total equity

Capital stock

Common stock 6 23,395,367 34 23,395,367 33Capital reserve 6 785,376 1 750,641 1Retained earnings 6

Legal Reserve 36,354 - - -Special Reserve 10,047,053 14 9,975,000 14Unappropriated earnings (Accumulated deficits) (3,100,268) (4) 160,587 -

Total retained earnings 6,983,139 10 10,135,587 14Other equities 4

Exchange differences on translation of foreign operation 8,114 - 329,756 -Unrealized gain or loss on available-for-sale financial instruments 235,469 - 562,106 1Non-current assets held for sale and equity directly associated (1,439) - - -

Total other equities 242,144 - 891,862 1

Treasury stock 4,6 (806,870) (1) (806,870) (1)

Total equity 30,599,156 44 34,366,587 48Total liabilities and equity $69,131,631 100 $71,433,747 100

Contents

TATUNG CO., LTD.

PARENT COMPANY ONLY BALANCE SHEETS

December 31, 2015 and December 31, 2014

(Expressed in Thousands of New Taiwan Dollars)



4



TATUNG CO., LTD.PARENT COMPANY ONLY STATEMENTS OF COMPREHENSIVE INCOME

For the Years Ended December 31, 2015 and 2014(Expressed in Thousands of New Taiwan Dollars, Except for Earnings Per Share)

Contents Note Amount % Amount %Operating revenues 4,6,7 $18,355,686 101 $21,386,157 100Less: Sales returns 5,6 (153,989) (1) (59,420) -Less: Sales allowances 5,6 (50,593) - (31,271) -Net operating revenues 18,151,104 100 21,295,466 100Operating cost 6,7 (16,569,601) (91) (19,448,727) (91)Gross profit 1,581,503 9 1,846,739 9Unrealized gross profit (66,148) - (113,661) (1)Realized gross profit 38,551 - 15,564 -Net operating profit 1,553,906 9 1,748,642 8

Operating expenses 6Sales and marketing (1,434,998) (8) (1,344,331) (6)General and administrative (451,091) (2) (616,206) (3)Research and development (634,151) (4) (662,830) (3)

Total operating expense (2,520,240) (14) (2,623,367) (12)Operating loss (966,334) (5) (874,725) (4)

Non-operating income and expenseOther income 4,6,7 470,957 3 307,098 1Other gains and (losses) 6, (545,607) (3) (391,008) (2)Finance cost 4,6 (600,275) (4) (724,696) (3)Share of (losses) or profits of subsidiaries, associates and joint ventures 6 (1,432,357) (8) 2,017,914 10

Total non-operating (expense) and income (2,107,282) (12) 1,209,308 6

(Loss) Income before income tax (3,073,616) (17) 334,583 2Income tax benefit 4,5,6 (1,399) - 28,956 -Net (loss) income (3,075,015) (17) 363,539 2

Other comprehensive income (loss) 4,6Not to be reclassified to profit or loss in subsequent periods:

Remeasurements of defined benefit plans 23,479 - (16,539) -

Share of other comprehensive income (loss) of subsidiaries, associates and joint venturesaccounted for using the equity method, not to be reclassified to profit or loss (49,459)

-19,813

-To be reclassified to profit or loss in subsequent periods:

Unrealized gain (loss) from available-for-sale financial assets (143,924) (1) 1,284 -

Share of other comprehensive income (loss) of subsidiaries, associates and joint venturesaccounted for using the equity method, to be reclassified to profit or loss (506,039) (3) 920,850 4

Total of other comprehensive income, net of income tax (675,943) (4) 925,408 4Total comprehensive income (loss) $(3,750,958) (21) $1,288,947 6

(Loss) Earnings per share 6Basic (loss) earnings per share (NT$) $(1.35) $0.16

Diluted (loss) earnings per share (NT$) $(1.35) $0.16

2015 2014


- 5 -



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7



8

TATUNG CO., LTD. NOTES TO PARENT COMPANY ONLY FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2015 and 2014 (Expressed in Thousands of New Taiwan Dollars unless otherwise Specified)

1. Organization operations

Established in 1918, Tatung Company (the “Company”) was incorporated under the Company Act of the Republic of China (“R.O.C.”) and underwent reorganization in 1939. The total capital at that time was Taiwan Yuan $180,000, later increased to Taiwan Yuan $20,000,000 after several capital injections. After the reformation of monetary system in 1949, the total capital was converted to the equivalent of New Taiwan dollars (“NTD”) 200,000. As of December 31, 2015, the issued capital and registered was NTD23,395,367 thousand. The main activities of the Company are as follows: (1) The design, manufacture, sale, installation, network system, automation system, lease,

maintenance service, import, export and agency of the following products:

1 Steel manufacturing machinery 2 Industrial appliances 3 Household appliances 4 Refrigerator 5 Air conditioners 6 Metal processing machinery 7 Electronic products 8 Wire and cable 9 Chemical industry 10 Cookware 11 Wood-made products 12 Plastic products 13 Office equipment 14 Audio products 15 Precision meter 16 Transmission equipment 17 Transportation facilities 18 Healthcare products 19 Microbe fermentation 20 Construction 21 Furniture 22 Solar wafers 23 Water treatment engineering 24 Telecommunication equipment 25 Parking facilities 26 Automation machinery 27 Semiconductor 28 Real estate development and leasing

(2) Magazine publishing (3) Customs brokerage (4) General import/export (excluding permitted business) (5) Development and leasing (excluding construction industry) of industrial parks on behalf of

the competent authority.





9

The investment plans should be resolved by the Board of Directors, but the total amount of investment is not limited to the amount provided by Article 13 of Company Act, which states that the total amount of investment shall not exceed 40% of the amount of its own paid-in capital. The Company’s common shares were publicly listed on the Taiwan Stock Exchange (TWSE) on February 9, 1962. The Company’s registered office and the main business location is at No. 22, Zhongshan North Road, Section 3, Taipei, Republic of China (R.O.C.).

2. Date and procedures of authorization of financial statements for issue

The parent company only financial statements of the Company for the years ended December 31, 2015 and 2014 were authorized for issue in accordance with a resolution of the board of directors’ meeting on March 23, 2016.

3. Newly issued or revised standards and interpretations

(1) Changes in accounting policies resulting from applying for the first time certain standards and amendments

The Company applied for the first time International Financial Reporting Standards,

International Accounting Standards, and Interpretations issued, revised or amended which are recognized by Financial Supervisory Commission (“FSC”) and become effective for annual periods beginning on or after January 1, 2015. The nature and the impact of each new standard and amendment that has a material effect on the Group is described below:

IAS 19 Employee Benefits The revised IAS 19 brought about the following changes to defined benefit plans which are summarized below:

(a) The interest cost and expected return on plan assets used in the previous version of IAS

19 are replaced with a net-interest amount under the revised IAS 19, which is calculated by applying the discount rate to the net defined benefit liability or asset at the start of each annual reporting period.





10

(b) In the previous version of IAS 19, past service cost is recognized as an expense immediately to the extent that the benefits are already vested, or on a straight-line basis over the average period until the benefits become vested. Under the revised IAS 19, all past service costs are recognized at the earlier of when the amendment/curtailment occurs or when the related restructuring or termination costs are recognized. Therefore unvested past service cost is no longer deferred over future vesting periods.

(c) The revised IAS 19 required more disclosure; please refer to Note 6 for more details.

IFRS 12 Disclosure of Interests in Other Entities IFRS 12 Disclosure of Interests in Other Entities sets out the requirements for disclosures relating to an entity’s interests in subsidiaries, joint arrangements, associates and structured entities. The requirements in IFRS 12 are more comprehensive than the previously existing disclosure requirements, for example, summarized financial information about the associate or disclosure on subsidiaries with material non-controlling interests. Please refer to Note 6 for more details.

IFRS 13 Fair Value Measurements

IFRS 13 establishes a single source of guidance under IFRS for all fair value measurements. IFRS 13 does not change when an entity is required to use fair value, but rather provides guidance on how to measure fair value under IFRS. The Company re-assessed its policies for measuring fair values. Application of IFRS 13 has not materially impacted the fair value measurements of the Company. Additional disclosures where required under IFRS 13, are provided in the individual notes relating to the assets and liabilities whose fair values were determined. Fair value hierarchy is provided in Note 12. According to the transitional provisions of IFRS 13, IFRS 13 is applied prospectively as of January 1, 2015; the disclosure requirements of IFRS 13 need not be applied in comparative information before January 1, 2015.

IAS 1 Presentation of Financial Statements – Presentation of items of other comprehensive income

Beginning January 1, 2014, the Company presented its items of other comprehensive income that will be reclassified to profit or loss separately from items that will not be reclassified in accordance with the amendments to IAS 1. The amendments affect presentation of statement of comprehensive income only and have no impact on the Company’s financial position or performance.





11

IAS 1 Presentation of Financial Statements – Clarification of the requirement for comparative information

Beginning January 1, 2014, according to the amendments to IAS 1, when an entity applies an accounting policy retrospectively or makes a retrospective restatement of items in its financial statements, or when it reclassifies items in its financial statements, the opening statement of financial position does not have to be accompanied by comparative information in the related notes. The amendments affect notes accompanying the financial statements only and have no impact on the Company’s financial position or performance.

(2) Standards or interpretations issued by IASB but not yet endorsed by FSC at the date when

the Company’s financial statements were authorized for issue are listed below.

(a) IAS 36 “Impairment of Assets” (Amendment)

This amendment relates to the amendment issued in May 2011 and requires entities to disclose the recoverable amount of an asset (including goodwill) or a cash-generating unit when an impairment loss has been recognized or reversed during the period. The amendment also requires detailed disclosure of how the fair value less costs of disposal has been measured when an impairment loss has been recognized or reversed, including valuation techniques used, level of fair value hierarchy of assets and key assumptions used in measurement. The amendment is effective for annual periods beginning on or after January 1, 2014.

(b) IFRIC 21 “Levies”

This interpretation provides guidance on when to recognize a liability for a levy imposed by a government (both for levies that are accounted for in accordance with IAS 37 Provisions, Contingent Liabilities and Contingent Assets and those where the timing and amount of the levy is certain). The interpretation is effective for annual periods beginning on or after January 1, 2014.

(c) IAS 39 “Financial Instruments: Recognition and Measurement” (Amendment)

Under the amendment, there would be no need to discontinue hedge accounting if a hedging derivative was novated, provided certain criteria are met. The interpretation is effective for annual periods beginning on or after January 1, 2014.





12

(d) IAS 19 “Employee Benefits” (Defined benefit plans: employee contributions)

The amendments apply to contributions from employees or third parties to defined benefit plans. The objective of the amendments is to provide a policy choice for a simplified accounting for contributions that are independent of the number of years of employee service, for example, employee contributions that are calculated according to a fixed percentage of salary. The amendment is effective for annual periods beginning on or after July 1, 2014.

(e) Improvements to International Financial Reporting Standards (2010-2012 cycle):

IFRS 2 “Share-based Payment” The annual improvements amend the definitions of 'vesting condition' and 'market condition' and add definitions for 'performance condition' and 'service condition' (which were previously part of the definition of 'vesting condition'). The amendment prospectively applies to share-based payment transactions for which the grant date is on or after July 1, 2014. IFRS 3 “Business Combinations” The amendments include: (1) deleting the reference to "other applicable IFRSs" in the classification requirements; (2) deleting the reference to "IAS 37 Provisions, Contingent Liabilities and Contingent Assets or other IFRSs as appropriate", other contingent consideration that is not within the scope of IFRS 9 shall be measured at fair value at each reporting date and changes in fair value shall be recognized in profit or loss; (3) amending the classification requirements of IFRS 9 Financial Instruments to clarify that contingent consideration that is a financial asset or financial liability can only be measured at fair value, with changes in fair value being presented in profit or loss depending on the requirements of IFRS 9. The amendments apply prospectively to business combinations for which the acquisition date is on or after July 1, 2014. IFRS 8 “Operating Segments” The amendments require an entity to disclose the judgements made by management in applying the aggregation criteria to operating segments. The amendments also clarify that an entity shall only provide reconciliations of the total of the reportable segments' assets to the entity's assets if the segment assets are reported regularly. The amendment is effective for annual periods beginning on or after July 1, 2014.





13

IFRS 13 “Fair Value Measurement” The amendment to the Basis for Conclusions of IFRS 13 clarifies that when deleting paragraph B5.4.12 of IFRS 9 Financial Instruments and paragraph AG79 of IAS 39 Financial Instruments: Recognition and Measurement as consequential amendments from IFRS 13 Fair Value Measurement, the IASB did not intend to change the measurement requirements for short-term receivables and payables. IAS 16 “Property, Plant and Equipment” The amendment clarifies that when an item of property, plant and equipment is revalued, the accumulated depreciation at the date of revaluation is adjusted to equal the difference between the gross carrying amount and the carrying amount of the asset. The amendment is effective for annual periods beginning on or after July 1, 2014. IAS 24 “Related Party Disclosures” The amendment clarifies that an entity providing key management personnel services to the reporting entity or to the parent of the reporting entity is a related party of the reporting entity. The amendment is effective for annual periods beginning on or after July 1, 2014. IAS 38 “Intangible Assets” The amendment clarifies that when an intangible asset is revalued, the accumulated amortization at the date of revaluation is adjusted to equal the difference between the gross carrying amount and the carrying amount of the asset. The amendment is effective for annual periods beginning on or after July 1, 2014.

(f) Improvements to International Financial Reporting Standards (2011-2013 cycle):

IFRS 1 “First-time Adoption of International Financial Reporting Standards” The amendment clarifies that an entity, in its first IFRS financial statements, has the choice between applying an existing and currently effective IFRS or applying early a new or revised IFRS that is not yet mandatorily effective, provided that the new or revised IFRS permits early application.





14

IFRS 3 “Business Combinations” This amendment clarifies that paragraph 2(a) of IFRS 3 Business Combinations excludes the formation of all types of joint arrangements as defined in IFRS 11 Joint Arrangements from the scope of IFRS 3; and the scope exception only applies to the financial statements of the joint venture or the joint operation itself. The amendment is effective for annual periods beginning on or after July 1, 2014. IFRS 13 “Fair Value Measurement” The amendment clarifies that paragraph 52 of IFRS 13 includes a scope exception for measuring the fair value of a group of financial assets and financial liabilities on a net basis. The objective of this amendment is to clarify that this portfolio exception applies to all contracts within the scope of IAS 39 Financial Instruments: Recognition and Measurement or IFRS 9 Financial Instruments, regardless of whether they meet the definitions of financial assets or financial liabilities as defined in IAS 32 Financial Instruments: Presentation. The amendment is effective for annual periods beginning on or after July 1, 2014. IAS 40 “Investment Property” The amendment clarifies the interrelationship of IFRS 3 and IAS 40 when classifying property as investment property or owner-occupied property; in determining whether a specific transaction meets the definition of both a business combination as defined in IFRS 3 Business Combinations and investment property as defined in IAS 40 Investment Property, separate application of both standards independently of each other is required. The amendment is effective for annual periods beginning on or after July 1, 2014.

(g) IFRS 14 “Regulatory Deferral Accounts”

IFRS 14 permits first-time adopters to continue to recognize amounts related to rate regulation in accordance with their previous GAAP requirements when they adopt IFRS. However, to enhance comparability with entities that already apply IFRS and do not recognize such amounts, the Standard requires that the effect of rate regulation must be presented separately from other items. IFRS 14 is effective for annual periods beginning on or after January 1, 2016.





15

(h) IFRS 11 “Joint Arrangements” (Accounting for Acquisitions of Interests in Joint Operations)

The amendments provide new guidance on how to account for the acquisition of an interest in a joint operation that constitutes a business. The amendments require the entity to apply all of the principles on business combinations accounting in IFRS 3 “Business Combinations”, and other IFRS (that do not conflict with the guidance in IFRS 11), to the extent of its share in a joint operation acquired. The amendment also requires certain disclosure. The amendment is effective for annual periods beginning on or after January 1, 2016.

(i) IAS 16“Property, Plant and Equipment and IAS 38 “Intangible Assets” — Clarification

of Acceptable Methods of Depreciation and Amortization

The amendment clarified that the use of revenue-based methods to calculate depreciation of an asset is not appropriate because revenue generated by an activity that includes the use of an asset generally reflects factors other than the consumption of the economic benefits embodied in the asset, such as selling activities and change in sales volumes or prices. The amendment also clarified that revenue is generally presumed to be an inappropriate basis for measuring the consumption of the economic benefits embodied in an intangible asset. This presumption, however, can be rebutted in certain limited circumstances. The amendment is effective for annual periods beginning on or after January 1, 2016.

(j) IFRS 15 “Revenue from Contracts with Customers”

The core principle of the new Standard is for companies to recognize revenue to depict the transfer of promised goods or services to customers in amounts that reflect the consideration to which the company expects to be entitled in exchange for those goods or services. An entity recognises revenue in accordance with that core principle by applying the following steps: Step 1: Identify the contract(s) with a customer Step 2: Identify the performance obligations in the contract Step 3: Determine the transaction price Step 4: Allocate the transaction price to the performance obligations in the contract Step 5: Recognise revenue when (or as) the entity satisfies a performance obligation The new Standard includes a cohesive set of disclosure requirements that would result in an entity providing users of financial statements with comprehensive information about the nature, amount, timing and uncertainty of revenue and cash flows arising from the entity's contracts with customers. The Standard is effective for annual periods beginning on or after 1 January 2018.





16

(k) IAS 16“Property, Plant and Equipment and IAS 41 “Agriculture” — Agriculture: Bearer Plants

The IASB decided that bearer plants should be accounted for in the same way as property, plant and equipment in IAS 16 Property, Plant and Equipment, because their operation is similar to that of manufacturing. Consequently, the amendments include them within the scope of IAS 16, and the produce growing on bearer plants will remain within the scope of IAS 41. The amendment is effective for annual periods beginning on or after January 1, 2016.

(l) IFRS 9“Financial Instruments”

The IASB has issued the final version of IFRS 9, which combines classification and measurement, the expected credit loss impairment model and hedge accounting. The standard will replace IAS 39 Financial Instruments: Recognition and Measurement and all previous versions of IFRS 9 Financial Instruments (which include standards issued on classification and measurement of financial assets and liabilities and hedge accounting). Classification and measurement: Financial assets are measured at amortized cost, fair value through profit or loss, or fair value through other comprehensive income, based on both the entity’s business model for managing the financial assets and the financial asset’s contractual cash flow characteristics. Financial liabilities are measured at amortized cost or fair value through profit or loss. Furthermore there is requirement that ‘own credit risk’ adjustments are not recognized in profit or loss. Impairment: Expected credit loss model is used to evaluate impairment. Entities are required to recognize either 12-month or lifetime expected credit losses, depending on whether there has been a significant increase in credit risk since initial recognition. Hedge accounting: Hedge accounting is more closely aligned with risk management activities and hedge effectiveness is measured based on the hedge ratio. The new standard is effective for annual periods beginning on or after January 1, 2018.





17

(m) IAS 27“Separate Financial Statements” — Equity Method in Separate Financial

Statements

The IASB restored the option to use the equity method under IAS 28 for an entity to

account for investments in subsidiaries and associates in the entity’s separate financial

statements. In 2003, the equity method was removed from the options. This amendment

removes the only difference between the separate financial statements prepared in

accordance with IFRS and those prepared in accordance with the local regulations in

certain jurisdictions.

The amendment is effective for annual periods beginning on or after January 1, 2016.

(n) IFRS 10“Consolidated Financial Statements” and IAS 28“Investments in Associates

and Joint Ventures” — Sale or Contribution of Assets between an Investor and its

Associate or Joint Ventures

The amendments address the inconsistency between the requirements in IFRS 10

Consolidated Financial Statements and IAS 28 Investments in Associates and Joint

Ventures, in dealing with the loss of control of a subsidiary that is contributed to an

associate or a joint venture. IAS 28 restricts gains and losses arising from contributions

of non-monetary assets to an associate or a joint venture to the extent of the interest

attributable to the other equity holders in the associate or joint ventures. IFRS 10

requires full profit or loss recognition on the loss of control of the subsidiary. IAS 28

was amended so that the gain or loss resulting from the sale or contribution of assets

that constitute a business as defined in IFRS 3 between an investor and its associate or

joint venture is recognized in full. IFRS 10 was also amended so that the gains or loss

resulting from the sale or contribution of a subsidiary that does not constitute a business

as defined in IFRS 3 between an investor and its associate or joint venture is recognized

only to the extent of the unrelated investors’ interests in the associate or joint venture.

The effective date of this amendment has been postponed indefinitely, but early

adoption is allowed.





18

(o) Improvements to International Financial Reporting Standards (2012-2014 cycle):

IFRS 5 “Non-current Assets Held for Sale and Discontinued Operations” The amendment clarifies that a change of disposal method of assets (or disposal groups) from disposal through sale or through distribution to owners (or vice versa) should not be considered to be a new plan of disposal, rather it is a continuation of the original plan. The amendment also requires identical accounting treatment for an asset (or disposal group) that ceases to be classified as held for sale or as held for distribution to owners. The amendment is effective for annual periods beginning on or after January 1, 2016. IFRS 7 “Financial Instruments: Disclosures” The amendment clarifies that a servicing contract that includes a fee can constitute continuing involvement in a financial asset and therefore the disclosures for any continuing involvement in a transferred asset that is derecognized in its entirety under IFRS 7 Financial Instruments: Disclosures is required. The amendment also clarifies that whether the IFRS 7 disclosure related to the offsetting of financial assets and financial liabilities are required to be included in the condensed interim financial report would depend on the requirements under IAS 34 Interim Financial Reporting. The amendment is effective for annual periods beginning on or after January 1, 2016. IAS 19 “Employee Benefits” The amendment clarifies the requirement under IAS 19.83, that market depth of high quality corporate bonds is assessed based on the currency in which the obligation is denominated, rather than the country where the obligation is located. The amendment is effective for annual periods beginning on or after January 1, 2016. IAS 34 “Interim Financial Reporting” The amendment clarifies what is meant by “elsewhere in the interim financial report” under IAS 34; the amendment states that the required interim disclosures must either be in the interim financial statements or incorporated by cross-reference between the interim financial statements and wherever they are included within the greater interim financial report. The other information within the interim financial report must be available to users on the same terms as the interim financial statements and at the same time. The amendment is effective for annual periods beginning on or after January 1, 2016.





19

(p) Disclosure Initiative – Amendment to IAS 1 “Presentation of Financial Statements” (Amendment):

The amendments contain (1) clarifying that an entity must not reduce the understandability of its financial statements by obscuring material information with immaterial information or by aggregating material items that have different natures or functions. The amendments reemphasize that, when a standard requires a specific disclosure, the information must be assessed to determine whether it is material and, consequently, whether presentation or disclosure of that information is warranted, (2) clarifying that specific line items in the statement(s) of profit or loss and OCI and the statement of financial position may be disaggregated, and how an entity shall present additional subtotals, (3) clarifying that entities have flexibility as to the order in which they present the notes to financial statements, but also emphasize that understandability and comparability should be considered by an entity when deciding on that order, (4) removing the examples of the income taxes accounting policy and the foreign currency accounting policy, as these were considered unhelpful in illustrating what significant accounting policies could be, and (5) clarifying that the share of OCI of associates and joint ventures accounted for using the equity method must be presented in aggregate as a single line item, classified between those items that will or will not be subsequently reclassified to profit or loss. The amendment is effective for annual periods beginning on or after January 1, 2016.

(q) IFRS 10“Consolidated Financial Statements”, IFRS 12 “Disclosure of Interests in

Other Entities”, and IAS 28“Investments in Associates and Joint Ventures” — Investment Entities: Applying the Consolidation Exception

The amendments contain (1) clarifying that the exemption from presenting consolidated financial statements applies to a parent entity that is a subsidiary of an investment entity when the investment entity measures all of its subsidiary at fair value, (2) clarifying that only a subsidiary that is not an investment entity itself and provides support services to the investment entity is consolidated when all other subsidiaries of an investment entity are measured at fair value, and (3) allowing the investor, when applying the equity method, to retain the fair value measurement applied by the investment entity associate or joint venture to its interests in subsidiaries. The amendment is effective for annual periods beginning on or after January 1, 2016.





20

(r) IFRS 16“Leases”

The new standard requires lessees to account for all leases under a single on-balance sheet model (subject to certain exemptions). Lessor accounting still uses the dual classification approach: operating lease and finance lease. The Standard is effective for annual periods beginning on or after January 1, 2019.

(s) IAS 12“Income Taxes” — Recognition of Deferred Tax Assets for Unrealized Losses

The amendment clarifies how to account for deferred tax assets for unrealized losses. The amendment is effective for annual periods beginning on or after January 1, 2017.

(t) Disclosure Initiative — Amendment to IAS 7 “Statement of Cash Flows”:

The amendment relates to changes in liabilities arising from financing activities and to require a reconciliation of the carrying amount of liabilities at the beginning and end of the period. The amendment is effective for annual periods beginning on or after January 1, 2017.

The abovementioned standards and interpretations issued by IASB have not yet endorsed by FSC at the date when the Company’s financial statements were authorized for issue, the local effective dates are to be determined by FSC. As the Company is still currently determining the potential impact of the standards and interpretations listed under (a), (c) ~(f), (i)~(j), (l)~(t), it is not practicable to estimate their impact on the Company at this point in time. All other standards and interpretations have no material impact on the Company.

4. Summary of significant accounting policies

(1) Statement of compliance

The financial statements of the Company for the years ended December 31, 2015 and 2014 have been prepared in accordance with the Regulations Governing the Preparation of Financial Reports by Securities Issuers (“the Regulations”).





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(2) Basis of preparation

The Company prepared parent company only financial statements in accordance with Article 21 of the Regulations, which provided that the profit or loss and other comprehensive income for the period presented in the parent company only financial statements shall be the same as the profit or loss and other comprehensive income attributable to stockholders of the parent presented in the consolidated financial statements for the period, and the total equity presented in the parent company only financial statements shall be the same as the equity attributable to the parent company presented in the consolidated financial statements. Therefore, the Company accounted for its investments in subsidiaries using equity method and, accordingly, made necessary adjustments. The parent company only financial statements have been prepared on a historical cost basis, except for financial instruments measured at fair value. The parent company only expressed in Thousands of New Taiwan Dollars.

(3) Foreign currency transactions

The Company’s parent company only financial statements are presented in its functional currency, New Taiwan Dollars (NTD). Items included in the financial statements are measured by the functional currency. Transactions in foreign currencies are initially recorded by the Company at functional currency rates prevailing at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies are retranslated at the functional currency closing rate of exchange ruling at the reporting date. Non-monetary items measured at fair value in a foreign currency are translated using the exchange rates at the date when the fair value is determined. Non-monetary items that are measured at historical cost in a foreign currency are translated using the exchange rates as of the dates of the initial transactions. All exchange differences arising on the settlement of monetary items or on translating monetary items are taken to profit or loss in the period in which they arise except for the following: A. Exchange differences arising from foreign currency borrowings for an acquisition of a

qualifying asset. If the differences are regarded as an adjustment to interest costs, which will be capitalized and take as part of the cost of the borrowing.





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B. Foreign currency items within the scope of IAS 39 Financial Instruments: Recognition and Measurement are accounted for based on the accounting policy for financial instruments.

C. Exchange differences arising on a monetary item that forms part of a reporting entity’s

net investment in a foreign operation is recognized initially in other comprehensive income and reclassified from equity to profit or loss on disposal of the net investment.

When a gain or loss on a non-monetary item is recognized in other comprehensive income, any exchange component of that gain or loss is recognized in other comprehensive income. When a gain or loss on a non-monetary item is recognized in profit or loss, any exchange component of that gain or loss is recognized in profit or loss.

(4) Translation of financial statements in foreign currency

The assets and liabilities of foreign operations are translated into NTD at the closing exchange rate at the balance sheet date. Income and expenses are translated at an average rate within the period. The exchange differences arising on the translation are recognized in other comprehensive income. On the disposal of a foreign operation, the cumulative amount of the exchange differences relating to that foreign operation, recognized in other comprehensive income and accumulated in the separate component of equity, is reclassified from equity to profit or loss when the gain or loss on disposal is recognized. The following are accounted for as disposals even if an interest in the foreign operation is retained by the Company: the loss of control over a foreign operation, the loss of significant influence over a foreign operation, or the loss of joint control over a foreign operation. On the partial disposal of a subsidiary that includes a foreign operation that does not result in a loss of control, the proportionate share of the cumulative amount of the exchange differences recognized in other comprehensive income is re-attributed to the non-controlling interests in that foreign operation. In partial disposal of an associate or jointly controlled entity that includes a foreign operation that does not result in a loss of significant influence or joint control, only the proportionate share of the cumulative amount of the exchange differences recognized in other comprehensive income is reclassified to profit or loss. Any goodwill and any fair value adjustments to the carrying amounts of assets and liabilities arising on the acquisition of a foreign operation are treated as assets and liabilities of the foreign operation and expressed in its functional currency.





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(5) Current and non-current distinction for assets and liabilities

An asset is classified as current when: A. The Company expects to realize the asset, or intends to sell or consume it, in its normal

operating cycle; B. The Company holds the asset primarily for the purpose of trading; C. The Company expects to realize the asset within twelve months after the reporting period; D. The asset is cash or cash equivalent unless the asset is restricted from being exchanged or

used to settle a liability for at least twelve months after the reporting period. All other assets are classified as non-current. A liability is classified as current when: A. The Company expects to settle the liability in its normal operating cycle B. The Company holds the liability primarily for the purpose of trading C. The liability is due to be settled within twelve months after the reporting period D. The Company does not have an unconditional right to defer settlement of the liability for

at least twelve months after the reporting period. Terms of a liability that could, at the option of the counterparty, result in its settlement by the issue of equity instruments do not affect its classification.

All other liabilities are classified as non-current.


Cash and cash equivalents comprises cash on hand, demand deposits and short-term, highly liquid time deposits (including ones that have maturity within 12 months) investments that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value.

(7) Financial instruments

Financial assets and financial liabilities are recognized when the Company becomes a party to the contractual provisions of the instrument.





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Financial assets and financial liabilities within the scope of IAS 39 Financial Instruments: Recognition and Measurement are recognized initially at fair value plus or minus, in the case of investments not at fair value through profit or loss, directly attributable transaction costs. A. Financial assets

The Company accounts for regular way purchase or sales of financial assets on the trade date. Financial assets of the Company are classified as financial assets at fair value through profit or loss, held-to-maturity investments, available-for-sale financial assets and loans and receivables. The Company determines the classification of its financial assets at initial recognition. Financial assets at fair value through profit or loss Financial assets at fair value through profit or loss include financial assets held for trading and financial assets designated upon initial recognition at fair value through profit or loss. A financial asset is classified as held for trading if: (a) it is acquired or incurred principally for the purpose of selling or repurchasing it in

the near term; (b) on initial recognition it is part of a portfolio of identified financial instruments that

are managed together and for which there is evidence of a recent actual pattern of short-term profit-taking;

(c) it is a derivative (except for a derivative that is a financial guarantee contract or a designated and effective hedging instrument).

If a contract contains one or more embedded derivatives, the entire hybrid (combined) contract may be designated as a financial asset at fair value through profit or loss; or a financial asset may be designated as of fair value through profit or loss when doing so results in more relevant information, because either: (a) it eliminates or significantly reduces a measurement or recognition inconsistency; or (b) a group of financial assets, financial liabilities or both is managed and its

performance is evaluated on a fair value basis, in accordance with a documented risk management or investment strategy, and information about the group is provided internally on that basis to the key management personnel.





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Financial assets at fair value through profit or loss are measured at fair value with changes in fair value recognized in profit or loss. Dividends or interests on financial assets at fair value through profit or loss are recognized in profit or loss (including those received during the period of initial investment). If financial assets do not have quoted prices in an active market and their far value cannot be reliably measured, then they are classified as financial assets measured at cost on balance sheet and carried at cost net of accumulated impairment losses, if any, as of the reporting date. Available-for-sale financial assets Available-for-sale investments are non-derivative financial assets that are designated as available-for-sale or those not classified as financial assets at fair value through profit or loss, held-to-maturity financial assets, or loans and receivables. Foreign exchange gains and losses and interest calculated using the effective interest method relating to monetary available-for-sale financial assets, or dividends on an available-for-sale equity instrument, are recognized in profit or loss. Subsequent measurement of available-for-sale financial assets at fair value is recognized in equity until the investment is derecognized, at which time the cumulative gain or loss is recognized in profit or loss. If equity instrument investments do not have quoted prices in an active market and their far value cannot be reliably measured, then they are classified as financial assets measured at cost on balance sheet and carried at cost net of accumulated impairment losses, if any, as of the reporting date. Held-to-maturity financial assets Non-derivative financial assets with fixed or determinable payments and fixed maturities are classified as held-to-maturity when the Company has the positive intention and ability to hold it to maturity, other than those that are designated as available-for-sale, classified as financial assets at fair value through profit or loss, or meet the definition of loans and receivables. After initial measurement held-to-maturity financial assets are measured at amortized cost using the effective interest method, less impairment. Amortized cost is calculated by taking into account any discount or premium on acquisition and fee or transaction costs. The effective interest method amortization is recognized in profit or loss.





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Loans and receivables Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market other than those that the Company upon initial recognition designates as available for sale, classified as of fair value through profit or loss, or those for which the holder may not recover substantially all of its initial investment. Loans and receivables are separately presented on the balance sheet as receivables or bond investments for which no active market exists. After initial measurement, such financial assets are subsequently measured at amortized cost using the effective interest rate method, less impairment. Amortized cost is calculated by taking into account any discount or premium on acquisition and fee or transaction costs. The effective interest method amortization is recognized in profit or loss. Impairment of financial assets The Company assesses at each reporting date whether there is any objective evidence that a financial asset other than the financial assets at fair value through profit or loss is impaired. A financial asset is deemed to be impaired if, and only if, there is objective evidence of impairment as a result of one or more loss events that has occurred after the initial recognition of the asset and that loss event has an impact on the estimated future cash flows of the financial asset. The carrying amount of the financial asset impaired, other than receivables impaired which are reduced through the use of an allowance account, is reduced directly and the amount of the loss is recognized in profit or loss. A significant or prolonged decline in the fair value of an available-for-sale equity instrument below its cost is considered a loss event. Other loss events include: (a) significant financial difficulty of the issuer or obligor; or (b) a breach of contract, such as a default or delinquency in interest or principal

payments; or (c) it becoming probable that the borrower will enter bankruptcy or other financial

reorganization; or (d) the disappearance of an active market for that financial asset because of financial

difficulties.





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For held-to-maturity financial assets and loans and receivables measured at amortized cost, the Company first assesses individually whether objective evidence of impairment exists individually for financial asset that are individually significant, or collectively for financial assets that are not individually significant. If the Company determines that no objective evidence of impairment exits for an individually assessed financial asset, whether significant or not, it includes the asset in a group of financial assets with similar credit risk characteristics and collectively assesses them for impairment. If there is objective evidence that an impairment loss has been incurred, the amount of the loss is measured as the difference between the assets carrying amount and the present value of estimated future cash flows. The present value of the estimated future cash flows is discounted at the financial assets original effective interest rate. If a loan has a variable interest rate, the discount rate for measuring any impairment loss is the current effective interest rate. Interest income is accrued based on the reduced carrying amount of the asset, using the rate of interest used to discount the future cash flows for the purpose of measuring the impairment loss. Receivables together with the associated allowance are written off when there is no realistic prospect of future recovery. If, in a subsequent year, the amount of the estimated impairment loss increases or decreases because of an event occurring after the impairment was recognized, the previously recognized impairment loss is increased or reduced by adjusting the allowance account. If a future write-off is later recovered, the recovery is credited to profit or loss. In the case of equity investments classified as available-for-sale, where there is evidence of impairment, the cumulative loss - measured as the difference between the acquisition cost and the current fair value, less any impairment loss on that investment previously recognized in profit or loss - is removed from other comprehensive income and recognized in profit or loss. Impairment losses on equity investments are not reversed through profit or loss; increases in their fair value after impairment are recognized directly in other comprehensive income. In the case of debt instruments classified as available-for-sale, the amount recorded for impairment is the cumulative loss measured as the difference between the amortized cost and the current fair value, less any impairment loss on that investment previously recognized in profit or loss. Future interest income continues to be accrued based on the reduced carrying amount of the asset, using the rate of interest used to discount the future cash flows for the purpose of measuring the impairment loss. The interest income is recognized in profit or loss. If, in a subsequent year, the fair value of a debt instrument increases and the increase can be objectively related to an event occurring after the impairment loss was recognized in profit or loss, the impairment loss is reversed through profit or loss.





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Derecognition of financial assets A financial asset is derecognized when: (a) The rights to receive cash flows from the asset have expired; (b) The Company has transferred the asset and substantially all the risks and rewards of

the asset have been transferred; (c) The Company has neither transferred nor retained substantially all the risks and

rewards of the asset, but has transferred control of the asset. Once the financial asset, are derecognized entirety, the difference between the carrying amount and the consideration received or receivable including any cumulative gain or loss that had been recognized in other comprehensive income, is recognized in profit or loss.

B. Financial liabilities and equity

Classification between liabilities or equity The Company classifies the instrument issued as a financial liability or an equity instrument in accordance with the substance of the contractual arrangement and the definitions of a financial liability, and an equity instrument.

Equity instruments An equity instrument is any contract that evidences a residual interest in the assets of an entity after deducting all of its liabilities. The transaction costs of an equity transaction are accounted for as a deduction from equity (net of any related income tax benefit) to the extent they are incremental costs directly attributable to the equity transaction that otherwise would have been avoided. Compound instruments The Company evaluates the terms of the convertible bonds issued to determine whether it contains both a liability and an equity component. Furthermore, the Company assesses if the economic characteristics and risks of the put and call options contained in the convertible bonds are closely related to the economic characteristics and risk of the host contract before separating the equity element.





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For the liability component excluding the derivatives, its fair value is determined based on the rate of interest applied at that time by the market to instruments of comparable credit status. The liability component is classified as a financial liability measured at amortized cost before the instrument is converted or settled. For the embedded derivative that is not closely related to the host contract (for example, if the exercise price of the embedded call or put option is not approximately equal on each exercise date to the amortized cost of the host debt instrument), it is classified as a liability component and subsequently measured at fair value through profit or loss unless it qualifies for an equity component. The equity component is assigned the residual amount after deducting from the fair value of the instrument as a whole the amount separately determined for the liability component. Its carrying amount is not remeasured in the subsequent accounting periods. If the convertible bond issued does not have an equity component, it is accounted for as a hybrid instrument in accordance with the requirements under IAS 39 Financial Instruments: Recognition and Measurement. Transaction costs are apportioned between the liability and equity components of the convertible bond based on the allocation of proceeds to the liability and equity components when the instruments are initially recognized. On conversion of a convertible bond before maturity, the carrying amount of the liability component being the amortized cost at the date of conversion is transferred to equity. Financial liabilities Financial liabilities within the scope of IAS 39 Financial Instruments: Recognition and Measurement are classified as financial liabilities at fair value through profit or loss or financial liabilities measured at amortized cost upon initial recognition. Financial liabilities at fair value through profit or loss Financial liabilities at fair value through profit or loss include financial liabilities held for trading and financial liabilities designated upon initial recognition as of fair value through profit or loss.





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A financial liability is classified as held for trading if: (a) it is acquired or incurred principally for the purpose of selling or repurchasing it in

the near term (b) on initial recognition it is part of a portfolio of identified financial instruments that

are managed together and for which there is evidence of a recent actual pattern of short-term profit-taking

(c) it is a derivative (except for a derivative that is a financial guarantee contract or a designated and effective hedging instrument)

If a contract contains one or more embedded derivatives, the entire hybrid (combined) contract may be designated as a financial liability at fair value through profit or loss; or a financial liability may be designated as of fair value through profit or loss when doing so results in more relevant information, because either: (a) it eliminates or significantly reduces a measurement or recognition inconsistency or (b) a group of financial assets, financial liabilities or both is managed and its

performance is evaluated on a fair value basis, in accordance with a documented risk management or investment strategy, and information about the group is provided internally on that basis to the key management personnel

Gains or losses on the subsequent measurement of liabilities at fair value through profit or loss including interest paid, are recognized in profit or loss. If the financial liabilities at fair value through profit or loss do not have quoted prices in an active market and their far value cannot be reliably measured, then they are classified as financial liabilities measured at cost on balance sheet and carried at cost as of the reporting date. Financial liabilities at amortized cost Financial liabilities measured at amortized cost include interest bearing loans and borrowings that are subsequently measured using the effective interest rate method after initial recognition. Gains and losses are recognized in profit or loss when the liabilities are derecognized as well as through the effective interest rate method amortization process. Amortized cost is calculated by taking into account any discount or premium on acquisition and fees or transaction costs.





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Derecognition of financial liabilities A financial liability is derecognized when the obligation under the liability is discharged or cancelled or expires. When an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified (whether or not attributable to the financial difficulty of the debtor), such an exchange or modification is treated as a derecognition of the original liability and the recognition of a new liability, and the difference in the respective carrying amounts and the consideration paid, including any non-cash assets transferred or liabilities assumed, is recognized in profit or loss.

C. Offsetting of financial instruments

Financial assets and financial liabilities are offset and the net amount reported in the balance sheet if, and only if, there is a currently enforceable legal right to offset the recognized amounts and there is an intention to settle on a net basis, or to realize the assets and settle the liabilities simultaneously.

(8) Derivative financial instrument

The Company uses derivative financial instruments to hedge its foreign currency risks and interest rate risks. A derivative is classified in the balance sheet as financial assets or liabilities at fair value through profit or loss (held for trading) except for derivatives that are designated effective hedging instruments which are classified as derivative financial assets or liabilities for hedging. Derivative financial instruments are initially recognized at fair value on the date on which a derivative contract is entered into and are subsequently remeasured at fair value. Derivatives are carried as financial assets when the fair value is positive and as financial liabilities when the fair value is negative. Any gains or losses arising from changes in the fair value of derivatives are taken directly to profit or loss, except for the effective portion of cash flow hedges, which is recognized in equity. Derivatives embedded in host contracts are accounted for as separate derivatives and recorded at fair value if their economic characteristics and risks are not closely related to those of the host contracts and the host contracts are not held for trading or designated at fair value though profit or loss. These embedded derivatives are measured at fair value with changes in fair value recognized in profit or loss.





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(9) Fair value measurement

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value measurement is based on the presumption that the transaction to sell the asset or transfer the liability takes place either: (a) In the principal market for the asset or liability, or (b) In the absence of a principal market, in the most advantageous market for the asset or

liability The principal or the most advantageous market must be accessible to by the Group. The fair value of an asset or a liability is measured using the assumptions that market participants would use when pricing the asset or liability, assuming that market participants in their economic best interest. A fair value measurement of a non-financial asset takes into account a market participant’s ability to generate economic benefits by using the asset in its highest and best use or by selling it to another market participant that would use the asset in its highest and best use. The Company uses valuation techniques that are appropriate in the circumstances and for which sufficient data are available to measure fair value, maximizing the use of relevant observable inputs and minimizing the use of unobservable inputs.

(10) Inventories

Inventories are valued at lower of cost and net realizable value item by item. Costs incurred in bringing each inventory to its present location and condition are accounted for as follows: Raw materials - purchase cost on weighted average cost formula Work in progress and finished goods - cost of direct materials and labor and a proportion of manufacturing overheads based on normal operating capacity but excluding borrowing costs. Net realizable value is the estimated selling price in the ordinary course of business, less estimated costs of completion and the estimated costs necessary to make the sale.





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(11) Construction contract

When the outcome of a construction contract can be estimated reliably, contract revenue and contract costs associated with the construction contract shall be recognized as revenue and expenses respectively by reference to the stage of completion of the contract activity at the end of the reporting period. The recognition of revenue and expenses by reference to the stage of completion of a contract is often referred to as the percentage of completion method. Under this method, contract revenue is matched with the contract costs incurred in reaching the stage of completion, resulting in the reporting of revenue, expenses and profit which can be attributed to the proportion of work completed. When the outcome of a construction contract cannot be estimated reliably, revenue shall be recognized only to the extent of contract costs. When it is probable that total contract costs will exceed total contract revenue, the expected loss shall be recognized as an expense immediately.

(12) Investments accounted for using the equity method

The Company’s investment in its subsidiaries is presented as investments accounted for using the equity method and adjusted by necessary measurements in accordance with Article 21 of the Regulations, which provided that the profit or loss and other comprehensive income for the period presented in the parent company only financial statements shall be the same as the profit or loss and other comprehensive income attributable to stockholders of the parent presented in the consolidated financial statements for the period, and the total equity presented in the parent company only financial statements shall be the same as the equity attributable to the parent company presented in the consolidated financial statements. These adjustments resulted from considering the different treatments of investments in subsidiaries under IFRS 10 Consolidated Financial Statements and under IFRS applied to different entity level. These investments may be debited or credited using the equity method, as share of profits (losses) of subsidiaries, associates and joint ventures, or share of other comprehensive income (loss) of subsidiaries, associates and joint ventures. The Company’s investment in its associate is accounted for using the equity method other than those that meet the criteria to be classified as held for sale. An associate is an entity over which the Company has significant influence.





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Under the equity method, the investment in the associate is carried in the balance sheet at cost and adjusted thereafter for the post-acquisition change in the Company’s share of net assets of the associate. After the interest in the associate is reduced to zero, additional losses are provided for, and a liability is recognized, only to the extent that the Company has incurred legal or constructive obligations or made payments on behalf of the associate. Unrealized gains and losses resulting from transactions between the Company and the associate are eliminated to the extent of the Company’s related interest in the associate. When changes in the net assets of an associate occur and not those that are recognized in profit or loss or other comprehensive income and do not affects the Company’s percentage of ownership interests in the associate, the Company recognizes such changes in equity based on its percentage of ownership interests. The resulting capital surplus recognized will be reclassified to profit or loss at the time of disposing the associate on a pro-rata basis. When the associate issues new stock, and the Company’s interest in an associate is reduced or increased as the Company fails to acquire shares newly issued in the associate proportionately to its original ownership interest, the increase or decrease in the interest in the associate is recognized in additional paid in capital and investment in associate. When the interest in the associate is reduced, the cumulative amounts previously recognized in other comprehensive income are reclassified to profit or loss or other appropriate items. The aforementioned capital surplus recognized is reclassified to profit or loss on a pro rata basis when the Company disposes the associate. The financial statements of the associate are prepared for the same reporting period as the Company. Where necessary, adjustments are made to bring the accounting policies in line with those of the Company. The Company determines at each reporting date whether there is any objective evidence that the investment in the associate is impaired in accordance with IAS 39 Financial Instruments: Recognition and Measurement. If this is the case the Company calculates the amount of impairment as the difference between the recoverable amount of the associate and its carrying value and recognizes the amount in the ‘share of profit or loss of an associate’ in the statement of comprehensive income in accordance with IAS 36 Impairment of Assets. In determining the value in use of the investment, the Company estimates: A. Its share of the present value of the estimated future cash flows expected to be generated

by the associate, including the cash flows from the operations of the associate and the proceeds on the ultimate disposal of the investment

B. The present value of the estimated future cash flows expected to arise from dividends to be received from the investment and from its ultimate disposal





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Because goodwill that forms part of the carrying amount of an investment in an associate is not separately recognized, it is not tested for impairment separately by applying the requirements for impairment testing goodwill in IAS 36 Impairment of Assets. Upon loss of significant influence over the associate, the Company measures and recognizes any retaining investment at its fair value. Any difference between the carrying amount of the associate upon loss of significant influence and the fair value of the retaining investment and proceeds from disposal is recognized in profit or loss.

(13) Property, plant and equipment

Property, plant and equipment is stated at cost, net of accumulated depreciation and accumulated impairment losses, if any. Such cost includes the cost of dismantling and removing the item and restoring the site on which it is located and borrowing costs for construction in progress if the recognition criteria are met. Each part of an item of property, plant and equipment with a cost that is significant in relation to the total cost of the item is depreciated separately. When significant parts of property, plant and equipment are required to be replaced in intervals, the Company recognized such parts as individual assets with specific useful lives and depreciation, respectively. The carrying amount of those parts that are replaced is derecognized in accordance with the derecognition provisions of IAS 16 Property, plant and equipment. When a major inspection is performed, its cost is recognized in the carrying amount of the plant and equipment as a replacement if the recognition criteria are satisfied. All other repair and maintenance costs are recognized in profit or loss as incurred. Depreciation is calculated on a straight-line basis over the estimated economic lives of the following assets: Buildings 3 50 year Machinery and equipment 3 20 year Transportation equipment 3 10 year Office equipment 3 10 year Leased assets 3 50 year Leasehold improvements The shorter of lease terms or economic useful lives Other equipment 2 10 year





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An item of property, plant and equipment and any significant part initially recognized is derecognized upon disposal or when no future economic benefits are expected from its use or disposal. Any gain or loss arising on derecognition of the asset is recognized in profit or loss. The assets’ residual values, useful lives and methods of depreciation are reviewed at each financial year end and adjusted prospectively, if appropriate.

(14) Leases

Company as a lessee Finance leases which transfer to the Company substantially all the risks and benefits incidental to ownership of the leased item, are capitalized at the commencement of the lease at the fair value of the leased property or, if lower, at the present value of the minimum lease payments. Lease payments are apportioned between finance charges and reduction of the lease liability so as to achieve a constant rate of interest on the remaining balance of the liability. Finance charges are recognized in profit or loss. A leased asset is depreciated over the useful life of the asset. However, if there is no reasonable certainty that the Company will obtain ownership by the end of the lease term, the asset is depreciated over the shorter of the estimated useful life of the asset and the lease term. Operating lease payments are recognized as an expense on a straight-line basis over the lease term. Company as a lessor Leases in which the Company does not transfer substantially all the risks and benefits of ownership of the asset are classified as operating leases. Initial direct costs incurred in negotiating an operating lease are added to the carrying amount of the leased asset and recognized over the lease term on the same basis as rental income. Rental revenue generated from operating lease is recognized over the lease term using the straight line method. Contingent rents are recognized as revenue in the period in which they are earned.





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(15) Intangible assets

Intangible assets acquired separately are measured on initial recognition at cost. The cost of intangible assets acquired in a business combination is its fair value as of the date of acquisition. Following initial recognition, intangible assets are carried at cost less any accumulated amortization and accumulated impairment losses, if any. Internally generated intangible assets, excluding capitalized development costs, are not capitalized and expenditure is reflected in profit or loss for the year in which the expenditure is incurred. The useful lives of intangible assets are assessed as either finite or indefinite. Intangible assets with finite lives are amortized over the useful economic life and assessed for impairment whenever there is an indication that the intangible asset may be impaired. The amortization period and the amortization method for an intangible asset with a finite useful life is reviewed at least at the end of each financial year. Changes in the expected useful life or the expected pattern of consumption of future economic benefits embodied in the asset is accounted for by changing the amortization period or method, as appropriate, and are treated as changes in accounting estimates. Intangible assets with indefinite useful lives are not amortized, but are tested for impairment annually, either individually or at the cash-generating unit level. The assessment of indefinite life is reviewed annually to determine whether the indefinite life continues to be supportable. If not, the change in useful life from indefinite to finite is made on a prospective basis. Gains or losses arising from derecognition of an intangible asset are measured as the difference between the net disposal proceeds and the carrying amount of the asset and are recognized in profit or loss when the asset is derecognized. Research and development costs Research costs are expensed as incurred. Development expenditures, on an individual project, are recognized as an intangible asset when the Company can demonstrate: A. The technical feasibility of completing the intangible asset so that it will be available for

use or sale B. Its intention to complete and its ability to use or sell the asset C. How the asset will generate future economic benefits D. The availability of resources to complete the asset E. The ability to measure reliably the expenditure during development





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Following initial recognition of the development expenditure as an asset, the cost model is applied requiring the asset to be carried at cost less any accumulated amortization and accumulated impairment losses. During the period of development, the asset is tested for impairment annually. Amortization of the asset begins when development is complete and the asset is available for use. It is amortized over the period of expected future benefit. Computer software The cost of computer software is amortized on a straight-line basis over the estimated useful life (3 years). A summary of the policies applied to the Company’s intangible assets is as follows: Computer software Useful lives Finite Amortization method used Amortized on a straight- line basis over the estimated

useful life Internally generated or acquired Acquired

(16) Impairment of non-financial assets

The Company assesses at the end of each reporting period whether there is any indication that an asset in the scope of IAS 36 Impairment of Assets may be impaired. If any such indication exists, or when annual impairment testing for an asset is required, the Company estimates the asset’s recoverable amount. An asset’s recoverable amount is the higher of an asset’s or cash-generating unit’s (“CGU”) fair value less costs to sell and its value in use and is determined for an individual asset, unless the asset does not generate cash inflows that are largely independent of those from other assets or groups of assets. Where the carrying amount of an asset or CGU exceeds its recoverable amount, the asset is considered impaired and is written down to its recoverable amount. For assets excluding goodwill, an assessment is made at each reporting date as to whether there is any indication that previously recognized impairment losses may no longer exist or may have decreased. If such indication exists, the Company estimates the asset’s or cash-generating unit’s recoverable amount. A previously recognized impairment loss is reversed only if there has been an increase in the estimated service potential of an asset which in turn increases the recoverable amount. However, the reversal is limited so that the carrying amount of the asset does not exceed its recoverable amount, nor exceed the carrying amount that would have been determined, net of depreciation, had no impairment loss been recognized for the asset in prior years.





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A cash generating unit, or groups of cash-generating units, to which goodwill has been allocated is tested for impairment annually at the same time, irrespective of whether there is any indication of impairment. If an impairment loss is to be recognized, it is first allocated

to reduce the carrying amount of any goodwill allocated to the cash generating unit (group of units), then to the other assets of the unit (group of units) pro rata on the basis of the carrying amount of each asset in the unit (group of units). Impairment losses relating to goodwill cannot be reversed in future periods for any reason. An impairment loss of continuing operations or a reversal of such impairment loss is recognized in profit or loss.

(17) Provisions

Provisions are recognized when the Company has a present obligation (legal or constructive) as a result of a past event, it is probably that an outflow of resources embodying economic

benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation. Where the Company expects some or all of a provision to be reimbursed, the reimbursement is recognized as a separate asset but only when the reimbursement is virtually certain. If the effect of the time value of money is material, provisions are discounted using a current pre-tax rate that reflects the risks specific to the liability. Where discounting is used, the increase in the provision due to the passage of time is recognized as a finance cost. Maintenance warranties A provision is recognized for expected warranty claims on products sold, based on past experience, management’s judgment and other known factors.

(18) Treasury shares

Own equity instruments which are reacquired (treasury shares) are recognized at cost and deducted from equity. Any difference between the carrying amount and the consideration is recognized in equity.





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(19) Revenue recognition

Revenue is recognized to the extent that it is probable that the economic benefits will flow to the Company and the revenue can be reliably measured. Revenue is measured at the fair value of the consideration received or receivable. The following specific recognition criteria must also be met before revenue is recognized: Sale of goods Revenue from the sale of goods is recognized when all the following conditions have been satisfied: A. the significant risks and rewards of ownership of the goods have passed to the buyer; B. neither continuing managerial involvement nor effective control over the goods sold have

been retained; C. the amount of revenue can be measured reliably; D. it is probable that the economic benefits associated with the transaction will flow to the

entity; E. the costs incurred in respect of the transaction can be measured reliably. Rendering of Services Revenue from Information systems integration services is recognized by reference to the stage of completion. Stage of completion is measured by reference to the proportion that contract cost incurred for work performed to date bear to the estimated total contract costs. Where the contract outcome cannot be measured reliably, revenue is recognized only to the extent that the expenses incurred are eligible to be recovered. Interest income For all financial assets measured at amortized cost (including loans and receivables and held-to-maturity financial assets) and available-for-sale financial assets, interest income is recorded using the effective interest rate method and recognized in profit or loss. Dividends Revenue is recognized when the Company’s right to receive the payment is established. Rent Income Rental income from operating lease is accounted by straight-line basis on the period of lease.





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(20) Borrowing costs

Borrowing costs directly attributable to the acquisition, construction or production of an asset that necessarily takes a substantial period of time to get ready for its intended use or sale are capitalized as part of the cost of the respective assets. All other borrowing costs are expensed in the period they occur. Borrowing costs consist of interest and other costs that an entity incurs in connection with the borrowing of funds.

(21) Government grants

Government grants are recognized where there is reasonable assurance that the grant will be received and all attached conditions will be complied with. Where the grant relates to an asset, it is recognized as deferred income and released to income in equal amounts over the expected useful life of the related asset. When the grant relates to an expense item, it is recognized as income over the period necessary to match the grant on a systematic basis to the costs that it is intended to compensate. Where the Company receives non-monetary grants, the asset and the grant are recorded gross at nominal amounts and released to the statement of comprehensive income over the expected useful life and pattern of consumption of the benefit of the underlying asset by equal annual installments. Where loans or similar assistance are provided by governments or related institutions with an interest rate below the current applicable market rate, the effect of this favorable interest is regarded as additional government grant.

(22) Post-employment benefits

All regular employees of the Company are entitled to a pension plan that is managed by an independently administered pension fund committee. Fund assets are deposited under the committee’s name in the specific bank account and hence, not associated with the Company. Therefore fund assets are not included in the Company’s consolidated financial statements. Pension benefits for employees of the overseas subsidiaries and the branches are provided in accordance with the respective local regulations. For the defined contribution plan, the Company will make a monthly contribution of no less than 6% of the monthly wages of the employees subject to the plan. The Company recognized expenses for the defined contribution plan in the period in which the contribution becomes due.





42

Post-employment benefit plan that is classified as a defined benefit plan uses the Projected Unit Credit Method to measure its obligations and costs based on actuarial assumptions. Re-measurements, comprising of the effect of the actuarial gains and losses, the effect of the asset ceiling (excluding net interest) and the return on plan assets, excluding net interest, are recognized as other comprehensive income with a corresponding debit or credit to retained earnings in the period in which they occur. Past service costs are recognized in profit or loss on the earlier of: (a) the date of the plan amendment or curtailment, and (b) the date that the Company recognizes restructuring-related costs Net interest is calculated by applying the discount rate to the net defined benefit liability or asset, both as determined at the start of the annual reporting period, taking account of any changes in the net defined benefit liability (asset) during the period as a result of contribution and benefit payment. The post-employment benefit plan cost in interim periods adopts the post-employment benefit plan cost ratio of the previous year. The base of the calculation starts from the beginning of the year to and ends at the period end. In addition, the effect of significant market fluctuations, significant deductions, payback or other significant one-time events is adjusted and disclosed.

(23) Income taxes

Income tax expense (income) is the aggregate amount included in the determination of profit or loss for the period in respect of current tax and deferred tax. Current income tax Current income tax assets and liabilities for the current and prior periods are measured at the amount expected to be recovered from or paid to the taxation authorities, using the tax rates and tax laws that have been enacted or substantively enacted by the end of the reporting period. Current income tax relating to items recognized in other comprehensive income or directly in equity is recognized in other comprehensive income or equity and not in profit or loss. The 10% income tax for undistributed earnings is recognized as income tax expense in the subsequent year when the distribution proposal is approved by the shareholders’ meeting.





43

Deferred tax Deferred tax is provided on temporary differences at the reporting date between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes. Deferred tax liabilities are recognized for all taxable temporary differences, except: A. Where the deferred tax liability arises from the initial recognition of goodwill or of an

asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss;

B. In respect of taxable temporary differences associated with investments in subsidiaries,

associates and interests in joint ventures, where the timing of the reversal of the temporary differences can be controlled and it is probable that the temporary differences will not reverse in the foreseeable future.

Deferred tax assets are recognized for all deductible temporary differences, carry forward of unused tax credits and unused tax losses, to the extent that it is probable that taxable profit will be available against which the deductible temporary differences, and the carry forward of unused tax credits and unused tax losses can be utilized, except: A. Where the deferred tax asset relating to the deductible temporary difference arises from

the initial recognition of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss

B. In respect of deductible temporary differences associated with investments in

subsidiaries, associates and interests in joint ventures, deferred tax assets are recognized only to the extent that it is probable that the temporary differences will reverse in the foreseeable future and taxable profit will be available against which the temporary differences can be utilized.

Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the year when the asset is realized or the liability is settled, based on tax rates and tax laws that have been enacted or substantively enacted at the reporting date. The measurement of deferred tax assets and deferred tax liabilities reflects the tax consequences that would follow from the manner in which the Company expects, at the end of the reporting period, to recover or settle the carrying amount of its assets and liabilities. Deferred tax relating to items recognized outside profit or loss is recognized outside profit or loss. Deferred tax items are recognized in correlation to the underlying transaction either in other comprehensive income or directly in equity. Deferred tax assets are reassessed at each reporting date and are recognized accordingly.





44

Deferred tax assets and deferred tax liabilities are offset, if a legally enforceable right exists to set off current income tax assets against current income tax liabilities and the deferred taxes relate to the same taxable entity and the same taxation authority. The income tax expense in interim periods is accrued and disclosed using the tax rate applicable to the total income in the corresponding year. Namely, the estimated effective interest rate is applied to the interim pre-tax income.

5. Significant accounting judgements, estimates and assumptions

The preparation of the Company’s parent only financial statements require management to make judgements, estimates and assumptions that affect the reported amounts of revenues, expenses, assets and liabilities, and the disclosure of contingent liabilities, at balance sheet date. However, uncertainty about these assumption and estimate could result in outcomes that require a material adjustment to the carrying amount of the asset or liability affected in future periods. Estimates and assumptions The key assumptions concerning the future and other key sources of estimation uncertainty at the reporting date, that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below. (1) Fair value of financial instruments

Where the fair value of financial assets and financial liabilities recorded in the balance sheet cannot be derived from active markets, they are determined using valuation techniques including the income approach (for example the discounted cash flows model) or market approach. Changes in assumptions about these factors could affect the reported fair value of the financial instruments. Please refer to Note 12 for more details.

(2) Impairment of non-financial assets

An impairment exists when the carrying value of an asset or cash generating unit exceeds its recoverable amount, which is the higher of its fair value less costs to sell and its value in use. The fair value less costs to sell calculation is based on available data from binding sales transactions in an arm’s length transaction of similar assets or observable market prices less incremental costs that would be directly attributable to the disposal of the asset. The value in use calculation is based on a discounted cash flow model. The cash flows projections are derived from the budget for the next five years and do not include restructuring activities that the Company is not yet committed to or significant future investments that will enhance the asset’s performance of the cash generating unit being tested. The recoverable amount is most sensitive to the discount rate used for the discounted cash flow model as well as the expected future cash-inflows and the growth rate used for extrapolation purposes.





45

(3) Pension benefits

The cost of post-employment benefit and the present value of the pension obligation under defined benefit pension plans are determined using actuarial valuations. An actuarial valuation involves making various assumptions. These include the determination of the discount rate, future salary increases, mortality rates and future pension increases. Please refer to Note 6 for more details.

(4) Revenue recognition - sales returns and allowance

The Company estimates sales returns and allowance based on historical experience and other known factors at the time of sale, which reduces the operating revenue.

(5) Income tax

Uncertainties exist with respect to the interpretation of complex tax regulations and the amount and timing of future taxable income. Given the wide range of international business relationships and the long-term nature and complexity of existing contractual agreements, differences arising between the actual results and the assumptions made, or future changes to such assumptions, could necessitate future adjustments to tax income and expense already recorded. The Company establishes provisions, based on reasonable estimates, for possible consequences of audits by the tax authorities of the respective counties in which it operates. The amount of such provisions is based on various factors, such as experience of previous tax audits and differing interpretations of tax regulations by the taxable entity and the responsible tax authority. Such differences of interpretation may arise on a wide variety of issues depending on the conditions prevailing in the respective Company’s domicile. Deferred tax assets are recognized for all carryforward of unused tax losses, unused tax credits and deductible temporary differences to the extent that it is probable that future taxable profit will be available or there are sufficient taxable temporary differences against which the unused tax losses, unused tax credits or deductible temporary differences can be utilized. The amount of deferred tax assets determined to be recognized is based upon the likely timing and the level of future taxable profits and taxable temporary differences together with future tax planning strategies. Please refer to Note 6 for more details on unrecognized deferred tax assets as of December 31, 2015.





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6. Contents of significant accounts


As of December 31, 2015 2014 Cash on hand & demand deposits $47,099 $48,590 Cash in banks 2,153,193 2,219,255 Time deposits - 531,018 Cash in transit 5,688 6,378 Total $2,205,980 $2,805,241

(2) Financial assets at fair value through profit or loss, current

As of December 31, 2015 2014 Held for trading: Derivatives not designated as hedging instruments

Forward foreign exchange contracts $4,479 $67,040 Subtotal 4,479 67,040

Non-derivative financial assets

Open-end funds 19,721 - Subtotal 19,721 -

Total $24,200 $67,040 Held for trading financial assets were not pledged.

(3) Available-for-sale financial assets

As of December 31, 2015 2014 Stocks $394,812 $539,606 Current $382,528 $483,365 Non-current 12,284 56,241 Total $394,812 $539,606 Financial assets available for sale were not pledged.





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(4) Held-to-maturity financial assets

As of December 31, 2015 2014 Bonds $20,000 $20,000 Current $20,000 $- Non-current - 20,000 Total $20,000 $20,000

Financial assets held-to-maturity were not pledged.

(5) Financial assets measured at cost

As of December 31, 2015 2014 Stocks $29,538 $29,538

Current $29,238 $29,238 Non-current 300 300 Total $29,538 $29,538 The above investments in the equity instruments of unlisted entities are measured at cost as the fair value of these investments are not reliably measurable due to the fact that the variability in the range of reasonable fair value measurements is significant for that investment and that the probabilities of the various estimates within the range cannot be reasonably assessed and used when measuring fair value. Financial assets measured at cost were not pledged.

(6) Debt instrument investments for which no active market exists

As of December 31, 2015 2014 Cash in banks $20,000 $20,000 Time deposits 3,181,669 74,263 Total $3,201,669 $94,263





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As of December 31, 2015 2014 Current $3,170,899 $94,263 Non-current 30,770 - Total $3,201,669 $94,263 Please refer to Note 8 for more details on debt instrument investments for which no active market exists that were pledged as collateral.

(7) Notes receivable and notes receivable-related parties

As of December 31, 2015 2014 Notes receivables arising from operating activities $296,180 $356,041 Less: allowance for doubtful debts - - Subtotal 296,180 356,041 Notes receivables-related parties 1,775 28,141 Less: allowance for doubtful debts - - Subtotal 1,775 28,141 Total $297,955 $384,182 Notes receivables were not pledged.

(8) Accounts receivable and accounts receivable-related parties

As of December 31, 2015 2014 Accounts receivable $1,990,697 $2,429,861 Less: allowance for doubtful debts (85,577) (162,059) Net 1,905,120 2,267,802 Installment accounts receivable 544,311 552,599 Less: unrealized interest revenue – trade receivables from

installment sales

(951) (1,351) Less allowance for doubtful debts - - Net 543,360 551,248 Subtotal 2,448,480 2,819,050 Accounts receivable-related parties 2,000,244 2,106,138 Less: allowance for doubtful debts (129) (737) Less: unrealized interest revenue – trade receivables from

installment sales

(3,606) (513) Net 1,996,509 2,104,888 Total $4,444,989 $4,923,938





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The expected recovery of the accounts receivables from installment sales is as follows: As of December 31, 2015 2014 Not later than one year $189,385 $240,979 Later than one year and not later than two years 182,871 145,357 Later than two years 172,055 166,263 $544,311 $552,599 Accounts receivables were not pledged. Accounts receivable are generally on 30-180 day terms. The movements in the provision for impairment of accounts receivable and accounts receivable-related parties are as follows:

Individually

impaired Collectively

impaired Total As of January 1, 2015 $20,135 $142,661 $162,796 Charge (reversal) for the current period - (77,090) (77,090) As of December 31, 2015 $20,135 $65,571 $85,706 As of January 1, 2014 $20,135 $152,707 $172,842 Charge (reversal) for the current period - (10,046) (10,046) As of December 31, 2014 $20,135 $142,661 $162,796 Impairment loss that was individually determined for the years ended December 31, 2015 and 2014 arose due to the fact that the counterparty was in financial difficulties. The amount of impairment loss recognized was the difference between the carrying amount of the trade receivable and the present value of its expected recoverable amount. The Company did not hold any collateral for such trade receivables. Ageing analysis of account receivables and account receivables-related parties that were past due as of the balance sheet date but not impaired is as follows: Neither past

due nor impaired

Past due but not impaired

As of 1 to 6

months 6 months to

1 year More than

1 year Total December 31, 2015 $4,038,859 $395,926 $211 $9,993 $4,444,989 December 31, 2014 4,372,615 447,755 103,521 47 4,923,938





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(9) Construction receivables (including from related parties)

As of December 31, 2015 2014 Accumulated cost incurred $4,801,735 $4,815,931 Accumulated recognized project profit (loss) 320,775 628,153 Accumulated amount of construction progress (4,268,609) (3,438,116) Construction receivables $853,901 $2,005,968


Items

Contract

proceeds

Contract costs

incurred

Accumulated

recognized

total project

profit(loss)

Percentage

of

completion

Amounts

billed based on

construction

progress

Construction

contracts

receivable

Percentage of

completion

method

Category A $82,700 $67,012 $7,045 25%~100% $52,703 $21,354

Category B 174,979 136,933 9,905 0%~100% 42,760 104,078

Category C 6,512,992 4,597,790 303,825 0%~100% 4,173,146 728,469

Total $6,770,671 $4,801,735 $320,775 $4,268,609 $853,901


Items

Contract

proceeds

Contract costs

incurred

Accumulated

recognized

total project

profit(loss)

Percentage

of

completion

Amounts

billed based on

construction

progress

Construction

contracts

receivable

Percentage of

completion

method

Category A $830,002 $558,011 $221,371 0~100% $528,210 $251,172

Category B 775,970 584,740 58,026 70~100% 309,847 332,919

Category C 5,899,007 3,652,699 338,660 20~100% 2,600,059 1,391,300

Category D 40,000 20,481 10,096 76% - 30,577

Total $7,544,979 $4,815,931 $628,153 $3,438,116 $2,005,968





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(10) Inventory

A. The details of inventories are as follows:

As of December 31, 2015 2014 Raw materials $715,286 $805,178 Work in progress 1,445,113 1,344,560 Finished good 1,421,222 1,580,253 Inventories in transit 33,469 53,293 Construction in progress 427,869 557,707 Total $4,042,959 $4,340,991 The cost of inventories recognized in expenses amounted to NTD 16,569,601 thousand and NTD 19,448,727 thousand, including the recognition of allowance for inventory valuation losses of NTD 246,508 thousand and NTD 71,929 thousand for the years ended December 31, 2015 and 2014, respectively. Inventories were not pledged.

(11) Investments accounted for using the equity method

A. The following table lists the investments accounted for using the equity method of the Company:

As of December 31,

2015 2014

Name of investee company

Carrying

amount

Percentage of

ownership

Carrying

amount

Percentage of

ownership

Investment in subsidiaries:

Listed companies

Chunghwa Picture Tubes, Ltd. $(644,343) 8.46 $143,705 8.46

Tatung System Technologies Inc. 493,761 53.60 526,060 53.60

Forward Electronics Co., Ltd. 122,290 12.05 147,848 12.05

San Chih Semiconductor Co., Ltd. 1,218,386 43.18 1,736,885 43.18

Tatung Fine Chemicals Co. 243,270 48.27 275,319 48.27

Subtotal 1,433,364 2,829,817





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Carrying

amount

Percentage of

ownership

Carrying

amount

Percentage of

ownership

Non-public companies

Taiwan Telecommunication Industry Co., Ltd. $(765,665) 100.00 $(731,863) 100.00

Central Research Technology Co. 60,001 100.00 63,359 100.00

Tatung Consumer Products (Taiwan) Co., Ltd. (677,127) 99.10 (478,842) 99.10

Tatung Sm-Cyclo Co., Ltd. 171,759 85.33 169,568 85.33

Shang-Chih Asset Development Co. 31,350,588 100.00 31,974,880 100.00

Chunghwa Electronic Investment Co., Ltd. 697,193 93.27 1,668,042 93.27

Tatung Die Casting Co. 41,867 51.00 38,996 51.00

Tatung (Thailand) Co., Ltd. 344,002 100.00 378,587 100.00

Tatung Company of Japan, Inc. 594,834 100.00 576,711 100.00

Tatung Electronics(S) Pte. Ltd. 58,849 90.00 63,672 90.00

Tatung Wire & Cable (Thailand) Co., Ltd. 74,218 100.00 79,294 100.00

Tatung Singapore Information Co., Ltd. 71,499 100.00 (37,035) 100.00

Tatung Electric (Singapore) Pte. Ltd. 865,023 100.00 917,143 100.00

Tatung Co. of America Inc. 139,447 50.00 148,765 50.00

Tatung Mexico S.A de C.V. 272,135 100.00 343,828 100.00

Tatung Science and Technology Inc. 8,371 100.00 9,045 100.00

Tatung Electric Company of America, Inc. 196,587 100.00 191,714 100.00

Tatung Netherlands B.V. (125,852) 100.00 (125,852) 100.00

Tatung (U.K.)Ltd. (Note 1) - - (221,130) 100.00

TATUNG CZECH s.r.o 33,342 100.00 64,067 100.00

Tatung Medical Healthcare Technologies Co.,

Ltd. (Note 2)

197,160 95.02 179,763 95.41

Toes Opto-Mechatronics Co. 106,848 85.00 143,458 85.00

Tisnet Technology Inc. (Note 3) - - 10,041 18.35

Tatung Vietnam Co. Ltd. (207,910) 100.00 (140,675) 100.00

Tatung Electric Technology (Vietnam) Co., Ltd. 53,034 100.00 72,169 100.00

Shang Chih Investment Co., Ltd. 461,971 95.83 577,840 95.83

Chih Sheng Investment Co., Ltd. 824,686 100.00 1,179,879 100.00

Taipei Industry Corporation (Note 4) 19 0.0026 - -

Tatung Forever Energy Co., Ltd. (Note 5) 99,841 100.00 - -

Tatung Global Strategy Investment And Trading

(BVI) Inc.

(863,923) 100.00 (525,875) 100.00

Absolute Alpha Limited 20,573 100.00 21,008 100.00

Subtotal 34,103,370 36,610,557





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Carrying

amount

Percentage of

ownership

Carrying

amount

Percentage of

ownership

Investment in associates:

Listed companies

Elitegroup Computer System Co., Ltd. $4,543,168 27.35 $5,017,072 27.38

Non-public companies

Tatung-Okuma Co., Ltd. 956,486 49.00 867,278 49.00

Kuender & Co., Ltd. 439,824 50.00 219,572 50.00

Hsieh Chih Industrial Library Publishing Co. 901 6.91 877 6.91

Chung-Tai Technology Development Engineering

Co.

14,646 22.00 15,669 22.00

Lansong International Co., Ltd. - 98.33 - 98.33

Tatung Telecom Corporation - - (3,159) 35.00

Subtotal 5,955,025 6,117,309

The balance of the investment accounted for

using equity method

41,491,759 45,557,683

Add: the credit balance of the investment

accounted for using equity method

3,284,820 2,264,431

Total $44,776,579 $47,822,114

B. Investments in subsidiaries:

Investments in subsidiaries were presented as investments accounted for using the equity

method and adjusted by necessary measurements.

Note 1: Tatung (U.K.) Ltd. was liquidated in December, 2015.

Note 2: The Company did not participate in the capital injections of Tatung Medical

Healthcare Technologies Co., Ltd. in August, 2015. Therefore, the shareholding

percentage has dropped to 95.02%.

Note 3: The board of directors of Tatung System Technologies Inc. resolved to

purchase all of the shares of Tisnet Technology Inc. held by the Company on

May 26, 2015.





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Note 4: On May 7, 2015, the board of directors of Taipei Industry Corporation resolved to issue new shares through capital injection. The capital injection was majorly invested by Shan-Chih Asset Development Co. and the remaining shares are purchased by the Company.

Note 5: The Company invested NTD 100,000 thousand in February 2015 to establish Tatung Forever Energy Co., Ltd., holding 100% of its shares.

For the years ended December 31, 2015 and 2014, the Company received dividends from investing in subsidiaries and associates using the equity method were amounting to NTD 2,381,926 thousand and 1,812,862 thousand, respectively. Please refer to Note 8 on investment in subsidiaries that were pledged as collateral.

C. Investments in associates:

a. Information on the material associate of the Company:

Company name: Elitegroup Computer Systems Co., Ltd. Nature of the relationship with the associate: Elitegroup Computer Systems Co., Ltd. is in the business of manufacturing and selling related products in the Company’s industry chain. The Company invested in Elitegroup Computer Systems Co., Ltd. for the purpose of upstream/downstream integration. Principal place of business (country of incorporation): Taiwan Fair value of the investment in the associate when there is a quoted market price for the investment: Elitegroup Computer Systems Co., Ltd. is a listed entity on the Taiwan Stock Exchange (TWSE). The fair value of the investment in Elitegroup Computer Systems Co., Ltd. was NT$3,087,627 thousand and NT$4,063,469 thousand, as of December 31, 2015 and 2014, respectively. Reconciliation of the associate’s summarized financial information presented to the carrying amount of the Group’s interest in the associate:





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The summarized financial information of the associate is as follows:

As of December, 2015 2014 Current assets $19,240,314 $24,728,602 Non-current assets 7,003,961 7,744,389 Current liabilities (11,158,840) (15,644,972) Non-current liabilities (631,634) (610,010) Equity 14,453,801 16,218,009

Proportion of the Company’s ownership 27.35% 27.38% Subtotal 3,953,115 4,440,491 Goodwill 614,638 614,638

Other adjustments (24,585) (38,057) Carrying amount of the investment $4,543,168 $5,017,072 For the years ended 2015 2014 Operating revenue $48,386,567 $55,895,307 Profit from continuing operations 1,111,205 1,302,128 Other comprehensive income (95,198) 470,897 Total comprehensive income 1,016,007 1,773,025

b. Except the associate mentioned above, other associates were not individually material.

The aggregate financial information based on Company’s share of other associates was as follows: For the years ended 2015 2014 Profit from continuing operations $24,046 $149,182 Other comprehensive income, net of income tax - - Total comprehensive income 24,046 149,182

c. The associates had no contingent liabilities or capital commitments as of December

31, 2015 and 2014, nor did the associates provide collaterals. d. The investments in associates of the Company were not pledged as collateral.





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(12) Property, plant and equipment

A. The details of property, plant and equipment are as follows:

Buildings

Machinery and

equipment

Office

equipment

Transportation

equipment

Leasehold

improvements

Other

equipment

Construction in

progress and

equipment

awaiting

examination Total

Cost:

As of January 1, 2015 $632,051 $6,095,510 $425,545 $60,666 $351,739 $1,612,001 $537,484 $9,714,996

Additions 50 373,115 23,027 4,301 53,257 176,743 278,792 909,285

Disposals (427) (112,726) (27,617) (3,459) (931) (156,535) (90) (301,785)

Other changes (Note) 810 375,501 (20,092) - 9,430 (118,544) (245,081) 2,024

As of December 31, 2015 $632,484 $6,731,400 $400,863 $61,508 $413,495 $1,513,665 $571,105 $10,324,520

As of January 1, 2014 $608,016 $5,988,542 $390,295 $64,543 $269,176 $1,557,109 $213,963 $9,091,644

Additions 19,895 434,573 8,884 1,545 84,670 67,980 474,828 1,092,375

Disposals - (334,207) (26,830) (5,422) (1,174) (21,929) (1,406) (390,968)

Other changes (Note) 4,140 6,602 53,196 - (933) 8,841 (149,901) (78,055)

As of December 31, 2014 $632,051 $6,095,510 $425,545 $60,666 $351,739 $1,612,001 $537,484 $9,714,996

Depreciation and impairment:

As of January 1, 2015 $(450,895) $(4,679,832) $(308,537) $(55,084) $(152,687) $(1,366,203) $- $(7,013,238)

Depreciation (16,620) (284,998) (55,001) (2,435) (58,256) (72,033) - (489,343)

Disposals 426 87,676 27,534 3,431 763 122,544 - 242,374

Other changes (Note) - (10,763) 10,763 - - (3,606) - (3,606)

As of December 31, 2015 $(467,089) $(4,887,917) $(325,241) $(54,088) $(210,180) $(1,319,298) $- $(7,263,813)

As of January 1, 2014 $(435,556) $(4,718,041) $(303,368) $(58,201) $(104,481) $(1,315,592) $- $(6,935,239)

Depreciation (15,339) (282,741) (32,143) (2,296) (49,380) (73,442) - (455,341)

Disposals - 322,523 26,538 5,426 1,174 21,922 - 377,583

Other changes (Note) - (1,573) 436 (13) - 909 - (241)

As of December 31, 2014 $(450,895) $(4,679,832) $(308,537) $(55,084) $(152,687) $(1,366,203) $- $(7,013,238)

Net carrying amount as of:

December 31, 2015 $165,395 $1,843,483 $75,622 $7,420 $203,315 $194,367 $571,105 $3,060,707

December 31, 2014 $181,156 $1,415,678 $117,008 $5,582 $199,052 $245,798 $537,484 $2,701,758

(Note: Including transfer from advance payments of equipment and reclassification.)





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No borrowing costs were capitalized as property, plant and equipment for the years ended December 31, 2015 and 2014. Components of buildings, including main building structure, electronic engineering, electrical engineering, fire engineering, air conditioning units and elevators, are depreciated by their own respective useful lives. Please refer to Note 8 for more details on property, plant and equipment that were pledged as collateral.

B. Assets related to Tatung University are described as follows:

As of December 31, 2015, the carrying amount of Hsin-She-Gong Building (“the Building”) was NTD 145,051 thousand. As of the audit report date of these consolidated financial statements, the ownership registration was still in progress, however, pursuant to R.O.C. Civil Code, the ownership of the Building belongs to the Company. Execution of specific development plan for the Building Hsin-She-Gong Building is located within the Company’s premises. The overall development plan involved the registration of land use change and urban planning, thus the long-term plans are still in the communication and planning stage. Hsin-She-Gong Building will continue to be used as it is. In addition, the Company had conducted building safety inspections and fire inspections according to the relevant laws in order to maintain the safety and the optimum utilization of the Building.

(13) Intangible assets

Computer software cost

Cost Amortization

and impairment Net book value As of January 1, 2015 $213,856 $(112,486) $101,370 Addition 33,014 - 33,014 Disposals (11,387) 11,387 - Amortization - (62,351) (62,351) As of December 31, 2015 $235,483 $(163,450) $72,033 As of January 1, 2014 $154,393 $(71,293) $83,100 Addition 71,690 - 71,690 Disposals (12,227) 12,227 - Amortization - (53,420) (53,420) As of December 31, 2014 $213,856 $(112,486) $101,370





58

Amortization expense of intangible assets under the statement of comprehensive income:

For the years ended

December 31, 2015 2014 Operating costs $1,520 $61 Operating expense $60,831 $53,359

(14) Other non-current assets

As of December 31, 2015 2014 Advance payments in equipment $42,691 $70,529 Other non-current assets - other 186,292 166,529 Total $228,983 $237,058 With respect to the above other non-current assets – other, part of the lands and land prepayment in the amount of NTD 70,073 thousand and NTD 4,669 thousand were held temporarily under third parties’ name because of regulatory requirements or other reasons as of December 31, 2015 and 2014. In order to secure the Company’s right over the lands, the Company has adopted relevant security measures, including having the lands pledged to the Company.

(15) Long-term receivables-net

As of December 31, 2015 2014 Tatung InfoComm Co., Ltd. $632,972 $591,368 Less: allowance for doubtful debts (508,972) (308,864) Net $124,000 $282,504 On March 30, 2012, the Company entered into a share purchase contract with Vee Telecom Multimedia Co., Ltd. Under the contract, the Company would sell all of its shares of its subsidiary, Tatung InfoComm Co., Ltd., to Vee Telecom Multimedia Co., Ltd. Moreover, the Company’s financing to Tatung InfoComm Co., Ltd in the amount of NTD 557,980 thousand would be repaid by Tatung InfoComm Co., Ltd. However, Tatung InfoComm co., Ltd. was not able to repay the Company as contracted. In addition to taking measures to secure creditor rights, the Company evaluated the financial condition of Tatung InfoComm co., Ltd. and the likelihood to recover, to recognize allowance for bad debts.





59

(16) Short-term loans

Interest Rates (%)

As of December 31, 2015 2014 Unsecured bank loans 1.88%-2.77% $3,228,000 $3,830,111 L/C loans 0.91%-2.69% 1,189,573 1,601,786 Short-term loans in foreign currency 1.12%-2.51% 1,088,766 1,089,389 Subtotal 5,506,339 6,521,286 Due to employees 0.17% 18,264 18,419 Total $5,524,603 $6,539,705 The Company’s unused short-term lines of credits amounted to NTD 3,679,348 thousand and NTD 3,556,449 thousand, as of December 31, 2015 and 2014, respectively.

(17) Short-term notes and bills payable

Guarantors

Interest Rates (%) As of December 31,

2015 2014 Unsecured domestic bills payable 0.85%-1.17% $550,000 $600,000 Less: Unamortized discount (241) (256) Net $549,759 $599,744

(18) Financial liabilities at fair value through profit or loss - current

As of December 31, 2015 2014 Held for trading: Derivatives not designated as hedging Instruments

Foreign currency option $807 $14,400 Total $807 $14,400

(19) Long-term deferred revenue

As of December 31, 2015 2014 Non-current deferred revenue $85,000 $-

The non-current deferred revenue is generated from unearned rent from operating lease.



TATU

NG

CO

., LT

D.

NO

TES

TO P

AR

ENT

CO

MPA

NY

ON

LY F

INA

NC

IAL

STA

TEM

ENTS

(E

xpre

ssed

in T

hous

ands

of N

ew T

aiw

an D

olla

rs u

nles

s oth

erw

ise S

peci

fied)

60

(2

0) L

ong-

term

loan

s D

etai

ls of

long

-term

loan

s as o

f Dec

embe

r 31,

201

5 an

d 20

14 a

re a

s fol

low

s:

Lend

ers

As o

f Dec

embe

r 31,

Inte

rest

rate

(%)(

Not

e)

M

atur

ity d

ate

and

term

s of r

epay

men

t 20

15

20

14

Secu

red

Long

-term

loan

s fro

m K

ing’

s Tow

n

Ban

k

$8

00,0

00

$135

,000

0.

81

Effe

ctiv

e fro

m D

ecem

ber 3

0, 2

015

to D

ecem

ber 3

0, 2

017.

The

prin

cipa

l will

be

repa

id u

pon

mat

urity

.

Secu

red

long

-Ter

m lo

ans f

rom

Ban

k of

Taiw

an

15

0,00

0

300,

000

2.

30

Effe

ctiv

e fro

m A

ugus

t 4, 2

011

to Ju

ly 2

8, 2

016.

The

firs

t rep

aym

ent d

ate

is 2

year

s afte

r the

dat

e of

this

agre

emen

t effe

ctiv

e an

d in

tere

st is

paid

mon

thly

. Prin

cipa

l is r

epai

d in

6 se

mi-a

nnua

lly p

aym

ents

.

Secu

red

Long

-term

loan

s fro

m B

ank

Sino

Pac

96

,749

57

,466

1.

94~2

.94

Effe

ctiv

e fro

m Ju

ly 9

, 201

4 to

July

9, 2

023.

Sin

ce th

e fir

st us

e da

te, p

rinci

pal i

s rep

aid

in 3

6 qu

arte

rly

paym

ents

.

Secu

red

Long

-term

loan

s fro

m B

ank

Sino

Pac

31

7,20

8

-

1.94

~2.9

4 E

ffect

ive

from

Apr

il 27

, 201

5 to

Apr

il 27

, 202

7. S

ince

the

first

use

date

, prin

cipa

l is r

epai

d in

48

quar

terly

paym

ents

.

Uns

ecur

ed lo

ng-te

rm lo

ans f

rom

Ban

k

Sino

Pac

50

0,00

0

-

2.00

E

ffect

ive

from

Dec

embe

r 31,

201

5 to

Dec

embe

r 31,

201

7. T

he p

rinci

pal w

ill b

e re

paid

upo

n m

atur

ity.

Uns

ecur

ed lo

ng-te

rm lo

ans f

rom

Ban

k

Sino

Pac

-

10

,590

2.

45~2

.85

Effe

ctiv

e fro

m Ju

ly 9

, 201

4 to

July

9, 2

017.

Sin

ce th

e fir

st us

e da

te, p

rinci

pal i

s rep

aid

in 3

6 qu

arte

rly

paym

ents

.

Uns

ecur

ed lo

ng-te

rm lo

ans f

rom

Meg

a

Inte

rnat

iona

l Com

mer

cial

Ban

k

1,

200,

000

1,

400,

000

2.

53~2

.60

Effe

ctiv

e fro

m Ja

nuar

y 11

, 201

5 to

Janu

ary

11, 2

017.

The

prin

cipa

l will

be

repa

id u

pon

mat

urity

.

Uns

ecur

ed lo

ng-te

rm lo

ans f

rom

Tai

shin

Inte

rnat

iona

l Ban

k

20

0,00

0

200,

000

2.

68

Effe

ctiv

e fro

m D

ecem

ber 2

5, 2

015

to D

ecem

ber 2

5, 2

017.

The

prin

cipa

l will

be

repa

id u

pon

mat

urity

.



TATU

NG

CO

., LT

D.

N

OTE

S TO

PA

REN

T C

OM

PAN

Y O

NLY

FIN

AN

CIA

L ST

ATE

MEN

TS

(Exp

ress

ed in

Tho

usan

ds o

f New

Tai

wan

Dol

lars

unl

ess o

ther

wise

Spe

cifie

d)

61

Lend

ers

As o

f Dec

embe

r 31,

Inte

rest

rate

(%)(

Not

e)

M

atur

ity d

ate

and

term

s of r

epay

men

t 20

15

20

14

Uns

ecur

ed lo

ng-te

rm lo

ans f

rom

Tai

shin

Inte

rnat

iona

l Ban

k

3,

000,

000

-

1.

80

Effe

ctiv

e fr

om D

ecem

ber 2

9, 2

015

to D

ecem

ber 3

0, 2

019.

The

1st

repa

ymen

t of p

rinci

pal i

s in

6 m

onth

s

afte

r firs

t dra

w. T

he re

mai

ning

prin

cipa

l is r

epai

d in

8 se

mi-a

nnua

l pay

men

ts. T

he c

redi

t will

be

decr

ease

d

by 1

2.5%

in e

ach

repa

ymen

t.

Uns

ecur

ed lo

ng-te

rm lo

ans f

rom

Cha

ng H

wa

Ban

k

80

0,00

0

800,

000

2.

27~2

.34

Effe

ctiv

e fr

om D

ecem

ber 2

1, 2

015

to D

ecem

ber 2

1, 2

017.

The

prin

cipa

l will

be

repa

id u

pon

mat

urity

.

Uns

ecur

ed lo

ng-te

rm lo

ans f

rom

Hua

Nan

Ban

k

1,

740,

000

1,

840,

000

1.

80

Effe

ctiv

e fro

m M

ay 2

2, 2

015

to M

ay 2

2, 2

017.

The

prin

cipa

l will

be

repa

id u

pon

mat

urity

.

Uns

ecur

ed lo

ng-te

rm lo

ans f

rom

Tai

wan

Coo

pera

tive

Bank

1,

300,

000

1,

300,

000

2.

28~2

.35

Effe

ctiv

e fr

om D

ecem

ber 1

, 201

5 to

Dec

embe

r 1, 2

017.

The

prin

cipa

l will

be

repa

id u

pon

mat

urity

.

Uns

ecur

ed lo

ng-te

rm lo

ans f

rom

Far

Eas

tern

Inte

rnat

iona

l

96

2,68

4

961,

056

2.

15~2

.19

Effe

ctiv

e fr

om D

ecem

ber 1

0, 2

015

to D

ecem

ber 1

0, 2

018.

The

prin

cipa

l will

be

repa

id u

pon

mat

urity

.

The

Expo

rt-Im

port

Ban

k O

f the

RO

C

60,0

00

180,

000

2.

41~2

.50

Effe

ctiv

e fr

om D

ecem

ber 1

0, 2

013

to M

ay 1

3, 2

016.

The

1st

repa

ymen

t of p

rinci

pal i

s in

6 m

onth

s afte

r

first

draw

. The

rem

aini

ng p

rinci

pal i

s rep

aid

in 5

sem

i- ann

ually

pay

men

ts. T

he la

st re

paym

ent i

s no

long

er

than

2 y

ear a

nd 6

mon

ths a

fter e

xecu

tion

date

of t

he lo

an a

gree

men

t.

Uns

ecur

ed lo

ng-te

rm lo

ans f

rom

EnT

ie

Com

mer

cial

Ban

k

20

0,00

0

-

2.75

E

ffect

ive

from

Nov

embe

r 24,

201

5 to

Nov

embe

r 24,

201

7. S

ince

the

first

use

date

, prin

cipa

l is r

epai

d in

10

quar

terly

pay

men

ts.

Secu

red

Synd

icat

ed lo

ans f

rom

Tai

shin

Inte

rnat

iona

l Ban

k

4,

400,

000

4,

400,

000

2.

63~2

.84

Effe

ctiv

e fr

om Ju

ne 1

3, 2

014

to Ju

ne 1

3, 2

018.

The

1st

repa

ymen

t of p

rinci

pal i

s in

36 m

onth

s afte

r firs

t

draw

. The

rem

aini

ng p

rinci

pal i

s rep

aid

in 3

sem

i-ann

ually

pay

men

ts. T

he 1

st a

nd 2

nd

repa

ymen

ts w

ill b

e bo

th a

t 20%

and

the

rem

aini

ng 6

0% w

ill b

e re

paid

in th

e 3rd

repa

ymen

t.

Secu

red

Synd

icat

ed lo

ans f

rom

Firs

t Ban

k

2,20

0,00

0

2,75

0,00

0

2.63

E

ffect

ive

from

Sep

tem

ber 1

6, 2

013

to S

epte

mbe

r 16,

201

8. T

he 1

st re

paym

ent o

f prin

cipa

l is i

n 18

mon

ths

afte

r firs

t dra

w. T

he re

mai

ning

prin

cipa

l is r

epai

d in

4 se

mi-a

nnua

lly re

paym

ents.

The

1st to

3rd

pay

men

ts

will

be

10%

and

the

rem

aini

ng 7

0% w

ill b

e re

paid

in th

e 4th

repa

ymen

t.



TATU

NG

CO

., LT

D.

N

OTE

S TO

PA

REN

T C

OM

PAN

Y O

NLY

FIN

AN

CIA

L ST

ATE

MEN

TS

(Exp

ress

ed in

Tho

usan

ds o

f New

Tai

wan

Dol

lars

unl

ess o

ther

wise

Spe

cifie

d)

62

Lend

ers

As o

f Dec

embe

r 31,

Inte

rest

rate

(%)(

Not

e)

M

atur

ity d

ate

and

term

s of r

epay

men

t 20

15

20

14

Secu

red

Synd

icat

ed lo

ans f

rom

Ban

k Si

noPa

c

1,00

0,00

0

700,

000

2.

64

Effe

ctiv

e fr

om S

epte

mbe

r 30,

201

5 to

Sep

tem

ber 3

0, 2

017.

The

1st

repa

ymen

t of p

rinci

pal i

s in

18 m

onth

s

afte

r firs

t dra

w. T

he re

mai

ning

prin

cipa

l is r

epai

d in

3 q

uarte

rly p

aym

ents

. The

1st a

nd 2

nd re

paym

ents

will

decr

ease

the

cred

it by

30%

eac

h, a

nd th

e re

mai

ning

40%

will

be

repa

id in

the

3rd re

paym

ent.

Secu

red

Synd

icat

ed lo

ans f

rom

Ban

k of

Taiw

an

80

0,00

0

800,

000

2.

49

Effe

ctiv

e fr

om M

arch

31,

201

4 to

Mar

ch 3

1, 2

017.

The

1st

repa

ymen

t of p

rinci

pal i

s in

24 m

onth

s afte

r

first

draw

. The

rem

aini

ng p

rinci

pal i

s rep

aid

in 2

sem

i-ann

ually

pay

men

ts. T

he 1

st a

nd 2

nd re

paym

ents

will

decr

ease

the

cred

it by

20%

eac

h, a

nd th

e re

mai

ning

60%

will

be

repa

id in

the

3rd re

paym

ent.

Secu

red

Synd

icat

ed lo

ans

from

Ban

k of

Taiw

an

48

0,00

0

800,

000

2.

49

Effe

ctiv

e fr

om M

arch

31,

201

4 to

Mar

ch 3

1, 2

017.

Onl

y on

e w

ithdr

aw is

allo

wed

. The

loan

shou

ld b

e

with

draw

in th

e fir

st six

mon

ths o

f the

effe

ctiv

e pe

riod.

The

cre

dit p

erio

d sh

ould

be

twel

ve m

onth

s afte

r

with

draw

. The

1st

repa

ymen

t of p

rinci

pal i

s in

12 m

onth

s afte

r firs

t dra

w. T

he re

mai

ning

prin

cipa

l is

repa

id in

5 se

mi-a

nnua

lly p

aym

ents

.

Hua

Nan

Ban

k L/

C lo

ans (

USD

)

197,

806

30

0,83

5

1.80

~2.2

7 P

rinci

pal i

s rep

aid

in 1

80 d

ays a

fter f

irst d

raw

. T

he m

atur

ity d

ate

is Ju

ne 2

8, 2

016.

Hua

Nan

Ban

k L/

C lo

ans (

EUR)

-

30,7

71

1.53

~1.6

6 P

rinci

pal i

s rep

aid

in 1

80 d

ays a

fter f

irst d

raw

. T

he m

atur

ity d

ate

is Ju

ne 2

1, 2

016.

Hua

Nan

Ban

k L/

C lo

ans (

SEK

)

4,18

4

4,39

0

5.40

~5.8

0 P

rinci

pal i

s rep

aid

in 1

80 d

ays a

fter f

irst d

raw

. T

he m

atur

ity d

ate

is Ju

ne 2

8, 2

016.

Cha

ng H

wa

Ban

k L/

C lo

ans (

USD

)

169,

640

34

8,30

1

1.48

~1.9

4 P

rinci

pal i

s rep

aid

in 1

80 d

ays a

fter f

irst d

raw

. T

he d

urat

ion

of th

e lo

an is

two

year

s.

Cha

ng H

wa

Ban

k L/

C lo

ans (

EUR)

67,9

60

15,0

04

1.02

~1.2

2 P

rinci

pal i

s rep

aid

in 1

80 d

ays a

fter f

irst d

raw

. T

he d

urat

ion

of th

e lo

an is

two

year

s.

Meg

a Ba

nk L

/C lo

ans (

USD

)

369,

378

48

7,77

9

2.11

~2.9

1 P

rinci

pal i

s rep

aid

in 1

80 d

ays a

fter f

irst d

raw

. T

he m

atur

ity d

ate

is Ju

ne 1

9, 2

016.

Hua

Nan

Ban

k se

cure

d lo

ans i

n a

fore

ign

curr

ency

(USD

)

17

9,11

6

47,3

65

1.69

~2.2

8 P

rinci

pal i

s rep

aid

in 1

80 d

ays a

fter f

irst d

raw

. T

he m

atur

ity d

ate

is Ju

ne 8

, 201

6.

Cha

ng H

wa

Ban

k se

cure

d lo

ans i

n a

fore

ign

curr

ency

(USD

)

37

,339

44

,641

1.

50~1

.94

Prin

cipa

l is r

epai

d in

180

day

s afte

r firs

t dra

w.

The

dur

atio

n of

the

loan

is tw

o ye

ars.



TATU

NG

CO

., LT

D.

N

OTE

S TO

PA

REN

T C

OM

PAN

Y O

NLY

FIN

AN

CIA

L ST

ATE

MEN

TS

(Exp

ress

ed in

Tho

usan

ds o

f New

Tai

wan

Dol

lars

unl

ess o

ther

wise

Spe

cifie

d)

63

Lend

ers

As o

f Dec

embe

r 31,

Inte

rest

rate

(%)(

Not

e)

M

atur

ity d

ate

and

term

s of r

epay

men

t 20

15

20

14

Meg

a Ba

nk se

cure

d lo

ans i

n a

fore

ign

curr

ency

(USD

)

61

,153

19

9,99

5

2.33

~2.3

8 P

rinci

pal i

s rep

aid

in 1

80 d

ays a

fter f

irst d

raw

. T

he m

atur

ity d

ate

is Ju

ne 1

4, 2

016.

Two-

year

loan

s due

to st

ockh

olde

rs a

nd

empl

oyee

s

17

,453

17

,801

Subt

otal

21,3

10,6

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64

(21) Post-employment benefits

Defined contribution plan The Company adopts a defined contribution plan in accordance with the Labor Pension Act of the R.O.C. Under the Labor Pension Act, the Company will make monthly contributions of no less than 6% of the employees’ monthly wages to the employees’ individual pension accounts. The Company has made monthly contributions of 6% of each individual employee’s salaries or wages to employees’ pension accounts. Expenses under the defined contribution plan for the years ended December 31, 2015 and 2014 were NTD 73,404 thousand and NTD 76,494 thousand, respectively. Defined benefits plan The Company adopts a defined benefit plan in accordance with the Labor Standards Act of the R.O.C. The pension benefits are disbursed based on the units of service years and the average salaries in the last month of the service year. Two units per year are awarded for the first 15 years of services while one unit per year is awarded after the completion of the 15th year. The total units shall not exceed 45 units. Under the Labor Standards Act, the Company contributes an amount equivalent to 2% of the employees’ total salaries and wages on a monthly basis to the pension fund deposited at the Bank of Taiwan in the name of the administered pension fund committee. Before the end of each year, the Company assesses the balance in the designated labor pension fund. If the amount is inadequate to pay pensions calculated for workers retiring in the same year, the Company will make up the difference in one appropriation before the end of March the following year.

The Ministry of Labor is in charge of establishing and implementing the fund utilization plan in accordance with the Regulations for Revenues, Expenditures, Safeguard and Utilization of the Labor Retirement Fund. The pension fund is invested in-house or under mandates, based on a passive-aggressive investment strategy for long-term profitability. The Ministry of Labor establishes checks and risk management mechanism based on the assessment of risk factors including market risk, credit risk and liquidity risk, in order to maintain adequate manager flexibility to achieve targeted return without over-exposure of risk. With regard to utilization of the pension fund, the minimum earnings in the annual distributions on the final financial statement shall not be less than the earnings attainable from the amounts accrued from two-year time deposits with the interest rates offered by local banks. Treasury Funds can be used to cover the deficits after the approval of the competent authority. As the Company does not participate in the operation and management of the pension fund, no disclosure on the fair value of the plan assets categorized in different classes could be made in accordance with paragraph 142 of IAS 19. The Company expects to contribute NTD 25,981 thousand to its defined benefit plan during the 12 months beginning after December 31, 2015. As of December 31, 2015 and 2014, the maturity year of the defined benefit plan is 2016.





65

Pension costs recognized in profit or loss for the years ended December 31, 2015 and 2014: For the years ended December 31, 2015 2014 Current period service costs $19,831 $20,300 Interest income or expense 21,732 24,003 Payments from the plan (58) (625) Total $41,505 $43,678 Changes in the defined benefit obligation and fair value of plan assets are as follows: As of 2015.12.31 2014.12.31 2014.1.1 Defined benefit obligation $2,645,880 $2,897,540 $3,200,459 Plan assets at fair value (55,639) (7,707) (83,410) Subtotal 2,590,241 2,889,833 3,117,049 Other 2,610 2,500 2,502 Other non-current liabilities - Accrued pension liabilities recognized on the consolidated balance sheets

$2,592,851 $2,892,333 $3,119,551 Reconciliation of liability (asset) of the defined benefit plan is as follows:

Defined benefit

obligation Fair value of plan assets

Benefit liability (asset)

As of January 1, 2014 $3,200,459 $(83,410) $3,117,049 Current period service costs 20,300 - 20,300 Net interest expense (income) 24,003 (625) 23,378 Subtotal 3,244,762 (84,035) 3,160,727 Remeasurements of the net defined benefit liability (asset):

Experience adjustments 17,608 - 17,608 Return on plan assets - (1,069) (1,069)

Subtotal 17,608 (1,069) 16,539 Payments from the plan (364,830) 364,830 - Contributions by employer - (287,433) (287,433) As of December 31, 2014 2,897,540 (7,707) 2,889,833 Current period service costs 19,831 - 19,831 Net interest expense (income) 21,731 (58) 21,673 Subtotal 2,939,102 (7,765) 2,931,337 Remeasurements of the net defined benefit liability (asset):

Actuarial gains and losses arising from changes in financial assumptions

7,000 - 7,000

Experience adjustments (28,953) - (28,953) Return on plan assets - (1,526) (1,526)

Subtotal (21,953) (1,526) (23,479) Payments from the plan (271,269) 271,269 - Contributions by employer - (317,617) (317,617) As of December 31, 2015 $2,645,880 $(55,639) $2,590,241





66

The following significant actuarial assumptions are used to determine the present value of the defined benefit obligation: As of December 31, 2015 2014 Discount rate 0.50% 0.75% Expected rate of salary increases 1.00% 1.00% A sensitivity analysis for significant assumption as at December 31, 2015 and 2014 is, as shown below:

Effect on the defined benefit obligation 2015 2014

Increase defined benefit

obligation

Decrease defined benefit

obligation

Increase defined benefit

obligation

Decrease defined benefit

obligation Discount rate increase by 0.25% $- $7,000 $- $- Discount rate decrease by 0.25% 7,169 - -

The sensitivity analyses above are based on a change in the actuarial assumption (for example: change in discount rate or future salary), keeping all other assumptions constant. The sensitivity analyses may not be representative of an actual change in the defined benefit obligation as it is unlikely that changes in assumptions would occur in isolation of one another. There was no change in the methods and assumptions used in preparing the sensitivity analyses compared to the previous period.

(22) Provisions, current


As of January 1, 2015 $91,916 Utilized (46,770) As of December 31, 2015 $45,146 As of December 31, 2015 $45,146 As of December 31, 2014 $91,916





67

Maintenance warranties A provision is recognized for expected warranty claims on products sold, based on past experience, management’s judgment and other known factors.

(23) Equities

A. Common stock

As of December 31, 2015 and 2014, the Company’s authorized capital were both NTD 100,000,000 thousand, and issued capital both were NTD 23,395,367 thousand, with a par value of NTD10 dollar. Each share is entitled to one voting right and the right to receive dividends.

B. Capital surplus

As of December 31, 2015 2014 Share of changes in net assets of associates and joint

ventures accounted for using the equity method $680,241 $645,506

Other 105,135 105,135 Total $785,376 $750,641 According to the Company Act, the capital reserve shall not be used except for making good the deficit of the company. When a company incurs no loss, it may distribute the capital reserves related to the income derived from the issuance of new shares at a premium or income from endowments received by the company. The distribution could be made in cash or in the form of dividend shares to its shareholders in proportion to the number of shares being held by each of them.

C. Treasury stock

As of December 31, 2015 and 2014 the Company’s subsidiaries, CPT and its subsidiaries, and Chunghwa Electronics Investment Co., held 70,598 thousand shares and 333 thousand shares of the Company’s stock. The stocks mentioned above were held for financing purpose before the amendments of the Company Act on November 12, 2001. As of December 31, 2015 and 2014, the carrying value of treasury shares is NTD 806,870 thousand.





68

D. Retained earnings and dividend policies:

According to the Company’s Articles of Incorporation, current year’s earnings, if any, shall be distributed in the following order: (a) Payment of all taxes and dues (b) Offset prior years’ operation losses (c) Appropriate 10% of the remaining amount after deducting items (a) and (b) as a legal

reserve (d) Appropriate or reverse special reserve in accordance with relevant laws or

regulations (e) Appropriate no more than 2% and no less than 1% of the remaining amount after

deducting items (a), (b), (c) and (d) as directors’ remuneration and employee’s bonus, respectively

(f) After deducting items (a), (b), (c) and (d) above from the current year’s earnings, the distribution of the remaining portion, if any, will be recommended by the board of directors and resolved in the stockholders’ meeting. The distribution of earnings could not be less than 60% of the accumulated distributable earnings

However, according to the addition of Article 235-1 of the Company Act announced on May 20, 2015, the Company shall provide a fixed amount or percentage of the actual profit for a year to be distributed as “employees’ compensation”, after deducting and setting aside an amount equal to the cumulative losses (if any). The aforementioned employees’ compensation may be made in the form of stocks or cash, which shall be determined by a resolution adopted by a majority vote at a board of directors meeting attended by two-thirds or more of the directors and be reported at a shareholders’ meeting. Furthermore the Articles of Incorporation may stipulate that the employees’ compensation could be distributed to employees of affiliated enterprises meeting certain criteria. The Articles of Incorporation are to be amended in accordance with the aforementioned recent amendment to the Company Act in the shareholders’ meeting in 2016. The policy of dividend distribution should reflect factors such as the current operating results and fund requirements. However, at least 10% of the dividends must be paid in the form of cash.





69

According to the Company Act, the Company needs to set aside amount to legal reserve unless where such legal reserve amounts to the total authorized capital. The legal reserve can be used to make good the deficit of the Company. When the Company incurs no loss, it may distribute the portion of legal reserve which exceeds 25% of the paid-in capital by issuing new shares or by cash in proportion to the number of shares being held by each of the shareholders. When distributing earnings, the Company has to set aside special reserve, for other net deductions from shareholders’ equity of the period. For any subsequent reversal of other net deductions from shareholders’ equity, the amount reversed may be distributed. Following the adoption of T-IFRS, the FSC on April 6, 2012 issued Order No. Jin-Guan-Zheng-Fa-Zi No. 1010012865, which sets out the following provisions for compliance: On a public company's first-time adoption of the T-IFRS, for any unrealized revaluation gains and cumulative translation adjustments (gains) recorded to shareholders’ equity that the company elects to transfer to retained earnings by application of the exemption under IFRS 1, the company shall set aside an equal amount of special reserve. Following a company’s adoption of the T-IFRS for the preparation of its financial reports, when distributing distributable earnings, it shall set aside special reserve, from the profit/loss of the current period and the undistributed earnings from the previous period, an amount equal to “other net deductions from shareholders’ equity for the current fiscal year, provided that the company has already set aside special reserve according to the requirements in the preceding point, it shall set aside supplemental special reserve based on the difference between the amount already set aside and other net deductions from shareholders’ equity. For any subsequent reversal of other net deductions from shareholders’ equity, the amount reversed may be distributed. As of January 1, 2014, special reserves set aside for the first-time adoption of T-IFRS amounted to NTD 15,894,690 thousand. Furthermore, the Company resolved to offset its losses by using special reserve of NTD 5,919,690 thousand in the shareholders’ meeting on June 6, 2014. The Company resolved to recover the special reserve amounted to NTD 124,233 thousand in the shareholders’ meeting on June 15, 2015.





70

In the fourth quarter of 2015, the Company disposed related assets and reversed special reserves of NTD 52,180 thousand. As of December 31, 2015 and 2014, special reserve set aside for the first-time adoption of T-IFRS amounted to NTD 10,047,053 and NTD 9,975,000 thousand, respectively. Details of the 2014 Compensating deficits as approved by the shareholders’ meeting on June 15, 2015 is as follows:

Appropriation of earnings 2014

Legal reserve $36,354 Special reserve 124,233 Please refer to Note 6(26) for more details about provision for employees’ bonuses and compensation for directors and supervisors.

(24) Operating revenue

For the years ended

December 31, 2015 2014 Sale of goods $16,132,508 $18,594,738 Less: sales returns, discounts and allowances (204,582) (90,691) Revenue arising from rendering of services 553,942 527,959 Construction contract revenue 1,032,739 1,803,181 Other operating revenues 636,497 460,279 Total $18,151,104 $21,295,466

(25) Operating leases

Company as lessee The Company has entered into commercial leases on land and plants. These leases have an average life of one year with no renewal option included in the contracts. There are no restrictions placed upon the Company by entering into these leases.





71

Future minimum rentals payable under non-cancellable operating leases as of December 31, 2015 and 2014 are as follows: As of December 31, 2015 2014 Not later than one year $194,081 $184,616 Operating lease expenses recognized are as follows: For the years ended

December 31, 2015 2014 Minimum lease payments $184,545 $216,798

(26) Summary statement of employee benefits, depreciation and amortization expenses by

function during the years ended December 31, 2015 and 2014:

2015 2014

Operating costs

Operating expenses Total amount

Operating costs

Operating expenses Total amount

Employee benefits expense

Salaries $1,003,231 $1,149,560 $2,152,791 $1,089,417 $1,218,054 $2,307,471 Labor and health insurance

92,273 111,068 203,341 100,325 115,448 215,773

Pension 45,670 69,239 114,909 51,573 68,599 120,172 Other employee benefits expense

40,364 7,544 47,908 46,643 10,074 56,717

Depreciation 419,689 69,654 489,343 396,793 58,548 455,341 Amortization 1,520 60,831 62,351 61 53,359 53,420

As of December 31, 2015 and 2014, the Company employed 3,406 and 3,535 employees, respectively. The Company planned to propose in May 2016 to amend the Article of Incorporation in accordance with the addition of Article 235-1 of the Company Act announced on May 20, 2015. The amendment to the Articles of Incorporation will be resolved in the shareholders’ meeting in 2016. Information on the Board of Directors’ resolution regarding the employees’ compensation and remuneration to directors and supervisors can be obtained from the “Market Observation Post System” on the website of the TWSE. The Company suffered net loss after tax in 2015 and thus did not estimate employee





72

compensation and remuneration for the directors and supervisors. As of December 31, 2014, there was unrecovered special reserves. Therefore, the Company did not estimate employee compensation and remuneration for the directors and supervisors.

(27) Non-operating income and expenses

A. Other income


2015 2014 Dividend income $26,864 $42,283 Interest income 42,669 41,400 Others 401,424 223,415 Total $470,957 $307,098

B. Other gains and losses


2015 2014 Gains on disposal of property, plant and equipment $12,783 $2,236 Gains on disposal of investments 105,070 41,777 Foreign exchange (losses) gains, net 15,412 (63,732) Gains (losses) on financial assets / financial liabilities at

fair value through profit or loss (10,449) 69,637

Excise tax dispute loss (385,188) - Other gains and losses (283,235) (440,926) Total $(545,607) $(391,008)

C. Finance costs


2015 2014 Interest on borrowings from bank $589,882 $626,416 Interest on bonds payable - 98,280 Other 10,393 - Total finance costs $600,275 $724,696





73

(28) Components of other comprehensive income


Arising during

the period

Reclassificatio

n adjustments

during the

period

Other

comprehensive

income, before

tax

Income tax

benefit

(expense)

relating to

components of

other

comprehensive

income

Other

comprehensive

income, net of

tax

Not to be reclassified to profit

or loss in subsequent

periods:

Remeasurements of defined

benefit plans

$23,479 $- $23,479 $- $23,479

Share of other

comprehensive income of

associates and joint

ventures accounted for

using the equity method

(49,459) - (49,459) - (49,459)

To be reclassified to profit or

loss in subsequent periods:

Unrealized gains (losses) from

available-for-sale financial

assets

(135,070) (8,854) (143,924) - (143,924)

Share of other comprehensive

income of associates and

joint ventures accounted for


(506,039) - (506,039) - (506,039)

Total of other comprehensive

income

$(667,089) $(8,854) $(675,943) $- $(675,943)





74


Arising during

the period

Reclassificatio

n adjustments

during the

period

Other

comprehensive

income, before

tax

Income tax

relating to

components of

other

comprehensive

income

Other

comprehensive

income, net of

tax

Not to be reclassified to profit

or loss in subsequent

periods:

Remeasurements of defined

benefit plans

$(16,539) $- $(16,539) $- $(16,539)

Share of other

comprehensive income of

associates and joint

ventures accounted for


19,813 - 19,813 - 19,813

To be reclassified to profit or

loss in subsequent periods:

Unrealized gains (losses) from

available-for-sale financial

assets

42,673 (41,389) 1,284 - 1,284

Share of other comprehensive

income of associates and

joint ventures accounted for


920,850 - 920,850 - 920,850

Total of other comprehensive

income

$966,797 $(41,389) $925,408 $- $925,408

The Company has accumulated a large amount of loss carry forward. Therefore, there was not significant deferred income tax effect resulted from other comprehensive income and

changes in equity in 2015 and 2014, and thus the Company did not record related income tax.





75

(29) Income tax

The major components of income tax expense (income) are as follows: Income tax expense (income) recognized in profit or loss For the years ended

December 31, 2015 2014 Current income tax expense (income):

Current income tax charge $(24,647) $(48,956) Adjustments in respect of current income tax of prior

periods

6,046 -

Deferred tax expense (income): Deferred tax expense (income) relating to origination

and reversal of temporary differences 20,000 20,000

Total income tax expense (income) $1,399 $(28,956) There was not significant deferred income tax effect resulted from other comprehensive income and changes in equity in 2015 and 2014, and thus the Company did not record related income tax. A reconciliation between tax expense and the product of accounting profit multiplied by applicable tax rates is as follows: For the years ended

December 31, 2015 2014 Accounting profit (loss) before tax from continuing operations $(3,073,616) $334,583 Tax at the domestic rates applicable to profits in the country concerned

$(522,515) $56,879

Tax effect of revenues exempt from taxation 142,954 (375,797) Tax effect of expenses not deductible for tax purposes 64,846 10,524 Other 8,067 7,145 Tax effect of deferred tax assets/liabilities 326,648 321,249 Adjustments in respect of current income tax of prior periods 6,046 - Income tax benefit from consolidated return system (24,647) (48,956) Total income tax expense (income) recognized in profit or loss $1,399 $(28,956)





76

Deferred tax assets (liabilities) relate to the following:


Beginning

balance

Deferred tax

income

(expense)

recognized in

profit or loss

Ending

balance


Deferred tax assets

Investments accounted for using the

equity method

$408,464 $16,234 $424,698

Unrealized intragroup profits and losses 19,322 (8,077) 11,245

Allowance for doubtful accounts 69,547 (3,101) 66,446

Other 15,626 (7,951) 7,675

Subtotal 512,959 (2,895) 510,064



equity method

(145,918) 15,320 $(130,598)

Unrealized gain on foreign exchange (122,308) (32,425) (154,733)

Reserve for land revaluation (3,417) - (3,417)

Subtotal (271,643) (17,105) (288,748)

Deferred tax income/ (expense) $(20,000)

Net deferred tax assets/(liabilities) $241,316 $221,316


Deferred tax assets $512,959 $510,064

Deferred tax liabilities $(271,643) $(288,748)





77


Beginning

balance

Deferred tax income

(expense) recognized in profit or loss

Ending balance

Temporary differences Deferred tax assets

Investments accounted for using the equity method

$422,895 $(14,431) $408,464

Unrealized intragroup profits and losses 2,646 16,676 19,322 Allowance for doubtful accounts 76,436 (6,889) 69,547 Other 223 15,403 15,626 Subtotal 502,200 10,759 512,959

Deferred tax liabilities Investments accounted for using the equity method

(92,179) $(53,739) $(145,918)

Unrealized gain on foreign exchange (145,288) 22,980 (122,308) Reserve for land revaluation (3,417) - (3,417) Subtotal (240,884) (30,759) (271,643)

Deferred tax income/ (expense) $(20,000) Net deferred tax assets/(liabilities) $261,316 $241,316 Reflected in balance sheet as follows: Deferred tax assets $502,200 $512,959 Deferred tax liabilities $(240,884) $(271,643) The following table contains information of the unused tax losses of the Company: Tax losses for Unused tax losses as of December 31, Expiration

Year the period 2015 2014 year 2015 $2,862,935 $1,880,683 $- 2025 2014 822,903 506,008 - 2024 2013 1,307,119 1,197,171 898,127 2023 2012 247,968 - 89,910 2022 2010 2,041,023 1,781,104 1,595,932 2020 2009 1,782,046 1,627,157 1,733,441 2019 2007 895,593 767,227 731,828 2017 2006 2,963,700 2,846,965 2,822,308 2016

$10,606,315 $7,871,546





78

Unrecognized deferred tax assets As of December 31, 2015 and 2014, deferred tax assets that have not been recognized as they may not be used to offset taxable profits amounted to NTD 3,896,585 thousand, and NTD 4,123,467 thousand, respectively. Imputation credit information As of December 31, 2015 2014 Balances of imputation credit amounts $1,443,132 $1,315,767 The actual creditable ratio for 2015 and 2014 were both 0%. The Company’s earnings generated in the year ended December 31, 1997 and prior years have been fully appropriated. The assessment of income tax returns As of December 31, 2015, the R.O.C. income tax authorities have assessed the income tax returns of the Company through 2012 (2011 has not assessed and approved).

(30) Earnings per share

Basic earnings per share amounts are calculated by dividing net profit for the year attributable to ordinary equity holders of the parent entity by the weighted average number of ordinary shares outstanding during the year. Diluted earnings per share amounts are calculated by dividing the net profit attributable to ordinary equity holders of the Company (after adjusting for interest on the convertible preference shares) by the weighted average number of ordinary shares outstanding during the year plus the weighted average number of ordinary shares that would be issued on conversion of all the dilutive potential ordinary shares into ordinary shares. For the years ended 2015 2014 Basic and diluted earnings (loss) per share: Net income (loss) (in thousands of NTD) $(3,075,015) $363,539 Weighted average number of ordinary shares outstanding

for basic and diluted earnings per share (in thousands)

$2,268,605 2,268,605 Basic and diluted earnings (loss) per share $(1.35) $0.16





79

There have been no other transactions involving ordinary shares or potential ordinary shares between the balance sheet date and the issuance date of the financial statements. .

7. Related party transactions

Significant related party transactions (1) Sales (including leasing revenue)

For the years ended 2015 2014 Subsidiaries $5,667,922 $6,225,977 Entity with joint control or significant influence over the

Company

1,826 1,519

Associates 11,936 38,757 Other related parties 137 615

Total $5,681,821 $6,266,868 The sales price to related parties was determined through mutual agreement based on market conditions. The collection terms for domestic related parties were 90 days, equivalent to those for domestic third parties; the collection terms for foreign related parties were 30-180 days, equivalent to these for foreign third parties.

(2) Purchase

For the years ended 2015 2014 Subsidiaries $1,691,564 $1,518,737 Entity with joint control or significant influence over the

Company 239 782

Associates 19,701 96,775

Total $1,711,504 $1,616,294

The purchase price from related parties was determined through mutual agreement based on market conditions. The payment terms to related parties and third parties for domestic purchases were both net 30-150 days, while the terms for overseas purchases were both net 30-120 days.





80

(3) Notes receivable– related parties

As of December 31, 2015 2014 Subsidiaries $1,775 $28,141

(4) Accounts receivable – related parties

As of December 31, 2015 2014 Subsidiaries $1,997,302 $2,090,113 Entity with joint control or significant influence over the

Company 33 64

Associates 2,909 15,961 Subtotal 2,000,244 2,106,138

Less: allowance for doubtful accounts (129) (737) Unrealized interest revenue – trade receivables from instalment sales

(3,606) (513)

Net $1,996,509 $2,104,888 (5) Construction receivables

As of December 31, 2015 2014 Subsidiaries $469,318 $412,279 Associates - 30,557

Total $469,318 $442,836 (6) Others receivable – related parties (current or non-current)

As of December 31, 2015 2014 Loans receivable(Note) $1,446,344 $1,410,965 Reclassified from accounts receivable due to over-due:

Subsidiaries 2,864,128 2,388,072 Entity with joint control or significant influence over the

Company 5 30

Associates 9,491 47,871 Subtotal 4,319,968 3,846,938

Less: allowance for doubtful accounts (87,833) (119,010) Net 4,232,135 3,727,928

Non-current portion (Reclassified as non-current assets) (3,007,680) (2,387,576) Current portion $1,224,455 $1,340,352





81

Note: Loans receivable details are as below: December 31, 2015

Name of related parties 2015

Maximum balance

Balance as of December 31,

2015 Interest

rates Interest revenue

Tatung Vietnam Co. Ltd. $546,700 $546,700 2% $10,570

Tatung Global Strategy Investment and Trading (BVI) Inc.

$899,644 $899,644 2% $17,394

December 31, 2014

Name of related parties 2014

Maximum balance

Balance as of December 31,

2014 Interest

rates Interest revenue

Tatung Vietnam Co. Ltd. $543,525 $543,525 2% $10,223

Tatung Global Strategy Investment and Trading (BVI) Inc.

$867,440 $867,440 2% $16,598

(7) Prepayments

As of December 31, 2015 2014

Subsidiaries $17,464 $69,988

(8) Accounts payable – related parties

As of December 31, 2015 2014 Subsidiaries $279,157 $50 Entity with joint control or significant influence over the

Company - 400,361

Associates 6,459 1,533 Total $285,616 $401,944





82

(9) Other payable– related parties

As of December 31, 2015 2014 Subsidiaries $43,324 $140,005 Entity with joint control or significant influence over the

Company 621 461

Associates 5,210 2,111 Other related parties 50 71

Total $49,205 $142,648 (10) Acquisition of property, plant and equipment and intangible assets

Acquisition proceeds 2015 2014 Subsidiaries $339,664 $326,793 Associates 5,647 2,679

Total $345,311 $329,472 (11) Plants and office leased – related parties

For the years ended 2015 2014 Subsidiaries $- $7,911 Associates - 1,850

Total $- $9,761 There were no significant differences in terms of rental between related parties and arm’s length transactions.

(12) Compensation of key management personnel

For the years ended 2015 2014 Short-term employee benefits $38,370 $35,236 Post-employment benefits 282 282 Other long-term employee benefits - - Termination benefits - - share-based payment awards - -

Total $38,652 $35,518





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(13) Operating expense rent expenditure

For the years ended 2015 2014

Subsidiaries $184,545 $216,798 There were no significant differences in terms of rental between related parties and arm’s length transactions.

(14) Notes endorsement and guarantee

The balances of guarantees that the Company provided for related parties as of December 31, 2015, and 2014 were as follows:

Name of related parties Purpose December 31, 2015 Tatung Company of Japan, Inc. Pledged for financing NTD 1,772,400 thousand Chunghwa Picture Tubes, Ltd. Pledged for financing NTD 3,000,000 thousand

Name of related parties Purpose December 31, 2014 Tatung Company of Japan, Inc. Pledged for financing NTD 2,040,000 thousand Please refer to Note 6(20) for more details of the subsidiary’s endorsement for the Company.

(15) Please refer to Note 6(12) for more details of utilization of Hsin-De-Hui Building and

Shan-Chih Hall by Tatung University. 8. Assets pledged as collateral

The following table lists assets of the Company pledged as collateral:

Carrying amounts as of December 31,

2015 2014 Purpose of pledge Machines and other Equipment $458,972 $554,300 Long-term loans Investment in debt instrument

investments with no active market exists

3,201,669 94,263 Construction security deposit and long-term loans

Investments accounted for under the equity method

4,100,025 982,196 Long-term loans and commodity tax controversy

Total $7,760,666 $1,630,759





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9. Commitments and contingencies

(1) Legal claim contingency

A. King Pro Group (“King Pro”) and Ka Hung Exhibition Co., Ltd. (“Ka Hung”) contracted with the Company as subcontractors to construct part of the Talin Power Plant, for which tender the Company contracted with Kai Yuan Construction Co., Ltd. However, King Pro and Ka Hung failed to complete the construction upon deadline and both parties claimed to terminate the contract. King Pro and Ka Hung claimed that the Company had not paid construction examination fees, prepayments and advances and filed an action against the Company to claim NTD 23,610 thousand. The Court scheduled a preliminary proceeding on April 19, 2016. In addition, the Company filed for provisional seizure against King Pro and Ka Hung on March 21, 2016 and planned to claim indemnities resulted from advances and contract termination after receiving the ruling of the provisional seizure.

B. United Aerotech System Corporation filed a legal action against the Company on January 6, 2010, claiming payments of consultant fees amounted to NTD 1.49 million. The court of first and second instance ruled in favor of the Company but United Aerotech System Corporation appealed. United Aerotech System Corporation claimed a higher amount of NTD2 million in the oral arguments. This case is now in the remand second instance and the result of the trial is uncertain. United Aerotech System Corporation did not file an action against the remaining balance, and both courts in the first and second instance found the evidence supporting the claim in the amount of NTD 60 million to be invalid. United Aerotech System Corporation filed a legal action of third instance on March 29, 2014. The Company received remand judgment from the Supreme Court on November 5, 2014 and the next court session will be March 24, 2016.

C. The Company engaged in a construction project with Taiwan Railways Administration,

MOTC (“Taiwan Railways”). Taiwan Railways failed to complete the inspection process after the construction was finished. The Company has filed an action against Taiwan Railways to claim payments of NTD 233,888 thousand in January 2013. On October 16, 2014, the action was settled and both parties agreed to inspect the construction quality with qualified tools from March 17 to 26, 2015. On April 20, 2015, Taiwan Railways decided that the rails the Company exchanged the first time were unqualified. On July 3, 2015, Taiwan Railways notified the Company for the second exchange according to the purchase agreement. On November 3, 2015, the Company received a notice from Taiwan Railways agreeing to change suppliers and had contracted with the new suppliers. The new suppliers had finished manufacturing the products and the new rails had arrived in Taiwan on January 11, 2016 and had been delivered to five stations. However two of these stations, Dadu and Fugang, did not receive the rails due to causes attributable to Taiwan Railways. The Company is still negotiating with Taiwan Railways for the delivery process.





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D. Yung Loong Engineering Corp. (Yung Loong) engaged in a construction project,

“BI-HAI machinery installing project”, with the Company, however, Yung Loong claimed that the Company’s power generation set was defective and caused delay in the construction. Therefore, Yung Loong claimed payment of NTD 56,997 thousand from the Company. After failing a mediation on July 22, 2014, the action is pending at the court of first instance. On January 25, 2016, Yung Loong requested for an appraisal for the items in dispute on court and currently the items are appraised by Taiwan Professional Electrical Engineers Association.

E. Compal Electronics, Inc. (“Compal”) made a public announcement on March 29, 2013

to request the Company to purchase the CPT shares held by Compal and it filed for arbitration to the Arbitration Association of the Republic of China. The Company received the arbitration appeal submitted by Compal from the Association on April 3, 2013. An arbitration tribunal was formed on August 20, 2013. The Company received the arbitration award 102-Chung-Sheng-He-Zi No. 25 Arbitration Judgment, from the Arbitration Association of the Republic of China on May 19, 2014. The main context is as follows:

The counterparty (“the Company”) shall make a payment to the petitioner (“Compal”) for NTD 2,118,607 thousand. The first payment of NTD 718,607 thousand shall be paid within a month after the arbitration award is delivered to the counterparty. The second payment of NTD 700,000 thousand shall be paid within four months after the arbitration award is delivered to the counterparty. The third payment of NTD 700,000 thousand shall be paid within seven months after the arbitration award is delivered to the counterparty. In addition, the Company shall pay the interest at an annual rate of 5% from April 3, 2013 to full repayment day.

Petitioner shall deliver the private shares for the corresponding payment for 374,274,704 shares, 364,583,334 shares and 364,583,333 shares.

Other claims from Compal are dismissed Two thirds of the arbitration fees shall be borne by the petitioner while the rest is borne by the counterparty.

The Company issued requests to Compal for acknowledging the payments (i.e., NTD718,607 thousand, NTD700,000 thousand and NTD700,000 thousand) and meanwhile delivering the corresponding numbers of shares (374,274,704 shares, 364,583,334 shares and 364,583,333 shares) on June 17, 2014, September 12, 2014 and December 14, 2014. However, as of the financial statement date, Compal neither accepted the payment nor handed over the shares. In addition, Compal has filed an action at Taiwan Taipei District Court to compulsory enforce the the arbitration mentioned above. On July 31, 2014, the Company had received 2014 Zhong-Zhi-Zi No. 3 Civil Judgment, which granted the compulsory enforcement of the arbitration award on July 28, 2014. The Company has not received the order of the compulsory enforcement from





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Taiwan Taipei District Court. On June 13, 2014, Compal has filed an action at Taiwan Taipei District Court to revoke the unfavorable part of the arbitration award. The case was ruled by Taiwan Taipei District Court in 2014 Zhong-Zhi-Zi No. 4 Civil Judgment which revoked Compal’s filing and demanded Compal to pay all the litigation costs. Compal appealed and the case was handled by their attorneys. The case is ruled by Taiwan High Court and the oral arguments had been ended on March 8, 2016. The judgment will be made on March 29, 2016.

(2) Others

A. The promissory notes issued by the Company to secure bank loans, construction performance bond and tariff guarantee amounted to NTD 9,743,634 thousand.

B. The Company’s unused letters of credit for importing raw materials and machinery

amounted to NTD 88,218 thousand, USD 10,030 thousand, EUR 1,171 thousand, SEK 498 thousand.

C. Performance bond issued by financial institutions amounted to NTD 1,480,043 thousand

and USD 65 thousand. D. The Company applied to Mega International Commercial Bank and Bank of Taiwan for a

credit line to be issued for Tatung Co., of Japan, Inc. The promissory notes amounted to NTD 972,400 thousand and NTD 800,000 thousand. The Company applied to Industrial Bank of Taiwan, Fubon Bank and Far Eastern Commercial Bank for a credit lines to be issued for CPT. The promissory notes of credit amounted to NTD 1,000,000 thousand, NTD 500,000 thousand and NTD 1,500,000 thousand, respectively.

E. The Company promised to supervise the operation and management of CPT and take

suitable measures to assist CPT in acquiring funds in order to maintain its normal operations.

10. Significant disaster loss

None. 11. Significant subsequent events

On February 16, 2016, the board of directors of the Company resolved to invest in Chunghwa Picture Tubes (Labuan) Ltd. for NTD 968,560 thousand. On March 23, 2016, the Company’s board of directors resolved to purchase the secured corporate bonds of Chunghwa Picture Tubes (Bermuda) Ltd. for USD 250,000 thousand.





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12. Others

(1) Categories of financial instruments

Financial assets As of December 31, 2015 2014 Financial assets at fair value through profit or loss: Held for trading $24,200 $67,040 Subtotal 24,200 67,040 Available-for-sale financial assets (including $29,538 reported as

financial assets measured at cost) (including the non-current portion)

424,350 569,144 Held-to-maturity financial assets 20,000 20,000 Loans and receivables:

Cash and cash equivalents (excluding cash on hand and demand deposit)

2,158,881 2,756,651

Debt instrument investments with no active market exists 3,201,669 94,263 Notes receivable (including related parties) 297,955 384,182 Accounts receivable (including related parties)(including the

construction receivable)

5,298,890 6,929,906 Other receivables (including related parties)(including the non

- current portion)

4,385,740 4,046,551 Other non - current assets deposits-out 219,228 206,026

subtotal 15,562,363 14,417,579 Total $16,030,913 $15,073,763

Financial liabilities As of December 31, 2015 2014 Financial liabilities at amortized cost:

Short-term loan $5,524,603 $6,539,705 Short-term notes and bills payable 549,759 599,744 Payables (including related parties) 4,688,021 5,938,703 Loan (including the current portion) 21,253,779 18,069,676 Deposits in 4,270 2,454

Subtotal 32,020,432 31,150,282 Financial liabilities at fair value through profit or loss:

Held-for-trading 807 14,400 Total $32,021,239 $31,164,682





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(2) Financial risk management objectives and policies

The Company’s risk management objectives are to manage market risk, credit risk and liquidity risk related to its operating activities. The Company identifies measures and manages the aforementioned risks based on policy and risk preference. The Company has established appropriate policies, procedures and internal controls for financial risk management. Before entering into significant financial activities, due approval process by the board of directors and audit committee must be carried out based on related protocols and internal control procedures. The Company complies with its financial risk management policies at all times.

(3) Market risk

Market risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market prices. Market risks comprise of currency risk, interest rate risk, and other price risk (such as equity price risk). In practice, it is rarely the case that a single risk variable will change independently from other risk variables, there is usually interdependencies between risk variables. However the sensitivity analysis disclosed below does not take into account the interdependencies between risk variables. Foreign currency risk The Company’s exposure to the risk of changes in foreign exchange rates relates primarily to the Company’s operating activities (when revenue or expense are denominated in a different currency from the Company’s functional currency) and the Company’s net investments in foreign subsidiaries. The Company has certain foreign currency receivables to be denominated in the same foreign currency with certain foreign currency payables, therefore natural hedge is received. The Company also uses forward contracts to hedge the foreign currency risk on certain items denominated in foreign currencies. Hedge accounting is not applied as they did not qualify for hedge accounting criteria. Furthermore, as net investments in foreign subsidiaries are for strategic purposes, they are not hedged by the Company.





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The foreign currency sensitivity analysis of the possible change in foreign exchange rates on

the Company’s profit is performed on significant monetary items denominated in foreign

currencies as of the end of the reporting period. The Company’s foreign currency risk is

mainly related to the volatility in the exchange rates for USD and JPY.

The information of the sensitivity analysis is as follows:

A. When NTD appreciates or depreciates against USD by 1%, the profit for the years ended

December 31, 2015 and 2014 will increase (decrease) by NTD 13,875 thousand and NTD

29,187 thousand respectively.

B. When NTD appreciates or depreciates against JPY by 1%, the profit for the years ended

December 31, 2015 and 2014 would will increase (decrease) by NTD 2,434 thousand and

NTD 116 thousand respectively.

Interest rate risk

Interest rate risk is the risk that the fair value of future cash flows of a financial instrument

will fluctuate because of changes in market interest rates. The Company’s exposure to the

risk of changes in market interest rates relates primarily to the Company’s loans and

receivables at variable interest rates, bank borrowings with fixed interest rates and variable

interest rates.

The Company manages its interest rate risk by having a balanced portfolio of fixed and

variable loans and borrowings and entering into interest rate swaps. Hedge accounting does

not apply to these swaps as they do not qualify for it.

The interest rate sensitivity analysis is performed on items exposed to interest rate risk as of

the end of the reporting period, including investments and borrowings with variable interest

rates and interest rate swaps. At the balance sheet date, a change of 10 basis points of

interest rate could cause the profit for the years ended December 31, 2015 and 2014 to

increase/decrease by NTD 14,910 thousand and NTD 14,036 thousand, respectively.





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Equity price risk The Company’s listed and unlisted equity securities are susceptible to market price risk arising from uncertainties about future values of the investment securities. The Company’s listed equity securities are classified under held for trading financial assets or available-for-sale financial assets, while unlisted equity securities are classified as available-for-sale. The Company manages the equity price risk through diversification and placing limits on individual and total equity instruments. Reports on the equity portfolio are submitted to the Company’s senior management on a regular basis. The Company’s board of directors reviews and approves all equity investment decisions. At the balance sheet date, a decrease of 1% in the price of the listed equity securities classified under available-for-sale could have an impact of NTD 2,647 thousand and NTD 4,834 thousand on the Company’s equity for the years ended December 31, 2015 and 2014, respectively.

(4) Credit risk management

Credit risk is the risk that a counterparty will not meet its obligations under a contract, leading to a financial loss. The Company is exposed to credit risk from operating activities (primarily for accounts receivables and notes receivables) and from its financing activities, including bank deposits and other financial instruments. Customer credit risk is managed by each business unit subject to the Company’s established policy, procedures and control relating to customer credit risk management. Credit limits are established for all customers based on their financial position, rating from credit rating agencies, historical experience, prevailing economic condition and the Company’s internal rating criteria etc. Certain customer’s credit risk will also be managed by taking credit enhancing procedures, such as requesting for prepayment or insurance. As of December 31, 2015 and 2014, amounts receivables from top ten customers represented 55.82% and 40.23% of the total accounts receivables of the Company, respectively. The credit concentration risk of other accounts receivables is insignificant. Credit risk from balances with banks, fixed income securities and other financial instruments is managed by the Company’s treasury in accordance with the Company’s policy. The Company only transacts with counterparties approved by the internal control procedures, which are banks and financial institutions, companies and government entities with good credit rating and with no significant default risk. Consequently, there is no significant credit risk for these counter parties.





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(5) Liquidity risk management

The Company’s objective is to maintain a balance between continuity of funding and

flexibility through the use of cash and cash equivalents, highly liquid equity investments,

bank borrowings, convertible bonds and finance leases. The table below summarizes the

maturity profile of the Company’s financial liabilities based on the contractual undiscounted

payments and contractual maturity. The payment amount includes the contractual interest.

The undiscounted payment relating to borrowings with variable interest rates is extrapolated

based on the estimated interest rate yield curve as of the end of the reporting period.

Non-derivative financial instruments

Less Than 1


More than 5

Years Total

December 31, 2015

Loans (including contracted

interests)

$9,932,700 $16,535,101 $813,774 $- $27,281,575

Short-term notes and bills

payable

550,000 - - - 550,000

Payables (including relates

parties)

4,688,021 - - - 4,688,021

Deposit-in 4,270 - - - 4,270

December 31, 2014

Loans (including contracted

interests)

$9,904,365 $12,500,164 $2,706,836 $- $25,111,365

Short-term notes and bills

payable

600,000 - - - 600,000

Payables (including relates

parties)

5,938,703 - - - 5,938,703

Deposit-in 2,454 - - - 2,454





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Derivative financial instruments

Less Than 1

Year 2-3 Years 4-5 Years More than 5

Years Total December 31, 2015 Flow-in $24,200 $- $- $- $24,200 Flow-out (807) - - - (807)

Net $23,393 $- $- $- $23,393 December 31, 2014 Flow-in $67,040 $- $- $- $67,040 Flow-out (14,400) - - - (14,400)

Net $52,640 $- $- $- $52,640 The above tables about the disclosures of derivative financial instruments used the undiscounted net cash flow.

(6) Fair value of financial instruments

A. the methods and assumptions applied in determining the fair value of financial instruments:

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The following methods and assumptions were used by the Company to measure or disclose the fair values of financial assets and financial liabilities:

(a) The carrying amount of cash and cash equivalents, accounts receivables, accounts

payable and other current liabilities approximate their fair value due to their short maturities.

(b) For financial assets and liabilities traded in an active market with standard terms and conditions, their fair value is determined based on market quotation price (including listed equity securities, beneficiary certificates, bonds and futures etc.) at the reporting date.

(c) Fair value of equity instruments without market quotations (including private placement of listed equity securities, unquoted public company and private company equity securities) are estimated using the market method valuation techniques based on parameters such as prices based on market transactions of equity instruments of identical or comparable entities and other relevant information (for example, inputs such as discount for lack of marketability, P/E ratio of similar entities and Price-Book ratio of similar entities).





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(d) Fair value of debt instruments without market quotations, bank loans, bonds payable

and other non-current liabilities are determined based on the counterparty prices or valuation method. The valuation method uses DCF method as a basis, and the assumptions such as the interest rate and discount rate are primarily based on relevant information of similar instrument (such as yield curves published by the Taipei Exchange, average prices for Fixed Rate Commercial Paper published by Reuters and credit risk, etc.)

(e) The fair value of derivatives which are not options and without market quotations, is determined based on the counterparty prices or discounted cash flow analysis using interest rate yield curve for the contract period. Fair value of option-based derivative financial instruments is obtained using on the counterparty prices or appropriate option pricing model (for example, Black-Scholes model) or other valuation method (for example, Monte Carlo Simulation).

B. Fair value measurement hierarchy for financial instruments Please refer to Note 12.8 for fair value measurement hierarchy for financial instruments of the Company.

(7) Derivative financial instruments

The Company’s derivative financial instruments include forward currency contracts and embedded derivatives. The related information for derivative financial instruments not qualified for hedge accounting and not yet settled as at December 31, 2015 and 2014 is as follows:

Forward exchange contracts Forward foreign exchange contracts to manage exposure part partial transactions, but not designated as hedging instruments: December 31, 2015

Currency Period Amount

(thousands) Buying currency exchange forward

Buy USD sell NTD April 2015-February 2016 USD 9,300

December 31, 2014

Currency Period Amount

(thousands) Buying currency exchange forward

Buy USD sell NTD January 2015-August 2015 USD 50,000





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Exchange options December 31, 2015 The following table refers to the related conditions with regard to the Company’s unamortized exchange options on December 31, 2015.

(Amount: thousands)

Counterparty bank

Foreign exchange

rate

Foreign exchange rate on the date of

settlement FX Term of settlement

A USD/JPY FX < 120.5 Executing price at 120.5 to buy USD 1,000 A USD/JPY FX > 124 Executing price at 124 to sell USD 1,000 A USD/TWD FX < 32.28 Executing price at 32.28 to buy USD 1,000 A USD/TWD FX < 32.4 Executing price at 32.4 to buy USD 1,000 B USD/JPY FX < 120.5 Executing price at 120.5 to buy USD 1,000 B USD/JPY FX < 120.8 Executing price at 120.8 to buy USD 1,000 B USD/JPY FX > 124.5 Executing price at 124.5 to sell USD 1,000 B USD/TWD FX < 32.39 Executing price at 32.39 to buy USD 1,000 B USD/TWD FX < 32.4 Executing price at 32.4 to buy USD 1,000 C USD/TWD FX < 32.45 Executing price at 32.45 to buy USD 1,000 D USD/TWD FX < 31.6 Executing price at 31.6 to buy USD 1,000 D USD/TWD FX < 32.47 Executing price at 32.47 to buy USD 1,000 D USD/TWD FX < 32.3 Executing price at 32.3 to buy USD 1,000 E USD/TWD FX < 31.55 Executing price at 31.55 to buy USD 1,000

As of December 31, 2015, foreign exchange options contracts that had settled amounted to USD 233,800 thousand, EUR 500 thousand, and the remaining unsettled contracts amounted to USD 14,000 thousand, with a fair value of NTD 807 thousand (including royalties amounted to NTD 1,645 thousand and unrealized loss amounted to NTD 838 thousand), recognized as financial liabilities carried at fair value through profit or loss - current. December 31, 2014 The following table refers to the related conditions with regard to the Company’s unamortized exchange options on December 31, 2014.





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(Amount: thousands)

Counterparty bank

Foreign exchange

rate



A USD/JPY FX > 108.50 Executing price at 108.50 to sell USD 400 A USD/JPY FX > 108.50 Executing price at 108.50 to sell USD 400 A USD/JPY FX > 108.50 Executing price at 108.50 to sell USD 400 A USD/JPY FX > 108.50 Executing price at 108.50 to sell USD 400 A USD/JPY FX > 108.50 Executing price at 108.50 to sell USD 400 A USD/JPY FX > 108.50 Executing price at 108.50 to sell USD 400 A USD/JPY FX > 108.50 Executing price at 108.50 to sell USD 400 A USD/JPY FX > 108.50 Executing price at 108.50 to sell USD 400 A USD/JPY FX > 108.50 Executing price at 108.50 to sell USD 400 A USD/JPY FX > 108.50 Executing price at 108.50 to sell USD 400 A USD/JPY FX > 108.50 Executing price at 108.50 to sell USD 400 A USD/JPY FX > 108.50 Executing price at 108.50 to sell USD 400 A USD/JPY 103.5 > FX > 108.5 Executing price at 108.50 to sell USD 200 A USD/JPY 103.5 > FX > 108.5 Executing price at 108.50 to sell USD 200 A USD/JPY 103.5 > FX > 108.5 Executing price at 108.50 to sell USD 200 A USD/JPY 103.5 > FX > 108.5 Executing price at 108.50 to sell USD 200 A USD/JPY 103.5 > FX > 108.5 Executing price at 108.50 to sell USD 200 A USD/JPY 103.5 > FX > 108.5 Executing price at 108.50 to sell USD 200 A USD/JPY 103.5 > FX > 108.5 Executing price at 108.50 to sell USD 200 A USD/JPY 103.5 > FX > 108.5 Executing price at 108.50 to sell USD 200 A USD/JPY 103.5 > FX > 108.5 Executing price at 108.50 to sell USD 200 A USD/JPY 103.5 > FX > 108.5 Executing price at 108.50 to sell USD 200 A USD/JPY 103.5 > FX > 108.5 Executing price at 108.50 to sell USD 200 A USD/JPY FX < 100.00 Executing price at 100.00 to buy USD 400 A USD/JPY FX < 100.00 Executing price at 100.00 to buy USD 400 A USD/JPY FX < 100.00 Executing price at 100.00 to buy USD 400 A USD/JPY FX < 100.00 Executing price at 100.00 to buy USD 400 A USD/JPY FX < 100.00 Executing price at 100.00 to buy USD 400 A USD/JPY FX < 100.00 Executing price at 100.00 to buy USD 400 A USD/JPY FX < 100.00 Executing price at 100.00 to buy USD 400 A USD/JPY FX < 100.00 Executing price at 100.00 to buy USD 400





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Counterparty bank

Foreign exchange

rate



A USD/JPY FX < 100.00 Executing price at 100.00 to buy USD 400 A USD/JPY FX < 100.00 Executing price at 100.00 to buy USD 400 A USD/JPY FX < 100.00 Executing price at 100.00 to buy USD 400 A USD/JPY 100 > FX > 103.5 Executing price at 100.00 to buy USD 200 A USD/JPY 100 > FX > 103.5 Executing price at 100.00 to buy USD 200 A USD/JPY 100 > FX > 103.5 Executing price at 100.00 to buy USD 200 A USD/JPY 100 > FX > 103.5 Executing price at 100.00 to buy USD 200 A USD/JPY 100 > FX > 103.5 Executing price at 100.00 to buy USD 200 A USD/JPY 100 > FX > 103.5 Executing price at 100.00 to buy USD 200 A USD/JPY 100 > FX > 103.5 Executing price at 100.00 to buy USD 200 A USD/JPY 100 > FX > 103.5 Executing price at 100.00 to buy USD 200 A USD/JPY 100 > FX > 103.5 Executing price at 100.00 to buy USD 200 A USD/JPY 100 > FX > 103.5 Executing price at 100.00 to buy USD 200 A USD/JPY 100 > FX > 103.5 Executing price at 100.00 to buy USD 200 B USD/NTD FX < 29.520 Executing price at 29.520 to buy USD 1,000 B USD/NTD FX < 29.550 Executing price at 29.550 to buy USD 1,000 C USD/NTD FX < 29.880 Executing price at 29.880 to buy USD 1,000 C USD/NTD FX < 29.890 Executing price at 29.890 to buy USD 1,000 D USD/NTD FX < 29.530 Executing price at 29.530 to buy USD 1,000 D USD/NTD FX < 30.23 Executing price at 30.230 to buy USD 1,000 D USD/NTD FX < 30.150 Executing price at 30.150 to buy USD 1,000 D USD/NTD FX < 29.890 Executing price at 29.890 to buy USD 1,000 D USD/NTD FX < 29.970 Executing price at 29.970 to buy USD 1,000 D USD/NTD FX < 30.900 Executing price at 30.900 to buy USD 1,500 E USD/NTD FX < 29.550 Executing price at 29.550 to buy USD 1,000 E USD/NTD FX < 29.590 Executing price at 29.590 to buy USD 1,000 E USD/NTD FX < 29.950 Executing price at 29.950 to buy USD 1,000 E USD/NTD FX < 29.940 Executing price at 29.940 to buy USD 1,000 E USD/NTD FX < 30.050 Executing price at 30.050 to buy USD 1,000 E USD/NTD FX < 30.950 Executing price at 30.950 to buy USD 1,200 F USD/NTD FX < 29.500 Executing price at 29.500 to buy USD 500 G USD/JPY FX < 116.8 Executing price at 116.800 to buy USD 1,000





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As of December 31, 2014, foreign exchange options contracts that have been settled

amounted to USD 583,100 thousand, EUR 38,000 thousand and JPY 30,990 thousand, and

the remaining unsettled contracts amounted to USD 27,400 thousand, with a fair value of

NTD 14,400 thousand (including royalties amounted to NTD 1,541 thousand and unrealized

loss amounted to NTD 12,859 thousand), recognized as financial liabilities carried at fair

value through profit or loss - current.

The counterparties of the aforementioned derivative transactions are reputable financial

institutions with good credit ratings, the credit risk is not so high.

The forward foreign exchange contracts aim at hedging the exchange rate risk of net assets

or net liabilities with cash inflows or outflows upon maturity. The company also has

sufficient working capital so there’s no significant cash flow risk.

(8) Fair value measurement hierarchy

(a) Fair value measurement hierarchy

All asset and liabilities for which fair value is measured or disclosed in the financial

statements are categorized within the fair value hierarchy, based on the lowest level

input that is significant to the fair value measurement as a whole. Level 1, 2 and 3

inputs are described as follows:

Level 1 – Quoted (unadjusted) market prices in active markets for identical assets or

liabilities that the entity can access at the measurement date

Level 2 – Inputs other than quoted prices included within Level 1 that are observable

for the asset or liability, either directly or indirectly

Level 3 – Unobservable inputs for the asset or liability

For assets and liabilities that are recognized in the financial statements on a recurring

basis, the Group determines whether transfers have occurred between Levels in the

hierarchy by re-assessing categorization at the end of each reporting period.





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(b) Fair value measurement hierarchy of the Group’s assets and liabilities

The Group does not have assets that are measured at fair value on a non-recurring basis. Fair value measurement hierarchy of the Group’s assets and liabilities measured at fair value on a recurring basis is as follows:

December 31, 2015 Level 1 Level 2 Level 3 Total

Financial assets Financial assets at fair value

through profit or loss:

Forward exchange contracts $- $4,479 $- $4,479 Open-end funds - 19,721 - 19,721

Available-for-sale financial assets: Share 264,747 - 130,065 394,812

Financial liabilities Financial liabilities at fair value


Forward exchange contracts - 807 - 807

December 31, 2014 Level 1 Level 2 Level 3 Total

Financial assets Financial assets at fair value


Forward exchange contracts $- $67,040 $- $67,040 Available-for-sale financial assets:

Share 370,652 - 168,954 539,606 Financial liabilities

Financial liabilities at fair value through profit or loss:

Exchange options - 14,400 - 14,400

Transfers between Level 1 and Level 2 during the period There were no transfers between Level 1 and 2 for the years ended December 31, 2015 and 2014.





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Reconciliation for fair value measurements in Level 3 of the fair value hierarchy for movements during the period is as follows:

Measurement at fair value

through income/loss Available-

for-sale

Capital-guaranteed

financial product

Derivative Share Total January 1, 2015 $- $- $168,954 $168,954 Total income (loss) recognized, 2015: Recognized in other comprehensive income, 2015

- - (38,889) (38,889)

December 31, 2015 $- $- $130,065 $130,065

January 1, 2014 $- $- $147,244 $147,244 Total income (loss) recognized, 2014: Recognized in other comprehensive income, 2014

- - 21,710 21,710

December 31, 2014 $- $- $168,954 $168,954

Information on significant unobservable inputs to valuation Description of significant unobservable inputs to valuation of recurring fair value measurements categorized within Level 3 of the fair value hierarchy is as follows: As at December 31, 2015

Valuation

techniques

Significant

unobservable inputs

Quantitative

information

Relationship

between inputs

and fair value


to fair value

Available-for-sale Shares Market approach discount for lack of

marketability

25%~30% The higher the

discount for lack

of marketability,

the lower the fair value of the stocks

1% increase (decrease)



result in increase (decrease) in the

Company’s equity by

NTD 1,301 thousand





100

As at December 31, 2014

Valuation

techniques

Significant

unobservable inputs

Quantitative

information

Relationship

between inputs

and fair value


to fair value

Available-for-sale

Shares Market approach discount for lack of

marketability

N/A N/A 1% increase (decrease)



result in increase

(decrease) in the

Company’s equity by

NTD 562 thousand

Valuation process used for fair value measurements categorized within Level 3 of the fair value hierarchy The Company’s Accounting Department is responsible for validating the fair value measurements and ensuring that the results of the valuation are in line with market conditions, based on independent and reliable inputs which are consistent with other information, and represent exercisable prices. The Department analyses the movements in the values of assets and liabilities which are required to be re-measured or re-assessed as per the Group’s accounting policies at each reporting date.

(c) Fair value measurement hierarchy of the Company’s assets and liabilities not measured at fair value but for which the fair value is disclosed

As at December 31, 2015

Level 1 Level 2 Level 3 Total


equity method(please refer to Note 6(11))

$3,087,627

$- $- $3,087,627 As at December 31, 2014

Not applicable





101

(9) Significant assets and liabilities denominated in foreign currencies

The exchange rates used to translate assets and liabilities denominated in foreign currencies are disclosed as follows:

Foreign currency-dollar, NTD-thousands As of December 31, 2015


Financial Assets -

Monetary items

USD $67,359,960 32.82500 $2,211,091

JPY 77,205,051 0.27270 21,054

EUR 187,610 35.88000 6,731

RMB 878,400 5.05498 4,440

CHF 650 33.18500 22

Non-Monetary items

USD 10,835,357 32.82500 355,671

RMB 185,267,068 5.05498 936,521

THB 457,270,741 0.91460 418,220

JPY 2,181,277,220 0.27270 594,834

SGD 2,531,153 23.25000 58,849

MXN 122,769,010 1.88788 231,773

CZK 25,117,754 1.32742 33,342

VND (106,079,612,416) 0.00146 (154,876)

Financial Liabilities -

Monetary items

USD 109,629,346 32.82500 $3,598,583

JPY 968,737,194 0.27270 264,175

EUR 2,841,231 35.88000 101,943

CZK 8,440 1.32742 11

CHF 26,540 33.18500 881

RMB 40,623 5.05498 205

GBP 5,996 48.67000 292

SEK 1,073,053 3.91000 4,196

HKD 16,859 4.23500 71

THB 7,438,070 0.91460 6,803





102



Financial Assets - Monetary items

USD $62,442,924 31.65000 $1,976,319 JPY 70,526,699 0.26460 18,661 EUR 85,212 38.47000 3,278 RMB 4,238,634 5.17241 21,924 CHF 7,974 31.97500 255 Non-Monetary items USD 11,288,593 31.65000 357,284 RMB 170,154,342 5.17241 880,108 THB 555,506,699 0.96700 537,175 JPY 2,179,556,003 0.26460 576,711 SGD 2,659,634 23.94000 63,672 MXN 94,717,929 2.14812 203,465 CZK 46,173,708 1.38753 64,067 VND (46,270,668,507) 0.00148 (68,481) Financial Liabilities - Monetary items

USD 154,662,345 31.65000 4,895,063 JPY 114,422,543 0.26460 30,276 EUR 1,306,074 38.47000 50,245 CZK 8,440 1.38753 12 CHF 38,000 31.97500 1,215 RMB 192,047 5.17241 993 GBP 3,687 49.27000 182 SEK 1,073,500 4.09000 4,391

(10) Capital management

The primary objective of the Company’s capital management is to ensure that it maintains a strong credit rating and healthy capital ratios in order to support its business and maximize shareholder value. The Company manages its capital structure and makes adjustments to it, in light of changes in economic conditions. To maintain or adjust the capital structure, the Company may adjust dividend payment to shareholders, return capital to shareholders or issue new shares.





103

(11) On December 7, 2015, Taiwan Supreme Court revoked the judgment made by Taiwan High

Court on the Nature Worldwide Technology Co., case and remanded the case to the Taiwan High Court. Chairman Lin has appointed an attorney to assist him in the legal issues of the judgment and he hopes the court can discover the truth that he is innocent. The Company's operations, finance and business were not affected by the case and will continue as usual.

13. Other disclosure

(1) Information at significant transactions:

A. Financing provided to others: refer to Attachment 1. B. Endorsement/Guarantee provided to others: refer to Attachment 2. C. Securities held: refer to Attachment 3. D. Individual securities acquired or disposed of with accumulated amount exceeding the

lower of NTD300 million or 20% of the capital stock: none. E. Acquisition of real estate in the amount exceeding the lower of NTD300 million or 20

percent of capital stock: none. F. Disposal of real estate up to the amount exceeding the lower of NTD300 million or 20%

of capital stock: none G. Related party transactions for purchases and sales amounts exceeding the lower of

NTD100 million or 20% of capital stock: refer to Attachment 7. H. Receivables from related parties with amounts exceeding the lower of NTD100 million or

20% of capital stock: refer to Attachment 8. I. Engaging in derivative transactions: refer to Note 6 and Note 12 in the parent company

only financial statements. J. Intercompany Relationships and Significant Intercompany Transactions: refer to

Attachment 12.





104

(2) Information on investees:

A. Of the investee company directly or indirectly has significant influence or control over, their investee companies’ information: refer to Attachment 10.

B. Of the investee company who directly or indirectly has control, the following information

is disclosed:

(a) Financing provided to others: refer to Attachment 1. (b) Endorsement/Guarantee provided to others: refer to Attachment 2. (c) Securities held: refer to Attachment 3. (d) Individual securities acquired or disposed of with accumulated amount exceeding the

lower of NTD 300 million or 20% of the capital stock: refer to Attachment 4. (e) Acquisition of real estate in the amount exceeding the lower of NTD 300 million or

20% of capital stock: refer to Attachment 5. (f) Disposal of real estate up to the amount exceeding the lower of NTD 300 million or

20% of capital stock: refer to Attachment 6. (g) Related party transactions for purchases and sales amounts exceeding the lower of

NTD 100 million or 20% of capital stock: refer to Attachment 7. (h) Receivables from related parties with amounts exceeding the lower of NTD 100

million or 20% of capital stock: refer to Attachment 8. (i) Engaging in derivative transactions: Attachment 9.

C. Information on investments in mainland China:

(a) The investee company name, main business, paid-in capital, investment, capital outflow, ownership, investment gains and losses, ending balance of investment, repatriation of investment income and have to go to the mainland investment limit scenario: refer to Attachment 11.





105

(b) with the investee companies directly or indirectly through a third country following

the occurrence of significant transactions, prices, payment terms and unrealized gains and losses were as follows:

i. Ending balance and percentage, purchase amount and percentage of related

payables: refer to Attachment 7. ii. Sales amount and percentage of the balance and percentage of the related

receivables: refer to Attachment 7. iii. Gains and loss on the transaction amount of property: None. iv. Endorsement guarantees or collateral ending balance and purpose: refer to

Attachment 2. v. The highest balance of financing, the total ending balance, and interest rate range

and current total interest: refer to Attachment 1. vi. Other transactions that have a significant impact on the profit or loss or financial

position of the current period, such as the provision of services or received, etc.: refer to Attachment 7.

Please refer to page 264 to 273 in the consolidated financial statements for the Attachment 1 to 8 to the parent company only financial statements, which are the Attachment 1 to 8 to the consolidated financial statements. Please refer to page 250 to 251 in the consolidated financial statements for the Attachment 9 to the parent company only financial statements, which are the information related to the derivatives financial instruments of the subsidiaries in the consolidated financial statements.Please refer to page 274 to 280 in the consolidated financial statements for the Attachment 10 to 12 to the parent company only financial statements, which are the Attachment 9 to 11 to the consolidated financial statements.

TATUNG COMPANY W.S.LinChairman