I. - OPTO · III.Corporate Governance Report ... enter the automotive lighting market and cooperate ... Profitability analysis: Unit: NT$ thousands Item 2015

I. The name, title, telephone number and e-mail of the spokesperson and Deputy spokesperson

1. Spokesperson

Name: Chui-Chuan Chang Title: Vice President

Tel: 886-3-5638951 E-mail: [email protected]

2. Deputy Spokesperson

Name: Chien-Chang Chen Title: Vice Manager

Tel: 886-3-5638951 E-mail: [email protected]

II. The Address and telephone number of the company and manufactories

The company

Address: No. 8, Innovation 1st Rd., Hsinchu Science Park, Hsinchu, 300 Taiwan R.O.C.

Tel: 886-3-5777481

Manufactory Ⅰ

Address: No. 8, Innovation 1st Rd., Hsinchu Science Park, Hsinchu, 300 Taiwan R.O.C.

Tel: 886-3-5777481

Manufactory Ⅱ

Address: No. 1, Li-hsin Rd. V, Hsinchu Science Park, Hsinchu 300, Taiwan. R.O.C.

Tel: 886-3-5638951

III. Stock Transfer Agent

Taishin International Bank Stock Affairs Department

Address: B1, No.96, SEC. 1, JIANGUO N. RD., TAIPEI, TAIWAN

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

Tel: 886-2- 25048125

IV. The name of the certified public accountant who duly audited the annual reports for the most

recent fiscal year and telephone number of said person’s accounting firm

Accountants: Philine Lee, Wilson Wang

Accounting firm: PricewaterhouseCoopers, Taiwan

Address:27F,333 Keelung Rd,, Sec. 1,Taipei, Taiwan

Website: http://www.pwc.com

Tel: 886-2-27296666

V. Overseas Securities Exchange

Not applicable

VI. Corporate Website

http://www.opto.com.tw

Contents

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

II. Company Profile

1. Date of Incorporation ............................................................................................................................... 4

2. Company History ..................................................................................................................................... 4

III. Corporate Governance Report

1. Organization ........................................................................................................................................... 5

2. Directors, Supervisors and Management Team ...................................................................................... 8

3. Implementation of Corporate Governance ............................................................................................. 18

4. Information Regarding the Company’s Audit Fee ............................................................................... 33

5. Replacement Of CPA ............................................................................................................................. 33

6. The Company’s Chairman, Chief Executive Officer, Chief Financial Officer, and managers in

charge of its finance and accounting operations did not hold any positions in the Company’s

independent auditing firm or its affiliates in the most recent two years ............................................... 34

7. Changes in Shareholding of Directors, Supervisors, Managers and Major Shareholders ...................... 34

8. Relationship among the Top Ten Shareholders .................................................................................... 35

9. Ownership of Shares in Affiliated Enterprises ..................................................................................... 35

IV.Capital Overview

1. Capital and Shares .................................................................................................................................. 36

2. Bonds ...................................................................................................................................................... 40

3. Preferred stock ....................................................................................................................................... .40

4. Global Depository Receipts .................................................................................................................... 40

5. Employee Stock Options ........................................................................................................................ 40

6. Status of New Shares Issuance in Connection with Mergers and Acquisitions ..................................... 41

7. Financing Plans and Implementation ..................................................................................................... 41

V. Operational Highlights

1. Business Activities ................................................................................................................................. 42

2. Market and Sales Overview.................................................................................................................... 48

3. Human Resources ................................................................................................................................... 54

4. Environmental Protection Expenditure .................................................................................................. 55

5. Labor Relations ...................................................................................................................................... 55

6. Important Contracts ................................................................................................................................ 59

VI.Financial Information

1. Five-Year Financial Summary ............................................................................................................... 60

2. Five-Year Financial Analysis ................................................................................................................. 64

3. Supervisors’ Report for the Most Recent Year ...................................................................................... 70

4. Consolidated Financial Statements for the Years Ended December 31, 2015 and 2014, and

Independent Auditors’ Report ................................................................................................................ 71

VII.Review of Financial Conditions, Operating Results, and Risk Management

1. Analysis of Financial Status .................................................................................................................132

2. Analysis of Financial Performance ......................................................................................................132

3. Analysis of Cash Flow .........................................................................................................................133

4. Major Capital Expenditure Items and Source of Capital ......................................................................133

5. Investment Policy in Last Year, Main Causes for Profits or Losses, Improvement Plans and the

Investment Plans for the Coming Year .............................................................................................. 133

6. Analysis of Risk Management..............................................................................................................133

7. Other Major events137

VIII.Special Disclosure

1. Summary of Affiliated Companies .....................................................................................................137

2. Private Placement Securities in the Most Recent Years .......................................................................142

3. The Shares in the Company Held or Disposed of by Subsidiaries in the Most Recent Years .............142

4. Others supplementary events ................................................................................................................142

5. Matters Significantly Influenced on Shareholders’ Equity or Securities Price ....................................142

1

I、 Letter to shareholders 1. Operating Performance in 2015:

(1) Outcome of business plan of 2015:

A. In terms of technology strategy, existing technological advantages are used to develop new products to meet customer requirements, expand application field and increase the added value of products.

B. Through excellent integrated capability and supplier cooperation, offer reasonably priced products, consolidate market competitiveness of existing customers and bring in new customers to increase market share.

C. Through internal vertical integration, enhance the luminous efficiency of flip-chip products, strengthen product reliability and reduce cost to achieve the competitive advantage of high price–performance ratio. At the same time, enter the automotive lighting market and cooperate with material suppliers for international manufacturers to mass produce high wattage LED products.

D. Overall, operating revenue in 2015 reaches NT$5.630 billion, net profit after tax reaches NT$573.373 million, with an EPS of NT$1.05.

(2) Budget implementation of 2015: Unit: Million pieces

Major Divisions Sales of 2015

Expected Actual Light emitting devices 35,783 23,931

Sensor devices 26,652 24,013 Total 62,435 47,944

(3) Profitability analysis: Unit: NT$ thousands

Item 2015 Operating revenues 5,630,540 Operating income 565,554

Profit before income tax 709,276 Interest expense 46,111

Ratio of interest expense to operating income (%) 8.15％

Unit: NT$ thousands；%

Year/Item 2015 Basic

information Total liabilities 4,057,899

Financial structure

Ratio of capital owned 65.53％

Ratio of liabilities to assets 34.47％ Ratio of long-term capital to Property, plant

and equipment 287.31％

Solvency Current ratio 270.23％

Quick ratio 225.46％ Times interest earned ratio 16.38

(4) Research and development status

A. Using the existing foundation for infrared products, develop long waveband optoelectronic products with wavebands 1000nm or above. In addition, further develop deep ultraviolet products from short waveband products.

B. Further the technologies of existing products to meet market changes and at the same time develop market differentiated products.

2

2. Business plan in 2016:

(1) Business objectives:

A. Continue to develop infrared products to expand high-end market share. Increase the proportion of high-end infrared LED products, and increase the combination of infrared surface emitting laser, InGaAs optical detector and other products to improve gross margin and market share.

B. Continue to promote existing technology advantage and develop niche products to enhance product features and satisfy customer needs.

C. Further the advantages of years of vertical integration. On one hand, develop market-oriented competitively priced differentiated products while on the other hand, continue to enhance the performance of existing products, thereby providing customers with the most competitive solutions.

(2) Forecast of sales volume and its basis:

Despite rising demand for LED lighting and a large number of traditional lighting applications being replaced, oversupply has resulted in 30%- 40% decline in the average unit price of LED, and many manufacturers are facing loss and gradual withdrawal from the market.

Due to the continuous growth of the LED lighting market, the global lighting market is expected to reach US$30.5 billion in 2016, in which LED lighting will up to 36% penetration rate . (Source:LEDinside)

Our business goals are as follows: Unit: Million pieces

Major Divisions Expected sales of 2016 Light emitting devices 23,198

Sensor devices 23,759 Total 46,957

(3) Sales forecast and sales policie:

A. Continue to enhance the quality of infrared optoelectronic products and high luminance LED products to meet high-end Japanese, Korean, European and US applications.

B. In line with the Company's business development and customer needs, increase the production of silicon power products accordingly to increased product market share.

3. Impact of the company’s future development strategy, external competitive environment, legal environment and Macroeconomic environment on the company:

(1) The company’s future development strategy:

Using the existing advantage of product development, the Company is actively involved in the development of new products, including a variety of short and long waveband light-emitting elements to layout and solidify the optical communications and medical beauty markets. In addition, it will integrate photovoltaic autonomous material (epitaxy, chips) and competitive advanced packaging technology to provide customers with packaged products that are high in price–performance ratio. At the same time, it will integrate lighting application products for business offices to achieve competitive LED terminal application products. Moreover, it will provide a full range of services, technical support and reasonable prices to secure existing customers and competitive market channels and create new markets and customers to increase market share.

(2) External competitive environment:

In 2016, the demand for LED lighting will continue to increase while prices will decrease. Due to the prop-up policy of the Chinese government, China's companies are actively securing overseas mergers and acquisitions, and coupled with the continuing development of specialized lighting in Europe, America, Japan and other countries, the market price of LED lighting is intensely competitive. However, emerging markets in countries such as India, Africa and Southeast Asia are subjected to local policies that encourage replacing lighting equipment and strengthening infrastructure development. Hence emerging markets are expected to develop and drive a certain level of demand.

3

(3) Impact of the legal environment：

Given legal stipulations and worldwide enforcement, and sales ban of incandescent light bulbs in the United States, Japan, mainland China and other countries, strengthening of public constructions in emerging markets and the shift to LED lighting facilities have substantially increased the demand for LED lighting in constructions, businesses and buildings. In Taiwan, the increased software and hardware capabilities and industrial value brought about by the Ministry of Economic Affairs' “Build the industrial supply chain through an organized team”, “Strengthen vendor competitiveness through field demonstration” and “Grasp overseas market opportunities by keeping with international standards ” strategies. Coupled with favorable LED niche application, the prospects are expected to drive market growth.

(4) Macroeconomic environment:：

The oversupply of energy in 2015 has resulted in the price fall of raw material, leading to the overall weakening of the economy and subsequent impact on the LED market. Overall, the price competiveness of the 2016 LED market will continue to fall, and products remain subjected to price pressure. Coupled with the impact of the red supply chain, many manufacturers are facing elimination and merger, non-competitive manufacturers will eventually exit the LED market, and long-term supply and demand balance will be gradually re-established. OptoTech has been consistently cultivating the LED industry with innovation, customization and sustainable operations to achieve a distinct market through product differentiation.

In summary, although the LED industry is being severely challenged, OptoTech can perform well in this environment with the continual recognition and support of our shareholders, customers, suppliers and employees. The Company will exercise caution in observing market development, coordinate with government policies, develop overseas channels, diligently pursue revenue and profit growth and fulfill corporate governance to achieve maximum benefits for all stakeholders. Chairman: President: Head of Accounting:

Yung-Chiang Huang Hung-Tung Wang Tzu-Chun Lin

4

II、 Company Profile 1. Date of Incorporation: December 21st, 1983

2. Company History: 12/1983 Company was founded

01/1984 Bank of Communications invested our company, and we began factory construction and equipment installation.

06/1984 Test run began.

07/1984 The production and sales of LED chips began

02/1986 Operation broke even

09/1987 The development of high brightness LED chip was completed and mass production began

12/1991 The production of LED large-size display began

08/1992 Securities and Exchange Commission of Ministry of Finance approved the re-submission of IPO of our company

03/1993 Our LED large-size display was granted US patent for 17 years

12/1993 The civil construction of the first factory of OPTOTECH was completed

05/1995 Our stock was listed on Taiwan Stock Exchange

08/1996 Received RWTUV ISO-9001 certificate

12/1999 Signed development project of “organic LED material and device technologies” with Material Laboratory of ITRI

09/2000 The civil construction of the second factory of OPTOTECH was completed. All departments were gradually moved to the second factory on Li Hsin Road.

03/2001 Successfully developed 2.5 inch and 3.3 inch OLED (Organic Light Emitting Diode) display with panels of 16 grey scales such as red, yellow, green, blue, and white

12/2001 Developed new generation high brightness algainp LED chip

01/2002 Our company signed with Advanced TEK International Corporation to begin “ERP+MES implementation” project

05/2002 Authorized by ISO 14001 and OHSAS 18001

07/2005 Successfully introduced Japanese investment from Nichia during company capital increase and promoted mutual collaboration and exchange.

06/2006 Taiwan Nichia was elected to be our board members

08/2006 Received SGS IECQ HSPM (QC080000) certificate

12/2006 Temporary shareholders’ meeting was convened to report that the operation of our Flat Panel Display Business Unit was ceased.

06/2007 Shareholders’ meeting decided to eliminate 255,965,785 of common shares for covering business losses.

06/2007 Invested and founded Optotech Semiconductor (Ningbo) Co., Ltd.

01/2008 Officially launched all new corporate identity system (CIS) to create new corporate brand image and strengthen international competitiveness.

12/2008 Involving in the cash capital increase plan of an international LED manufactory, Nichia Japan

06/2009 The annual shareholders’ meeting in 2009 had passed the resolution of private equity capital increase

03/2011 Ningbo OPTOTECH Semiconductor started to be built.

09/2012 LED products passed carbon footprint check

02/2013 Launched a new product image

08/2013 Secured energy saving label certification from the Bureau of Energy, Ministry of Economic Affairs (street lighting lamps)

01/2015 Achieved taf (taiwan accreditation foundation) iso/iec 17025 (photovoltaic test laboratory) certification

5

III、 Corporate Governance Report 1. Organization:

(1) Organization Chart OPTOTECH CORPORATION

6

(2) Major Corporate Functions

A. Chairman & Chief Strategy Officer

In charge of all business matters on behalf of OPTOTECH.

Provides the board of directors with the company's mid- and long-term development

strategies.

B. Chairman’s Office

Assist the chairman to fulfill power and responsibilities conferred by the Companies Act, and

to assist the convention of board meetings to discuss the Company's major proposals and

strategies; to implement the resolutions of the board, and to ensure that all actions of the

Company are in compliance with the law and the interests of shareholders; responsible for all

shareholders.

Legal Affairs Roome：Planning and management of corporate law and intellectual property

rights.

Stock Affairs Room：Handles affairs related to stocks, organizes board meetings and

stockholders' meetings.

C. President Office

Formulates the company's overall operating objectives and responsible for matters related to

the implementation of management objectives. Prepares and adjusts annual operating plans

and formulates mid- and long-term operating and development plans.

Drafts rules governing the management of businesses in which the company invests.

Brand strategy planning and brand promotion and management.

D. Management Division

Formulation of objectives and strategies for the Management Division in line with

OPTOTECH’s corporate vision and overall goals, and plan implementation.

Oversees the daily operations of all the units under the Management Division.

Implementation of tasks falling with the scope of the Managemen Division’s responsibilities.

E. Sales & Marketing Division

Formulation of objectives and strategies for the Sales & Marketing Division in line with


Oversees the daily operations of all the units under the Sales & Marketing Division.

Implementation of tasks falling with the scope of the Sales & Marketing Division’s

responsibilities.

F. Material Management Division

Formulation of objectives and strategies for the Material Management Division in line with


Oversees the daily operations of all the units under the Materials Management Division.

Implementation of tasks falling with the scope of the Material Management Division’s

responsibilities.

G. Facility & Equipment Division

Formulation of objectives and strategies for the Facility & Equipment Division in line with


Oversees the daily operations of all the units under the Facility & Equipment Division.

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Implementation of tasks falling with the scope of the Facility & Equipment Division’s

responsibilities.

H. Optoelectronics Division

Formulation of objectives and strategies for the Optoelectronics Division in line with


Oversees the daily operations of all the units under the Optoelectronics Division.

Implementation of tasks falling with the scope of the Optoelectronics Division’s

responsibilities.

I. Silicon Division

Formulation of objectives and strategies for the Silicon Division in line with OPTOTECH’s

corporate vision and overall goals, and plan implementation.

Oversees the daily operations of all the units under the Silicon Division.

Implementation of tasks falling with the scope of the Silicon Division’s responsibilities.

J. Systems Division

Formulation of objectives and strategies for the Systems Division in line with OPTOTECH’s


Oversees the daily operations of all the units under the Systems Division.

Carrying out of tasks relating to LED markets, customers and technologies, etc.

Implementation of tasks falling with the scope of the Systems Division’s responsibilities

K. Research Center

Formulation of objectives and strategies for the Research Center in line with OPTOTECH’s


Oversees and inspects the daily operations of all the units under the Research Center.

Implementation of tasks falling with the scope of the Research Center’s responsibilities.

L. Safety & Health Office

Drafts occupational disaster prevention and management plans and environmental protection

implementation plans.

Handles matters related to the safety, hygiene, and environmental protection of employees of

various departments and oversees their implementation.

Handles other labor safety, hygiene, and environmental protection related matters and other

matters as instructed by senior management.

M. Auditing Office

Reviewing the design and implementation of internal control systems, providing suggestions

for improvement, and submitting periodic follow-up reports.

Other matters as instructed by senior management.

8

2. Directors, Supervisors and Management Team：

(1) Directors and Supervisors Apr. 26, 2016

Title Nationality/ Country of Origin

Name Date

Elected Term

(Years) Date First Elected

Shareholding when Elected

Current Shareholding

Spouse & Minor

Shareholding

Shareholding by Nominee Arrangement

Experience（Education） Other Position

Executives, Directors or Supervisors who are spouses or within two

degrees of kinship Shares ％ Shares ％ Shares ％ Shares ％ Title Name Relation

Chairman R.O.C. Yung-Chiang Huang 2014.06.17 3 1990.05.26 2,625,600 0.48 2,625,600 0.48 512,891 0.09 0 0.00

Dept. of Electrical Engineering, Chung Yuan Christian University Chairman of OptoTech

Chairman of Opto Tech Corp. Chairman and President of Viking Tech Corp. Chairman of Ho Chung Investment Co.,Ltd. Chairman of Jyu Shin Investment Co.,Ltd. Director of Shin-Etsu Opto Electronic Co., Ltd. Director of Giga Epitaxy Technology Corp.

None None None

Director R.O.C. Hung-Tung Wang 2014.06.17 3 2002.05.29 2,219,743 0.41 2,219,743 0.41 13,790 0.00 0 0.00

Dept. of Chemistry, National Changhua University of Education President of OptoTech

Chairman of CS Bright Corp. Chairman of Opto Tech (Suzhou) Co., Ltd. Chairman of Opto Plus Technology Co., Ltd. Director of Viking Tech Corp. Director of Ho Chung Investment Co., Ltd. Director of Jyu Shin Investment Co., Ltd. Director of OPTO Tech (Macao) Co., Ltd. President of Opto Tech Corp.

None None None

Director R.O.C. Chui-Chuan Chang 2014.06.17 3 2008.06.13 800,503 0.15 800,503 0.15 0 0.00 0 0.00

Master of International Business, National Taiwan University Vice President of OptoTech

Director of CS Bright Corp. Director of Opto Tech (Suzhou) Co., Ltd. Director of Opto Plus Technology Co., Ltd. Vice President of Opto Tech Corp.

None None None

Director R.O.C. Shun-Chih Chen ( NOTE 1)

2014.06.17 3 2008.06.13 250,694 0.05 499,694 0.09 0 0.00 0 0.00

Sec. Electrical Engineering, Dept. of Engineering Education , National Changhua University of Education Deputy Assistant General Manager for System Dept., OptoTech

Director of CS Bright Corp. Director of United Radiant Technology Corp. Director of Opto Tech (Suzhou) Co., Ltd. Deputy Assistant General Manager for System Dept., OptoTech

None None None

Director

R.O.C. Nichia Taiwan Corp. 2014.06.17 3 2006.06.14 31,755,947 5.82 31,755,947 5.82 0 0.00 0 0.00 - - None None None

Japan Rep. of legal person: Ishigami Koji ( NOTE 2)

2015.09.09 3 2015.09.09 0 0.00 0 0.00 0 0.00 0 0.00

Dept. of Business and Economics, Div. of Kindai University Vice President of Nichia Taiwan Corp.

Vice President of Nichia Taiwan Corp. Vice President of Nichia ShenZhen Corp. Assisted General Manager of Nichia ShangHai Corp. Assisted General Manager of Nichia Hongkong Corp.

None None None

9

Title Nationality/ Country of Origin

Name Date

Elected Term

(Years) Date First Elected

Shareholding when Elected

Current Shareholding

Spouse & Minor

Shareholding

Shareholding by Nominee Arrangement Experience（Education） Other Position

Executives, Directors or Supervisors who are spouses or within two

degrees of kinship Shares ％ Shares ％ Shares ％ Shares ％ Title Name Relation

Director

R.O.C. Lee Tech Co., Ltd. 2014.06.17 3 2011.06.17 2,020,000 0.37 2,231,000 0.41 0 0.00 0 0.00 - - None None None

R.O.C. Rep. of legal person: Zong-Xing Wu

2014.06.17 3 2011.06.17 0 0.00 8,000 0.00 0 0.00 0 0.00 Dept. of International Trade Tamkang University

Chairman of Lee Tech Co., Ltd. Chairman of Giga Epitaxy Technology Corp.

None None None

Director

R.O.C. Shin-Etso Opto Electronic Co.,Ltd

2014.06.17 3 2014.06.17 930,232 0.17 930,232 0.17 0 0.00 0 0.00 - - None None None

Japan Rep of legal person: Shuji Ogasawara

2014.06.17 3 2014.06.17 0 0.00 21,006 0.00 0 0.00 0 0.00

Department of Economics Rakuno Gakuen University

Chairman of Shin-Etso Opto Electronic Co.,Ltd None None None

Supervisor

R.O.C. Medison Pacific Investment Co., Ltd.

2014.06.17 3 2005.06.10 5,361,681 0.98 5,361,681 0.98 0 0.00 0 0.00 - - None None None

R.O.C. Rep of legal person: Tsang-Der Ni

2014.06.17 3 2005.06.10 0 0.00 298,548 0.05 66,642 0.01 0 0.00 PhD of Electrical Engineering, Drexel University, USA

Director of J-MEX Inc. Supervisor of CS Bright Corp.

None None None

Supervisor R.O.C. Tzu-Hua Han 2014.06.17 3 2005.06.10 245,000 0.04 245,000 0.04 60,000 0.01 0 0.00 Dept. of Radar Engineering,Air Force Institute of Technology

Chairman of United Radiant Technology Corp. Chairman of LT Lighting (Taiwan) Corp. Supervisor of QinSi Investment Co., Ltd.

None None None

NOTE 1:Mr. Shun-Chih Chen retired director on Jun. 17th, 2011, and re- elected as director on Jun. 17th, 2014. NOTE 2: Due to Nichia Taiwan Corp. changed its representive on Sep.9th 2015.

10

A. Major shareholders of the institutional shareholders Mar. 31, 2016

Name of Institutional Shareholders

Major shareholders of the institutional shareholders Ratio of

shareholding (%)

Nichia Taiwan Corp. Nichia Corp. 99.74Kan-Lin Yen 0.13Jo-Li Chang 0.13

Lee Tech Co., Ltd.

Zong-Xing Wu 18.40Yu-Hui Chen 38.46Fei-Yu Wu 21.57Qian-Hua Wu 21.57

Shin-Etso Opto Electronic Co.,Ltd

Shin-Etsu Handotai Co., Ltd. 80.00 Opto Tech Corp. 10.00 TOPCO Co., Ltd. 10.00

Medison Pacific Investment Co., Ltd.

Ting-Hu Shao 25.00

Ru-Mei Chia Chiu 14.50

Feng-Kang Ni 12.00

Ai-Ti Chao 9.90

Ying Wan 9.50

Kuei-Cheng Liu 7.60

Ying Chang 7.00

Yu-Hsun Shao 6.00

Mei Ling Wang Lin 5.50

Hsiang-Yun Yang 2.00

11

B. Major shareholders of the Company’s major institutional shareholders

Mar. 31, 2016

Name of Institutional Shareholders

Major Shareholders Ratio of

shareholding (%)

Nichia Corp.

日亜持株組合 13.3

株式会社協同医薬研究所 5.9

Tokushima Bank,Ltd. 4.7

The Awa Bank, Ltd 4.7

Shikoku Bank, Ltd. 4.7

Citizen Holdings Co., Ltd. 4.0

Mizuho Bank, Ltd. 3.4

Otsuka Holdings Co., Ltd 3.0

The Iyo Bank, Ltd. 3.0

The Bank of Tokyo-Mitsubishi UFJ 2.8

Shin-Etsu Handotai Co., Ltd Shin-Etsu Chemical Co., Ltd. 100.00

Opto Tech Corp.

Nichia Taiwan Corp. 5.82

Nichia Corp. entrusted to Chinatrust Commercial Bank 2.96

Dimensional Emerging Markets Value Fund 1.50

Polunin Emerging Markets Small Cap Fund, LLC 1.49

Foreningen AP Invest F.M.B.A. 1.31

Vanguard Emerging Markets Stock Index Fund, A Series Of Vanguard International Equity Index Funds

1.29

JPMorgan Chase Bank N.A. Taipei Branch in custody for Norges Bank

1.03

Medison Pacific Investment Co., Ltd 0.98

JPMorgan Chase Bank N.A., Taipei Branch in custody for Vanguard Total International Stock Index Fund, a series of Vanguard Star Funds

0.96

Emerging Markets Social Core Equity Portfolio of DFA Investment Dimensions Group Inc.

0.70

TOPCO Co., Ltd.

J.W. Kuo 6.16

Nan Shan Life Insurance Company, Ltd. 5.47

Chia Pin Technology Co., Ltd. 2.98

Kuei-Yu Chang Chiu 2.48

HSBC Emerging Markets Small Cap Equity Fund 1.31

Mercuries Life Insurance Co., Ltd. 1.21


1.05

Jeffery C.L. Pan 1.03

Employee Stock ownership trust of TOPCO Co., Ltd. entrusted to Chinatrust Commercial Bank

0.97

Pei-Fen Chang 0.81

12

C. Professional qualifications and independence analysis of directors and supervisors

Criteria Name

Meet One of the Following Professional Qualification Requirements, Together with at Least Five Years Work Experience

Independence Criteria(Note)

Number of Other Public Companies in Which the Individual is Concurrently Serving as an Independent Director

An Instructor or Higher Position in a Department of Commerce, Law, Finance, Accounting, or Other Academic Department Related to the Business Needs of the Company in a Public or Private Junior College, College or University

A Judge, Public Prosecutor, Attorney, Certified Public Accountant, or Other Professional or Technical Specialist Who has Passed a National Examination and been Awarded a Certificate in a Profession Necessary for the Business of the Company

Have Work Experience in the Areas of Commerce, Law, Finance, or Accounting, or Otherwise Necessary for the Business of the Company

1 2 3 4 5 6 7 8 9 10

Yung-Chiang Huang 0 Hung-Tung Wang 0 Chui-Chuan Chang 0 Shun-Chih Chen 0 Ishigami Koji (Nichia Taiwan Corp.)

0

Zong-Xing Wu (Lee Tech Co., Ltd.)

0

Shuji Ogasawara (Shin-Etso Opto Electronic Co.,Ltd)

0

Tsang-Der Ni - (Medison Pacific Investment CO., Ltd.)

0

Tzu-Hua Han 0 Note: Please tick the corresponding boxes that apply to the directors or supervisors during the two years prior to being elected or during the term of office.

(1). Not an employee of the Company or any of its affiliates. (2). Not a director or supervisor of the Company or any of its affiliates. Not applicable in cases where the person is an independent director of the Company, its parent company, or any subsidiary in which the

Company holds, directly or indirectly, more than 50% of the voting shares. (3). Not a natural-person shareholder who holds shares, together with those held by the person’s spouse, minor children, or held by the person under others’ names, in an aggregate amount of 1% or more of

the total number of outstanding shares of the Company or ranking in the top 10 in holdings. (4). Not a spouse, relative within the second degree of kinship, or lineal relative within the third degree of kinship, of any of the persons in the preceding three subparagraphs. (5). Not a director, supervisor, or employee of a corporate shareholder who directly holds 5% or more of the total number of outstanding shares of the Company or who holds shares ranking in the top five

holdings. (6). Not a director, supervisor, officer, or shareholder holding 5% or more of the shares, of a specified company or institution which has a financial or business relationship with the Company. (7). Not a professional individual who is an owner, partner, director, supervisor, or officer of a sole proprietorship, partnership, company, or institution that provides commercial, legal, financial, accounting

services or consultation to the Company or to any affiliate of the Company, or a spouse thereof. These restrictions do not apply to any member of the remuneration committee who exercises powers pursuant to Article 7 of the “Regulations Governing the Establishment and Exercise of Powers of Remuneration Committees of Companies whose Stock is Listed on the TWSE or Traded on the TPEx“.

(8). Not having a marital relationship, or a relative within the second degree of kinship to any other director of the Company. (9). Not been a person of any conditions defined in Article 30 of the Company Law.

(10). Not a governmental, juridical person or its representative as defined in Article 27 of the Company Law.

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(2) Management Team

Apr. 26, 2016

Title Nationality/ Country of

Origin Name

Date Effective

Shareholding Spouse & Minor

Shareholding

Shareholding by Nominee Arrangement Experience（Education） Other Position

Managers who are Spouses or Within Two

Degrees of Kinship Shares ％ Shares ％ Shares ％ Title Name Relation

Chief Strategy Officer

R.O.C. Yung-Chiang Huang 2008.06.13 2,625,600 0.48 512,891 0.09 0 0.00 Dept. of Electrical Engineering, Chung Yuan Christian University Chairman of OptoTech

Chairman of OptoTech Chairman and President of Viking Tech Corp.Chairman of Ho Chung Investment Co.,Ltd. Chairman of Jyu Shin Investment Co.,Ltd. Director of Shin-Etsu Opto Electronic Co., Ltd. Director of Giga Epitaxy Technology Corp.

None None None

President R.O.C. Hung-Tung Wang 2008.06.16 2,219,743 0.41 13,790 0.00 0 0.00 Dept. of Chemistry, National Changhua University of Education President of OPTOTECH

Chairman of CS Bright Corp. Chairman of Opto Tech (Suzhou) Co., Ltd. Chairman of Opto Plus Technology Co., Ltd.Director of Viking Tech Corp. Director of Ho Chung Investment Co., Ltd. Director of Jyu Shin Investment Co., Ltd. Director of OPTO Tech (Macao) Co., Ltd.

None None None

Vice President R.O.C. Chui-Chuan Chang 2008.06.16 800,503 0.15 0 0.00 0 0.0 Master of International Business, National Taiwan University Vice President of OPTOTECH

Director of CS Bright Corp. Director of Opto Tech (Suzhou) Co., Ltd. Director of Opto Plus Technology Co., Ltd.

None None None

Vice President (Head of

Financing and Accounting)

R.O.C. Tzu-Chun Lin 2012.01.01 300,548 0.06 0 0.00 0 0.00 Dept. of Comprehensive Commerce, Hsinchu Commercial High School Vice President of OPTOTECH

Director of CS Bright Corp. Supervisor of Ho Chung Investmetn Co., Ltd.Supervisor of Jyu Shin Investment Co., Ltd.

None None None

Deputy Assistant General Manager

R.O.C. Jung-Huan Lee 2006.01.01 304,442 0.06 2,000 0.00 0 0.00 Dept. of Chemical Engineering, Tamkang University Deputy Assistant General Manager at Dept. of Silicon, OPTOTECH

None None None None


R.O.C. Shun-Chih Chen 2008.01.01 499,694 0.09 0 0.00 0 0.00

Sec. Electrical Engineering,Dept. of Engineering Education, National Changhua University of Education Deputy Assistant General Manager at Dept. of Systems, OPTOTECH

Director of CS Bright Corp. Director of United Radiant Technology Corp.Director of Opto Tech (Suzhou) Co., Ltd.

None None None


R.O.C. Chin-Lung Ma 2009.01.01 91,639 0.02 48 0.00 0 0.00

Dept. of Electronic Engineering, Ta Hwa Institute of Technology Deputy Assistant General Manager at Dept. of Facility & Equipment, OPTOTECH

None None None None

14

(3) Remuneration of Directors, Supervisors, President, and Vice President A. Remuneration of Directors Unit: NT$ thousands / Thousand shares

Title Name

Remuneration Ratio of total remuneration

(A+B+C+D) to net income(%)

Relevant remuneration received by directors who are also employees Ratio of total compensation

(A+B+C+D+E+F+G) to net income(%)

Compensation paid to directors from an invested company other than

the company’s subsidiary

Base Compensation

(A)

Severance Pay (B)

Bonus to Directors(C)

Allowances(D)Salary, Bonuses, and

Allowances (E) Severance Pay

(F) Profit Sharing- Employee Bonus (G)

Exercisable Employee Stock

Options (H)

New Restricted Employee Shares (I)

OP

TO

TE

CH

Com

pani

es in

the

cons

olid

ated

fi

nanc

ial s

tate

men

ts

OP

TO

TE

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Com

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es in

the

cons

olid

ated

fi

nanc

ial s

tate

men

ts

OP

TO

TE

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Com

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es in

the

cons

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ated

fi

nanc

ial s

tate

men

ts

OP

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Com

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the

cons

olid

ated

fi

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ial s

tate

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ts

OP

TO

TE

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Com

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the

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olid

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fi

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ial s

tate

men

ts

OP

TO

TE

CH

Com

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es in

the

cons

olid

ated

fi

nanc

ial s

tate

men

ts

OP

TO

TE

CH

Com

pani

es in

the

cons

olid

ated

fi

nanc

ial s

tate

men

ts

OPTOTECH Companies in the

consolidated financial statements

OP

TO

TE

CH

Com

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es in

the

cons

olid

ated

fi

nanc

ial s

tate

men

ts

OP

TO

TE

CH

Com

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es in

the

cons

olid

ated

fi

nanc

ial s

tate

men

ts

OP

TO

TE

CH

Com

pani

es in

the

cons

olid

ated

fi

nanc

ial s

tate

men

ts

Cash Stock Cash Stock

Chairman Yung-Chiang Huang

0 0 0 0 26,924 26,924 1,440 1,440 4.95％ 4.95％ 20,382 20,744 845 845 18,059 0 18,059 0 0 0 0 0 11.80％ 11.80％ 16,086

Director Hung-Tung Wang Director Chui-Chuan Chang

Director Shun-Chih Chen

Director

Nichia Taiwan Corp. Rep. of legal person: Masao Shono （Note 1） Katsuse Hideaki（Note 2） Ishigami Koji （Note 3）

Director Lee Tech Co., Ltd. Rep. of legal person: Zong-Xing Wu

Director

Shin-Etso Opto Electronic Co.,Ltd Rep. of legal person: Shuji Ogasawara

Note 1：Mr. Masao Shono resigned from director on Sep. 1th ,2015. Note 2：Mr. Katsuse Hideaki was appointed as the representative of Nichia Taiwan Corp. on Sep. 1th ,2015 and resigned from director on Sep. 9th ,2015. Note 3：Mr. Ishigami Koji was appointed as the representative of Nichia Taiwan Corp. on Sep. 9th ,2015.

Range of Remuneration

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

OPTOTECH Companies in the consolidated financial

statements OPTOTECH

Companies in the consolidated financial statements

Under NT$ 2,000,000 Masao Shono、Katsuse Hideaki 、Ishigami Koji、

Shuji Ogasawara、Zong-Xing Wu Masao Shono、Katsuse Hideaki 、Ishigami Koji、

Shuji Ogasawara、Zong-Xing Wu Masao Shono、Katsuse Hideaki、Ishigami Koji、

Shuji Ogasawara、Zong-Xing Wu Masao Shono、Katsuse Hideaki 、Ishigami Koji、

Shuji Ogasawara、Zong-Xing Wu

NT$2,000,000 ~ NT$5,000,000

Nichia Taiwan Corp.、Shin-Etso Opto Electronic、 Lee Tech Co., Ltd.、Hung-Tung Wang、

Chui-Chuan Chang、Shun-Chih Chen

Nichia Taiwan Corp.、Shin-Etso Opto Electronic、 Lee Tech Co., Ltd.、Hung-Tung Wang、

Chui-Chuan Chang、Shun-Chih Chen

Nichia Taiwan Corp.、Shin-Etso Opto Electronic、 Lee Tech Co., Ltd.

Nichia Taiwan Corp.、Shin-Etso Opto Electronic、 Lee Tech Co., Ltd.

NT$5,000,000 ~ NT$10,000,000 Yung-Chiang Huang Yung-Chiang Huang Shun-Chih Chen Shun-Chih Chen

NT$10,000,000 ~ NT$15,000,000 - - Chui-Chuan Chang Chui-Chuan Chang

NT$15,000,000 ~ NT$30,000,000 - - Yung-Chiang Huang、Hung-Tung Wang Yung-Chiang Huang、Hung-Tung Wang

NT$30,000,000 ~ NT$50,000,000 - - - -

NT$50,000,000 ~ NT$100,000,000 - - - -

Over NT$100,000,000 - - - -

Total 12 12 12 12

15

B. Remuneration of Supervisors Unit: NT$ thousands / Thousand shares

Title Name

Remuneration Ratio of Total Remuneration (A+B+C) to Net Income (%)

Compensation Paid to

Supervisors from an Invested

Company Other than the

Company’s Subsidiary

Base Compensation (A) Bonus to Supervisors (B) Allowances (C)

OPTOTECH

Companies in the

consolidated financial

statements

OPTOTECH

Companies in the


statements

OPTOTECH

Companies in the


statements

OPTOTECH

Companies in the


statements

Supervisor

Medison Pacific Investment Co., Ltd. Rep. of legal person: Tsang-Der Ni 0 0 7,180 7,180 360 360 1.32％ 1.32％ 346

Supervisor Tzu-Hua Han

Range of Remuneration

Name of Supervisors

Total of (A+B+C+D)

OPTOTECH Companies in the consolidated financial statements

Under NT$ 2,000,000 Tsang-Der Ni Tsang-Der Ni

NT$2,000,000 ~ NT$5,000,000 Medison Pacific Investment Co., Ltd.、

Tzu-Hua Han Medison Pacific Investment Co., Ltd.、

Tzu-Hua Han NT$5,000,000 ~ NT$10,000,000 - - NT$10,000,000 ~ NT$15,000,000 - - NT$15,000,000 ~ NT$30,000,000 - - NT$30,000,000 ~ NT$50,000,000 - - NT$50,000,000 ~ NT$100,000,000 - - Over NT$100,000,000 - -

Total 3 3

16

C. Remuneration of the President and Vice President Unit: NT$ thousands / Thousand shares

Title Name

Salary(A) Severance Pay (B)Bonuses and

Allowances (C) Profit Sharing- Employee Bonus

(D)

Ratio of total compensation

(A+B+C+D) to netincome(%)

Exercisable Employee Stock

Options

Obtaining new shares that restrict employees’ rights

Com

pens

atio

n pa

id to

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pres

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fro

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OPT

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stat

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ts

OPT

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H

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fin

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al

stat

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ts

OPT

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H

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OPT

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emen

ts

OPT

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H

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the

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fin

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stat

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ts

OPT

OT

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H

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cons

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fin

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stat

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ts

Cash Stock Cash Stock

Chief Strategy Officer

Yung-Chiang Huang

14,469 14,831 940 940 7,026 7,026 20,299 0 20,299 0 7.45％ 7.52％ 0 0 0 0 4,989 President

Hung-Tung Wang

Vice President

Chui-Chuan Chang

Vice President

Tzu-Chun Lin

Range of Remuneration Name of President and Vice President

OPTOTECH Companies in the consolidated

financial statements Under NTD2,000,000 - -

NT$2,000,000 ~ NT$5,000,000 - -

NT$5,000,000 ~ NT$10,000,000 Chui-Chuan Chang、Tzu-Chun Lin Chui-Chuan Chang、Tzu-Chun Lin

NT$10,000,000 ~ NT$15,000,000 Yung-Chiang Huang、Hung-Tung Wang Yung-Chiang Huang、Hung-Tung Wang

NT$15,000,000 ~ NT$30,000,000 - -

NT$30,000,000 ~ NT$50,000,000 - -

NT$50,000,000 ~ NT$100,000,000 - -

Over NT$100,000,000 - -

Total 4 4

17

D. Employee Bonus to Executive Officers Unit: NT$ thousands

Title Name

Employee Bonus

- in Stock (Fair Market

Value)

Employee Bonus

- in Cash Total

Ratio of Total

Amount to Net Income

(%)

Executive Officers

Chairman &

Chief Strategy Officer Yung-Chiang Huang

0 27,400 27,400 4.78％

President Hung-Tung Wang

Vice President Chui-Chuan Chang Vice President

(Head of Financing and Accounting)

Tzu-Chun Lin


Jung-Huan Lee


Shun-Chih Chen


Chin-Lung Ma

Note: The employee bonus to Executive Officers for the year 2015 has not been reviewed by the Compensation Committee meeting yet. The above figures are only estimates.

(4) Comparison of Remuneration for Directors, Supervisors, Presidents and Vice Presidents in the Most Recent Two Fiscal Years and Remuneration Policy for Directors, Supervisors, Presidents and Vice Presidents

A. The ratio of total remuneration paid by the Company and by all companies included in the consolidated financial statements for the two most recent fiscal years to directors, supervisors, presidents and vice presidents of the Company, to the net income.

Item

Title

Ratio of total remuneration to net income

2015 2014





Director 4.95％ 4.95％ 3.84％ 3.84％

Supervisor 1.32％ 1.32％ 1.02％ 1.02％

President & Vice President 7.45％ 7.52％ 6.90％ 7.02％

B. The policies, standards, and portfolios for the payment of remuneration, the procedures for determining remuneration, and the correlation with business performance.

a. The remuneration paid to Director and Supervisor for the year 2015 was according to our Articles of Incorporation and was resolved by the board of directors and reported at the shareholders’ meeting.（Note）

b. A ratio of profit of the current year distributable as Employee, director and supervisory director remunerations. However, the company’s accumulated losses shall have been covered.

c. The remuneration to President and Vice President has been handled in compliance with Article 27 of OPTOTECH’s Corporate Charter and Article 29 of the Company Act.

d. We had set up the Remuneration Committee. The Remuneration Committee periodically evaluate the performance of directors, supervisors and managers and review the Company’s remuneration policy, system, standard and structure.

Note: In accordance to the stipulations outlined in Taiwan Stock Exchange Document No.1041802730 and the Ministry of Economic Affairs Business Document No.10402427800, the Company's Board of Directors has revised the Articles 235, 235-1 and 240 of the Company Regulations in the Company Constitution, approved the revision and will present the amendment to the 2016 stockholder meeting for discussion. Employee, director and supervisory director remunerations for 2015 are allocated according to the abovementioned revised draft of the Company Regulations.

18

3. Implementation of Corporate Governance

(1) Board of Directors:

A total of 10 meetings of the Board of Directors were held in the previous period. The attendance of director and supervisor were as follows:

Title Name Attendance in Person

By Proxy

Attendance rate (%)

Remarks

Chairman Yung-Chiang Huang 10 0 100％

Director Hung-Tung Wang 10 0 100％

Director Chui-Chuan Chang 10 0 100％

Director Shun-Chih Chen 10 0 100％

Director Nichia Taiwan Corp. Rep. of legal person: Masao Shono

6 0 85.71％ Resigned from

director. Should attend 7 times

Director Nichia Taiwan Corp. Rep. of legal person: Katsuse Hideaki

0 0 - Resigned from

director. Should attend 0 times

Director Nichia Taiwan Corp. Rep. of legal person: Ishigami Koji

3 0 100％ Appointed as the representative.

Should attend 3 times

Director Lee Tech Co., Ltd. Rep. of legal person: Zong-Xing Wu

10 0 100％

Director Shin-Etso Opto Electronic Co.,Ltd Rep. of legal person:Shuji Ogasawara

10 0 100％

Other mentionable items: 1. If there are circumstances referred to in Article 14-3 of the Securities and Exchange Act and resolutions of the directors’

meetings objected to by independent directors or subject to qualified opinion and recorded or declared in writing, the dates of the meetings, sessions, contents of motion, all independent directors’ opinions and the company’s response should be specified: None

2. If there are directors’ avoidance of motions in conflict of interest, the directors’ names, contents of motion, causes for avoidance and voting should be specified:

(1) The 11th meeting of the eleventh term Board of Directors on Auguest 11, 2015: The Company resolved the remuneration for the Manager. The Manager - MR. Chui-Chuan Chang and MR. Shun-Chih Chen did not attend the discussion in accordance with the law due to the conflict of interest.

(2) The 11th meeting of the eleventh term Board of Directors on Auguest 11, 2015: The Company resolved the allocation plans for manager and employee bonuses. MR. Huang Yung-chiang, MR. Hung-Tung Wang, MR. Chui-Chuan Chang and MR. Shun-Chih Chen did not attend the discussion in accordance with the law due to the conflict of interest.

3. Measures taken to strengthen the functionality of the board: (1) To strengthen corporate governance, OPTOTECH has laid down the “Rules of Procedure for Board of Directors

Meeting”, and post the status of directors’ attendance of board meetings on the Market Observation Post System. (2) OPTOTECH has the “Remuneration Committee” with the function to assist the board of directors in executing their

duties. Please refer to the “Composition, Responsibilities and Operations of Remuneration Committee” in the annual report.(P.23)

(3) To help directors enhance their corporate governance related abilities, OPTOTECH from time to time to provide the course information compliance with the “Directions for the Implementation of Continuing Education for Directors and Supervisors” for directors and supervisors.

(4) OPTOTECH has valued its shareholders’ equity and enhanced its corporate information transparency. The important resolutions made in each board meeting have all been posted on OPTOTECH’s coporate website.

(5) OPTOTECH has instituted the “Procedures for Handling Material Inside Information”, and informed its directors, supervisors, managers and employees across the board of the procedure. At the same time, the procedure has also been posted on OPTOTECH’s coporate website at http://www.opto.com.tw for reference.

19

(2) Audit Committee: OPTOTECH do not establish the Audit Commission.

(3) Attendance of Supervisors at Board Meetings:

A total of 10 meetings of the Board of Directors were held in the previous period. The attendance of director and supervisor were as follows:

Title Name Attendance in

Person Attendance rate (%) Remarks

Supervisor Medison Pacific Investment Co., Ltd.Rep. of legal person: Tsang-Der Ni

8 80％

Supervisor Tzu-Hua Han 10 100％

Other mentionable items: 1. Composition and responsibilities of supervisors: (1) Communications between supervisors and the Company's employees and shareholders (e.g. the communication

channels and methods, etc.): Supervisors shall properly exercise its supervision rights. When necessary, they shall communicate with our employees and shareholders in an appropriate manner. Also, supervisors are allowed to review our internal audit reports, trace our execution of internal control and audit. Furthermore, they can use the spokesperson to communicate with our employees and shareholders through telephone, e-mail and shareholders meetings, etc.

(2) Communications between supervisors and the Company's Chief Internal Auditor and CPA (e.g. the items, methods and results of the audits of corporate finance or operations, etc.): A. Our supervisors shall regularly come to OPTOTECH to check and review the reports submitted by the audit unit,

and communicate with the internal audit chief through telephone or e-mail. B. The CPA shall quarterly submit its audit results of the financial reports to supervisors.

2. If a supervisor expresses an opinion during a meeting of the Board of Directors, the dates of meetings, sessions, contents of motions, resolutions of the directors’ meetings and our response to supervisor’s opinion should be specified: None.

20

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

Evaluation Item Implementation Status Deviations from “the Corporate

Governance Best-Practice Principles for TWSE/TPEx

Listed Companies” and Reasons Yes No Abstract Illustration

1. Does the company establish and disclose the Corporate Governance Best-Practice Principles based on “Corporate Governance Best-Practice Principles for TWSE/TPEx Listed Companies”?

V Although the Company has not established the "Corporate Governance Best-Practice Principles ", it has been implementing the spirit of corporate governance among the various internal controls in accordance with the "Corporate Governance Best Practice Principles for TWSE/GTSM Listed Companies ".

None

2. Shareholding structure & shareholders’ rights

(1) Does the company establish an internal operating procedure to deal with shareholders’ suggestions, doubts, disputes and litigations, and implement based on the procedure?

(2) Does the company possess the list of its major shareholders as well as the ultimate owners of those shares?

(3) Does the company establish and execute the risk management and firewall system within its conglomerate structure?

(4) Does the company establish internal rules against insiders trading with undisclosed information?

V

V

V

V

(1) In addition to commissioning a shareholder services agent to handle relevant services, the Company has also put in place spokesman and deputy spokesman to deal with issues related to shareholders, and when necessary commissions legal counsel to provide assistance.

(2) The Company regularly reports the changes in directors and managers of equity transaction based on the list of major shareholders and ultimate controllers of the Company complied by the shareholder service agent.

(3) OPTOTCH has instituted regulations to control and manage the trading, endorsement guarantee and capital loans (to others) between OPTOTECH and the related parties of our affiliated enterprises. In addition, according to the “Regulations Governing Establishment of Internal Control Systems by Public Companies” stipulated by Financial Supervisory Committee, our has laid down the “Rules Governing for Subsidiary” to carry out the subsidiary risk control and management mechanism.

(4) The Company has established “Rules of Procedure for the Handling of Major Internal Information" to ensure that the consistency and accuracy of company-published information, to avoid undue leakage of information, and to prevent the use of undisclosed insider information to trade securities on the market.

None

3. Composition and Responsibilities of the Board of Directors

(1) Does the Board develop and implement a diversified policy for the composition of its members?

(2) Does the company voluntarily establish other functional committees in addition to the Remuneration Committee and the Audit Committee?

(3) Does the company establish a standard to measure the performance of the Board, and implement it annually?

V

V

V

(1) The Board of Directors of the Company is formed with members from different professional backgrounds and includes foreign national members, providing objective and professional assessments of the decisions of the board.

(2) The Company has established the Remuneration Committee in accordance with the law. In addition to establishing an Audit Committee in the future, the Company will evaluate the establishment of other types of functional committees based on its actual operational situation.

(3) The Company has not yet to establish board performance assessment methods, but the operations of the Board of Directors are in compliance with laws and regulations as well as the Company’s corporate governance spirit.

None

21


Governance Best-Practice Principles for TWSE/TPEx Listed

Companies” and Reasons Yes No Abstract Illustration

(4) Does the company regularly evaluate the independence of CPAs? V (4) Each year, the Company's Accounting Department and Audit Department review the independence of the certified public accountant to obtain the Statement of Accountant Independence. Checks for any joint ventures or other shared interests between the accountants and the Company or its affiliated businesses, and examines whether the accountants hold posts in the Company and its affiliated enterprises, as well as if the accountants have violated The "Code of Ethics Gazette No. 10”. The result of the above assessment is reported to the Company's Board of Directors.

None

4. Does the company establish a communication channel and build a designated section on its website for stakeholders, as well as handle all the issues they care for in terms of corporate social responsibilities?

V The Company has an external website for stakeholders with correspondence windows and communication channels for the various types of stakeholders to promptly and appropriately address stakeholder concerns. None

5. Does the company appoint a professional shareholder service agency to deal with shareholder affairs?

V The Company has appointed Taishin International Bank as its Shareholder Service Agency, specializing in handling matters related to shareholders' meetings.

None

6. Information Disclosure

(1) Does the company have a corporate website to disclose both financial standings and the status of corporate governance?

(2) Does the company have other information disclosure channels (e.g. building an English website, appointing designated people to handle information collection and disclosure, creating a spokesman system, webcasting investor conferences)?

V

V

(1) As regulated, OPTOTECH has periodically or non-periodically reported a variety of its financial and business information on the website of the Market Observation Post System. At the same time, it has also posted the above mentioned information on its own website at http://www.opto.com.tw for its shareholders and the public to refer to.

(2) Our has designated exclusive personnel to collect and disclose its information, and followed statutory regulations to fulfill the spokesperson system. Also, by going to the website of the Market Observation Post System, investors can obtain the information regarding our finance, business and corporate governance.

None

7. Is there any other important information to facilitate a better understanding of the company’s corporate governance practices (e.g., including but not limited to employee rights, employee wellness, investor relations, supplier relations, rights of stakeholders, directors’ and supervisors’ training records, the implementation of risk management policies and risk evaluation measures, the implementation of customer relations policies, and purchasing insurance for directors and supervisors)?

V (a)Status of employee rights and employee wellness:OPTOTECH has been based on the spirit of faith, innovation and pragmatism to give sustainable operation, take good care of its employees and clients and take up its social responsibility. At the same time, it has adopted the following measures to protect its employees’ rights and interests and care for its employees. A. Based on the Gender Equality Act, our employees are eligible to request for the

baby nursing leave, baby feeding time, maternity leave and childbirth leave. B. OPTOTECH has taken out labor and health insurance as well as medical insurance

and provided regular physical examinations at no charge for its employees. C. OPTOTECH has established the employee welfare committee to arrange

employee tours and take care of a variety of employee welfare related matters. D. OPTOTECH has contributed employee pensions by law. E. OPTOTECH has provided on-the-job training for its employees. F. OPTOTECH has taken sex harassment and irrational management prevention

measures, and punished violators. G. Stipulate personal information protection and management regulations.

None

22


Governance Best-Practice Principles for TWSE/TPEx

Listed Companies” and Reasons Yes No Abstract Illustration

(b) Investor relations, supplier relations and rights of stakeholders: OPTOTECH has designated exclusive personnel to handle investor’s recommendations or problems, and has good financial and business relationships with its suppliers and rights of stakeholders, for which it hopes to generate a win-win benefit based on the equal and reciprocal principle.

(c) Directors’ and supervisors’ training records:

Title Name Course Training hours

Chairman Yung-Chiang Huang

- Introduction of corporate governance and securities regulation.

- Explanation session for the Promotion of Compliance of Laws for internal shareholder trading for listed companies.

- Directors and supervisory director forums for listed companies-corporate integrity risk control and new horizon for social responsibility.

- Corporate governance philosophy of professional directors and supervisors and establishment of an effective board of directors.

- Fulfilling the functions of independent directors and practices of the audit committee.

-Best practices of the Board.

3 3 3 3 3 6

Director Hung-Tung Wang -Introduction of corporate governance and

securities regulation.3

Director Chui-Chuan Chang -Introduction of corporate governance and


Director Shun-Chih Chen -Introduction of corporate governance and


Director Ishigami Koji - Practice workshops for directors and supervisors

(including independent directors).12

Director Shuji Ogasawara -Introduction of corporate governance and


Director Zong-Xing Wu -Introduction of corporate governance and


Supervisor Tsang-Der Ni -Introduction of corporate governance and


Supervisor Tzu-Hua Han -Introduction of corporate governance and


8. Has the company implemented a self-evaluation report on corporate governance or has it authorized any other professional organization to conduct such evaluation? If so, please describe the opinion from the Board, the result of self or authorized evaluation, the major deficiencies, suggestions, or improvements.

V The Company has not yet to establish Corporate Governance Assessment Report or to commission external assessment on its corporate governance, but the operations of the Company are in compliance with laws and regulations as well as the Company’s corporate governance spirit. None

23

(5) Composition, Responsibilities and Operations of the Remuneration Committee:

A. Information of the remuneration committee member

Title

Criteria

Name

Meets One of the Following Professional Qualification Requirements, Together with at Least Five Years’ Work

Experience

Independence Criteria (Note)

Number of Other Public Companies in Which the Individual is Concurrently Serving as an Remuneration Committee Member

Rem

arks

An instructor or higher position in a department of commerce, law, finance, accounting, or other academic department related to the business needs of the Company in a public or private junior college, college or university

A judge, public prosecutor, attorney, Certified Public Accountant, or other professional or technical specialist who has passed a national examination and been awarded a certificate in a profession necessary for the business of the Company

Has work experience in the areas of commerce, law, finance, or accounting, or otherwise necessary for the business of the Company

1 2 3 4 5 6 7 8

Other Hsueh-Liang Wu 1

Other Chung-Hsing Huang

0

Other Yen-Ming Hsu 0 Note: Please tick the corresponding boxes that apply to a member during the two years prior to being elected or during the term(s) of office.

1. Not an employee of the Company or any of its affiliates. 2. Not a director or supervisor of affiliated companies. Not applicable in cases where the person is an independent director of the parent

company, or any subsidiary in which the Company holds, directly or indirectly, more than 50% of the voting shares. 3. Not a natural-person shareholder who holds shares, together with those held by the person’s spouse, minor children, or held by the person

under others’ names, in an aggregate amount of 1% or more of the total number of outstanding shares of the Company, or ranking in the top 10 in holdings.

4. Not a spouse, relative within the second degree of kinship, or lineal relative within the third degree of kinship, of any of the persons in the preceding three sub-paragraphs.

5. Not a director, supervisor, or employee of a corporate shareholder who directly holds 5% or more of the total number of outstanding shares of the Company, or who holds shares ranking in the top five holdings.

6. Not a director, supervisor, officer, or shareholder holding 5% or more of the shares of a specified company or institution which has a financial or business relationship with the Company.

7. Not a professional individual, who is an owner, partner, director, supervisor, or officer of a sole proprietorship, partnership, company, or institution that provides commercial, legal, financial, accounting services or consultation to the Company or to any affiliate of the Company, or a spouse thereof.

8. Not a person of any conditions defined in Article 30 of the Company Law.

B. Attendance of Members at Remuneration Committee Meetings

(a) There are 3 members in the Remuneration Committee.

(b) Current term of members: From July 9, 2014 to June 16, 2017. A total of 3 Remuneration Committee meetings were held in the previous period. The attendance record of the Remuneration Committee members was as follows:

Title Name Attendance in

Person By Proxy Attendance Rate (%) Remarks

Convener Hsueh-Liang Wu 3 0 100%

Committee Member

Chung-Hsing Huang 3 0 100%

Committee Member

Yen-Ming Hsu 3 0 100%

Other mentionable items: 1. If the Board of Directors shall not accept or revise the suggestions proposed by the remuneration committee, the dates of meetings,

sessions, contents of motions, all independents’ opinion and the Company’s response to the remuneration committee’ opinion should be specified(i.e., the remuneration passed by the Board of Directors is better than the remuneration suggested by the remuneration committee, reasoning for the deviation shall be stated.): None.

2. If the committee member is in opposition or reservation the suggestions proposed by the remuneration committee and he/she has record or written statement, information such as remuneration committee date, committee number, meeting content, suggestions of all members and how these suggestions were handled shall be clearly stated: None.

24

(6) Corporate Social Responsibility:

Evaluation Item

Implementation Status Deviations from “the Corporate

Social Responsibility Best-Practice Principles for

TWSE/TPEx Listed Companies” and Reasons

Yes No Abstract Explanation

1. Corporate Governance Implementation

(1) Does the company declare its corporate social responsibility policy and examine the results of the implementation?

(2) Does the company provide educational training on corporate social responsibility on a regular basis?

(3) Does the company establish exclusively (or concurrently) dedicated first-line managers authorized by the board to be in charge of proposing the corporate social responsibility policies and reporting to the board?

(4) Does the company declare a reasonable salary remuneration policy, and integrate the employee performance appraisal system with its corporate social responsibility policy, as well as establish an effective reward and disciplinary system?

V

V

V

V

(1) The company has yet to establish its corporate social responsibility policy, but has always upheld the spirit to implement the concept of social responsibility, the maintenance of the ecological environment, and the promotion of carbon reduction. The Company has also actively participated in community activities to make a contribution to the society and to provide employee a safe and healthy work environment.

(2) Management and staff hold annual in-house management courses and formulate employee performance management and also develop and incorporate clearly defined incentives and disciplinary system into employee code of conduct.

(3) Other than environmental protection and safety as well as health which are taken care of by the safety & Health Office, our administrative department has taken charge of remaining issues, such as social and public welfare and human rights.

(4) OPTOTECH has periodically provided management courses every year for its management executives and other employees. In addition, it has also instituted the employee performance management regulations, while specifically included the reward and punishment system in employees’ work rules, so the employees may fully understand the rules.

None

2. Sustainable Environment Development

(1) Does the company endeavor to utilize all resources more efficiently and use renewable materials which have low impact on the environment?

(2) Does the company establish proper environmental management systems based on the characteristics of their industries?

V

V

(1) OPTOTECH has implemented water recycling, for which the volume of water usage and water recycling rate are monthly monitored. Furthermore, indoor and outdoor lighting equipment has also been gradually replaced with LED lights, so as to save the energy and maximize the efficiency of resources. As for the waste, it has been disposed for re-utilization under the circumstance where it can be re-used. At the same time, the use of materials is in line with the Company’s policy to ban and cut environmentally hazardous materials, in order to reduce impacts on the environment.

(2) By executing the ISO14001 management system, OPTOTECH has periodically appraised its processes, operation activities, products and service environment, so as to evaluate the environmental impact on its employees and interested parties, use of hazardous substances, working sites and the environment. OPTOTECH has also used the results as the reference for setting the industrial safety and health goal, and taking measures, such as operation control and educational training, to control the environmental impact. OPTOTECH has reviewed the goal, and considered the environmental impact, safety and health risks, statutory

None

25

Evaluation Item





(3) Does the company monitor the impact of climate change on its operations and conduct greenhouse gas inspections, as well as establish company strategies for energy conservation and carbon reduction?

V

laws and regulations, international standards, technological feasibility , economic feasibility and interested parties’ opinions every year to continue to make improvement and fulfill its commitment of pollution prevention.

(3) Implementation of energy saving and carbon elimination, secure ISO / DIS 14067 certification of carbon footprint of product and certification of use of energy saving label of Bureau of Energy, Ministry of Economic Affairs, regularly examine the emission of greenhouse gas that passes international audit organizations, and obtained the ISO 14064-1 Greenhouse Gas Verification Statement as the basis for preparation of energy saving strategy in order to slow down global warming.

None

3. Preserving Public Welfare

(1) Does the company formulate appropriate management policies and procedures according to relevant regulations and the International Bill of Human Rights?

(2) Has the company set up an employee hotline or grievance mechanism to handle complaints with appropriate solutions?

(3) Does the company provide a healthy and safe working environment and organize training on health and safety for its employees on a regular basis?

(4) Does the company setup a communication channel with employees on a regular basis, as well as reasonably inform employees of any significant changes in operations that may have an impact on them?

V

V

V

V

(1) OPTOTECH has abided by related labor laws and regulations, instituted the management regulations and systems and disclosed its information through public channels, so employees can fully understand the details and their legal rights and interest can be protected. At the same time, OPTOTECH has also respected the internationally recognized basic labor rights and not allowed any hindrance to labor’s basic rights.

(2) The Company has developed sexual harassment and unreasonable management prevention measures as well as guidance for complaints and disciplinary actions, providing employees channel to file complaints in order to property handle employees’ complaints.

(3) Our emphasizes the management of safety, sanitation and occupational health and has secured certificates including CNS15506 Taiwan Occupational Safety and Health Management System (TOSHMS), and Occupational Health and Safety Assessment Series (OHSAS 18001) in continuation of providing a safe and healthy working environment. In the execution portion of safety and health related operations, OPTOTECH in addition to carrying out requirements based on legal regulations also continued to handle hazard warning activities and promoted machine safety standard mechanism so as to escalate employee safety and health awareness and maintain factory safety. In the health management portion, we also continued to plan and promote all kinds of health improvement activities such as Maternity protection , Prevention of human-caused hazards, Health Forum, Women Health Activities, and Bone Mineral Intensity Checks, etc. and reduce safety and health risks in company operations.

(4) Besides the Labor-Management Meeting held quarterly, the employee mailbox feature was incorporated into the homepage of employees for improving their dialogue with the management

None

26

Evaluation Item



TWSE/TPEx Listed Companies” and Reasons Yes No Abstract Explanation

(5) Does the company provide its employees with career development and training sessions?

(6) Does the company establish any consumer protection mechanisms and appealing procedures regarding research development, purchasing, producing, operating and service?

(7) Does the company advertise and label its goods and services according to relevant regulations and international standards?

(8) Does the company evaluate the records of suppliers’ impact on the environment and society before taking on business partnerships?

(9) Do the contracts between the company and its major suppliers include termination clauses which come into force once the suppliers breach the corporate social responsibility policy and cause appreciable impact on the environment and society?

V

V

V

V

V

(5)OPTOTECH has periodically training survey every year,and implementation of the annual training plan. Then according to the results after training to estimate efficacy, in order to strengthen staff functions, improve business performance and competitiveness.

(6) Even though our clients are not the end-users, OPTOTECH has still been devoted to fulfilling the standards of IECQ-QC-080000, so as to reduce the product’s hazardous substances and protect consumers’ safety.

(7) The marketing and labeling of the Company's products are in accordance with the laws and regulations.

(8) The Company pays attention to environmental protection and energy saving. The Company pays attention to environmental protection as a criterion in the choice of suppliers, in order to fulfill its corporate social responsibility.

(9) The cooperation between the Company and its suppliers is in accordance with the laws and international regulations. If suppliers have significantly negative impacts on the environment and society, the Company may at any time terminate or cancel the terms of the contracts.

None

4. Enhancing Information Disclosure

(1) Does the company disclose relevant and reliable information regarding its corporate social responsibility on its website and the Market Observation Post System (MOPS)?

V

(1) The Company exposes from time to time crucial and reliable information relating to corporate social responsibility in the Company's website and the Taiwan Exchange’s Market Observation Post System, etc.

None

5. If the Company has established the corporate social responsibility principles based on “the Corporate Social Responsibility Best-Practice Principles for TWSE/TPEx Listed Companies”, please describe any discrepancy between the Principles and their implementation:

The Company is committed to enhance corporate governance, to continue urging and practicing corporate social responsibility, and to keep reviewing the effectiveness of its implementation and continuously improve its policies.

6. Other important information to facilitate better understanding of the company’s corporate social responsibility practices:

A. Environmental protection: a. Based on the principles of reduction, re-use and increasing the effectiveness of use, the Company is committed to co-existence with the environment through sustainable operation, and expects

to fulfill our corporate social responsibility. b.It will incorporate the best pollution control technology to enhance the purification of waste water and facilitate the re-use of water resources for better protection of river water quality. c. OPTOTECH has reinforced its waste management and minimization, classified garbage, promoted office dematerialization in order to reduce the use of paper. It will apply for waste recycling

projects to turn waste into resource. d.OPTOTECH has aggressively developed and promoted the use of green raw materials, in an attempt to continuously cut down the impact of its products on the environment. In the end, our

hopes to develop the products which can be harmoniously blended with nature and friendly to the earth.

27

Evaluation Item





B. Community participation:

Participated in the ACCTON Dream Actualization Plan, with which our employees were called to donate the Christmas gifts underprivileged children wanted.

C.Contribution to society:

OPTOTECH has been devoted to R&D for enhancement of LED product effect and reduction of resource waste.

D. Service to society, social and public interests:

a. OPTOTECH participated in the 2015 blood donation activity showing its enthusiasm for blood donation related public welfare activities.

b.OPTOTECH has continued to promote its ISO-14001 environmental management system and avoid polluting and hurting the neighboring environment.

c. Our Employees were called to donate the Christmas gifts underprivileged children wanted and received certificate of appreciation.

E. Consumer rights and interests:

Our clients are not the end-users, but we have devoted our efforts to fulfilling the rules of IECQ-QC-080000, so as to reduce hazardous substances of our products and protect consumers’ safe

use of our products.

F. Human rights: OPTOTECH has good labor relations, and provides the following fringe benefits for its employees:

a. Health insurance, labor insurance, medical insurance and casualty insurance for its employees

b.Various prizes, employee bonuses and the stock ownership plan.

c. Establishment of the employee welfare committee

d.Integrated study and training measures

e. Integrated retirement system.

G. Safety and health:

It will take care of employee health, implement workplace maternity protection, prevent human-caused hazards, and prevent abnormal workload and other issues to create a healthy workplace.

7. A clear statement shall be made below if the corporate social responsibility reports were verified by external certification institutions:

- Sep. 2005:As recommended by SGS, OPTOTECH passed the ISO14001:2004 version Environment Management System Verification.

- Aug. 2006: As recommended by SGS, OPTOTECH passed the IECQ HSPM(QC080000)version Environment Management System Verification.

- Oct. 2008: As recommended by SGS, OPTOTECH passed the OHSAS 18001:2007 version Environment Management System Verification.

- July 2010: As recommended by SGS, our Optoelectronics Division/ Silicon Division passed ISO/TS16949: 2009 Quality Management System Certification.

- Oct. 2010: As recommended by SGS, OPTOTECH passed the ISO 9001:2008 Management System Verification.

- Aug. 2012: As recommended by SGS, our system products MR-16 passed ISO/DIS 14067 Verification certificate .

- Sep. 2013: As recommended by SGS, OPTOTECH passed the CNS15506: 2011 Management System Verification.

- Jan. 2015: As recommended by TAF (Taiwan Accreditation Foundation), OPTOTECH passed the ISO/IEC 17025:2005 (Optoelectronic Test Lab) Verification.

28

(7) Ethical Corporate Management

Evaluation Item

Implementation Status Deviations from “the

Ethical Corporate Management

Best-Practice Principles for TWSE/TPEx Listed


1. Establishment of ethical corporate management policies and programs

(1) Does the company declare its ethical corporate management policies and procedures in its guidelines and external documents, as well as the commitment from its board to implement the policies?

(2) Does the company establish policies to prevent unethical conduct with clear statements regarding relevant procedures, guidelines of conduct, punishment for violation, rules of appeal, and the commitment to implement the policies?

(3) Does the company establish appropriate precautions against high-potential unethical conducts or listed activities stated in Article 2, Paragraph 7 of the Ethical Corporate Management Best-Practice Principles for TWSE/TPEx Listed Companies?

V

V

V

(1) The operation of OPTOTECH has followed applicable laws. Related operating procedures and regulations for the operation of OPTOTECH have been established and announced on OPTOTECH’s corporate website. The Board of Directors and management will perform necessary practices to fulfill ethical corporate management.

(2) We will offer non-scheduled courses relating to corporate working rules and announced the related regulations on OPTOTECH’s corporate website for people to follow.

(3) It has been clearly stated in corporate working rules that our employees should stay on their post and strictly follow all applicable regulations. Our employees, when conducting businesses, shall not offer or accept any improper benefits including rebates, commissions, grease payments, etc.

None

2. Fulfill operations integrity policy

(1) Does the company evaluate business partners’ ethical records and include ethics-related clauses in business contracts?

(2) Does the company establish an exclusively (or concurrently) dedicated unit supervised by the Board to be in charge of corporate integrity?

(3) Does the company establish policies to prevent conflicts of interest and provide appropriate communication channels, and implement it?

(4) Has the company established effective systems for both accounting and internal control to facilitate ethical corporate management, and are they audited by either internal auditors or CPAs on a regular basis?

V

V

V

V

(1) Prior to any commercial transactions with other companies, we shall take into consideration their legality and records of unethical conduct, if any. Rules and regulations relating to ethical conduct shall be clearly stated in the contract of any commercial transaction.

(2) The Company has yet to set up a dedicated unit to implement operating integrity of the enterprise, but the moral conducts of the Company’s directors and supervisors, managers and all its employees are in compliance with regulations and norms for business integrity.

(3) Directors shall exercise a high degree of self-discipline, a director is prohibited from participating in discussion of or voting on any proposal where the director or the juristic person that the director represents is an interested party, and such participation is likely to prejudice the interests of OPTOTECH. Employees when encounters conflicts in interests while conducting businesses shall report to their supervisors or the dedicated unit.

(4) We have established effective accounting systems and internal control systems according to the related laws and regulations. The Audit Department formulates an annual audit plan based on the results of risk assessments, and assesses the Company's internal control system accordingly.

None

29

Evaluation Item

Implementation Status Deviations from “the

Ethical Corporate Management

Best-Practice Principles for TWSE/TPEx Listed


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

V (5)The Company holds annual internal promotion, in which the chairman, general manager, or other senior executives convey the importance of integrity to the directors, the employees and the mandatories of the Company.

None

3. Operation of the integrity channel

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

(2) Does the company establish standard operating procedures for confidential reporting on investigating accusation cases?

(3) Does the company provide proper whistleblower protection?

V

V

V

(1) We established “Directors, Supervisors and Management Ethical Conduct Principles” and “Working Rules” to clearly state the disciplinary and complaint system. The above regulations were announced on OPTOTECH’s corporate internal website.

(2) The Company has been actively assessing its standard operating procedures and confidentiality mechanisms for the handling of reports on violations.

(3) The company promises that people reporting on violations will not be subjected to undue disposals due to their reports.

None

4. Strengthening information disclosure

(1) Does the company disclose its ethical corporate management policies and the results of its implementation on the company’s website and MOPS?

V (1) The operation of OPTOTECH has followed applicable laws. Related operating procedures and regulations for the operation of OPTOTECH have been established and announced on OPTOTECH’s corporate website. It has been clearly stated in corporate working rules that our employees should stay on their post and strictly follow all applicable regulations. Our employees, when conducting businesses, shall not offer or accept any improper benefits including rebates, commissions, grease payments, etc.

None

5. If the company has established the ethical corporate management policies based on the Ethical Corporate Management Best-Practice Principles for TWSE/TPEx Listed Companies, please describe any discrepancy between the policies and their implementation.

The Company has yet to establish "Procedures for Ethical Management" but bases its business activities on principles of fairness, honesty, trustworthiness, and transparency, in order to implement business integrity policies and to actively prevent acts of bad faith.

6. Other important information to facilitate a better understanding of the company’s ethical corporate management policies (e.g., review and amend its policies).

We will at all times monitor the development of relevant local and international regulations concerning ethical corporate management, so as to review and improve our ethical corporate management principles and achieve better results from implementing the principles.

(8) Corporate Governance Guidelines and Regulations:

OPTOTECH has yet to institute any corporate governance rules, but it has fulfilled the corporate governance spirit, including internal control and various kinds of management. Its control and management functions have been operated smoothly.

30

A. Based on the “Corporate Governance Best-Practice Principles for TSEC/GTSM Listed Companies”, OPTOTECH has instituted the following regulations: - Rules of Procedure for Shareholders Meeting - Rules of Procedure for Board of Directors Meeting - Rules of Election of Directors and Supervisors - Remuneration Committee Charter - Procedures for Acquistion or Disposal Assets - Procedures for Endorsement and Guarantee - Procedures for Lending Funds to Other Parties - Rules Governing for Subsidiary - Rules Governing for Investments - Procedures for Handling Material Inside Information - Directors, Supervisors and Management Ethical Conduct Principles - Procedures for Halt and Resumption Applications

B. Enquiry: OPTOTECH’s corporate website at http://www.opto.com.tw for the financial data and corporate governance information disclosed by OPTOTECH.

(9) Other Important Information Regarding Corporate Governance:

A. Program and training of manager:

Title Name Date or program /training

Organizing unit Program Name Hours

Vice President (Head of

Financing and Accounting)

Tzu-Chun Lin2015/09/08

- 2015/09/10

Accounting Research and Development Foundation

Continuous advancing classes for issuer, security broker, and accounting department head of security trading office

12

Chief of Auditing Office

Ting-Hui Chou

2015/09/02 Accounting Research and Development Foundation

(COSO- ERM): Evaluate the effectiveness of the analytical approach

6


Discuss internal control and management according to ISO implementation

6


Observe how internal auditor gather and analyze evidence and how investigative departments search and seize criminal evidence

6


Conduct case analysis of illegal kickback liability and investigations in corporate procurement and sales

3

B. Procedures for Handling Material Inside Information: To manage our internal material information, our board of directors instituted the “Procedure for Handling Internal Material Information”, and informed its directors, supervisors, managers and employees. At the same time, the procedure system and precautious matters have been posted on OPTOTECH’s corporate website for all the colleagues across the board to comply with. In so doing, it is hoped that there will be no violation or insider trading occurring in the company.

(10) Internal Control System: A. Internal control statement: (P.32)

B. Those that entrust a CPA to examine the internal control system as a project shall disclose the CPA’s audit report: None.

(11) For the most recent fiscal year or during the current fiscal year up to the date of printing of the annual report, disclose any sanctions imposed in accordance with the law upon the company or its internal personnel, any sanctions imposed by the company upon its internal personnel for violations of internal control system provisions, principal deficiencies, and the state of any efforts to make improvements: None.

31

(12) Major Resolutions of Shareholders’ Meeting and Board Meetings:

A. Major resolutions made in the 2015 regular shareholders’ meeting:

Major Resolutions Implementation Status

Approval of the 2014 business report and financial statements. All the resolutions of the Shareholders’ Meeting have been

fully implemented in accordance with the resolutions. Approval of the distribution of 2014 retained earnings

B. Major resolutions made in board meetings include the following:

Year Major Resolutions Implementation Status

2015

- Resolved to revise the “Internal Control Systems” and “Internal audit

implementation rules”

- Approval of the 2014 business report and financial statements.

- Approval of the distribution of 2014 retained earnings

- Approval of the 2014 Internal Control System Statement

- Convening the 2015 Annual Shareholders’ Meeting.

- Resolved to set the company’s ex-dividend date

- Approval of the 2016 annual audit plans

All the resolutions of the Board Meeting have been fully implemented in accordance with the resolutions.

2016

- Approval of the change of auditing CPA.

- Approval of the amendment to the “Articles of Incorporation”

- Approval of the amendment to the “Directors and Supervisors Election

Guidelines”

- Approval of the amendment to the “Regulations Governing Shareholders’

Meetings”


- Approval of the distribution of 2015 cash bonus for employees, directors and

supervisors.

- Approval of the 2015 business report and financial statements.


- Removal of the restriction against the ban on directors’ engagement in similar

businesses

- Convening the 2016 Annual Shareholders’ Meeting.

- Approval of the amendment to the “Code of Ethics for Directors, Supervisors

and Officers”.

- Approval of the amendment to the “Procedure for Loaning Capital to Others”

and “Procedure for Making Endorsements and Guarantees”.

- Approval of the 2015 Internal Control System Statement.

All the resolutions of the Board Meeting have been fully implemented in accordance with the resolutions.

(13) Major Issues of Record or Written Statements Made by Any Director or Supervisor Dissenting to Important Resolutions Passed by the Board of Directors :None.

(14) Resignation or Dismissal of the Company’s Key Individuals, Including the Chairman, CEO, and Heads of Accounting, Finance, Internal Audit and R&D :

March, 31, 2016

Title Name Date of

Appointment Date of Termination

Reasons for Resignation or Dismissal

Chief Internal Auditor

Eric Chen July, 28, 1992 August, 03, 2015 Job Adjustment

32

Optotech Corporation Limited

Statement of Internal Control System

Date:March 25,2016

Based on its internal control system in 2015, Optotech Corporation Limited (OPTOTECH) declares the results of its self-examination as below:

1. OPTOTECH is fully aware that establishing, operating, and maintaining an internal control system are the responsibility of its Board of Directors and management. OPTOTECH has established such a system aimed at providing reasonable assurance regarding the achievement of objectives in the following categories: effectiveness and efficiency of operations (including profitability, performance, and safeguarding of assets), reliability of financial reporting, and compliance with applicable laws and regulations.

2. An internal control system has inherent limitations. No matter how perfectly designed, an effective internal control system can provide only reasonable assurance of accomplishing the three objectives mentioned above. Moreover, the effectiveness of an internal control system may be subject to changes of environment or circumstances. Nevertheless, the internal control system of OPTOTECH contains self-monitoring mechanisms, and OPTOTECH takes corrective actions whenever a deficiency is identified.

3. OPTOTECH evaluates the design and operating effectiveness of its internal control system based on the criteria provided in the Regulations Governing the Establishment of Internal Control Systems by Public Companies (herein below, the “Regulations”). The criteria adopted by the Regulations identify five components of internal control based on the process of management control: 1.control environment, 2.risk assessment, 3.control activities, 4.information and communication, and 5.monitoring. Each component further contains several items. Please refer to the Regulations for details.

4. OPTOTECH has evaluated the design and operating effectiveness of its internal control system according to the aforesaid criteria.

5. Based on the findings of the evaluation mentioned in the preceding paragraph, OPTOTECH believes that, during the year 2015, its internal control system (including its supervision and management of subsidiaries), as well as its internal controls to monitor the achievement of its objectives concerning operational effectiveness and efficiency, reliability of financial reporting, and compliance with applicable laws and regulations, were effective in design and operation, and reasonably assured the achievement of the above-stated objectives.

6. This Statement will be an integral part of OPTOTECH’s Annual Report for the year 2015 and Prospectus, and will be made public. Any falsehood, concealment, or other illegality in the content made public will entail legal liability under Articles 20, 32, 171, and 174 of the Securities and Exchange Law.

7. This Statement has been passed by the Board of Directors in their meeting held on March 25, 2016, with zero of the Seven attending directors expressing dissenting opinions, and the remainder all affirming the content of this Statement.

OPTOTECH Corporation Limited

Chairman: Yung-Chiang Huang

President: Hung-Tung Wang

33

4. Information Regarding the Company’s Audit Fee

Accounting Firm Name of CPA Period Covered by

CPA’s Audit Remarks

Pricewaterhouse Coopers Philine Lee Wilson Wang 2015.01.01-2015.12.31 -

Fee Items Fee Range Audit Fee Non-audit Fee Total

1 Under NT$ 2,000,000 V

2 NT$2,000,001 ~ NT$4,000,000

3 NT$4,000,001 ~ NT$6,000,000 V V

4 NT$6,000,001 ~ NT$8,000,000

5 NT$8,000,001 ~ NT$10,000,000

6 Over NT$100,000,000

(1) In the case that the amount of the non-audit fee paid to the CPA, the CPA’s firm or its affiliated enterprise is more than 1/4 of that of the audit fee, the audit and non-audit amounts and non- nonauditservices shall be disclosed: None.

(2) In the case that the accounting firm is replaced and the audit fee paid for the year making replacement is less than that of the year before replacement, the audit fees before and after replacement of the accounting firm and the reason for replacement shall be disclosed: None.

(3) The company whose audit fee is reduced by no less than 15% from the previous year shall disclose the audit fee reduction amount, ratio and reason. The audit fee referred to in item (1) is the amount paid by the company to the CPA for audit, examination, re-review of financial reports, financial prediction review and taxation certificat: None.

5. Replacement of CPA

(1) Regarding the former CPA

Replacement Date Resolved by the board of directors on 7th Jan., 2016

Reason of change and explanation

As PricewaterhouseCoopers reorganized its internal structure, the CPAs auditing the financial statements of March 31,2016 would be changed from the CPAs Philine Lee and Wilson Wang to the CPAs Yu-Kuan, Lin and Charles Lai.

Describe whether the Company terminated or the CPA did not accept the appointment

PartiesStatus CPA CPA

Termination of appointment Philine Lee Wilson Wang

Did not accept (continue) the appointment

Other issues (except for unqualified issues) in the audit reports within the last two years

None

Differences with the company None

Other Revealed Matters None

34

(2) Regarding the successor CPA

Name of accounting firm PricewaterhouseCoopers Name of CPA Yu-Kuan, Lin / Charles Lai Date of appointment 7th Jan., 2016 Consultation results and opinions on accounting treatments or principles with respect to specified transactions and the company's financial reports that the CPA might issue prior to the engagement.

None

Succeeding CPA’s written opinion of disagreement toward the former CPA

None

(3) Reply letter from the former CPA: None.

6. The Company’s Chairman, Chief Executive Officer, Chief Financial Officer, and managers

in charge of its finance and accounting operations did not hold any positions in the Company’s independent auditing firm or its affiliates in the most recent two years.

7. Changes in Shareholding of Directors, Supervisors, Managers and Major Shareholders

(1) Changes in Shareholding of Directors, Supervisors, Managers and Major Shareholders:

Title Name

2015 As of Mar. 31, 2016

Holding Increase

(Decrease)

Pledged Holding Increase

(Decrease)

Holding Increase

(Decrease)

Pledged Holding Increase

(Decrease)Chairman& Chief Strategy Officer

Yung-Chiang Huang 0 0 0 0

Director & President Hung-Tung Wang 0 0 0 0Director &

Vice President Chui-Chuan Chang 217,000 0 166,000 0

Director & Deputy Assistant General Manager

Shun-Chih Chen 249,000 0 0 0

Director

Nichia Taiwan Corp. 0 0 0 0

Rep. of legal person:Masao Shono 0 0 - -

Rep. of legal person:Katsuse Hideaki 0 0 - -

Rep. of legal person:Ishigami Koji 0 0 0 0

Director Lee Tech Co., Ltd. 259,000 0 0 0

Rep. of legal person:Zong-Xing Wu 0 0 0 0

Director Shin-Etso Opto Electronic Co.,Ltd 0 0 0 0

Rep of legal person:Shuji Ogasawara 0 0 0 0

Supervisor Medison Pacific Investment Co., Ltd. 0 0 0 0

Rep of legal person:Tsang-Der Ni 0 0 0 0

Supervisor Tzu-Hua Han 0 0 0 0Vice President

(Head of Financing and Accounting)

Tzu-Chun Lin 0 0 0 0


Jung-Huan Lee 0 0 0 0


Chin-Lung M 0 0 0 0

(2) Shares Trading with Related Parties: None.

(3) Shares Pledge with Related Parties: None.

35

8. Relationship among the Top Ten Shareholders As of 04/26/2016

Name

Current

Shareholding

Spouse’s

/minor’s

Shareholding

Shareholding

by Nominee

Arrangement

Name and Relationship

Between the Company’s Top

Ten Shareholders, or Spouses or

Relatives Within Two Degrees

Rem

arks

Shares % Shares % Shares % Name Relationship

Nichia Taiwan Corp. 31,755,947 5.82 0 0.00 0 0.00

Hitachi Metals, Ltd. entrusted to

Chinatrust Commercial Bank

Parent company

Nichia Corp. entrusted to Chinatrust Commercial Bank

16,163,760 2.96 0 0.00 0 0.00Nichia Taiwan

Corp. Subsidiary

Dimensional Emerging Markets Value Fund

8,205,000 1.50 0 0.00 0 0.00 None None

Polunin Emerging Markets Small Cap Fund, LLC

8,155,400 1.49 0 0.00 0 0.00 None None

Foreningen AP Invest F.M.B.A.

7,121,000 1.31 0 0.00 0 0.00 None None

Vanguard Emerging Markets Stock Index Fund, A Series Of Vanguard International Equity Index Funds

7,027,000 1.29 0 0.00 0 0.00 None None


5,640,007 1.03 0 0.00 0 0.00 None None

Medison Pacific Investment Co., Ltd

5,361,681 0.98 0 0.00 0 0.00 None None

JPMorgan Chase Bank N.A., Taipei Branch in custody for Vanguard Total International Stock Index Fund, a series of Vanguard Star Funds

5,260,000 0.96 0 0.00 0 0.00 None None

Emerging Markets Social Core Equity Portfolio of DFA Investment Dimensions Group Inc.

3,802,713 0.70 0 0.00 0 0.00 None None

9. Ownership of Shares in Affiliated Enterprises

As of 12/31/2015 Unit:shares/%

Affiliated Enterprises Ownership by the Company

Direct or Indirect Ownership by Directors, Supervisors, Managers

Total Ownership

Shares % Shares % Shares %

Viking Tech Corp. 9,189,994 7.83 11,587,883 9.87 20,777,877 17.70

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IV、 Capital Overview 1. Capital and Shares

(1) Source of Capital

A. Issued Shares: No change in capital stocks in fiscal year 2015 and as of printing of annual report.

B. Type of Stock

C. Information for Shelf Registration: None.

(2) Status of Shareholders

As of 04/26/2016

(3) Shareholding Distribution Status (Common Shares)

As of 04/26/2016

Class of Shareholding (Unit: Share)

Number of Shareholders

Shareholding (Shares)

Percentage

1 ~ 999 17,760 3,879,232 0.71％

1,000 ~ 5,000 29,762 70,328,601 12.89％

5,001 ~ 10,000 7,230 59,538,123 10.91％

10,001 ~ 15,000 1,927 24,942,682 4.57％

15,001 ~ 20,000 1,611 30,591,368 5.61％

20,001 ~ 30,000 1,137 29,758,864 5.45％

30,001 ~ 50,000 916 37,548,098 6.88％

50,001 ~ 100,000 607 45,296,380 8.30％

100,001 ~ 200,000 258 36,888,358 6.76％

200,001 ~ 400,000 115 32,063,529 5.88％

400,001 ~ 600,000 27 13,623,531 2.50％

600,001 ~ 800,000 16 11,272,773 2.07％

800,001 ~ 1,000,000 12 10,517,960 1.93％

1,000,001 or over 33 139,412,616 25.55％

Total 61,411 545,662,115 100.00％

Share Type

Authorized Capital Remark

Issued Shares Un-issued

Shares Total

Employees’ warrant (Share)

Shares convertible from converted bonds (Share)

Common stock

545,662,115 454,337,885 1,000,000,000 60,000,000 150,000,000

Item Government

Agencies Financial

Institutions

Other Juridical Persons

Domestic Natural Persons

Foreign Institutions &

Natural Persons Total

Number of Shareholders

2 13 63 61,216 117 61,411

Shareholding (shares)

254,483 398,484 47,762,545 403,842,839 93,403,764 545,662,115

Percentage 0.05％ 0.07％ 8.75％ 74.01％ 17.12％ 100.00％

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(4) List of Major Shareholders

As of 04/26/2016

Shareholder's Name Shares Percentage

Nichia Taiwan Corp. 31,755,947 5.82％

Nichia Corp. entrusted to Chinatrust Commercial Bank 16,163,760 2.96％

Dimensional Emerging Markets Value Fund 8,205,000 1.50％

Polunin Emerging Markets Small Cap Fund, LLC 8,155,400 1.49％

Foreningen AP Invest F.M.B.A. 7,121,000 1.31％

Vanguard Emerging Markets Stock Index Fund, A Series of Vanguard

International Equity Index Funds 7,027,000 1.29％

JPMorgan Chase Bank N.A. Taipei Branch in custody for Norges

Bank 5,640,007 1.03％

Medison Pacific Investment Co., Ltd 5,361,681 0.98％

JPMorgan Chase Bank N.A., Taipei Branch in custody for Vanguard

Total International Stock Index Fund, a series of Vanguard Star Funds5,260,000 0.96％

Emerging Markets Social Core Equity Portfolio of DFA Investment

Dimensions Group Inc. 3,802,713 0.70％

(5) Market Price, Net Worth, Earnings, and Dividends per Share

Items 2014 2015

01/01/2016 -

03/31/2016

Market

Price per

Share

Highest Market Price 17.55 14.65 11.80

Lowest Market Price 11.60 6.80 8.81

Average Market Price 14.57 11.50 10.22

Net Worth

per Share

Before Distribution 13.89 14.16 14.42

After Distribution 13.14 - -

Earnings

per Share

Weighted Average Shares 544,554,839 544,554,839 544,554,839

Diluted Earnings Per Share 1.03 1.05 0.21

Dividends

per Share

Cash Dividends 0.75 1.00 -

Stock

Dividends

Dividends from

Retained Earnings - - -

Dividends from Capital

Surplus - - -

Accumulated Undistributed

Dividends - - -

Return on

Investment

Price / Earnings Ratio (Note 1) 13.96 9.95 -

Price / Dividend Ratio (Note 2) 19.43 - -

Cash Dividend Yield Rate (Note 3) 5.15％ - - Note 1: Price / Earnings Ratio = Average Market Price / Earnings per Share Note 2: Price / Dividend Ratio = Average Market Price / Cash Dividends per Share Note 3: Cash Dividend Yield Rate = Cash Dividends per Share / Average Market Price

38

(6) Dividend Policy and Implementation Status

A. Dividend Policy:

If there is any surplus in the company’s yearly final accounts, it will be distributed as follows: (a) Offset the losses from previous years. (b) Withdrawing 10% statutory surplus reserve until the accumulated amount has reached the total capital

of OPTOTECH. (c) Provision or rotation of special reserves depending on company’s need of operation and legal

requirement. (d) Deduction of balance required by article (a) to article (c), adding the undistributed surplus

accumulated in the previous fiscal year. Except for a reserved portion, the stockholder’s meeting has decided the amount of bonus for stockholder to be appropriated.

Since OPTOTECH requires capital expenditure and well-rounded financial planning in order to pursue sustainable development. Hence, we will distribute both stock dividend and cash dividend in accordance with our growth rate and capital expenditure status, in which the cash dividend shall be no less than 50% of the total amount of the dividend distribution of the year that the dividend occurs.

B. Proposed Distribution of Dividend: As resolved in the board meeting held on March 25, 2016, the company’s 2015 surplus distribution is as below. The case will be sent to the board of supervisors for examination and approval and submitted to the regular shareholders meeting for recognition. Then, the board of directors will separately determine a base day to distribute the stock (cash) dividend.

OPTOTECH Corporation Statement of Earning Distribution 2015

Unit: NT$

Item Amount

Undistributed earnings at the beginning of year(IFRS) 631,776,479

Less: Retained earnings translation adjustment recognized under equity method to the invested company

0

Less: Adjustment of retained earnings for the deletion of treasury stock

0

Plus: Actuarial gains and losses of current fiscal year 13,653,812

Subtotal 645,430,291

After-tax profit of the year 573,375,135

Less: Allocated legal earning reserve （57,337,514）

Plus: Rotating special reserves. 0

Distributable retained earnings 1,161,467,912

Cash dividends to shareholders （545,662,115）

Undistributed surplus at year end. 615,805,797

(7) Effect of the free share allotment to be proposed at the shareholders’ meeting on the Company’s business performance and its EPS:

According to the resolution by the board of directors on March 25, 2016, neither stock dividends to shareholders nor stock bonus to employees will be distributed for the year 2015.

(8) Employee, Director and Supervisors' Remuneration:

A. Information Relating to Employee, Director and Supervisors' Remuneration in the Articles of Incorporation:

10%-15% of the Company's annual profit, if any, should be allocated to employee remuneration, and not more than 5% to director and supervisors' remuneration; however, in the event of accumulated loss, the Company should be compensated.

39

Employees' remuneration can in be the form of stock or cash. Allocation recipients must include Company employees who satisfy certain conditions. The current year profit referred to in Paragraph 1 is defined as pre-tax profit minus benefits prior to remunerating dispatch employees, directors and supervisors. Allocation for employees, directors and supervisors must be approved by a board meeting in which more than two-thirds of the directors are present and more than half of those present agree to the resolution, which is reported at the shareholders meeting.

B. The Estimated Basis for Calculating the Employee, Director and Supervisors' Remuneration:

Employee, director and supervisors' remuneration that is calculated according to legal stipulations or construction obligation and reasonably estimated is recognized as expense and liability. Subsequent to resolution, discrepancy between actual allocated amount and estimated amount will be handled according to changes in accounting estimate.

C. Profit Distribution for Employee, Director and Supervisors’ Remuneration for 2015 Approved in Board of Directors Meeting:

(a) Recommended Distribution of Employee, Director and Supervisors’ Remuneration:

(NT$ thousands)

Director and Supervisors' Remuneration $ 34,103,882

Employees' Remuneration – in Cash $102,331,647

Total $136,435,529

(b) Ratio of Recommended Employee Stock Bonus to Capitalization of Earnings:

As resolved in OPTOTECH’s board meeting held on March 25, 2016, we would not distribute the employee stock bonus.

D. Information of 2014 Earnings Set Aside for Employee Bonus and Directors’ and Supervisors’ Remuneration:

Distribution of 2014 Earnings

(NT$ thousands)

Distributed actually according

to the resolution at the shareholders’ meeting

Proposed to be distributed by the board of directors

Difference

Bonus for shareholders 409,246,586 409,246,586 0

Remuneration to directors and supervisors

25,577,912 25,577,912 0

Bonus for employees 76,733,735 76,733,735 0

Note:There is no difference between the employees’ bonus and remuneration to directors and supervisors actually distributed and those proposed to be distributed by the board of directors.

(9) Buyback of Treasury Stock:None.

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2. Bonds:None.

3. Preferred Stock:None. 4. Global Depository Receipts:None. 5. Employee Stock Options

(1) Status of Employee Stock Options

A. Issuance of Employee Stock Options Mar. 31, 2016

Type of Stock Option Employees’ stock option voucher for year 2010

Regulatory approval date Aug. 09, 2010

Issue date Aug. 26, 2010

Units issued 13,910,000 units

(1 common share of the Company to be subscribed by every unit)Option shares to be issued as a percentage of outstanding shares

2.55%

Duration Till Dec. 31, 2017

Conversion measures Issuing new shares

Conditional conversion periods and percentages(%)

Duration of allocating stock option vouchers

Ratio of stock options to be exercised

2 years 50% 3 years 75% 4 years 100%

Converted shares 0

Exercised amount 0

Number of shares yet to be converted 10,863,250 units

(1 common share of the Company to be subscribed by every unit)Adjusted exercise price for those who have yet to exercise their rights

NTD 17.2

Unexercised shares as a percentage of total issued shares(%)

1.99%

Impact on possible dilution of shareholdings

The stock option vouchers are used to subscribe 13,910,000 common shares. It does not have much effect on dilution of original shareholders’ equity and shareholders’ equity.

41

B. List of Executives Receiving Employee Stock Options and the Top Ten Employees with Stock Options Mar. 31, 2016

Title Name No. of Option

Shares

Option Shares as a Percentage of Shares Issued

Exercised Unexercised

No. of Shares Converted

Strike Price (NT$)

Amount (NT$

thousand)

Converted Shares as a

Percentage of shares Issued

No. of Shares Converted

Strike Price (NT$)

Amount (NT$ thousand)

Converted Shares as a

Percentage of shares Issued

Executive Officers

Chairman & Chief Strategy Officer

Yung-Chiang Huang

2,830,000 0.52% －－－－ 2,830,000 17.2 48,676,000 0.52%

President Hung-Tung Wang

Vice President Chui-Chuan Chang Vice President (Head of Financing and Accounting)

Tzu-Chun Lin


Jung-Huan Lee


Shun-Chih Chen


Chin-Lung Ma

President of Subsidiary Chih-Yuan Yen Head of Financing and Accounting of Subsidiary

Ko-Ying Teng

Employee

Manager Wen-cong Lai

1,388,000 0.25% －－－－ 1,388,000 17.2 23,873,600 0.25%

Manager Shu-zhen You Manager Qian-yan Huang Manager Yin-rui Chen Manager Ming-song Hsieh Manager Jia-zhang Hsieh Manager Kun-Tai Chung Manager Hsiu-Tao Tseng Manager Ru-yuan You Sales Executive Hui-chao Chen Manager Yun-qiang Mo Manager Hong-ji Lee Manager Shao-Cheng Chang

(2) Issuance of New Restricted Employee Shares:None.

6. Status of New Shares Issuance in Connection with Mergers and Acquisitions:None.

7. Financing Plans and Implementation:None.

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V、 Operational Highlights 1. Business Activitie (1) Business Scope: A. Main areas of business operations:

(A) Production and sales of opto-electronic semiconductor devices: (a) LED (b) Infrared LED (c) Photodiode (d) Phototransistor (e) Opto-electronic coupler (f) Laser diode (g) Optical integrated circuit

(B) Production and sales of semiconductor electronic devices: (a) Varactor diode (b) Field effect transistor (c) Microwave transistor (d) Diode (e) Transistor (f) All kinds of semiconductor devices

(C) Production and sales of wireless communication equipments: UHF wireless hopping communication device.

(D)Production and sales of wired communication equipments:intercom system inside the artillery armored vehicle.

(E) The research, development, design, manufacturing, sales, leasing (only for self-owned products), promotion and after-sale service of aforementioned items and associated system products.

(F) We are also involved in export/import trading activities associated with our company’s business.

B. Revenue distribution: Unit: NT$ thousands

Major products 2015 revenue, net Ratio % Light emitting devices 2,166,415 38.47 Sensor devices 1,940,798 34.47 System product 1,224,508 21.75 Packaging Products 298,819 5.31 Total 5,630,540 100.00

C. Main products: In the aspect of LED products, the opto-electronic product division has devoted its efforts to servicing each of its clients with its well-rounded resources and processes and providing innovative resolution schemes to meet its clients’ respective requirements. These products include GaP (red, yellowish green, standard green, pure green), VPE (red, orange, light orange, yellow), AlGaAs (SH, DH, DDH), IR (infrared LED), AlGaInP (red, orange, yellow, yellowish green, pure green), InGaN (green, cyanine, blue, purple), and Flip-Chip (green, blue) LED chip. We will continue to focus on enhancing brightness and efficiency in order to develop LED chip products at a higher level.

The silicon electronic product division has combined current technology, integrated the resources to be developed in the years to come and adopted the cutting edge process to provide clients with flexible services and the overall resolution schemes. Just in a few short years, this new integration technology has gained recognition and support from clients. The silicon electronic product division is still making every effort to provide its clients with on-time delivery and low-defect quality products, in an attempt to become its clients’ “most reliable partner”. Its products are especially acclaimed by its Japanese clients.

System Products division - full-color display: using unique technologies, with 16-bit red, green and blue bands to achieve the best gamma curve to allow delicate and vivid color distribution on the display. At the same time, the Company has overcome the flashing and interference effects of low-level color and low brightness in order to create clearer screen rendition; in addition, pixel sharing technology can enhance the overall resolution of the display, producing superb high-quality images. Lighting products (including streetlights, project lamps, patio lights, T8, LED lights, down lights) use modular design that allows easy removal as well as unique cooling technology to rapidly and effectively reduce the heat generated by the optical module. Equipped with excellent power module, the lights’ conversion efficiency is up to 90%, and with the characteristics of a constant current output, reducing the long-term decay of LED. Other system products include LED car lighting systems, variable information sign board and LED traffic lights, etc.

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D. New products development

(A) Light emitting devices

a. High-power UV LED b.Infrared LED with waveband exceeding 1000nm

c. High-power Surface-emitting laser diode

(B) Sensor devices a.Develop photodiode detector products for

encoder applications b.Develop photodiode detector products for IR

band-pass c.Develop ambient light optotransistor

products d.Develop nonpolarized resistor products

e.Develop photodiode detector products for Mesa-type TVS

f.Develop planar-type rectifier diode products

g.Develop products for Pressure sensor h.Develop products for III-V based Schottky diode

(C) System products

Systems Display R&D Department

a.Develop MRT passenger information display system

b.Develop control system products for High resolution full-color

c.Develop display control system products for FHD d.Develop flexible module display control system

e.Import high refresh rate LED Driver

Systems Lighting R&D Department

a.High penetration glass screen full-color LED display screen development

b.High resolution full-color LED display screen development

c.Develop full-color display screen d.To develop 2K/4K LED Display control system

e.Develop mounted LED display module f.Special Purpose LED lighting development

g.Smart lighting control system

Systems General R&D Department

a.Develop sensor module

(D) LED packaging devices

a.Develop AlGaInP infrared/yellow light flip chip LED chips and package for automotive light applications and special purpose market

b.Develop packaging technology for UVC wavelength LED for applications in sterilization and biotechnology

c.Develop and build technology for a series of high-wattage light sources for automobiles

d.Develop high power multi-chip mixed light or white light products for primary use in stage lighting or high-wattage projector lamp

(2) Industry Overview:

A. Current status and future development: 2015 was a sluggish year for LED. Propped up by the policies of the Chinese government, China's companies have vigorously secured overseas mergers and acquisitions, and with big companies growing bigger, the profit margins of small and medium sized companies fell sharply. Faced with losses, many manufacturers are gradually withdrawing from the market. However, the red supply chain continued to threaten local businesses such that in recent years, local LED manufacturers have been cutting back on the proportion of backlighting and lighting products. To resolve the problem, one solution is to become the main player in future markets by giving up on price competition and instead seek technology transformation and cross-industry cooperation and niche applications such as automotive lighting and medical equipment.

44

DIGITIMES Research estimates that by 2016, the annual growth of global high luminance LED output value will be 3.4%, reaching US$ 12.82 billion. In terms of number, up to 245.2 billion light bulbs will be used in 2016, and annual growth rate will be 31.8%, of which the highest growth rate of up to 57.1% will come from lighting applications. In terms of LED usage distribution, the lighting applications rate for 2016 will reach up to 58.7%. The highest proportion of lighting application will be in LED bulbs, reaching up to 35.9%, followed by tube LED light source, reaching up to 34.7%.

B. Relationship with Up-, Middle- and Downstream Companies: The current LED supply chain is relatively excessively lengthy: from upstream raw materials supplying: single crystal wafer, epitaxial wafer to midstream electrode production, die cutting, die testing, the downstream die bonding, wire bonding to packaging, and finally into the application side. In recent years, competition in the LED industry is very intense, resulting in constant changes in the overall up, middle and down stream industrial chain. Particularly in the lighting market where demand fell short of expectation, the oversupply of LED packages has resulted in a slow growth in LED. Coupled with price competition among China's manufacturers, investment, joint venture, merger and acquisition, strategic alliance and other business patterns have gradually emerged in the overall LED industrial chain, forcing small and medium sized companies to eventually withdraw from the market. However, from a long-term perspective, this could stimulate the overall LED industrial chain into restoring the supply and demand balance.

C. Product trends: LED emits cold light, and the advantages of low electricity consumption, long lifetime, no need for warm-up, quick response time, small dimension, vibration resistant and suitable for mass production have made LED applicable to all kinds of electronic products. The development overview is shown below:

Backlight application In response to the demand of compact and space saving dimension, along with the advancing technology, the cold light and compact feature of LED have been utilized for the backlight applications for electronic products such as cell phone display panel, LCD TV, and NB display panel.

Lighting application In light of the environmental protection issues such as greenhouse effect and energy saving, the low electricity consumption and cold light features of LED have enabled the applications as street lights, traffic signals, car lights and household lighting.

Large-size display Due to the compact size, good plasticity, and full-color capability, the system-controlled large-size LED displays have been constantly applied to entertainment venues, shopping malls, and concerts.

Sensor product This kind of product is usually based on LED with invisible light, and the applications are mainly consumer products such as household appliance, communication devices, computers, remote controls, ear thermometers, rapid temperature measuring devices, and temperature sensors for car or household appliance.

D. Product competition: 2016 remains a difficult year for the LED industry.Faced with slim trend in cell phones, panel specifications will change, and along with maturing OLED technology, the defect-free rate and capacity of panels continue to improve to meet the demand of LED backlight market. However, due to factors such as greater wear and tear, weaker luminance and color performance, shorter life-span and higher acquisition cost of OLED light compared to traditional LED, the penetration rate of OLED will not achieve substantial growth in the short term, which is the only respite for the LED industry. However in the long run, OLED remains a threat to the LED panel market; on the other hand, the LED industry should seek solutions such as better technology and lower cost as solutions.

45

According to the LEDinside research on 2016 Global LED Lighting Market Trend, prices for alternative light source products have fallen sharply and profitability is low. Hence lighting manufacturers will begin to shift their focuses to professional lighting and hope that governments can introduce domestic demand policies, stimulate spending on public construction and develop new construction projects. If such is the case, then the potential growth in construction lighting, commercial lighting and building lighting will be considerable.

(3) Research and Development A. R&D expense of the most recent fiscal year up to the publication date of this annual report:

Year Total Expenses (NT$ thousands) 2015 282,029

2016(As of March 31) 77,263

B. Technologies and R&D achievements R&D and innovation have been the driving force behind everlasting growth of Optotech. There are R&D engineering units under each business division with major objectives including new product development, innovative improvement of existing products, and development of customer service oriented customized products. The technologies and R&D achievements of R&D engineering units in each division is shown below:

Optoelectronics Division (A) Organization

This unit is mainly in charge of the development, the characteristic improvement, process stability and the mass production of compound semiconductor LED materials and devices. Currently the organization is divided into several sectors based on product features such as epitaxial material development sector, R&D and specifications formulation of new devices and new processes sector, process parameter setting sector, process technology improvement and upgrading sector, process capability control sector and yield improvement sector for satisfying customers’ demands.

(B) Strategy (a) Continue to develop and invest in AlGaInP epitaxial. Using existing infrared products as

foundation, develop LED with long waveband greater than 1000nm. (b) Engage in strategic alliance with substrate material and epitaxial wafer suppliers in achieving

vertical integration and complementary for epitaxial wafer and chip production in anticipation of stable expansion market share.

(c) Continue to develop of infrared surface emitting laser to meet market demand for lighting, optical communication and sensor.

(d) To focus on patent deployment and alliance for breaking through LED patent dilemma in addition to continuously improving existing high power LED efficiency, so as to respond to the future demand in the high power LED market, in response to future market of high power LED.

(e) Expand market share for traditional LED and IR products. Aggressively win LED market orders. (f) Continue to cooperate with our R&D center and R&D units of silicon electronic departments and

system departments in the development of new and niche products. (g) To continue to cooperate with Nichia Corp and Hitachi Metals to expand the market. (h) Continue to deepen blue light flip-chip technology and advanced packaging technology as well as

the vertical integration of wafer level package. (i) Develop GaN UV-LED niche products.

(C) Performance and achievement (a) Stabilize quality standards of two element and three element products. Win new traditional two

element and three element LED orders from Japanese customers. Expand market share and continue to maintain number one for traditional LED production capacity.

(b) Adjust the ratio of high-end and low-end four-element LED products, and full wavelength product packages to enhance the net profit margin and market share.

46

(c) Complete development of new IR products required by customers in cooperation with customer’s new demand and expand IR new market and achieve continuous increase in market share. Currently the market share of IR chips are still number one in the application of CCD camera and opto-electronic coupling application. The shipment is already stable in Japanese market. We will continue to win more customers and orders subsequently.

(d) Through internal vertical integration, enhance the luminous efficiency of flip-chip products, strengthen product reliability and reduce cost to achieve the competitive advantage of high price–performance ratio. At the same time, enter the automotive lighting market lighting market and cooperate with material suppliers for international manufacturers to mass produce high wattage LED products.

Silicon Division: (A) Organization

Major duties are to assist the mass production of silicon electronic products and the development of new products. This unit will enhance competitiveness among peers and expand the scope of applications by improving product features and satisfying customers’ demand based on existing foundation.

(B) Strategy (a) Our current technology advantages are in the field of high voltage MOS manufacturing process,

high voltage transistor manufacturing process, optical technology of light sensor device, Schottky manufacturing process and MEMS manufacturing process. Light sensor devices with high voltage, high power and high sensitivity will be developed by integrating the aforementioned technologies.

(b) Based on our current capability of high voltage process, we will conduct technology exchange with or partners to enhance the quality and market share of our high voltage products.

(c) In response to the demand of consumer electronic products, comprehensive solution will be provided in conjunction with IC design house to meet different application demands.

(d) In response to the demand for LED lighting and backlighting, the Company has developed a semiconductor protection and sensing component.

(e) To have technological cooperation with foreign manufacturers, so as to combine advantages of both sides and develop competitive products.

(C) Performance and achievement (a) High voltage Rbe optotransistor: Completed development and in the process of client certification. (b) Visible light photodetector diode: In mass production and used in automotive market. (c) THB verification for 800V zero-crossing & non-zero-crossing photo thyristor: In mass production

and used in AC control components. (d) High-power (600V 1A) thyristor: Completed development and in the process of client certification. (e) N side up 80Vzener diode: Completed development and in the process of client certification.

Systems Division: (A) Organization

(a) The Systems Display R&D Department of Optotech plays the role of developer for large-size full color LED display panel with several sectors responsible for software, hardware, firmware, and mechanism design, respectively.

(b) The Systems Lighting R&D Department of Optotech plays the role of developer for lighting system, LED billboard, and car use headlight products.

(c) The Systems General R&D Department of Optotech plays the role of developer for whole new application products.

(B) Strategy (a) Insist on providing high-quality products and complete after-sales service. (b) Integration of the supply chain for the best interest of the Company group. (c) Prioritize technology in order to meet the engineering and product needs of high-end customers. (d) Implement materials and component verification to ensure product quality. (e) Combine global customer demand to develop future products. (f) Gradually expand production energy to establish Taiwan's manufacturing reputation.

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(C) Performance and achievement

(a).Landmark P20 display screen and lighting control system

(b).Hong Kong's Victoria Peak P6.4 display screen

(c).The Palais Garnier P8 display screen (d). SEIKO P6.4 Rental Type display screen

(e).Hasmore Dazhi Store P6.4 display screen (f).Passenger information display system in Taichung Metro carriages

(g).Passenger information display systems in Taichung Metro hall and platforms

(h).Exported special hospital lighting to Japan

(i). Exported freeway street lights to Indonesia

R&D Center (A) Organization

The Center is responsible for the evaluation and development of new products and technologies. Within the Center, there is one R&D Division responsible for the development of LED advanced packaging technology and related technologies.

(B) Strategy Photovoltaic autonomous material (epitaxy, chips) and competitive advanced packaging technology are integrated to provide customers with packaged products that are high in price–performance ratio. At the same time, lighting application products for business offices are integrated to achieve competitiveness in LED terminal application products.

(C) Performance and achievement

(a).Completed the development of packaging technology for LED white light chips and the development of technology for modular technology.

(b).Completed development of high power VCSEL IR waveband LED package and established mass production technology.

(c).Completed the development and verification for independent lens COB module manufacturing. ( W30*L30*T 3mm)

(d).Completed development of ceramic package for LED UV-A series and established mass production technology.

(e).Developed and established technology for white light pod chips.

(4) Long-term and Short-term Development

A. Short-term Development (A) With our sound and down-to-earth corporate culture, we have accumulated profound experience and

professionalism. Also, with our dedication to clients and our focus on the LED business, we have provided diversified products and customized services for our clients, and come up with resolution schemes exclusively for our respective clients.

(B) Our goal of strategic alliance with Nichia Corp. has been successfully achieved. In addition to developing a whole series of quaternary LED with Hitachi Metals, we have also cooperated with Nichia Corp to build a cooperation platform for the blue ray, in which OPTOTECH is responsible for producing epitaxial dies. Our obtaining of the material patented by Hitachi Metals enable us to produce LED epitaxial dies without worrying about infringement.

(C) We will increase production capacity of LED and silicon electronic products in response to market demand by bottleneck analysis and expansion of key production equipments. In light of the potential risk after production expansion, other than adopting selective approaches for hardware expansion, the observation on customer orders and global economy will be early warning signs for potential dangerous situations.

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B. Long-term Development (A) In order to pursue product innovation, technological sophistication, quality enhancement and cost

reduction, our has constantly devoted to the research and development of new products such as high-brightness chip, light emitting device product with high response speed, high frequency high power silicon electronics products, in the hope of further developing the market and enhancing our company’s overall competiveness.

(B) OPTOTECH has many LED international technology patents, and they all came from many years of professionalism and originality of our R&D crew. We have especially accumulated rich experience and fruition in die process technology and design of application products. Also, in response to the change in the world industrial trends, we have combined the aggressive corporate management concept and outstanding technological capacity to make every effort to promote the innovative, environmentally friendly and energy efficiency products.

2. Market and Sales Overview (1) Market Analysis

A. Sales (Service) Region: Our major products include LED Light emitting devices, Sensor devices and system products. The sales of 2015 are as follows:

Unit: NT$ thousands

Year Item

2015 Subtotal Total

Operating income from import of domestic region (i.e. Taiwan) 1,844,197 1,844,197

Operating income from export of domestic region (i.e. Taiwan)

Europe 176,732

America 588,450

Southeast Asia 2,505,977

Northeast Asia 434,599

Other areas (not reaching 10%) 80,585

Operating income from export 3,786,343

Net operating income 5,630,540

B. Market Share: LEDinside reported that in 2015, the global output value of the LED industry showed an unprecedented weakening, dropping to USD$14.325 billion and declining at an annual rate of 3%. This is mainly due to price competition among LED manufacturers, leading to an average price drop of up to 40% or more in some mainstream LED specifications. Strong appreciation of the US dollars also resulted in decreased revenue for many LED manufacturers when converting into US dollars. Calculating with product revenues of the Company’s light emitting components, packaging products and system products in 2015 of NT$ 5,613 million, the Company’s market share is about 1.19%.

C. Market Analysis of Major Product Categories: Expected LED trends: (A) With market price competition, the red supply chain has emerged sharply, small manufacturers are

predicted to exit the market and the overall LED market supply and demand re-balanced. (B) Market demand for niche applications such as automobile lighting, medical treatment and smart home

appliances is high, and is expected to grow significantly in 2016. (C) The lighting market has a policy-based demand in the emerging market where demand for LED

lighting is expected due to a large number of deprecated public facilities. However, due to price competition, profit margin for manufacturers is limited.

(D) With maturing OLED technology, demand for LED panel will be affected.

49

D. Competitive niche LED chips are our core business. With the core business, we have built our position today, earned trust and respect in the industry and gained a place in the local and foreign market. Our advantages are as below: (A) Owning a vertical integration supply chain

By having the advantage of vertical integration of our supply chain, we are in the position to establish a strong strategic alliance with our suppliers, buyers or customers in the aspects covering material sources and chip and LED related product lines. We have made every effort to promote stable growth. On the other hand, we and our cooperation partners all consider good faith and customer prioritization the core of our business conviction.

(B) Put stress on patent technology research and development and yield rate improvement We have put focus on technology research and development and accumulation of experiences and strength in order to overcome the risk resulting from rapid change of the market. Our R&D crew are constituted by the professionals integrated across the board, so professionals in different fields can be gathered to research and develop new products and new technologies. As a result of our research and development, we have more than 100 patents in the world. Furthermore, with our product strategy to broaden and strengthen our cooperation with Hitachi Metals and Nichia Corp., we hope to overcome patent related problems.

(C) Equipped with strong and extraordinarily flexible capacity to customize our products Our products are all customer oriented. Our professional crew have specifically tailored the resolution scheme for our respective clients, which enable us to respond to extensive requirements and produce the products which can meet the needs of varying projects. With OPTOTECH’s customizing capacity, we can always actualize our client’s design originality, and that is why we are popular for cooperation among dealers, agents and even proprietors throughout the world.

E. Favorable and unfavorable factors and countermeasures for development outlook (A) Favorable factors

(a) In the global market where competition is keen, how to use your competition edge to have a presence in the market turns out to be the challenge every enterprise would face. To look into the future, we will make the most of our operating advantages including integration of the following three major categories of products: light emitting components, sensor components and system products, which are not available to our competitors, to create profuse operating income.

(b) To integrate “vertical alliance” and “horizontal alliance”, give aggressive strategic deployment and provide customers with most efficient services: With our professional teamwork, we use our rich talent resources and profound experience to keep pursuing innovation.

(c) As a member of the LED energy efficiency industry, we have devoted our efforts to develop LED energy efficiency products so as to counter the problem of global warming, actualize environmental protection and do our share of corporate social responsibility.

(B) Unfavorable factors (a) The risk of patent infringement

Currently there are four major high brightness LED makers in the world such as Nichia, Samsung LED, OSRAM, Philips, and LG Innotek, and together they occupy 75% of global market share. Almost all patents associated with LED technology are in the hands of these major players, and most of them are not open for licensing. Therefore Taiwanese companies have been facing the risk of patent infringement. Corresponding measures: Our strong R&D team has been actively developing products and manufacturing processes different from other companies and applying for all kinds of patent with the objectives of mutual licensing and collaboration. We will also expand our collaboration with Nichia Chemical in order to obtain patented epitaxial materials.

50

(b) With China’s enterprises on the rise, the price war is ignited The scale of China’s local market is greater and greater, so more and more Chinese enterprises have jumped on the bandwagon. Our LED lighting market is still threatened by China’s seizure of the market share with low-price competition. Corresponding measures: In order to initiate new markets and expand production capacity, we have established Suzhou plant and Ningbo plant, in an attempt to use the low development cost and product innovation capacity to get into the market. In so doing, we will be able to serve the nearby markets and OPTOTECH will turn out to be maturer and stronger.

(2) Key Performance Indicator (KPI): Product yield of our optoelectronic products is 91.00% Product yield of our silicon electronic products is 88.70%

(3) The Production Procedures of Main Products

A. Important applications

Product Name Important applications

Light Emitting Device

LED chip

Full color LED, digital display, Dot-Matrix display, light source display for fax machine, indicating devices for consumer products such as household appliance, communication and computers, indoor lighting, car lights and tail lights, display backlight and lighting products

IR emitting diode chip Remote control device for infrared LED, photo-coupler, photo-replay, and infrared lighting applications

Sensor Device

Photodiode chip Phototransistor chip Liquid crystal light valve FET chip

Photodiode, phototransistor device, devices for remote control reception of consumer products such as home appliance, communication, computers and cars. AC motor driving, SSR (Solid State Relay), Dimming control. Condenser microphone.

High power electric device Devices for opto-electronic solid-state relay and power supply

System Product

LED Information Display Road condition display, indoor display, outdoor display

LED lighting system and LED head light

Indoor and outdoor lighting system, all kinds of head lights

51

B. Manufacturing Process

(A) Light emitting device (LED chip)

○Epitaxial chip growth

|

○Grinding

|

○Vapor deposition

|

○Photolithography

|

○Etching

|

○Sintering

|

○Cutting

|

□Testing

|

□Visual inspection

|

Stocking

(B) Sensor device (Phototransistor chip)

○Silicon wafer

│

○Oxidation

│

○Base photolithography

│

○Diffusing

│

○Emitter photolithography

│

○Diffusion

│

○Photolithography

│

○Metal layer vapor deposition

│

○Photolithography

│

○Protection laypr deposition

│

○Photolithography

│

○Grinding

│

○Back metal deposition

│

□Testing

│

□Visual inspection

│

▽Stocking

52

(C) System product (LED Display) ○Central

control panel

○Address control panel

○50W Power supply

○Control box chassis

○LED ○Display circuit board

○ASIC chip ○Other electric Components

○Driver circuit board

○300W Power supply

○Cables ○Body materials

○Assembly of control box

○Brightness classification

○Point testing

○Assembly of main body

□Testing of control box

○Assembly of display unit

○Packaging ○Wiring

□Testing of display unit

○Classificaton

○Power configuration

○Assembly of driving unit

□Testing of driving unit

○Assembly of display module

□Testing of display module

○Assembly of display system

□Testing of display system

○Assembly of control system

□Reliability test

▽Stocking

53

(4) Supply Status of Main Materials

Product Group Major Raw Materials Source of Supply Supply

Situation

Light emitting devices

GaAs, GaAlAs, GaP, GaAsP, AlInGaN wafers Japan, Korea, Taiwan,China

Sufficient

Sensor devices Silicon wafer Germany, Japan,

Taiwan Sufficient

System product Chip, control IC, circuit board Taiwan Sufficient

(5) Major Suppliers and Clients

A. Major Clients to which products have been sold: (A) Major Clients in the Last Two Calendar Years

Unit: NT$ thousands

2014 2015 2016 (As of March 31)

Item

Company Name

Amount Percent Relation

with Issuer

CompanyName

Amount PercentRelation

with Issuer

Company Name


with Issuer

1 Client A 623,840 9.87 - Client A 700,865 12.45 - Client A 162,379 11.97 -

2 Client B - - - Client B 112,568 2.00 - Client B 148,513 10.95 -

3 Others 5,693,543 90.13 - Others 4,817,107 85.55 - Others 1,045,318 77.08 -

Net Sale 6,317,383 100.00 Net Sale 5,630,540 100.00 Net Sale 1,356,210 100.00

(B) Explanation of reasons of any change, increase or decrease: There is no obvious difference between the ratio of sale from major clients of 2015 and that of 2014.

B. Major Suppliers to which products have been purchased: (A) Major Suppliers in the Last Two Calendar Years

Unit: NT$ thousands

2014 2015 2016(As of March 31)

Item

Company Name

Amount Percent Relation

with Issuer

CompanyName


with Issuer

Company Name


with Issuer

1 Supplier A 828,864 24.88

OPT

OT

EC

H’s

di

rect

or

Supplier A 476,784 17.13

OPT

OT

EC

H’s

di

rect

or

Supplier A 87,473 13.01

OPT

OT

EC

H’s

di

rect

or

2 Supplier B 393,512 11.81 - Supplier B 320,817 11.53 - Supplier B 74,998 11.16 -

3 Others 2,108,543 63.31 - Others 1,985,419 71.34 - Others 509,714 75.83 -

Net

purchase 3,330,919 100.00

Net purchase

2,783,020 100.00 Net purchase

672,185 100.00

(B) Explanation of reasons of any change, increase or decrease: There is no obvious difference between the ratio of purchase from major suppliers of 2015 and that of 2014.

54

(6) Production in the Last Two Years Unit: NT$ thousands/Thousand pieces

Year Output

2014 2015

Major Products Capacity Quantity Amount Capacity Quantity Amount


34,000,000 31,253,672 1,858,105 31,000,000 21,583,337 1,440,759

Sensor devices 23,500,000 23,422,025 1,335,449 28,800,000 24,121,172 1,039,767

System product - - 738,439 - - 705,582 Packaging Products

265,525 131,474 210,947 312,135 143,802 206,381

Other products - - - - - -

Total 57,765,525 54,807,171 4,142,940 60,112,135 45,848,311 3,392,489

Note: System products vary, with different types, so there is no meaning to compare the quantity.

(7) Shipments and Sales in the Last Two Years Unit: NT$ thousands/Thousand pieces

Year Shipments & Sales

2014 2015

Local Export Local Export

Major Products

Quantity Amount Quantity Amount Quantity Amount Quantity Amount


9,013,704 992,942 23,856,414 1,813,029 6,756,368 700,776 17,174,169 1,472,366

Sensor devices

10,869,534 958,516 11,962,239 1,125,064 12,174,780 837,727 11,838,607 1,101,048

System product

- 195,932 - 890,842 - 249,563 - 964,538

Packaging Products

24,976 38,081 111,133 252,383 44,188 50,593 78,507 236,605

Other products

38 34,244 16 16,350 3 5,538 343 11,786

Total 19,908,252 2,219,715 35,929,802 4,097,668 18,975,339 1,844,197 29,091,626 3,786,343

Note: System products vary, with different types of compounds to be sold, so there is no meaning to compare the quantity.

3. Human Resources

Mar. 31, 2016

Year 2014 2015 As of Mar. 31, 2016

Number of Employees

Management personnel

551 353 348

Technology personnel

334 328 321

Direct personnel 868 983 985

Total 1,753 1,664 1,654

Average Age 35.39 36.05 36.06

Average Years of Service 6.74 8.28 7.69

Education

Ph.D. 0.17 0.18 0.19

Masters 4.80 5.40 5.38

Bachelor’s Degree 52.08 51.86 50.72

Senior High School 30.01 30.70 31.07 Below Senior High School

12.95 11.86 12.64

55

4. Environmental Protection Expenditure: The loss or penalty caused by environmental pollution during the latest year and up to the printing date of this annual report: None.

5. Labor Relations (1) A variety of employee welfare measures, studies, training and retirement system taken by the

company and the implementation status, and the progress made for agreements with employees and protection of employee rights and interests.

A. Employee welfare measures and the implementation status: (A) OPTOTECH began production in July 1984, and, based on the Rules Governing Organization of

Employees’ Welfare Committee decreed by the Ministry of the Interior, OPTOTECH set up its employees’ welfare committee on August 7, 1984 to carry out various welfare matters. Our current welfare measures, such as local and foreign travel activities, annual physical examinations, birthday gift coupons, presents given for festivals, wedding, funeral and childbirth subsidies and employee counseling, have all been literally executed by our employees’ welfare committee in accordance with our status and employees’ demands.

(B) Other than the labor insurance and national health insurance, OPTOTECH has also purchased group life insurance, casualty insurance, serious disease and hospitalization insurance for its employees at its expense. At the same time, OPTOTECH has also assisted the spouses, children and parents of its employees in purchasing the medical insurance, in which t OPTOTECH shares half of the premium.

B. Employee studies and training: OPTOTECH has gone to great lengths to cultivate its employees. Based on the perspectives on lifetime learning and career development education training, OPTOTECH has made every effort to elevate its labor quality and nurture its future operating management talents, so as to shape a good corporate culture and generate better performance. In order to cultivate the talents required by OPTOTECH for its operating development, OPTOTECH has planned a well-rounded education training system and laid down an annual education training plan according to OPTOTECH’s annual business status, so as to provide its employees with a good learning environment. Also, by holding a variety of training through the talent cultivation system, OPTOTECH has strengthened its employees’ talent development and professional expertise. On the other hand, OPTOTECH has also encouraged its employees to give self studies. (A) Our training comes in on-the-job training and out-of-the-job training, whereas its training system is

divided into management, professionalism and self-development training and joint training, etc. After enrolling in OPTOTECH, the new entrants will receive the pre-job training and on-the-job training. At the same time, according to the annual training requirement survey, OPTOTECH will map out an annual training plan for implementation, and give an evaluation of the implementation efficiency, so, by using job functions along with job improvement, employees’ competence will be reinforced and our operating performance and competition will therefore be further enhenced.

(B) OPTOTECH’s education training system is shown below:

Management training

High-ranking director training

Medium level director training

General management training Basic director training

Professional training Advanced skill training

Basic skill training

Self- Development training

Common training

Languages, computer and etc. Policy and mission of the Company

Quality control training, new employees’ training, security and health training and etc.

General employee Supervisor / Vice ManagerManager / Vice Manager

High-ranking management such as Deputy Assistant General Manager,

Vice President (included)

56

(C) OPTOTECH 2015 education training courses came in five major categories. A total of 4,840 employees participated in the training courses, which included the ones held by OPTOTECH, various competent authorities, the CPA firm and the industry. The following are the names of the training courses and the training execution status:

Program name Number of classes Number of total

people Total hours Total fee

General knowledge 153 1,535 3,500 5,350

Management 17 311 1,600 395,300

Computer 21 132 540 0Professional

program 138 913 2,792 274,519

Environmental safety and health

157 1,949 6,277 342,670

Total 486 4,840 14,709 1,017,839

C. Implementation status of the retirement system: OPTOTECH set up a supervisory committee of workers’ retirement reserve on November 19, 1986 to supervise labor retirement reserve related contribution and payment. In conjunction with the new system of the Labor Standards Act enacted on July 1, 2005, our old employees are allowed to have the optional choice while the new entrants shall follow the new system. In addition, OPTOTECH has also instituted its own retirement system, which is better than what is regulated in the Labor Standards Act, and reported it to the competent authorities for approval and future reference. Also, in order to encourage its employees to contribute their professionalism and provide good post-retirement life for its employees, OPTOTECH has allowed the employees eligible for retirement to apply for extension of their service period when they are willing to retain themselves in OPTOTECH and OPTOTECH considers the retention necessary.

D. Labor-management agreements:None.

E. Employee behavior and ethics rules: OPTOTECH uses the exclusive stamp of “service discipline” included in its working rules to discipline its employees’ behavior and ethics. The following articles are the excerpt from the working rules of the industry attendants: Chapter 3 Service discipline Article 18: Employees shall be devoted to their work, follow OPTOTECH’s regulations and obey reasonable command from respective ranks of superiors. They are not allowed to be delinquent and give feign compliance. On the other hand, all ranks of superiors shall guide the employees in an obliging and earnest manner. - Article 19:Inside OPTOTECH, employees shall work hard, well protect public property, reduce wear and

tear, enhance quality and increase production. Outside the company, they shall keep trade or task secrets. - Article 20:Employees shall directly report to their immediate superior. Bypassing immediate superior to

report is not allowed. However, it is not limited to the emergency or special situation. - Article 21:After enrollment and proper task assignment, employees are not allowed to use any excuse to

request changes. - Article 22:Employees are not allowed to leave their posts without permission during the working hours. - Article 23:Without permission, employees are not allowed to bring their friends or relatives into the

working site. - Article 24:Employees are not allowed to bring contraband goods or the ones irrelevant to production into

the working site. - Article 25:Without permission, employees are not allowed to bring public property out of the factory. In

the case that the public property is required to be brought out of the factory, the employee shall process the required procedure before bringing it out of the factory.

57

- Article 26:Employees shall not take advantage of their authority to benefit themselves or others. - Article 27:Employees are not allowed to engage in the business same as or similar to OPTOTECH’s. - Article 28:Employees shall not have the violating behavior, such as receiving entertainment treats,

presents, kickbacks or other illegal benefits. - Article 29:Employees shall abide by labor safety and health laws and regulations and OPTOTECH’s

regulations, protect the working site, keep the environment clean and safe, and prevent occurrence of theft, fires or other natural disasters. - Article 30:Employees shall wear work uniforms along with I.D. badges at work as regulated. The original

work uniform and I.D. badge shall be returned to OPTOTECH when they are changed or re-issued or the employee leaves his or her job. - Article 31:Employees are not allowed to discretionarily read the documents, correspondence and account

books not in their charge. They shall also not to present the documents in their charge to the persons irrelevant to the task. - Article 32:When getting off work, employees shall tidy away all the used tools before leaving the working

site. In case of working on shift, the employees shall clearly hand over the work to the next shift employees before departing the working site. - Article 33:Except for the errand-running leave, employees shall follow the regulated working time to work

and leave on time, and clock in and out accordingly.

F. Measures taken to protect the working environment and employees’ personal safety: (A) Environment safety and health management meeting company management system policy:

(a) Well-rounded quality together with sustainable ecology concept Optotech has placed a high premium on the well-rounded quality for its products, environment and safety and health issues. In addition to continuously improving the efficiency of its process and operation activities, it has also banned or cut down on environmentally hazardous substances. As a whole, Optotech has been devoted to fulfilling energy efficiency and waste reduction as an enterprise citizen, in order to create an environmentally friendly living space.

(b) Present management efficiency through self-discipline By using internal education training and communication, Opotech has made every effort with high standard self-discipline to enhance its employees’ perception of product quality, prohibition from use of environmentally hazardous substances, and environmental safety and health. With education and fulfillment of product and environmental safety and health related laws and regulations, Optotech has come a long way to produce the products which even surpass customers’ expectations. Moreover, Optotech has even showcased its overall management efficiency by presenting its internal safety and unpolluted environment.

(B) Concrete safety and health management measures (a) Hazard appraisal, risk evaluation and countermeasures

Each department shall determine unacceptable risks, acceptable high risks, and items not meeting regulations, etc. after distinguishing risk assessment and prepare, stipulate management solutions or control risk measure to prevent occurrence of accidents. Subsequently carry out progress and report to environment safety committee for follow up in order to protect employee’s health and OPTOTECH’s assets.

(b) Health management In accordance with the “Labor Health Protection Regulations”, OPTOTECH has provided health examinations for the employees involved in the general operation and special hazardous operation respectively. For the working personnel having to touch ionizing radiation, organic solvents and specific chemical substances, OPTOTECH has provided with many items of the special health examination. The results of the special health examination will be graded for management. Other than the items required to be included in the health examination as regulated in the statutory laws and regulations, OPTOTECH has also additionally included other items, such as cancer detection

58

and abdominal echo, etc, in the annual health examination. It shows that what OPTOTECH has provided for its employees’ health is better than the items regulated in laws and regulations. To give more care for its employees’ health, OPTOTECH has also cooperated with the hospital to provide its employees with free services of health consultation and women and children health and nutrition consultation, so as to develop its employees’ health care habit.

(c) Operation environment testing In accordance with the “Regulations Governing Implementation of Labor Operation Environment Testing”, OPTOTECH has conducted chemical factor and physical factor operation environment testing. The chemical factors include organic solvents, specific chemical substances, and heavy metal ,whereas the physical factor refers to noise, for which OPTOTECH has entrusted a qualified operation environment testing agency to test and inspect if the noise is within the standard regulated in statutory laws and regulations. In the case that irregularity is found, We will proceed with project management and give remediation, so as to protect employees’ health.

(d) Hazard prevention education training To have employees better understand the danger resulting from hazardous factors in various kinds of operations and the prevention measures, OPTOTECH has periodically or non-periodically held hazard prevention education training. The education training teaches employees how to prevent hazard other than wearing required protection devices, and reinforce their occupational safety and health professional knowledge. In so doing, the risk of occupational disasters in the working environment will be greatly reduced.

(e) Contractor management As stipulated in labor safety and health related laws and regulations, the undertaking construction unit shall process safety and health operation control, in which, in addition to the hazard notification given by the contractor on the site and education training, general work permission and special operation shall also be controlled. Furthermore, when working on the high risk operation, the safety and health personnel shall be designated to oversee and ensure safety of the construction operation all the way through. Also, the task safety protection schedule shall be submitted, examined and approved before going into operation. In order to fulfill contractor’s safety and health supervision, OPTOTECH has laid down related operation controls and promoted safety and health related experiences for all the units and employees to refer to accordingly.

(f) Automatic examination In accordance with the “Labor Safety and Health Organizational Management and Automatic Examination Regulations”, OPTOTECH has laid down an annually automatic examination schedule for routine examinations of the hazardous machines and equipment in the factory zone, in which other than the items and frequency as regulated in laws and regulations, other examination items required by respective units for hazardous prevention have been added and a surveillance and audit mechanism has been executed, so as to prevent accidents from happening.

(g) Safety and health round checks In order to carry out the safety and health management system and establish the mechanism for the safety and health personnel to make round checks of the factory zone and give mobile checks of the operation status in the factory zone so as to effectively prevent accidents from happening or reduce the frequency of accident occurrence, in addition to monitoring the surrounding operation environment, the safety and health personnel shall come to assist in emergency rescue for the accidents occurring in the factory zone, so property loss and personnel casualties can be reduced.

(h) Radiation protection management To ensure the actual execution of routine detection and inspection work, avoid anomaly of the equipment and resulting in radiation damage of operating personnel, workers are required to wear radiation detection badges during work and attend radiation operation medical checks in order to specifically grasp operating personnel’s health condition.

59

G. Current labor relations Based on the conviction of taking good care of its employees, OPTOTECH has provided its employees with various welfare benefits, retirement system and management system regulated in the Labor Standards Act or better than what are regulated the Act. Also, OPTOTECH has mostly handled its labor issues by mutual coordination and communication, so its employees have high sense of coherence to OPTOTECH, its labor relationship is based on mutual respect and understanding, and there is no labor dispute.

(2) Loss resulting from labor disputes in the latest year and before the annual report was published, and disclosure of estimated losses for the current and future periods and the countermeasures to be taken:

There had been no labor dispute occurring to OPTOTECH in the latest year and before the annual report was published.

6. Important Contracts Mar. 31, 2016

Agreement Counterparty Period Main contents Restrictions

Lease of land Science Park

Administration

2010.11.25 ~

2029.12.31 Rental of land of Ke-Guan Sec.

Limited to the usfor the target business

Lease of land Science Park

Administration

1997.06.16 ~

2017.06.15 Rental of land of the 3rd phase of the Park

Limited to the use for the target business

60

VI、 Financial Information 1. Five-Year Financial Summary

(1) Condensed Balance Sheet -IFRSs

A. Condensed Balance Sheet (Consolidated)- IFRSs Unit: NT$ thousands

Year Item

Four-Year Financial Summary (Note1) Financial data as of

Mar. 31, 2016(Note2)

2012 2013 2014 2015

Current assets 6,272,497 7,038,371 7,402,548 7,384,082 7,575,060 Property, Plant and Equipment 3,789,902 3,601,183 3,398,412 3,146,759 3,061,975 Intangible assets 11,648 13,498 12,930 9,932 9,232 Other assets 1,395,411 1,328,081 1,331,993 1,232,674 1,244,769 Total assets 11,469,458 11,981,133 12,145,883 11,773,447 11,891,036 Current liabilities

Before distribution 3,220,433 2,798,072 2,963,709 2,732,491 2,753,790 After distribution 3,465,981 3,125,469 3,372,956 - -

Non-current liabilities 1,230,406 1,922,766 1,616,066 1,325,408 1,285,602 Total liabilities


Equity attributable to shareholders of the parent

7,015,085 7,256,768 7,562,554 7,711,998 7,848,091

Capital stock 5,456,621 5,456,621 5,456,621 5,456,621 5,456,621 Capital surplus 610,447 624,100 640,826 641,656 641,656 Retained earnings

Before distribution 1,031,380 1,203,440 1,434,986 1,612,768 1,728,860 After distribution 785,832 876,043 1,025,739 - -

Other equity interest (56,664) (694) 56,820 27,652 47,653 Treasury stock (26,699) (26,699) (26,699) (26,699) (26,699) Non-controlling interest 3,534 3,527 3,554 3,550 3,553 Total equity


Note1:The financial data of latest 4 years have been audited and certified by CPAs. Note2:The financial data of the 1st quarter of 2016 have been approved by CPAs.

B. Condensed Balance Sheet (Unconsolidated) - IFRSs Unit: NT$ thousands

Year Item

Four-Year Financial Summary (Note)

2012 2013 2014 2015

Current assets 5,576,697 6,303,350 6,731,584 6,460,765 Property, plant and equipment 3,176,684 2,925,116 2,814,558 2,854,442 Intangible assets 10,408 12,443 12,048 9,333 Other assets 2,245,593 2,166,371 2,004,246 1,875,637 Total assets 11,009,382 11,407,280 11,562,436 11,200,177 Current liabilities

Before distribution 2,787,838 2,243,957 2,396,306 2,172,356 After distribution 3,033,386 2,571,354 2,805,553 -

Non-current liabilities 1,206,459 1,906,555 1,603,576 1,315,823 Total liabilities


Capital 5,456,621 5,456,621 5,456,621 5,456,621 Capital reserves 610,447 624,100 640,826 641,656 Retained earnings

Before distribution 1,031,380 1,203,440 1,434,986 1,612,768 After distribution 785,832 876,043 1,025,739 -

Other Equity Adjustments (56,664) (694) 56,820 27,652 Treasury stocks (26,699) (26,699) (26,699) (26,699) Total equity


Note:The financial data of latest 4 years have been audited and certified by CPAs.

61

(2) Condensed Balance Sheet –ROC GAAP

A. Condensed Balance Sheet (Consolidated) –ROC GAAP Unit: NT$ thousands

YearItem

Two -Year Financial Summary (Note)

2011 2012 Current assets 6,943,750 6,314,549 Funds and investments 899,527 906,921 Property, plant and equipment 3,762,529 3,746,919 Intangible assets 78,271 75,275 Other assets 406,093 378,280 Total assets 12,090,170 11,421,944

Current liabilities Before distribution 3,585,129 3,199,345 After distribution 3,914,532 3,444,893

Long-term liabilities 1,167,590 849,605 Other liabilities 163,217 251,775

Total liabilities Before distribution 4,915,936 4,300,725 After distribution 5,245,339 4,546,273

Capital 5,481,881 5,456,621 Capital reserves 677,539 716,671

Retained earnings Before distribution 1,088,283 1,093,988 After distribution 758,880 848,440

Unrealized gain or loss on available-for-sale financial assets (40,058) (27,534) Cumulative translation adjustments 67,992 38,836 Treasury stocks (26,699) (26,699) Unrecognized pension cost (78,296) (134,198) Minority interests 3,592 3,534

Total shareholders’ equity Before distribution 7,174,234 7,121,219 After distribution 6,844,831 6,875,671


B. Condensed Balance Sheet (Unconsolidated) –ROC GAAP Unit: NT$ thousands

Year Item


2011 2012 Current assets 6,021,408 5,618,749 Funds and investments 1,939,349 1,839,304 Property, plant and equipment 3,256,946 3,133,701 Intangible assets 1,964 1,745 Other assets 382,164 365,593 Total assets 11,601,831 10,959,092

Current liabilities Before distribution 3,104,233 2,767,824 After distribution 3,433,636 3,013,372

Long-term liabilities 1,167,590 849,605 Other liabilities 159,366 223,978

Total liabilities Before distribution 4,431,189 3,841,407 After distribution 4,760,592 4,086,955

Capital 5,481,881 5,456,621 Capital reserves 677,539 716,671

Retained earnings Before distribution 1,088,283 1,093,988 After distribution 758,880 848,440

Unrealized gain or loss on available-for-sale financial assets (40,058) (27,534) Cumulative translation adjustments 67,992 38,836 Unrecognized pension cost (78,296) (134,198)

Total shareholders’ equity Before distribution 7,170,642 7,117,685 After distribution 6,841,239 6,872,137


62

(3) Condensed Statement of Comprehensive Income -IFRSs

A. Condensed Statement of Comperehensive Income (Consolidated) -IFRSs Unit: NT$ thousands

Year Item

Four-Year Financial Summary (Note1) Financial data as of

Mar. 31, 2016(Note2)

2012 2013 2014 2015

Operating revenue 6,844,325 6,391,594 6,317,383 5,630,540 1,356,210

Gross profit 1,278,316 1,409,113 1,671,922 1,519,536 400,176

Income from operations 407,548 487,047 746,399 565,554 155,351

Non-operating income and expenses 15,737 31,155 (78,649) 143,722 (14,372)

Income before tax 423,285 518,202 667,750 709,276 140,979

Net income (Loss) 341,100 420,047 561,691 573,373 116,095

Other comprehensive income (income after tax)

(65,369) 53,524 67,439 (15,516) 20,001

Total comprehensive income 275,741 473,571 629,130 557,857 136,096

Net income attributable to shareholders of the parent

341,167 420,061 561,682 573,375 116,092

Net income attributable to non-controlling interest

(57) (14) 9 (2) 3

Comprehensive income attributable to Shareholders of the parent

275,799 473,578 629,119 557,861 136,093

Comprehensive income attributable to non -controlling interest

(58) (7) 11 (4) 3

Earnings per share 0.63 0.77 1.03 1.05 0.21

Note1:The financial data have been audited and certified by CPAs. Note2:The financial data of the 1st quarter of 2016 have been approved by CPAs.

B. Condensed Statement of Comperehensive Income (Unconsolidated) -IFRSs Unit: NT$ thousands

Year

Item

Four-Year Financial Summary (Note)

2012 2013 2014 2015

Operating revenue 6,586,467 6,113,156 5,986,572 5,289,803

Gross profit 1,259,566 1,384,592 1,633,905 1,459,119

Income from operations 488,306 556,790 847,120 638,056

Non-operating income and expenses (77,796) (30,750) (179,451) 67,964

Income before tax 410,510 526,040 667,669 706,020

Net income (Loss) 341,167 420,061 561,682 573,375

Other comprehensive income (income after tax)

(65,368) 53,517 67,437 (15,514)

Total comprehensive income 275,799 473,578 629,119 557,861

Earnings per share 0.63 0.77 1.03 1.05

Note:The financial data have been audited and certified by CPAs.

63

(4) Condensed Statement of Comprehensive Income – ROC GAAP

A. Condensed Statement of Income (Consolidated) – ROC GAAP Unit: NT$ thousands

Year Item


2011 2012

Operating revenue 7,343,116 6,844,325

Gross profit 1,554,629 1,278,316

Income from operations 617,496 401,358

Non-operating income 173,451 103,897

Non-operating expenses 257,792 88,199

Income before tax 553,155 417,056

Income from operations of continued segments - after tax 453,402 335,987

Income from discontinued operations - -

Extraordinary gain or loss - -

Cumulative effect of accounting principle changes - -

Net income 453,402 335,987

Net income attributable to shareholders of the parent 453,423 336,044

Net income attributable to Minority interests (21) (57)

Earnings per share 0.83 0.62

Note:The financial data have been audited and certified by CPAs.

B. Condensed Statement of Income (Unconsolidated) – ROC GAAP Unit: NT$ thousands

Year Item


2011 2011

Operating revenue 7,062,718 6,586,467

Gross profit 1,482,389 1,259,423

Income from operations 674,614 481,842

Non-operating income 65,669 40,128

Non-operating expenses 210,466 117,689

Income before tax 529,817 404,281

Income from operations of continued segments - after tax 453,423 336,044

Income from discontinued operations - -

Extraordinary gain or loss - -

Cumulative effect of accounting principle changes - -

Net income 453,423 336,044

Earnings per share 0.83 0.62Note:The financial data have been audited and certified by CPAs.

64

(5) Auditors’ Opinions from 2011 to 2015

Year CPA’s Name Auditing Opinion Remark

2011 Charles Lai,

Wilson Wang Modified unqualified

opinions

2012 Charles Lai,

Wilson Wang Unqualified opinions

2013 Philine Lee,


For the needs of the adjustment of internal operation, the auditing CPAs have been changed to the CPAs Philine Lee and Wilson Wang.

2014 Philine Lee,


2015 Philine Lee,


2. Five-Year Financial Analysis

(1) Consolidated Financial Analysis – Based on IFRS

A. Financial Analysis (Consolidated) –IFRS

Year

Item

Financial analysis in the past four years Financial dataas of Mar. 31,

2016 2012 2013 2014 2015

Financial structure (%)

Debt Ratio 38.81 39.40 37.71 34.47 33.97Ratio of long-term capital to property, plant and equipment

207.61 244.30 270.19 287.31 298.41

Solvency (%)

Current ratio 194.77 251.54 249.77 270.23 275.08

Quick ratio 154.99 207.19 207.96 225.46 227.4

Interest earned ratio (times) 10.07 11.74 12.78 16.38 14.65

Operating performance

Accounts receivable turnover (times) 3.50 3.23 3.42 3.35 3.46

Average collection period 104 113 107 109 105

Inventory turnover (times) 4.16 4.01 3.82 3.48 3.3

Accounts payable turnover (times) 3.87 3.61 3.86 3.99 4.43

Average days in sales 88 91 96 105 111Property, plant and equipment turnover (times)

1.80 1.73 1.81 1.72 1.75

Total assets turnover (times) 0.58 0.55 0.52 0.47 0.46

Profitability

Return on total assets (%) 3.22 3.92 5.05 5.11 4.21

Return on stockholders' equity (%) 4.85 5.88 7.58 7.5 5.97

Pre-tax income to paid-in capital (%) 7.76 9.50 12.24 13.00 2.58

Profit ratio (%) 4.98 6.57 8.89 10.18 8.56

Earnings per share (NT$) 0.63 0.77 1.03 1.05 0.21

Cash flow

Cash flow ratio (%) 36.38 22.17 36.06 31.61 17.92

Cash flow adequacy ratio (%) 124.31 139.03 123.16 113.34 140.66

Cash reinvestment ratio (%) 5.46 2.25 4.33 2.85 3.08

Leverage Operating leverage 3.25 2.92 1.79 2.09 2.06

Financial leverage 1.13 1.11 1.08 1.09 1.07

Analysis of financial ratio change in the last two years： 1. Interest earned ratio (times):Mainly due to increase of profit after tax and decrease of interest expenses in this

fiscal year. 2. Cash reinvestment ratio:Mainly due to decrease of cashflows form investing activities in this fiscal year.

Note 1:The financial data of latest 4 years have been audited and certified by CPAs.

Note 2:The financial data of the 1st quarter of 2016 were calculated based on the financial statements audited by CPAs.

65

B. Financial Analysis (Unconsolidated) –IFRS Year

Item

Financial analysis in the past four years

2012 2013 2014 2015


Debt Ratio 36.28 36.38 34.59 31.14

Ratio of long-term capital to property, plant and equipment

247.58 300.64 312.62 316.27

Solvency (%)

Current ratio 200.04 280.90 280.92 297.41

Quick ratio 157.97 230.94 232.36 243.17

Interest earned ratio (times) 15.24 17.76 18.49 26.20

Operating performance

Accounts receivable turnover (times) 3.52 3.28 3.48 3.35

Average collection period 104 111 105 109

Inventory turnover (times) 4.44 4.26 3.86 3.39

Accounts payable turnover (times) 3.82 3.58 3.79 3.89

Average days in sales 82 86 95 108

Property, plant and equipment turnover (times)

2.03 2.00 2.09 1.87

Total assets turnover (times) 0.58 0.55 0.52 0.46

Profitability

Return on total assets (%) 3.22 3.98 5.17 5.24

Return on stockholders' equity (%) 4.85 5.89 7.58 7.51

Pre-tax income to paid-in capital (%) 7.52 9.64 12.24 12.94

Profit ratio (%) 5.18 6.87 9.38 10.84

Earnings per share (NT$) 0.63 0.77 1.03 1.05

Cash flow

Cash flow ratio (%) 41.72 28.92 44.16 40.35

Cash flow adequacy ratio (%) 131.86 153.76 134.01 127.42

Cash reinvestment ratio (%) 5.52 2.47 4.39 3.00

Leverage Operating leverage 1.97 1.23 1.60 1.84

Financial leverage 1.06 1.06 1.05 1.05

Analysis of financial ratio change in the last two years： 1. Interest earned ratio (times):Mainly due to increase of profit after tax and decrease of interest expenses in this

fiscal year. 2. Cash reinvestment ratio:Mainly due to decrease of cashflows form investing activities in this fiscal year.

Note :financial data of latest 4 years have been audited and certified by CPAs.

66

1.Financial structure

(1)Ratio of liabilities to assets＝Total liabilities／Total assets

(2)Ratio of long-term capital to Property, plant and equipment＝（Total equity＋Non-current liabilities）／ Net

Property, plant and equipment

2. Solvency

(1)Current ratio＝Current assets／Current liabilities

(2)Quick ratio＝（Current assets－ Inventory － Prepaid expenses）／Current liabilities

(3)Times interest earned ＝ Profit before income tax and Interest expense／ Interest expenses of the period

3.Operation ability

(1)Receivables (including accounts receivable and notes receivable from business) turnover ratio＝ Net sales ／

Balance of average receivables (including accounts receivable and notes receivable from business)

(2)Average collection period (days)＝365／Receivables turnover ratio

(3)Inventory turnover ratio＝ Sales cost／ Average inventory

(4)Payables (including accounts payable and notes payable from business) turnover ratio ＝ Sales cost ／Balance

of average payables (including accounts payable and notes payable from business)

(5)Inventory turnover in days＝365／Inventory turnover ratio

(6)Property, plant and equipment turnover ratio＝ Net sales／ Net average property, plant and equipment

(7)Total assets turnover ratio＝Net sales／Average total assets

4.Profitability

(1)Return on assets＝〔After-tax profit or loss＋Interest expense×（１－Tax rate）〕／ Average Total assets

(2)Return on shareholders’ equity ＝After-tax profit or loss／Net average total equity

(3)Net profit ratio＝After-tax profit or loss／Net sales

(4)EPS＝（Equity attributable to owners of parent－ Dividends of preferred stock）／Weighted average shares issued

5.Cash flows

(1)Cash flows ratio＝Net cash flows of operating activities／Current liabilities

(2)Net cash flow adequacy ratio＝Net cash flows of operating activities in latest 5 years／(Capital expense＋

Increase in inventories ＋Cash Dividends) in latest 5 years

(3)Cash re-investment ratio＝(Net cash flows of operating activities－Cash Dividends)／(Gross of property, plant

and equipment ＋ Long-term investments ＋Other non-current assets＋Operational funds)

6.Leverage:

(1)Degree of operational leverage＝(Net operating income－ Variable operating costs and expenses) ／ Operating

profit

(2)Degree of financial leverage＝Operating profit ／ (Operating profit－Interest expense)

67

(2) Consolidated Financial Analysis – Based on ROC GAAP

A. Financial Analysis (Consolidated) –GAAP

Year Item

Financial analysis in the past two years

2011 2012


Ratio of liabilities to assets 40.66 37.65

Ratio of long-term capital to fixed assets 221.71 212.73

Solvency (%)

Current ratio 193.68 197.37

Quick ratio 153.59 157.32

Times interest earned ratio 12.22 9.93

Operating ability

Accounts receivable turnover (turns) 3.70 3.50

Average collection period 99 104

Inventory turnover (turns) 3.99 4.16

Accounts payable turnover (turns) 3.64 3.87

Average days in sales 91 88

Fixed assets turnover (turns) 2.06 1.82

Total assets turnover (turns) 0.60 0.58

Profitability

Return on total assets (%) 4.01 3.19

Return on stockholders' equity (%) 6.36 4.70

Ratio to issued capital (%)

Operating income 11.26 7.36

Pre-tax income 9.73 7.64

Profit ratio (%) 6.17 4.91

Earnings per share ($) 0.83 0.62

Cash flow

Cash flow ratio (%) 32.81 36.73

Cash flow adequacy ratio (%) 131.99 123.97

Cash reinvestment ratio (%) 4.52 6.04

Leverage Operating leverage 1.96 2.34

Financial leverage 1.08 1.13


68

B. Financial Analysis (Unconsolidated) –GAAP Year

Item

Financial analysis in the past two years

2011 2012


Ratio of liabilities to assets 38.19 35.05

Ratio of long-term capital to fixed assets 256.01 254.25

Solvency (%)

Current ratio 192.96 203.00

Quick ratio 151.32 160.63

Times interest earned ratio 17.87 15.03

Operating ability

Accounts receivable turnover (turns) 3.42 3.38

Average collection period 107 108

Inventory turnover (turns) 3.43 3.40

Accounts payable turnover (turns) 3.65 3.82

Average days in sales 106 107

Fixed assets turnover (turns) 2.23 2.06

Total assets turnover (turns) 0.60 0.58

Profitability

Return on total assets (%) 4.07 3.19

Return on stockholders' equity (%) 6.37 4.70

Ratio to issued capital (%) Operating income 12.31 8.83

Pre-tax income 9.66 7.41

Profit ratio (%) 6.42 5.10

Earnings per share ($) 0.83 0.62

Cash flow

Cash flow ratio (%) 40.52 42.15

Cash flow adequacy ratio (%) 115.05 131.52

Cash reinvestment ratio (%) 5.03 5.85

Leverage Operating leverage 2.49 2.69

Financial leverage 1.05 1.06


69

1.Financial structure

(1)Ratio of liabilities to assets＝Total liabilities／Total assets

(2)Ratio of long-term fund to fixed assets＝（Net shareholders’ equity＋Long-term liabilities）／ Net fixed assets

2. Solvency

(1)Current ratio＝Current assets／Current liabilities

(2)Quick ratio＝（Current assets－ Inventory － Prepaid expenses）／Current liabilities

(3)Times interest earned ＝ Profit before income tax and Interest expense／ Interest expenses of the period

3.Operation ability

(1)Receivables (including accounts receivable and notes receivable from business) turnover ratio＝ Net sales ／

Balance of average receivables (including accounts receivable and notes receivable from business)

(2)Average collection period (days)＝365／Receivables turnover ratio

(3)Inventory turnover ratio＝ Sales cost／ Average inventory

(4)Payables (including accounts payable and notes payable from business) turnover ratio ＝ Sales cost ／Balance

of average payables (including accounts payable and notes payable from business)

(5)Inventory turnover in days＝365／Inventory turnover ratio

(6)fixed assets turnover ratio＝ Net sales／ Net fixed assets

(7)Total assets turnover ratio＝Net sales／Total assets

4.Profitability

(1)Return on assets＝〔After-tax profit or loss＋Interest expense×（１－Tax rate）〕／ Average Total assets

(2)Return on shareholders’ equity ＝After-tax profit or loss／Net average shareholders’ equity

(3)Net profit ratio＝After-tax profit or loss／Net sales

(4)EPS＝（After-tax profit－ Dividends of preferred stock）／Weighted average shares issued

5.Cash flows

(1)Cash flows ratio＝Net cash flows of operating activities／Current liabilities

(2)Net cash flow adequacy ratio＝Net cash flows of operating activities in latest 5 years／(Capital expense＋

Increase in inventories ＋Cash Dividends) in latest 5 years

(3)Cash re-investment ratio＝(Net cash flows of operating activities－Cash Dividends)／(Gross of fixed assets ＋

Long-term investments ＋Other assets＋Operational funds)

6.Leverage:

(1)Degree of operational leverage＝(Net operating income－ Variable operating costs and expenses) ／ Operating

profit

(2)Degree of financial leverage＝Operating profit ／ (Operating profit－Interest expense)

70

3. Supervisors’ Report for the Most Recent Year

Supervisors’ Auditing Report

To: The General Meeting of Shareholders as of year 2016

We have reviewed and audited the business report, statement of earning distribution and financial

statements of the year 2015 (including the consolidated financial statements), which were prepared

by the Board of Directors and audited and certified by the CPAs Philine Lee and Wilson Wang of

PricewaterhouseCoopers. We hereby issue this report in compliance with Article 219 of the

Company Act.

OPTOTECH Corporation

Supervisor: Tzu-Hua Han

Supervisor: Tsang-Der Ni

Mar. 25, 2016

71

4.Consolidated Financial Statements for the Years Ended December 31, 2015 and 2014, and

Independent Auditors’ Report

OPTO TECH CORPORATION AND SUBSIDIARIES Declaration of Consolidated Financial Statements of Affiliated Enterprises

For the year ended December 31, 2015 pursuant to the “Criteria Governing Preparation of

Affiliation Reports, Consolidated Business Reports and Consolidated Financial Statements of

Affiliated Enterprises,” the company that is required to be included in the consolidated financial

statements of affiliates, is the same as the company that is required to be included in the

consolidated financial statements of parent and subsidiary companies under International Financial

Reporting Standard 10. And if relevant information that should be disclosed in the consolidated

financial statements of affiliates has all been disclosed in the consolidated financial statements of

parent and subsidiary companies, it shall not be required to prepare separate consolidated financial

statements of affiliates.

Hereby declare,

72

REPORT OF INDEPENDENT ACCOUNTANTS

(15)PWCR15002958

To the Board of Directors and Stockholders of Opto Tech Corporation

We have audited the accompanying consolidated balance sheets of Opto Tech Corporation and

subsidiaries as of December 31, 2015 and 2014 and the related consolidated statements of comprehensive

income, of changes in equity and of cash flows for the years then ended. These consolidated financial

statements are the responsibility of the Company’s management. Our responsibility is to express an opinion

on these consolidated financial statements based on our audits.

We conducted our audits in accordance with the “Regulations Governing Auditing and Attestation of

Financial Statements by Certified Public Accountants” and generally accepted auditing standards in the

Republic of China. Those standards require that we plan and perform the audit to obtain reasonable

assurance about whether the financial statements are free of material misstatement. An audit includes

examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An

audit also includes assessing the accounting principles used and significant estimates made by management,

as well as evaluating the overall financial statement presentation. We believe that our audits provide a

reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material

respects, the consolidated financial position of Opto Tech Corporation and subsidiaries as of December 31,

2015 and 2014, and their performance and cash flows for the years then ended in conformity with the “Rules

Governing the Preparation of Financial Statements by Securities Issuers”, the International Financial

Reporting Standards, International Accounting Standards, IFRIC Interpretations and SIC Interpretations as

endorsed by the Financial Supervisory Commission.

We have also audited the parent company only financial statements of Opto Tech Corporation as of and

for the years ended December 31, 2015 and 2014, and have expressed an unqualified opinion on such

financial statements.

PricewaterhouseCoopers, Taiwan

March 25, 2016 -------------------------------------------------------------------------------------------------------------------------------------------------The accompanying consolidated financial statements are not intended to present the financial position and results of operations and cash flows in accordance with accounting principles generally accepted in countries and jurisdictions other than the Republic of China. The standards, procedures and practices in the Republic of China governing the audit of such financial statements may differ from those generally accepted in countries and jurisdictions other than the Republic of China. Accordingly, the accompanying consolidated financial statements and report of independent accountants are not intended for use by those who are not informed about the accounting principles or auditing standards generally accepted in the Republic of China, and their applications in practice.

73

OPTO TECH CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

YEARS ENDED DECEMBER 31 (Expressed in thousands of New Taiwan dollars, except as otherwise indicated)

December 31, 2015 December 31, 2014

Assets Notes AMOUNT % AMOUNT %

Current assets

Cash and cash equivalents 6(1) $ 3,919,862 33 $ 3,840,208 32

Financial assets at fair value through profit

or loss - current

6(2)

625,462 6 462,413 4

Notes receivable - net 13,406 - 26,562 -

Notes receivable - related parties - net 7 - - 252 -

Accounts receivable - net 6(4) 1,436,428 12 1,620,590 14

Accounts receivable - related parties - net 7 107,216 1 156,599 1

Other receivables 31,763 - 29,460 -

Inventories - net 6(5) 1,144,204 10 1,218,061 10

Prepayments 50,571 1 21,293 -

Non-current assets held for sale - net 6(9) 28,572 - - -

Other current assets 8 26,598 - 27,110 -

Current Assets 7,384,082 63 7,402,548 61

Non-current assets

Available-for-sale financial assets -

non-current

6(3)

606,684 5 622,786 5

Investments accounted for using equity

method

6(6)

432,915 4 427,435 3

Property, plant and equipment - net 6(7) and 8 3,146,759 27 3,398,412 28

Intangible assets 6(8) 9,932 - 12,930 -

Deferred tax assets 6(26) 126,819 1 186,960 2

Other non-current assets 6(10) and 8 66,256 - 94,812 1

Non-current assets 4,389,365 37 4,743,335 39

Total assets $ 11,773,447 100 $ 12,145,883 100

(Continued)

74


CONSOLIDATED BALANCE SHEETS

YEARS ENDED DECEMBER 31 (Expressed in thousands of New Taiwan dollars, except as otherwise indicated)


Liabilities and Equity Notes AMOUNT % AMOUNT %

Current liabilities Short-term loans 6(11) and 8 $ 917,151 8 $ 924,225 8 Financial liabilities at fair value through

profit or loss - current 6(2)

- - 2,492 - Notes payable 219 - 3,402 - Accounts payable 6(12) 611,739 5 770,006 6 Accounts payable - related parties 7 270,460 2 406,982 4 Other payables 552,187 5 457,922 4 Current income tax liabilities 72,161 1 8,128 - Provisions for liabilities - current 6(16) 10,207 - 11,411 - Other current liabilities 6(13) 298,367 2 379,141 3

Current Liabilities 2,732,491 23 2,963,709 25 Non-current liabilities

Long-term loans 6(13), 8 and 9 1,014,625 9 1,236,418 10 Provisions for liabilities - non-current 6(16) 49,327 - 47,644 - Deferred tax liabilities 6(26) 969 - 2,892 - Other non-current liabilities 6(14) 260,487 2 329,112 3

Non-current liabilities 1,325,408 11 1,616,066 13 Total Liabilities 4,057,899 34 4,579,775 38

Equity attributable to owners of parent Capital

Common stock 6(15)(17) 5,456,621 47 5,456,621 45 Capital Reserve 6(18)

Capital reserve 641,656 6 640,826 5 Retained Earnings 6(19)

Legal reserve 393,962 3 337,793 3 Special reserve - - 13,333 - Unappropriated earnings 1,218,806 10 1,083,860 9

Other Equity Adjustments Other equity adjustments 6(20) 27,652 - 56,820 - Treasury stocks 6(17) ( 26,699) - ( 26,699) -

Equity attributable to owners of

parent

7,711,998 66 7,562,554 62 Non-controlling interest 3,550 - 3,554 -

Total equity 7,715,548 66 7,566,108 62 Total liabilities and equity $ 11,773,447 100 $ 12,145,883 100

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

75


CONSOLIDATED STATEMENTS OF INCOME

FOR THE YEARS ENDED DECEMBER 31 (Expressed in thousands of New Taiwan dollars, except as otherwise indicated)

For the years ended December 31,

2015 2014

Items Notes AMOUNT % AMOUNT %

Operating revenue 7 $ 5,630,540 100 $ 6,317,383 100

Operating costs 6(5)(24)(25) and

7 ( 4,111,004) ( 73) ( 4,645,461) ( 73)

Gross profit, net 1,519,536 27 1,671,922 27

Operating Expenses 6(24)(25)

Selling expenses ( 168,982) ( 3) ( 159,566) ( 3)

General and administrative expenses ( 502,971) ( 9) ( 482,701) ( 8)

Research and development expenses ( 282,029) ( 5) ( 283,256) ( 4)

Total operating expenses ( 953,982) ( 17) ( 925,523) ( 15)

Operating income 565,554 10 746,399 12

Non-operating income and expenses

Other income 6(21) 58,149 1 61,010 1

Other gains and losses 6(22) 107,504 2 ( 107,011) ( 2)

Finance costs 6(23) ( 47,929) ( 1) ( 58,483) ( 1)

Share of profit of associates and joint

ventures accounted for using equity

method

6(6)

25,998 1 25,835 1

Total non-operating income and

expenses

143,722 3 ( 78,649) ( 1)

Profit before income tax 709,276 13 667,750 11

Income tax expense 6(26) ( 135,903) ( 3) ( 106,059) ( 2)

Net income $ 573,373 10 $ 561,691 9

(Continued)

76


CONSOLIDATED STATEMENTS OF INCOME

FOR THE YEARS ENDED DECEMBER 31 (Expressed in thousands of New Taiwan dollars, except as otherwise indicated)


2015 2014

Items Notes AMOUNT % AMOUNT %

Other comprehensive income (loss)

Components of other comprehensive

income that will not be reclassified to

profit or loss

Other comprehensive income, before

tax, actuarial gains (losses) on defined

benefit plans

$ 16,479 - $ 11,969 -

Income tax related to components of

other comprehensive income that will

not be reclassified to profit or loss

( 2,825) - ( 2,046) -

Items that may be reclassified

subsequently to profit or loss

Currency translation differences of

foreign operations

( 37,051) - 25,203 -

Unrealized gain on valuation of

available-for-sale financial assets

8,088 - 31,893 1

Share of other comprehensive income

of associates and joint ventures

accounted for using equity method -

items that may be reclassified to profit

or loss

( 207) - 420 -

Other comprehensive (loss) income

for the year, net of income tax

($ 15,516) - $ 67,439 1

Total comprehensive income for the

year

$ 557,857 10 $ 629,130 10

Profit attributable to:

Owners of the parent $ 573,375 10 $ 561,682 9

Non-controlling interest ( 2) - 9 -

$ 573,373 10 $ 561,691 9

Total comprehansive income

attributable to:

Owners of the parent $ 557,861 10 $ 629,119 10

Non-controlling interest ( 4) - 11 -

$ 557,857 10 $ 629,130 10

Basic earnings per share

Profit for the year 6(27) $ 1.05 $ 1.03

Diluted earnings per share

Profit for the year 6(27) $ 1.03 $ 1.02


77

OPTO TECH CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

(Expressed in thousands of New Taiwan dollars)

Equity attributable to owners of the parent Retained Earnings Other equity interest

NoteCommon

stock Capital reserve

Legal reserve

Special reserve

Unappropriated earnings

Currency translation

differences of foreign

operations

Unrealized gain or loss on

available-for-sale financial assets

Treasury stocks Total

Non-controlling interest Total equity

2014 Balance at January 1, 2014 $ 5,456,621 $ 624,100 $ 295,787 $ 133,363 $ 774,290 $ 16,448 ($ 17,142 ) ( $ 26,699 ) $ 7,256,768 $ 3,527 $ 7,260,295Distribution of 2013

earnings : Legal reserve 6(19) - - 42,006 - ( 42,006 ) - - - - - - Special reserve 6(19) - - - ( 120,030 ) 120,030 - - - - - - Cash dividends 6(19) - - - - ( 327,397 ) - - - ( 327,397 ) - ( 327,397 )Changes in other capital

reserve : Changes in share of loss

of associates and joint ventures accounted for using equity method

6(6)

- ( 1,861) - - - - - - ( 1,861 ) - ( 1,861 ) Difference between

consideration and carrying amount of subsidiaries acquired or disposed - 12,646 - - ( 12,662 ) - - - ( 16 ) 16 -

Changes in capital reserve for dividends paid to subsidiaries - 665 - - - - - - 665 - 665

Net income for the year - - - - 561,682 - - - 561,682 9 561,691Other comprehensive

income for the year6(20)

- - - - 9,923 25,621 31,893 - 67,437 2 67,439Share-based payment

transactions 6(15)

- 5,276 - - - - - - 5,276 - 5,276Balance at December 31,

2014 $ 5,456,621 $ 640,826 $ 337,793 $ 13,333 $ 1,083,860 $ 42,069 $ 14,751 ( $ 26,699 ) $ 7,562,554 $ 3,554 $ 7,566,108

2015 Balance at January 1, 2015 $ 5,456,621 $ 640,826 $ 337,793 $ 13,333 $ 1,083,860 $ 42,069 $ 14,751 ( $ 26,699 ) $ 7,562,554 $ 3,554 $ 7,566,108Distribution of 2014

earnings : Legal reserve 6(19) - - 56,169 - ( 56,169 ) - - - - - - Special reserve 6(19) - - - ( 13,333 ) 13,333 - - - - - - Cash dividends 6(19) - - - - ( 409,247 ) - - - ( 409,247 ) - ( 409,247 )Changes in other capital

reserve: Changes in capital reserve

for dividends paid to subsidiaries - 830 - - - - - - 830 - 830

Net income for the year - - - - 573,375 - - - 573,375 ( 2 ) 573,373Other comprehensive

income for the year6(20)

- - - - 13,654 ( 37,256 ) 8,088 - ( 15,514 ) ( 2 ) ( 15,516 )Balance at December 31,

2015 $ 5,456,621 $ 641,656 $ 393,962 $ - $ 1,218,806 $ 4,813 $ 22,839 ( $ 26,699 ) $ 7,711,998 $ 3,550 $ 7,715,548


78


CONSOLIDATED STATEMENTS OF CASH FLOWS (Expressed in thousands of New Taiwan dollars)


Notes 2015 2014 CASH FLOWS FROM OPERATING ACTIVITIES Consolidated profit before tax for the year $ 709,276 $ 667,750 Adjustments to reconcile profit before income tax to net cash provided by

operating activities Income and expenses having no effect on cash flows Depreciation 6(7)(24) 397,431 428,171 Amortization 6(8)(24) 13,563 11,628 Bad debts expense (recovery of bad debts expense) 13,182 ( 12,634 ) Net gain on financial assets and liabilities at fair value through profit or

loss 6(2)

( 5,541 ) ( 808 ) Interest expense 6(23) 46,111 56,670 Interest income 6(21) ( 25,502 ) ( 24,226 ) Dividend income 6(21) ( 13,020 ) ( 14,720 ) Compensation cost of employee stock options 6(25) - 5,276 Share of profit of associates and joint ventures accounted for using

equity method 6(6)

( 25,998 ) ( 25,835 ) (Gain) loss on disposal of property, plant and equipment 6(22) ( 1,476 ) 176 Gain on disposal of non-current assets held for sale 6(22) ( 25,385 ) - (Gain) loss on sale of investments 6(22) ( 89,582 ) 824 Impairment loss on non-current assets held for sale 6(22) 28,945 - Impairment loss on financial assets 6(22) 756 16,776 (Reversal of) impairment loss on non-financial assets 6(22) ( 10,746 ) 91,909 Changes in assets/liabilities relating to operating activities Net changes in assets relating to operating activities Acquisition of financial assets at fair value through profit or loss ( 160,000 ) ( 239,680 ) Notes receivable - net 13,156 ( 5,658 ) Notes receivable - related parties - net 252 ( 252 ) Accounts receivable - net 172,305 64,502 Accounts receivable - related parties - net 48,733 44,647 Other receivables ( 3,239 ) 120 Inventories - net 73,857 ( 3,215 ) Prepayments ( 29,278 ) ( 3,163 ) Other current assets 512 2,021 Other non-current assets 1,586 7,499 Net changes in liabilities relating to operating activities Notes payable ( 3,207 ) ( 18,189 ) Accounts payable ( 158,267 ) 2,682 Accounts payable - related parties ( 136,522 ) ( 31,856 ) Other payables 94,581 26,297 Provisions for liabilities 867 ( 8,585 ) Other current liabilities ( 8,421 ) 14,862 Accrued pension liabilities ( 52,150 ) 2,267 Cash generated from operations 866,779 1,055,256 Interest received 26,500 30,789 Dividends received 33,331 45,187 Interest paid ( 46,403 ) ( 56,754 ) Income tax paid ( 16,539 ) ( 5,901 ) Net cash provided by operating activities 863,668 1,068,577

(Continued)

79


CONSOLIDATED STATEMENTS OF CASH FLOWS (Expressed in thousands of New Taiwan dollars)


Notes 2015 2014

CASH FLOWS FROM INVESTING ACTIVITIES

Acquisition of available-for-sale financial assets $ - ( $ 18,626 )

Proceeds from disposal of available-for-sale financial assets 72,209 -

Acquisition of investments accounted for using equity method - ( 74,429 )

Proceeds from disposal of non-current assets held for sale 314,875 -

Acquisition of property, plant and equipment 6(7) ( 444,085 ) ( 288,853 )

Proceeds from disposal of property, plant and equipment 6(7) 3,270 321

Increase in deposits-out ( 21,481 ) ( 1,530 )

Acquisition of intangible assets 6(8) ( 11,026 ) ( 11,042 )

Net cash used in investing activities ( 86,238 ) ( 394,159 )

CASH FLOWS FROM FINANCING ACTIVITIES

Increase in short-term loans 1,539,093 2,337,053

Decrease in short-term loans ( 1,546,167 ) ( 2,263,179 )

Increase in long-term loans 154,635 -

Decrease in long-term loans ( 448,781 ) ( 200,980 )

Increase in guarantee deposits 4 130

Payment of cash dividends ( 408,417 ) ( 326,732 )

Net cash used in financing activities ( 709,633 ) ( 453,708 )

Effect of change in exchange rate 11,857 5,295

Increase in cash and cash equivalents 79,654 226,005

Cash and cash equivalents at beginning of year 3,840,208 3,614,203

Cash and cash equivalents at end of year $ 3,919,862 $ 3,840,208


80


NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(EXPRESSED IN THOUSANDS OF NEW TAIWAN DOLLARS,

EXCEPT AS OTHERWISE INDICATED)

1. HISTORY AND ORGANIZATION

Opto Tech Corporation (the “Company”) was incorporated as a company limited by shares under

the provisions of the Company Law of the Republic of China (R.O.C.). The shares of the

Company have been traded on the Taiwan Stock Exchange since May 2, 1995. The Company and

its subsidiaries (collectively referred herein as the “Group”) are primarily engaged in the

manufacture and sales of semiconductor components as well as research and development, design,

manufacture and sales of systems products.

2. THE DATE OF AUTHORIZATION FOR ISSUANCE OF THE CONSOLIDATED

FINANCIAL STATEMENTS AND PROCEDURES FOR AUTHORIZATION

These consolidated financial statements were authorized for issuance by the Board of Directors

on March 25, 2016.

3. APPLICATION OF NEW STANDARDS, AMENDMENTS AND INTERPRETATIONS

(1) Effect of the adoption of new issuances of or amendments to International Financial

Reporting

Standards (“IFRS”) as endorsed by the Financial Supervisory Commission (“FSC”)

According to Financial-Supervisory-Securities-Auditing No. 1030010325 issued by FSC on

April 3, 2014, commencing 2015, companies with shares listed on the TWSE or traded on the

Taipei Exchange or Emerging Stock Market shall adopt the 2013 version of IFRS (not

including IFRS 9, ‘Financial instruments’) as endorsed by the FSC and Regulations

Governing the Preparation of Financial Reports by Securities Issuers effective January 1,

2015 (collectively referred herein as the “2013 version of IFRS”) in preparing the

consolidated financial statements. The impact of adopting the 2013 version of IFRS is listed

below.

A. IAS 19 (revised), ‘Employee benefits’

The revised standard required additional disclosures for defined benefit plans.

B. IAS 1, ‘Presentation of financial statements’

The amendment requires entities to separate items presented in OCI classified by nature

into two groups on the basis of whether they are potentially reclassifiable to profit or loss

subsequently when specific conditions are met. If the items are presented before tax then

the tax related to each of the two groups of OCI items (those that might be reclassified and

those that will not be reclassified) must be shown separately. Accordingly, the Group will

adjust its presentation of the statement of comprehensive income.

C. IFRS 13, ‘Fair value measurement’

The standard defines fair value as the price that would be received to sell an asset or paid

81

New Standards, Interpretations and Amendments

Effective date by

International AccountingStandards Board

IFRS 9, ‘Financial instruments' January 1, 2018Sale or contribution of assets between an investor and its associate orjoint venture (amendments to IFRS 10 and IAS 28)

To be determined byInternational Accounting

Standards BoardInvestment entities: applying the consolidation exception (amendments toIFRS 10, IFRS 12 and IAS 28)

January 1, 2016

Accounting for acquisition of interests in joint operations(amendments to IFRS 11)

January 1, 2016

IFRS 14, 'Regulatory deferral accounts' January 1, 2016IFRS 15, ‘Revenue from contracts with customers' January 1, 2018IFRS 16, 'Leases' January 1, 2019Disclosure initiative (amendments to IAS 1) January 1, 2016Disclosure initiative (amendments to IAS 7) January 1, 2017Recognition of deferred tax assets for unrealised losses (amendments toIAS 12)

January 1, 2017

Clarification of acceptable methods of depreciation and amortisation(amendments to IAS 16 and IAS 38)

January 1, 2016

Agriculture: bearer plants (amendments to IAS 16 and IAS 41) January 1, 2016Defined benefit plans: employee contributions (amendments to IAS 19R) July 1, 2014Equity method in separate financial statements (amendments to IAS 27) January 1, 2016Recoverable amount disclosures for non-financial assets (amendmentsto IAS 36)

January 1, 2014

Novation of derivatives and continuation of hedge accounting(amendments to IAS 39)

January 1, 2014

IFRIC 21, ‘Levies’ January 1, 2014

to transfer a liability in an orderly transaction between market participants at the

measurement date. The standard sets out a framework for measuring fair value from

market participants’ perspective, and requires disclosures about fair value measurements.

For non-financial assets only, fair value is determined based on the highest and best use of

the asset. Based on the Group’s assessment, the adoption of the standard has no significant

impact on its consolidated financial statements, and the Group will disclose additional

information about fair value measurements accordingly.

(2) Effect of new issuances of or amendments to IFRSs as endorsed by the FSC but not yet

adopted by the Group

None.

(3) IFRSs issued by IASB but not yet endorsed by the FSC

New standards, interpretations and amendments issued by IASB but not yet included in the

2013

version of IFRSs as endorsed by the FSC:

82

New Standards, Interpretations and Amendments

Effective date byInternational Accounting

Standards Board

Improvements to IFRSs 2010-2012 July 1, 2014

Improvements to IFRSs 2011-2013 July 1, 2014

Improvements to IFRSs 2012-2014 January 1, 2016

The Group is assessing the potential impact of the new standards, interpretations and

amendments above. The impact will be disclosed when the assessment is complete.

4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The principal accounting policies applied in the preparation of these consolidated financial

statements are set out below. These policies have been consistently applied to all the periods

presented, unless otherwise stated.

(1) Compliance statement

The consolidated financial statements of the Group have been prepared in accordance with the

“Regulations Governing the Preparation of Financial Reports by Securities Issuers”,

International Financial Reporting Standards, International Accounting Standards, IFRIC

Interpretations, and SIC Interpretations as endorsed by the FSC (collectively referred herein

as the “IFRSs”).

(2) Basis of preparation

A. Except for the following items, the consolidated financial statements have been prepared

under the historical cost convention:

(a) Financial assets and financial liabilities (including derivative instruments) at fair value

through profit or loss.

(b) Available-for-sale financial assets measured at fair value.

(c) Defined benefit liabilities recognised based on present value of defined benefit

obligation less the net amount of pension fund assets.

B. The preparation of financial statements in conformity with IFRSs requires the use of

certain critical accounting estimates. It also requires management to exercise its judgment

in the process of applying the Group’s accounting policies. The areas involving a higher

degree of judgment or complexity, or areas where assumptions and estimates are

significant to the consolidated financial statements are disclosed in Note 5.

(3) Basis of consolidation

A. Basis for preparation of consolidated financial statements:

(a) All subsidiaries are included in the Group’s consolidated financial statements.

Subsidiaries are all entities controlled by the Group. The Group controls an entity

when the Group is exposed, or has rights, to variable returns from its involvement with

the entity and has the ability to affect those returns through its power over the entity.

Consolidation of subsidiaries begins from the date the Group obtains control of the

subsidiaries and ceases when the Group loses control of the subsidiaries.

83

Name of investor

Name of subsidiary

Main business activities

December 31,2015

December 31,2014 Description

Opto Tech Corp.

Ho Chung Investment Co., Ltd. (Ho Chung Investment)

Investment business 100.00 100.00 Note 1

Opto Tech Corp.

Opto Technology International Group Co., Ltd. (Opto)

Investment business 100.00 100.00 -

Opto Tech Corp.

Jyu Shin Investment Co., Ltd. (Jyu Shin Investment)


Ownership (%)

(b) Inter-company transactions, balances and unrealised gains or losses on transactions

between companies within the Group are eliminated. Accounting policies of

subsidiaries have been adjusted where necessary to ensure consistency with the

policies adopted by the Group.

(c) Profit or loss and each component of other comprehensive income are attributed to the

owners of the parent and to the non-controlling interests. Total comprehensive income

is attributed to the owners of the parent and to the non-controlling interests even if this

results in the non-controlling interests having a deficit balance.

(d) Changes in a parent’s ownership interest in a subsidiary that do not result in the parent

losing control of the subsidiary (transactions with non-controlling interests) are

accounted for as equity transactions, i.e. transactions with owners in their capacity as

owners. Any difference between the amount by which the non-controlling interests are

adjusted and the fair value of the consideration paid or received is recognised directly

in equity.

(e) When the Group loses control of a subsidiary, the Group remeasures any investment

retained in the former subsidiary at its fair value. That fair value is regarded as the fair

value on initial recognition of a financial asset or the cost on initial recognition of the

associate or joint venture. Any difference between fair value and carrying amount is

recognised in profit or loss. All amounts previously recognised in other comprehensive

income in relation to the subsidiary are reclassified to profit or loss on the same basis

as would be required if the related assets or liabilities were disposed of. That is, when

the Group loses control of a subsidiary, all gains or losses previously recognised in

other comprehensive income in relation to the subsidiary should be reclassified from

equity to profit or loss, if such gains or losses would be reclassified to profit or loss

when the related assets or liabilities are disposed of.

B. Subsidiaries included in the consolidated financial statements:

84

Name of

investor

Name of

subsidiary

Main business

activities

December 31,

2015

December 31,

2014 Description

Opto Tech Corp.

Source Ever Limited (Source)

International trading 100.00 100.00 -

Opto Opto Tech (Cayman) Co., Ltd. (Cayman)


Opto Opto Grand (Cayman) Co., Ltd. (Opto Grand)


Opto Everyung Investment Ltd. (Everyung)


Jyu Shin Investment Co., Ltd.

CS Bright Corporation (CSB)

Manufacture and sales of LED and electronic products

99.87 99.87 -

Cayman Opto Tech (Macao) Co., Ltd. (Opto Macao)

International trading 100.00 100.00 -

Cayman Opto Tech (Suzhou) Co., Ltd. (Opto Tech Suzhou)

Research, design and manufacture of LED display, wireless communication equipment and related parts

100.00 100.00 -

Opto Grand Opto Tech Semiconductor (Ningbo) Co., Ltd. (Opto Tech Ningbo)


- 100.00 Note 2

CSB Bright Investment International Ltd. (Bright)


Bright Everyung Investment Ltd. (Everyung)

Investment business50.00 50.00 -

Everyung Opto Plus Technology Co., Ltd. (Opto Plus)


100.00 100.00 -

Ownership (%)

.

Note 1: Ho Chung Investment has been continuously acquiring the Company’s common

stock amounting to 1,107 thousand shares from 1998 to 2000. It holds about 0.2%

of the Company’s outstanding common stock.

Note 2: Opto Grand had received the proceeds from disposal of Opto Tech Ningbo on

November, 2015.

C. Subsidiaries not included in the consolidated financial statements：None.

85

D. Adjustments for subsidiaries with different balance sheet dates：None.

E. Nature and extent of significant restrictions on its ability to access or use assets, and settle

liabilities of the Group：None.

F. Subsidiaries that have non-controlling interests that are material to the Group：None.

G. Details of the parent’s stock that is held by the subsidiary：Please refer to Note 13 Table 3

for holdings of marketable securities at the end of the period.

(4) Foreign currency translation

Items included in the financial statements of each of the Group’s entities are measured using

the currency of the primary economic environment in which the entity operates (the

“functional currency”). The consolidated financial statements are presented in New Taiwan

dollar, which is the Company’s functional and the Group’s presentation currency.

A. Foreign currency transactions and balances

(a) Foreign currency transactions are translated into the functional currency using the

exchange rates prevailing at the dates of the transactions or valuation where items are

remeasured. Foreign exchange gains and losses resulting from the settlement of such

transactions are recognised in profit or loss in the period in which they arise.

(b) Monetary assets and liabilities denominated in foreign currencies at the period end are

re-translated at the exchange rates prevailing at the balance sheet date. Exchange

differences arising upon re-translation at the balance sheet date are recognised in profit

or loss.

(c) Non-monetary assets and liabilities denominated in foreign currencies held at fair

value through profit or loss are re-translated at the exchange rates prevailing at the

balance sheet date; their translation differences are recognised in profit or loss.

Non-monetary assets and liabilities denominated in foreign currencies held at fair

value through other comprehensive income are re-translated at the exchange rates

prevailing at the balance sheet date; their translation differences are recognised in other

comprehensive income. However, non-monetary assets and liabilities denominated in

foreign currencies that are not measured at fair value are translated using the historical

exchange rates at the dates of the initial transactions.

B. Translation of foreign operations

(a) The operating results and financial position of all the group entities and associates that

have a functional currency different from the presentation currency are translated into

the presentation currency as follows:

i. Assets and liabilities for each balance sheet presented are translated at the closing

exchange rate at the date of that balance sheet;

ii. Income and expenses for each statement of comprehensive income are translated at

average exchange rates of that period; and

iii All resulting exchange differences are recognised in other comprehensive income.

(b) When the foreign operation partially disposed of or sold is an associate, exchange

differences that were recorded in other comprehensive income are proportionately

reclassified to profit or loss as part of the gain or loss on sale. In addition, even when

the Group still retains partial interest in the former associate after losing significant

86

influence over the former foreign associate, such transactions should be accounted for

as disposal of all interest in these foreign operations.

(c) When the foreign operation partially disposed of or sold is a subsidiary, cumulative

exchange differences that were recorded in other comprehensive income are

proportionately transferred to the non-controlling interest in this foreign operation. In

addition, even when the Group still retains partial interest in the former foreign

subsidiary after losing control of the former foreign subsidiary, such transactions

should be accounted for as disposal of all interest in the foreign operations.

(5) Classification of current and non-current items

A. Assets that meet one of the following criteria are classified as current assets; otherwise

they are classified as non-current assets:

(a) Assets arising from operating activities that are expected to be realised, or are intended

to be sold or consumed within the normal operating cycle;

(b) Assets held mainly for trading purposes;

(c) Assets that are expected to be realised within twelve months from the balance sheet date;

(d) Cash and cash equivalents, excluding restricted cash and cash equivalents and those

that are to be exchanged or used to pay off liabilities more than twelve months after the

balance sheet date.

B. Liabilities that meet one of the following criteria are classified as current liabilities;

otherwise they are classified as non-current liabilities:

(a) Liabilities that are expected to be paid off within the normal operating cycle;

(b) Liabilities arising mainly from trading activities;

(c) Liabilities that are to be paid off within twelve months from the balance sheet date;

(d) Liabilities for which the repayment date cannot be extended unconditionally to more

than twelve months after the balance sheet date. 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.

(6) Cash equivalents

Cash equivalents refer to short-term, highly liquid investments that are readily convertible to

known amounts of cash and which are subject to an insignificant risk of changes in value.

Time deposits that meet the definition above and are held for the purpose of meeting

short-term cash commitments in operations are classified as cash equivalents.

(7) Financial assets at fair value through profit or loss

A. Financial assets at fair value through profit or loss are financial assets held for trading.

Financial assets are classified in this category of held for trading if acquired principally for

the purpose of selling in the short-term.

B. On a regular way purchase or sale basis, financial assets at fair value through profit or loss

are recognised and derecognised using trade date accounting.

C. Financial assets at fair value through profit or loss are initially recognised at fair value.

Related transaction costs are expensed in profit or loss. These financial assets are

subsequently remeasured and stated at fair value, and any changes in the fair value of these

financial assets are recognised in profit or loss.

87

(8) Available-for-sale financial assets

A. Available-for-sale financial assets are non-derivatives that are either designated in this

category or not classified in any of the other categories.

B. On a regular way purchase or sale basis, available-for-sale financial assets are recognised

and derecognised using trade date accounting.

C. Available-for-sale financial assets are initially recognised at fair value plus transaction

costs. These financial assets are subsequently remeasured and stated at fair value, and any

changes in the fair value of these financial assets are recognised in other comprehensive

income. Investments in equity instruments that do not have a quoted market price in an

active market and whose fair value cannot be reliably measured or derivatives that are

linked to and must be settled by delivery of such unquoted equity instruments are

presented in ‘financial assets measured at cost’.

(9) Loans and receivables

Accounts receivable are loans and receivables originated by the entity. They are created by the

entity by selling goods or providing services to customers in the ordinary course of business.

Accounts receivable are initially recognised at fair value and subsequently measured at

amortised cost using the effective interest method, less provision for impairment.

However, short-term accounts receivable without bearing interest are subsequently measured

at initial invoice amount as the effect of discounting is immaterial.

(10) Impairment of financial assets

A. The Group assesses at each balance sheet date whether there is objective evidence that a

financial asset or a group of financial assets is impaired as a result of one or more events

that occurred after the initial recognition of the asset (a ‘loss event') and that loss event

(or events) has an impact on the estimated future cash flows of the financial asset or

group of financial assets that can be reliably estimated.

B. The criteria that the Group uses to determine whether there is objective evidence of an

impairment loss is as follows:

(a) Significant financial difficulty of the issuer or debtor; (b) A breach of contract, such as a default or delinquency in interest or principal

payments; (c) The Group, for economic or legal reasons relating to the borrower’s financial

difficulty, granted the borrower a concession that a lender would not otherwise consider;

(d) It becomes probable that the borrower will enter bankruptcy or other financial reorganisation;

(e) The disappearance of an active market for that financial asset because of financial

difficulties;

(f) Observable data indicating that there is a measurable decrease in the estimated future

cash flows from a group of financial assets since the initial recognition of those assets,

although the decrease cannot yet be identified with the individual financial asset in

the group, including adverse changes in the payment status of borrowers in the group

or national or local economic conditions that correlate with defaults on the assets in

the group;

88

(g) Information about significant changes with an adverse effect that have taken place in

the technology, market, economic or legal environment in which the issuer operates,

and indicates that the cost of the investment in the equity instrument may not be

recovered; or

(h) A significant or prolonged decline in the fair value of an investment in an equity

instrument below its cost.

C. When the Group assesses that there has been objective evidence of impairment and an

impairment loss has occurred, accounting for impairment is made as follows according to

the category of financial assets:

(a) Financial assets measured at amortized cost

The amount of the impairment loss is measured as the difference between the asset’s

carrying amount and the present value of estimated future cash flows discounted at

the financial asset’s original effective interest rate, and is recognised in profit or loss.

If, in a subsequent period, the amount of the impairment loss decreases and the

decrease can be related objectively to an event occurring after the impairment loss

was recognised, the previously recognised impairment loss is reversed through profit

or loss to the extent that the carrying amount of the asset does not exceed its

amortised cost that would have been at the date of reversal had the impairment loss

not been recognised previously. Impairment loss is recognised and reversed by

adjusting the carrying amount of the asset through the use of an impairment

allowance account.

(b) Available-for-sale financial assets

The amount of the impairment loss is measured as the difference between the asset’s

acquisition cost (less any principal repayment and amortisation) and current fair value,

less any impairment loss on that financial asset previously recognised in profit or loss,

and is reclassified from ‘other comprehensive income’ to ‘profit or loss’. Impairment

loss of an investment in an equity instrument recognised in profit or loss shall not be

reversed through profit or loss. Impairment loss is recognised and reversed by

adjusting the carrying amount of the asset directly.

(11) Derecognition of financial assets

The Group derecognises a financial asset when one of the following conditions is met:

A. The contractual rights to receive cash flows from the financial asset expire.

B. The contractual rights to receive cash flows from the financial asset have been transferred

and the Group has transferred substantially all risks and rewards of ownership of the

financial asset.

C. The contractual rights to receive cash flows from the financial asset have been transferred

and however, the Group has not retained control of the financial asset.

(12) Inventories

Inventories are stated at the lower of cost and net realisable value. Cost is determined using

the weighted-average method. The cost of finished goods and work-in-process comprises

raw materials, direct labor, other direct costs and related production overheads (allocated

based on normal operating capacity). It excludes borrowing costs. The item-by-item

89

approach is used in applying the lower of cost and net realisable value. Net realisable value

is the estimated selling price in the ordinary course of business, less the estimated cost of

completion and applicable variable selling expenses.

(13) Non-current assets held for sale

Non-current assets are classified as assets held for sale when their carrying amount is to be

recovered principally through a sale transaction rather than through continuing use, and a

sale is considered highly probable. They are stated at the lower of carrying amount and fair

value less costs to sell.

(14) Investments accounted for using equity method / associates

A. Associates are all entities over which the Group has significant influence but not control.

In general, it is presumed that the investor has significant influence, if an investor holds,

directly or indirectly 20 percent or more of the voting power of the investee. Investments

in associates are accounted for using equity method and are initially recognised at cost.

B. The Group’s share of its associates’ post-acquisition profits or losses is recognised in

profit or loss, and its share of post-acquisition movements in other comprehensive

income is recognised in other comprehensive income. When the Group’s share of losses

in an associate equals or exceeds its interest in the associate, including any other

unsecured receivables, the Group does not recognise further losses, unless it has incurred

legal or constructive obligations or made payments on behalf of the associate.

C. When changes in an associate’s equity that are not recognised in profit or loss or other

comprehensive income of the associate and such changes not affecting the Group’s

ownership percentage of the associate, the Group recognises change in ownership

interests in the associate in ‘capital surplus’ in proportion to its ownership.

D. Unrealised gains on transactions between the Group and its associates are eliminated to

the extent of the Group’s interest in the associates. Unrealised losses are also eliminated

unless the transaction provides evidence of an impairment of the asset transferred.

Accounting policies of associates have been adjusted where necessary to ensure

consistency with the policies adopted by the Group.

E. In the case that an associate issues new shares and the Group does not subscribe or

acquire new shares proportionately, which results in a change in the Group’s ownership

percentage of the associate but maintains significant influence on the associate, then

‘capital surplus’ and ‘investments accounted for using equity method’ shall be adjusted

for the increase or decrease of its share of equity interest. If the above condition causes a

decrease in the Group’s ownership percentage of the associate, in addition to the above

adjustment, the amounts previously recognised in other comprehensive income in

relation to the associate are reclassified to profit or loss proportionately on the same basis

as would be required if the relevant assets or liabilities were disposed of.

(15) Property, plant and equipment

A. Property, plant and equipment are initially recorded at cost. Borrowing costs incurred

during the construction period are capitalised.

B. Subsequent costs are included in the asset’s carrying amount or recognised as a separate

asset, as appropriate, only when it is probable that future economic benefits associated

90

with the item will flow to the Group and the cost of the item can be measured reliably.

The carrying amount of the replaced part is derecognised. All other repairs and

maintenance are charged to profit or loss during the financial period in which they are

incurred.

C. Land is not depreciated. Other property, plant and equipment apply cost model and are

depreciated using the straight-line method to allocate their cost over their estimated

useful lives. If 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 must be depreciated separately.

D. The assets’ residual values, useful lives and depreciation methods are reviewed, and

adjusted if appropriate, at each financial year-end. If expectations for the assets’ residual

values and useful lives differ from previous estimates or the patterns of consumption of

the assets’ future economic benefits embodied in the assets have changed significantly,

any change is accounted for as a change in estimate under IAS 8, ‘Accounting Policies,

Changes in Accounting Estimates and Errors’, from the date of the change. The estimated

useful lives of property, plant and equipment are as follows:

Buildings 10 ~ 50 years

Machinery 8 ~ 10 years

Utility facilities 6 ~ 25 years

Pollution prevention facilities 8 ~ 20 years

Transportation equipment 3 ~ 5 years

Office equipment 3 ~ 7 years

Other equipment 3 ~ 25 years

(16) Leased assets/ leases (lessee)

Payments net of any incentives received from the lessor made under an operating lease are

recognised in profit or loss on a straight-line basis over the lease term.

(17) Intangible assets

Intangible assets, mainly computer software, is stated at cost and amortised on a straight-line

basis over its estimated useful lives of 2~10 years.

(18) Impairment of non-financial assets

The Group assesses at each balance sheet date the recoverable amounts of those assets where

there is an indication that they are impaired. An impairment loss is recognised for the

amount by which the asset’s carrying amount exceeds its recoverable amount. The

recoverable amount is the higher of an asset’s fair value less costs to sell or value in use.

When the circumstances or reasons for recognizing impairment loss for an asset in prior

years no longer exist or diminish, the impairment loss is reversed. The increased carrying

amount due to reversal should not be more than what the depreciated or amortised historical

cost would have been if the impairment had not been recognised.

(19) Borrowings

A. Borrowings are recognised initially at fair value, net of transaction costs incurred.

Borrowings are subsequently stated at amortised cost; any difference between the

proceeds (net of transaction costs) and the redemption value is recognised in profit or loss

over the period of the borrowings using the effective interest method.

91

B. Fees paid on the establishment of loan facilities are recognised as transaction costs of the

loan to the extent that it is probable that some or all of the facility will be drawn down. In

this case, the fee is deferred until the draw-down occurs. To the extent there is no

evidence that it is probable that some or all of the facility will be drawn down, the fee is

capitalised as a pre-payment for liquidity services and amortised over the period of the

facility to which it relates.

(20) Notes and accounts payable

Notes and accounts payable are obligations to pay for goods or services that have been

acquired in the ordinary course of business from suppliers. They are recognised initially at

fair value and subsequently measured at amortised cost using the effective interest method.

However, short-term accounts payable without bearing interest are subsequently measured at

initial invoice amount as the effect of discounting is immaterial.

(21) Financial liabilities at fair value through profit or loss

Financial liabilities at fair value through profit or loss are financial liabilities held for trading.

Financial liabilities are classified in this category of held for trading and are initially

recognised at fair value. Derivatives are also categorized as financial liabilities held for

trading unless they are designated as hedges. Related transaction costs are expensed in profit

or loss. These financial liabilities are subsequently remeasured and stated at fair value, and

any changes in the fair value of these financial liabilities are recognised in profit or loss.

(22) Derecognition of financial liabilities

A financial liability is derecognised when the obligation under the liability specified in the

contract is discharged or cancelled or expires.

(23) Offsetting financial instruments

Financial assets and liabilities are offset and reported in the net amount in the balance sheet

when there is a legally enforceable right to offset the recognised amounts and there is an

intention to settle on a net basis or realise the asset and settle the liability simultaneously.

(24) Derivative financial instruments

Derivatives are initially recognised at fair value on the date a derivative contract is entered

into and are subsequently remeasured at their fair value. Any changes in the fair value are

recognised in profit or loss.

(25) Provisions

Provisions, mainly warranties, are recognised when the Group has a present legal or

constructive obligation as a result of past events, and it is probable that an outflow of

economic resources will be required to settle the obligation and the amount of the obligation

can be reliably estimated. Provisions are measured at the present value of the expenditures

expected to be required to settle the obligation on the balance sheet date, which is discounted

using a pre-tax discount rate that reflects the current market assessments of the time value of

money and the risks specific to the obligation. When discounting is used, the increase in the

provision due to passage of time is recognised as interest expense. Provisions are not

recognised for future operating losses.

(26) Employee benefits

A. Short-term employee benefits

92

Short-term employee benefits are measured at the undiscounted amount of the benefits

expected to be paid in respect of service rendered by employees in a period and should be

recognised as expenses in that period when the employees render service.

B. Pensions

(a) Defined contribution plans

For defined contribution plans, the contributions are recognised as pension expenses

when they are due on an accrual basis. Prepaid contributions are recognised as an

asset to the extent of a cash refund or a reduction in the future payments.

(b) Defined benefit plans

i. Net obligation under a defined benefit plan is defined as the present value of an

amount of pension benefits that employees will receive on retirement for their

services with the Group in current period or prior periods. The liability recognised

in the balance sheet in respect of defined benefit pension plans is the present value

of the defined benefit obligation at the balance sheet date less the fair value of plan

assets. The defined benefit net obligation is calculated annually by independent

actuaries using the projected unit credit method. The rate used to discount is

determined by using interest rates of government bonds (at the balance sheet date)

that are denominated in the currency in which the benefits will be paid, and that

have terms to maturity appoximating to the terms of the related pension liability.

ii. Remeasurement arising on defined benefit plans are recognised in other

comprehensive income in the period in which they arise and are recorded as

retained earnings.

C. Termination benefits

Termination benefits are employee benefits provided in exchange for the termination of

employment as a result from either the Group’s decision to terminate an employee’s

employment before the normal retirement date, or an employee’s decision to accept an

offer of redundancy benefits in exchange for the termination of employment. The Group

recognises expense as it can no longer withdraw an offer of termination benefits or it

recognises relating restructuring costs, whichever is earlier. Benefits that are expected to

be due more than 12 months after balance sheet date shall be discounted to their present

value.

D. Employees’, directors’ and supervisors’ remuneration

Employees’ remuneration and directors’ and supervisors’ remuneration are recognised as

expenses and liabilities, provided that such recognition is required under legal obligation

or constructive obligation and those amounts can be reliably estimated. Any difference

between the resolved amounts and the subsequently actual distributed amounts is

accounted for as changes in estimates.

(27) Employee share-based payment

For the equity-settled share-based payment arrangements, the employee services received

are measured at the fair value of the equity instruments granted at the grant date, and are

recognised as compensation cost over the vesting period, with a corresponding adjustment to

equity. The fair value of the equity instruments granted shall reflect the impact of market

93

vesting conditions and non-market vesting conditions. Compensation cost is subject to

adjustment based on the service conditions that are expected to be satisfied and the estimates

of the number of equity instruments that are expected to vest under the non-market vesting

conditions at each balance sheet date. And ultimately, the amount of compensation cost

recognised is based on the number of equity instruments that eventually vest.

(28) Income tax

A. The tax expense for the period comprises current and deferred tax. Tax is recognised in

profit or loss, except to the extent that it relates to items recognised in other

comprehensive income or items recognised directly in equity, in which cases the tax is

recognised in other comprehensive income or equity.

B. The current income tax charge is calculated on the basis of the tax laws enacted or

substantively enacted at the balance sheet date in the countries where the Company and

its subsidiaries operate and generate taxable income. Management periodically evaluates

positions taken in tax returns with respect to situations in accordance with applicable tax

regulations. It establishes provisions where appropriate based on the amounts expected to

be paid to the tax authorities. An additional 10% tax is levied on the unappropriated

retained earnings and is recorded as income tax expense in the year the stockholders

resolve to retain the earnings.

C. Deferred tax is recognised, using the balance sheet liability method, on temporary

differences arising between the tax bases of assets and liabilities and their carrying

amounts in the consolidated balance sheets. Deferred tax is provided on temporary

differences arising on investments in subsidiaries, except where the timing of the reversal

of the temporary difference is controlled by the Group and it is probable that the

temporary difference will not reverse in the foreseeable future. Deferred tax is

determined using tax rates (and laws) that have been enacted or substantially enacted by

the balance sheet date and are expected to apply when the related deferred tax asset is

realised or the deferred tax liability is settled.

D. Deferred tax assets are recognised only to the extent that it is probable that future taxable

profit will be available against which the temporary differences can be utilised. At each

balance sheet date, unrecognised and recognised deferred tax assets are reassessed.

E. Current income tax assets and liabilities are offset and the net amount reported in the

balance sheet when there is a legally enforceable right to offset the recognised amounts

and there is an intention to settle on a net basis or realise the asset and settle the liability

simultaneously. Deferred tax assets and liabilities are offset on the balance sheet

when the entity has the legally enforceable right to offset current tax assets against

current tax liabilities and they are levied by the same taxation authority on either the

same entity or different entities that intend to settle on a net basis or realise the asset and

settle the liability simultaneously.

F. A deferred tax asset shall be recognised for the carryforward of unused tax credits

resulting from research and development expenditures to the extent that it is possible that

future taxable profit will be available against which the unused tax credits can be utilised.

94

(29) Share capital

A. Ordinary shares are classified as equity. Incremental costs directly attributable to the issue

of new shares or stock options are shown in equity as a deduction, net of tax, from the

proceeds.

B. Where the Company repurchases the Company’s equity share capital that has been issued,

the consideration paid, including any directly attributable incremental costs (net of

income taxes) is deducted from equity attributable to the Company’s equity holders.

Where such shares are subsequently reissued, the difference between their book value

and any consideration received, net of any directly attributable incremental transaction

costs and the related income tax effects, is included in equity attributable to the

Company’s equity holders.

(30) Dividends

Dividends are recorded in the Company’s financial statements in the period in which they

are approved by the Company’s shareholders. Cash dividends are recorded as liabilities.

(31) Revenue recognition

A. Sales of goods

Revenue is measured at the fair value of the consideration received or receivable taking

into account of business tax, returns, rebates and discounts for the sale of goods to

external customers in the ordinary course of the Group’s activities. Revenue arising from

the sales of goods is recognised when the Group has delivered the goods to the customer,

the amount of sales revenue can be measured reliably and it is probable that the future

economic benefits associated with the transaction will flow to the entity. The delivery of

goods is completed when the significant risks and rewards of ownership have been

transferred to the customer, the Group retains neither continuing managerial involvement

to the degree usually associated with ownership nor effective control over the goods sold,

and the customer has accepted the goods based on the sales contract or there is objective

evidence showing that all acceptance provisions have been satisfied.

B. Sales of services

Revenue from delivering services is recognised under the percentage-of-completion

method when the outcome of services provided can be estimated reliably. The stage of

completion of a service contract is measured by the percentage of the actual services

performed as of the financial reporting date to the total services to be performed. If the

outcome of a service contract cannot be estimated reliably, contract revenue should be

recognised only to the extent that contract costs incurred are likely to be recoverable.

C. A sale agreement comprising of multiple components A sale agreement offered by the Group might comprise of multiple components, including sale of goods and subsequent repair services, etc. If a sale agreement comprises of multiple identifiable components, the fair value of the consideration received or receivable in respect of the sale agreement shall be allocated between those components based on the relative fair value of each component. The amount of proceeds allocated to each component is recognised as revenue in profit or loss following the revenue recognition criteria applied to each component. The fair value of each component is determined by its market value when it is sold separately.

95

(32) Operating segments

Operating segments are reported in a manner consistent with the internal reporting provided

to the chief operating decision-maker. The Group’s chief operating decision-maker, who is

responsible for allocating resources and assessing performance of the operating segments,

has been identified as the Board of Directors that makes strategic decisions.

5. CRITICAL ACCOUNTING JUDGEMENTS, ESTIMATES AND KEY SOURCES OF

ASSUMPTION UNCERTAINTY

The preparation of these consolidated financial statements requires management to make critical

judgements in applying the Group’s accounting policies and make critical assumptions and

estimates concerning future events. Assumptions and estimates may differ from the actual results

and are continually evaluated and adjusted based on historical experience and other factors. Such

assumptions and estimates have a significant risk of causing a material adjustment to the carrying

amounts of assets and liabilities within the next financial year; and the related information is

addressed below:

(1) Critical judgements in applying the Group’s accounting policies

Financial assets—impairment of equity investments

The Group follows the guidance of IAS 39 to determine whether a financial asset—equity

investment is impaired. This determination requires significant judgement. In making this

judgement, the Group evaluates, among other factors, the duration and extent to which the fair

value of an equity investment is less than its cost and the financial health of and short-term

business outlook for the investee, including factors such as industry and sector performance,

changes in technology and operational and financing cash flow.

If the decline of the fair value of an individual equity investment below cost was considered

significant or prolonged, the Group would suffer a loss in its financial statements, being the

transfer of the accumulated fair value adjustments recognised in other comprehensive income

on the impaired available-for-sale financial assets to profit or loss or being the recognition of

the impairment loss on the impaired financial assets measured at cost in profit or loss. As of

December 31, 2015, the Group recognised loss of $756 in its financial statements.

(2) Critical accounting estimates and assumptions

A. Impairment assessment of tangible and intangible assets (excluding goodwill)

The Group assesses impairment based on its subjective judgement and determines the

separate cash flows of a specific group of assets, useful lives of assets and the future

possible income and expenses arising from the assets depending on how assets are utilised

and industrial characteristics. Any changes of economic circumstances or estimates due to

the change of Group strategy might cause material impairment on assets in the future.

As of December 31, 2015, the Group has recognised impairment loss on the tangible and

intangible assets to $37,927.

B. Impairment assessment of investments accounted for using equity method

The Group assesses the impairment of an investment accounted for using equity method as

soon as there is any indication that it might have been impaired and its carrying amount

cannot be recoverable. The Group assesses the recoverable amounts of an investment

accounted for using equity method based on the present value of the Group’s share of

96


Cash on hand 521$ 797$ Checking demand deposits 867,779 937,678 Cash equivalents -Time deposits 2,586,562 2,279,733

-Resale bonds 465,000 622,000

3,919,862$ 3,840,208$

Items December 31, 2015 December 31, 2014

Current items: Financial assets held for trading Funds 620,000$ 460,000$ Valuation adjustment of financial assets held for trading

Funds 5,462 2,413

Total 625,462$ 462,413$

Valuation adjustment of financial liabilities held for trading Forward exchange contracts $ - $ 2,492

expected future cash flows of the investee and analyses the reasonableness of related

assumptions.

As of December 31, 2015, the Group has not recognised any impairment loss on its

investments accounted for using equity method.

C. Financial assets—fair value measurement of unlisted stocks without active market

The fair value of unlisted stocks held by the Group that are not traded in an active market

is determined considering those companies’ recent funding raising activities and technical

development status, fair value assessment of other companies of the same type, market

conditions and other economic indicators existing on balance sheet date. Any changes in

these judgements and estimates will impact the fair value measurement of these unlisted

stocks. Please refer to Note 12(3) for the financial instruments fair value information.

As of December 31, 2015, the carrying amount of unlisted stocks without active markets

was $562,108.

6. DETAILS OF SIGNIFICANT ACCOUNTS

(1) Cash and cash equivalents

A. The Group transacts with a variety of financial institutions all with high credit quality to

disperse credit risk, so it expects that the probability of counterparty default is remote.

B. The Group has no cash and cash equivalents pledged to others.

(2) Financial assets and financial liabilities at fair value through profit or loss

A. The Group recognised net gain of $5,541, and $808 on financial assets held for trading for

the years ended December 31, 2015 and 2014, respectively.

B. The non-hedging derivative instrument transactions and contract information are as

follows:

97

Derivative Instruments Contract Period

Current items: Forward exchange contracts USD 3,000$ 2014.11.19~2015.01.20

December 31, 2014

Contract Amount

(Notional Principal)

Items December 31, 2015 December 31, 2014

Non-current items: Listed stocks 11,988$ 35,414$ Unlisted stocks 571,857 572,621

Subtotal 583,845 608,035 Valuation adjustment of available -for-sale financial assets 22,839 14,751

Total606,684$ 622,786$


Accounts receivable 1,537,539$ 1,720,927$

Less: Allowance for doubtful accounts 101,111)( 100,337)(

1,436,428$ 1,620,590$


Up to 180 days 80,847$ 117,208$ 181 to 365 days 22,184 14,479 Over 365 days 47,075 46,667

150,106$ 178,354$

As of December 31, 2015: None.

The Group entered into forward exchange contracts to sell USD and buy TWD to hedge

exchange rate risk of export proceeds. However, these forward exchange contracts are not

accounted for under hedge accounting.

C. The Group has no financial assets at fair value through profit or loss pledged to others.

(3) Available-for-sale financial assets

A. The Group recognised $8,088 and $31,893 in other comprehensive income for fair value

change for the years ended December 31, 2015 and 2014, respectively.

B. As of December 31, 2015, the Group recognised impairment loss of $756 (shown as

“Other gains and losses”) on its investment in Jin Misa Technology Co., Ltd.. And as of

December 31, 2014, the Group recognised impairment loss of $16,776 (shown as “Other

gains or losses”) on its investment in United Radiant Technology Corp. Since the values of

these companies have been impaired, and recovery were unlikely.

(4) Accounts receivable

A. The Group’s accounts receivable that were neither past due nor impaired had good credit

quality.

B. The ageing analysis of accounts receivable that were overdue but not impaired is as

follows:

The above ageing analysis was based on past due date.

98

Individual provision Group provision

At January 1 57,168$ 43,169$

Provision for impairment 627 12,684

Reversal of impairment - 780)( Write-offs during the period 11,082)( - Effects of exchange rate - 675)(

At December 31 46,713$ 54,398$

2015

Individual provision Group provision

At January 1 55,700$ 63,049$

Provision for impairment 1,468 -

Reversal of impairment - 14,815)( Write-offs during the period - 6,185)( Effects of exchange rate - 1,120

At December 31 57,168$ 43,169$

2014

Cost Allowance forvaluation loss Book value

Raw materials 525,650$ 251,051)($ 274,599$ Supplies 206,822 21,479)( 185,343 Work in process 374,607 18,682)( 355,925 Semi-finished goods 210,817 118,143)( 92,674 Finished goods 298,573 62,910)( 235,663

Total 1,616,469$ 472,265)($ 1,144,204$

December 31, 2015

Cost Allowance forvaluation loss Book value

Raw materials 532,757$ 250,887)($ 281,870$ Supplies 207,244 22,381)( 184,863 Work-in-process 323,186 13,763)( 309,423 Semi-finished goods 188,270 93,322)( 94,948 Finished goods 419,103 72,146)( 346,957

Total 1,670,560$ 452,499)($ 1,218,061$

December 31, 2014

C. Movements analysis of financial assets that were impaired are as follows: (a) As of December 31, 2015 and 2014, accounts receivable that had been individual

provision impaired were $46,713 and $57,168, respectively. (b) Movements on the Group’s provision for impairment of accounts receivable are as

follows:

D. The Group does not hold any collateral as security.

(5) Inventories

The cost of inventories recognised as expense for the years ended December 31, 2015 and 2014 was $4,111,004 and $4,645,461, respectively, including the amounts of $21,963 and $17,922, respectively, that the Group wrote down from cost to net realisable value accounted for as ‘cost of goods sold’.

99

2015 2014

At January 1 427,435$ 359,052$ Additional investments accounted for using equity method

- 74,429

Share of profit of investment accounted for using quity method

25,998 25,835

Earnings distribution of investments accounted for using equity method

20,311)( 30,467)(

Change in capital reserve - 1,861)( Change in other equity items (Note 6(20)) 207)( 420 Gain on disposal of investments - 27

At December 31 432,915$ 427,435$

Associated enterprises December 31, 2015 December 31, 2014

Viking Tech Corporation 432,915$ 427,435$ VML TECHNOLOGIES B.V. - -

432,915$ 427,435$


Current assets 2,006,010$ 2,126,474$ Non-current assets 1,394,767 1,328,735 Current liabilities 801,836)( 874,313)(

Non-current liabilities 97,225)( 110,386)(

Total net assets 2,501,716$ 2,470,510$

Viking Tech Corporation

2015 2014

Revenue 1,549,394$ 1,437,079$

Profit for the period from continuing operations 149,715$ 148,095$

Profit for the period from discontinued operations - - Other comprehensive income- net of tax 1,169)( 2,661

Total comprehensive income 148,546$ 150,756$

Dividends received from joint venture

-$ -$

Viking Tech Corporation


(6) Investments accounted for using equity method

A. The summarized financial information of the associates that are material to the Group is as

follows:

B. The Group’s investment in Viking Tech Corporation has quoted market price. The fair

value of Viking Tech Corporation as of December 31, 2015 and 2014 was $513,874 and

$480,361, respectively.

C. The Company invested directly and indirectly through its subsidiaries to Viking Tech

Corporation totaling 17.30% of the total ownership, which does not exceed 20%. However,

the Company has the highest ownership percentage and is represented by two directors in

100

Viking Tech Corporation. As a result of the significant influence, the Group’s investment

in Viking Tech Corporation is accounted for using equity method.

D. On September 22, 2015, the Group and GuangDon Fenghua Advanced Technology

Holding Co., Ltd. (“Fenghua”) have signed a tender offer agreement for Viking Tech

Corporation’s 20,311 thousand shares held by the Group and Fenghua is expecting to

acquire 35%~40% of Viking Tech Corporation’s outstanding ordinary shares at a public

tender offer price of $29.8 per share. Fenghua will file for declaration of the public tender

offer to the competent authority in charge of securities after receiving approvals from the

competent authority in charge of investments in Taiwan and related competent authorities

in Mainland China, and will officially initiate the public tender offer from the date of

declaration. If Fenghua does not receive necessary approvals, it will not initiate the public

tender offer.

When Fenghua or designated person proceeds with the public tender offer, the Group’s

shares in Viking Tech Corporation should be sold under conditions and selling price stated

in the tender offer agreement, along with limits allowed by regulations. Agreements

between the Group and Fenghua are as follows:

(a) If the amount of shareholders’ shares to be sold does not reach the expected acquiring

amount during the public tender offer period, the Group does not have obligation to

complete settlement in accordance with the agreement.

(b) If the amount of shareholders’ shares to be sold reaches the minimum acquiring amount

but not reach the expected acquiring amount, Fenghua will acquire all shares for the

amount to be sold.

(c) If the amount of shareholders’ shares to be sold exceeds the expected acquiring amount,

Fenghua will acquire from each shareholder for the amount proportionate to the

shareholder’s shareholding ratio (that is, the Group will not sell all its shares it wishes

to sell).

Fenghua has obtained approval from the Investment Commission of the Ministry of

Economic Affairs on December 29, 2015. However, the public tender offer will not be

initiated during the tender offer period until the offer is approved by authorities in charge

of securities. If Fenghua do not declare the public tender offer during the effective period

stated in the approval letter, the Group will not be able to sell all its shares in Viking Tech

Corporation to Fenghua.

101

Construction inPollution progress and

Utility prevention Transportation Office Other prepayment for At January 1, 2015 Buildings Machinery facilities facilities equipment equipment equipment equipment Total

Cost 2,405,338$ 5,889,255$ 1,094,708$ 638,006$ 14,810$ 79,136$ 1,737,425$ 124,063$ 11,982,741$ Accumulated depreciation 925,524)( 3,721,459)( 891,829)( 550,698)( 11,180)( 69,150)( 1,353,256)( - 7,523,096)( Accumulated impairment 93,636)( 966,924)( - - 424)( 33)( 216)( - 1,061,233)(

1,386,178$ 1,200,872$ 202,879$ 87,308$ 3,206$ 9,953$ 383,953$ 124,063$ 3,398,412$

2015

Opening net book amount 1,386,178$ 1,200,872$ 202,879$ 87,308$ 3,206$ 9,953$ 383,953$ 124,063$ 3,398,412$ Additions 25,408 40,247 17,930 4,681 2,060 7,648 23,660 322,451 444,085 Disposals - 248)( - - 1,459)( 59)( 28)( - 1,794)( Reclassifications 5,049 153,531 1,563 1,301 786 1,458 21,011 196,240)( 11,541)( Reclassification to non-current assets held for sale

166,736)( 28,572)( 65,326)( - - 16)( 4,875)( 18,686)( 284,211)(

Depreciation expense 69,528)( 256,547)( 14,294)( 8,508)( 990)( 4,397)( 43,167)( - 397,431)( Reversal of impairment loss - 16,160 1,520)( - - 1,456)( 1,985)( - 11,199 Net exchange differences 8,503)( 1,279)( 1,518)( - 29)( 30)( 148)( 453)( 11,960)(

Closing net book amount 1,171,868$ 1,124,164$ 139,714$ 84,782$ 3,574$ 13,101$ 378,421$ 231,135$ 3,146,759$

At December 31, 2015Cost 2,143,278$ 4,744,375$ 1,046,673$ 643,988$ 10,394$ 79,071$ 1,774,667$ 231,135$ 10,673,581$ Accumulated depreciation 971,351)( 3,608,716)( 905,449)( 559,206)( 6,757)( 64,490)( 1,394,058)( - 7,510,027)( Accumulated impairment 59)( 11,495)( 1,510)( - 63)( 1,480)( 2,188)( - 16,795)(

1,171,868$ 1,124,164$ 139,714$ 84,782$ 3,574$ 13,101$ 378,421$ 231,135$ 3,146,759$

(7) Property, plant and equipment

102

Construction inPollution progress and

Utility prevention Transportation Office Other prepayment for At January 1, 2014 Buildings Machinery facilities facilities equipment equipment equipment equipment Total

Cost 2,377,411$ 5,701,376$ 1,079,152$ 631,209$ 15,538$ 73,918$ 1,708,328$ 105,544$ 11,692,476$ Accumulated depreciation 840,155)( 3,478,331)( 875,701)( 540,177)( 10,888)( 65,613)( 1,311,450)( - 7,122,315)( Accumulated impairment 59)( 968,247)( - - 423)( 33)( 216)( - 968,978)(

1,537,197$ 1,254,798$ 203,451$ 91,032$ 4,227$ 8,272$ 396,662$ 105,544$ 3,601,183$

2014Opening net book amount 1,537,197$ 1,254,798$ 203,451$ 91,032$ 4,227$ 8,272$ 396,662$ 105,544$ 3,601,183$ Additions 4,683 17,438 12,492 4,353 110 5,956 19,020 224,801 288,853 Disposals - 353)( 4)( - - 46)( 94)( - 497)( Reclassifications 667 199,215 382 2,444 - - 11,692 206,295)( 8,105 Depreciation expense 79,705)( 273,654)( 15,541)( 10,521)( 985)( 4,291)( 43,474)( - 428,171)( Impairment loss 93,184)( 1,275 - - - - - 91,909)( Net exchange differences 16,520 2,153 2,099 - 146)( 62 147 13 20,848

Closing net book amount 1,386,178$ 1,200,872$ 202,879$ 87,308$ 3,206$ 9,953$ 383,953$ 124,063$ 3,398,412$

At December 31, 2014Cost 2,405,338$ 5,889,255$ 1,094,708$ 638,006$ 14,810$ 79,136$ 1,737,425$ 124,063$ 11,982,741$ Accumulated depreciation 925,524)( 3,721,459)( 891,829)( 550,698)( 11,180)( 69,150)( 1,353,256)( - 7,523,096)( Accumulated impairment 93,636)( 966,924)( - - 424)( 33)( 216)( - 1,061,233)(

1,386,178$ 1,200,872$ 202,879$ 87,308$ 3,206$ 9,953$ 383,953$ 124,063$ 3,398,412$

103

2015 2014

Amount capitalised $ 740 $ 763

Interest rate 0.30%~0.63% 0.52%~0.94%


Software

At January 1, 2015Cost 33,099$ Accumulated amortisation 20,169)(

12,930$

2015

Opening net book amount 12,930$ Additions 11,026 Amortisation expense 13,563)( Impairment loss 453)( Net exchange differences 8)(

Closing net book amount 9,932

At December 31, 2015Cost 33,799$ Accumulated amortisation 23,417)( Accumulated impairment 450)(

9,932$

Software

At January 1, 2014Cost 36,726$ Accumulated amortisation 23,228)(

13,498$

2014

Opening net book amount 13,498$ Additions 11,042 Amortisation expense 11,628)( Net exchange differences 18

Closing net book amount 12,930

At December 31, 2014Cost 33,099$ Accumulated amortisation 20,169)(

12,930$

A. Amount of borrowing costs capitalised as part of property, plant and equipment and the

range of the interest rates for such capitalisation are as follows:

B. Information about the property, plant and equipment that were pledged to others as

collaterals is provided in Note 8.

(8) Intangible assets

104

2015 2014Operating costs 4,040$ 3,305$ Selling expenses 721 865 General and administration expenses 6,139 4,552

Research and development expenses 2,663 2,906

Total 13,563$ 11,628$



Land-use rights 14,755$ 77,116$

Type of loans December 31, 2015 December 31, 2014

Unsecured bank loans 917,151$ 924,225$

Interest rate range 0.66%~7.20% 0.65%~7.20%


Accounts payable 601,497$ 742,323$ Estimated accounts payable 10,242 27,683

611,739$ 770,006$

Details of amortisation on intangible assets are as follows:

(9) Non-current assets held for sale

A. The Group has signed a facility agreement and received the deposits from Raystar

Optronics, Inc. in December, 2015. The facilities have been reclassified as disposal group

held for sale. The completion date for the transaction is expected by June, 2016. The assets

of the disposal group held for sale as at December 31, 2015 amounted to $28,572.

Reversal of impairment of $19,212 was recognised in other gains and losses as a result of

the remeasurement of the disposal group held for sale at the lower of its carrying amount

or fair value less costs to sell. Information relating to fair value is provided in Note 12(3).

B. The buildings, utility facilities and land-use rights related to Opto Tech Semiconductor

(Ningbo) Co., Ltd. have been reclassified as disposal group held for sale following the

approval of the Company’s Board of Directors on March 23, 2015 to sell to a non-related

party. The completion date for the transaction is on May, 2015. Impairment loss of $28,945

was recognised in other gains and losses as a result of the remeasurement of the disposal

group held for sale at the lower of its carrying amount or fair value less costs to sell.

(10) Long-term prepaid rents (shown as “Other non-current assets”)

(11) Short-term loans

Please refer to Note 8 for details of the collateral.

(12) Accounts payable

105

Interest rate

Type of loans Credit line Period range

Syndicated loans with 10 financial institutions including Taiwan Cooperative Bank

$ 2,000,000 2012.12.06~2017.12.06

1.3807%~1.9027%

1,214,625$

Chinatrust Commercial Bank 850,000 2011.03.29~2016.03.29

1.6058%~1.6800%

24,118

1,238,743 224,118)(

1,014,625$

Interest rate Type of loans Credit line Period range

Syndicated loans with 10 financial institutions including Taiwan Cooperative Bank

$ 2,000,000 2012.12.06~2017.12.06

1.5539%~2.4842%

1,412,300$

Chinatrust Commercial Bank 850,000 2011.03.29~2016.03.29

1.6580%~1.6980%

120,589

1,532,889 296,471)(

1,236,418$

December 31,2015

Less: Current portion (shown as “Other non-current liabilities”)

December 31,2014

Less: Current portion (shown as “Other non-current liabilities”)

(13) Long-term loans

A. Pursuant to the syndicated loan facility agreement entered into by the Company with Taiwan

Cooperative Bank and 9 other banks, the Company is required to maintain certain financial

ratios during the period of the syndicated loan facility agreement. Please refer to Note 9.

B. Please refer to Note 8 for details of the collateral.

(14) Pensions

A. (a) The Company and CS Bright Corporation have a defined benefit pension plan in

accordance with the Labor Standards Law, covering all regular employees’ service

years prior to the enforcement of the Labor Pension Act on July 1, 2005 and service

years thereafter of employees who chose to continue to be subject to the pension

mechanism under the Law. Under the defined benefit pension plan, two units are

accrued for each year of service for the first 15 years and one unit for each additional

year thereafter, subject to a maximum of 45 units. Pension benefits are based on the

number of units accrued and the average monthly salaries and wages of the last 6

months prior to retirement. The Company and CS Bright Corporation contribute

monthly an amount equal to 4.88% and 2% of the employees’ monthly salaries and

wages to the retirement fund deposited with Bank of Taiwan, the trustee, under the

name of the independent retirement fund committee. Before the end of each year, the

Company and CS Bright Corporation would assess the balance in the aforementioned

labor pension reserve account. If the account balance is insufficient to pay the pension

calculated by the aforementioned method, to the labors expected to be qualified for

retirement next year, the Company and CS Bright Corporation will make contribution

to cover the deficit before the end of March of the next year.

106


Present value of funded defined benefit obligation

583,005$ 590,381$

Fair value of plan assets 322,908)( 261,655)(

Net defined benefit liability 260,097$ 328,726$

Present value ofdefined benefit Fair value of Net defined

obligations plan assets benefit liability

2015Balance at January 1 590,381$ 261,655)($ 328,726$ Current service cost 9,818 - 9,818 Interest (expense) income 13,282 5,886)( 7,396

613,481 267,541)( 345,940

Remeasurements: Return on plan assets (excluding amounts included in interest income or expense) - 1,130)( 1,130)( Change in demographic assumptions 893 - 893 Change in financial assumptions 45,914 - 45,914 Experience adjustments 62,156)( - 62,156)(

15,349)( 1,130)( 16,479)(

Pension fund contribution - 69,364)( 69,364)( Paid pension 15,127)( 15,127 -

Balance at December 31 583,005$ 322,908)($ 260,097

Present value ofdefined benefit Fair value of Net defined

obligations plan assets benefit liability

2014Balance at January 1 589,011$ 250,583)($ 338,428$ Current service cost 10,279 - 10,279 Interest (expense) income 11,781 5,012)( 6,769

611,071 255,595)( 355,476

Remeasurements: Return on plan assets (excluding amounts included in interest income or expense) - 837)( 837)( Change in demographic assumptions 4)( - 4)( Change in financial assumptions 13,906)( - 13,906)( Experience adjustments 2,778 - 2,778

11,132)( 837)( 11,969)(

Pension fund contribution - 14,781)( 14,781)( Paid pension 9,558)( 9,558 -

Balance at December 31 590,381$ 261,655)($ 328,726

(b) The amounts recognised in the balance sheet are as follows:

(c) Movements in net defined benefit liabilities are as follows:

107

2015 2014

Discounted rate 1.25%~1.75% 2.125%~2.25%Future salary increases 2.25%~3.00% 2.25%~3.00%


Increase0.25%~0.5%

Decrease0.25%~0.5%

Increase0.25%~0.5%

Decrease0.25%~0.5%

December 31, 2015Effect on present value of defined benefit obligations 24,521)($ 27,823$ 27,179$ 24,239)($

December 31, 2014Effect on present value of defined benefit obligations 22,927)($ 28,725$ 28,355$ 22,883)($

Discount rate Future salary increases

(d) The Bank of Taiwan was commissioned to manage the Fund of the Company’s and

CS Bright Corporation’s defined benefit pension plan in accordance with the Fund’s

annual investment and utilisation plan and the “Regulations for Revenues,

Expenditures, Safeguard and Utilisation of the Labor Retirement Fund” (Article 6:

The scope of utilisation for the Fund includes deposit in domestic or foreign financial

institutions, investment in domestic or foreign listed, over-the-counter, or private

placement equity securities, investment in domestic or foreign real estate

securitization products, etc.). With regard to the utilisation of the Fund, its minimum

earnings in the annual distributions on the final financial statements shall be no less

than the earnings attainable from the amounts accrued from two-year time deposits

with the interest rates offered by local banks. If the earning is less than

aforementioned rates, government shall make payment for the deficit after authorized

by the Regulator. The Company has no right to participate in managing and operating

that fund and hence the Company is unable to disclose the classification of plan asset

fair value in accordance with IAS 19 paragraph 142. The constitution of fair value of

plan assets as of December 31, 2015 and 2014 is given in the Annual Labor

Retirement Fund Utilisation Report announced by the government.

(e) The principal actuarial assumptions used were as follows:

Future mortality rate was estimated based on the Taiwan Standard Ordinary

Experience Mortality Table (2012).

Because the main actuarial assumption changed, the present value of defined benefit

obligations is affected. The analysis was as follows:

The sensitivity analysis above is based on other conditions are unchanged but only

one assumption is changed. In practice, more than one assumption may change all at

once. The method of analysing sensitivity and the method of calculate net pension

liability in the balance sheet are the same.

(f) Expected contributions to the defined benefit pension plans of the Group for the year

ended December 31, 2015 amounts to $14,363.

108

Within 1 year 427,946$ 1-2 year(s) 21,955 2-5 years 51,387 Over 5 years 36,108

537,396$

(g) As of December 31, 2015, the Company’s and CS Bright Corporation’s weighted

average duration of that retirement plan is 9 and 15 years, respectively. The analysis

of timing of the future pension payment was as follows:

B. (a) Effective July 1, 2005, the Company and CS Bright Corporation established a funded

defined contribution pension plan (the “New Plan”) under the Labor Pension Act (the

“Act”), covering all regular employees with R.O.C. nationality. Under the New Plan,

the Company and CS Bright Corporation contribute monthly an amount based on 6%

of the employees’ monthly salaries and wages to the employees’ individual pension

accounts at the Bureau of Labor Insurance. The benefits accrued are paid monthly or

in lump sum upon termination of employment.

(b) The Company’s Mainland China subsidiaries, Opto Tech (Suzhou) Co., Ltd., Opto

Plus Technology Co., Ltd. and Opto Tech Semiconductor (Ningbo) Co., Ltd, have

defined contribution plans. Monthly contributions to an independent fund

administered by the government in accordance with the pension regulations in the

People’s Republic of China (P.R.C.) are based on certain percentage of employees’

monthly salaries and wages. The above Mainland China subsidiaries’ contribution

percentage for both the years ended December 31, 2015 and 2014 was 20%, 14% and

14%, respectively. Other than the monthly contributions, the Group has no further

obligations.

(c) The pension costs under defined contribution pension plans of the Group for the years

ended December 31, 2015 and 2014 were $39,847 and $38,100, respectively.

(15) Share-based payment

On November 29, 2007 and August 9, 2010, as a result of setting up rules for the employee

stock options for the years 2007 and 2010, the Company issued 10,000 and 15,000

thousands units of employee stock options on December 21, 2007 and August 26, 2010,

respectively. Each unit could buy one share, and the exercise price is based on the closing

price of the Company’s common stock quoted in the Taiwan Stock Exchange and Taipei

Exchange at the issued date. The exercise price under the stock-based employee

compensation plan is based on the closing price of the Company’s common stock at the

grant date and is subject to adjustments due to changes in the number of common shares and

issuance of cash dividends. The vesting period of the Company’s employee stock option plan

is 7 years. The employees may exercise the stock options in installment within a period of 2

years after the stock options are granted. The Company recognised compensation costs

under the stock-based employee compensation plan for the years ended December 31, 2015

and 2014, amounting to $0 and $5,276, respectively.

109

Weighted- Weighted-average average

No. of shares exercise price No. of shares exercise priceStock options (in thousands) (in dollars) (in thousands) (in dollars)

Options outstanding at beginning of period

11,158 18.40$ 18,285 20.99$

Options exercised - - - - Options revoked 238)( 7,127)(

Options outstanding at end of period 10,920 11,158

Options exercisable at

end of period 10,898 11,098


2015 2014

RemainingNo. of shares vesting period Exercise price No. of shares Exercise price(in thousands) (in years) (in dollars) (in thousands) (in dollars)

10,920 2 17.20$ 10,898 17.20$

December 31, 2015December 31, 2015Stock options outstanding as at Stock options exercisable as at

RemainingNo. of shares vesting period Exercise price No. of shares Exercise price(in thousands) (in years) (in dollars) (in thousands) (in dollars)

11,158 3 18.40$ 11,098 18.40$

Stock options outstanding as at Stock options exercisable as at


WarrantyAt January 1, 2015 59,055$ Additional provisions 26,005 Used during the period 16,468)( Reversal of unused amount 8,670)( Exchange differences 388)(

At December 31, 2015 59,534$

A. Details of the employee stock options are set forth below:

B. Details of the employee stock options outstanding as of December 31, 2015 and 2014 are

set forth below:

On July 2, 2015, the Board of Directors of the Company approved the issuance of

employee stock options authorized in 2010. The exercise price were adjusted from $18.4

to $17.2 on July 27, 2015. On July 9, 2014, the Board of Directors of the Company

approved the issuance of employee stock options authorized in 2010. The exercise price

were adjusted from $19.1 to $18.4 on July 31, 2014.

(16) Provisions

110


Current 10,207$ 11,411$

Non-current 49,327$ 47,644$

Name of company Number ofholding the shares Reason for reacquisition Shares (thousand) Carrying amount

The Company The Company’s shares Subsidiary-Ho Chung held by its subsidiary Investment Co., Ltd. 1,107 26,699$

Name of company Number ofholding the shares Reason for reacquisition Shares (thousand) Carrying amount

The Company The Company’s shares Subsidiary-Ho Chung held by its subsidiary Investment Co., Ltd. 1,107 26,699$

December 31, 2015

December 31, 2014

Analysis of total provisions:

The Group provides warranties on LED products sold. Provision for warranties is estimated

based on historical warranty data of LED products.

(17) Share capital

A. As of December 31, 2015, the Company’s authorized capital was $10,000,000, consisting

of 1,000,000 thousand shares of common stock, and the paid-in capital was $5,456,621,

consisting of 545,662 thousand shares of common stock with a par value of $10 (in

dollars) per share. All proceeds from shares issued have been collected. The number of

the Company’s ordinary shares outstanding are the same for the years ended December

31, 2015 and 2014.

B. Treasury stock

(a) Reason for share reacquisition and movements in the number of the Company’s

treasury shares are as follows:

(b) Pursuant to the R.O.C. Securities and Exchange Law, the number of shares bought

back as treasury share should not exceed 10% of the number of the Company’s issued

and outstanding shares and the amount bought back should not exceed the sum of

retained earnings, paid-in capital in excess of par value and realised capital reserve.

(c) Pursuant to the R.O.C. Securities and Exchange Law, treasury shares should not be

pledged as collateral and is not entitled to dividends before it is reissued to the

employees.

(d) Pursuant to the R.O.C. Securities and Exchange Law, treasury shares should be

reissued to the employees within three years and shares not reissued within the

three-year period are to be retired. Treasury shares to enhance the Company’s credit

rating and the stockholders’ equity should be retired within six months of acquisition.

111

Dividends DividendsAmount per share (in dollars) Amount per share (in dollars)

Legal reserve 56,169$ 42,006$ Special reserve 13,333)( 120,030)( Cash dividends 409,247 0.75$ 327,397 0.60$

Total 452,083$ 249,373$

2014 2013

(18) Capital reserve

Pursuant to the R.O.C. Company Law, capital reserve arising from paid-in capital in excess

of par value on issuance of common stocks and donations can be used to cover accumulated

deficit or to issue new stocks or cash to shareholders in proportion to their share ownership,

provided that the Company has no accumulated deficit. Further, the R.O.C. Securities and

Exchange Law requires that the amount of capital reserve to be capitalised mentioned above

should not exceed 10% of the paid-in capital each year. Capital reserve should not be used to

cover accumulated deficit unless the legal reserve is insufficient.

(19) Retained earnings

A. Under the Company’s Articles of Incorporation, the current year’s earnings, if any, shall

first be distributed as follows:

(1) Offset prior years’ operating losses.

(2) 10% of the remaining amount shall be set aside as legal reserve, unless the

accumulated legal reserve equals the total capital of the Company.

(3) Appropriation of the remainder shall be proposed by the Board of Directors and

resolved by the stockholders.

(4) Bonus distributed to the shareholders.

B. The Company operates in the high-tech industry and its business life cycle is in the

growth stage. In view of its capital expenditure demand and comprehensive financial

plan for continuous development, the Company issues both stock and cash dividends.

The proportion of dividends to be distributed in stocks and cash is determined based on

the Company’s rate of growth and capital expenditures. However, the amount of cash

dividends shall not be lower than 20% of the dividends distributed.

C. Except for covering accumulated deficit or issuing new stocks or cash to shareholders in

proportion to their share ownership, the legal reserve shall not be used for any other

purpose. The use of legal reserve for the issuance of stocks or cash to shareholders in

proportion to their share ownership is permitted, provided that the balance of the reserve

excess 25% of the Company’s paid-in capital.

D. In accordance with the regulations, the Company shall set aside special reserve from the

debit balance on other equity items at the balance sheet date before distributing earnings.

When debit balance on other equity items is reversed subsequently, the reversed amount

could be included in the distributable earnings.

E. For information relating to employees’ remuneration (bonuses) and directors’ and

supervisors’ remuneration, please refer to Note 6(25).

F. The appropriation of 2014 and 2013 earnings had been resolved at the stockholders’

meeting on June 24, 2015 and June 17, 2014, respectively. Details are summarized below:

112

DividendsAmount per share (in dollars)

Legal reserve 57,338$ Cash dividends 545,662 1.00$

Total 603,000$

2015

Unrealized gain orCurrency translation loss ondifferences of foreign available-for-sale

operations financial assets TotalAt January 1, 2015 42,069$ 14,751$ 56,820$ Change in unrealized gain or loss on available-for-sale financial assets - 8,088 8,088 Currency translation differences: -Group 37,049)( - 37,049)( -Associates 207)( - 207)(

At December 31, 2015 4,813$ 22,839$ 27,652$

Unrealized gain orCurrency translation loss ondifferences of foreign available-for-sale

operations financial assets Total

At January 1, 2014 16,448$ 17,142)($ 694)($ Change in unrealized gain or loss on available-for-sale financial assets - 31,893 31,893 Currency translation differences: -Group 25,201 - 25,201 -Associates 420 - 420

At December 31, 2014 42,069$ 14,751$ 56,820$

The above-mentioned 2014 earnings appropriation as approved by the stockholders were

in agreement with those amounts approved by the Board of Directors on March 23, 2015.

Information on the appropriation of the Company’s earnings as resolved by the Board of

Directors and approved by the stockholders will be posted in the “Market Observation

Post System” at the website of the Taiwan Stock Exchange.

G. The appropriation of 2015 earnings had been proposed by the Board of Directors on

March 25, 2016. Details are summarized below:

As of March 25, 2016, the appropriation of 2015 earnings had not been approved by the

stockholders.

(20) Other equity items

113

2015 2014

Rental revenue 1,415$ 1,930$ Dividend income 13,020 14,720 Interest income: Interest income from bank deposits 22,846 19,831 Interest income from resale bonds 2,629 4,386 Other interest income 27 9 Recovery of bad debts expense - 12,634 Others 18,212 7,500

Total 58,149$ 61,010$


2015 2014

Net gains on financial assets at fair value through profit or loss

5,541$ 808$

Impairment loss on non-current assets held for sale

28,945)( -

Reversal of (impairment loss) on non-financial assets

10,746 91,909)(

Net currency exchange gains 13,912 24,520 Gains (losses) on disposal of property, plant and equipment

1,476 176)(

Gains on disposal of non-current assets held for sale

25,385 -

Gains (losses) on disposal of investments 89,582 824)( Impairment loss on financial assets 756)( 16,776)( Others 9,437)( 22,654)(

Total 107,504$ 107,011)($


2015 2014

Interest expense: Bank loans 46,827$ 57,318$

Others 24 115

Less: capitalisation of qualifying assets 740)( 763)(

46,111 56,670

Other financial costs 1,818 1,813

Total 47,929$ 58,483$


(21) Other income

(22) Other gains and losses

(23) Finance costs

114

2015 2014Employee benefit expense 1,207,120$ 1,180,883$ Depreciation on property, plant and equipment

397,431 428,171

Amortisation on intangible assets 13,563 11,628

1,618,114$ 1,620,682$


2015 2014Wages and salaries 1,041,685$ 1,012,615$ Employee stock options - 5,276 Labor and health insurance fees 86,935 84,081 Pension costs 57,061 55,148 Other personnel expenses 21,439 23,763

1,207,120$ 1,180,883$


(24) Expenses by nature

(25) Employee benefit expense

A. According to the Articles of Incorporation of the Company, when distributing earnings,

the Company shall distribute bonus to the employees and pay remuneration to the

directors and supervisors that account for 15% and 5%, respectively, of the total

distributed amount. However, in accordance with the Company Act amended in May 20,

2015, a company shall distribute employee remuneration, based on the distributable

profit of the current year in a fixed amount or a proportion of profits. If a company has an

accumulated deficit, earnings should be used to cover losses. A Company may, by a

resolution adopted by a majority vote at a meeting of the Board of Directors attended by

two-thirds of the total number of directors, have the profit distributable as employees’

compensation distributed in the form of shares or in cash; and in addition thereto a report

of such distribution shall be submitted to the shareholders’ meeting. Qualification

requirements of employees, including the employees of subsidiaries of the company

meeting certain specific requirements, entitled to receive aforementioned stock or cash

may be specified in the Article of Incorporation. The Board of Directors of the Company

has approved the amended Articles of Incorporation of the Company on January 7, 2016.

According to the amended articles, a ratio of distributable profit of the current year, after

covering accumulated losses, shall be distributed as employees’ compensation and

directors and supervisors remuneration. The ratio shall be 10%~15% for employees’

compensation and shall not be higher than 5% for directors’ and supervisors’ remuneration.

The amended articles will be resolved in the shareholders’ meeting in 2016.

C. For the years ended December 31, 2015 and 2014, employees’ compensation (bonus) was

accrued at $102,312 and $76,734, respectively; directors’ and supervisors’ remuneration

was accrued at $34,104 and $25,578, respectively. The aforementioned amounts were

recognised in salary expense.

115

2015 2014

Current tax: Current tax on profits for the year 65,628$ 23$ Tax on undistributed earnings 11,952 12,704 Understatement of income tax payable 2,485 2,133 Prepaid and withholding taxes from foreign income which will not be realized 445 504

Total current tax 80,510 15,364

Deferred tax: Origination and reversal of temporary differences 55,393 90,695

Income tax expense 135,903$ 106,059$


2015 2014

Remeasurement of defined benefit obligations 2,825)($ 2,046)($


The employees’ compensation and directors’ and supervisors’ remuneration were

estimated and accrued based on 12% and 4% of distributable profit of current year for the

year ended December 31, 2015. The employees’ compensation and directors’ and

supervisors’ remuneration resolved by the Board of Directors were $102,312 and $34,104,

respectively, and the employees’ compensation will be distributed in the form of cash.

The expenses recognised for the year of 2014 were accrued based on the net income of

2014 and the percentage 15% and 5% for employees and directors/supervisors,

respectively, taking into account other factors such as legal reserve. Where the accrued

amounts for employees’ bonus and directors’ and supervisors’ remuneration are different

from the actual distributed amounts as resolved by the stockholders’ at their stockholders’

meeting subsequently, the differences are accounted for as changes in estimates.

Employees’ bonus and directors’ and supervisors’ remuneration of 2014 as resolved at the

shareholders’ meeting were in agreement with those amounts recognised in the profit or

loss of 2014.

Information about employees’ compensation (bonus) and directors’ and supervisors’

remuneration of the Company as resolved by the Board of Directors and the shareholders

at the shareholders’ meeting will be posted in the “Market Observation Post System” at

the website of the Taiwan Stock Exchange.

(26) Income tax

A. Income tax expense

(a) Components of income tax expense:

(b) The income tax charge relating to components of other comprehensive income is as

follows:

116

2015 2014

Tax calculated based on profit before tax and statutory tax rate

121,730$ 117,614$

Expenses disallowed by tax regulation 7,723 1,867)( Tax exempted income by tax regulation 8,293)( 56)( Taxable loss not recognised as deferred tax assets

123)( 24,973)(

Understatement of income tax payable 2,485 2,133 Effect of tax-exempt income 16)( - Prepaid withholding taxes from foreign income which will not be realized

445 504

Tax on undistributed earnings 11,952 12,704

Income tax expense 135,903$ 106,059$


January 1Recognised inprofit or loss

Recognised inother

comprehensiveincome December 31

Temporary differences: - Deferred tax assets (liabilities):Loss on inventory value decline

29,640$ 277)($ -$ 29,363$

Over provision of allowance for bad debts

9,446 562 - 10,008

Service warranty expense 6,803 733 - 7,536 Investment loss 2,900 2,900)( - - Impairment loss 30,319 11,285)( - 19,034 Net pension costs 46,975 9,481)( - 37,494 Loss carryforwards 44,751 34,694)( - 10,057 Remeasurement of defined benefit obligations

8,442 - 2,825)( 5,617

Others 4,792 1,949 - 6,741

Total 184,068$ 55,393)($ 2,825)($ 125,850$

For the year ended December 31, 2015

B. Reconciliation between income tax expense and accounting profit.

C. Amounts of deferred tax assets or liabilities as a result of temporary difference, loss

carryforward and investment tax credit are as follows:

117

January 1Recognised inprofit or loss

Recognised inother

comprehensiveincome December 31

Temporary differences: - Deferred tax assets (liabilities):Loss on inventory value decline

22,682$ 6,958$ -$ 29,640$

Over provision of allowance for bad debts

13,075 3,629)( - 9,446

Service warranty expense 7,429 626)( - 6,803 Investment loss 11,481 8,581)( - 2,900 Impairment loss 15,335 14,984 - 30,319 Net pension costs 46,637 338 - 46,975 Loss carryforwards 142,971 98,220)( - 44,751 Remeasurement of defined benefit obligations

10,488 - 2,046)( 8,442

Others 6,711 1,919)( - 4,792

Total 276,809$ 90,695)($ 2,046)($ 184,068$


Yearincurred

Amount filed/assessed Unused amount

Amount ofunrecogniseddeferred tax

assets

2006 49,454$ 49,151$ 40,502$ 2007 54,255 54,255 45,607 2008 12,202 12,202 3,553 2009 38,634 38,634 29,986 2010 123,142 123,142 114,494 2011 7,266 7,266 - 2012 10,332 10,332 1,684

295,285$ 294,982$ 235,826$

December 31, 2015

D. Expiration dates of unused net operating loss carryforward and amounts of unrecognised

deferred tax assets are as follows:

118

Year

incurred

Amount filed/

assessed Unused amount

Amount ofunrecogniseddeferred tax

assets

2005 210,768$ 54,835$ 48,071$ 2006 49,454 49,454 49,454 2007 54,255 54,255 54,255 2008 131,461 131,461 12,202 2009 96,314 96,314 38,634 2010 19,318 19,318 9,659 2011 7,266 7,266 3,633 2012 10,332 10,332 5,166 2013 122,164 122,164 61,082

701,332$ 545,399$ 282,156$

December 31, 2014


Deductible temporary differences 387,782$ 391,974$


Earnings generated in and after 1998 1,218,806$ 1,083,860$

Weighted-averageoutstanding

common share Earnings per

share

Profit after tax (in thousands) (in dollars)


Profit attributable to owners of the parent 573,375$ 544,555 1.05$ Dilutive effect of common stock equivalents: Stock options - -

Employees’ bonus - 13,254

Diluted earnings per share

Profit attributable to owners of the parent plus dilutive effect of common stock equivalents 573,375$ 557,809 1.03$


E. The amounts of deductible temporary difference that are not recognised as deferred tax

assets are as follows:

F. As of December 31, 2015, the Company’s income tax returns through 2013 have been

assessed and approved by the Tax Authority.

G. Unappropriated retained earnings:

I. As of December 31, 2015 and 2014, the balance of the imputation tax credit account was

$29,892 and $27,302, respectively. The creditable tax rate was estimated to be 2.45% for

2015 and actual creditable tax rate was 3.50% for 2014.

(27) Earnings per share

119

Weighted-averageoutstanding

common share Earnings per

share

Profit after tax (in thousands) (in dollars)


Profit attributable to owners of the parent 561,682$ 544,555 1.03$ Dilutive effect of common stock equivalents: Stock options - -

Employees’ bonus - 7,624

Diluted earnings per shareProfit attributable to owners of the parent plus dilutive effect of common stock equivalents 561,682$ 552,179 1.02$



Not later than 1 year 18,228$ 18,228$ Later than 1 year but not later than 5 years 25,946 41,286 Later than 5 years 30,326 33,022

74,500$ 92,536$

2015 2014

Long-term liabilities maturing within one year 224,118$ 296,471$ Property, plant and equipment reclassified as non-current assets 11,541$ -$

Property, plant and equipment reclassified as non-current assets held for sale 284,211$ -$


(28) Operating leases

The Company had entered into an agreement to lease land from Hsinchu Science Park for

the period from 1997 to 2029, and CS Bright Corporation had entered into an agreement to

lease office from a non-related party. For the years ended December 31, 2015 and 2014, the

Company and CS Bright Corporation together recognised rental expenses of $18,868 and

$18,608, respectively. The future aggregate minimum lease payments under non-cancellable

operating leases are as follows:

(29) Non-cash transactions

Non-cash flows from investing and financing activities:

120

2015 2014

Sales of goods:

Associates 14,631$ 3,391$ Other related parties 427,530 525,846

Total 442,161$ 529,237$


2015 2014

Purchases of goods:

Associates 1,296$ 158$ Other related parties 668,362 1,079,669

Total 669,658$ 1,079,827$



Receivables from related parties: Other related parties -$ 252$


Receivables from related parties: Associates -$ 2,659$ Other related parties 108,580 154,653 Less:Allowance for doubtful accounts 1,364)( 713)(

Total 107,216$ 156,599$


Payables to related parties: Associates 1,287$ 128$ Other related parties 269,173 406,854

Total 270,460$ 406,982$

7. RELATED PARTY TRANSACTIONS

(1) Significant transactions and balances with related parties

A. Operating revenue:

The selling prices charged to the above related parties are not materially different from

those charged to non-related parties. For the years ended December 31, 2015 and 2014, the

credit term was 45~136 days and 66~136 days for the related parties respectively, and

90~150 days for the non-related parties for both periods.

B. Purchases:

The purchase prices charged by the above related parties were not materially different

from those charged by non-related parties. For the years ended December 31, 2015 and

2014, the credit term was 60~120 days for the related parties for both periods, and 90~120

days for the non-related parties for both periods.

C. Notes receivable

D. Accounts receivable:

E. Accounts payable:

121

2015 2014

Salaries and other short-term employee benefits

55,832$ 47,288$

Termination benefits - - Post-employment benefits 940 752 Other long-term benefits - - Share-based payments - 836

Total 56,772$ 48,876$


December 31, December 31,Pledged assets 2015 2014 Creditor Bank Type

Restricted assets- Time deposits, shown as "other current assets"

20,860$ 20,860$ Chang Hwa Commercial Bank

Land and dormitory lease deposits

Property, plant and equipment

809,007 843,625 Taiwan Cooperative Bank and 9 other banks

Long-term loans

Property, plant and equipment and land-use rights, shown as "other non-current assets"

- 73,937 Chung Hsin Bank (Mainland China)

Short-term loans

Property, plant and equipment 352,670 440,320

Chinatrust Commercial Bank

Long-term loans

1,182,537$ 1,378,742$

Book value Purpose of pledge

Guarantor Nature of Guarantee Amount

Chang Hwa Commercial Bank Customs duty 15,000$ Chang Hwa Commercial Bank Product performance bond and warranty 296 Mega International Commercial Bank 〞 1,767 Taipei Fubon Commercial Bank 〞 800 Taiwan Cooperative Bank 〞 468

18,331$

(2) Key management compensation

8. PLEDGED ASSETS

The Group’s assets pledged as collateral are as follows:

9. SIGNIFICANT CONTINGENT LIABILITIES AND UNRECOGNISED CONTRACT

COMMITMENTS

(1) As of December 31, 2015, the guarantees provided by the Group through banks were as

follows:

122

Currency Amount

TWD 11,015$ JPY 32,150 USD 276

(2) As of December 31, 2015, the outstanding letters of credit issued for the importation of raw

materials and machinery were as follows:

(3) Operating lease commitments:

See Note 6(28).

(4)Tender offer agreements of shares:

See Note 6(6).

(5) Pursuant to the syndicated loan facility agreement entered into by the Company with Taiwan

Cooperative Bank and 9 other banks, the Company is required to maintain its every half-year

current ratio at 100% or above, debt ratio at 150% or below, interest coverage ratio at 300%

or above and net value of tangible assets at $5 billion or above. If the Company breaches the

above debt covenants, it is required to adjust interest rates as committed in the agreement. If

the Company fails to improve its interest rates before examination day, the Company will

violate the above debt covenants.

(6) As of December 31, 2015 and 2014, the promissory notes issued by the Company and CS

Bright Corporation for loans, performance guarantee for purchases and loans granted for

subsidiaries amounted to $7,032,287 and $6,860,582, respectively.

(7) As of December 31, 2015, the capital expenditure contracted but not yet incurred is $25,692.

10. SIGNIFICANT DISASTER LOSS

None.

11. SIGNIFICANT EVENTS AFTER THE BALANCE SHEET DATE

The Company had resolved to sell the plant and land-use rights of the subsidiary, Opto Tech

(Suzhou) Co., Ltd., to a non-related party on February, 2016. The contract amount is CNY

52,500 thousand dollars.

12. OTHERS

(1) Capital risk management

The Group’s objectives when managing capital are to safeguard the Group’s ability to

continue as a going concern in order to provide returns for shareholders and to maintain an

optimal capital structure to reduce the cost of capital. In order to maintain or adjust the

capital structure, the Group may adjust the amount of dividends paid to shareholders or issue

new shares to reduce debt. The Group monitors capital on the basis of the gearing ratio. This

ratio is calculated as net debt divided by total capital. Net debt is calculated as total

borrowings less cash and cash equivalents. Total capital is calculated as ‘equity’ as shown in

the consolidated balance sheet plus net debt.

As of December 31, 2015 and 2014, the gearing ratios was (29.64%) and (22.37%),

respectively.

123

(2) Financial instruments

A. Fair value information of financial instruments

The Group used the book value of financial instruments measured at cost (including notes

receivable, accounts receivable, other receivables, short-term loans, notes receivables,

accounts payable and other payables) as its reasonable fair value. The fair value of

long-term loans is based on the present value of expected future cash flows. Since

long-term loans have floating interest rates, the carrying value is equivalent to the fair

value. For information of financial instruments measured at fair value, please refer to

Note 12(3).

B. Financial risk management policies

(1) The Group’s activities expose it to a variety of financial risks: market risk (including

foreign exchange risk, interest rate risk and price risk), credit risk and liquidity risk.

The Group’s overall risk management programme focuses on the unpredictability of

financial markets and seeks to minimise potential adverse effects on the Group’s

financial position and financial performance.

(2) The plans for material treasury activities are reviewed by Board of Directors in

accordance with procedures required by relevant regulations or internal controls.

During the implementation of such plans, Corporate Treasury function must comply

with certain treasury procedures that provide guiding principles for overall financial

risk management and segregation of duties.

C. Significant financial risks and degrees of financial risks

(1) Market risk

Foreign exchange risk

The Group operates internationally and is exposed to foreign exchange risk

arising from various currency exposures, primarily with regards to the USD and

JPY. Foreign exchange risk arises from future commercial transactions,

recognised assets and liabilities and net investments in foreign operations.

To manage their foreign exchange risk arising from future commercial

transactions and recognised assets and liabilities, entities in the Group use

forward foreign exchange contracts, transacted with Group treasury. The expired

dates of these forward foreign exchange contracts are shorter than 6 months and

are not accounted for under hedge accounting. Foreign exchange risk arises when

future commercial transactions or recognised assets or liabilities are denominated

in a currency that is not the entity’s functional currency.

As the foreign operations are strategic investments, the Company does not hedge

for them.

The Group’s businesses involve some non-functional currency operations (the

Company’s and certain subsidiaries’ functional currency: TWD; other

subsidiaries’ functional currency: CNY). The information on assets and liabilities

denominated in foreign currencies whose values would be materially affected by

124

Foreign

currency

amount

(in

thousands)

Exchange

rate

Book value

(TWD)

Extent

of

variation

Effect

on profit

or loss

Effect

on other

compre-

hensive

income

Unrealized

exchange

gain or

loss

(Foreign currency: functional currency)Financial assets Monetary items USD : TWD 71,240$ 32.775 2,334,891$ 1% 23,349$ -$ 28,436$ JPY : TWD 506,413 0.2707 137,086 1% 1,371 - 1,557 USD : CNY (Note) 730 6.5716 23,962 1% 240 - 735 Non-monetary items:NoneFinancial liabilities Monetary items USD : TWD 35,670$ 32.875 1,172,651$ 1% 11,727$ -$ 18,409)($ JPY : TWD 880,886 0.2747 241,979 1% 2,420 - 4,868)( USD : CNY (Note) 7,327 6.5716 240,509 1% 2,405 - 10,094)( Non-monetary items:None

Sensitivity AnalysisDecember 31, 2015


Foreign

currency

amount

(in

thousands)

Exchange

rate

Book value

(TWD)

Extent

of

variation

Effect

on profit

or loss

Effect

on other

compre-

hensive

income

Unrealized

exchange

gain or

loss

(Foreign currency: functional currency)Financial assets Monetary items USD : TWD 58,148$ 31.600 1,837,477$ 1% 18,375$ -$ 60,635$ JPY : TWD 835,721 0.2626 219,460 1% 2,195 - 7,237)( USD : CNY (Note) 8,304 6.2040 262,406 1% 2,624 - 2,916)( Non-monetary items:NoneFinancial liabilities Monetary items USD : TWD 45,053$ 31.700 1,428,180$ 1% 14,282$ -$ 49,434)($ JPY : TWD 1,014,628 0.2666 270,500 1% 2,705 - 7,484 USD : CNY (Note) 7,391 6.2040 233,556 1% 2,336 - 1,158 Non-monetary items:None

Sensitivity AnalysisDecember 31, 2014


the exchange rate fluctuations is as follows:

Note：If the consolidated entities’ functional currency is not TWD, the foreign currency

denominated assets and liabilities of the consolidated entities should be disclosed.

For example, when the functional currency of a subsidiary is CNY, its USD

foreign currency positions should also be disclosed.

125

Price risk

The Group is exposed to equity securities price risk because of investments held

by the Group and classified on the consolidated balance sheet either as

available-for-sale or at fair value through profit or loss. The Group is not

exposed to commodity price risk. The Group’s investments in equity securities

comprise domestic listed and unlisted stocks. The prices of equity securities

would change due to the change of the future value of investee companies. If the

prices of these domestic funds, equity securities of listed company or unlisted

company had increased/decreased by 5%, 20% or 10%, respectively, with all

other variables held constant, post-tax profit for the years ended December 31,

2015 and 2014 would have increased/decreased by $25,957 and $19,190,

respectively, as a result of gains/losses on equity securities classified as at fair

value through profit or loss. Other components of equity would have

increased/decreased by $65,126 and $67,295 as a result of gains/losses on equity

securities classified as available-for-sale.

Interest rate risk

The Group’s interest rate risk arises from long-term loans. Loans issued at

floating rates expose the Group to cash flow interest rate risk which is partially

offset by cash and cash equivalents held at floating rates. During the years ended

December 31, 2015 and 2014, the Group’s loans at floating rate were

denominated in TWD and USD.

At December 31, 2015 and 2014, if interest rates on loans had been 100 basis

point higher/lower with all other variables held constant, post-tax profit for the

years ended December 31, 2015 and 2014 would have been $10,282 and $12,723

lower/higher, respectively, mainly as a result of higher/lower interest expense on

floating rate loans.

(b) Credit risk

i. Credit risk refers to the risk of financial loss to the Group arising from default by

the clients or counterparties of financial instruments on the contract obligations.

According to the Group’s credit policy, each local entity in the Group is responsible

for managing and analysing the credit risk for each of their new clients before

standard payment and delivery terms and conditions are offered. Internal risk

control assesses the credit quality of the customers, taking into account their

financial position, past experience and other factors, the utilisation of credit limits is

regularly monitored. Credit risk arises from cash and cash equivalents, derivative

financial instruments and deposits with banks and financial institutions, as well as

operating activities, including outstanding receivables.

ii. As the counterparties of deposits and other financial instruments are creditworthy

banks and financial institutions with good rating, there is no significant doubt

arising from default and credit risk.

126

Between Between BetweenLess than 1 and 2 2 and 3 3 and 5 Over 5

December 31, 2015 1 year years years years years Short-term loans 917,151$ -$ -$ -$ -$ Notes payable 219 - - - - Accounts payable 882,199 - - - - (including related parties)Other payables 552,187 - - - - Long-term loans 244,160 1,016,514 - - - (including current portion)

Between Between BetweenLess than 1 and 2 2 and 3 3 and 5 Over 5

December 31, 2014 1 year years years years years Short-term loans 924,225$ -$ -$ -$ -$ Notes payable 3,402 - - - - Accounts payable 1,176,988 - - - - (including related parties)Other payables 457,922 - - - - Long-term loans 325,429 247,325 997,200 - - (including current portion)

Non-derivative financial liabilities：

Non-derivative financial liabilities：

iii As of December 31, 2015 and 2014, the Group’s 10 largest customers accounted

for 63% and 62% of the balance of the Group’s accounts receivable, respectively.

The centralized credit risk of other accounts receivable is not relatively significant.

iv. Ageing analysis of financial assets that were overdue but not impaired: Please refer

to Note 6(4).

v. The individual analysis of financial assets that had been impaired is provided in the

statement for each type of financial assets in Note 6.

(c) Liquidity risk

i. Cash flow forecasting is performed in the operating entities of the Group and

aggregated by Group treasury. Group treasury monitors rolling forecasts of the

Group’s liquidity requirements to ensure it has sufficient cash to meet operational

needs while maintaining sufficient headroom on its undrawn committed borrowing

facilities at all times.

ii. The table below analyses the Group’s non-derivative financial liabilities and

derivative financial liabilities into relevant maturity groupings based on the

remaining period at the balance sheet date to the contractual maturity date for

non-derivative financial liabilities and to the expected maturity date for derivative

financial liabilities.

Derivative financial liabilities：

As of December 31, 2014, the periods of derivative financial liabilities are all less

than 1 year.

127

December 31, 2015 Level 1 Level 2 Level 3 Total

Assets:Recurring fair value measurementsFinancial assets at fair value through profit or loss Domestic funds 625,462$ -$ -$ 625,462$ Available-for-sale financial assets Equity securities 44,576 - 562,108 606,684

Recurring fair value measurements

Non-current assets held for sale 28,572 - - 28,572

Total 698,610$ -$ 562,108$ 1,260,718$

Note: Under IFRS 5, assets held for sale must be measured at fair value less costs to sell when the fair value less the cost to sell is lower than the carrying amount.

December 31, 2014 Level 1 Level 2 Level 3 Total

Assets:Recurring fair value measurementsFinancial assets at fair value through profit or loss Domestic funds 462,413$ -$ -$ 462,413$ Available-for-sale financial assets Equity securities 50,165 - 572,621 622,786

Total 512,578$ -$ 572,621$ 1,085,199$

Liabilities:

Recurring fair value measurementsFinancial liabilities at fair value through profit

or loss

Forward exchange contracts -$ 2,492$ -$ 2,492$

(3) Fair value information

A. The different levels that the inputs to valuation techniques are used to measure fair value

of financial and non-financial instruments have been defined as follows:

Level 1: Quoted prices (unadjusted) in active markets for identical assets or liabilities

that the entity can access at the measurement date. A market is regarded as

active where a market in which transactions for the asset or liability take place

with sufficient frequency and volume to provide pricing information on an

ongoing basis.

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.

B. The related information of financial and non-financial instruments measured at fair value

by level on the basis of the nature, characteristics and risks of the assets and liabilities at

December 31, 2015 and 2014 is as follows:

C. The methods and assumptions the Group used to measure fair value are as follows:

(a) The instruments the Group used market quoted prices as their fair values (that is,

Level 1) are composed of : listed shares using closing price and open-end fund using

net asset value at balance sheet date.

128

2015 2014

At January 1 572,621$ 554,038$ Acquired - 18,557 Impairment loss 756)( - Losses recognised in other comprehensive income (Note)

9,749)( -

Net exchange differences 8)( 26

At December 31 562,108$ 572,621$

Note: Recorded as unrealised valuation gain or loss of available-for-sale financial assets.

(b) Except for financial instruments with active markets, the fair value of other financial

instruments is measured by using valuation techniques or by reference to counterparty

quotes.

(c) When assessing non-standard and low-complexity financial instruments, the Group

adopts valuation technique that is widely used by market participants. The inputs used

in the valuation method to measure these financial instruments are normally

observable in the market. Forward exchange contracts are usually valued based on the

current forward exchange rate.

(d) The market approach is used by the Group to measure its assets held for disposal

(Price-to-Sales Ratio, P/S ratio), which is calculating the ratio of recent identical or

similar transaction price to sales as an observable input to project the fair value of the

disposal group.

(e) The output of valuation model is an estimated value and the valuation technique may

not be able to capture all relevant factors of the Group’s financial and non-financial

instruments. Therefore, the estimated value derived using valuation model is adjusted

accordingly with additional inputs. In accordance with the Group’s management

policies and relevant control procedures relating to the valuation models used for fair

value measurement, management believes adjustment to valuation is necessary in

order to reasonably represent the fair value of financial and non-financial instruments

at the consolidated balance sheet. The inputs and pricing information used during

valuation are carefully assessed and adjusted based on current market conditions.

(f) The Group takes into account adjustments for credit risks to measure the fair value of

financial and non-financial instruments to reflect credit risk of the counterparty and

the Group’s credit quality.

D. For the years ended December 31, 2015 and 2014, there was no transfer between Level 1

and Level 2.

E. The following chart is the movement of Level 3 financial instruments of equity securities

for the years ended December 31, 2015 and 2014.

F. For the years ended December 31, 2015 and 2014, there was no transfer into or out from

Level 3.

G. Financial segment is in charge of valuation procedures for fair value measurements being

categorized within Level 3, which is to verify independent fair value of financial

129

Fairvalue at

December ValuationSignificant

unobservableRange

(weightedRelationshipof inputs to

31, 2015 technique input average) fair value

Unlisted shares 562,108$ Market Price to 0.62~1.12 The higher the multiple,comparable earnings the higher the fair value.companies ratio multiple

Discounted Weighted 10.74% The higher the weightedCash flow average cost average cost of capital,

of capital the lower the fair value.

Non-derivative equity:

instruments. Such assessment is to ensure the valuation results are reasonable by

applying independent information to make results close to current market conditions and

reviewing periodically.

H. The following is the qualitative information of significant unobservable inputs and

sensitivity analysis of changes in significant unobservable inputs to valuation model used

in Level 3 fair value measurement:

13. SUPPLEMENTARY DISCLOSURES

(1) Significant transactions information

A. Loans to others: Please refer to table 1.

B. Provision of endorsements and guarantees to others: Please refer to table 2.

C. Holding of marketable securities at the end of the period (not including subsidiaries,

associates and joint ventures): Please refer to table 3.

D. Acquisition or sale of the same security with the accumulated cost exceeding $300

million or 20% of the Company’s paid-in capital: None.

E. Acquisition of real estate reaching NT$300 million or 20% of paid-in capital or more:

None.

F. Disposal of real estate reaching NT$300 million or 20% of paid-in capital or more:

Please refer to table 4.

G. Purchases or sales of goods from or to related parties reaching NT$100 million or 20% of

paid-in capital or more: Please refer to table 5.

H. Receivables from related parties reaching NT$100 million or 20% of paid-in capital or

more: None.

I. Trading in derivative instruments undertaken during the reporting periods: Please refer to

Note 6(2).

J. Significant inter-company transactions during the reporting periods: Please refer to table 6.

(2) Information on investees

Names, locations and other information of investee companies (not including investees in

Mainland China)：Please refer to table 7.

130

LED and Displays and Packaging

Silicon Sensor Lighting Business Other

Chips Group Group Group segments Total

Revenue from external customers 4,107,213$ 1,224,508$ 298,819$ -$ 5,630,540$

Segment income (loss) 558,594$ 48,572$ 54,137)($ 156,247$ 709,276$

LED and Displays and Packaging

Silicon Sensor Lighting Business Other

Chips Group Group Group segments Total

Revenue from external customers 4,889,476$ 1,138,635$ 283,534$ 5,738$ 6,317,383$

Segment income (loss) 812,960$ 6,916)($ 111,350)($ 26,944)($ 667,750$



(3) Information on investments in Mainland China

A. Basic information: Please refer to table 8.

B. Significant transactions, either directly or indirectly through a third area, with investee

companies in the Mainland Area: Please refer to table 9.

14. SEGMENT INFORMATION

(1) General information

The Group identifies the entity’s operating segments based on the decision of the chief

operating decision-maker and in accordance with IFRS 8 “Operating Segments”.

For the years ended December 31, 2015 and 2014, operating segments required to be

disclosed are categorized as LED and Silicon Sensor Chips Group, Displays and Lightening

Group and Packaging Business Group.

(2) Measurement of segment information

The Group’s segment is measured by Board of Directors with operating profit (loss) before

tax, which is used as a basis for the Group in assessing the performance of the operating

segments.

The accounting policies of the operating segments are in agreement with the significant

accounting policies summarised in Note 4.

(3) Segment information

The segment information provided to the chief operating decision-maker for the reportable

segments is as follows:

(4) Reconciliation for segment income (loss)

A. The revenue from external customers reported to the chief operating decision-maker is

measured in a manner consistent with that in the statement of comprehensive income.

131

2015 2014

Semiconductor products revenues LED 2,166,415$ 2,803,057$ Silicon sensor 1,940,798 2,086,419 System product revenues 1,224,508 1,138,635 Packaging product revenues 298,819 283,534 Others - 5,738

5,630,540$ 6,317,383$


Revenues

Non-current

assets Revenues

Non-current

assets

Taiwan 1,844,197$ 2,915,778$ 2,219,715$ 2,843,494$ Mainland China 1,976,319 307,169 2,091,436 662,660 Other countries 1,810,024 - 2,006,232 -

5,630,540$ 3,222,947$ 6,317,383$ 3,506,154$


2015 2014

2015 2014

Customer A 700,865$ 623,840$


B. A reconciliation of reportable segment income or loss to the income/(loss) before tax

from continuing operations is measured in a manner consistent with that in the statement

of comprehensive income.

(5) Information on products and services

External revenue mainly comes from sales of semiconductor, system and packaging

products.

Summary of balance of revenue is as follows:

(6) Geographical information

Geographic information for the years ended December 31, 2015 and 2014 is as follows:

(7) Major customer information

Major customer information of the Group for the years ended December 31, 2015 and 2014

is as follows:

132

VII、 Review of Financial Conditions, Financial Performance, and Risk Management

1. Analysis of Financial Status Unit: NT$ thousands

Year Item 2015 2014

Difference Amount %

Current Assets 7,384,082 7,402,548 (18,466) (0.25) Funds and Investments 1,039,599 1,050,221 (10,622) (1.01) Property, plant and equipmen 3,146,759 3,398,412 (251,653) (7.41) Other Assets 203,007 294,702 (91,695) (31.11)

Total Assets 11,773,447 12,145,883 (372,436) (3.07) Current Liabilities 2,732,491 2,963,709 (231,218) (7.80) Long-term Liabilities 1,325,408 1,616,066 (290,658) (17.99)

Total Liabilities 4,057,899 4,579,775 (521,876) (11.40) Capital 5,456,621 5,456,621 - - Capital reserves 641,656 640,826 830 0.13 Retained Earnings 1,612,768 1,434,986 177,782 12.39 Other equity interest 953 30,121 (29,168) (96.84) Non-controlling interest 3,550 3,554 (4) (0.11)

Total shareholders’ Equity 7,715,548 7,566,108 149,440 1.98 Analysis of changes in financial ratios: Other assets decreased by 31.11%, mainly due to decrease in deferred tax assets.

2. Analysis of Financial Performance (1) Major reason of changes in operating income, operating profit and before-tax profit during latest 2

years Unit: NT$ thousands

Year

Item 2015 2014

Increase（Decrease）

Ratio of change ％

Operating revenue 5,630,540 6,317,383 (686,843) (10.87)

Operating cost 4,111,004 4,645,461 (534,457) (11.50)

Gross profit 1,519,536 1,671,922 (152,386) (9.11)

Operating expense 953,982 925,523 28,459 3.07

Income from operations 565,554 746,399 (180,845) (24.23)

Non-operating income 143,722 (78,649) 222,371 282.74

Income before tax 709,276 667,750 41,526 6.22

Tax Expense (Benefit) 135,903 106,059 29,844 28.14

Net income (Loss) 573,373 561,691 11,682 2.08

Analysis and explanation of changes in ratio of increase or decrease during latest 2 years： 1. Decreased for income from operationse:Mainly due to decrease in operating revenue. 2. Increased for Non-operating income: Gain from disposition of investment. 3. Increased for Tax Expense: Mainly due to increase in Income before tax.

(2) Effect of change on the company’s future business and future response plans: Please refer to P. 1 of the annual report for more details.

133

3. Analysis of Cash Flow

(1) Cash Flow Analysis for the Current Year

Year Item

2015 2014 Ratio of increase

of decrease %

Cash flow ratio(%) 31.61 36.06 (12.34)

Cash Flow Adequacy Ratio(%) 113.34 123.16 (7.97)

Cash Reinvestment Ratio(%) 2.85 4.33 (34.18)

Cash Reinvestment Ratio:Mainly due to decrease of cashflows form investing activities in this fiscal year.

(2) Cash Flow Analysis for the Coming Year

Unit: NT$ thousands

Cash and Cash Equivalents,

Beginning of Year

Net Cash Flow from Operating

Activities Cash Outflow

Cash Surplus (Deficit)

Leverage of Cash Deficit

Investment Plans

Financing Plans

3,919,862 591,460 811,704 3,699,618 －－

1.Analysis of change in cash flow in the current year: - Operating activities:The expectation for continuous operating growth resulted in net cash inflow from

operating activities. - Investing activities:The expectation for continuous reinforcement of production capacity resulted in

increase of capital expenditure. - Financing activities: It mainly resulted from cash dividend distribution and loan repayments.

2. Remedy for cash shortage and its liquidity analysis：None.

4. Major Capital Expenditure Items and Source of Capital:None.

5. Investment Policy in the Last Year, Main Causes for Profits or Losses, Improvement Plans and Investment Plans for the Coming Year:

(1) Investment loss of OPTOTECH in 2015 is mainly due to loss recognition from part of reinvestment operating performance unable to increase.

(2) OPTOTECH will continue to devote its efforts to growing its core business. For its Investment policy, we will place focus on following the product trend to give up and down-stream integration. At the same time, we will persistently supervise and assist its subsidiaries, so as to accelerate its speed to make more profits. In the future, it will be in conjunction with the market’s overall trend to timely adjust its product policy and reinforce its investment effects.

6. Analysis of Risk Management (1) Effects of Changes in Interest Rates, Foreign Exchange Rates and Inflation on Corporate Finance,

and Future Response Measures Unit: NT$ thousands

Item 2015 Ratio on net revenue Ratio on net

operating profit

Net interest income or expense (20,609) 0.37% 3.64%

Net foreign exchange gain or loss 13,912 0.25% 2.46%

Operating revenue 5,630,540 - -

Income from operations 565,554 - -

134

A. Interest rate Since OPTOTECH has good financial status, sound system and good as well as close long term cooperation with its banks, it has obtained better interest rates. At the same time, OPTOTECH has closely watched the trend of market interest rates and adjusted its position of its floating rate loans and fixed rate loans at any time when necessary. By taking risks into consideration, OPTOTECH will still stably handle its cash management.

B. Foreign exchange rates Given that OPTOTECH has the substantive demand for foreign currencies (such as U.S. dollars and Japanese yen, etc.), except for reducing required hedge position through natural hedge, lowering the impact of changes in currency rates on operating gain or loss, we will use spot swap and forward foreign exchange contracts and currency options to hedge the risk resulting from exchange rate volatility.

C. Inflation The quotations provided by OPTOTECH for its clients or suppliers are mostly flexibly adjusted according to the market status. Hence, OPTOTECH is not significantly affected by inflation. Nevertheless, it will devote its efforts to improve its product structure and production process while continuously executing the cost efficiency plan to counter the problem of inflation.

(2) Policies, Main Causes of Gain or Loss and Future Response Measures with Respect to High-risk, High-leveraged Investments, Lending or Endorsement Guarantees, and Derivatives Transactions:

A. Policies, Main Causes of Gain or Loss and Future Response Measures with Respect to High-risk, High-leveraged Investments: OPTOTECH has handled its financial affairs with stability, so it has a sound financial base. It does not give high leverage investment.

B. Lending or Endorsement Guarantees: (A) Our endorsement guarantee and capital loans to others are mainly made to meet business

requirements of its re-investment companies. Based on the laws and regulations stipulated by Securities and Futures Bureau, OPTOTECH has instituted “Procedures for Endorsement and Guarantee” and “Procedures for Lending Funds to Other Parties”, and evaluated and controlled risks through internal responsible units. At the same time, based on the “Regulations Governing Establishment of Internal Control Systems by Public Companies” stipulated by Securities and Futures Bureau, the audit unit of OPTOTECH has also laid down relevant systems for management and risk evaluation and regular audits of execution status.

(B) OPTOTECH has currently only endorsed and guaranteed the affiliated enterprises under its control. The endorsement and guarantee items are mostly in the nature of financing, Since its affiliated enterprises have healthy finance and have been stably operating, it has never inflicted any loss from endorsement and guarantee.

C. Derivatives Transactions: (A) OPTOTECH has engaged in derivative product trading in accordance with its regulated “Procedures

for Acquistion or Disposal Assets”. (B) The main purpose for OPTOTECH to engage in derivative financial product transactions is to hedge

our operating and financial risk. OPTOTECH assets in US dollar is greater than liabilities, and the NT dollar was devalued such that there is gain on exchange.

(C) To meet our future requirements, we will engage in the transactions related to forward foreign exchange and currency swap contracts and options, and adjust its foreign asset and liability positions as needed, so as to hedge the risk resulting from changes in exchange rates.

135

(3) Future Research & Development Projects and Corresponding Budget Unit：NTD

Research projects Present progress Expected research expenditure in the

future

Expected completion

schedule

Major factors that will impact future success

High-power UV LED chip Epitaxial and trial production 5,000,000 2016/12

Capability of key process technology and stability

Development of high power IR LED custom product group

In trial production 3,900,000 2016/09 Capability of key product design process technology and stability

Infrared LED chips with waveband exceeding 1000nm.

Epitaxial and trial production 2,000,000 2016/12

Capability of key process technology and stability

Development of Redundant control system.

In the process of development and design 750,000 2016/9

Based on current mainstream control system framework, develop systematic Redundant function so that abnormalities in power supply or scan board can be automatically detected and replaced by a backup without affecting display, thereby saving the cost of manual maintenance.

Development of 4K UHD In the process of development and design 1,000,000 2017/06

In response to mainstream imaging market, enhance SPU compatibility with front-end players, reduce the number of front-end controllers and simplify the complexity of wiring in large display screen.

Import control system into network communication.


In response to market applications, ensure compatibility of future UI with mobile communications and support higher-speed transmission to facilitate customers use.

Develop P2 LED display module. In the process of development 3,000,000 2016/06

Based on P2 192x192 common aluminum base, develop the series of Pitch P1.6 240x240 models according to business needs.

Develop P16.67 glass screen display module.

In the process of development 2,000,000 2016/06

With transparent glass substrate, this product features high penetration and can be widely used such as in building facades and indoor screens.

Develop LED smart power source control.


Use according to market demand for intelligent dimming in mounted lighting.

Spotlights for large outdoor billboards. In the process of development and design 1,500,000 2016/09

Develop exclusive secondary optics to improve the effectiveness of spotlighting.

Outdoor spotlight modules. In the process of development and design 1,000,000 2016/06

Structural flexibility and product reliability.

Develop various types of sensor sensing modules.

Preliminary assessment 1,500,000 2017/12 Product stability and the degree of market segmentation.

Develop customized special LED light source modules.

Preliminary assessment 800,000 2016/12 Specificity and price competitiveness of product.

Develop photodiode detector products for encoder applications.

In the process of development and design 1,000,000 2016/12

Process control ability and product characteristics.

Develop IR band-pass photodiode detector products.



Develop ambient light optotransistor products.



Develop non-polarized resistor products. In the process of development and design 1,000,000 2016/06

Product design and process control capability

Develop Mesa-type TVS diode products. In the process of development and design 1,000,000 2016/09


Develop planar-type rectifier diode products.



Develop Pressure sensor products. In the process of development and design 2,000,000 2016/12


Develop III-V based Schottky diode products.


Quality of epitaxial materials, product design process control capability

Develop flip chip red light R/yellow Y LED chips and package.

Planning 3,500,000 2016/12 Factors affecting quality of newly developed flip chip epitaxy and chips.

Develop and build technology for UVC wavelength LED package.

planning 5,000,000 2016/12 Selection of Luminous efficacy ratio, cost and package material of UVC chips.

Develop and build technology for various high-wattage automotive light sources.

planning 3,000,000 2016/10 Package materials and equipment capability.

Develop and build technology for high-power multi-chip mixed light or white light products.

planning 5,000,000 2016/10 Quality selection of special high-power chip and cost control.

136

(4) Effects of and Response to Changes in Policies and Regulations Relating to Corporate Finance and Sales: OPTOTECH has complied with government policies and national laws and regulations. The Management division of OPTOTECH has kept abreast of major policies and changes of laws and abided by them. In addition, our business activities and governance directions have also been flexibly and timely adjusted to meet the change of policies, laws and regulations, so as to maintain smooth business operation.By now OPTOTECH has not yet been penalized by supervisor by law or supervisory authority, nor has it suffered any major financial or reputational loss.

(5) Effects of and Response to Changes in Technology and in Industry Relating to Corporate Finance and Sales: To ensure autonomy and legality in technical application, other than having its R&D workforce develop new techniques, OPTOTECH has also aggressively worked with respective local research institutes on emerging technology, in an attempt to keep its leading position in technology. Furthermore, to prevent its newly developed technology from being taken out a patent by its competitors resulting in loss of enormous business opportunity, we will take lead to aggressively apply for a patent to European and American countries, Japan and mainland China after a new technology being developed, so as to secure its R&D outcome, protect its business interests and reduce its overall operating risk.

(6) The impacts of changes to corporate image on the management of corporate crisis, and the corresponding measures: In response to the Company's image adjustment, four brand design projects, namely graphics for corporate and product promotion, Company website, brand image videos and corporate image videos, were completed and launched on Feb 1, 2015. Using the original OptoTech identity as the fundamental tone, the new designs incorporated rich colors and creative and interactive concepts to demonstrate that OptoTech is not only a professional manufacturer, but also a creator. Through interaction and communication, the Company continues to explore the rich and diverse possibilities of light induction with customers to develop technology application for intelligent living and achieve a people-oriented and quality aesthetics in daily living. Our change in enterprise image is to make fine adjustment based on the original vision of the company and brand value, but does not create any impact to the enterprise management philosophy. Also, OPTOTECH continues to promote brand internalization educational training in order to establish the recognition of company among entire staff based on the conveying of corporate vision and brand knowledge, such that all staff can fulfill their duties in their positions while implementing the brand values of our company in terms of “professionalism”, “trust”, “innovation”, and “flexibility”. From the management aspect, our company requires the behaviors of all employees to be in compliance with company’s business philosophy by providing customers with high quality product and service. We must all be in compliance with government laws and regulations, and all management regulations and systems of our company must be formulated and amended according to law in order to surely maintain our corporate image. For the latest year until the publication date of the annual report, there is no incident occurring to affect our corporate image.

(7) Expected Benefits from, Risks Relating to and Response to Merger and Acquisition Plans: As of the publication date of the annual report, OPTOTECH had not had any acquisition plan.

(8) Expected Benefits from, Risks Relating to and Response to Factory Expansion Plans: In view of business volatility in the industry, the silicon division of OPTOTECH gives a production expansion plan in order to meet the market demand, for which, by analyzing the bottleneck area and expanding major production equipment.

137

Regarding the potential risk after production expansion, other than prudently selecting required hardware for expansion, the silicon division has also carefully observed client order placement status and the world economy as the indicator for risk management. In addition, new product development, market survey and new product application have all been included in the measures to counter the potential risk.

(9) Risks Relating to and Response to Excessive Concentration of Purchasing Sources and Excessive Customer Concentration: A. Our raw materials have all been purchased from more than two suppliers and the individual supplier

having the highest supply ratio in terms of the company’s procurement only takes up 17.58% of the company’s total procurement, so the company does not have the risk resulting from too much concentration of goods purchase on an individual supplier.

B.Our major sales client is an acknowledged firm do not more than taking up 10% of our total sales, so OPTOTECH does not have the risk resulting from too much sales concentration on an individual client.

(10) Effects of Risks Relating to and Response to Large Share Transfers or Changes in Shareholdings by Directors, Supervisors, or Shareholders with Shareholdings of over 10%: Before the publication day of the annual report, there had been no mass equity transfer or replacement from our directors, supervisors or major shareholders holding more than 10% of our shares.

(11) Effects of Risks Relating to and Response to Changes in Control over the Company: As of the publication date of latest year annual reports, there had not been such incident occurring to OPTOTECH.

(12) Litigation or Non-litigation Matters: As of the publication dates of 2016 and 2015 annual reports, there had not been such incident occurring to OPTOTECH.

(13) Other Major Risks: None.

7. Other Major events:None.

VIII、 Special Disclosure 1. Summary of Affiliated Companies

(1) Consolidated business report of affiliated enterprises (Base date：Dec. 31, 2015)

Please refer page 138~ 142

(2) Consolidated financial statements of affiliated enterprises: Please refer the consolidated financial statements and auditors’ report.

(3) Affiliation report:None.

138

A. OPTO Subsidiaries Chart

100% 100% 100% 100%

99.87%

100%

50%

100%

100% 100%

100% 100%

0.20%

50%

139

B.OPTO Subsidiaries Unit: NT$ thousands

Company Date of

IncorporationPlace of Registration Capital Stock Business Activities

Ho Chung Investment Co.,Ltd. 1998.03.24 2F, No. 363, Sec. 2, Gong-Dao 5th Rd., Hsinchu City 64,940 General investment

CS Bright Corp. 1973.03.01 11F, No.659, Bannan Rd., Zhonghe Dist., New Taipei City 49,999Manufacturing and sale of LED

Opto Technology International Group Co., Ltd

2002.05.07 4th Floor, Harbour Place, 103 South Church Street, P.O. Box 10240, Grand Cayman KY-1002, Cayman Islands

1,120,084 Holding company

Opto Tech (Macao) Co., Ltd 2007.02.14 Alameda Dr. Carlos D’ Assumpcao No.258, Kin Heng Long , 19R , Macao

4.096Distribution of LED system products

Opto Tech (Cayman) Co., Ltd 2002.05.07 4th Floor, Harbour Place, 103 South Church Street, P.O. Box 10240, Grand Cayman KY-1002, Cayman Islands

316,203 Holding company

Jyu Shin Investment Co., Ltd. 2008.05.19 2F, No. 363, Sec. 2, Gong-Dao 5th Rd., Hsinchu City 125,687 General investment

Bright Investment International Ltd. 2002.07.31 Trustnet Chambers,P.O.Box 3444 Road Town,Tortola,British Virgin Islands


Everyung Investment Ltd. 2002.07.31 Trustnet Chambers Lotemau Centre,P.O.Box1225 Apia,Samoa


OPTO Plus Technology Co., Ltd. 2002.09.19 No. 696, Shunjiang Rd., Jishan St., Shaoxing City, Zhejiang Province, China

317,341Manufacturing and sale of LED

OPTO TECH (Suzhou) Co., Ltd. 2002.06.24 No. 735, Changjiang Rd., Suzhou Gaoxin Dist., Suzhou City, Jiangsu Province, China

294,708Manufacturing and sale of LED system products

Opto Grand (Cayman) Co.,Ltd. 2007.03.06 Floor 4, Willow House, Cricket Square, P O Box 2804, Grand Cayman KY1-1112, Cayman Islands


Source Ever Limited 2010.04.26 P.O. Box 957,Offshore Incorporations Centre, Road Town, Tortola, British Virgin Islands


Note:All amounts involving in foreign currencies were converted into NTD at the exchange rate used for original investments of each company.

140

C. Data of the shareholders presumed having control or subordinate relationship with the company: None.

D. Businesses and related details covered in the overall affiliated enterprises and their labor division status: (A) Businesses covered in the overall affiliated enterprises:

They are mainly LED downstream and application related manufacturing, sales and service footholds, while part of them are investment, share holding and international trading businesses.

(B) Business exchange and labor division among respective affiliated enterprises: (a). In order to expand its business to China and other foreign countries, OPTOTECH has set up

subsidiaries at Macao, Hong Kong, Suzhou and Ningbo respectively to engage in LED downstream and application related manufacturing and sales businesses.

(b). In order to build a well-rounded industrial structure, OPTOTECH has invested in CS Bright Corporation, a downstream manufacturer which has set up subsidiaries in Shaoxing, Zhejiang to produce and sell its products, so as to expand its markets in Mainland China and other foreign countries.

E. Rosters of Director, Supervisor and President of OPTO Subsidiaries

Company Title Name Shareholding

Shares Percentage

Ho Chung Investment Co.,Ltd.

Chairman Opto Tech Corp. 6,494,000 100.00

Yung-Chiang Huang - -

Director Opto Tech Corp. 6,494,000 100.00

Hung-Tung Wang - -


Chien-Chang Chen - -

Supervisor Opto Tech Corp. 6,494,000 100.00

Tzu-Chun Lin - -

CS Bright Corp.

Chairman Jyu Shin Investment Co., Ltd. 4,993,562 99.87

Hung-Tung Wang - -

Director Jyu Shin Investment Co., Ltd. 4,993,562 99.87

Chui-Chuan Chang - -


Zhi-Yuan Yan - -


Shun-Chih Chen - -


Tzu-Chun Lin - -

Supervisor Jyu Shin Investment Co., Ltd. - -

Supervisor Chien-Chang Chen - -

Opto Technology International Group Co., Ltd.

Director OPTO TECH Corp. 34,769,906 100.00


Opto Tech (Cayman) Co., Ltd. Director Opto Technology International Group Co., Ltd. 9,669,906 100.00Yung-Chiang Huang - -

Bright Investment International Ltd Director

Cs Bright Corp. 5,100,000 100.00

Hung-Tung Wang - -

Everyung Investment Ltd. Director

Opto Technology International Group Co., Ltd. 5,000,000 50.00

Bright Investment International Ltd 5,000,000 50.00

Hung-Tung Wang - -

141

Company Title Name Shareholding

Shares Percentage

Opto Plus Technology Co. Ltd.

Chairman Everyung Investment Ltd. 9,000,000 100.00

Hung-Tung Wang - -

Director Everyung Investment Ltd. 9,000,000 100.00


Director Everyung Investment Ltd. 9,000,000 100.00

Chen-Ch Wu - -

Supervisor Everyung Investment Ltd. 9,000,000 100.00

Qian-Yan Huang - -

Opto Tech (Suzhou) Co. Ltd.

Chairman Opto Tech (Cayman) Co., Ltd. 9,000,000 100.00

Hung-Tung Wang - -

Director Opto Tech (Cayman) Co., Ltd. 9,000,000 100.00

Shun-Chih Chen - -


Hong-Xiang Tan - -


Hui -Chao Chen - -



Supervisor Opto Tech (Cayman) Co., Ltd. 9,000,000 100.00

Qian-Yan Huang - -

Opto Grand (Cayman) Co.,Ltd.

Director Opto Technology International Group Co., Ltd.

20,000,000 100.00

Qian-Yan Huang - -

Source Ever Limited Director Opto Tech Corp. 200,001 100.00Qian-Yan Huang - -

Opto Tech (Macao) Co., Ltd. Director Opto Tech (Cayman) Co., Ltd. 999,000 100.00

Hung-Tung Wang - -

Jyu Shin Investment Co., Ltd.

Chairman Opto Tech Corp. 12,568,706 100.00



Hung-Tung Wang - -


Chien-Chang Chen - -

Supervisor Opto Tech Corp. 12,568,706 100.00

Tzu-Chun Lin - -

142

F. Operational Highlights of OPTO Subsidiaries

Unit: NT$ thousands

Name of Enterprise Capital Total AssetsTotal

LiabilitiesNet Worth

Operating Income

Operating Profit

Profit / Loss Of The Period

(After-Tax)

EPS (NTD) (After-Tax)

Ho Chung Investment Co.,Ltd. 64,940 163,492 110 163,382 5,265 1,422 1,422 0.22 Jyu Shin Investment Co. Ltd. 125,687 262,882 110 262,772 8,577 8,443 8,454 0.67 Opto Tech (Macao) Co., Ltd. 4,096 24,888 3,979 20,909 185,731 5,629 5,670 - CS Bright Corp. 49,999 206,647 119,707 86,940 278,460 4,552 (1,674) - Opto Technology International Group Co., Ltd. 1,120,084 533,387 - 533,387 - (132) (54,590) - Opto Tech (Cayman) Co., Ltd. 316,203 84,977 - 84,977 - (282) (94,568) - Bright Investment International Limited 171,332 30,772 86 30,686 - (153) (5.364) - Everyung Investment Ltd. 317,331 58,883 - 58,883 - - (10,522) - Opto Plus Technology Co. Ltd. 317,341 381,628 322,745 58,883 250,968 (2,698) (10,521) - Opto Tech (Suzhou) Co., Ltd 294,708 190,361 305,673 (115,312) 63,139 (70,831) (100,323) - Opto Grand (Cayman) Co.,Ltd. 651,721 585,707 - 585,707 - (397) 45,245 - Source Ever Limited 5,725 2,005 - 2,005 - - 75 - Note:For all amounts involving in foreign currencies, the capital was converted into NTD at the exchange rate used for original investments of each company, and the rest was

converted into NTD at the exchange rate of Dec. 31, 2015.

2. Private Placement Securities in the Most Recent Years: None.

3. The Shares in the Company Held or Disposed of by Subsidiaries in the Most Recent Years: Unit: NT$ thousands；Shares；％

Name of subsidiary

Stock capital collected

Fund source

Shareholding ratio of the company

Date of acquisition or

disposition

Shares and amount acquired

Shares and amount

disposed of

Investment gain (loss)

Shareholdings & amount in the most recent year

Mortgage Endorsement amount

made for the subsidiary

Amount loaned to the subsidiary

Ho Chung Investment

Co.,Ltd. 64,940

Self- owned capital

100% －－－－ 1,107,276 Shares NTD 12,734

None None None

4. Others supplementary events:None.

5. Matters Significantly Influenced on Shareholders’ Equity or Securities Price:None.

OPTOTECH Co., Ltd

Chairman:

Yung-Chiang Huang

Documents

I. - OPTO · III.Corporate Governance Report ... enter the automotive lighting market and cooperate ... Profitability analysis: Unit: NT$ thousands Item 2015